Backers see job creation, but I see high costs for ratepayers.
“The project workforce has reached an all-time high with approximately 9,000 workers now on site. With more than 800 permanent jobs available once the units begin operating, Vogtle 3 & 4 is currently the largest jobs-producing construction project in the state of Georgia.” — Georgia Power, Press Release, February 11, 2020.
I understand why Georgia Power is emphasizing the jobs created by the Vogtle nuclear power plant project. Many policymakers, and perhaps even some utility commissioners, view these jobs as a significant benefit. I’m happy for the workers who are employed on this impressive project.
But when I see 9,000 workers on site, and 800 permanent jobs, I don’t see job creation. I see high costs for ratepayers. Electricity bills are already going up to pay for Vogtle.
These higher electricity rates hurt households, particularly lower-income households for whom bills are a larger share of the household budget. Higher electric rates also hurt small- and medium-sized companies and lead energy-intensive companies to move elsewhere.
The broader point is that counting jobs created in one sector misses the overall impact. Promoting labor-intensive energy sources makes energy more expensive if they aren’t cost effective, which leads to lost jobs in other sectors. Energy is an input into almost everything, so making it more expensive hurts the economy and reduces growth.
Not the Time for Economic Stimulus
During a recession, many economists will argue for short-term Keynesian-style economic stimulus. There are times when this makes sense, but now is not one of those times. Despite the recent volatility in the stock market and virus-related uncertainty, the United States is not in a recession. Friday’s job report showed a national unemployment rate of only 3.5%. In Georgia, it is even lower.
What this means is that Vogtle is not creating many jobs. If it weren’t for the Vogtle project, the vast majority of these talented people would be working elsewhere in the economy. They would be somewhere else, doing some other job, creating value in another industry. When we employ workers in one place, we give up the gains we would have enjoyed from them working elsewhere. This is the opportunity cost of labor, and during good economic times, the opportunity cost is high.
There is also a fundamental mismatch between multi-year projects like this and fiscal stimulus. For fiscal stimulus you need jobs that can be quickly deployed at the right moment, and then pulled back when the economy starts to recover. Nuclear projects aren’t like that.
Perhaps I’m being unfair in singling out nuclear. There is a tendency across energy sectors to talk about job creation. Not coincidentally, job creation tends to be discussed more often in relatively labor-intensive sectors (like rooftop solar and weatherization), than in less labor-intensive sectors (like grid-scale renewables).
But the labor costs for nuclear are striking. The sheer scale and complexity of the Vogtle project requires an unusually large labor force, many of them highly-skilled, highly-specialized engineers. These high labor costs are one of the reasons why it costs so much to build a nuclear power plant.
Perhaps even more striking are the ongoing labor costs. Georgia Power anticipates 800 permanent jobs at Vogtle once the new units are operational. A natural gas combined cycle plant of similar generation capacity would employ less than 100. That is a big difference. Nuclear power is not only capital-intensive, but it is also labor-intensive.
What About The Future?
Can we view the Vogtle project as an investment in human capital? Will the skills learned on the job at Vogtle position U.S. workers on the vanguard of a growing market? Could this investment be a way of moving the entire economy to a different equilibrium path?
Maybe, but I doubt it. The Bureau of Labor Statistics doesn’t see bright prospects for U.S. nuclear engineers. There are dozens of nuclear reactors currently under construction worldwide, but only Vogtle 3 & 4 in the United States, and it’s not clear whether U.S. workers and U.S. firms will be able to leverage their experience at Vogtle to join these international projects.
It seems more likely that the primary legacy of Vogtle will be higher electricity rates. Ratepayers will be paying for this $25+ billion project for a very long time. Higher electricity rates will raise the cost of doing business for everyone, leading to fewer jobs throughout the economy. Just because it is harder to point to these jobs in a press release doesn’t mean they are any less real.
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Suggested citation: Davis, Lucas. “The High Cost of Nuclear Jobs” Energy Institute Blog, UC Berkeley, March 9, 2020, https://energyathaas.wordpress.com/2020/03/09/the-high-cost-of-nuclear-jobs/
Lucas Davis is the Jeffrey A. Jacobs Distinguished Professor in Business and Technology at the Haas School of Business at the University of California, Berkeley. He is a Faculty Affiliate at the Energy Institute at Haas, a coeditor at the American Economic Journal: Economic Policy, and a Faculty Research Fellow at the National Bureau of Economic Research. He received a BA from Amherst College and a PhD in Economics from the University of Wisconsin. Prior to joining Haas in 2009, he was an assistant professor of Economics at the University of Michigan. His research focuses on energy and environmental markets, and in particular, on electricity and natural gas regulation, pricing in competitive and non-competitive markets, and the economic and business impacts of environmental policy.