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By Joseph A.

Stanislaw

Clean Energy 1.0 Moving beyond green to create sustainable jobs and a long-term energy strategy

Deloitte Center for Energy Solutions

Contents

Green energy: from superhero to plain hero Jobs: the beginning of the clean energy evolution A clean, efficient sweep: priorities for policymakers The energy jobs of the future Energy: a state of mind About the author

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Green energy: from superhero to plain hero

Firstback when oil was levitating towards $100 a barrel and Russia was playing politics with pipelinesgreen energy was the holy grail of energy security. Then, when concern over climate change reached fever pitch, it became the silver bullet to solve global warming. And when the Great Recession struck, it was the panacea for unemployment and falling wages. Green energy, it would seem, has been everything to all people. Faced with seemingly insurmountable challenges, the human instinct, understandably, is to grasp for easy salvation. This is also true of our elected policymakerswhat better, after all, than a sovereignty-boosting, air-purifying, job-producing elixir? Inevitably, the pendulum swings. In this case, it already has. Over the past year, we experienced a course correction as the political classes suddenly became sensitive to cost considerations in the midst of a deep recession. They thus began giving greater weight to clean energy over green energy, acknowledging that fossil fuels and nuclear power are a bridge to the futuremaybe a longer bridge than most people expect or realize. Figure 1. Bridge to the future The green (clean) future: Sustainable, affordable low-carbon energy; more with less

Today Renewables Efficient End Use Clean Coal Clean Oil Clean Gas

New Technologies Nuclear

Source: The JAStanislaw Group LLC, 2010

Clean Energy 1.0 Moving beyond green to create sustainable jobs and a long-term energy strategy 1

Figure 2. A new race clean development A dynamic continuum of technology developments from generation 1.0 to 2.0 to 3.0 Serves workers, environment, durable job development, sustainable business

Devloping clean fossil fuels New energy technologies

Increasing efficiencies of use

Promotes economic growth

Increases energy security

Addresses climate change problem

Contrary to conventional wisdom: If not addressed, climate change and energy security will limit economic growth.
Source: The JAStanislaw Group LLC, 2010

Reframing the challenge in this way is essential: rather than being in a green energy race, we are in a global clean technology race to develop clean energy in a way that serves the economy, workers, the environment, and national security. This clean-energy movement is in its early days stillClean Energy 1.0where the mobile phone industry was in 1983, when Motorola released its two-pound, $4,000 DynaTac 8000x, or where the computing world stood that same year, when Windows 1.0 was launched. We are now due for another recalibration, as the evidence comes in about the reality of jobs in the green collar economy. Policymakers can get beyond the hype and make a more measured assessment of how green and clean technologies might evolve and how they fit into the overall energy equation. As we move forward from Clean Energy 1.0, we will be better able to understand how energy is evolving. A smart strategy will allow us to focus our investments and dramatically increase research into technologies that create sustainable, local jobs. We can thus help guide consumer investments in energy technologies. All this is good newsa necessary maturing of the debate around energy. Where once energy was a matter confined to Congressional committees and industry groups, today nearly every constituency is mobilizedfrom politicians across the spectrum, to corporations of all kinds, to individuals in every corner of America and the world. Unions, too, are on the front lines, since they represent workers whose skillsas plumbers, welders, technicianscan be transferred to the new, clean energy spheres. Energy is now a national state of mind.

Energy policy is climate policy, national security policy, economic policy, and employment policy.
This mobilizationfor which the green movement is responsiblehas forever changed how we develop energy policy. Energy policy is climate policy, national security policy, economic policy, and employment policy. Above all, it has transformed the American consumer into a pivotal actor in the debate. Put another way, the consumption of energy has been politicized due to our heightened awareness of the impact of energy consumption on our wallets, on national security, on the environment and, more recently, on our jobs. This politicization of demand means that consumers have empowered themselves. In seeking more energy-efficient, cleaner productsas well as clean energythey are fundamentally changing the behavior of corporations, the allocation of capital, and the views of lawmakers. Figure 3. Energy of geopolitics: clean development race

Technology Policy
Energy Policy National Security Policy

Employment Policy All interlinked

Sustainable Clean Energy Development Policy

The driving force the green-clean movement


Source: The JAStanislaw Group LLC, 2010

Clean Energy 1.0 Moving beyond green to create sustainable jobs and a long-term energy strategy 3

Figure 4. Clean energy: driven by markets

Public demand for clean energy and energy-efficient products

Lawmakers

Corporate response to market demands Job growth

Politicization of Demand Climate (Energy Security) + Consumers + Capital = Energy and Job Creation
Source: The JAStanislaw Group LLC, 2010

Improved economy

The recession has accentuated this trend. Before the crisis, demanding clean, energy-efficient products allowed consumers to be part of the solution to the environmental and national security challenges facing the U.S., while also saving money. The economic crisis now has underscored the cost advantages of energy-efficient products. National security, climate change, and the economic crisis are thus combining powerfully to change the behavior of consumers, who are trying to use less energy and going clean. This is changing the products corporations are producing, which impacts the allocation of capital, and thus affects job growth and the economy. This politicization of demand is important, especially given our level of energy consumption: each American is responsible for 20 tons of CO2 emissions each year, versus just 8.4 tons per European. The grassroots energy movement already has led to critical policy innovations at the corporate, civic, local and state levels. As of February 2010, for instance, 1,017 mayors from the 50 statesrepresenting a total population of almost 90 million citizenshave developed sustainability plans for their cities that focus on energy efficiency and husbanding resources. Thirty states have developed renewable energy mandates, with targets of between 15-25 percent by 2020. Corporations, meanwhile, continue to focus on the clean products being demanded by consumers.

