Full text of Creating Jobs Through Energy Policy : Hearings Before the Subcommittee on Energy of the Joint Economic Committee, Congress of the United States, Ninety-Fifth Congress, Second Session, March 15 and 16, 1978

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CREATING JOBS THROUGH ENERGY POLICY

11568
HEARINGS
BEFORE THE

SUBCOMMITTEE ON ENERGY
OF THE

JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED S T 4 1 ®
NINETY-FIFTH CONGRESS
SECOND SESSION

MARCH 15 AND 16, 1978

Printed for the use of the Joint Economic

U.S. GOVERNMENT p r i n t i n g o f f i c e
31-502

WASHINGTON : 1978

For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington, D.C. 20402

JOINT ECONOMIC COMMITTEE
(Created pursuant to sec. 5(a) of Public Law 304, 79th Cong.)
RICHARD BOLLING, Missouri, Chairman
LLOYD BENTSEN, Texas, Vice Chairman
SENATE

HOUSE OF REPRESENTATIVES
HENRY S. REUSS, Wisconsin
WILLIAM S. MOORHEAD, Pennsylvania
LEE H. HAMILTON, Indiana
GILLIS W . LONG, Louisiana
PARREN J. MITCHELL, Maryland
CLARENCE J. BROWN, Ohio
GARRY BROWN, Michigan
MARGARET M. HECKLER, Massachusetts
JOHN H. ROUSSELOT, California

JOHN SPARKMAN, Alabama
W ILLIAM PROXMIRE, Wisconsin
ABRAHAM RIBICOFF, Connecticut
EDWARD M. KENNEDY, Massachusetts
GEORGE MCGOVERN, South Dakota
JACOB K. JAVITS, New York
W ILLIAM V. ROTH, Jr., Delaware
JAMES A. McCLURE, Idaho
ORRIN G. HATCH, Utah

J ohn R. Stark, Executive Director
Louis C. K rauthoff II, A ssistant Director

Richard F. Kaufman, General Counsel
E conomists
Deborah Norblli Matz
George R. T yler

K ent H. H ughes
L. Douglas Lee
P hilip McMartin

G. T homas Cator
T homas F. Dernburo
Robert D. Hamrin

Minority
Stephen J. E ntin
Charles H. Bradford
M. Catherine Miller

S u b c o m m it t e e

George D. K rumbhaar, Jr.
Mark R. P olicinski

E nergy

EDWARD M. KENNEDY, Massachusetts, Chairman
SENATE
JOHN SPARKMAN, Alabama
WILLIAM PROXMIRE, Wisconsin

HOUSE OF REPRESENTATIVES
GILLIS W . LONG, Louisiana
CLARENCE J. BROWN, Ohio

JAMES A. McCLURE, Idaho
ORRIN G. HATCH, Utah

Jerry B rady, Professional Staff Member
(II)

CONTENTS
WITNESSES AND STATEMENTS
W ednesday, M arch 15, 1978
Kennedy, Hon. Edward M., chairman of the Subcommittee on Energy:
Opening statement________________________________________________
Cooper, Maudine R., deputy director, Washington Bureau, National
Urban League, Inc________________________________________________
Aim, Hon. Alvin L., Assistant Secretary for Policy and Evaluation, De
partment of Energy, accompanied by Clark W. BuUard, Director,
Office of Conservation and Advanced Energy Policy_________________
Benson, James W., project director, Council on Economic Priorities, New
York, N .Y _______________________________________________________
Chapman, Duane, associate professor of resource economics, Department
of Agricultural Economics, CorneU University, and visiting associate
professor, energy and resources program, University of California,
Berkeley_________________________________________________________
Hannon, Bruce, associate professor and director, Energy Research Group,
Center for Advanced Computation, University of Illinois_____________

Pag«
1
2

1$
27

42
52

T hursday, M arch 16, 1978
Kennedy, Hon. Edward M., chairman of the Subcommittee on Energy:
Opening statement________________________________________________
Clark, Wilson, assistant to the Governor for issues and planning, State of
California, accompanied by Sim Van der Ryn, State architect________
Marshall, Hon. F. Ray, Secretary of Labor, accompanied by Arnold H.
Packer, Assistant Secretary for Policy, Evaluation, and Research; Ron
Kutscher, Assistant Commissioner, Bureau of Labor Statistics; and
Willis Nordlund, Special Assistant to the Under Secretary of Labor___
Winpisinger, William W., president, International Association of Ma
chinists and Aerospace Workers____________________________________
Mazzocchi, Anthony, vice president, Oil, Chemical & Atomic Workers
International Union, accompanied by Frank Collins, consultant on
energy matters___________________________________________________
Ruttenberg, Stanley H., president, Ruttenberg & Associates, Washington,
D.C., on behalf of Edward J. Carlough, general president, Sheet Metal
Workers’ International Association_________________________________
Carbone, Hon. Nicholas R., councilman, Hartford City Council, Hartford
Conn________________ __ _________ ______________________________

69
70

132
160
173
188
201

SUBMISSIONS FOR THE RECORD
W ednesday, M arch 15, 1978
Aim, Hon. Alvin L., et al.:
Prepared statement_____________________________________________
18
Benson, James W.:
Prepared statement_____________________________________________
31
Chart reflecting manpower comparison of nuclear powerplant, Long
Island, N.Y., to a conservation/solar equivalent_________________ 40-41
Chapman, Duane:
Prepared statement_____________________________________________
45
Cooper, Maudine R.:
Prepared statement____________________________________________ _
5
Hannon, Bruce:
Prepared statement_____________________________________________
55

(m)

IV
T

h u rsd ay,

arch

16, 1978

Carbone, Hon. Nicholas R.:
Prepared statement_____________________________________________
Clark, Wilson, et al.:
Prepared statement, together with attachments____________________
Response to additional written questions posed by Senator Kennedy.«
McGovern, Hon. George:
Article entitled “ Shift to Atom Power Urged by Schlesinger,,, from
the Los Angeles Times, March 15, 1978-------------------------------------Marshall, Hon. F. Ray, et al.:
Prepared statement_____________________________________________
«Response to Senator Javits' request to supply supporting information
* on the relationship between the cost of energy and its impact on
.^employment__________________________________________________
Response to Senator Javits’ request to provide information on the
cooperation between the Departments of Labor and Energy in
developing a closer relationship in assessing the impacts of an energy
policy on employment and training_____________________________
Mazzocchi, Anthony, et al.:
Prepared statement--------------------------------------------------------------------Ruttenberg, Stanley H .:
Prepared statement of Edward J. Carlough________________________
Winpisinger, William W.:
Prepared statement---------------------------------------------------------------------

202
78
127
206
140
156

157
177
191
164

APPENDIX
Statements, articles, and responses to written questions posed by Senator
Kennedy regarding the relationship between energy supply, jobs and eco
nomic growth------------------------------------------------------------:--------------------

209

CREATING JOBS THROUGH ENERGY POLICY

W EDN ESDAY, M ARCH 15, 1978
C ongress
of

U n it e d S t a t e s ,
S u b c o m m it t e e o n E n e r g y
t h e J o in t E c o n o m ic C o m m it t e e ,
of t h e

Washington D.O.
The subcommittee met, pursuant to notice, at 9:30 a.m., in room
5110, Dirksen Senate Office Building, Hon. Edward M. Kennedy
(chairman of the subcommittee) presiding.
Present: Senators Kennedy and McClure; and Representative
Heckler.
Also present: Jerry Brady, subcommittee professional staff member;
Kent H. Hughes, professional staff member; Mark Borchelt, admin
istrative assistant; and Stephen J. Entin and George D. Krumbhaar,
Jr., minority professional staff members.
O p e n in g S t a t e m e n t

S enator K

ennedy,

C h a ir m a n

Senator K e n n e d y . Ladies and gentlemen, this is the first hearing
held by the Congress explicitly on the relationship between energy
and employment. This alone should make our hearings interesting and
provocative and I welcome you here.
I asked for these hearings today for one simple reason: I could not
see where the national energy plan took employment into account. I
wondered if the need to expand employment was considered when the
plan was written. I suspected, without knowing, that too little was
known about the subject, then and now.
All of us have heard for years the argument that we must keep build
ing more and more powerplants, strip more and more land for coal
and build huge shale oil and coal gasification plants to keep the econ
omy running and provide jobs. In the next few weeks we will be hear
ing more about the need to spend billions to convert coal to gas or
liquid fuel at a cost of something like $30 a barrel of oil equivalent.
The Congress will be asked to subsidize shale oil and geopressured
gas production. We are told that more and more capital must go into
energy production—even though energy already consumes one-third
of our entire capital investment.
With the fervor of missionaries, the energy companies have pro
moted this proposition as if it were gospel. And indeed most of us
have assumed there was an absolute relationship between energy and
economic growth—making more difficult any argument against proj
ects which harm the environment or create safety hazards.

(l)

2
Today we cannot continue to accept uncritically this assumption.
We cannot accept higher prices from highly priced technologies be
cause we are told jobs are at stake.
I am hopeful these hearings will give us insight into these ques
tions: How much energy do we really need to sustain economic
growth ? To what extent can labor be substituted for energy and capi
tal ? What energy production systems make the most favorable contri
bution to employment ?
Before we hear our witnesses, I would like to note that there has
been a great deal of interest in this. A great many people could not be
accommodated. I regret that.
At this point in the record, without objection, I will submit a state
ment by the NAACP and the American Association of Blacks in En
ergy, together with a large number of additional statements, which will
all appear in the appendix to the hearings.
Our first witness is Maudine R. Cooper. Ms. Cooper is the deputy di
rector of the Washington Bureau, National Urban League and has
been kind enough to appear before us. The president of the Urban
League could not be with us.
Ms. Cooper, please proceed in any way you wish.
STATEMENT OP MAUDINE R. COOPER, DEPUTY DIRECTOR, WASHINGTON BUREAU, NATIONAL URBAN LEAGUE, INC.

Ms. C ooper. Thank you. I ask your indulgence. I have a severe case
of laryngitis.
Senator K e n n e d y . We brought you a little sunshine this morning
in order to help you get over that.
Ms. C ooper. Mr. Jordan is not here this morning, and for those of
you in the audience, obviously, I am not him. I am too short. He sends
his warmest regards.
As you know, minority employment has been the top policy and
program priority of the NUL for over 65 years. Energy policy, how
ever, is a more recent concern of our organization. Recently, some
critics have suggested that minority based organizations such as the
League are perhaps overstepping their bounds or losing sight of their
priorities by focusing attention on what some term, related or tangen
tial priorities such as energy or environment.
However, our organization is increasingly aware of the fact that
the lives of poor blacks and other minorities in this country are de
pendent on securing an adequate income base through productive em
ployment. Therefore, the league cannot and does not view such issues
as energy as outside of the purview of our concerns for the plight of
black and other minority Americans. We know that in 1978 we must
examine as forthrightly as resources will allow, all of the major forces
which foster sound economic growth. We cannot blindly advocated jobs
without a basic understanding of the mechanisms by which jobs are
created and maintained. Energy production, distribution, consumption
and conservation raise issues and problems which ultimately affect
the economic health and employment potential of all Americans, but
especiallv low income people, too many of whom are black.
Indeed, we are here today to call the attention of this distinguished
Joint Economic Committee of our Congress to a very basic concern,

3
that is, while our Government has recently created a new cabinet-level
agency, the Department of Energy, to deal with energy problems, little
has been done to directly address the implications of alternate energy
policies on employment. Indeed, we would like to suggest some con
crete ways in which various entities of government should be cooperat
ing to look more closely with energy and employment.
Let me begin by reviewing for you the underpinnings of the National
Urban League’s basic approach to energy policy. Last January 20,
1978, Mr. Vernon E. Jordan, Jr., president of the National Urban
League spoke before a consumer/utility conference in Minneapolis,
Minn., and set forth our basic thinking.
He said:
In my view, the three pillars of a sound energy policy include conservation,
development of renewable energy resources, and shielding the poor from the
negative fallout effects of energy policies.

He went on to state:
These three pillars must support the structure of continued economic growth
with emphasis on including the minorities in that growth.

We look upon conservation as a key initial step in a successful energy
policy. Indeed conservation fosters it. Conservation means rational
application of limited national resources toward their most productive
uses and the elimination of waste. They are not inconsistent policies.
In our opinion energy conservation should also mean jobs. Insulating
our homes, expanding and upgrading our mass transit systems, and
recycling materials all mean jobs—and not jobs solely for the unskilled
but employment for those semiskilled and skilled workers so hard hit
by our Nation’s economic slide.
We know in the United States the poorest fifth of all families use
about 25 percent of their budget to buy energy intensive items; the
wealthiest fifth of the families use only 5 percent of their budget for
this purpose. When the prices of energy rises the poor suffer most.
Conservation we believe can reduce the demand on our current non
renewable energy supplies and encourage attention to development
of alternative technologies.
Alternative energy technological development is the second pillar
of the Urban League’s approach. The creativity, imagination, and
ingenuity which produced the productive technologies which made our
Nation great must be put to work in developing alternate means of
energy production.
Traditional energy modes utilizing fossil fuels or uranium for
energy production require increasing capital investments per Btu
produced. One dollar invested in oil production in 1974 produced about
17 million Btu’s of energy per year. But that same dollar invested in
producing strip-mined coal yielded only 2 million Btu’s per year; in
shale oil only about 400,000 Btu’s per year and nuclear power brings
up the rear with the equivalent of 20,000 Btu’s per year.
Thus, investment in our traditional energy enterprises will continue
to place an inordinate drain on investment capital so badly needed for
investment in productive enterprise which create jobs. Those tradi
tional energy industries generate fewer jobs per dollar of investment
than almost any other major industries. The Ford Foundation found

4
that the 15 largest energy using industries consumed 45 percent of
the energy used in manufacturing, but accounted for only 6 percent
of manufacturing jobs. Furthermore, the environmental and health
cost of continued use of fossil fuels and uranium to generate power
are now being documented and are proving to be indeed quite high.
So we are forced to turn to alternate technologies. Clearly the de
monstrated potential is great. In fact, they are competitive with tradi
tional sources in specific markets. Undoubtedly, your hearings will
produce accounts of technical feasibility studies and demonstrations.
The league defers to the experts in presentation of all the evidence
for alternate energy development. However, we must express our
genuine concern that the Federal Government is not doing enough
to first, foster alternate technologies on an immediate priority na
tional basis, and second, incorporate employment effects in their stud
ies of means of stimulating energy supplies.
It is increasingly evident that our energy crisis is central to both
inflation and unemployment in this country. This is the heart of the
Urban League’s concern. I might add, not to be placed as a first or
second priority but to be largely tangential.
Senator K e n n e d y . As I understand, you think as we are fashioning,
in the Congress, a national energy policy we ought to have a kind of
employment assessment evaluation of these various alternatives ?
Ms. C ooper. Absolutely.
Senator K e n n e d y . I think it is a matter of national policy when we
develop environmental assessments, when we are developing new build
ings or making major decisions that make an impact on the environ
ment as a result of Government policy. But we really have not, in the
effort to fashion and shape an energy policy, really given a great deal
of attention as to what the employment impact will be. We may make
judgments that we may feel that in some instances if the employment
impact is not one way or the other we still have to move ahead in terms
of our energy requirements. But we must be more mindful of what the
implications of those energy decisions will be.
As I gather from your statement there, that has really not been an
issue that has been addressed in the fashioning of a national energy
policy, nor is it very apparent in terms of congressional direction of
the energy approach.
Ms. C ooper. Y ou are absolutely correct.
Senator K e n n e d y . And perhaps given the statistics that you point
out, where the need is and the lowest income groups in our society are
the most impacted by energy decisions, at least their interest or con
cerns ought to be addressed. And I gather from what you have stated
here that that has not been the case.
^Ms. C ooper. That has not been the case. I f I might expand, in pre
vious testimony we have called for employment impact statements,
similar to what we now have in the environmental impact statements,
on all major national policy. We believe that it is inconsistent with na
tional policy to have, for example, a full employment policy on the one
hand and then other policies being implemented by the Congress which
mav have inconsistent outcomes.
Senator K e n n e d y . So on the one hand we are being asked to deal
with whether it is a CETA program, jobs program, youth employ

5
ment program, on the one hand, and putting hundreds of millions of
dollars in that, and as the result of an energy decision working in the
opposite direction. We really don’t know what that relationship is.
We will have other witnesses who have studied this and have given
a good deal of attention to it.
Ms. C ooper. Unfortunately, we see little or no evidence that the De
partment of Energy, with primary responsibility to solve our Nation’s
energy problems, is effectively cooperating with the Department of
Labor, the Department of Commerce, or other Federal agencies in
identifying the effects of their proposed energy policies on employ
ment, inflation, or business investment before developing its own en
ergy strategies.
What we hear from DOE are plans for advanced fossil fuel and
nuclear technologies, oil stockpiles, ways to decrease imports, crude
oil equalization taxes, natural gas deregulation issues—an endless list
of technical solutions. Little is heard about the employment and infla
tionary effects of those proposals, and even less is heard about their
employment and inflationary effects in comparison with the alternate
technologies.
Eight now, DOE proposes that technologies be tested and employ
ment and inflation will be addressed later. Even in its approach to
alternative technologies the government omits employment concerns.
The President has recently established a Solar Policy Coordinating
Committee of cabinet officials and heads of critical Federal agencies;
but did not include the Secretary of Labor in that group.
A memorandum from Senate Commerce Committee staff to the
Carter transition team in December 1976 pointed to a feasible program
for creating 100,000 jobs through a $1.6 billion investment in solar.
Has that recommendation been implemented ?
What we have before us is a very basic need to shift our national
goals and priorities to the needs of the future. And the needs of poor
people and workers in this country must be taken into the equation
rather than left as an afterthought. Our Department of Energy is
simply not doing a complete job. There are basic equity issues at stake.
In conclusion, the National Urban League is asking that those Gov
ernment entities responsible for the development of energy policy
place a priority on jobs and simultaneously address the inflation and
unemployment impacts which affect the economic opportunities of
black people.
I will entertain questions.
[The prepared statement of Ms. Cooper follows:]
P repared S t a t e m e n t

a t jd in e

C ooper

Mr. Chairman, I am Maudine R. Cooper, Deputy Director of the Washington
Bureau, National Urban League, Inc. We welcome this opportunity to respond
to your invitation to give our views on the relationship between energy and
employment.
The National Urban League is a non-profit, charitable and educational social
service organization founded in 1910 to secure equal opportunities for Black
Americans. Its scope has since been expanded to include all minority groups,
and poor and disadvantaged Americans, whoever they may be. But its major
thrust continues to be on behalf of Black people in the nation’s cities. The League
is nonpartisan and interracial in its leadership, staff and membership. Through
its impressive network of 109 affiliates, the NUL has carried out its mandate with
a view towards the concerns of poor and minority Americans.

6
The League is committed to enhancing employment opportunities for minorities:
and the disadvantaged and to educating that portion of the population to existing
opportunities. The demonstrated effectiveness of the League in this area has
been proven through the development and operation, nationally as well as
locally, of over 100 highly successful training and employment programs. Approx
imately eighty-five of our one hundred nine affiliates Urban Leagues operate
employment programs, and many affiliates address the problems of youth
employment.
Thank you for the opportunity to discuss with you the concerns the National
Urban League shares regarding the relationship between energy and employ
ment. As you know minority employment has been the top policy and program
priority of the NUL for over sixty-five years. Energy policy, however, is a more
recent concern of our organization. Recently some critics have suggested that
minority based organizations such as the League are perhaps overstepping their
bounds or losing sight of their priorities by focusing attention on what some
term, related or tangential priorities such as energy or environment. However,
our organization is increasingly aware of the fact that the lives of poor Blacks
and other minorities in this country are dependent on securing an adequate in
come base through productive employment. Therefore, the League cannot and
does not view such issues as energy as outside the purview of our concerns for
the plight of Black and other minority Americans. We know that in 1978 we
must examine as forthrightly as resources will allow, all of the major forces
which foster sound economic growth. We cannot blindly advocate jobs without
a basic understanding of the mechanisms by which jobs are created and main
tained. Energy production, distribution, consumption and conservation raise issues
and problems which ultimately affect the economic health and employment po
tential of all Americans—but especially low income people—too many of whom
are Black.
Indeed, we are here today to call the attention of this distinguished Joint
Economic Committee of our Congress to a very basic concern; that is, while our
government has recently created a new Cabinet-level agency, the Department of
Energy, to deal with energy problems—little has been done to directly address
the implications of alternate energy policies on employment. Indeed, we would
like to suggest some concrete ways in which various entities of government
should be cooperating to look more closely with energy and employment.
Let me begin by reviewing for you the underpinnings of the NUL’s basic ap
proach to energy policy. Last January 20,1978, Mr. Vernon E. Jordan, Jr., Presi
dent of the NUL spoke before a Consumer/Utility Conference in Minneapolis,
Minnesota and set forth our basic thinking. He said “In my view, the three pil
lars of a sound energy policy include conservation, development of renewable
energy resources, and shielding the poor from the negative fallout effects of
energy policies.”
He went on to state “These three pillars must support the structure of con
tinued economic growth with emphasis on including the minorities in that
growth.”
We look upon conservation as a key initial step in a successful energy policy.
Indeed it fosters it. Conservation means rational application of limited national
resources towards their most productive uses and the elimination of waste. In
our opinion energy conservation should also mean jobs. Insulating our homes,
expanding and upgrading our mass transit systems, and recycling materials all
mean jobs—and not jobs solely for the unskilled but employment for those semi
skilled and ¡skilled workers so hard hit by our nation’s economic slide.
(Conservation also has another important effect. Benefits flow from decreases
upon the demand for scarce non-renewable resources upon which our economic
system has come to depend. Reduction in demand, while not a panacea for in
flation, is certainly a step in the right direction. In addition, the rising energy
costs of non-renewable resources are basic ingredients in the inflation gripping
the nation as a whole, and simultaneously strangling the low income ghetto
family squeaking by on income far below the poverty level.
In the United States, the poorest fifth of all families use about 25 percent of
their budget to buy energy intensive items; the wealthiest fifth of the families
use only five percent of their budget for this purpose. When the prices of energy
rises the poor suffer the most. Conservation we believe can reduce the demand
on our current non-renewable energy supplies and encourage attention to develop
ment of alternative energy production technologies.

