Red States, Green Jobs
The South has more green jobs than any other region. But will politicians keep investing in something many Southern voters don’t believe in?
David Kiss looks out with satisfaction across the floor of the 110,000-square-foot solar panel factory he runs: An assortment of people, robots and advanced machinery are turning the 180,000 solar cells that arrive every morning into approximately 3,000 solar panels that ship out at the end of every day. The plant is owned by Sharp Electronics, the Japanese manufacturing conglomerate. Previously, Sharp made color televisions in the factory. But after it moved television production to Mexico in 2000, Sharp repurposed this plant for the post-carbon future. In 2002, the company sent Kiss, a mechanical engineer specializing in factory innovation, to Japan to study its Katsuragi solar fabrication plant. The following year, Sharp opened the factory, its first U.S. solar panel plant. “We’ve been adding to it ever since,” he says proudly.
Solar panels are heavy -- about 43 pounds -- so you would think there would be a competitive advantage to being close to your market. Yet, although most of the installed solar systems in the U.S. are in a handful of states -- Arizona, California, Colorado, Nevada and New Jersey -- the Sharp factory isn’t in any one of them. It’s in Tennessee.
Sharp isn’t the only company setting up post-carbon factories in the state. Tennessee is in the middle of a solar boom that is on the verge of making it a major player in the clean tech economy. North of Nashville in Clarksville, Michigan-based Hemlock Semiconductor recently broke ground on a 500-acre, $1.2 billion plant to produce polycrystalline silicon, also called polysilicon, the base material used for solar panels. Some 3,500 workers are currently working on the site, which Hemlock officials hope will start production in a year’s time. In southeast Tennessee, a German company, Wacker Chemical, is building another billion-dollar-plus polysilicon plant, one that will ultimately employ more than 600 workers. AGC Flatglass, a Belgian company that supplies 60 percent of the world’s solar glass, produces some of that glass in a factory in the little Tennessee town of Kingsport. And then there’s Shoals Technologies Group, located north of Nashville, which controls nearly two-thirds of the U.S. photovoltaic wiring market. The products produced in its factories find a home in countries ranging from Canada and Germany to China and India.
And that’s just the solar industry. Last summer, Nissan began preparations to ramp up U.S. production of its all-electric LEAF hatchback with a $1.4 billion investment in a new lithium-ion battery plant on the grounds of its 5.4 million-square-foot assembly plant in Smyrna, just south of Nashville. Nissan predicts that the battery plant and retrofitted assembly plant will add up to 1,300 new jobs when operating at maximum capacity. All totaled, 10,000 green jobs will be created in the state between now and 2014, according to a recent report by the Business and Economic Research Center at Middle Tennessee State University and the Tennessee Department of Labor and Workforce Development.
Tennessee’s experience with green jobs isn’t unique. The green economy already employs 2.7 million workers nationwide, half a million more jobs than the so-called fossil fuel economy. More surprising still, the region with the most green jobs is the South. “It turns out that the largely ‘red’ South is surprisingly green, at least when it comes to the production side of the clean economy,” observes Mark Muro, a senior fellow and one of the authors of a recent report on green jobs by the Brookings Institution and Battelle’s Technology Partnership Practice. He notes that of the 21 states with at least 40,000 clean economy jobs, seven are in the South.
The South’s emergence as a green jobs powerhouse raises several questions. One is about the necessity of policies, such as renewable energy portfolios and generous rebates that several states -- California, Colorado, New Jersey and New York, among them -- have long insisted are necessary to support the emergence of green tech companies. The other poses a serious challenge for Republican governors in states such as Tennessee: Many voters in Southern states are against federal stimulus programs, deeply suspicious of renewable energy and downright angry about the use of taxpayer dollars to create green jobs. Yet, the Volunteer State’s emergence as a potential solar powerhouse has been anything but accidental. Rather, it reflects a concerted effort by former Gov. Phil Bredesen, a Democrat and Harvard-educated entrepreneur, to “catapult Tennessee to the front of the emerging solar technology industry,” using federal stimulus money wherever possible. As stimulus funding winds down and a new administration, led by former Knoxville Mayor Bill Haslam, a moderate Republican, settles into office, it faces a question: Can Tennessee -- and the South as a whole -- grow a sector of the economy if many of its voters don’t believe in it?