Figure 5. The clean development race: the pole positions?

The clean technology race: U.S. versus China and others

The goal: Manufacturing dominance of renewable energy components, and the resulting economic and employment rewards

U.S., a former favorite, is now in middle of pack

China is now the leader. Head start provided by U.S. R&D, and technologies developed in the 1970s and 1980s, strategic planning, and a trillion dollars invested over ten years

The clean development race: technologically, not unlike U.S. versus Soviet Union in the 1960s' moon race, except for the outcome (so far)
Source: The JAStanislaw Group LLC, 2010

In turn, after a quarter-century of stagnation, the federal government is feeling the heat to create a visionary national framework on energy. In doing so, lawmakers will face the new reality that energy policy is now a potent prism through which our overall economic and jobs policies are formed. Energy policy, too, is now even more about national security than ever before, since we have entered a clean technology race with China and othersnot unlike the race with the Soviet Union to put the first man on the moonthat could determine our place in the global economy. And, in this context, the U.S. would appear to be significantly behind in developing such a strategic vision for energy. It is sobering to consider that China now has a more favorable and predictable market for private investments in clean energy technology than America does. In large part, this is because China understands where it wants to fit on the energy spectrumas the dominant manufacturing player that produces the components of renewable energy technologies. (It is not without irony that these technologies have their roots in original research funded by the United States, back when American R&D budgets were flush in the 1970s and 1980s.) And China is investing massively towards its goalssome $1 trillion over just 10 years.

It is sobering to consider that China has a more favorable and predictable market for private investments in clean energy technology than America does.
Clean Energy 1.0 Moving beyond green to create sustainable jobs and a long-term energy strategy 5

The Obama Administrations focus on green technologies has made energy a national state of mindand if only for this reason, the Administrations approach can be deemed a success. However, the emphasis on green has distorted the broader energy debate, and clouded our ability to accurately assess what is in our best interests. Over the past two years, in particular, federal funds have been concentrated in green energy in the hopes of creating the jobs of the future. As a result, much of the emphasis was placed on supply-side jobsthe manufacture and installation of wind turbines, for instance, or photovoltaics (mostly made in China)and not enough on building the skills base of sustainable jobs along the entire energy supply chain. Manufacturing jobs might provide some instant gratification, but such jobs are both fewer than predicted and likelier to flee abroad. By contrast, jobs on the demand sidethose that help reduce and manage demandwill prove better paying and more sustainable. This might change as clean energy technologies evolve from 1.0 to 2.0 and beyond; but, in every case, policymakers need to scrutinize the employment bottom line much more carefully. Figure 6. Reverse our thinking: from the means to the end

Focus on energy policy

Not here... Energy generation and distribution

...but here Clean technology development path

Energy policy is not about energy. It is about technology and the new clean technology development path. The end is fostering (through markets) government policy and rules/regulations for developing clean technology for growth. It will apply along the complete value chain from R&D to final product implementation.
Source: The JAStanislaw Group LLC, 2010