7
Alternative energy technological development is the second pillar of the Urban
League’s approach. The creativity imagination and ingenuity which produced the
productive technologies which made our nation great must be put to work in
developing alternative means of energy production. Traditional energy modes
utilizing fossil fuels or uranium for energy production require increasing capital
investments per BTU produced. One dollar invested in oil production (in 1974)
produced about 17 million BTU’s of energy per year. But that same dollar invested
in producing strip-mined coal yielded only two million BTU per year; in shale
oil only about 400,000 BTU per year and nuclear power brings up the rear with
the equivalent of 20,000 BTU per year.
iThus, investment in our traditional energy enterprises will continue to place
an inordinate drain on investment capital so badly needed for investment in
productive enterprise which create jobs. Those traditional energy industries gen
erate fewer jobs per dollar of investment than almost any other major industries.
The Ford Foundation found that the 15 largest energy using industries consumed
45 percent of the energy used in manufacturing, but accounted for only six per
cent of manufacturing jobs. Furthermore, the environmental and health cost of
continued use of fossil fuels and uranium to generate power are now documented
and are proving to be indeed quite high.
So we are forced to turn to alternate technologies. Clearly the demonstrated
potential is great. In fact, they are competitive with traditional sources in specific
markets. Undoubtly, your hearings will produce accounts of technical feasibility
studies and demonstrations. The League defers to the experts in presentation of
all the evidence for alternate energy development. However, we must express our
genuine concern that the federal government is not doing enough to first, foster
alternate technologies on an immediate priority national basis, and second, in
corporate employment effects in their studies of means of stimulating energy
supplies.
It is increasingly evident that our energy crisis is central to both inflation and
unemployment in this country. This is the heart of the Urban League’s concern.
Unfortunately, we see little or no evidence that the Department of Energy, with
primary responsibility to solve our nation’s energy problems, is effectively co
operating with the Department of Labor, the Department of Commerce, or other
federal agencies in identifying the effects of their proposed energy policies on
employment, inflation, or business investment before developing its own energy
production strategies. What we hear from DOE are plans for advanced fossil
fuel and nuclear technologies, oil stockpiles, ways to decrease imports, crude oil
equalization taxes, natural gas deregulation issues—an endless list of technical
solutions. Little is heard about the employment and inflationary effects of those
proposals; and even less is heard about their employment and inflationary
effects in comparation with the alternate technologies. Right now, DOE pro
poses that technologies be tested and employment and inflation will be addressed
later. Even in its approach to alternative technologies the government omits em
ployment concerns. The President has recently established a Solar Policy Coor
dinating Committee of Cabinet officials and heads of critical federal agencies;
but did not include the Secretary of Labor in that group. How else will we be
able to generate unemployment data? The Small Business Administration dis
regards the Congressional Office of Technology Assessment’s report of March,
1977 which states that solar technology will result in jobs both in unskilled and
skilled trades in areas now suffering from chronic unemployment through the
construction of buildings and industrial facilities which are the backbone of
America’s small businesses. Instead, SBA views the solar industry as having
limited or speculative potential. Indeed this lack of priority attention to em
ployment pervades the energy community. The April 1977 report of the American
Bar Associations Special Committee on Energy Policy to the Section on Natural
Resources Law looks solely at means of increasing supplies—oil, gas, electric
power, hydroelectric, coal and energy conversion and takes on extremely nega
tive view of solar. Never once does it mention employment implications of any
of these.
A. memorandum from Senate Commerce Committee staff to the Carter Tran
sition Team in December 1976 pointed to a feasible program for creating 100,000
jobs through a $1.6 billion investment in solar. Has that recommendation been
implemented?
What we have before us is a very basic need to shift our national goals and
priorities to the needs of the future. And the needs Qf poor people and workers

8
In this country must be taken into the equation rather than left as an after
thought. Our Department of Energy is simply not doing a complete job. There
^re basic equity issues at stake.
As the Department of Energy directs the course of American energy develop
ment in the coming years, it must work closely with other agencies and organiza
tions to examine the jobs impact of each major decision it considers. DOE should
be playing a central role in stimulating investment in employment generating
energy technologies. The financing mechanisms must be implemented in order to
direct massive investments to small business and homeowners to convert to solar
and other already-proven technologies.
Development of renewable energy sources amounts to creation of a new sector
of the energy industry, an industry in which Black participation has been minimal.
Adoption of new energy technologies typically requires less capital, fewer skills,
and generates more jobs. Neighborhood-based heating installations, roof-top solar
devices and community based energy technologies are suited to small scale busi
ness development and to the training and employment of poor and minority
persons. So too are insulation programs and programs to modify existing struc
tures to make them more energy-efficient.
We can no longer afford to divert our capital into energy sources without
demonstrated employment benefits.
DOE Should be working with DHEW to get the educational system to turn
out engineers and conduct research to develop our alternate technologies. Cor«
(porations must be assisted in meeting the challenge of energy conversion.
In all, what is needed is government creativity and leadership in the large
scale conversion of our economy to renewable resources and alternate technolo
gies. In doing so, we are fostering economic growth as a whole while softening
the inevitable blow which such a major conversion can entail. And, as an interim
measure, DOE should be working with CSA, HUD, HEW and other agencies
which provide services to inner-city persons, to seek short-term means of shield
ing or at least cushioning the poor from escalating energy prices.
In conclusion, the NUL is asking that those government entities responsible
for the development of energy policy place a priority on jobs and simultaneously
address the inflation and unemployment impacts which affect the economic
opportunities of Black people.
Thank you.
Senator K ennedy. Thank you, Ms. Cooper. We will hear in greater

detail later in the morning about the impact, very direct impact for
alternative energy sources from a jobs point of view and we will get
into that in some detail. I don’t know whether you have some specific
suggestions or recommendations as it applies to the urban areas, cities
of this country, what your own studies have shown would be the most
effective way of meeting the problem of employment, particularly in
the minority groups and also in low-skilled groups.
Ms. C ooper. All of the information that we have seen, studies done
on solar energy, for example, show that you do not need the highskilled technology that you would need in the construction of a nuclear
facility. We have also found that those kinds of facilities can be con
structed within urban areas rather than in the outlying suburban
areas.
The question is, Why is this country lagging in the use of solar en
ergy in comparison to other countries ? We keep hearing it is not tech
nologically feasible at this time. If it is not, what is it that is causing
the delay in getting the appropriate dollars out there to make the tech
nology feasible?
Those kinds of jobs that would be created, for example, in installing
solar window boxes in apartment dwellings of low-income persons,
whv is it we cannot do that on a large-scale basis?
Putting aside solar, going to insulation of homes, for example, why
is it we don’t have massive dollars being put into the weatherization

9
program instead of the small sums being put forth in this prosent
budget %
It seems to me if we are serious as a Nation about energy conserva
tion we ought to reallocate our scarce resources in a manner which will
both conserve energy and create jobs. I don’t see us doing that. I don’t
think it takes an awful lot of creativity to do that. There is just a lack
of willpower on the part of some 01 our Federal Agencies and/or
leaders.
Senator M cC lure. Y ou make that statement because you believe it
will be more efficient in the production of employment. And do you
think it would also be more efficient in the production of energy ?
Ms. C ooper. Not in the production of energy but energy conserva
tion.
Senator M cC lure. Conservation. Do you think that dollar expendi
ture is more efficient ?
Ms. C ooper. We are talking about saving energy right now. We keep
hearing about the balance of payments, about the OPEC pricing po
tential for increases, all of concern to us as well as the immediate job
impact upon Joe Blow in the inner city. We are not oblivious to such
international issues as the balance of payments and the impact of
OPEC on our internal domestic pricing policy and structure.
Senator K ennedy . A s we are making judgments and tradeoffs in
terms of where we are going in the direction of alternatives, we have
a variety of different ways of dealing with a national crisis and we
have been exploring those. But your point is that in each of these we
ought to be coordinating our policy as it relates to the major segment
of our population, and that is generally the poorest both in terms of
pricing and employment. We ought to be doing an impact study of
both of these.
In your prepared statement you mentioned pricing. You admit you
have some recommendations that weatherization, obviously it is a
program that has impacted in terms of jobs and employment and
impacted in terms of conservation. But the program, weatherization
program, the model program that was stimulated worked very suc
cessfully. It did up our way in New England. It was one of the really
effective programs.
You have some other recommendations in that area. I wonder if you
would just mention those.
Ms. C ooper. We have a great concern for those on fixed income or
those who receive income, for example, like welfare. When the costs
of that individual’s life style go up considerably, especially for some
thing like utilities, there is no immediate way to save that person
from the devastation that occurs when they have suddenly been faced
with a fuel adjustment clause, or an increase in their utility by virtue
of that fuel adjustment. There ought to be some immediate escalation
clause to make sure they do in fact receive immediate assistance rather
than when they are being evicted.
We also talk about fuel stamps as a way of assisting low-income
persons. To be very candid with you, we have had to recant from that
position because we found you don’t get utility reform with fuel
stamps. You just get Federal subsidy. We are sort of quiet on that,
but I understand in some areas fuel stamps are being used and used
successfully.

10
Our bigger goal is utility reform rather than fuel stamps and we
believe that will get more directly at the program rather than using
the stamj>s.
In addition, we would like to see an emergency assistance program
which is paid for by the Federal Government, monitored, evaluated,
and made to work. For example, we find it ludicrous that in this area
we recently heard that the emergency funds for energy utilities are not
being used or not being spent. I believe it was Washington, D.C.
It seems that DOE ought to be on top of those programs. They ought
to know at any point in time if the dollar is being spent, how it is being
spent; and if it is not being spent, why not. They are not doing this.
The money is being sent out to the States and it is sitting there. People
are being evicted or they have to make choices between fuel and food.
Senator K ennedy . We are aware of that and we are working with
Senator Muskie with that 200 million set aside. The earlier decision,
of course, was absolutely essential in terms of the number of people,
and generally the poorest people in the areas of the country that were
most adversely affected by the extraordinary cold weather last winter,
not this current one.
I think your testimony is helpful. I again understand that in each
of these areas of energy as we make policy that the economic impact
ought to be very carefully considered. And the economic impact in
terms of employment and jobs, and that we really ought to, in terms
of making choices, give weight to that particular impact. What we
need is the coordination and consolidation of policy and not just tar
geting of jobs but looking at the job impact and the fashioning of an
energy policy. That has not been done to date.
You raise these issues and across the spectrum, and primarily target
ing in on the poorest and unskilled people in our society that are bear
ing both the burden in terms of increased prices and the impact in
terms of increased unemployment. I think that is what we want to ad
dress in the course of our hearings about how we can deal with that
I want to thank you.
Senator M cC lure. I certainly agree that there are alternatives and
we ought to weigh the economic and social costs of the alternatives.
I think that perhaps hasn’t been done as fully as it should be, and we
ought to be addressing ourselves to the question. I appreciate your
comments along that line.
I am also concerned with the aspect of whether or not our society
will continue to grow and whether or not the disadvantaged in our
society will have opportunities to grow if our economy does not grow.
Will the opportunities for those who are least behind now be en
hanced—be more easily attained in a growing economy or more easily
attained in an economy that is somewhat constrained and in which pol
icy then must make the allocation to the benefits of the disadvantaged ?
Do you have an opinion as to which course is the better one ?
Ms. C ooper. N o growth versus slow growth, I guess is the shorthand
capsule of your question. We have some problem with that whole con
cept. To begin with, again, if you were to examine, for example, a
nuclear facility, you walk in and see absolutely no people. You see
computers. If you were to look at one of the energy company’s produc
tion facilities, you see no people. What I see us doing is growing but

11
using less and less manpower. We are becoming a technological so
ciety. What that means for our constituency is no jobs.
Senator M cC lure. Does that mean that? That may be the basic
question we have to answer. But it may mean they don’t have any jobs
where the energy is produced but there are jobs where it is consumed.
Ms. C ooper. That is also questionable. We can go into our manufac
turing companies and we will see now assembly lines where there is
little or no manpwoer. I know the argument has been well documented
that we are becoming a technological society.
Senator M cC lure. And you think that is bad?
Ms. C ooper. It is bad if it means we will have only machines
rather than people.
Senator M cC lure. I recall going through that same argument at
the end of World War II. Now that the war was over and the war
machinery was being disbanded and world production was going to
decline, that now we are going to go back to the Great Depression
days of breadlines and W PA projects and that there was no way our
economy could provide enough jobs for our people. Yet, quite the
•contrary occurred. There was a great upsurge of of job production for
civilian and nonmilitary segments of our society, and more people
found more jobs at better wages than they ever had before.
You are entitled to say what you wish. 1 am only trying to get from
you what your position is. If 1 understand it, you would go back to
ibuilding the interstate highway by use of pick and shovel and wheel
barrows instead of using tractors ?
Ms. C ooper. No. I think that a balance should be struck between the
technologies that are being advanced today and full employment as
a national goal. I don’t think we are doing that. I think we are going
full speed ahead and using cost-benefit analyses that say it is far
more productive to use some kind of construction technology and
use 5 people rather than 55 people, which is fine. But after you do a
full cost-benefit analysis that includes a social and economic analysis
of the impact on people, you might find that those figures aren’t ac
curate.
For example, does it make a lot of sense to have us spending $45,000
a year to keep a person incarcerated when we could have given that
person a job, cut back a little on technology 5 or 10 years before he or
she was arrested? Does it make sense for us to continue developing
high technology when we should be putting those monies into the
educational system to keep young, poor kids from dropping out in
inordinate numbers? Nobody seems to be looking at this.
We look at the cost-benefit analysis in terms of direct machine costs
Tather than the social cost or the long range social cost.
Senator M cC lure. I think the point is valid, and I think we need
to take a look at what we can do. But at the same time we have to look
at what technology has been able to do in increasing the availability
of goods and services at a cost which people in society can afford to
pay, recognizing that some can and some cannot pay that cost.
I agree with you that there needs to be a careful look at the total
long-term cost. I suspect what you are really suggesting is that we
address this with the same fervor of indirect costs that we direct at the
indirect costs of environmental degradation and that we have an

12
employment impact statement, as horrendous as that may sound to
some, in the same way that we have an environmental statement. At
the same time we have to understand that there are societies that are
backward in the world and also the society that produces very little
in terms of per capita production of energy or per capita consump
tion of energy, and that the society with the lowest standard of living
and the least opportunity for the people to raise that standard of living
are the people living in very simple societies that are nontechnological.
The technological society does something to create the environment
in which all people can elevate their standard of living.
Ms. C ooper. I agree. As a matter of fact, we are m the business of
suggesting to what you call backward countries----Senator M cC lure. T o become more like us.

Ms. C ooper [continuing]. Which I assume is based on their desire as
well as our desire to help those who are less fortunate, if you will.
However, I go back to my original statement, there has to be a bal
ance. How long do we let technology take over before we say we have
to slow down or stop the process in order to maintain what we have ?
Senator M cC lure. Y ou sound like a true conservative.
Ms. C ooper. I don’t like to be classified as a conservative or a liberal.
We have to strike a balance. We are paying the cost on the other end.
You mentioned goods and services that people can’t afford. As we keep
getting more and more money in our pockets, we are finding those
goods and services that you say we can’t afford are costing more and
more.
Also, the ancillary services are costing more. I mentioned the prison
system, consider also the juvenile justice system. Even additional wel
fare money outlays to those who cannot afford to bnv those goods and
services. So we have to say that technology is now being cost ineffec
tive because of those indirect, ancillary problems.
Senator M cC lure. There is a little being done, perhaps not as much
as should be. There was a statement released bv the Department of
Labor and the Department of Energy, a joint study, a joint report on
labor and capital requirements dated January of this year; January
13, 1978. So some work is being done. Perhaps not enough, perhaps
not enoup-h indepth or with enough range.
I noted with a great deal of interest the statement made by the
NAAOP in January in regard to energy growth. As a matter of fact,
I think that may be one of the most important statements made in
the last several years on the question of energy. It was important
because it came from a sector of our society from which it was not
not expected. We have expected statements like that from a number
of other people but I regard that statement as being one of the most
clear and lucid statements of the desire of a group of people repre
senting a minority, and sometimes a disadvantaged minority of our
country, in regard to demand for energy growth in order to keep our
economy growing enough that people who do not now enjoy all of the
benefits of our society will have the opportunity to elevate themselves
to that status.
I thought that statement by the NAACP was a very important state
ment, and I have written to Mr. Hooks to congratulate him for that,
because it to me indicated their assessment which may be somewhat

13
different from yours, that energy growth was essential to the well
being of the constituency that they serve.
So you find yourselves in disagreement with that statement ?
Ms. C ooper. I think, though, that perhaps you ought to read our
statement that came out in Minneapolis, and you may find that it
is equally clear, equally lucid, or equally clarifying our position----Senator M cC lure. I didn’t mean to indicate that yours wasn’t clear
and lucid. I happen to like this. I have read yours. Some of what you
say I can’t follow quite as easily. Maybe it is my perception rather
than your statement.
Ms. C ooper. Just as congressional representatives may disagree or
not take the same position with impunity, I don’t think that there is
any mandate that all organizations, be they black or white, take the
same position on any issue.
Senator M cClure. We haven’t gotten to that point yet.
Ms. C ooper. We are not rubberstamping the NAACP and they are
not rubberstamping us.
Senator M cClure. Y ou do find yourself in some disagreement with
that statement?
Ms. C ooper. Yes, clearly.
Senator M cClure. D o you regard growth in GNP as essential ?
Ms. C ooper. I keep going back to my original statement, growth for
what purpose and how much is necessary to maintain a standard of
living that all in this country can enjoy and not just some. With the
kind of studies we have been talking about, I don’t know how I could,
or you could, sit and say we must grow, we must continue to grow,
until we have looked at all of the options. I don’t think we have.
There is a blatant assumption that we must continue to grow and
everyone----Senator M cC lure. Y ou haven’t decided that no growtli is the best
policy ?
Ms. C ooper. No, n o ; definitely not.
Senator M cC lure. You haven’t adopted that policy ?
Ms. C ooper. N o, we have not.
Senator M cClure. D o you believe that there is a correlation between

GNP growing and energy consumption ?
Ms. C ooper. Yes, there is.
Senator M cClure. The Humphrey-Hawkins bill calls for setting
national goals including the economic goals of growth. Do you support
that concept or would you say that the Humphrey-Hawkins bill is
off target 011 that area ?
Ms. C ooper. We support the Humphrey-Hawkins bill, but I think
you also should know that within that bill is enough of a caveat that
when the President finds those goals are either unreachable or causing
such disruption within the economy that those goals may be set aside.
I think that is the reason we can support it.
Senator M cClure. Y ou can accept it because it has that caveat so
that if we look at growth as slowing down we can rearrange it or stop it.
Ms. C ooper. Or maybe we want more.
Senator M cClure. That kind of growth. Do you believe, as some
do, that the GNP can grow with the rate of energy consumption grow
ing at a much slower pace than the rate of growth in GNP ?
31-502—78---- 2

14
Ms. C ooper. I am not sure. I am not an economist. I hate to speculate.
I know you do have some economists coming on after me. I hope that
they present all sides of the issue.
But I question whether or not we can have growth in GNP without
growth in energy consumption. I see those two as going hand in hand.
The question is how much growth. I keep going back to my original
statement—for us to maintain a standard of living that most Ameri
cans can afford and will enjoy we must examine implications of growth.
I am just not sure, frankly, how to answer your question.
Senator M cC lure. Thank you. While I may have questions, I think
your statement was clear. I do understand the point you are trying
to make, and I think the evaluation, as Senator Kennedy has said,
must be a central piece, not a peripheral piece of policy development,
to determine what this kind of energy policy, or any other policy, we
adopt as a major U.S. policy does as to the aspirations of our people,
including the employment and social framework in which that growth
takes place.
I thank you for your statement.
Senator K ennedy . Just before recognizing Congresswoman Heckler,
we will hear later from economists. There are other industrialized
societies that are increasing significantly in terms of growth and have
established their energy consumption. We have some interesting testi
mony on this issue in our joint economic hearings.
One of the particular things that we will hear is that the opportunity
for employment in alternative sources of energy, in solar energy, for
example, shows that there is an increase in employment of some 270
percent, double the output of energy with less capital investment,
which means less capital, particularly among the low-income groups.
Those are the issues we want to get into in more detail.
I think these are things that are theories that are challenged. But
I don’t know if you have to accept the proposition that with trying
to meet the issue of unemployment that it doesn’t necessarily mean that
we can’t increase our capacity of energy and not mean additional
jobs as well.
We will hear some of the economists that have done work on it.
Senator M cC lure. I think we would all agree, and perhaps even
stipulate, that the most labor intensive form of energy is muscle power,
and maybe we will want to substitute human muscle for that con
sumption of coal and nuclear. And perhaps we would rather have
people again working rather than having machines doing the work
for themselves. That is an option which our country can pursue.
Senator K ennedy . Even in a broader context, what do we do, for
example, in the recycling of various materials, bottles, and cans? Do
we make a decision that we are going to provide more intensively to
produce more of a product that will consume more energy, or do we
recycle which means less energy and more jobs ?
it doesn’t mean you have to do it with a pick and shovel. It means
you can conserve energy and do more jobs. Are our tax policies, invest
ments, writeoffs so skewed in such a way that we will encounter coun
terproductive areas ? I don’t think that any of us have suggested that
we go back to the pick and shovel.
Senator M cC lure. Some have.

15
Senator K ennedy . But not in this committee.
Senator M cClure. Ten percent of a population in the northernmost
part of my State is populated by young people who have gone back
to the soil movement, which they believe precisely that.
Senator K ennedy. They are doing that in my part of the country,
too. God bless them. That isn’t what we are trying to focus on. Maybe
there will be attention focused on that, but I think we will be more
fundamental and basic to the question of priorities during the course
of these hearings.
We will have some administration witnesses. A1 Aim has to be out
at a given time. Having taken more than my share of time, we will
ask Congresswoman Heckler to question.
Eepresentative H eckler. I would like to ask a brief question. I feel
that your testimony speaks to a very significant issue in terms of
energy policy, and it is one that isn’t usually discussed. So it is a facet
that has to be explored.
I am interested in knowing which you would prefer in terms of
dealing with problems of unemployment in the black community.
Would you prefer to see an expansion in employment opportunities in
the private sector or public sector? Do you see the component of
employment as part of an energy policy as a private question or a
public question ?
Ms. C ooper. If you are talking private or public in the sense that we
use in our manpower legislation------Eepresentative H eckler. I am talking

about CETA versus private
sector jobs.
Ms. C ooper. We firmly believe that private sector jobs are preferable.
But you also have real problems to consider. Can the private sector on
its own initiative deal with the hardcore, structurally unemployed?
That is the big question. That is why I think the administration is
pushing so hard for its private sector initiative. It feels it has to have
private sector direction in job policy formulation and job creation.
Public sector jobs are definitely—I shouldn’t say definitely, generally
dead end with very little training and what we want to do is get people
into long-term employment, employment that will be a transition into
the mainstream, if you will, and that is why we do in fact support pri
vate sector jobs.
Unfortunately, it seems as though this country has not been able to
absorb this large segment of the population that is unemployed and
that is ready, willing, and seeking a job.
Eepresentative H eckler. In order to achieve a long-term employ
ment, that I think is desirable and needed. But has the Urban League
taken a position on any of the tax proposals which can stimulate the
private sector? Are you going into tax legislation as part of the resolu
tion, as a part of the central issue of unemployment?
Ms. C ooper. We will be. I mentioned in my testimony that we will
be looking at a number of areas that exist within our resources. You
do need experts when you look at these issues. And frequently we
ha^e to call on a number of our friends.
Eepresentative H eckler. Are you supportive of the President’s
initiative in terms of the development of private sector employment?
Ms. C ooper. The new title VII of CETA, the reauthorization, we

16
have serious problems with. I will be testifying before the Hawkins
subcommittee on that very issue tomorrow. There are some specific
recommendations we have for changing that private sector initiative.
Representative H eckler. Thank you.
Senator M cC lure. Thank you.
I will be listening for that statement because I am very interested in
this Youth Employment Act which was adopted last year. I was one
of the original sponsors of that legislation. I think it is important. I
will be very interested in seeing that it works better.
Thank you for your testimony.
We will proceed to have Mr. Alvin Aim, Assistant Secretary for
Policy and Evaluation in the Department of Energy. Mr. Aim was
part of the team which created the national energy plan and organized
the new department.
He is accompanied by Mr. Clark Bullard, who is a widely respected
authority on energy economics.
I also understand that you have a time limit, so you can either give
your statement in its entirety, place it in the record, summarize it, or
however you desire.
STATEMENT OF HON. ALVIN L. AIM, ASSISTANT SECRETARY FOR
POLICY AND EVALUATION, DEPARTMENT OF ENERGY, ACCOM
PANIED BY CLARK W. BULLARD, DIRECTOR, OFFICE OF CONSER
VATION AND ADVANCED ENERGY POLICY

Mr. A lm. I propose not to summarize but rather to cut out cer
tain parts of my prepared statement.
Senator M cC lure. Your prepared statement will appear in the
record in full, and you may summarize or give portions as you wish.
Mr. A lm. Our position on energy and employment was stated clearly
in the national energy plan, NEP, last April: “It is an axiom of pub
lic policy that full employment be promoted. The energy problem can
be solved without turning off or slowing down America’s economic
progress. * * * Indeed, in the long run, the Nation can continue
to enjoy economic health only if it solves its energy problems.”
The Department of Energy has some capability for analyzing the
manpower, material, and capital requirements for constructing and
operating a variety of energy supply technologies. For each type of
facility, studies have been performed to calculate manpower require
ments in each occupational category, and have determined that the
total figure was doubled when the jobs created indirectly in the manu
facture and transportation of materials to the construction site were
taken into account. These results and the computer models are now
used by my staff on a continuing basis to evaluate the employment im
pact of energy supply development policies.
Investments in energy conservation also create employment. It is
important to distinguish here between conservation and curtailment.
Curtailment has given conservation a bad name. Conservation is
achieved through investments in efficiency. Whenever any input to
production is used more efficiently, economic growth and disposable
income are increased. This is true for energy as well as for capital
and labor.