That issue is playing itself out 40 miles east of Memphis where, along Interstate 40, a crew of installers and electricians is hurrying to finish work on the West Tennessee Solar Farm. When it’s completed, the 5-megawatt, 40-acre solar farm will be the largest solar installation in the state, capable of generating enough electricity to power 2,500 homes. It’s a striking -- and unusual -- site. Unlike most solar installations, where lines of solar arrays stretch across a flat landscape, the solar farm is laid out in a circle, around an empty knoll overgrown with 6-foot-tall weeds and grass. As the $31 million solar farm was originally envisioned, the knoll was intended to be the site of a Tennessee Department of Transportation rest stop where travelers could learn how solar power works. But after Gov. Bredesen’s term ended and Gov. Haslam took office, the rest stop was put on hold.
The West Tennessee Solar Farm was built as part of an unprecedented, $37 billion surge in federal funding for renewable energy. Most of that funding came from the passage of the American Reinvestment and Recovery Act, President Obama’s stimulus package. Federal grants and tax credits have sparked explosive growth in both the solar and wind fields. According to the Solar Energy Industries Association, the solar market share of the renewable energy pie grew by 67 percent last year as the industry added 956 megawatts, enough to power 200,000 homes. The wind industry also saw a 40 percent surge in market share. Tennessee shared in the bounty, receiving $62.5 million. Half of those funds went to the solar farm. The other half went to installation and innovation grants run by the Tennessee Solar Institute, a joint project between the University of Tennessee and Oak Ridge National Laboratory.
There was a reason new money for renewable energy was included in the stimulus package: It was supposed to create jobs -- lots of them. The Obama administration promised 5 million new, well-paying green jobs. Nationally, it hasn’t worked out that way. The Council of Economic Advisers estimates that the renewable energy portion of the stimulus package created or preserved 225,000 new green jobs through the third quarter of 2010. Administration officials expect to put another 825,000 Americans to work in green jobs by the end of 2012. Even if they do, though, those numbers fall far short of the president’s promise.
Part of the problem was clearly wishful thinking about the country’s ability to build a renewable energy industry. “There are good reasons to create green jobs,” observed Princeton University economics professor and former Federal Reserve vice chairman Alan Blinder, “but they have more to do with green than with jobs.” Another part of the problem has almost certainly been the failure of the federal government to raise the price of carbon-based fuels through either a carbon tax or with a cap-and-trade system. Most experts agree that without raising the price of carbon-based fuels, it’s going to be hard to jump-start the clean economy, particularly with recent discoveries of massive deposits of cheap natural gas. Most people will simply gravitate to the cheapest source of energy.
Then there’s Solyndra. The California-based firm developed a photovoltaic panel that relied on a source other than polysilicon, which was expensive at the time. It also looked to low-cost installation techniques that held out the promise of significant cost savings. The supposed technological edge -- and the company’s willingness to create hundreds of jobs -- made it a particular favorite of the Obama administration. Through its loan guarantee program, the U.S. Energy Department (DOE) provided $535 million to the company; Obama personally visited the factory. However, Solyndra was caught unprepared for a precipitous drop in the price of polysilicon and conventional solar panels, a drop caused by the entrance of Chinese manufacturers into the market. In August, Solyndra announced that it was laying off 1,100 workers and shutting its doors.
Solyndra’s failure put a bull’s-eye on the Obama administration’s green jobs program. Conservatives such as former Oklahoma Rep. Ernest Istook, now an analyst with the conservative Heritage Foundation, declared that green jobs “are about government subsidies, cronyism and job cannibalism.” The libertarian Cato Institute criticized what it called “the false dream” of a green economy. The controversy made “green jobs,” a phrase that had once had overwhelmingly positive connotations, controversial, even in states such as Tennessee where the benefits of green jobs are so palpable. That poses a problem for Bill Haslam.
Tennessee’s new governor proudly pursued DOE designation while mayor of Knoxville as one of the nation’s 12 Solar America Cities, proclaiming at the time, “We want to be a leader in clean technology.” But as governor, he’s stayed away from such rhetoric. Instead, he and his economic and community development officials prefer to talk about growing Tennessee’s “advanced manufacturing and energy cluster.”