Another consequence of looking at the world through green-tinted glasses is that we have given short shrift to other crucial energy formsespecially natural gas, which is relatively clean and abundant. We simply cannot cross the bridge to a low-carbon future without mobilizing the American oil and gas industries. To accelerate this process, all energy forms, including fossil fuels and nuclear, should be allowed to compete within a low-carbon framework. It is also essential to remember that the oil and gas industries generate hundreds of thousands of highly skilled, high-paying jobsjobs that America needs now to develop the low-carbon oil and gas resources of the future. These are skills and positions that, once lost, are unlikely to return. They also happen to be ones that could be bridged to clean technology occupations (for instance, the high-tech, remote-control technologies that allow the oil and gas industries to monitor their production are ones highly relevant to clean-technology fields).
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We simply cannot cross the bridge to a low-carbon future without mobilizing the American oil and gas industries which generate hundreds of thousands of highly skilled, high-paying jobsjobs that America needs now to develop the low-carbon oil and gas resources of the future. These are the skills and positions that, once lost, are unlikely to return.
Above all, the green hype also has weakened our focus on the energy we should not be wastingthrough efficiency initiatives, conservation, and demand reduction. Finally, we could deepen the focus and broaden the lens on innovation and R&D. The current generation of renewable technologies, as in wind, are nearing maturity, while others, like solar, are advancing quickly along the current technology curve. But as the next generation of these technologies evolve, we need to understand where the sustainable jobs will be created and seize the resulting opportunities. To do so, we also need to plumb the next frontiers of energy more aggressivelyfrom the low-hanging fruit of reducing the carbon emissions of fossil fuels, to the need to reinvent our national grid, to the nascent movement to draw energy from the oceans waves, innovative approaches to storing energy, and advances in battery technologies. We should build sustainable industries in these new energy frontiers based on research, innovation, development, and implementation along the continuum of each energy technology curve from 1.0 to 3.0. In so doing, we also should develop the rules of the game that encourage innovation and implementation along the entire supply chain of any given technology. Green energy is no longer the magic bullet. We should be grateful for this. It can now take its pivotal but mortal place in an array of energy forms and technologies that will power the world in the 21st century. The transition from green to clean will power the next phase of development of the world economy, as we race to create technologies that help us better produce energy and reduce its use. As we climb the learning curve of Clean Energy 1.0 and beyond, we will become better able to assess the complex calculus of energy. We will weigh the benefits of each energy formbalancing cost, environmental impact, job creation potential, and national security considerationsin order to develop smarter policies and encourage market frameworks to drive the right portfolio of energy forms. If we play our cards right, in addressing these concerns we will be promoting growth rather than hindering it. This will position us not at the starting block of the clean development race, but squarely in the thick of it.

Clean Energy 1.0 Moving beyond green to create sustainable jobs and a long-term energy strategy 7

Jobs: the beginning of the clean energy evolution

Americas policymakers and corporate leaders will have to consider where the energy jobs will be in the future, analyzing the entire supply chain, and determining which jobs are sustainable, well-paying, and likeliest to stay in America.
After decades of stagnation in American energy policy, the Obama Administration entered office with a sweeping vision and determined, well-financed plans. The Presidents approach has not just reinvigorated the energy debate, but has made energy a national state of mind. Citizen-consumers and corporations have thus been mobilized. The Administration now should step back and assess the results of its experimentationdoing so from the vantage point that this was, essentially, Year One of a two-generation-long process of transformation. When it does so, it will realize that understanding the arc of clean technologys evolutionfrom CleanTech 1.0 to CleanTech 7.0 (or so), where we should be by mid-centuryis more complicated than it might have seemed. Americas policymakers and corporate leaders will have to consider where the energy jobs will be in the future, analyzing the entire supply chain, and determining which jobs are sustainable, well-paying, and likeliest to stay in America. So far, one critical realization is that we might be paying too much in subsidies for jobs that might soon disappeara lesson painfully learned by Spain and Germany. Both countries subsidized photovoltaic markets to help create jobs and promote demand for Spanish and German PV modules. And they succeededfor a while. But it was not long before the Chinese, who have commoditized the PV markets, dominated supply. Beijing is now benefiting from Spanish and German subsidies. Understanding that this could happen in America is perhaps the most important takeaway from the past year. Figure 7. The technology continuum: the dynamic for economic success Clean Energy 3.0 The technology continuum: The new energy policy will provide for future evolution of individual technologies. Computer operating systems evolved from Windows 1.0 to Windows 7.0. We are now at Clean Energy 1.0. There will be a Clean Energy 2.0 and Clean Energy 3.0. This technology continuum applies to: Energy sources Coal, oil, gas Renewables and alternatives Energy products Everything from insulation to batteries to smart meters to new products yet to be developed Mid-century

Clean Energy 2.0

Clean Energy 1.0

Today
Source: The JAStanislaw Group LLC, 2010 8

Figure 8. Policy design: the goal is the question Targeting subsidies "wisely"?: A case study Spain and Germany subsidized their photovoltaic markets to help create jobs and demand for Spanish and German PV Modules Jobs? Profits?

German and Spanish growth

But China commoditized PV markets, then dominated supply in the German and Spanish markets Chinese jobs? Chinese Profits? Chinese growth

Source: The JAStanislaw Group LLC, 2010

President Obama came to Washington promoting green as the answer to a clutch of challenges: climate change, national security, and economic growth. Within a month of taking office his Administration had created the outlines of a Green New Deal. Obama ordered higher standards for fuel efficiency, appointed ardent advocates of emissions cuts to senior jobs, and committed almost $80 billion for energy and environment projects in his economic stimulus package. This was, as White House energy and climate czar Carol Browner dubbed it, the biggest energy bill the countrys ever seen. It appeared the Administrations goal was to fast-forward us, in a flash, from the era of fossil fuels to a zero-carbon world. In arguing for his Green New Deal, Obama emphasized the environmental prerogative over the other two legs of the green society triptychthe creation of enduring, local jobs and the enhancement of national security. But relatively quickly, with the Great Recession bearing down, greens environmental virtues lost some of their relevancesaving jobs became more important than saving the environment (this explains, in part, the loss of momentum that led to the collapse of climate negotiations in Copenhagen). The relevance of green energy to national security, meanwhile, also dimmed as oil and gas prices collapsed. With unemployment groaning towards 10 percent, it was jobs that mattered. And so green energy metamorphosed into a pathway to well-paying jobsa mantra that has exploded at every level of government. Lawmakers everywhere trumpet their potential. The predictions were eye-popping. Obama promised to create some five million green jobs over a decade by spending $150 billion. The Apollo Alliance said $500 billion would be needed for those same five million green jobs. (Said an Apollo Alliance spokesman about the discrepancy in how much each job would cost: Honestly, it's just to inspire people.) The Center for American Progress was even more ambitious, suggesting that federal outlays of $100 billion over two years would create two million green jobs. (All this still pales in comparison to Chinas $1 trillion investment over 10 years.)
Clean Energy 1.0 Moving beyond green to create sustainable jobs and a long-term energy strategy 9