17
Investments in energy conservation also serve to increase the tax
base where people live and work instead of the more remote areas
where new energy supplies are increasingly found. Moreover, invest
ments in conservation reduce expenditures for fuels and increase the
demand for other products which tend to be less energy intensive and
more labor intensive, creating added employment over the long term.
Analyzing the energy-employment relationship is no easy task,
because investments in energy supply and conservation necessarily
alter the structure of the Nation’s stock of capital equipment. There
fore, many aggregate economic models, which may perform other
tasks well enough, are inadequate for analyzing job impacts of pro
posed energy policies. Most econometric models are based on relation
ships observed during an era when energy costs were a small and de
creasing part of everyone’s budget, and consequently reflect a stable
relationship between energy use and capital investment.
Such models tend to reinforce the myth that cutbacks in energy use
must necessarily reduce economic growth, by retarding capital invest
ment. Nothing could be further from the truth. Many detailed studies
have shown that energy efficiency—that is, energy productivity—can
be increased by substituting capital for energy without reducing em
ployment. For example, most people are employed in the service sector,
where most of the energy is used in space heating and cooling. The
energy efficiency of the building and its heating system can be im
proved without affecting the number of people employed by the firm.
Similar findings hold for energy intensive industrial processes.
During the development of the first NEP we relied on studies by the
Ford Foundation and others that indicated the generally favorable
impacts of energy conservation on total employment. However, in many
cases it is not sufficient to look simply at the total number of jobs
created; it is necessary to be able to direct programs toward the re
gions and occupational categories where unemployment is highest. The
NEP tax credit for insulating existing structures is an example of such
a policy initiative.
The tax credit is designed to create jobs where they are most needed,
and to spur economic growth by allocating capital more efficiently to
investments that are often economically equivalent to buying oil at
less than half the OPEC world oil price. It will also provide the con
sumer with savings on monthly utility bills that can be spent on more
labor intensive goods and services.
At the present time, the Department does not have an adequate capa
bility for analyzing the employment impact of specific energy conser
vation investments in a way that permits easy comparison with energy
supply investments. Therefore, I am unable to report on comparisons
today. However, the Department is developing better methods and
collecting needed data and will perform analyses of employment ef
fects as an integral part of the development of the 1979 national energy
plan.
Several steps have been taken to permit better analysis. We are
developing a regional energy activity and demographic model, based
on county-level data, that will improve our capability for understand
ing subnational impacts of energy supply options.

18
The Department is also increasing its activity in energy manpower
data collection and analysis. Studies have been completed on man
power needs in energy research and on the skills needed by installers
of solar equipment. In conjunction with the Bureau of Labor Sta
tistics, (BLS), a survey of manpower in the nuclear industry has been
initiated.
In addition, manpower surveys of the solar, geothermal, and con
struction industries are now underway.
These efforts are not intended to develop a long-range forecasting
capability that would calculate detailed requirements for pipefitters
and insulators 30 years in the future; the uncertainty is simply too
great for any model to accomplish such a task. Rather, we are taking
a pragmatic line of inquiry to more fully understand how energy is
now being used in the economy, and to assess both the energy and
employment impacts of emerging technologies.
At the present time, we are engaged in two types of cooperative
efforts with the Department of Labor. One program is actually cre
ating jobs and conserving energy today; others are improving our
ability to develop and analyze new policy initiatives.
DOE, the Community Services Administration, and the Department
of Labor are jointly participating in a weatherization program which
employs over 12,000 CETA workers to insulate and weatherstrip the
homes of the poor and the elderly. DOE funds buy the materials which
are installed by the CETA workers.
Through an interagency agreement with the Bureau of Labor Sta
tistics, we have already begun to improve the Labor Department’s
employment impact model so it can accurately reflect the way energy
related investments change the structure of the economy. We hope to
expand this cooperation in the future and explore policy initiatives
that can help us achieve employment and energy goals together.
This brings me back, in closing, to our commitment in the NEP to
develop an energy policy which supports and promotes fuller employ
ment. I am very glad that you have called these hearings on this sub
ject at this time.^ It will help us to refocus ourselves on this issue and
to be more conscious of employment goals. I hope that these hearings
and the work which will develop out of them will increase under
standing and support for our efforts.
[The prepared statement of Mr. Aim follows:]
P repared S t a t e m e n t

on.

A l v in L . A

I am pleased to appear before you today to discuss the relationship between
energy and employment. In your letter of invitation, you asked three basic ques
tions. In response, I will first present our view of the linkage between energy
and employment and how the creation of jobs can be taken more fully into
account in energy policy. Second, I will discuss improvements in our analysis
that should help everyone to better understand this problem. Finally, I shall
describe how we are now working with other Departments to achieve our energy
and employment goals.
Our position on energy and employment was stated clearly in the National
Energy Plan (NEP) last April: “It is an axiom of public policy that full employ
ment be promoted. The energy problem can be solved without turning off or
slowing down America’s economic progress. . . Indeed, in the long run, the
Nation can continue to enjoy economic health only if it solves its energy
problems.”
The connection between jobs and energy was forcefully demonstrated when
energy use had to be suddenly curtailed during the 1973 oil embargo, and again

19
during the cold winter of 1977. As a result of these experiences, the Department
of Energy has taken several actions to protect America’s labor force from the
threat of layoffs induced by energy supply interruptions. We have accelerated
development of the Strategic Petroleum Reserve to reduce our vulnerability to
an embargo, and have initiated a variety of contingency planning studies to im
prove our ability to efficiently handle energy curtailments in ways that minimize
unemployment. NEP was developed to reduce our dependence on foreign oil by
eliminating energy waste, stimulating energy production, and encouraging utili
ties and industry to convert to coal. The tax provisions in the NEP are designed
to encourage investment in more efficient autos and industrial equipment.
To effectively deal with the real causes of our energy problem, energy pol
icies must influence investment decisions. Almost 25 percent of the Nation’s
gross private domestic investment goes for facilities that produce energy; the
other 75 percent for buildings, vehicles, and industrial plant and equipment
that consume it. As conventional resources are depleted, existing energy supply
facilities must be replaced by newer—often more capital intensive—technologies.
As energy prices rise, energy-consuming capital stocks must be replaced by newer,
more efficient vehicles, buildings and capital equipment. Each investment deci
sion, therefore, affects both energy and labor requirements. Our national goals
require that high priority be given to policies which encourage investments that
simultaneously reduce unemployment and close the gap between energy supply
and demand.
These hearings provide an opportunity to distinguish between the type o f
employment impacts associated with energy curtailments and those associated
with energy-related investments. While the impacts of energy curtailment are
generally negative, the effects of energy investments are generally positive.
Investments in energy production, conversion and conservation have somewhat
different, but positive, impacts on employment.
The Department of Energy has some capability for analyzing the manpower,
material and capital requirements for constructing and operating a variety of
energy supply technologies. For each type of facility, studies have been per
formed to calculate manpower requirements in each occupational category, and
have determined that the total figure was doubled when the jobs created indirectly
in the manufacture and transportation of materials to the construction site
were taken into account. These results and the computer models are now
used by my staff on a continuing basis to evaluate the employment impact of
energy supply development policies.
Investments in energy conservation also create employment. It is important
to distinguish here between conservation and curtailment. Curtailment has
given conservation a bad name. Conservation is achieved through investments
in efficiency. Whenever any input to production is used more efficiently, economic
growth and disposable income are increased. This is true for energy as well as for
capital and labor. Investments in energy conservation also serve to increase'
the tax base where people live and work instead of the more remote areas where
new energy supplies are increasingly found. Moreover, investments in conserva
tion reduce expenditures for fuels and increase the demand for other products
which tend to be less energy intensive and more labor intensive, creating added
employment over the long term.
ANALYTICAL CAPABILITIES

Analyzing the energy-employment relationship is no easy task, because invest
ments in energy supply and conservation necessarily alter the structure of the
Nation’s stock of capital equipment. Therefore, many aggregate economic models,
which may perform other tasks well enough, are inadequate for analyzing job
impacts of proposed energy policies. Most econometric models are based on
relationships observed during an era when energy costs were a small and
decreasing part of everyone’s budget, and consequently reflect a stable relation
ship between energy use and capital investment. Such models tend to reinforce
the myth that cutbacks in energy use must necessarily reduce economic growth,
by retarding capital investment. Nothing could be farther from the truth. Many
detailed studies have showrn that energy efficiency (energy productivity) can
be increased by substituting capital for energy without reducing employment.
For example, most people are employed in the service sector, where most of the
energy is used in space heating and cooling. The energy efficiency of the building
and its heating system can be improved on without affecting the number of

20
people employed by the firm. Similar findings hold for energy intensive industrial
processes.
During the development of the first NEP we relied on studies by the Ford
Foundation and others that indicated the generally favorable impacts of energy
conservation on total employment. However in many cases it is not sufficient to
look simply at the total number of jobs created; it is necessary to be able to
direct programs toward the regions and occupational categories where unem
ployment is highest. The NEP tax credit for insulating existing structures is an
example of such a policy initiative. It is designed to create jobs where they
are most needed, and to spur economic growth by allocating capital more effi
ciently to investments that are often economically equivalent to buying oil at
less than half the OPEC price. It will also provide the consumer with, savings
on monthly utility bills that can be spent on more labor intensive goods and
services.
At the present time, the Department does not have an adequate capability for
analyzing the employment impact of specific energy conservation investments in
a way that permits easy comparison with energy supply investments. Therefore
I am unable to report on comparisons today. However, the Department is develop
ing better methods and collecting needed data and will perform analyses of em
ployment effects as an integral part of the development of the 1979 NEP.
Several steps have been taken to permit better analysis. We are developing
a Regional Energy Activity and Demographic model, based on county-level
data, that will improve our capability for understanding subnational impacts of
energy policy options.
The Department is also increasing its activity in energy manpower data col
lection and analysis. Studies have been completed on manpower needs in energy
research and on the skills needed by installers of solar equipment. In conjunc
tion with the Bureau of Labor Statistics (BLS), a survey of manpower in the
nuclear industry has been initiated. In addition, manpower surveys of the
solar, geothermal, and construction industries are now underway.
These efforts are not intended to develop a long-range forecasting capabiilty
that would calculate detailed requirements for pipefitters and insulators thirty
years in the future; the uncertainty is simply too great for any model to ac
complish such a task. Rather, we are taking a pragmatic line of inquiry to more
fully understand how energy is now being used in the economy, and to assess
both the energy and employment impacts of emerging technologies.
INTERAGENCY COOPERATION

At the present time, we are engaged in two types of cooperative efforts with
the Department of Labor. One program is actually creating jobs and conserv
ing energy today; others are improving our ability to develop and analyze
new policy initiatives.
DOE, the Community Services Administration, and the Department of Labor
are jointly participating in a Weatherization Program which employs over
12.000 CETA workers to insulate and weatherstrip the homes of the poor and
the elderly. DOE funds buy the materials which are installed by the CETA
workers.
Through an interagency agreement with BLS, we have already begun to im
prove the Labor Department’s employment impact model so it can accurately
reflect the way energv-related investments change the structure of the economy.
We hope to expand this cooperation in the future and explore policy initiatives
that can help us achieve employment and energy goals together.
This brings me back, in closing, to our commitment in the NEP to develop
an energy policy which supports and promotes fuller employment. I am very
glad that you have called these hearings on this subject at this time. It will
help us to refocus ourselves on this issue and to be more conscious of employ
ment goals. I hope that these hearings and work which will develop out of
them will increase understanding and support for our efforts.

Senator K e n n e d y . Thank you very much.
Isn’t it true, the fact of the matter, in the drafting of the national
energy programs the issue was very seldom mentioned about employ
ment and the question of the impact of employment? I don’t know
how you characterize it, but it doesn’t appear to have been one of the

21
prime or front-burner decisions in terms of recommendations; was it?
Mr. A l m . There was a great deal of concern in the development of
the national energy policy on two issues relating to this hearing. One
was the macroeconomic impact. We prepared an analysis of macroeconomic impact of the national energy plan, together with the
Council of Economic Advisers. This was made available to the Con
gress and to others.
The analysis showed that the national energy plan had no impact
on employment one way or the other. This is because most of the
revenue from the energy plan is recycled.
Second, the plan dealt with the equity impact of the plan itself.
To balance the equity there were certain provisions in the plan, such
as the one concerning which would keep consumer costs down for oilheated homes. Other provisions, such as the refund of tax money
would have provided per capita rebates which would have a progres
sive impact. There was a concern for equity impacts and the macroeconomic impact. There was not a close checking of the primary eco
nomic impact.
Senator K ennedy . Was there an evaluation in terms of alternative
sources of energy, about what the impact was going to be ? Obviously,
not the totality of the issue and not macro but in terms of various
alternatives, conservation versus increasing nuclear versus solar.
Was there an evaluation of that ?
Mr. A l m . It is fair to say that the evaluation was a very crude cal
culation. It was not the kind of analysis that this subcommittee is
concerned about, nor the kind the Department of Energy is concerned
about performing in the future.
Senator K ennedy . Was there a study done by the Department of
Labor ? Were they called in ?
Mr. A l m . No, they were not. We worked mainly with the Council
of Economic Advisers.
Senator K ennedy . Y ou have a second stage of the national energy
plan that is coming out.
Mr. A l m . N o ; they were not. We worked mainly with the Council
early in 1979. That plan will, among other things, look at employ
ment impact.
Senator K ennedy . Maybe you can talk about that.
^Mr. A l m . We will be looking at a very large range of supply initia
tives. When I say supply initiatives, this includes conservation, and
soft technology as well as hard technology.
We will be considering those periods in the future when we would
have energy gaps which would require either rising imports; some
domestic supply source, or conservation to fill the gap. We will be look
ing specifically at the economic impact of the various alternatives. This
will give us the ability to consider employment as well as other factors
in the development of the national energy policy, including environ
mental factors, institutional and the like.
Senator K en n edy . When they submit the plan, will they be doing: an
analysis on the employment implications of various provisions of the
second plan?
M r . A l m . M y in te n t io n is t h a t t h e r e w i l l b e a s e c t io n d e a lin g w i t h
e m p lo y m e n t im p a c t s a l o n g w it h o t h e r e c o n o m ic im p a c t s .

22
Senator K e n n e d y . D o you intend to ask the Department of Labor
to work with the Department on this ?
Mr. A l m . We certainly do. We are undertaking a number of coopera
tive arrangements with the Department of Labor now, and I think
this hearing underscores the need for us to do more in that regard.
S e n a t o r K e n n e d y . Y ou a re n o t p r e p a r e d t o m a k e a n y p r e d ic t io n
a b o u t t h e r e la t io n s h ip b e t w e e n c o n s e r v a t io n in s t e a d o f p r o d u c t i o n
o r s o la r in s t e a d o f c o a l ?

Mr. A l m . I might make a general observation, Mr. Chairman. The
detailed analyses have not been done to give you hard numbers. I
think it is true that whenever you can bring a source of supply on more
cheaply than other sources, then you are providing more disposable
income which has a multiplier effect in terms of job creation. Insofar
as job creation activities can result in savings at half the cost of the
world price of oil, you are providing, on the one hand, direct jobs in
installation and production, and on the other hand more disposable in
come which is also job creating.
Senator M c C lure . I would like to focus on that last statement be
cause it is one I highlighted as you read through your statement, be
cause it runs directly counter to what the previous witness was sug
gesting. That is the portion of your prepared statement which you
just paraphrased in almost the same language. “Whenever any input
to production is used more efficiently, economic growth and disposals
income are increased.”
That may not be directlv counter to what she was saying, because
she was focusing on the distribution of that income rather than the
quantity of it.
But you might expand just a little more on whether or not you think
the benefits to the less technologically qualified, the least educated in
what sometimes are grouped together as the disadvantaged, may hope
to achieve from that increase in disposal income or growth in eco
nomics. total economic activity.
Mr. A l m . My personal view, although I am not a macroeconomist,
is that the benefits of growth can be spread rather widely. Focusing
particularly on conservation, outlined in my prepared statement, if
there is more disposable income, the less advantaged are helped in two
wavs. One, if the particular weatherization is conducted in their own
residences, they will save money directlv. Indeed, this is the reason for
the administration pushing the weatherization program.
Second, whoever has more disposable income will spread that money
throughout the economy through the purchase of goods and services.
Obviously, that will create jobs in the service, manufacturing, and
distribution sectors.
Senator M cC lure . Incidentally, as one Member of the Senate, I am
particularly glad to have the administration’s assistance on the weath
erization program. The Senate passed that three times, as I recall, be
fore we got the House to go along with us and twice before we could
get the administration to go along with us.
I do think it has some real potential for conservation, a very real
potential for decreasing the cost to many people who live in housing
from an energy conservation standpoint that is substandard and often
substandard by any test. We may be dealing directly with a sector of

23
our society that very desperately needs relief from the increased energy
costs.
So for a whole variety of reasons I think it is a good program and
I hope it will be implemented. And I hope we can fund it fully. I hope
when this bill is passed, and I hope it will be passed, that it will em
brace in it the elements that are in the Senate-passed version of that
bill.
One of the concerns that I have, and this deals with your question
that we are addressing today of employment opportunity, it gets a
little into the question of macroeconomic policy. We focused for a long
while on unemployment, on underutilized capacity saying stimulative
efforts cannot be inflationary as long as they are unused capacity. I
am not subscribing to that argument, I am only repeating it.
Yet the Federal Reserve Bank of St. Louis has issued several arti
cles criticizing the measure of potential GNP and full employment
capacity because the higher energy prices that have gone into effect
since 1974 have made many plants and pieces of equipment obsolete.
And the total plant capacity, effective plant capacity, has been reduced
by as much as 5 percent between 1973 and 1975. We may be very much
near full capacity than old and more traditional measures may
indicate.
If that is true, then one of the great needs for our economy must be
investment in new plant capacity, particularly when measured against
the rate of investment of the United States as against other industrial
ized countries. Our efforts in energy production or conservation may
inhibit the ability to generate the plant capacity, investment that is
necessary if we are going to meet our employment goals.
Would you care to comment ?
Mr. A lm. I have not read that particular article. Since the OPEC
embargo there has been a tremendous increase in the efficiency of in
dustrial operations in their use of energy. I have talked personally to
many members of industry who have toid me that they had woken up
to the things that they could do to make their plants more efficient.
The dramatic impact of the embargo showed them in a dollars and
cents way, ways that they can save money.
I would think that generally improvements in efficiency are very
consistent with general investment in improving productivity of an
industry by reducing costs of any input. That is what capital invest
ments are usually about. As part of the national energy plan there are
provisions for tax credits for investments made by energy industries
in which energy conservation measures are used. So this would be an
incentive for industry to move along in installing energy conservation
systems.
Senator MoClure. My question was not so much directed toward
capital investment for energy conservation or energy production,
which we have talked about a great deal, but the need for capital
investment in productive capacity not related to energy. I f we lag in
that, we will not have jobs. Unemployment will go up instead of down.
Mr. A lm. First, in the industrial sector, where total energy costs are
about 5 percent of production, the investment in energy conservation
would not be a serious drain on a particular firm’s ability to invest in
expanding production, though this varies by industry.

24
Second, I think the expanded capacity, obviously, will be consider
ably more energy efficient than current capacity. But I think that, as
sheer numbers indicate, most industry energy conservation investments
made in light of higher oil prices should not be a serious impediment
for investment.
Senator M c C lure . Again, I am looking at it in much different terms
than that. And that is, that there is a certain pool of capital available
for investment in the United States, total. One of the reasons we have
a high rate of inflation today is because we have a rate of monetary
growth that has doubled the rate of GNP. No other country in the
world has done that without experiencing the effect of inflation that
follows it. So there is a limited pool which can be increased only by
increasing inflationary pressures.
As a matter of fact, we are nearer industrial capacity than the total
number of jobs in our society will diminish, unless we have an in
creased investment in productive capacity, in plant, capital and equip
ment. I am not talking about energy now.
To the extent that energy development or energy conservation ab
sorbs capital, there is less capital available for alternative investment.
It is quite unlike saying it doesn’t inhibit their ability to make an in
vestment. It either reduces their ability to make the investment, or it
increases the demand for capital markets that will drive interest rates
up which will lead to an expanded monetary policy which will lead
to inflation which again causes economic problems, including unem
ployment problems. That is the context in which I asked the question.
Mr. A l m . I think my original answer focused too narrowly on con
servation. There is no doubt that with the type of energy investments
that are projected, and some estimates are up to a trillion dollars of
energy investment by 1985, that there will be a significant impact on
total capital markets. I don’t have a good answer now. One part of the
analysis that will underly the next national energy plan will be an
analysis of total investment requirements.
The Department of Energy alone is not fully competent to draw
all of the monetary implications of that investment. But the informa
tion will be available to the Council of Economic Advisers, the Federal
Reserve Board, and the Congress to draw whatever policy implica
tions that would derive from such policy.
Senator M cC lure . I would iust comment, the best data I have been
able to develop over the past several years in deciding the energy
question is that the energy investment requirements for the Western
industrialized world between now and 1985 exceeds $1.5 trillion. If we
don’t meet it, we will see a declining standard of living, and political
pressures, and perhaps political change resulting from it.
Representative H eckler . I am very concerned about the contra
dictions. The President’s energy proposal and some of the analysis
which have been recommended on the Hill bv DRI and the Wharton
School and Chase Econometrics—the President does say that the
energy plan would increase employment. He assumes that all invest
ment spending would be expanded, would produce expanded capacity
in hiring.
However, isn’t it true that coal conversion would be a diversion
of the funds from the steel mill modernization, from all plants in

25
newer parts of the country, as well as that plus the tax implications
of the energy bill will potentially reduce production and make us
less competitive abroad by increasing costs ?
So there seems to be a genuine difference of very, very serious con
sequences in terms of payment activity of energy policy on employ
ment. On the one hand one group of economists asserts that this will
be diversion of existing funds. On the other hand, the President, your
administration asserts that this will produce new investment in plant
and capacity and new employment opportunities.
How do you reconcile this ?
Mr. A l m . I have studied all of the various projections and what has
impressed me is how amazingly close they all came. The figure that
the administration developed as compared to the DEI is almost in the
range of statistical error. The fact is that the energy plan has very
little impact on employment either way. The analysis, using different
assumptions, show either a slight positive impact or a slight negative
impact.
The reasons are, for example, the crude oil utilization tax would be
fully rebated under the President’s program. There would be no
change in total disposable income in the society, only a slight redistri
bution. It is true that because so many programs are tied to the Con
sumer Price Index there is a mild inflationary impact just because of
the way we keep our books. For example, labor contracts are often tied
to the CPI. So there is a mild inflationary impact.
In terms of investment, you mentioned the coal conversion program.
Most of the investment in coal would be in new facilities, not con
version of existing facilities. In the utility rate reform part of the orig
ina1 plan there would have been a reduction in investment, because
utility loads would be stabilized somewhat, which would have reduced
investment in peak facilities.
Senator McClure probably has said that some of those issues are
questionable. There was a great deal of debate in the Senate and a
somewhat different bill came out. But I think the bill that came out is
a good bill and will have some impacts.
Senator M c C l u r e . But the net impact would be an increase in pro
duction costs and we are not talking at all about the environmental
effect of massive coal conversion which I have not seen analyzed. I
am sure they are being conducted but they aren’t public. We are not
at all aware of any environmental tradeoffs in this coal conversion
program.
But isn’t it true that the energy program itself must of necessity in
crease production costs which can have a negative impact and usually
does in terms of employment ?
Mr. A l m . The impact in cost from the initial energy plan was, as
I recall, in the range of 1 percent or thereabouts over a number of
years. In terms of the impact of inflation, first, from the crude oil and
the indexing impact, and, second, from cost increases arising from oil
and gas user taxes—I think it is amazing that the economic impacts
are so small from such a comprehensive program.
I did want to comment on the environmental impacts. There has
been a number of studies on the environmental impacts of the energy
program, which have been made public. I will be glad to send them to

26
you. The President appointed a blue ribbon panel to look at the en
vironmental impacts, as are promised in the plan. That panel report
was issued by the Department of Health, Education, and Welfare. The
report concluded that, with the use of environmental controls required
by the Clean Air Act, the environmental impact would not be severe.
Representative H eckler . I will say, Mr. Aim, I am encouraged by
some aspects of your testimony and the very fact that you are embark
ing on an evaluation of employment implications of the program is
encouraging to me. The fact that it is done in conjunction with the
Bureau of Labor Statistics proceeding in the usual order—I would
hope that your forecast would be based on measurement tools that are
more accurate for today’s economy and society than the current meth
od of acquiring unemployment statistics.
Just recently in Massachusetts, last year, we had a benchmarking of
our unemployment statistics which were completely revised, and be
fore this committee we have heard repeated affirmations of the inade
quacy and outdated methods used in the collection of unemployment
statistics. That is a pervasive problem. I would say that, therefore, any
new study in which you would be involved would be based on current
measurement tools that would be representative of the best thinking
and ability of this society,
I am concerned, however, that you are looking into the regional
activities and hope to assemble county level data, while counties are
not relevant, nevertheless employment data is desperately needed.
Again, the shortcomings of the whole methodology of collecting un
employment figures is further increased by the fact that we have very
inadequate statistics for the cost of employment controls around the
country, and specifically on a regional basis. If there is any one area
where the glaring weaknesses of our system become apparent to any
Member of Congress, it is this area where we are attempting to count
unemployed people, especially young, college-educated, or masters de
gree recipients and Ph. D.’s that cannot find job opportunities.
If we can have tools for assessing employment consequences in the
energy program updated, our pathetic present system of forecasting
employment opportunities, and on a regional basis perhaps given a 5year forecast on the short range, we would be serving the whole
society. I hope you will undertake the general problem of employ
ment and its consequences in energy policy with the kind of narrow
perspective as well as the long range view that is needed.
Mr. A lm. You have given us good counsel and we will follow it.
Senator K e n n e d y . We will have the Secretary of Labor here tomor
row who will comment on these issues. I think Secretary Marshall has
been very much concerned about the inadequacy of the formulation of
unemployment statistics, measuring unemployment and being a real
reflection of where these statistics are, as Congresswoman Heckler has
stated.
I think we will be glad to indicate to the Secretary that he may
comment on those matters tomorrow.
There was the establishment of a group to recommend to the Secre
tary 2 years ago more efficient and effective ways of dealing with this
particular kind of an issue. This has been something that has been of
concern to many of us. We are glad to have you note our concern on

27
this issue and hope you will—probably the Secretary will respond to
some of those questions tomorrow.
We are delighted that you have been familiarized with the senti
ment on this committee.
Senator M cClure. I would like to add to that one other thing which
I wanted to mention earlier when Ms. Cooper was testifying. I hope
the Department, and all the departments of Government will become
a little more sensitized to the fact that the Environmental Policy Act
of Congress is a balanced act. It requires that the considerations must
include the concerns about the political and social framework in which
man finds himself, including whether or not he has a job.
Sometimes, whether Government willingly does it not, the courts
will interpret that act to require that employment impacts be included
in the environmental impact statement, and I think they should be.
I think the law requires it.
I think that what the Congress said at the time that act was passed
was that. It has been almost totally ignored, not only by this adminis
tration, but by past administrations. Not only by Government, but by
various groups who are outside looking at the employment picture.
They do not avail themselves of the tools which are there in that act
to force evaluation of employment impact.
Senator K ennedy . These are going to be reviewed. One of the things
that we have seen in terms of the materials made available to us is that
actually the Fortune 500 which had received the greater benefit, for
example, on investment credits with a clear idea of increasing employ
ment for a period of the past 9 years has seen a total increase of 0.15
percent. The second 500 has seen 2.5 percent, and small businesses have
actually increased employment 14 percent. So we start talking about
capital and investment and all of the rest. We have to do a good deal
more thinking about it. That isn’t where you are in terms of our hearing
this morning, but these are obviously factors.
Thank you very much.
Next we will have a panel, Mr. James Benson, economist for the
Council on Economic Priorities in New York; Mr. Duane Chapman,
associate professor of resource economics at Cornell University and
visiting professor at the University of California at Berkeley; and
Mr. Bruce Hannon, associate professor and director of the Energy
Research Group of the Center for Advanced Computation, Univer
sity of Illinois.
Mr. Benson, would you lead off, please.
STATEMENT OF JAMES W. BENSON, PROJECT DIRECTOR, COUNCIL
ON ECONOMIC PRIORITIES, NEW YORK, N.Y.