“It’s really a difference in language,” explains Clint Brewer, the assistant commissioner of economic and community development. “I don’t think [green jobs] has bad connotations. I just don’t think it’s as accurate as saying advanced manufacturing or energy. We’re looking at those investments in a broader sense.”
Haslam’s predecessor, Phil Bredesen, pursued big deals with companies such as Volkswagen, Hemlock Semiconductor and Wacker Chemical. Bredesen says his administration “did not try to pick technologies.” Instead, it sought to attract a few big players -- “anchor” tenants, as it were -- to create what he says is “a feel and aura that Tennessee is serious about this, that it’s a place where a lot is going on.”
As an example of how important creating this aura is, Bredesen recounts a dinner with visiting Volkswagen executives held at U.S. Sen. Bob Corker’s house in Chattanooga. Dinner was pleasant but perfunctory until Bredesen started talking about a joint project between Oak Ridge National Laboratory and a private company to develop cellulosic ethanol in eastern Tennessee.
“Suddenly they were all ears,” says Bredesen. “It turned out they had this huge interest in green automobiles.” While the presence of biofuel innovation didn’t win Tennessee Volkswagen Passat’s plant on its own, “there’s no question that it really helped turn the corner to help them take us very seriously.”
But where the Bredesen administration aggressively recruited out-of-state firms and lost few opportunities to talk up the green economy, the Haslam administration has placed more emphasis on growing jobs in companies that are already there, in looking at those industry clusters where the state has a strategic advantage and growing those clusters.
“We feel government doesn’t create jobs,” says Brewer. “Government helps create a positive environment where jobs can grow.” Brewer notes that Tennessee has a big advantage in advanced manufacturing and energy, with two companies -- Hemlock Semiconductor and Wacker -- making massive investments. He wants growth to be driven by the private sector. “It’s not about the solar industry. It’s about market demand for private investment and about businesses wanting to do business in Tennessee.”
The new administration’s emphasis on growing in-state jobs is a reasonable one. The economic literature suggests that once states achieve a certain concentration of industry, they’re better off growing existing clusters rather than paying hefty incentives to lure in big firms from outside the state. But it’s not clear that capturing the next economy works that way. Consider, for instance, the deal-making that went into Tennessee’s pursuit of Hemlock Semiconductor. The Clarksville-Montgomery County area offered some notable attractions to Hemlock. One, ironically, was access to cheap power. Purifying polysilicon from metallurgical-grade silicon to silicon that is 99.9 percent pure -- the standard necessary for efficient solar panels -- is extremely energy intensive. Tennessee is in a position to deliver massive quantities of energy cheaply thanks to the presence of the coal and hydropower plants of the Tennessee Valley Authority (TVA), a public utility.
Another attraction was Fort Campbell. Retiring military per- sonnel made for an attractive workforce. But Hemlock’s decision to locate in Tennessee didn’t happen naturally. Talk to officials in Clarksville and Montgomery County and it quickly becomes clear that it was the result of intense deal-making by Clarksville Mayor Kim McMillan and Montgomery County Mayor Carolyn Bowers -- deal-making that included but went beyond the standard types of incentives that states routinely offer big companies to relocate. To address concerns about the workforce knowledge base, for instance, at the two mayors’ request, the Bredesen administration shook loose more than $4 million in state funds to build a chemical engineering certification program at Austin Peay University. (The company contributed $2.3 million worth of equipment so that students could train on machinery that would approximate the equipment in the plant.) Although precise figures aren’t available, the Nashville Business Journal recently estimated that more than $300 million in tax credits and infrastructure improvements had gone to Hemlock and Wacker Chemical, which is building a similar plant in southeastern Tennessee.
Proponents of Tennessee’s renewable energy economy believe that the presence of Hemlock and Wacker, as well as companies like Sharp, Shoals Electronics and AGC Flatglass, will attract other solar companies to Tennessee, much as Nissan’s decision to open its first assembly plant in Smyrna in the early 1980s led to the growth of a local auto supplier chain.