Congress, too, joined the chorus: Today, August 10th, here in Las Vegas, we're firing the first shots of a new revolution to regain that prosperity and restore that leadershipa clean energy revolution that will create millions of jobs across America, declared Senator Harry Reid at the Clean Energy Summit in Las Vegas in August 2009. Bernie Sanders, who chairs the Senates green jobs sub-committee, drafted the 10 Million Solar Roofs and 10 Million Gallons of Solar Water Heating Act of 2010. Obama repeatedly has cast this as a competition among nationsthe space race has been replaced by a race for green jobs. The nation that leads the clean energy economy will be the nation that leads the global economy, Obama said in his January 2010 State of the Union address. And America must be that nation. Before the crash, greenwashingthe practice of invoking green to underscore ones virtueswas primarily a corporate phenomenon. Hardly a day went by without several corporations unveiling new, greener versions of themselves. Companies scrambled to create low-energy productscomputers, cars, light bulbs, insulation. Today, greenwashing has infected the political world. Policymakers everywhere trip over themselves to issue press releases about the number of green jobs their town, state, region, or country has created. A Google search will yield half-a-million hits for green jobs councils. Green job websites, blogs, fairs, and recruiters are legion. Good Jobs Advocacy Day took place on May 6, 2010 in Washington, to coincide with the Good Jobs, Green Jobs National Conference. States, meanwhile, are proliferating programs like the one in Connecticut that waives college loans if students go into green fields. This set the stage for the $787 billion American Recovery and Reinvestment Act, which included $80 billion for clean energy initiatives. Its supporters said the overall Act would create 3.5 million jobs, many of them green. "Building a robust clean energy sector is how we will create the jobs of the futurejobs that pay well and can't be outsourced," Obama said. But it turns outat least judging from the early returnsthat green energy jobs are fewer than anticipated, lower paying, less permanentand yes, in fact, they can be outsourced. This is not a reason to despair about green energy jobs in the longer termwe are, after all, only at Clean Energy 1.0but it should give policymakers pause as they consider the overall energy strategy and the race to move along the clean economic development curve. It is worth considering the evidence. More than a year after the Recovery Act, the governments own tally of jobs created by stimulus spending on energy is a grand total of 60,000 (out of 300,000 jobs created overall by the stimulus bill). In some sectors, despite heavy spending, there was even a net loss in jobs. Take Americas wind energy industry: the U.S. installed more wind power last year9,900 megawatts, or enough to power 2.4 million homesthan in any other year. But, according to a report from American Universitys Investigative Reporting Workshop, 1,219 of the 1,807 wind turbines funded by the stimulus were manufactured abroad. While the wind sector is particularly egregious in this respect, these basic dynamics are evident throughout the industry. Today, roughly 70 percent of America's clean energy systems and components are produced abroad, and the U.S. produces less than 10 percent of the global solar component market. But the race is hardly over. As solar moves to the next generation of technology, the U.S. needs to reestablish its predominance in ways that not only secure patents, but that create domestic jobs.