Mr. B enson . Thank you. I appreciate the opportunity of being here
and giving some preliminary results of a year-long study that i have
been engaged in with the Council on Economic Priorities. I would like
to point out I am not an economist. I have degrees in geology and
urban planning with about 6 years of experience in systems and energy
analysis.
Just very briefly, to summarize the prepared statement I brought
with me today, in comparing a package of conservation and solar

energy measures with a total cost of $6 billion for a regional area, we
have found that three times as many jobs would be created than for
nuclear. Roughly 30 jobs per million dollars invested for conservation
and solar compared to 10 jobs per million dollars invested in nuclear
power. That same package would provide about twice as much energy
to the end users as would the nuclear option. Energy produced through
solar and conservation is 1.8 quadrillion Btu’s as compared to 0.8
quadrillion Btu’s for nuclear power.
I might also point out a most important finding. The employment
created is locally based and it is where the poor and unemployed need
the employment the most.
I would like to describe very briefly the study we are engaged in. It
is a year-long study concerning the Long Island region, which consists
of approximately 900,000 households. We are studying two proposed
nuclear plants of 1,150 megawatts. We are comparing three solar
energy measures, 30 conservation measures, and 12 improved appli
ances as outlined by the Federal Energy Administration. The results
will be released in June. We will construct scenarios which will show
vear-by-year energy savings for each of the solar energy and conserva
tion measures, the amount and type of labor required for construction
of a nuclear powerplant, and the conservation and solar measures, the
economic costs and other parameters.
The statement I am giving is on my own behalf and not on behalf of
the council. Our findings are just coming in. They are somewhat pre
liminary. I have submitted a 20-page prepared statement and I will
now go through and summarize some of the major conclusions.
The prepared statement that I brought with me is consumer oriented
in that we are examining the whole system cost, from the construction
of a powerplant all the way through to supplying energy to the end
users in the form of hot air to heat houses and hot water at the tap. It
is very important to stress that it is the whole system cost which must
be looked at and not just how much it costs to build plants.
This testimony does not include the indirect and induced employ
ment that is required to manufacture materials—that which comes
forth through the economic multiplier effect. This testimony presents
the direct employment required for manufacturing the materials and
goods that go into the plant, but not all of the supporting industries
throughout the economy. However, that will be covered in our final
study in June.
For this package of three conservation measures which consist of
insulating attics, insulating rooms, installing storm windows and sup
plying hot water through solar, approximately 178,000 jobs would be
created over a 30-year period compared to the 72,000 jobs created by
nuclear power and the construction, operation, and maintenance.
The cost for the two options would be $6 billion for 960,000 packages
of conservation and solar compared to $7 billion for the nuclear powerplants. This includes the cost of construction, transmission and dis
tribution, overhead, 20 percent reserve margin, and other things. We
tried to take into account the entire cost from the meter to the hot
water itself. On an overall average the cost of energy with the conser
vation and solar package comes to $1.22 per million Btu for a home
owner. Homeowners paying for electricity on Long Island now pay
6 cents per kilowatt hour. The savings are tremendous.

29
The same package which costs $6 billion for conservation and solar
will result in an overall energy savings of 6 cents per kilowatt hour, or
$32 billion over a 30-year period. The $7 billion investment in nuclear
powerplants, paid for at the 6 cents per kilowatt hour results in a cost
to the households of $17 billion.
One of the most important aspects we are looking at in more detail
is the effect of these households paying $17 billion to utility companies.
The money then flows into large financial institutions where it is rein
vested in other projects in society, usually very large ones.
In comparison with the conservation and solar scenarios, there is a
savings in energy per household which result in disposable income
being increased by a net amount of $26 billion. That means those home
owners make the decision on how to spend that additional $26 billion
which has been released through conservation and solar energy, rather
than paying out $17 billion to the utility company. This reinforces
the argument we are hearing more often about, democracy—about
democratic considerations related to the difference of energy supply
technologies, to social equity. Who is making the decisions and how is
the money spent ? Much of this $26 billion will be spent by households
in the local economy. It seems only logical that local, small businesses
and the regional economy itself is going to be stimulated much more
directly than having the $17 billion flow out of the regional economy
through the utilities, to pay for nuclear powerplants.
In the type of jobs we are looking at, there is a large difference in
constructing a nuclear powerplant and installing conservation and
solar. Most of the construction work is done over a 7 year period and
much of it is fairly specialized, many workers are imported from other
parts of the country.
Conservation and solar require small businesses in the regional
economy to supply not only the material but also the manpower to in
stall and maintain this equipment over the life of the equipment it
self. We are examining types of labor where it is needed the most, and
that is in the building trades where the highest unemployment exists
now; for carpenters, plumbers, sheet metal workers, and so forth.
That is where unemployment is highest and that is where conserva
tion and solar creates jobs.
There is a fortuitous linking of more jobs being created plus being
created at the skill level where jobs are most needed. This brings up
some major issues; when you discuss whole systems and energy sav
ings. I would like to run through several issues very quickly.
First, there are existing, large subsidies to other sources of energy,
especially nuclear power. The nuclear industry is constantly asking for
more subsidies. The breeder reactor is a good example of more and
more money being taken from the taxpayer and put into a reactor
which almost by every economic study shows it won’t pan out as orig
inally thought.
Solar and conservation have no incentive, no support at all. Yet in
spite of this people are still trying to conserve using their own money
in addition to paying out higher taxes for energy supplies that in most
part they don’t want and don’t need.
I would also like to point out very briefly that there is a national
security consideration here. As we go to larger and larger energy sup31- 502—78---- 3

30
ply systems, especially to the concept of energy parks where 1() or
more powerplants could be co-located together, there are serious im
plications for national security. It is a further concentration and cen
tralization and makes our entire energy supply more vulnerable. It
does not require much to knock out a major energy park. But with
conservation and solar, the energy system is dispersed, and increases
national security.
Second, spreading nuclear power in developing countries and other
nations around the world does in fact lead to increased weapons pro
liferation, upsetting the international balance of power, because it
gives small countries access to nuclear material.
I would also like to point out that solar and conservation are sup
ported by environmental groups around the country, such as the En
vironment for Full Employment. They understand fully the link be
tween protecting the environment and increased jobs. They have been
working hard to support the Humphrey-Hawkins bill and the Labor
Reform Act.
The final example I would like to give is that of the way we have been
doing business in the past. We tend to concentrate on projects such as
urban renewal—or urban removal as it is sometimes called—this ex
ample consists of building new buildings in urban areas in order to
stimulate the economy. What happens is the poor are driven out. The
high rises go up. The poor have to leave to find other dwellings. The
new buildings are energy inefficient and require massive amounts of
electricity.
I recommend very strongly that instead of that, money be trans
ferred directly from capital intensive programs directly to the poor
so they can rebuild and renovate the buildings in the inner cities, own
the dwellings themselves, acquire a trade while learning conservation
and installing solar energy on their own places. This approach will
strengthen the local economy. It will save the environment because
of conservation and solar energy. It is less expensive, requires no new
taxes and creates more jobs.
There is a lot to say and too little time. I will stop here and answer any
questions.
Senator K en n ed y . I think we best hear from the panel. The only
thing is maybe you can just run through that chart.
Mr. B enson . I would be happy to. Over on the left, under “on-site
man-years,” we have three types of labor. One category is what we
call on-site man-years ; that is the labor required in the locality to con
struct or install solar conservation or the nuclear power plant. In other
words, these are the real jobs, on the spot.
There is a very large difference, 75,000 jobs created for this package
for solar and conservation compared to 32,000 jobs for nuclear powerplant construction. The second category is called direct manufacturing.
These jobs result from the fabrication and manufacturing of materials
that go into the different packages. For example, the installation of
concrete, the reinforcing steel, and so forth.
There is quite a difference, 36,000 compared to 12,000 for nuclear.
The third category is labor spread out over a long number of years,
and that is for operation and maintenance for nuclear facilities and so
forth—67,000 for conservation/solar versus 28,000 for nuclear.

31
The middle category is direct manufacturing and is often spread
out through the economy. The local economy is on the left, the na
tional in the center, and then back to the spread over a number of years
for the operation and maintenance category.
[The prepared statement of Mr. Benson, together with the chart
referred to, follows:]
P repared S t a t e m e n t

Ja m e s

W. B e n s o n

My name is James W. Benson. I am Project Director at the Council on Eco
nomic Priorities located at 84 Fifth Avenue in New York City, 10011. The Council
is a non-profit research organization supported by foundation and government
grants. For the past twelve months, I have directed the Jobs study of the Council.
Results of the CEP Jobs study are scheduled for release in June. Preliminary
results are just beginning to emerge and cannot be quoted at this time. For this
testimony, I have performed independent calculations and will speak on my own
behalf.
The Jobs Study was designed to provide a detailed analysis of on-site, direct,
indirect and induced employment, cost and amount of energy supply/savings for
conservation, nuclear and solar technologies. Findings will indicate the type,
amount and timing of labor requirements. Energy supply and savings will be
calculated for electricity, gas and oil. Capital costs for approximately 30 con
servation measures, a twin 1150 MW PWR nuclear plant, 12 improved appliances
and 3 solar energy measures will be provided. Scenarios are being constructed
which will involve retro-fits and new construction for residential and non-residential buildings over a thirty year period. Results will be given for both the Long
Island region and for the nation.
Results of the CEP Jobs Study study will be released later in the year. Pre
liminary results are just beginning to emerge and cannot be quoted at this time.
For this testimony, I will speak on my own behalf and discuss major issues in
the energy/employment area, the need for values to be considered, preliminary
calculations I have performed and other recent studies related to this issue.
PARTI

As requested by the Chairman, much of my testimony will deal with energy
conservation, employment and costs. All of this information is presented in
quantitative form. Unfortunately, too many members of our society have been
trained to respond to quantitative considerations more comfortably than to
qualitative considerations. The numbers I discuss have no meaning in and of
themselves. What is more important is the context in which these numbers reside.
Dealing exclusively with numbers leads to decision which can be stated in
quantitative terms. For example I example I have found that solar and conserva
tion do indeed result in more employment per dollar spent than nuclear. So what?
If our leaders continue following existing decision making methods, they will
continue to treat symtoms rather than treat the cause. As long as our leaders
continue to follow the path of least political resistance our wants will continue
to be called needs.
The issues we are discussing here today are fundamental to society. While it
is a truism that everything is related to everything else, and everything affects
and is affected by everything else, energy is the center from which the web of the
universe radiates. Energy (and employment) cannot be examined without getting
involved in the most fundamental assumptions about the values and the workings
of our society. It is challenging and provides the ultimate regard; to openly
explore the basis of our social and physical existence.
How is this related to a hearing of the Joint Economic Committee of the Con
gress of the United States ? Members of this committee vote on issues in a manner
which results in their re-election (they hope). Economics is an arbitrary system
for the allocation of material wealth and power which various interest groups
try to control in such a way that the system will favor them. History is the docu
mentation of the manipulation of the economic system for the benefit of the
wealthy minority. It is not necessary to cite examples of economic catastrophes

32
caused by greed nor the failure of the once much vaunted trickle-down theory in
which the poor would move to the middle class as a natural result of economic
growth.
The poor have continued to become poorer and minorities suffer ever greater
proportions of unemployment.
There was once a time when most citizens of this nation were proud of being
citizens. There were clear and positive visions and myths which enabled them to
joyfully sing “American the Beautiful” and our national anthem without looking
down at the ground out of embarrassment. Our great dreams and hopes have
been entirely replaced by the pursuit of economic growth. Economic growth is
held by many to be a necessary prerequisite to the functioning of democracy. It is
claimed that more growth will create more jobs, make the poor rich, keep us
ahead of the communists, lower the crime rate, ensure increasing material
affluence.
Even this, the last of the great myths, is rapidly being seen for the fraud that
is it. We have entered a new era in the unfolding of the history of this planet. The
global population and corresponding “wants” exceed the capacity of the planet
to survive even the “demands” of today. For energy, resource and environmental
reasons which have been well documented elsewhere, the consumption of goods
will soon begin a permanent decline, with short term shifts and expansions taking
place in a few parts of the globe.
Another myth which has faded is that of the technological fix. If we spend
more money we will develop new technology to get around the latest warning our
Mother Earth has given. Man has always triumphed over Nature with tech
nological progress. We can overcome all of these problems. Or can we? A close
examination of modern technological progress will show that it is this very
“progress” which has so rapidly caused us to deplete resources, foul the environ
ment, start a cancer epidemic and dull the minds and quell the spirit of the two
most recent generations through exposure to commercial mass media.
It is the single-minded pursuit of ever greater profits (mainly through the
exploitation of Nature) combined with the economic ploy of “productivity” and
the myth of a free market that is the root of the problem. Counting only dollars
as profit causes the private sector to count wages and salaries as costs in the
universally used cost/ benefit test of all decisions. The thousands of private
sector daily decisions which minimize costs leads to massive and structural
unemployment. Political influence buys business loopholes such as the investment
credit which is responsible for disemploying large numbers of workers.
The public sector rightfully sees employment as a societal good. This direct
conflict of values illustrates the failing of the present value system and is at the
heart of industrial societies. Business cuts costs by reducing employment, cuts
cost by shifting them to the public (eg. dumping its known carcinogens into
drinking water supplies), by manufacturing ever cheaper merchandise while
touting it as the best through advertising and the mass media.
Corporations become larger. Political influence increases. Their actions have
ever larger impacts upon our lives. We are forced to demand protection and
redress through the only channel we think is available: the federal government.
As industry and technology grow, as their impacts grow, so grows the govern
ment. As it grows it becomes more inefficient and inconsistent in its policies and
all but the most wealthy are squeezed. Squeezed out of jobs, squeezed into in
humanly, boring jobs, squeezed as tax-payers to pay the cost of the government
to clean up after industry, squeezed by crime, uncertainly and ever present
advertising.
It is time to step back and take a fresh look at the overall state of our nation.
We import half of all our oil. We now claim to be dependent on the economies
of Japan and Germany. The Mid-East could blow up any day. We could suffer
a real and lasting embargo, our currency could collapse, a nuclear plant could
melt down, someone could steal a few more pounds of plutonium and ransom a
nation. We are beginning a race to arm space. There is no improvement in our
slipping human rights, right here in the U.S. Talk to a Native American who
had to go to Geneva to ask for help.
The solution to our problems does not lie entirely in numbers. Nor in legislation.
Especially not in more growth of business and technology. We are engaged in the
game of life, characterized by playing by our own rules, hoping that those who

33
suffer will not suffer to the point of rising up and upsetting the game. It is time
for a new universal rule. We can win only by all playing the game of the whole.
We must learn to think in terms of the whole interrelated system of rocks, plants,
water, air, animals, feelings, friends, right livelihood, simplicity, selflessness.
Our condition cannot improve until we examine our values and acquire a new
set which leads to peace and harmony with all people and all aspects of our
fragile life support system. This new set of values will recognize that small
businesses create more jobs than large businesses. That small, appropriately
designed technology is safer, cleaner and results in more jobs. That constant
pursuit of material goods and status lead to uclers, murder and worse. Life can
be full, light, friendly, deeply rewarding through a shedding of the heavy load
acquired during the reign of our old myths.
The military and utility sectors create less jobs per dollar than solar and
conservation. Bigger technologies such as Trident submarines and nuclear plants
increase our vulnerability. Dispersed defense mechanisms and dispersed small
scale energy systems improve our defense. Small renewable energy technologies
are cheaper from a whole-system view and conserve depleting resources leaving
material for developing countries. Smaller systems can be better understood by
the public. Democracy requires an informed and participatory citizenry, but the
scale and complexity of technology, business and government exclude the public
from participating. Solar and conservation technologies lessen our reliance on
imports. Their use creates local jobs in greater proportion than large systems.
The type of labor required corresponds best to the skills of those out of work.
Upon combining new values with these technological considerations, it can
be seen that the strength and sustainability of the nation can be increased by
lessening energy and resource consumption and by shifting money from the
military-industrial complex into community projects. One such project is to re
vitalize inner cities. Not through urban removal, but by transferring money
which would have gone to capital intensive aerospace industries and utilities
directly to inner city residents to acquire old buildings in need of repair.
The poor and unemployed would learn new skills or use unemployed skills
to insulate, re-finish and clean the old buildings and neighborhoods. Money would
be used to install solar water heaters, solar space heat, wind machines, urban
farming and other techniques which would lessen dependence upon large, re
mote institutions. After rehabilitation and upon moving in, the property would
be maintained in good condition. This program would improve the environment,
save energy, increase the local economic activity of small businesses, lower crime,
increase pride and give hope to people and cities which seem to have been given
up on long ago.
Without this type of integrated, consistent conceptualizing we will be doomed
to an increasingly unfortunate future. If we do not change our ways soon, we
will find that first one form of energy will be rationed, then another. Then
something else will be rationed, perhaps water, then food. One by one we will
find all aspects of life rationed and controlled. Controlled by what means and
by whom?
It is those who continue to call for more growth, who continue to confuse
the issues. It is they who lead us to a most unpleasant future of universal
scarcity. Those who question growth as a national priority are contributing
to a much needed public discussion of our fundamental goals. Those who peace
fully occupy the sites of deadly technologies are patriots who are calling to our
attention that certain aspects of technology and related institutions are out of
control. They warn us that massive changes in our society are taking place,
with little or no opportunity for the public to participate.
PART II

The following calculations for nuclear costs are based upon data from the Long
Island Lighting Company (LILCO), the Nuclear Regulatory Commission and
the Energy Research and Development Administration (ERDA). Direct em
ployment figures were calculated using the Bureau of Labor Statistics (BLS)
1970 Input-Output matrix (134 sector). Conservation and solar specifications
are preliminary. More detailed specifications are being developed for the Coun
cil on Economic Priorities Jobs study.

34
The two power plants consist of 1150 MW PWR nuclear reactors. The capacity
factor is assumed to be 55 percent. Transmission losses are assumed to be 12
percent. Distribution losses have not been calculated for this example. A reserve
margin of 20 percent is assumed. The tables which follow summarize cost and
labor requirements for plant construction, transmission and distribution (T&D),
utility company administration and overhead and nuclear fuel for 30 years.
Plant construction costs have been allocated to the appropriate industrial
sectors of the BLS matrix. Direct employment was calculated as follows. Divide
Domestic Output by Employment to obtain Total Output per Job. Output per
Job was divided by expenditures per industrial sector. This produces the number
of jobs per expenditure.
Domestic Output (Gross Duplicated Domestic Output) represents the total
dollar output of each industrial sector minus all transfer imports, valued at port
value. Employment represents the number of jobs within each industrial sector
and includes wage and salary workers, self-employed individuals and unpaid
family workers. The data and conventions were derived from The Structure of
the U.S. Economy in 1980 and 1985 by the BLS.
For this example, a prototype single family detached home of 1500 square feet
was used. The number of degree days for the region is assumed to be 5200. Attic
insulation was increased from 2.5" to 12". The windows had a U value of 1.13
before and .56 after installation of storms. Wall insulation went from none to
3.25" of foam. The solar system provides 70 percent of the hot water in the
winter and 90 percent during the summer.
The same methodology was used for both the nuclear and the conservation
and solar calculations. Materials expenditures were allocated to the BLS InputOutput sectors and direct employment was calculated. In both cases, indirect
and induced employment have not been calculated. The Council’s Jobs Study will
calculate these effects.
The Council is currently developing detailed design and performance data for
approximately 30 conservation measures, 12 home appliances and 3 solar energy
systems. These data will be available upon release of the final report.
Insulate walls:
Materials BLS I/O code, 44.
Homeowner expenditure (1963 $), $180.
Domestic output (millions $), 10,611.
Employment (000s), 294.
Dollars per man-year, 36,092.
Man years, .004987.
Note: All $ below are 1976.
1911 square feet of insulation.
38 hours of on-site labor (.0226 man years).
$470 for installation.
$420 for materials.
$890 total cost to end-user.
23.9X10® BTUs saved per year.
26.6X10* BTU displaced at average efficiency of 90 percent.
$468 saved each year at $.06/Kwhr.
798X106BTU’s displaced over 30 year life.
$890 total cost to end-user (no depreciation and maintenance).
$1.11 per million BTU (insulation).
$19.55 per million BTU ($.06 Kwhr minus 10 percent loss).
53 percent return on investment.
Insulate attic:
Materials BLS I/O code, 48.
Homeowner expenditure (1963 $), $78.56.
Domestic output (millions $), 3554.
Employment ( 000s), 178.
Dollars per man year, 19,966.
Man years, .003935.
Note: All $ below are in 1976.
1000 square feet of fiberglass insulation.
24 hours on-site labor (.0143 man years).