Still, there are reasons for spreadsheet folks to be nervous. Polysilicon prices on the spot market have been falling dramatically as new entrants from China enter the market. Dow Corning and Hemlock Semiconductor spokesman Jarrod Erpelding insists the company is in the solar business for the long haul. Most of the polysilicon is sold on the basis of stable, long-term contracts. As for the competition from China, Erpelding acknowledges the challenges posed by new entrants into the marketplace -- by some estimates, as many as 100 new polysilicon producers -- but cautions that “this is a very complex and capital-intensive process.”
“We feel like we can compete,” Erpelding says. “That’s what is important to us.” However, he emphasizes that government support for the industry in the form of tax credits for advanced manufacturing operations and to prompt installation plays a role. “The U.S. isn’t even in the same ballpark as far as what other countries have done to support their solar industries,” notes Erpelding. “While the U.S. has certainly made some steps, it’s impossible to compare it with what countries like China and Germany have done.”
Gil Melear-Hough, the president of the Tennessee Solar Energy Industries Association, puts it more bluntly: “U.S. government policymakers may not believe the green economy is coming, but the Chinese sure do. They want to own it.”
Some states, most notably California and New York, have attempted to compensate for the lack of federal action by acting on their own. Last month, California became the first U.S. state to implement a mandatory cap-and-trade system. It’s the centerpiece of the effort mandated by the state’s groundbreaking global warming legislation AB 32 to reduce California’s carbon emissions to 1990 levels by 2013. But that’s just part of California’s efforts. Earlier this year, Gov. Jerry Brown signed a law that requires California utilities to generate one-third of their total power from renewable sources by 2013. It’s part of Brown’s pledge to create 500,000 clean tech jobs (and add 20,000 megawatts of renewable energy to the grid) by the end of the decade.
So far, it hasn’t paid off. “[T]he results,” opined The New York Times in a recent article on San Jose’s struggle to jump-start the solar economy, “suggest such numbers are a pipe dream.” Still, with more than 300,000 green jobs, California has more people working in the clean tech economy than any other state, and the scale of the projects under way in the Golden State dwarf anything envisioned for Tennessee. This summer, Brown attended the groundbreaking of the Blythe Solar Project in the Mojave Desert. Upon its completion, the 1,000-megawatt solar plant will generate enough electricity to power half a million homes. That’s nearly 200 times the size of the West Tennessee Solar Farm.
Still, Bredesen and his successor agree on one thing. Tennessee shouldn’t implement the kinds of ambitious renewable energy targets that states like California and New York have enacted, even if its politicians were willing. Putting these renewable standards in place, says Bredesen, encourages a very specific thing: the production of green energy. But he wants Tennessee “to be the state that builds everything and sends it to them.” It’s not clear that the state’s renewable industry can grow solely by counting on other states to shoulder the burden of higher energy costs. The time is coming when Tennessee itself may have to make some tough decisions about its solar future.
Federal stimulus funding is running out. The future of the Tennessee Solar Institute is uncertain. While administrators at the University of Tennessee and Oak Ridge National Laboratory express optimism that funding will be found, legislators would have to agree to appropriate money, and their willingness to do so is uncertain. That worries Steve Johnson, the owner of LightWave Solar, a solar installation company south of Nashville. Johnson founded LightWave Solar five years ago in a barn behind his house. “In 2006 there was nothing happening in Tennessee,” Johnson says. “Some off-grid solar up in the mountains in people’s cabins, that was basically it. I was told that I wouldn’t be able to keep a truck and two men busy, and that was quite true.”
But Johnson stuck with it. Today, he has 59 employees, a number that has doubled every year. Six of his employees have moved to Tennessee from other states to work for LightWave. “If we can keep growing,” he says, “we will keep hiring.” But he worries that if incentives expire and the TVA trims its modest energy rebate program, “installation could come to a crashing halt.”
His company is living on grants from an old program and once that finishes, he isn’t sure what the future will be. “There is no incentive from the state at all. It has always been federal money.”
The state, he points out, has no renewable portfolio standard. To help his industry, the state could mandate that the TVA provide 3 percent solar in their energy mix. It could also remove property tax from solar equipment.
Tennessee has not done any of that, nor is it likely to. “This is a business with a real future, a worldwide future,” Johnson says. “I don’t think they have the vision for what it could be.”
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