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Overall, according to the White Houses figures, it has cost $135,294 to create each green job. This would be acceptable, were the positions sustainable. The fact that they often are not has drawn fire even from Administration supporters. There is a lot of wishful thinking about green jobs, said Philip Mattera, lead author of the study by Good Jobs First, an affiliate of the Corporate Research Project. A lot of proponents just take it on faith that these are going to be good jobs (and) therefore we should invest in them. A lot of people are so caught up in creating the jobs that they are not paying a lot of attention to the quality of the jobs. Or they may be saying, Let's worry about that later. Wage rates at many wind and solar manufacturing facilities are below the national average for comparable manufacturing sector jobs, according to the Good Jobs report. The numbers as tallied at the state and nation levels, thus far, are not especially encouraging either. In California, the vanguard of environmentalism in America, just one percent of all jobs are green; in the past 15 years, the state has added only about 45,000 such positions. Overseas, too, researchers are finding cause for concern. A King Juan Carlos University study in Spain determined that for every green job created, 2.2 others were lost and only one in 10 green jobs became permanent. The study found that green jobs in Spain cost $800,000 each to create, thanks to subsidies, higher electricity costs, and tax hikes. A recent report from German think tank Rheinisch-Westfalisches Institut fur Wirtschaftsforschung"Economic Impacts from the Promotion of Renewable Energies: The German Experience"concludes that the countrys green jobs program seems to have created 278,000 jobs, albeit at the very steep cost of $240,000 per position. Even those jobs that were created are vulnerable, since they are export orientedand other nations have rapidly undercut German green hardware prices. As a result, green energy installers in Germany import components produced abroadmeaning that Germany is subsidizing jobs in China. Asia is playing a much better funded and more sophisticated clean energy game than most of the West. South Korea has dedicated 81 percent of its stimulus funds to green initiatives, while China is at 34 percent. By contrast, the U.S. earmarked just 12 percent of such spending to the green sector, and Britain lagged at just 7 percent. The bottom line is that Chinawhich is spending $9 billion each month on clean energy projectsis a more attractive destination for investors. And it shows: In 2008, the U.S. took the lead as the worlds largest producer of wind turbines, passing Germany. It took all of one year for China to seize the mantle. In his State of the Union address, Obama acknowledged the urgency of the clean technology race: Chinas not waiting to revamp its economy. Germany's not waiting. India's not waiting, he said. These nations aren't playing for second place. ... Well, I do not accept second place for the United States of America. But to reach beyond second place, the U.S. will have to revamp its strategyand soon.

Clean Energy 1.0 Moving beyond green to create sustainable jobs and a long-term energy strategy 11

A clean, efficient sweep: priorities for policymakers


We stand before an opportunity of a lifetime: There will be more money spent in the energy sector in a broad sense in the next 50 years than has been invested in the past 100 years, if not in history. Channeling these investments wellinto job-producing technologies and services that create clean energy, reduce demand, and drive us along the Clean Energy continuumis the challenge that policymakers, the private sector, and the public face united and together. Figure 9. The clean energy continuum: a long-term American energy strategy

Energy use is now top of mind Federal stimulus bill's investment in clean energy has centered America's attention on energy

New strategic direction New focus on long-term energy goals

Clean beats green: efficiency trumps all Wind, scrubbed coal, natural gas, or nuclear are all good. Less energy use is better.
NO SALE

Research and development

Energy policy is jobs policy And sustainable jobs matter most

Energy improves the bottom line Efficiency and clean energy benefits individuals and corporations alike

Go clean or go broke Americans insist that corporations offer clean energy products and services

Policy supporting the clean energy continuum

Challenges faced in common by policymakers, the private sector, and the public
Source: The JAStanislaw Group LLC, 2010

The Great Recession has served an unexpected but important role in setting the stage for a smart, long-term American energy strategyfor numerous reasons: Energy is now top of mind: The federal stimulus bill has helped kick-start a massive investment in clean energy technologies and has shifted Americas psychology on energy. New strategic direction: This immersion experience has allowed us to better understandthrough experimentation and debatewhat our long-term energy strategy might be. Clean beats greenefficiency trumps all: More specifically, we have come to understand that what matters most is not green energy but clean energywhether it comes from the wind, clean coal, natural gas, or nuclear. And best of all is using less energy overall. Energy is jobs policy: Policymakers have learned that energy policy cannot be separated from jobs policyand that sustainable jobs matter most. From the start, the Obama Administration could have established that energy policy was, first and foremost, jobs policy. Energy improves the bottom line: The recession has underscored the pocketbook benefits of efficiency and clean energy for individuals and corporations. Added to their positive impact on climate change and national security, efficiency and clean energy are now firmly embedded in the consciousness of Americans. Go clean: And as a resultAmericans continue to insist that corporations go clean, thus shaping product development and capital allocation, and that policymakers follow their lead as well. One shortcoming that corporate and political leaders must still reckon with is the impoverished R&D budgets for clean technology product development.
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Now, with over a year of frenetic investments under our belt, we have a chance to pause and consider the principles that will guide us as we move from Clean Energy 1.0 to the next generation of technology and the next iteration of our energy strategy. Four core principles could guide us as we move along the clean development continuum: Figure 10. The four principles: guiding the movement along the clean development continuum
New clean energy products and services: Research Develop Design

Manufacture Distribute A federal energy framework is critical Federal government should mandate renewable power consumption, and upgrade the electrical grid

Sustainable jobs are as important to energy policy as climate change The recession is a new factor in energy policy

Reducing demand is more important than producing clean energy Energy efficiency is an untapped market for entrepreneurs, investors, and policymakers

Research and development should rise again Recent decline in R&D investment should be reversed