35
$298 for installation.
$172 for materials.
$468 total cost to end-user.
9.3X10° BTXJs saved per year (1.7X10®) summer -f 7.6x10® winter).
10.3 XlO8BTU’s displaced at average of 90 percent efficiency.
$182 saved each year at $.06/Kwhr.
309X10° BTUs displaced over 30 year period.
$468 total cost to end-user (no depreciation and maintenance).
$1.51 per million BTU (insulation).
$19.55 per million BTU ($.06/Kwhr minus 10 percent loss).
39 percent return on investment.
Storm Windows:
Materials BLS I/O code, 60.
Homeowners expenditure (1963 $), $73.72.
Domestic output (millions $), 30,157.
Employment (000s), 434.
Dollars of output/job, 23,403.
Man-years, .00315.
Note: All $ below are 1976.
188 square feet of aluminum triple track storm windows.
9 hours on-site labor (.00536 man years).
$100 for installation.
$225 for materials.
$325 total cost to end-user.
12.9X10° BTU’s saved per year (12.2X106 winter+.7X10° summer).
14.3X10® BTU’s displaced in electric home with average 90 percent efficiency.
$252 saved each year at $.06 Kwhr.
430X6® BTU’s displaced over 30 year life.
$520 total cost over 30 years with 2 percent depreciation and maintenance.
$1.21 per million BTU (storm windows).
$19.55 per million BTU ($.06 Kwhr minus 10 percent loss) at end-use.
74 percent return on investment.
SOLAR HOT WATER SYSTEM

Materials BLS 1/0 Code
48 .............................................
5 9
6 0
62..............................................
69..............................................
88..............................................

Homeowner
expenditure
[1963 dollars]
24.80
191,30
151.00
124.20
66.91
50.20

Domestic
output
[millions]
$3,554
2,058
10,157
11,406
6,923
4,048

Employment
[thousands]
178
81
434
454
288
215

Dollars of
output/job

Manyears

19,966
25,408
23,403
25,123
24,038
18,916

0.001292
. 007529
.006452
.004944
. 002784
.002654

Total...............................................................................................................

. 025655

Note: all $ below are 1976.
48 square feet of flat plate collector.
60 hours on-site labor (.0357 man years).
$821 for installation.
$1,315 for materials.
$2,136 total system cost to end-user.
10.72 XlO8BTU’s produced at end-use per year.
11.28X10® BTU’s of electricity displaced at 95 percent efficiency.
$198 saved each year at $.06/Kwhr.
338X10® BTU’s displaced over 30 year life.
$4272 total cost over 20 years with 3.3 percent depreciation and maintenance
.0636 man years maintenance.
$18.90 per million BTU (solar).
$18.52 per million BTU ($.06/Kwhr minus 5 percent loss) at end-use.
5 percent return on investment.

36
JAMESPORT NUCLEAR PLANTS

LILCO
expenditure
[1963 dollars]

BLS I/O Code

Total
domestic
output
[millions of
1963 dollars]

Employment
[thousands]

14
.
35,530,305 ................. ..................................
23------ ------------------- -----------------20 228
5,410
132
2» ........
................................
1,164,557
6,164
298
3 0
........ .............. .......... ............ .
847 384
2,592
146
3 1
........................ ..........480,276
15,724
481
3 3
...........................— - - - - l2’ m
610
3 4
'
444,256
10,361
563
4 1
....................... ...............431,797
2,974
70
4 2
... ............
595,279
28,156
191
44........
.......... ..........120,650
10, 6i i
294
... .............. ...........
151,962
3,866
186
4 6
4 7
........
9,178,169
7,118
291
...........
'
______
3,477,909
3,554
178
4 8
4 9
_
396,554
21,601
628
5 0
..........
467,499
5,966
296
56.................... ........... I
7,299,322
3,818
99
5 9
" " ..........................
1,451,726
2,058
81
6 0
.............
91,935,333
10,157
434
6 2
........ 441,872
11,406
454
6 3
.............
— .................
21,630,074
4,176
110
6 5
...............
...
3,899,849
5,625
205
1,432,104
2,420
92
6 6
I ' " " " " " " . ........ —
67
....
488,418
6,575
327
6 8
'
............. .
1,122,323
4,651
200
6 9
...........
37,832,102
6,923
288
_
2,687,114
6,830
233
71.................................. ... ~
7 3
............. .
1,323,520
6,549
148
...................... ............. ..... _
9,925,468
4,532
204
7 4
7 5
............. ZZIZ'ZIZIZZIIZri___
13,467,681
5,130
217
76
49 301
6,557
184

7 9
...............
8 0
........................ . "
...............
82................
. —
881"""” ........ " " " I " - ” - " .............
89
. . . .
9 1
9 2
..........
I ........ . "
9 3
............................
9 5
........ I —
9 6
..........
99................
104................ ....................
I .I
ioszzzzzzzzzzzzzrrzzzzr_z_z ..............

, 10,156

3 588,213

4,273

3,737
237,343
9,063
124,160
3,108
14,295,087
4,048
128,666
1,830
84,000
4,078
132,076
8,871
1,895,986
12,744
2, 875, 963
17,383
2,195,527
4,344
637,241
24,593
14,912,967
69,681
5, 427,00196,066
13,470

200

163
337
117
214
84
112
449
627
1,259
219
990
4,098

Total direct man-years--------- ------ --------- -------------------------------- ------ —

Dollars of
output/job

Man-years
created

31,700
40,985
20,685
17,753
32,690
20>271
18,403
42,486
147,414
36,092
20,785
24,461
19,966
34,397
20,155
38,566
25,407
23,403
25,123
37,964
27,439
26,304
20,107
23,255
24,038
29,313
44,230
22,216
23,641
35,636

1,120

21,365

22,926
26,893
26,564
18,916
21,787
36,411
19,757
20,325
13,807
19,836
24,563
69,681
96,966
...... - ..........

56
48
15
3
24

4
3
7
38
17

23
190
57
3,928
18
570
140
54
24
48
1,573
92
30
447
570

170

9
5
756
6

2
7
93
208

111

26
877
761
12,129

Note : All $ below are 1976.
1150 MW PWR nuclear reactors (2).
$2.76 billion for plant construction.
39.310.000 man-hours of engineering, on-site construction labor, utility com
pany project management, start up and test.
$.55 billion for 20 percent reserve margin.
7.862.000 man-hours calculated from above construction costs.
$.37 billion for construction of transmission and distribution facilities (based
on Long Island Lighting Company marginal system requirements).
6.750.000 man-hours of engineering, on-site construction, utility company
project management and administration.
$.56 billion for operation and maintenance of plant and T & D system for
30 years of operation.
6.550.000 man-hours for O & M personnel.
$.65 billion for utility company administrative and overhead costs associated
with electric production, operation and maintenance of 2300 MW system
for 30 years.
18.160.000 man-hours for utility company personnel including executive and
legal staff, management and support staff.
$1.96 billion for nuclear fuel supply for 2300 MW operating at 55 percent
capacity factor for 30 years.
21.823.000 man-hours for mining, milling, conversion, enrichment, transporta
tion of fuel required during 30 years.

37
Subtotals:
$3.68 billion for construction reserve, transmission and distribution 53,922,000
man-hours of labor.
$3.17 billion for operation and maintenance, utility company overhead and
fuel supply—all for a 30 year period.
46.533.000 man-hours of labor.
Total:
$6.85 billion dollars.
100.455.000 man-hours (59,790 man-years at 1680 hrs/yr).
20,368,300 man-hours from manufacture of materials (12,124 man-years).
Comparison
The nuclear plants cost $3.68 billion for construction reserve, transmission,
and distribution. The total number of man-years required for this is 38,920
(on-site plus direct). Divide this cost by $3,819 for the conservation/solar pack
age (storms, $325; walls, $890; attic, $468; solar, $2,136), giving 963,600 packages
resulting in equal costs for the two cases. To put this into perspective there will
be approximately the same number of households in the Nassua/Suffolk region
during the next three decades.
The conservation/solar packages have the following characteristics in com
parison to the nuclear case:
75,120—vs.—32,100—on-site man-years.
36,350—vs.—12,124—direct manufacturing.
66,880—vs.—27,000—portion« and maintenance.
178,350—vs.—71,924=250 percent more employment for conservation/solar.
1.81 X1015BTUs at end use saved by package over 30 years.
.8SX1015 BTUs at end use (55 percent capacity factor, 12 percent transmis
sion loss, 90 percent efficiency).
206 percent more energy from conservation/solar.
Conservation/solar costs :
$5.9 billion over 30 year, total, including maintenance.
1.81 X1013BTUs saved over 30 years ($31.8 billion saved at 3,26 million
BTUs $.06/kWh).
$33,100 per man-year (30.2 man-years per million dollars).
Conservation:
$1.80 billion total.
1.48X10“ BTUs over 30 years ($26 billion saved at $.06/kWh).
$1.22 per million BTUs.
$31,100 per man-year (32.2 man-years per million dollars).
Solar:
$4.11 billion total including maintenance.
.33 X1015BTUs over 30 years ($5.8 billion saved at $.06/kWh).
$12.45 per million BTUs.
$34,100 per man-year (29.3 man-years per million dollars).
Nuclear:
$6.8 billion excluding full insurance, R&D, regulation, waste disposal, de
commissioning, health effects, etc.
.88X1015BTU over 30 years ($17 billion spent at $.06kWh at the meter).
$17.60 per million BTU (at the meter).
$102,100 per man year (9.8 man-years per million dollars).
The Northeast suffers from high unemployment, high fuel rates and a paucity
of domestic fossil fuels. Two simple options are presented here. One option
consists of supplying electricity from nuclear plants. The direct cost of this
option is very conservatively estimated to be about $7 billion, excluding many
hidden and subsidized costs. At $.06/kWh, users would pay out $17 billion over
the thirty year period, to the utility company. This rate is being charged cus
tomers of LILCO with the rate for Con Ed near $.075/kWh. Rate increases are
a constant feature these days, so $.06/kWh will prove to be a low estimate over
the next three decades.
With the conservation/solar option, the direct cost would be about $6 billion.
Twice as much energy would be made available for end-use. Under this option
however, households would save about $32 billion at $.06/kWh. The net dollar
transaction would provide $26 billion in additional disposable income ($32-6
billion). Some of this would be saved, some spent, thereby stimulating the local

38
economy and producing an even greater requirement for employment. (The
Council's study will examine this effect on a year-by-year basis).
The Council presently has under consideration a study which would compare
the flow of money under the two options. Questions to be asked are: Who pays
the $17 billion? How much money stays in the local economy? How much goes
to centralized institutions such as banks and insurance companies? How are
the recipients related to the planning, design, construction and financing of the
nuclear facilities? Similar questions would be asked for the other option, but
it is expected that a small proportion would flow directly to the largest institu
tions, with most money remaining in the local economy. What would households
do with the new savings of $26 billion? What effect would this have on the
economy and upon unemployment?
CONCLUSIONS

1. Of the four categories (conservation, conservation/solar, solar, and nuclear)
considered in this example, conservation provides energy for the least cost.
Utilization of conservation creates more jobs than the other options. Disposable
income is greatest with conservation.
2. Conservation and solar reduce non-renewable energy consumption, reduce
resource use, reduce air and water pollution, reduce carbon dioxide release, re
duce carcinogen release, reduce radiation induced cancer.
3. Conservation and solar contribute directly to increased national security
through decreased imports and decreased reliance upon large, expensive central
ized systems which are prone to sabotage, disruption and self-destruction.
4. A program which directly transferred spending for the proposed 200 new
nuclear plants to conservation for all homes would cost half as much while pro
ducing full employment.
5. Such a program would permanently lessen inflationary pressures because
a shift to renewables moves the economy partially away from increasingly ex
pensive energy (caused by scarcity through depletion).
RECOMMENDATIONS

1. All new dwelling units be required to be constructed so that no active sys
tems are needed for space and water heating.
2. All new non-residential buildings be required to be constructed so that no
non-renewable resources be needed to supply heat and hot water.
3. All existing structures be re-insulated to reduce energy consumption by
more than half.
4. The expenses for the above recommendations should be transferred from
existing capital intensive programs (candidates include defense, space, and high
way construction). This shift of expenditures would require no new taxes, would
create more jobs and would decrease inflation.
further

c o n s id e r a t io n s

The solar system in this example utilizes a copper based flat plate collector.
As demand increases, plates may become non-metalic. This will result in cheaper
collectors and a saving of resources, especially if the material used is a renew
able substance such as paper (treated with plastic).
Active solar space heating systems should only be used to retro-fit existing
buildings. All new construction should be required to be excruciatingly energy
conserving in the first place and passively conditioned in the second place. Pas
sive heating and cooling costs little or nothing in new buildings. It is as close
as one can come to a free lunch. Heating needs which cannot be satisfied by
conservation and passive design should be made up with active solar systems.
No new buildings need be constructed after 1980 which require a non-renewable
source of energy for any portion of heating. Only ignorance and political intran
sigence stand in the way of building zero energy buildings in all climate areas
of the United States.
Training solar mechanics will be required. Several training programs are
currently in existence. Some use CETA funds to train unemployed, one program
on Long Island is sponsored by the Sheet Metal Workers local, for its members.

39
In this example I have not calculated this type of additional manpower require
ments needed to support the solar industry, but the number will be significant.
It will be calculated in the Councils’ Jobs Study.
Some amount of work will be done by the home owner. This is especially true
for measures such as insulating attics. Other measures require special skills or
tools. The Jobs study scenario generator has the ability to accept and calculate
a percentage of do-it-yourself for each of the 30 conservation and solar measures.
An examination of alternative energy options leads to policy issues of all
types. One example is that of equity. Under the nuclear option, it is the utility
company which decides upon the design, siting, and timing of nuclear facilities.
Customers have little say in the decision making process. There is no competition,
utilities are government created and maintained monopolies. Because they are so
capital intensive, only the largest institutions can afford to finance their projects.
Billions of dollars of customers’ money flows through the utilities to the multi
national corporations and banks. The wealthy few make the decisions about what
type of projects to finance. With the conservation option, each household makes
its own decision and spends money in the local economy, often with small busi
nesses (which create more jobs than large businesses). This option is more equi
table and produces plurality where the nuclear option further concentrates wealth
and power (through the exercise of that wealth).

BENSON:
MANPOWER COMPARISON OF
NUCLEAR POWER PLANT,
LONG ISLAND, NEW YORK
TO A CONSERVATION/SOLAR EQUIVALENT
(1) ON-SITE MAN-YEARS

(2) DIRECT MANUFACTURING

75,120

36,350
27,880

11,030

CONSERVATION/
SOUR

NUCLEAR

CONSERVATION/
SOLAR

NUCLEAR

41
(3) OPERATION AND MAINTENANCE

(4) TOTAL MANPOWER REQUIREMENTS
178,350

66,880

66,610

27,700

CONSERVATION/
SOLAR

NUCLEAR

CONSERVATION/
SOLAR

NUCLEAR

42
Senator K e n n e d y . Thank you, Mr. Benson. I will ask Mr. Chapman
and then Mr. Hannon to give their presentations.
STATEMENT OF DUANE CHAPMAN, ASSOCIATE PROFESSOR OF RE
SOURCE ECONOMICS, DEPARTMENT OF AGRICULTURAL ECO
NOMICS, CORNELL UNIVERSITY, AND VISITING ASSOCIATE
PROFESSOR, ENERGY AND RESOURCES PROGRAM, UNIVERSITY
OF CALIFORNIA, BERKELEY

Mr. C h a p m a n . I was interested in the exchange between Senator
McClure and Ms. Cooper on the present nature of the economy with re
spect to employment and energy. I think there are three or four points
which ought to be major concerns with respect to the kind of paradox
that exists at the present time.
First, I would like to point out that the current business recovery
is very similar to the typical business cycle of the postwar period in
the sense that it is related to energy production and use. Half of the
increase in gross national product since the low point in 1974-75 has
been in automobiles, residential and suburban construction. Sixty per
cent of the private investment in industry and transportation has been
in energy production facilities or in industries that are major energy
users. In 1977 we have seen a return to exponential growth in every
kind of energy consumption except natural gas.
Second, inflation is itself concentrated in these sectors and both
wholesale and consumer prices have risen most strongly in energy
and in goods and services dependent on energy for manufacturing or
consumption.
Third, unemployment, or perhaps I might say disemployment, has
been greatest in these same activities. Those manufacturing sectors
which are most energy intensive have seen the greatest loss of employ
ment since 1973.
Finally, 1973 real median family income has essentially been un
changed. I believe for black families it is somewhat lower than in 1973.
My opinion is that the paradox of unemployment and recovery is in
art related to energy production and use throughout the country,
nexpensive domestic energy sources are no longer widely available,
and our ability to make use of inexpensive foreign sources of energy
has been permanently altered. I think those statistics point to an indi
cation of future strain on the economy which I think we all ought to
give some thought to.
In my discussion this morning I want to focus on a single problem
which is particularly related to those contradictory statistics. That is,
the influence of our corporate and personal tax codes as they relate
to energy consumption, energy prices, energy use, and employment.
Let’s begin by noting that energy production industries are simply
the most capital intensive industries in the economy. For example, gas
and electric utilities will have on the order of $300,000 of investment
per employee. Petroleum refining companies had $200,000, and mining
and crude oil production, $115,000. The average for all industries
taken from the same largest group of corporations was $40,000. So the
three most capital intensive manufacturing industries that we have

43
are energy industries. How are they affected by the principal tax
structures?
Basically, with existing provisions for accelerated depreciation and
the investment tax credit, there is no longer any net Federal-State
income tax liability for revenue generated from the investment. In
other words, if you were to take the credits which accumulate in the
early years of a project’s operation and put those credits in an account,
and pay the taxes which accrue in later years, that account at the end
of 30 years would end with a positive balance. That is essentially an
abstract, theoretical finding, but I think we can see clear evidence that
this is taking place for real corporations operating at the present time.
For example, Pacific Gas and Electric in California received a net
refund in 1975 and 1976 for those very reasons. Southern California
Edison will receive a net refund in 1977. In New York the plans of
utilities in the State would coordinate and merge their construction
plans based in part upon the desire to so allocate those tax credits that
no utility in the State of New York will have a net income tax liability
for the next 20 years. All of this is wholly legal and in fact there is a
strong incentive to do so.
The executives and directors of utilities have an obligation both to
their stockholders and their customers to use these tax provisions to
minimize their tax burden. But I am concerned not about the motiva
tion to do so but the economic implications for the economy and for the
country. One of the problems which this causes is a serious underpricing of conventional energy resources thereby reducing the demand
for renewable resources and for employment.
I would like to illustrate this point by referring you to table 2 of
my prepared statement which has been distributed to you. This table
summarizes an analysis of the corporate and personal income tax pro
visions which apply to energy production and consumption in Cali
fornia. In other words, for homeowners the interest expense on a
heating system have also been considered, and local property taxes,
and so on.
The first row shows costs in an environment in which there are no
special deductions of any kind. Solar heating would be either competi
tive with or slightly less expensive than gas from Alaska—liquefied
natural gas—or nuclear power as a source of home heating.
But when we look to the fourth row, when we are considering the
present tax environment of energy sources, we see that the actual prices
which homeowners pay are now such that solar heating is more costly.
An important conclusion is that on a full-cost basis solar heating
is competitive in Southern California. Yet any homeowner who would
choose to install it would be clearly sacrificing a significant amount
because the tax subsidies completely reverse the result of solar heat
ing being preferable.
There is a similar kind of effect with respect to employment. Note,
for example, that the social insurance cost incurred by taxes, not only
social security but life insurance costs and so on, will add 30 percent
to the wage payments an employer must make for each employee.
The cost of capital is reduced roughly about a third by the corporate
tax subsidies cited previously. So the net effect is that labor is made
more expensive and capital less expensive.

44
Available statistics on income distribution of the effect of these
tax provisions are summarized in a later table. For the seven items
which bear directly on the tax provisions, it is clear that they are dis
proportionately beneficial to upper income groups. Those persons hav
ing incomes greater than $50,000 received on the average $1,100 in re
duced taxes. Those persons having incomes less than $20,000 received
$10 in reduced taxes.
Senator K e n n e d y . I would like you to get through your presenta
tion, but can you tell me how that works ?
How do you figure that one out ? Maybe it is better off to continue.
Maybe you can flag that and continue.
Mr. C h a p m a n . It is shown in table 6. This is a direct excerpt from
the Treasury Department’s statistics on the income distribution effect
of income taxes.
The nature of the present tax proposals which are being presently
considered are such that they will further distort the prices paid for
finite and renewable energy, further distort the relative costs of labor
and capital. Social security taxes increased 11 percent and are ex
pected to increase 31 percent next year.
The kind of changes in the corporate tax code which you are con
sidering include a reduction in the overall rate, and a further increase
in the investment tax credit. The end result for the most capital
intensive of industries which are specifically utilities and petroleum
corporations is, in my opinion, essentially an introduction of a negative
income tax program for these industries.
The kinds of reasons why these programs have been promoted is
because they have real shortrun gains in terms of employment, build
ing construction, and factory equipment manufacture. The income and
that investment associated with construction and equipment manufac
turing brings expansion to other kinds of business and consumer
activities. This gain is very real.
I wish to emphasize to you that there is a very serious distortion in
the long run which arises from these distortions of prices paid for
energy, labor, and capital. Other witnesses on this panel discuss the
relative employment requirements associated with the most capitalintensive kinds of energy technology compared to renewable tech
nologies and conservation technologies.
I make some brief reference to relative employment in solar energy.
My own statement summarizing other work concluded that the employ
ment associated with solar heating in southern California is four times
that associated with home heating through electricity.
In my own opinion, we should attempt to look at the requirements
which are associated with full employment energy policy. It is neces
sary to permit and encourage growth in economic activities which
would be clearly competitive with existing types of energy production
and use, thereby resulting in lesser use of our energy resources, and
increased use of less costly renewable resources and labor.
The kind of specific policies which may go in that direction I
attempted to make some brief reference to. I think they include rail
transportation. I think they include solar heating. I think they include
either a revocation of the existing capital subsidies and pricing sub-

45
sidies or else, and less desirably, an introduction of offsetting subsidies
both to renewable energy resources as well as to employment.
[The prepared statement of Mr. Chapman follows:]
P re p a r e d S t a t e m e n t

uane

Chapm an

Taxation, Energy Use, and Employment
SUMMARY

1. Present corporate income tax deductions and credits available to gas and
electric utilities result in a negative or zero income tax for new investment.
2. Pricing subsidies to new high cost conventional energy sources encourage
the inefficient growth in demand for such sources.
3. At present, the anticipated full cost of solar heating in Southern Cali
fornia is equivalent to, or less than, the cost of liquefied natural gas heating
or nuclear powered electrical heating. However, present tax and pricing sub
sidies distort market prices so that new gas heating appears to be less costly.
4. Growth in solar heating and in public transportation would have net posi
tive impact on employment and reduce inflationary pressure.
5. Social insurance costs and capital tax subsidies interact to make labor
more costly and capital and energy less costly to business. The result is an in
efficient use of excessive capital and energy and insufficient levels of employ
ment.
6. Capital and energy tax subsidies are received primarily by persons with
incomes in excess of $50,000.
7. The present business recovery is conventional in the sense that it is char
acterized by resumed exponential growth in energy consumption, increased
expenditures on automobiles and residences, and investment in energy supply
and energy intensive industries. Future adjustment is made more difficult.
8. Energy policies which would encourage full employment and renewable
resource use include: revocation of existing capital tax subsidies; solar energy
and employment tax credits; incremental cost rate schedules by utilities; energy
excise taxes; and Federal activity in rail construction and operation.
i. Utilities and the end of tax Mobility
Under current provisions of the Internal Revenue Code, it appears that—
in a present worth context—no electric or gas utility need anticipate a positive
Federal/State income tax liability on revenue from new investment. Present
deductions for interest expense, accelerated depreciation, and the investment
tax credit appear sufficient to wholly offset the nominal 48 percent tax rate on
net income in excess of $50,000.
A utility may raise 50 percent-55 percent of its new capital in debt. The in
terest expense deduction on debt is sizeable in early years of new plant operation.
Accelerated depreciation in an economic sense has two components. First,
the tax life of a property may be considerably less than its actual expected
life. For example, a nuclear power plant is expected to operate for 30 or 35
years, but its life for tax purposes may be 16 years. Depreciation methods such
as double declining balance may double the rate of annual depreciation. Taken
together, the short tax life and the accelerated depreciation methods provide
significant deductions in early years. For example, normal straight line de
preciation for a 30 year life would result in a first year’s depreciation of 3.2
percent; accelerated depreciation provides a first year’s deduction of 12.5 percent.
Normal straight line depreciation is usually used by companies and regulatory
commissions as the basis for determining rates and profitability. However, for
tax purposes, special accelerated depreciation accounting is appropriate.
The investment tax credit provides 10 percent or 11 percent of the value of
a new investment as a direct credit against taxes.
Table 1, “Capital Tax Subsidies,” illustrates the economic significance of
these tax provisions. With no deductions or credits, a utility would use a 25
percent annual fixed rate on capital investment including an income tax com
ponent of 9.1 percent. The average charge to customers would be 1.7^/KWH
for income taxes. However, interest deductions lower this tax charge to 1^/KWH,
and accelerated depreciation and the investment tax credit eliminate the tax
requirement.

