The Clean Energy Sector Is Set For A Major Labor Shortage

Editor OilPrice.com
Mon, January 16, 2023

The Biden administration’s Inflation Reduction Act is a sweeping piece of legislation that will have a huge range of impacts from imposing a 15% minimum corporate tax rate to reforming prescription drug pricing. The Act also marks a turning point for the clean energy industry and imposes a protectionist approach to energy production that stands to alter the United States’ relationship with Europe. It seems like the Inflation Reduction Act does just about everything – oh, yeah, except reduce inflation.

The Inflation Reduction Act is actually a slimmed-down version of the Build Back Better Act, and it, therefore, includes massive financial support for United States industries, most notably in the renewable energy sector. According to the Biden administration, the Act provides an estimated $370 billion in subsidies for solar, wind, and electric vehicle subsidies.

Through these and other provisions, the bill aims to enable the United States to lower greenhouse gas emissions to a threshold 40% below 2005 levels by 2030. However, the bill also includes provisions supporting fossil fuels, which were added to the Act in order to sway key holdout West Virginia Senator Joe Manchin to help pass the legislation. While this has led to a lukewarm reception among environmentalists, the Act stands to create unprecedented support for the green energy transition and could have major positive implications for the U.S. economy as a whole.

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Altogether, the investments and subsidies included in the Inflation Reduction Act will create a whopping 537,000 jobs a year for a decade. While that kind of job creation is great on the surface, it actually highlights a major problem for the clean energy industry’s big moment: there just aren’t enough workers to get the job done. According to reporting from Reuters, the labor shortage is severe enough that it stands to derail Biden’s climate change agenda altogether. Despite tactics including “ offering better wages and benefits, flying in trainers from overseas, and contemplating ideas like buying roofing and electric repair shops just to hire their workers,” U.S. clean energy companies haven’t been able to bridge the labor gap.

Reuters Graphics


Clean energy companies have been forced to try new recruiting tactics and new labor pools. “In their hunt for workers,” Reuters reports, “solar, wind and electric vehicle companies have expanded programs offering free and subsidized training to military veterans, women and the formerly incarcerated.” But so far those efforts have fallen short. "It feels like a big risk for this expansion. Where are we going to find all the people?" said Abigail Ross Hopper, president of the Solar Energy Industries Association trade group, quoted in the report.

The United States unemployment rate is currently at a historic low of just 3.5%. The question is whether it’s going to stay there. The United States Federal Reserve has a dual mandate – to maintain price stability and the ideal inflation rate of 2% and to support maximum employment. Clearly, the Fed has had its work cut out for it on the inflation front over the last year; last month the annual inflation rate clocked in at 6.5% – which may sound bad but actually represents the sixth consecutive month that the inflation rate has decreased. Those decreases are due to the Fed’s aggressive interest rate hikes. While that tactic has proven successful, however, some economists are now wondering whether the Fed has gone too far.

Lots of economic experts are predicting that we will enter into a recession this year, which means that while the runaway interest rates will stabilize, the unemployment rate will rise. While this is terrible news for the economy as a whole, it could prove to be a saving grace for the clean energy industry and the climate agenda.

By Haley Zaremba for Oilprice.com