Source: The JAStanislaw Group LLC, 2010

A federal framework is critical: As Washington stood idle for the past few decades, cities and states took the lead on energy policy. This made a difference in many positive ways, including by fostering experimentation that has made us smarter about what works and what does not. But the absence of a Federal framework is now an enormous handicap. It seems unlikely that clean energy companies will hire in large numbers until the Federal government mandates renewable power consumption nationwide and upgrades the electric grid. Whether the target is 20 percent of American energy coming from renewable sources by 2020, or something more modest, a mandate is essential. Policymakers should not try to pick winners, but they should set targets. This transformation also should be led by policymakers who need to make it knownthrough transparent rulesthat there is no silver bullet in our common effort to build a carbon-free future. All energy formsprovided they can meet standards for being clean and cost-effectiveshould be able to compete for market share and funding. Sustainable jobs are as important to energy policy as are climate change, national security, and cost: The green movement was driven for much of the past decade by a grassroots commitment to reduce global warming. Then, the need to rethink American energy strategy gained even more momentum from national security concernshighlighted by the Iraq war and Americas reliance on Saudi Arabiaand resource nationalism. Now, the recession, with its double hit on American pocketbooks and jobs, has introduced a new factor in designing energy policies. The creation of sustainable jobs that keep communities whole should become a factor, together with cost and carbon reduction, in calibrating Americas new energy portfolio.

Clean Energy 1.0 Moving beyond green to create sustainable jobs and a long-term energy strategy 13

Reducing and managing demand is more important than producing clean energy: Energy efficiency is perhaps the biggest untapped market for entrepreneurs, investors, and policymakers. It meets all the demands of those seeking to reduce emissions and increase national security, while having the potential to contribute mightily to the creation of sustainable, well-paying jobs. Research and development should rise again: Before the stimulus bill, the Federal government budget for energy research was the same today, adjusted for inflation, as it was in 1968: about $3 billion. The share of research and development money, both from the public and private sectors, going into energy has been in decline for over two decades. We should reverse this by creating market conditions to promote investments in research, development, and market penetration in energy efficiency, in new methods of consumption, and in all forms of energy, be they traditionaloil, gas, coal, nuclearor alternative. Asian nations, in particular, are investing vast resources in renewable energy research and technology development, while setting ambitious targets for clean energy use. For example, South Korea has committed to investing two percent of GDP each year in clean energy, for a total of $80 billion over five years. China is aiming to generate 20 gigawatts of solar power by 2020, a tenfold increase from today, and is offering its industry the worlds most generous subsidy to help meet that goal. Beijing also is investing heavily in wind, battery, and other technologies. By contrast, only one-fourth of the world's top renewable energy companies are American-owned. And only one U.S. company, General Electric, is among the worlds top 10 wind turbine makers. R&D can help America position itself on the leading edge of the Clean Energy evolution. Figure 11. Every company is an energy company

Reduce energy use Efficient equipment/processes Innovative architecture


www.moescab.com

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Self-generation Small-scale: Wind Solar Geothermal Cogeneration

Increased profits (and enhanced energy security)

Improved transportation fleet Hybrids Electrics CNG Route planning

Reduced CO2

Source: The JAStanislaw Group LLC, 2010

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The energy jobs of the future

Until now, the notion of green jobs was thrown around willy-nilly to justify a wide array of initiatives, policies, and investments. We need to reset our sights and narrow our definition of green jobs. It might be easy to generate fast construction jobs installing Chinese-made wind turbines, but the costs of these is immensely high and their duration very short. By contrast, investing in training (and re-training) a new generation of skilled workers to manage our energy use should pay off handsomely. Figure 12. Energy: a state of mind

Demand for clean energy products and services Supply of clean energy Individual awareness Corporate response

Voting clean energy

Policies that encourage or reward clean energy

Government Mandate (at every level) In the last year or two, energy consciousness has captured national attention as never before
Source: The JAStanislaw Group LLC, 2010

The management of energy offers a motherlode of long-term, well-paying job opportunities. These jobs echo those in the world of IT, where companies create software and hardware applications and then establish a sustainable market for their services by constantly updating and maintaining their products. The Clean Energy world has the same potential. Heres just a short list of jobs in the world of energy efficency: Energy efficiency specialists, engineers, strategists and managers, all of whom will become increasingly important to businesses as the price of carbon increases Energy managers responsible for power usage across an entire organization, requiring experience in areas such as technology, behavioral change, compliance and procurement Environmental managers are needed to ensure that organizations comply with legislation and other procedures Supply chain experts are needed by large retailers to monitor and minimize the carbon footprint of all the goods they sell Water conservation specialists, including engineers to develop water-saving technology and managers to ensure that businesses minimize their use of water
Clean Energy 1.0 Moving beyond green to create sustainable jobs and a long-term energy strategy 15

Until now, the notion of green jobs was thrown around willy-nilly to justify a wide array of initiatives, policies, and investments. We need to reset our sights and narrow our definition of green jobs.
In the U.K., the Carbon Reduction Commitment legislation, which takes effect in 2011, will require 5,000-6,000 businesses to monitor their carbon output, thus creating an array of positions for carbon managers. (Efficiency jobs are hiding elsewhere, too: Think of the bike shop workers in cities that adopt bicycle lanes, or the bus and subway employees in those that have congestion charges for cars.) Add to this the immense job creation potential of every promising new startup in the field. Take Verdiem, which provides software to reduce energy consumption of PC networks, or Google PowerMeter, which allows consumers to monitor energy usage in their homes. Meanwhile, entire massive industriesshipping, for instanceare only just now beginning to explore the potential of reducing energy consumption and emissions (shippers are now being spurred to do so by legislation that compels them to reduce emissions near the shores of North America and elsewhere). There are two sectors in which the job potential of energy efficiency is most evident: construction and urban management.