46
If nuclear power were to cost 8<£/KWH delivered to the customer, interest
deductions reduce this to 7.3^/KWH, and the other capital subsidies reduce the
price to 7^/KWH.
Tax changes currently under consideration will apparently permit a negative
income tax to be established for revenue from new investment. The last entry
in Table 1 shows the possible effect of lowering the corporate tax rate to 44 per
cent, raising the investment tax credit to 12 percent, and excluding dividend pay
ments from taxable income. The result appears to be that each kilowatt hour
sold would lead to a net refund of 7/10 of a cent.
For this negative income tax to have maximum benefit, it needs to be applied
to earned income from other sources. For example, an electric utility can shelter
income from existing plants by claiming the credits and deductions arising
from new plants.
A gas utility which does not have a construction program may be a valuable
subsidiary of another company which generates tax losses in other areas such
as real estate and agriculture (see “Report on Income Taxes Southern Cali
fornia Gas Company. . . ” ).
It should be emphasized that these tax accounting methods are wholly law
ful, and must be followed at present if the company is to provide minimum cost
service to customers and minimum tax liability to share holders.
2. Taxing present customers for new uses
Average cost pricing is a general principle of utility and regulatory commis
sion rate making although it is receiving increasing scrutiny by companies and
commissions. Basically, it means that the high cost of new nuclear power, or of
liquefied natural gas (LNG) from Alaska, is “averaged in” with low cost hydro
power, or existing natural gas, or other energy sources.
Historically this promoted lower rates since prior to 1973, average cost pricing
used the savings from low cost new plans and supplies to offset older, higher
cost energy sources. However, in 1978 this principle provides a substantial sub
sidy to new, high cost energy.
Suppose with existing capital subsidies it would cost $4.60/million BTU to
deliver 148 trillion BTU per year of LNG to Southern California customers. If
this is “rolled in” with 810 trillion BTU of gas with a cost of $2/million BTU,
then the $2.40/million BTU charged for all gas will mean that the Alaskan gas
users receive a $2.20 subsidy on each million BTU.
The solution to this dilemma probably lies through some form of incremental
cost rate schedule, and is generally applicable both to gas and electric utilities.
Average cost pricing also appears to be generally characterized of the petro
leum industry where hisrh cost oil from Alaska and the Middle East is “averaged
in” with lower cost “ old” domestic oil.
In each industry—electricity, natural gas, petroleum—average cost pricing
and capital tax subsidies interact to stimulate growth in use by bringing about
artificially low product prices.
Since present market energy prices are artificially lowered, these tax policies
act to inhibit growth in renewable energy resource use.
S. Solar heating: Market cost and social cost
In Southern California today, it appears that solar space and water heating
will be competitive with, or less expensive than, the unsubsidized costs of Alas
kan gas or nuclear power which would be available in 1985. The major assump
tions are (1) a cost of $5,000 for solar equipment and other design features on
a new home, (2) nuclear power costing $1,000 per KW, and (3) capital cost for
Alaskan gas for all facilities (including distribution) of $3.3 billion for 148
trillion BTU per year.
All values are in 1977 dollars.
The results are summarized in Table 2, “Annual Home Heating Costs.” On a
total cost basis without subsidies, solar heating shows a cost of $725 per year.
This is competitive with Alaskan gas at $775, and nuclear powered home heating
at $1,325.
However, the present system of tax and price subsidies result in a market
situation where solar heating would cost $150 more per year than heating
with Alaskan gas. The tax subsidies considered in this analysis include the
California solar tax credit, the various personal income tax deductions as ap
propriate, and the corporate capital tax subsidies of accelerated depreciation,
the investment tax credit, and Interest Expense deductions as discussed above.

47
The analysis is tentative in the sense that further review may revise particu
lar numerical assumptions. However, I am certain that the qualitative conclu
sion reached here is correct: present tax and price subsidies promote the use of
existing finite energy sources and retard growth in use in renewable energy
sources in general and solar energy in particular.
4. Energy conservation and employment
iCurrent research programs sponsored by the Department of Energy and else
where are deficient in their development of specific data on employment require
ments for new energy technologies and conservation. While it is admittedly
difficult to prepare employment analyses for those technologies which are pres
ently nonexistent, such research is nevertheless essential in gauging the reaction
of the national economy to growth in these new economic activities.
Table 3, “Employment, Electric Home Heating, and Solar Energy,” summar
izes estimates of employment associated with solar energy. It will be noted that
providing home heating by solar energy appears to require more than four times
the labor involved in the direct production of energy through coal mining and
power generation. It seems unlikely to me that these statistics are reliably accu
rate. Actual employment arising from solar energy and power generation may be
many multiples greater than the values shown here. The general point, however,
seems correct: the use of solar energy resources probably requires significantly
more employment than the finite energy technologies that it will displace.
Similar findings with respect to public transportation are reported by Bruce
Hannon (see Table 4, “Employment Effects of Public Transportation Use” ). As
Hannon may indicate elsewhere in these proceedings, inter-city rail transporta
tion and construction will reduce energy use per passenger mile and per ton
freight mile, and increase national employment.
These two illustrations—solar heating and public transportation—show how
the economy can adapt to present circumstances by securing growth which re
duces energy use and increases employment.
Aggregate economic analyses of employment and energy use show similar
findings. Ernst Berndt and David Wood reviewed their own and other studies (26
in total) for our CONAES Demand Panel, and they generally report energy-labor
substitutability in the econometric investigation of actual data. In their own work,
they had found energy and labor to be substitutable in U.S. manufacturing.
Ellen Hornig examined New York Manufacturing in the 1964-73 period, and
observed that growth in electricity use reflected the substitution of electrical
machinery and equipment for labor and for fossil fuel processes.
This kind of aggregate analysis in general supports the conclusions noted
above: policies which accelerate energy use increase unemployment in the long
run, and policies which promote growth in conservation, solar energy, renew
able resource use, and public transportation will increase employment.
5. Wage penalties and capital/energy subsidies
We have seen that present tax policy subsidizes conventional energy prices to a
degree sufficient to dominate the present market choice between solar heating
and utility gas heating for future use. While the total cost of solar heating ap
pears to be competitive with or less than that of Alaskan gas, tax and pricing
subsidies reverse this preference.
We noted that electric and gas utilities need not anticipate a net Federal or
State income tax liability on revenue from new investment.
A similar distortion in market signals is taking place with respect to the rela
tive costs of labor and capital. Labor is made more expensive by the tax system
and capital, less expensive. Table 5, “ Tax Impact on Relative Labor, Energy and
Capital Costs” illustrates how social insurance costs and capital tax subsidies
may make a capital intensive process less costly to an employer than the labor
intensive process it displaces. In this illustration, the capital intensive process
is 9 percent more costly without capital subsidies or employment taxes. With the
present tax system, the labor intensive process becomes 31 percent more costly.
The long run economic effect is to make labor appear more costly and capital
less costly, thereby causing a substitution of capital for labor.
6. Equity and income distribution
It is apparent that the tax subsidies discussed here are disproportionately
received by upper income groups. The Table “ Tax Expenditures” shows the dis
tribution of $3 billion in such benefits for seven capital tax subsidies and provi

48
sions specific to energy industries. The average return in the $0-$20,000 income
class received $10 in such tax reduction benefits; in the $50,000 and above class,
the average was $1,064 in reduced taxes.
These statistics apply only to Federal personal income tax expenditures. The
seven items shown here account for $10 billion in corporate tax expenditures of
a total of $23 billion in last year’s Budget Special Analysis. It seems unlikely that
the corporate tax expenditures would have a more progressive distribution than
that of the personal tax expenditures for the same items.
To summarize the points made thus far, the present tax environment bearing
upon energy production and use has these characteristics: (1) there is no net
Federal-State income tax liability for revenue from new utility investment in
electric or gas production facilities. (2) The true economic cost of solar heating
in Southern California is either competitive with, or less than the cost of gas
heating using Alaskam or other new gas and less expensive than electric heating
using nuclear power. (3) Tax and pricing subsidies reverse this ordering in
actual market costs with Alaskan gas being made less costly to the homeowner.
(4) Energy conservation, solar heating, and public transportation would increase
employment while reducing the need for finite energy consumptions. (5) The tax
environment penalizes labor through social insurance wage taxes and subsidies
capital and energy. (6) These tax subsidies are received almost wholly by upper
income classes.
7. Macroeconomic implications
The absence of necessary growth in solar heating, renewable resource use
employment, and public transportation has an inflationary impact in three ways.
First, tax subsidies result in a higher general price level. Utilities are the
most capital intensive manufacturing industry, followed by petroleum. As these
industries approach the position of zero tax liability, the tax burden on other
business rises. The product prices of these less capital intensive industries rise to
reflect their greater tax burden, thereby contributing to inflation in these sectors.
Second, continued exponential growth in use of conventional energy re
sources rather than in their substitutes contributes direcly to inflation in en
ergy products and in the goods and services which are energy intensive. In
general, insulation is less expensive than electricity or fuel use, public trans
portation on a total cost basis is less expensive than automobile or plane use,
solar energy is becoming less expensive than heating with new gas or electric
ity, and on a total economic cost basis, we may assume that many labor intensive
processes are less costly than capital intensive processes. The absence of growth in
these needed activities while conventional energy prices rise causes unnecessary
inflation.
In 1977, energy demand returned to previous patterns of exponential growth
in petroleum (6 percent), electricity (6 percent), and coal (8 percent). Natural
gas use increased 1 percent, while total energy consumption rose 4 percent. Con
tinuation of this pattern will mean continued inflationary pressures.
Third, the absence of sufficient growth in new and renewable technologies
employment, and conservation is inflationary in the sense that the economy
does not adopt the most efficient methods of providing goods and services, thereby
lowering average real income. Individual and corporate decisions made on the
basis of market prices which do not reflect real economic costs result in inef
ficiency both in production and consumption.
The conventional approach to inflation has a more aggregate perspective, gen
erally viewing inflation as influenced by past inflation, productivity, unem
ployment, and wage rigidity. The implication of this conventional approach is
that energy-induced inflation must be contained by unemployment and other
policies.
In my opinion, the desired policies are those which promote efficient growth
in new activities which are competitive with conventional energy products and
with energy intensive goods and services. This provides a method of reducing
inflation through increased employment.
Stimulation of business investment has may short run economic arguments
in its favor. These are (1) increased employment in construction and capital
equipment manufacture, (2) multiplied gains in employment and income as the
effect of greater investment activity spreads to increased personal consumption
and business spending, (3) greater capacity for production, and (4) increased
productivity in the sense of Greater output per employee.

49
However, in the long run, the tax policies discussed here lead to less em
ployment and greater energy use.
This presents a serious conflict between short run and long run economic goals.
In the future, we wish to have lesser conventional energy use or lesser growth
in energy use, greater employment, and increased use of conservation and re
newable energy and materials. But the economic policies employed in the short
run make the long run goals more difficult to achieve.
“Energy Conservation, Income, and Employment” (submitted to the Committee
as an Appendix to this testimony) outlines some of the major characteristics of
the present business recovery. Certain points made there are relevant, and revised
with current data, emphasize the relationship of the recovery to energy use. With
respect to the increase in non-inventory GNP since the low point of the 1974-75
winter, 48 percent of the current increase is in automobile sales and residential
construction and services. Considering automobiles to be national investment in
transportation, 61 percent of current private investment in industry and transpor
tation is in energy intensive sectors. Investment is highest in automobiles, electric
utilities, and petroleum. There is no apparent change in use of public transporta
tion : intercity train and bus travel were less in 1976 than in 1974.
From mid-1973 to mid-1977, employment losses were concentrated in energy
intensive activities: manufacturing production workers, particularly metals,
automobile and transportation equipment, textiles, and electrical equipment;
agriculture; and construction. Employment gains were concentrated in services,
self-employment, finance and real estate, and trade.
Taken together with renewed exponential growth in energy consumption, these
data lend themselves to the interpretation that the present busines recovery is
conventional in that it is based upon growth in energy intensive activities. Yet
the disemployment in energy related sectors suggests that at its peak the present
recovery will have greater unemployment than has been customary.
In summary, by accelerating energy use and by increasing national investment
in energy intensive sectors, the current business cycle makes future adaptation
more difficult.
8. Current tax proposals
The maximum social security tax contribution rose 11 percent this year and is
scheduled to rise 31 percent next year.
Current corporate income tax changes being considered include a reduction
in the general rate, an increase in the investment tax credit, and dividend exclu
sion from taxable income.
In my opinion the long run consequences of these changes are negative. I would
expect a further movement towards negative income tax liability by utility and
petroleum companies, a positive stimulus to growth in conventional energy use,
a negative impact on employment, and a negative effect upon growth in solar
energy, public transportation, and conservation. In the short run, there would
be gains in employment and income induced by increased construction and capital
equipment manufacturing.
The obvious difficulty is that these tax provisions attempt to continue the present
growth by strengthening the economic incentives for energy use and capital rela
tive to labor, and provide strength for renewed exponential growth in energy
consumption.
9. Conclusion: Full employment energy policy
This interpretation leads to support of the following policies:
A. Gradual revocation of existing capital tax subsidies and employment penal
ties. This would increase incentives for solar and renewable energy use, employ
ment, conservation, and public transportation.
B. Federal solar energy tax credits and employment credits. This would be
desirable to offset the subsidies to conventional energy and to capital.
C. Federal and State action to end pricing subsidies to new high cost energy
sources. Incremental cost rate schedules are appropriate for utilities. A Federal
excise tax on energy consumption merits consideration. This would reduce the in
efficient demand for high cost energy.
D. Increased research on the employment and conservation aspects of renew
able energy technologies.
E. A strong Federal presence in rail construction and operation.
In my opinion, there are no innate physical or economic constraints to inhibit
development of an economy with greater employment, lesser energy use, increased

50
renewable resource use, and an equivalent or higher living standard. The problem,
as I see it, is that present tax, energy, and economic policy attempts to guide the
flow and level of economic activity within the present structure of the economy.
But policy should be directed to the purpose of encouraging the structure to adapt
to new reality.
REFERENCES

Ernst Berndt and David Wood, “ Consistent Projections of Energy Demand and
Aggregate Economic Growth,” prepared for the Energy Demand Panel, Na
tional Academy of Science Committee on Nuclear and Alternative Energy
Systems, June 1977.
Ernst Berndt and David Wood, “Technology, Prices, and the Derived Demand
for Energy,” Review of Economics and Statistics, August 1975, pp. 259-68.
California Energy Commission, Solar Energy in California, Residential Thermal
Applications, Draft report, February 1978.
California Public Policy Center, Jobs from the Sun: Employment Development
in the California Solar Energy Industry, February 1978.
Duane Chapman, “Energy Conservation, Employment, and Income,” Cornell Ag.
Econ. Staff Paper No. 77-6, presented at the 1977 Annual Meeting of the In
stitute of Management Science and Operations Research Society of America.
Duane Chapman, “Taxation and Solar Energy,” California Energy Commission,
forthcoming.
K. A. Gulbrand and P. Leung, “Power System Economics: A Sensitivity Analysis
of Annual Fixed Charges,” Journal of Engineering for Power, October 1975,
pp. 465-472.
Bruce Hannon, “Energy, Labor, and the Conserver Society,” Technology Review,
March/April 1977, pp. 47-53.
Ellen Hornig, “The Effect of Energy Pricing on Employment in New York State
Manufacturing,” M.S. thesis, Cornell University Dept, of Ag. Econ., 1977.
Lloyd Humphrey and Henry Angerbauer, California Public Utilities Commis
sion, “Report on Income Taxes of Southern California Gas Company and
Pacific Lighting Service Company,” February 22, 1978.
U.S. Congress, Office of Technology Assessment, Application of Solar Technology
to Today’s Energy Needs, Draft, June 1977.
U.S. Council of Economic Advisors, Annual Report, January 1978.
U.S. Department of the Treasury, “Tax Expenditures Affecting Individuals, Fis
cal Year 1977,” February 13,1978.
U.S. Office of Management and Budget, “Tax Expenditures.” in Special Analyses,
Budget of the United States Government fiscal year 1977.
TABLE 1.— CAPITAL TAX SUBSIDIES

Utility fixed
charge rate
on capital
1. No subsidies_______________________________ ______________
II. Interest deductions only_____ ________________ ______________
III. Present subsidies___________________________ ....................
IV. Proposed additional subsidies_________________ _______ ______

0.250
.209
.159
.159

Federal and
State income
tax compo
nent in fixed
charge rate
0.091
.050
( - . 004)
( — .038)

Federal and
State income
tax charge,
c/kWh
1.7
1.0
—0
-.7

In some circumstances, negative liability results in net refunds in cases III
and IV, Present subsidies considered were accelerated depreciation and the
investment tax credit.
Proposed tax changes considered were reduction in the corporate income tax
rate to 44 percent on profit exceeding $50,000, an investment tax credit rate of
12 percent, and a dividend exclusion equal to 3 percent of utility plant.

51
The analysis uses the Gulbrand-Leung levelized cost method, anu as-sumes a
future 1985 cost of $1,000/KW for generating plant, transmission, and distri
bution facilities, an 11 percent rate of return on investment, a 9 percent State
income tax rate, a 60 percent capacity factor, and a 30 year life. See “Taxation
and Solar Heating.”
TABLE 2.— PROJECTED ANNUAL HOME HEATING COSTS, 1985, IN 1976 DOLLARS PER YEAR, LOS ANGELES
Type of heating

Tax and pricing policy:
1. Social cost: No subsidies....... .......... .............................
2. Present tax subsidies including solar, no pricing subsidy...... .
3. Interest and property tax deductions, pricing subsidies, solar
credit________________________________________________
4. Market cost: Present tax and pricing subsidies.......... ...........

Solar

Alaskan gas

Nuclear power

$725
500

$775
525

$1,325
1,000

500
500

375
350

775
750

Note: See “Taxation and Solar Heating.”
TABLE 3.—-EMPLOYMENT, ELECTRIC HOME HEATING, AND SOLAR ENERGY
Employment (person-years), heating energy for 1,000,000 homes in Los Angeles
Installation
1. Solar water and space heating:
(a) California Energy Commission.
(b) California Public Policy
Center.............................

Manufacturing

Total

91,000

136,500

6,825

26,650

133,250

6,663

Total

Average over
30 years

Operations
per year

Total, average
over 30 years

5,775
425
425
1,075
3,000
3,650

193
14
14
36
100
121

228
264
107
1
385
0

421
278
121
37
485
121

14,350

478

984

1,462

45,503
79,000

Total, average
over 20 years

Distribution

27,600

Construction

2. Electric water and space heating:
(a) Powerplant__________________ ________ _
(b) Western strip mine coal____________ ____
(c) Rail coal transport..............................
(d) Electricity transmission_________________
(e) Electricity distribution_____ _____________
(f) Turbine, generator manufacturing.________
Total_________________ ___________

Note: The employment data on electricity production are adapted from an OTA analysis. The major assumptions used
here are 100 percent capacity utilization during the winter and generation of 10,000/kwh for heating each house. Actual
system lives are assumed to 20 years for the home solar system and 30 years for the power system. Apparently excluded
are labor in home electric heating and water heating equipment, both in the electric case and as “backup” heating in
the solar case.

Table 4. Employment Effects of Public Transportation Use (net increases in
employment per quadrillion BTU reduction in energy consumption, 1974 data)
Change:
employment
1. Inter-city train use replacing
9ain
A. Plane travel_________________________________________ 930, 000
B. Car travel___________________________________________ 700, 000
C. Owner-operator truck freight_________________________ 675, 000
2. Rail and mass transit construction replacing highway construc
tion --------------------------------------------------------------------------------- 30,000
N ote: Net employment effects count the lost employment in the displaced activity and
its supplier industries as well as the gain from the increased activity. Gross National Prod
uct is assumed to be unaffected. These data are taken directly from Bruce Hannon’s
“Energy, Labor, and the Conserver Society.”

52
TABLE 5.— TAX IMPACT ON RELATIVE LABOR, ENERGY, AND CAPITAL COSTS: AN ILLUSTRATION
Method A:
Labor
intensive

Method B:
Capital
intensive

1. Labor, energy, capital, no subsidies, annual basis:
Number of workers....................................
Electricity used [kWh].... .................... ........
Machine cost, 25-year life.............................
Wage rate...............................................
Social insurance benefit rate [percent]..............
Interest rate [percent]...... ..........................
Corporate tax rate [percent]..........................
User cost of capital, per year [percent].............
Electricity cost [0/kWh]...............................

3
0
0
$15,000
30
9
48
19.6
2

1
2,500
$200,000
$15,000
30
9
48
19.6
2

Labor cost with benefits...............................
Capital cost.............................................
Electricity cost..........................................

$58,500
0
0

$19, 500
39,200
5,000

Total cost.........................................

58,500

63,700

II. Present capital tax subsidies, per year
Labor cost with benefits.............................. .
Capital cost [11.1 percentl.............................
Electricity cost [1.250 /kWh]......................... .

58, 500
0
0

19, 500
22,200
3,125

Total cost............................................ .

58,500

44,825

Note: This illustration is taken from “ Energy Conservation, Employment and Income."
TABLE 6.— TAX EXPENDITURES, FISCAL YEAR 1977, BY INCOME CLASS
[Dollar amounts in millions]
Number
of returns
(millions)

Percent
of
returns

Expensing,
exp. and
dev.

Percentage
depletion

Capital
gain, coal
royalties

Accel,
dep.,
non rental

None to $20,000................. ........
$20,000 to $50,000.......................
$50,000 plus...............................

73.513
13.254
1.252

83.5
15.1
1.4

$13
40
157

$18
57
230

$4
11
30

$4
26
106

Total................................

87.999

100.0

210

305

140

Income class

Investment
credit

Tax life
depletion;
ADR

Expensing
construction
interest taxes

Total
7 items

Average per
return

O'to $20,000___________ _______ _____
$20,001 to $50,000............ .............
$50,001 and over..........................

661
800
614

12
28
60

8
28
114

724
990
1,311

$10
75
1,064

Total________________________

2,075

100

150

3,025

Income class

Note: These data are taken directly from “Tax Expenditures Affecting Individuals," U.S. Treasury Department, Feb. 13,
1978. The total amount for 69 items was $84,000,000,000,$26,000,000,000 being in the form of reduced taxes to individuals
with incomes over $50,000.

Senator K e n n e d y . Thank you, Mr. Chapman. Mr. Hannon.
STATEMENT OF BRUCE HANNON, ASSOCIATE PROFESSOR AND DI
RECTOR, ENERGY RESEARCH GROUP, CENTER FOR ADVANCED
COMPUTATION, UNIVERSITY OF ILLINOIS

Mr. H a n n o n . I am Bruce Hannon, associate professor and director
of the Energy Research Group at the Center for Advanced
Computation, University of Illinois. For the past 9 years my colleagues
and I have researched the economics of energy conservation.

53
In summary, I would say that^Ebe twin problems of unemployment
and energy scarcity can be solved by true energy conservation By
anticipating the inevitable energy scarcity that is to come we can avoid
the tragedy of abrupt energy shortages and the consequent massive
unemployment. The scarcity of energy is a fundamental problem for
government at all levels, but so is the unemployment problem.
The energy conservation tax rebate program can solve the energy
and unemployment problem. Many people believe that it is the best
solution. I believe^he most important governmental action today is to
provide a lasting job, even if it does begin on a low rung of the eco
nomic laddeJ>The energy conservation-employment issue is one of
those for which there exists no strongly favoring vested interest group.
Nor does the issue rest comfortably in Government.
The Department of Labor and certainly the Department of Energy
appear to have no interest in connecting energy conservation with
unemployment.
By way of explaining what energy and labor costs mean, I refer you
to the chart on the wall or the chart in my prepared statement.
When we calculate energy costs, we are talking about the total
energy costs in the system that is used to deliver a particular good or
service. If we are talking about making autos, for example, we mean
the energy used in the auto assembly plant plus the energy used in
the steel plant, plus the energy used for mining the coal to provide the
input to the steelmaking plant, and so on, even including the consump
tion of automobiles by executives of the steel company in the manu
facture of steel used for making that car.
We sum all of these inputs and we do the same for labor. Then we
can compare the energy saved and employment created by substituting
a passenger mile by automobile for one by train, in for example, inter
city travel. Looking at the third line you see that car-to-train substitu
tions in intercity operations yields a net total change of about 700,000
new jobs per quadrillion Btu. This means that in the switch to trains,
not only would you generally reduce energy use, but also increase em
ployment. You would also generally save money which would be spent
on something else. That something else will demand energy and pro
vide jobs and these changes must be added to the changes in energy use
and job demands created within the transportation industry to bring
the economy back to equilibrium. The next effect on the whole economy
is to create 700,000 new jobs per quad of energy saved.
I also note that when new highway construction moneys are trans
ferred to health insurance the net economic effect is 640,000 new jobs
per quad of energy saved. There are more well-studied individual
changes.-(Ranging from throwaways to refill able beverage containers
creates onbalance about 750,000 new jobs per quad of energy savegtf
When we look at the details of that change, we find that energy is saTed
and the number of jobs increased within the container industry and the
supporting industries. The change to refillables would/ree up about
$1.5 billion in consumer saving^which would be spent on other general
forms of personal consumption. When the dollar savings are spent
about half of the original energv saving is used to r>rovide for this
alternative consumption. More jobs—of a general kind—are needed to
provide for this increase in general consumption and those jobs are

54
added to the jobs change within the industry that supply the bever
ages. The net result of the shift to refillables is about 750,000 new jobs
per quad of energy saved.
We also find that within the industries that supply these beverages,
there is a diminution of average wages and increased capital invest
ment. This point is most important.
Another interesting study is the one on the increase of home insula
tion in existing attics. We found that to bring existing housing stock
to the optimium level would take 400,000 man-years of effort, both in
the production of insulation and in the installation of it. However,
after that initial construction effort there is also a permanent change
in energy and employment demand, so less money would be spent on
energy and more on general personal consumption, and that gives a
net figure of 15,000 new jobs per quad of energy saved. This example
shows that the major job change occurs during the construction phase
of the program.
We can, however, also find changes which produce increases in
energy use and decreases in the number of jobs. For an individual con
sumer who decides to change from beef to soybeans as a source of
protein, the total effect is a decrease in employment of 720,000 jobs for
every extra quad of energy used. The concerned individual and the
governmental policymaker can obviously get into trouble by making
individual changes.
We can avoid this apparently pernicious complexity of the economy
by what should be an easy governmental policy.
I urge the/Government to tax energy as it moves from the ground on
a Btu basis and let the effect of that tax filter through the economy
giving the correct economic signals as it goes. The revenues generated
by the energy conservation tax must be rebated to the individual con
sumer to compensate them for the loss in personal income caused by
the tax.
The effect of the tax would be to increase the cost of energy used by
all consumers and to increase tihe cost of producing highly energyintensive goods more than with lower energy intensive goods. <Che
tax would cause consumers to switch from high energy intensive
¿roods—the purchase of which has low job intensity to low energy
intensive ones, which generally have high labor intensity^ The tax
would also encourage industrial producers to substitute labor for
energy in the production process. Both of these reactions to the energy
conservation tax would increase employment while saving energy.
It is very important that we understand the effect of rebating the
tax and how that tax can be rebated progressively, regressively or in
a neutral way. From our studies, we have shown that total enersry use
and income are directly proportional. That is, a family earning $30,000
per year uses about twice as much energy directly and indirectly, as a
family earning $15,000.
So the proposed energy tax filtering through the economy, impacts
the consumer in proportion to their income.

55
To be totally neutral, the tax revenues should be rebated propor
tional to income. One could be very progressive and rebate the revenues
on a per capita basis. The tax might also be used specifically to reward
those industries, commercial establishments, and individuals, who can
demonstrate effective energy conservation.
In general, this tax would tend to create energy conservation and
increase employment, reduce wages below what we expect them to
rise to, tend to redistribute jobs away from the urban areas and tend to
create jobs on the first rung of the economic ladder. Rebating the tax
to individual consumers makes us all part-owners in the Nation’s
energy resources.
[The prepared statement of Mr. Hannon follows:]
P re p a r e d S t a t e m e n t

B ruce H

annon

Conserving Energy While Also Increasing Employment
In 1949, the renowned English philosopher and mathematician, Bertrand Rus
sell, in a lecture entitled, “Authority and the Individual,” said that government
had only three necessary functions: the provision of security; the establishment
of justice; and the conservation of non-renewable resources, particularly energy.
It should be no surprise that a man with such insight would foresee the present
energy crisis. What is surprising is that nearly 30 years later, the federal gov
ernment still has not really adopted a policy of energy conservation. Perhaps,
though, such a policy can finally be realized when coupled with the idea of in
creasing employment as well as conserving energy.
Even though the energy picture is clouded by inflation and urgings for volun
tary conservation, it seems that true energy conservation will become a way of
life in the United States only if the price of energy rises in relation to the price
of labor (wages) and the price of capital (interest rates). From such a relative
price increase, one can easily predict that labor and capital will be substituted
for energy, by producers and by consumers. Such an increased participation in
the production of goods and services would mean that on the average, real wages
and interest rates would decrease in the long term, while returns to energy
suppliers would increase. The Gross National Product should not decrease sig
nificantly, however, until the supply of unemployed labor and capital is exhausted.
Then only the rather rare energy labor and capital-saving technological changes
could maintain income. Such an outcome is not bleak when compared to the alter
native of ignoring increasing energy scarcity. Doing so will produce accelerating
inflation, increasing inequity between rich and poor and rising unemployment.
The energy conservaton policy of the government need not be more complex
than a tax on the basis of energy content in raw materials (coal, natural gas,
crude* oil, hydropower, uranium) at the point where the energy moves from the
ground. The effect of an energy tax would be to :
Increase the cost of energy used directly by consumers.
Increase the cost of producing energy-intensive goods more than that of
those with a low energy intensity. Therefore, the tax would have the following
general effects on job creation:
Cause consumers to switch from energy-intensive goods (most of which have
a low labor intensity) to goods with the opposite characteristics.
Cause producers to tend to substitute labor for energy in the production
processes.
The J&x revenue could then be distributed to consumers in proportion to aftertax income( including income transfers). Research by the Energy Research Group
has shown that the levels of total energy demand and income are proportional, i.e.,
double the income, double the total energy use per household, approximately.
Through this energy-conservation-tax/rebate plan, the government, in effect, an
ticipates the increasing energy scarcity and compensates wage-eamers and capital

56
holders in approximate proportion to the disadvantage caused by the higher
prices for energy. Such a plan is an even-handed treatment of all citizens. A major
requisite of the plan is that it be implemented very gradually, over a period of
no less than five years, to cushion "the effect of shifting job patterns and to pro
vide an opportunity for public understanding. For a more complete explanation of
the tax-rebate effects, see references. In addition, we are now studying the rela
tionships between possible tax levels and potential energy savings. We would be
happy to supply the result of this research as it becomes available.
In effect, the energy-conservation-tax/rebate plan makes all consumers func
tion as part owners of America’s energy supply. The plan also makes us all be*
come energy conservers and inadvertent job producers.
The government could also use the tax to subsidize the initial capital requirements of energy-conserving changes in the industrial, commercial, and household
sectors of the economy. The energy tax could also be used to encourage full em
ployment. Aa alternative to direct government spending of the tax would be an
offsetting tax reduction elsewhere, which would also encourage the productivity
of energy and increase employment. Investment-tax credit reductions and payroll
tax reductions are examples.
The alternate energy policies are to continue past trends of regulating low
prices, or to deregulate energy prices. The latter alternative has the possible ad
vantage that higher returns to the energy companies may call forth greater en
ergy supplies, but the disadvantage that there is no compensation for the result
ing inflation.
There are significant energy and labor impacts that would be produced by ini
tial changes in energy-conserving consumption which could be made without
imposing the tax. The following analysis is intended to set forth the opportunities
and pitfalls of individual consumer changes or of governmentally regulated
changes, no matter how well-intentioned these may be.
The total energy and employment content of a passenger-mile of automobile
or rail transport can be compared to the relative dollar costs, for example.
Changes from an energy-intensive transport mode to a more energy-efficient one
would produce a net change in total energy and employment use and a net dollar
savings. This “extra” income could be spent on other things which, in turn, demand
energy and employment. These additions should be combined with the initial
energy and employment changes to produce an approximate equilibrium in the
set of demand changes.
We have examined hundreds of specific consumer decisions and evaluated
tlieir dollar, energy, and employment demands. By comparing choices involving
high energy usage with lower energy-using alternatives and by incorporating
the respending effects, the net energy and employment changes caused by the
substitution can be determined. All of the changes proposed would reduce energy
use before the respending effects were included. Taking the net change in employ
ment demand and dividing that by the net change in energy demand produces an
indication of the job potential per unit of energy saved (or of new energy) for
each conservation project.
The accompanying table lists selected activities in order by the decreasing num
ber of new jobs created per unit of energy saved. The options presented cover
nearly an entire ten-fold range in the number of new jobs created per quad
(quadrillion B.t.u.) of energy saved. Given that the present U.S. energy use is
about 80 quad and the irreducible level of unemployment is approximately 4 mil
lion persons, full employment would be reached with energy use reduced by ap
proximately 5 to 10 percent through implementation of the first category o f
changes in the table.
This table contains the net total employment change per quadrillion B.t.u.
of net total energy change. The numbers in this table are calculated as follows r
for each unit of service, for example a passenger-mile, the differences of the direct
and indirect energy and employment demands of an activity and its alternative
are calculated; to these differences are added the direct and indirect energy and
employment caused by the expenditure of any dollar savings on average personal
consumption; a ratio of the net employment to the net energy change is then
formed and normalized to one quad of energy.

57
Changes to increase employment and decrease energy use (U.S. economy; 1974)
New jobs per
quadrillion
new B.t.u.
( sewed )

Changing from:
( 940,000)
Plan© to train (intercity)--------------------------------------------------------- 930,000
Throwaway to refillable beverage containers_______ ______________ 750,000
Car to train (intercity)_______________________________________ 700,000
Owner-operator truck to class 1 freight train____________________ 675,000
New highway construction to health insurance (federal)________ 640,000
Car to bus (intercity)_________________________________________ 330,000
Car to bus (urban)------------------------------------------------------------------ 210,000
New highway construction to personal consumption--------------------- 200,000
Car to bicycle--------------------------------------------------------------------------- 200, 000
Plane to car__________________________________________________ 160,000
Plane to bus---------------------------------------------------------------------------- 140,000
Electric to gas stove------------------------------------------------------------------ 160,000
Electric to gas water heater------------------------------------------------------ 120, 000
Electric commuter to car------------------------------------------------------------ 110,000
Electric to gas clothes dryer____________________________________ 100,000
Frost-free to conventional refrigerator---------------------------------------- 60, 000
Plush (25 appliances) to moderately-equipped (16 appliances)
kitchen____________________________________________________ 30,000
New highway construction to railroad and mass transit construc
tion _______________________________________________________ 30,000
Present to increased home (oil heat) insulation__________________ 15,000
Moderate to spartan (4-appliance) kitchen--------------------------------- 10,000
Changes to increase employment and increase energy use (Average U.S. Economy:
1950-1978)
Jobs gained per
quadrillion
B.t.u. lost
(used)

( 1, 620 , 0 0 0 )

Changing from electric commuter to bus------------------------------------ 530,000
Changes to decrease employment and decrease energy use

Jobs lost per
quadrillion
new B.t.u.

Changing from:
(saved)
Black and white TV to radio_________________________________
35,000
75,000
Present to new electricity supplies------------------------------------------Bus to bicycle_______________________________________________
330,000
430,000
Car to motorbicycle_________________________________________
Color TV to black and white TV______________________________ 1,750,000
Changes to decrease employment and ultimately increase energy use
Jobs lost per
quadrillion
B.t.u. lost
(used)

Changing from:
Beef protein to textured soy protein-----------------------------------720,000
Beef protein to direct bean consumption______________________
860,000
Beef protein to complete soybean meat analog_________________
970,000
Class 1 truck to container train---------------------------------------------- 13,600,000
The viability of this point of view' is essentially supported by the aggregate
behavior of the U.S. economy in 1974. New jobs were gained at the rate of
940,000 per quad of reduction in energy demand. During 1974, real compensa
tion per man-hour, adjusted for inflation, declined 1.6 percent, the real Gross
National Product per capita dropped 2.9 percent, and total energy use dropped
about 2.1 percent. This 1974 result may be too dramatic for useful comparison
however, for in 1975 total employment declined about 1 percent, although total
energy use also declined much faster (2.5 percent).

58
In the first section of the table, please note that adding home insulation in
creases employment throughout the economy at the rate of 15,000 jobs per quad
of energy saved. This does not include the jobs required to install the added
insulation. In a separate and more detailed study, we found that installing
ceiling insulation in all existing U.S. homes to the economic optimum thickness
would require about 400,000 man-years of effort and save about two-thirds of
one percent of the total energy use in the United States. Of course, these jobs
do not exist once the installation is complete, a phenomenon typical of all con
struction projects, but the process would be an extended one, covering several
years.
A well-studied example in this first category is the refillable vs. the throw
away beverage container issue. If the country were to shift entirely from
throwaway to refillable beverage containers, energy demand would be reduced,
employment would be increased (although the average wage might be reduced),
capital stock would be increased, litter would be reduced and material flows
(steel, aluminum, and glass) would be decreased. If the shift were to occur
slowly, say over a three-year period, our research shows those industries which
would lose employment would find that the normal attrition rate of their labor
force would furnish the needed reduction in employment.
This table contains only one example of increasing employment coupled with
increasing energy use. The most interesting data point in this category is the
rate at which the U.S. economy increased employment and energy use during
the period 1950-1973. During those years, real compensation on the average per
man-hour rose by 8.4 cents per year (1967, base year) and real Gross National
Product per capita rose at an annual rate of 3.6 percent. Rising wages caused
the substitution of energy for labor. Unemployment was prevented by increasing
economic growth and by reducing the work time per worker. Both economic
growth and energy use were driven by wages, which were rising in relation to
energy prices. The same effect was true for capital. Low-priced energy has
tended to be substituted for relatively high-priced capital since the early 1950’s.
Another category of consumer options contains activities in which jobs are
lost while energy is conserved (or while the supply of energy is increased).
Most notable among these options is the increase in electricity generation. Our
studies show that approximately 75,000 jobs are lost over the entire economy,
in the short run at least, for each new quad of primary energy transformed
into electricity. This happens because in an equilibrium economy, the decision
to purchase electricity requires a reduction in spending somewhere else. This
spending reduction means a reduction in the demand for labor which exceeds the
number of jobs involved, directly and indirectly, in the production of electricity.
The bottom section of the table includes those options which actually cause
a job loss even though energy use would be increased. The change from beef
to vegetable protein would reduce energy consumption significantly, but the
equilibrium effects of respending the large dollar savings would cause total energy
consumption to rise.
All of the activities in the table were thought of as happening alone, with an
otherwise current or modern economy. But if we consider them as occurring
under pressure from an energy tax, the energy cost of dollar savings that are
respent in the average way would decrease with time. Conversely, the labor
content of the average personal consumption dollar would tend to increase. This
circumstance would tend to reduce the effects of the paradox given in the pro
tein example and further enhance the job-producing and energy-saving qualities
of the first set of activities shown in the table.
The accuracy of the numbers in the table is open to some question because
of the great quantities of data used and the inherent limitations of the economic
models involved. We believe, however, that the numbers are in the correct cate
gories, even though there might be some errors in individual entries.
In summary, the twin problems of unemployment and energy scarcity can be
solved by true energy conservation. By anticipating the inevitable energy scar
city that is to come, we can avoid the tragedy of abrupt energy shortages and
the consequent massive unemployment.
The scarcity of energy, as Russell has said, is a fundamental problem for
government at all levels. But so is the unemployment problem. The most impor
tant action is to provide a lasting job, even if it does begin on a low rung of
the economic ladder.

59
The energy-conservation-tax/rebate program can solve the energy and unem
ployment problems. Many believe that it is the best solution. The issue is one
of those for which there exists no strongly favoring vested interest group. Nor
does the issue rest comfortably in government. The Department of Labor and
certainly the Department of Energy appear to have no interest in connecting
energy conservation with unemployment.
To me it provides a significant test of the ability of a democracy to survive
the crises produced when a fundamental resource becomes scarce. We shall all
be measured, I believe, by how well we respond.
REFERENCES

Bruce Hannon, “Energy Conservation and the Consumer,” Science, Volume
189, No. 4197, July (1974).
Bruce Hannon, “Energy, Growth and Altruism,” Alternatives to Growth I :
A Search for Subtainable Futures, Dennis L. Meadows, ed., Ballinger Publish
ing Company, Cambridge, Mass., Chap. 4, pp. 79-100.
Bruce Hannon, “Energy, Labor, and the Conserver Society,” Technology Re
view, Volume 79, No. 5, March/April (1977).
Charlotte Ford, “The Net Effect on Energy Use and Employment Demand
of a National Residential Ceiling Insulation Plan,” Center for Advanced Com
putation, University of Illinois, Urbana, IL. 61801 (February, 1978).

Senator K ennedy. Thank you, Mr. Hannon. Mr. Benson, can you
give us the basis of your assumption to determine that solar energy,
and also in the area of conservation as well as nuclear—I think it is a
general kind of assumption about the enormous cost and expense of
what we now know about solar energy. And what kind of projections
are you using and how realistic are they in terms of your cost analysis ?
Mr. B enson. I will go through that quickly. We assume a 1,500
square foot home, roughly three bedrooms, a climate similar to Long
Island. In insulating the walls we used 1,900 square feet of insulation,
increased the insulation roughly from zero to about 3 inches of foam.
The cost would be $890 to the homeowner for insulating the walls and
would result in about 26 million Btu’s being saved each year per home.
Insulating the attic we calculated an increase from 2y2 inches to 12
inches of insulation, 1,000 square feet----Senator M cClure. Could I interrupt you? How did you arrive at
the cost of $890 of installation ?
Mr. B enson. We contracted with an engineering firm which has a
great deal of experience in this area.
Senator M cClure. Did they go out and ask for a bid from an insulat
ing company ?
Mr. B enson. Basically.
Senator M cC lure. The prices in Long Island are a lot lower than in
the Washington, D.C., area. I don’t know that anyone would do that
for twice the cost here. It may be true up there.
Mr. B enson. That is what we are finding.
Senator M cC lure. I hope we can get some of those contractors to
move down here.
Mr. B enson. Insulating the attic consists of 1,000 square feet of in
sulating increasing from 2y2 inches to 12 inches at a cost of $470.
Senator K ennedy. Does this include the labor or material ?
Mr. B enson. Both, for installation we calculated 38 hours of labor.
Senator K ennedy . Union scale or nonunion scale ?
Mr. B enson. I believe that is union scale. I don’t have the exact num
ber but the breakdown is $470 for labor, $420 for material. For the at

60
tic, $296 for installation, $172 for materials, for a saving of 10 million
Btu’s per year.
Senator K ennedy . Wliat kind of insulation are you talking about ?
Mr. B enson . In the attic it is fiberglass.
Senator M cC lure. Y ou must have gotten those prices before the
price increases.
Mr. B enson . We tried to make this as accurate as we could, and we
are constantly checking and rechecking. We have been criticized for
saying $900. People have said, “ who would spend $900 to insulate their
homes” ? Storm windows, $100 for installation, $225 for materials—
that is 9 windows. That comes to $32 a window. I believe that is
reasonable.
I had my windows put on for $25 apiece. This is $32.50 so that is
reasonable. The savings is 14 million Btu’s per year.
Senator M cC lure. I hope the Washington Post is listening to this
and I hope they will get those ripoff artists.
Mr. B enson . I agree with you that we don’t need any more ripoffs.
Senator K ennedy . D o you live in Washington ?
Mr. B enson . Yes.
Senator K ennedy . That is where you got your windows ?
Mr. B enson . A s a matter of fact, it was a door-to-door

salesman.
Solar hot water system is 48 square feet of flat plate collector with 60
hours of labor to install, $1,315 for materials, for a total cost of $2,136
to produce about 11 million Btu’s per year. We also figured that about
3 percent depreciation and maintenance which comes out to about 5
hours a year to maintain the solar hot water system. The normal cost
of this system is about $2,000. We are closer to $2,200.
Senator K ennedy . Y ou are talking about water and heating as well ?
Mr. B enson . In addition to hot water, yes. We have three solar
measures.
Senator K ennedy . That is not space heating?
Mr. B enson . A s a matter of fact, you find that conservation—by the
time you put in all that needs to be done, the solar flat plate collectors
that are being pushed by DOE are not economical because you save so
much on energy through conservation that the solar flat plate collec
tors really are not economical. That is the major error in the solar
heating and cooling demonstration program; this push of the most
technically sophisticated type of a system. We need to get the NASA
people out of control of that program and get people who understand
simplicity and cost effectiveness and not just sophistication.
Senator M cClure. Not that the collector system is not efficient but
the economic efficiency of conservation is greater.
Mr. B enson . Y ou always want to insulate before you go to active
solar energy systems.
I would like to very strongly make this point. It does not make sense
to put active solar energy systems on new homes and new buildings.
New homes and buildings should be designed in such a way that they
are fully energy conservative with passive solar systems absorbing
some light through the windows, heating the walls, with no moving
parts, no extra equipment, and no extra cost for constructing that
building. The active solar systems should only be retrofitted onto
existing buildings.

61
To answer the question, labor for insulating the walls is $12.50 an
hour. That is close to union scale.
Nucelar powerplants are twin 1150 megawatt pressurized water
reactors. They are very similar in design to the Millstone III unit that
is being installed now. The cost is $2.76 billion for plant design and
construction. This is taken from utility companies, as are the labor
figures. We have included 20 percent reserve margin, which gives us
another $0.65 billion. We have included $0.37 billion cost of trans
mission, $0.56 billion for operation and maintenance of the plant,
transmission and distribution system over a 30-year period, $0.65
billion for utility companies’ administrative overhead cost----Senator K ennedy . Will you submit all of that?
Mr. B enson . That is in my prepared statement; it is all summarized.
Senator K ennedy . I would like to ask one more question quickly.
Mr. Chapman, could you explain your chart in terms of analyzing
the tax differences and supports for these different utilities ? Can you
just develop that for a few minutes ?
Mr. C h a pm an . The kind of approach by which projected costs are
analyzed is called levelized or annualized cost. The variations in time
distribution of different costs and revenues are put on a present worth
or on an annual equivalent basis. The particular cost methodology
which I used here----Senator Kennedy. I s this part of the same table ?
Mr. Ch a p m a n . Yes. For the utilities it is based on a method devel
oped by two engineering economists with Southern California Edison
and the Bechtel Corp., a major supplier of electric generating
equipment. The characteristic which this approach has is that it takes
the tax credits, takes the present worth value, so to speak, then amor
tizes them over the life of the project.
For example, a nuclear power plant is expected to operate for 30 to
35 years and has a tax life of 16 years. Accelerating appreciation pro
vides double the minimum straight line. So when the utility is report
ing depreciation to its stockholders it uses a straight line depreciation.
But for tax purposes to the Internal Revenue Service it will in its first
year report more than four times that depreciation. The result is a net
accumulation of credits during the first year of operation so that utili
ties need not pay net Federal or State income tax on their investment.
When that is applied to the expected cost of nuclear powerplants
or new gas plants, the result is to greatly reduce what otherwise would
be the legitimate cost which customers would pay for gas and electric
ity. And as a consequence, the net effect of these provisions is to
greatly stimulate the use of natural gas and nuclear power to a signifi
cantly greater degree than would otherwise be the case if these tax
subsidies didn’t exist.
Senator M c C lure . M r. Hannon, you talk about a tax policy to stim
ulate conservation by raising the cost of power, the cost of energy, not
only allowing the market to increase the cost but also to artificially
or additionally increase cost by direct tax policy. Is that correct ?
Mr. H a n n o n . Yes. The tax is an anticipatory policy, although nor
mal energy scarcity would be reflected in market price rises, regulatory
policy may inhibit the price rise. Also we do know that the market did
not anticipate the sudden quadrupling of energy costs in 1973. It is
this suddenness I propose to anticipate with the tax.
31-502— 78--- 5

62
Senator M cC lure. So yours would be a positive program of increas
ing costs in order to stimulate conservation through increased costs ?