Figure 13. Redefining the business model from cost-based to value-pulled capitalism

Education Ideas Solutions

Redefining capitalism: Three interconnected virtuous circles driving local solutions to reduce carbon Goal: Create a low- or zero-carbon world

Carbon Cost Recycle Revise Reduce Reimagine Redesign Reengineer

Source: The JAStanislaw Group LLC, 2010

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Figure 14. Value-based capitalism: driving business and thus sustainability

A company/business should be sustainable. This means services and products should meet demand needs of customers through cost reductions to ensure a better choice.

And "choice" in tomorrow's world means that all costs associated with the "Commons" are incorporated.

Then the company is sustainable, society is on a sustainable path, and so is the planet.

Buy Green
Cars Houses Electricity Auto fuel Appliances Technology Paper goods Ofce buildings Clothing Food Entertainment Ideas

Make these products chic and use Say's Law to create a new eco-ethic/ eco-chic, where the supply of environmental, climate-change-friendly goods creates market and creates demand.

Source: The JAStanislaw Group LLC, 2010

Cities generate the vast bulk of CO2 emissions. As a result, city policymakers are under growing pressurefrom citizens and from investorsto incorporate into their policymaking environmental sustainability in general and greenhouse gas emissions in particular. Cities are relevant because of their immense worldwide growth and their complex systemswhich can greatly reduce energy use. In 2008, for the first time in human history, the majority of the worlds people lived in cities. If there were ever a time to focus on developing solutions for sustainable cities, that time is now. And mayors are taking action: More than half of U.S. cities are either currently creating a sustainability plan or have finished one within the past year, and about one-quarter of cities finished their plans even earlier than that. The most concrete sign of this commitment from cities is in the mass compact signed by the majority of mayorsthe U.S. Conference of Mayors Climate Protection Agreement. As of February 14, 2010, 1,017 mayors from the 50 states, the District of Columbia and Puerto Rico, represented a total population of over 86 million citizens. The mayors of 400 European cities, meanwhile, pledged last year to make drastic cuts in CO2 emissions by 2020.

Clean Energy 1.0 Moving beyond green to create sustainable jobs and a long-term energy strategy 17

Figure 15. Value-based capitalism and the clean energy continuum: two generations

The essentials
Education: Continuous Leadership: Learning Basics: The ingredients based on factoring in all costs with a holistic approach Time Scale: One generation and more

A Sampling from the New Clean Energy Rule Book How to build a house; how to position house for sun and wind Local rules for small-scale windmills in a suburban setting Architecturegreen building

New game, new playing field


Clean Energy 1.0 Today Clean Energy 2.0 Clean Energy 3.0 Mid-century

Layout of city roads (can't change drive for mobility, but can shape and influence it) Local development, local production Alternative energy: local suppliers, local maintenance Process changefrom seeds with higher annual yields to producing goods with zero-carbon footprint Packaging: Reduce mass, make biodegradable and carbon neutral Smarter consumption and smarter production

And new rules


Value-based capitalism Capture all costs associated with the "Commons" All local, regional, and national elements Then write the Clean Energy Rule Book
Source: The JAStanislaw Group LLC, 2010

Take traffic congestion, which costs the U.S. economy $78 billion in 2005. The economic costs of congestion in New York alone are close to $4 billion a year. Estimates suggest that congestion costsin developed and developing citiesare between one percent and three percent of GDP. As car ownership grows, even greater strain will be placed on the transport infrastructure. Cities are just beginning to invest in managing this load. In Stockholm, for instance, a dynamically priced congestion charge for cars has reduced inner-city traffic by 25 percent and emissions by 14 percent, while boosting inner-city retail by six percent and generating new revenue streams. The great potential for America in the Clean Energy race is that it emanates from the IT industry, where America has a history of leadership. Pervasive information and communication technology means that there is much greater scope for leveraging technology for the benefit of cities: Instrumentation, or digitization, of a citys system means that the workings of that system are turned into data points and the system is made measurable. The connection between smarter water and energy systems is an example of the linkages that exist between urban systems. A substantial amount of electricity generated goes toward pumping and treating water. In Malta, for example, a new smart utility system informs citizens and businesses about their use of both energy and water, enabling them to make better decisions about resource consumption. In Seattle, a trial that gave businesses and households access to live energy pricesand thus the opportunity to adjust their use accordinglyreduced stress on the grid by up to 15 percent and energy bills by 10 percent on average.

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The construction sector is even more rife for savings. In the U.S., buildings account for 70 percent of all energy use. Meanwhile, a startling 40 percent of the world's output of raw materialsthree billion tonsis used in buildings. Green buildings can reduce energy consumption by 30 to 50 percent, on average, according to IBM. And yet achieving just a 15 percent reduction in energy consumption in buildings worldwide could lead to $295 billion in energy savings. The opportunities for energy innovation and management are everywhere evident, beginning with the training of architects who design the buildings, to construction processes, to insulation, the HVAC system, the lights, the water, the elevators, the power and cooling for technology, the heating and cooling for people. Requiring that new buildings be green is a good first step for cities. But retrofitting existing buildings is where the greatest mid-term potential liesover 90 percent of buildings in America are over five years old. There are up to 250 billion square feet of buildings in the United States, mostly in cities, that need to be retrofitted, according to the Green Cities Report (produced by the Living Cities philanthropic collaborative). Green retrofitting, of course, can create new green jobs. Investments in retrofits can produce immediate economic impact: $1 million spent on retrofits creates between eight and 11 jobs, according to the Green Cities Report, and generates about $300,000 in taxes.

Figure 16. Clean energy triptych

Durable local jobs

Climate
Source: The JAStanislaw Group LLC, 2010

National security

Clean Energy 1.0 Moving beyond green to create sustainable jobs and a long-term energy strategy 19

Energy: a state of mind

This is just the early dawn of the Clean Energy era. Only in the past year or two has energy become a national state of mind. But the historic importance of this can hardly be underestimated. Today, every American citizen and corporation has been empowered. Each one is becoming aware that they have their own energy P&L and carbon footprint. Businesses and governments should respond to this new reality by creating the products and services that will help Americans manage their energy consumption. Corporations, meanwhile, should realize that in addition to their core business, each and every one of them is an energy company, tooand that managing their energy usage can be critical to their bottom line. Policymakers can amplify these trends by creating the rules of the game and funding the research that will position the United States at the cutting edge of the Clean Energy evolution.

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About the author

Dr. Joseph A. Stanislaw is founder of the advisory firm The JAStanislaw Group, LLC, specializing in strategic thinking, sustainability, and environmentally sound investment in energy and technology. He is an independent senior advisor to Deloittes energy and sustainability practices. As an energy industry leader, advisor, strategist and commentator, Dr. Stanislaw advises on future trends in the global energy market. Dr. Stanislaw serves on several boards in the energy and clean technology space. He is a member of the Council on Foreign Relations. Dr. Joseph A. Stanislaw Independent Senior Advisor Energy & Sustainability Deloitte LLP +1 703 251 1726 jstanislaw@deloitte.com Dr. Stanislaw was one of three founders of Cambridge Energy Research Associates in 1983 and served as managing director for all non-U.S. activity until 1997, when he was named president and chief executive officer. He is an adjunct professor in the Nicholas School of the Environment and Earth Sciences at Duke University, where he is a Member of the Board of Advisors for the Nicholas Institute for Environmental Policy Solutions. Dr. Stanislaw was a Research Fellow of Clare Hall and lecturer in Economics at Cambridge University, where he was also a member of the Energy Research Group in the Universitys Cavendish Laboratory. He was a senior economist at the Organization of Economic Cooperation and Developments International Energy Agency in Paris. Dr. Stanislaw is co-author of The Commanding Heights: The Battle for the World Economy. Now in the second edition, the book has been translated into 13 languages and made into a six-hour documentary on PBS. He is also the author or co-author of numerous reports and published papers on the geopolitics and economics of future energy supply and demand, including Energy in Flux: The 21st Centurys Greatest Challenge, and Clean Over Green: Striking a New Energy Balance as We Build a Bridge to a Low-Carbon Future, and he is featured in the public television documentary, Oil ShockWave. Dr. Stanislaw received a B.A., cum laude, from Harvard College, a Ph.D. in Economics from the University of Edinburgh, and was awarded an M.A. from the University of Cambridge. He is one of only several people to have been awarded an Honorary Doctorate and Professorship from Gubkin Russian State University of Oil and Gas in Moscow. Dr. Stanislaw may be contacted at jas@thejastanislawgroup.com.

Clean Energy 1.0 Moving beyond green to create sustainable jobs and a long-term energy strategy 21

About the Deloitte Center for Energy Solutions The Deloitte Center for Energy Solutions provides a forum for innovation, thought leadership, groundbreaking research, and industry collaboration to solve the most complex energy challenges. Through the Center, Deloittes Energy & Resources Group leads the debate on critical topics on the minds of executivesfrom legislative and regulatory policy, to operational efficiency, to sustainable and profitable growth. We provide complete solutions through a global network of specialists and thought leaders. With locations in Houston and Washington, D.C., the Deloitte Center for Energy Solutions offers interaction through seminars, roundtables and other forms of engagement, where established and growing companies can come together to learn, discuss and debate. www.deloitte.com/energysolutions

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte, its affiliates, and related entities shall not be responsible for any loss sustained by any person who relies on this publication. Copyright 2010 Deloitte Development LLC. All rights reserved. Member of Deloitte Touche Tohmatsu June 2010

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