Mr. H a n n o n . That is correct.
Senator M cC lure. And then as I understand, that is coupled with
a tax rebate schedule which would be devised in many of several differ
ent ways?
Mr. H a n n o n . That is correct.
Senator M cC lure. I think you also made the point that income
levels and energy consumption were almost parallel, but as income
goes up energy consumption goes up in almost exactly the same
proportions.
Mr. H a n n o n . I didn’t make a dynamic prediction. I was referring
to the distribution of income at a particular time in the economy.
Senator M cC lure. But I think you used the example that a person
with $30,000 income uses approximately twice the energy of a person
or household with $15,000 a year.
Mr. H a n n o n . Yes.
Senator M c C lure. Would it not be true that if there were a rebate of
taxes raised, the person who had the $30,000 income would have paid
twice as much for the energy ? They would get less back in rebate and,
therefore, their cost of energy under this plan would be very much
greater than would be the people at the lower end.
Mr. H an n o n . The idea of rebating the tax to a proportion of income
is used so one can find a neutral position with regard to changing the
equity of----Senator M cC lure. It isn’t neutral if it takes away from one and
gives to another.
Mr. H a n n o n . The idea is not to do that. I don’t think I made it quite
clear. What I am saying is to rebate according to income would be to
compensate the person making $30,000 twice as much as the person
with a $15,000 income.
Senator M cC lure. Y ou compensate in the rebate but you have also
taken away in the taxing procedure.
Mr. H a n n o n . And that is why I call it neutral.
Senator M cC lure. N o . I don’t understand that to be your proposal

because you would have taxed them at one level and rebated at another,
inversely.
Mr. H an n o n . N o.
Senator M cC lttre. Maybe I didn’t understand your proposal.
Mr. H a n n o n . The tax is placed on coal and uranium from the mine,

oil and gas from the wellhead, and electricity from the hydroplant.
That is all. The tax would work its way through the economy----Senator M cC lure. Presumably for your example it works perfectly
and equally at all modes.
Mr. H a n n o n . The net effect is that the tax would come through the
production process proportional to income. This happens because peo
ple use energy, directly and indirectly, in direct proportion to their
income.
Senator M cC lure. That is right. With a household with $30,000 a
year income they would pay those taxes twice as much as the household
with income of $15,000 per year.

63
Mr. H an n o n . That is right. And the rebate, if it were to be neutral,
would rebate twice as much to the $30,000 household as to the $15,000
household.
Senator M cC lure. I didn’t understand you had said that.
In order to be neutral the rebate would be in proportion to either
income or energy consumption ?
Mr. H an n o n . That is right. It would be the same.
Senator M cC lure. It worked on a paid basis and it would then not
be neutral ?
Mr. H a n n o n . On a per capita basis it would be very progressive.
Senator M cC lure. Mr. Schlesinger would like that because he has
10 children.
Senator K ennedy . What is wrong with that ?
Senator M cC lure. There is nothing wrong with it, but that is a
matter that until recently was of individual choice. There are those
who wish to change that.
I have not understood you to indicate a neutral system would re
bate in proportion to income, or in proportion to energy consumption.
I am not sure I have been able to fully assimilate all of the questions
that have been raised in the statements this morning.
One of the questions we have had before the Budget Committee in
the last couple of years in particular, has been the effect of taxation
and the tax expenditure side of the Federal budget, which is not a
budgeted item and not even considered, generally speaking, in terms
of allocating priorities. We don’t make policy after having looked at
the tax expenditure question.
We have some problems with the Senate Finance Committee, that
they don’t want tax expenditures brought under the budget process
because they have greater latitude and that may be one reason why tax
expenditures have grown, because the cost is hidden. The expenditures
of Federal money is not exposed in the same way that it is where there
is a direct appropriation of the money, first collected and then
rebated.
So we have much more to be done in the area of tax expenditures
as far as the creation of the budget, if the budget is to be a tool of
policy.
Mr. Chairman, there are so many questions that I would like to go
into I suspect we would be here all day. I think rather than start I
will reserve them.
Senator K ennedy . As I understand, and I agree with Senator Mc
Clure as far as the tax expenditure aspect and the basic reluctance of
the Members of Congress to deal with that in the way we deal with
direct expenditures. That has been growing substantially higher than
direct appropriations.
I may make a casual observation that it is incredible to me that we
would be willing to empty the Federal treasury in terms of tax ex
penditures when we absolutely refuse in terms of direct appropria
tions. We have seen this instance after instance. I think the testimony
this morning has brought that up in a related way in your analysis
of taxing policy and how it has reallv sheltered the real cost as far as
competitive sources of energy. Mr. Chapman has brought that up.

64
I look forward to reviewing those parts of your testimony on that
issue.
I think one of the central themes, although each of you approach it
obviously from a somewhat different point of view, is the central
analysis that you have done in terms of looking at whole system analy
sis on energy both in terms of its cost and its real cost, both from the
consumer and the general taxpayer point of view, and relating this
very closely to the issue of employment. And you also recognize what I
think has been very important and significant, and that is the need for
the creation of alternative sources of energy, whether it be in terms of
conservation or in terms of alternative energy resources. I think the
fact remains, in terms of your presentation, we obviously need a good
deal more careful and reasoned analysis because these are new findings.
And it is something I, for one, have not seen either the administration
approach in energy policy with this kind of analysis.
Just assuming the accuracy, and obviously we would in terms of your
approach, the fact is that there has not been the kind of careful
analysis in the development of our national energy program that you
have given in a rather precise and exact way to the Long Island situa
tion, to the impact in southern California, or on the question of jobs
in general.
I think what this testimony means to me is that you can clearly pro
vide the needed national goals in terms of energy and can do that more
effectively in terms of employment. We haven’t gotten into the ques
tion of the careful analysis of the environmental factors, and that is
obviously related to the question.
By doing the kind of review from a national perspective that you
people have done in a very precise way, that is something I gather from
what you have testified here this morning we need. We ought to expect
our policy developers to do this kind of analysis to permit us to make
an informed and intelligent choice. We may come out with another
view. We may reach different conclusions. That is what the electoral
process is all about.
Would that be a fair comment ? I would be interested in any views
you may give us to energy policy developers as well as to our appro
priate legislative committees. We are not a legislative committee. We
are trying to review the growth, the macroeconomic considerations.
That is pretty broad and general but there is no place in the Congress
that those issues are reviewed outside of this committee.
What can you tell us ? What should be the lessons ? What are the
lessons that we ought to take from it and what should we, as Members
of Congress, be asking our policymakers to do to try and give our na
tional energv policy the kind of attention that you have given to a very
important slice of this issue ?
Mr. B enson . I was with ERDA for 2 years under the Ford ad
ministration and left precisely because I could not do these types of
studies. I tried and ran into problems in getting the results out.
I feel with Mr. Aim and people like Clark Bullard in the new
administration that there will be more of an emphasis on open, honest
analysis, a broad view of things. It is important to look at the whole
svstem and not just at the economics, but the related social impacts,
the environmental impacts, all types of considerations from mining

65
the material all the way through to the end use and over the long term.
For example, we have used the document from the Bureau of Labor
Statistics that consist of proiections of the structure of the economy
in 1980 and 1985. We are really struck by looking at these projections
to see that the employment per dollar invested was actually projected
about half of what it is today. What that means is that we have today’s
trends and continue them on out into the future, putting an emphasis
on increased “labor productivity.”
What this means is that business, by its very nature, has to treat
everything that it does on a cost-benefit analysis. That is the bottom
line. Will it make a profit ? Labor, salaries, wages, are always reviewed
as a cost and therefore employment is something to be minimized.
Business has asked for and received many incentives to lower its cost
for labor. This is something that needs to be examined.
When we look at these projections by the Bureau of Labor Statistics,
is shows that labor intensity will only be half what it is in 1980 to
1985 compared to what it is today. What does that mean in terms of
employment? I believe we are not going to have much growth on a
global scale. We are running out of resources and we have to consider
a more labor intensive economy. We have to consider fundamental
changes within the structure of the econom y. That should not be
viewed as a bad occurrence. If we go about it with foresight and plan
ning, it can work out well. I f we try to maintain the status quo and
continne to wear blinders, I think we are in for some very, very rude
and disruptive changes.
Senator M cC lure. What you are saying is a relative share of the
market in regard to capital or energy or resources must decline rela
tive to the share of labor; is that not correct ?
Mr. B enson . I am saying that since fewer materials and resources
will be available to us we have to substitute labor back in and displace
capital and energy, because they will be increasingly less available^
to us.
Senator M cClure. What has been the growth over the last several
years? If we look at 20 years ago, what is the relative job per unit of
output compared to today ?
Mr. B enson . I would like to let Bruce answer that after I make
one comment. A lot of people say it is back to the plow or back to the
caves if we don’t continue growth and if we don’t continue our en
ergy consumption and so on. The answer is, can you visualize a society
that uses only half as much energy per capita? Since 1963 things have
really not changed that much except we are using and wasting more
energy.
Senator M cC lure. Per capita consumption of energy in 1963 was
half as much as today ?
Mr. H an n o n . I do remember that per capita consumption in 1970
was about 50 percent greater than 1950, if that is of any help. I don’t
recall those figures, but I can answer the question that you had earlier.
I refor f0 the chart in mv prepared statement.
What I am talking about, with regard to labor, energy, and capital
use, hinges on the relative rise in the price of these things, the interest
rate on industrial bonds, manufacturing wages, and the industrial
price of energy. Let’s compare the average industrial wage and the price

of electricity—the energy most are ready to substitute for labor. Com
paring these ratios historically, we find the economic pressures that
are sufficient to cause a substitution one way or the other—as I have
shown in my paper, “Energy, Labor and the Conserver Society.”
Until 1973 these ratios reflected the pressure to substitute energy
for labor and energy for capital. You can find examples of these sub
stitutions throughout the economy. But from 1973 these ratios turned
around meaning the pressure was reversed; capital and labor are
being substituted for energy.
Senator M cC lure . So the relative cost of consuming more goods or
services in the future would be made more of a labor cost and less of
an energy------

Mr. H annon. That is right. And perhaps more of capital—it is
a very difficult question. Perhaps more of capital, at least in the long
run.
Senator M cC lure. There has been quite a little said about tax incen
tives for labor. There is also some double taxation of capital in our
system, too. There are some tax loopholes, tax incentives to the tax
reduction side, but also some disincentives on the side of the tax as
an equivalent for capital. You have not only that chart but a larger
chart in your prepared statement.
Are you suggesting that these are things which ought to be done,
Qr iiist a way of measuring the effect of choices which we might make?
Mr. H a n n o n . The latter. I want to add a comment to Senator
Kennedy’s question. I have performed energy research when it was
sponsored by the NSF, the FEA, the ERDA and now DOE. I have
seen a tremendous organizational change and tremendous change in
government personnel since 1970 and find very little policy set. I
would say they have two basic problems. One is they tend to concen
trate research on industrial problems. There is very little trans-indus
trial research work being done.
They will fund research, for example, to design a third lobe for a
two-lobe clock thermostat but Honeywell could do it far better than
the government. The research in energy conservation tends to look at
how a given industry could save energy. But I know that as precisely
what industry does best. They should stop this sort of research funding
and begin what I call transindustrial research.
For example, the steel scrap industry is not considered as part of
the steel industry. Studies should be done which view the steel and
scrap as a whole but the steel industry won’t do it by themselves. With
such a research view, the optimal decision for society as a whole can be
delineated rather than one for a single industry.
The main research vehicle which DOE uses today is the Request
For Proposal or RFP. An energy researcher in my position finds that
most of the research ideas which will be funded are ideas which govern
ment bureaucrats develop. They then issue an RFP but I have never
answered one of them. I have always approached the government with
mv own ideas, what they call unsolicited proposals. They have great
difficulty with the unsolicited proposal concept because it is generally
running counter to what they prefer to have done at that time. I have
spent up to 3 years convincing them of a certain idea, for example ex
ploring the relationship between jobs and energy, or how taxes or

67
higher priced energy will affect people at various income levels. I find
to my great frustration that they toy with the idea for about 3 years,
and then fund someone else without my knowing about it—the worst
of all possible acts. These are to my major problems with the energy
research agencies.
Senator K e n n e d y . Mr. Chapman, what should we demand of our
energy policy developers ?
Mr. C h a p m a n . I can recall in 1971 first learning of Bruce’s work
and thinking it was very foolish for them to undertake it. I don’t
know if*B^uce is aware of that. Certainly I was the foolish one in that
respect, in that their work has achieved a great amount of respect and
is the largest single source of useful and original research on employ
ment and energy.>
I think if Bruce is correct in indicating that he has substantial diffi
culty in obtaining research support for his imaginative and original
work, this stands by itself in a criticism of the way in which research
funds are administered.
On the larger point, my personal opinion is that there is no per
manent barrier in technology or resources to prohibit both growth in
employment, growth in activities which would reduce energy related
inflation, and growth in activities which would reduce our current ex
ponential growth in finite energy resources.
I think one of the reasons why we don’t consider doing this is because
our conventional thinking and macroeconomic studies basically operate
within a given structure. They assume explicitly, or unconsciously and
implicitly, that the economy should rise or fall on cycles of automo
biles, suburban housing, investment in energy production facilities, etc.
Yet, I think the nature of the problem is not how to stimulate through
monetary and expenditure policy the rise and fall of these activities.
I think rather the broad question that you have to consider is how to
alter the structure itself so that needed growth and new activities can
take place.
Senator M cC lure . D o I understand you to say that the economic
surge built around automobiles and suburban housing and things of
that nature ought to be modified to manufacture different kinds of
automobiles and perhaps fewer of them and build smaller houses and
build them better and divert some of the money we are putting into
Detroit to the diffused housing market ?
Mr. C h a p m a n . I think the table looking down upon us is character
ized by transportation changes in its upper levels, including throw
away bottles. I think that indicates one of the major kinds of structural
changes we must have.
Senator M cC lure . We have to change the aspirations of our people,
too. They have to want smaller cars instead of bigger ones. They have
to want fewer instead of more. Thev have to stop striving for a large,
separate home in the suburbs in exchange for a smaller garden apart
ment, condominium, or a townhouse.
Mr. C h a p m a n . I am not quite sure that I follow everyone of your
comparisons, but I think the general thrust of what you are saying is
something I agree with. I believe we all have gotten accustomed to
using a car for immediate transportation to anywhere in America and

68
have gotten used to the feeling that we ought to be able to walk outside
and go 3,000 miles.
Senator M cC lure . We have to stop our kids from going to Vermont
for a ski weekend.
Mr. H a n n o n . Perhaps there is another way to do it.
•Senator K en n e d y . Just stop in Massachusetts and not drive to Ver
mont. It is very interesting, and obviously you have all done a lot of
thinking about something that the country will have to pay more
attention to. It has been very valuable to me. I want to thank you.
The subcommittee stands recessed until tomorrow.
[Whereupon, at 12:30 p.m., the subcommittee recessed, to reconvene
at 9 a.m., Thursday, March 16,1978.]

CREATING JOBS THROUGH ENERGY POLICY

TH U R SD A Y, M ARCH 16, 1978
C ongress of th e U nited S tates ,
S ubcom m ittee on E nergy
of th e J o int E conomic C o m m ittee ,

Washington, D.G.
The subcommittee met, pursuant to recess, at 9:12 a.m., in room
5110, Dirksen Senate Office Building, Hon. Edward M. Kennedy
(chairman of the subcommittee) presiding.
Present: Senators Kennedy, McGovern, and Javits.
Also present: Jerry Brady, subcommittee professional staff member;
Deborah Norelli Matz, professional staff member; Mark Borchelt, ad
ministrative assistant; and Charles H. Bradford, Stephen J. Entin,
and Mark R. Policinski, minority professional staff members.
O p e n in g S ta te m e n t of S enator K e n n e d y , C h a ir m a n

Senator K e n n e d y . The subcommittee will come to order.
Yesterday this subcommittee heard testimony which was so chal
lenging that I believe both the Congress and the administration must
respond to it when considering energy, employment, and tax policy.
Let me review the highlights for you.
First, it became clear that in writing the National Energy Plan the
Department of Energy did not calculate the employment impact of its
decisions, except by consulting one macroeconomic model.
Second, the Department still does not have this capacity and has not
worked closely with the Department of Labor in making its decisions.
Third, too little attention has been paid to the potential for creat
ing jobs among our most disadvantaged citizens, particularly minori
ties, through conservation efforts in the cities or alternative energy
systems.
Fourth, our tax system has been so constructed that utilities fre
quently pay no taxes at all, and even receive a kind of negative tax for
constructing new energy production systems.
Fifth, the 1,000 largest companies in this country—which use over
80 percent of the investment tax credit and well over half of industrial
energy—created only 75,000 new jobs in 8 years. The other 6 million
businesses created 9.5 million jobs.
Sixth, because of subsidies to energy and capital, we have consist
ently disadvantaged labor and reduced the number of jobs available.
We have made capital less expensive and labor more expensive,
creating unemployment.

(69)

70
Seventh, because of subsidies to utilities, solar energy is put at a
disadvantage. Nonetheless solar hot water heating and improved hous
ing construction would create three times more jobs in Long Island
and four times more jobs in California, according to the testimony of
our witnesses.
Eighth, conservation is the best job creator of all, outperforming all
other energy measures by a margin of 3 to 1, considering both direct
and indirect employment.
Finally, we heard that, over the long run, conservation and alterna
tive energy would place tens of billions of dollars in the hands of con
sumers, driving the economy through consumer spending instead of
trickle-down economics which places control at the top.
As you can see the recommendations from yesterday’s testimony fre
quently runs contrary to conventional wisdom and established prac
tice. While no doubt we will hear other opinions, and the final figures
may vary somewhat, there is no doubt in my mind these hearings are
on the right track. Our witnesses have brought the employment issue
clearly into energy decisions. Their testimony exposes, once again, the
folly of a tax system which subsidizing utilities and the biggest busi
nesses which promise jobs 'but do not deliver.
Yesterday, we heard from the economists who provided the empir
ical basis and the forecasts for job creation in the future. We heard
from the Department of Energy which promised to improve its record.
Today, we will hear from the Secretary of Labor, from the cities,
from the States and from the leaders of organized labor. Our wit
nesses today are all practical. We will look to them for guidance on
how to bring energy and employment together to create full employ
ment and a full and sufficient supply of energy.
There has been a change in schedule. We advanced the hearings to
9 o’clock. We will still hear from Secretary Marshall at approxi
mately 9 :30. We will hear from Mr. Wilson Clark from the State of
California now.
Mr. Clark is an early pioneer in the environmental movement. He
is cofounder of the Environmental Policy Center. His book, “Energy
for Survival,” is an encyclopedia on saving energy in today’s environ
ment, and he is California’s new leader in ways to save energy. And
he serves as assistant to Governor Brown for issues and planning.
STATEMENT OF WILSON CLARK, ASSISTANT TO THE GOVERNOR
FOR ISSUES AND PLANNING, STATE OF CALIFORNIA, ACCOMPA
NIED BY SIM VAN DER RYN, STATE ARCHITECT

Mr. C l a r k . Thank you, Senator.
I would like to introduce Sim Yan der Byn, the State architect who
has accompanied me today.
Briefly, I brought along copies of a description of California’s State
buildings, designed by Sim Yan der Byn. Some of the most progressive
solar techniques have been used, yet to be matched by any programs in
the Nation in terms of public building energy standards.
These buildings are 50 percent better than any current standards now
in effect, and effectively serve as a model for the development of new
sources of energy and conservation techniques.

71
We are very interested in the applications for employment from the
use of solar energy. In my prepared statement, I state that one of the
great fallacies of economic thinking over the past century has been
that our economy has been directly tied to an ever-increasing rate of
energy growth. Since the Arab oil boycott----Senator K en n ed y . That is a very good point to expand upon, because
we hear that frequently, and on this subcommittee as well.
M r . C l a r k . C o n v e n t io n a l w is d o m h a s s ta te d t h a t i f w e e x p a n d o u r
e n e r g y g r o w t h r a t e a t 7 t o 10 p e r c e n t a y e a r w e w i l l h a v e s u b s ta n t ia l
e c o n o m ic g r o w t h . T h e p r o b le m w i t h t h a t t h e o r y is t h a t y o u b e g in t o
r u n o u t o f s e v e r a l f a c t o r s . O n e is c a p i t a l ; o n e is l a n d ; o n e is t h e c le a n
e n v ir o n m e n t i n w h i c h t o c o n t in u e g r o w t h in .

Senator K en n ed y . What is the reverse side of that ? Could we have
growth without the continued expansion in a significant way ?
Mr. C la r k . W e think so.
In California, to use the data that has been developed, which I have
in my testimony, since the Arab oil boycott we have experienced a very
high rate of economic growth in the State. Unlike the Nation, where
you use a GNP indicator, in the State of California we use a personal
income increase indicator.
In 1977, for example, the rate of personal income went up 12.5 per
cent. That was a great increase; it was a boom year.
Almost 500,000 new jobs were created in California last year, yet
energy growth has been quite low compared to the pre-Arab oil boycott
days.
In fact, electrical energy growth increased 3.1 percent. We have seen
that rate of lower growth since the boycott, yet a very high rate of
economic growth.
This tends to indicate that we can have economic growth without
increasing energy growth, at least at the preoil-boycott-trend rates.
I might also point out here that in my own work I have found that
the increases in energy growth have very real limits. We will begin to
reach them by the end of this century. Therefore, it is important to
keep the perspective of economic growth and energy growth in mind.
If we continue to expand energy consumption over the next 50 years at
the rate of increase of the electrical industry in the 1960’s decade, we
will find very real limits within 30 years on the siting of power
facilities.
Nevertheless, I think it is incumbent upon not only the Nation but
all of the States, and other agencies of Government, to press for in
creases in energy efficiency, and for new trends in policy that will lead
to economic growth without that kind of increase in energy.
We find that in California the job implications of our energy policies
are most directly related to those policies that encourage energy con
servation and some of the new renewable resources of energy.
For example, in conservation related investments, we can supply
energy at one-tenth the projected marginal costs of new sources of very
expensive energy, such as the centralized distribution of liquified natu
ral gas, or of nuclear power, or of coal.
By supplying energy that is one-tenth of the cost of these sources,
more income from consumers is realized in the economy, and therebv
indirectly creates more opportunities for economic growth and job

72
potential. Consider the direct impact of the jobs that are related to
energy sources.
I have listed in my prepared statement some of the measures that we
are planning in the State of California. As you are aware, California
has in effect building standards for both residential and nonresideiitial
buildings. We have a number of progressive practices that were initi
ated and pioneered in the State, including things, Senator, such as the
lifeline rates established by the State’s public utilities commission.
We are moving in conservation areas in the future that include utility
voltage reduction; that include large-scale building audits and solar
energy in buildings.
We think the measures proposed already by the State of California,
have the potential to reduce approximately 20 percent of our electricity
demand in 1985, and also, about 20 percent of our natural gas demand
in 1980.
Senator K e n n e d y . H ow much more expensive were these require
ments?
Mr. C l a r k . Were the conservation measures? The conservation
measures we have found to date have an average payback, if you use
conventional economic terms, anywhere from 6 months to some of the
more expensive measures such as solar energy, to somewhere around,
in some cases, 7 to 10, and in large installations, 15 years.
Unfortunately, the way that we look at economics today, we do not
take into consideration life cycle costing. Therefore, when we are
comparing in economic terms an investment that may payback very
quickly, we are using the very cheap subsidized fuel of today to try to
project the world tomorrow. What we should look at are higher mar
gin al costs in fuel.
T point out, incidentally, in the prepared statement, that the conser
vation investments that we are looking at in the State have rates of
return that range from 7 percent to 65 percent.
There really is no way that you or I as individuals could get a savings
account that would get us any kind of return like the types of conserva
tion investments that we are projecting. We believe that conservation
could also contribute directly to labor intensity in the economy through
the manufacture of new equipment, more efficient appliances, the in
stallation and retrofit of our homes and buildings, and the development
of new products and services.
I would like to reiterate your comment; of the morning in looking at
the job implications of many of these measures. I would just point out
that we do not have access to data that would indicate how many jobs
are created by the conservation measures excepting a few specific pro
grams such as consumer appliance standards. These are unique to the
State of California, although proposed federally.
We find for these standards alone, in the State, we would have 1,300
direct jobs beginning in 1985. This is only one out of a large number of
proposed State conservation programs.
We found that installation retrofit----Senator K e n n e d y . Would you hold for just a moment, Mr. Clark ?
Mr. C l a r k . Yes; certainly.
f A brief recess was taken.*!
Senator K e n n e d y . All right, Mr. Clark.

73
Mr. C la r k . Yes, I wanted to add to that, one other program we have
looked at would create over 2,500 new jobs, and that is an installation
retrofit program proposed for the State by a change in the procedures
of the public utilities commission. I want to add that in conjunction
with the strong conservation effort we believe that State programs in
solar energy development will result in a new industry for California,
with a concomitant significant employment potential.
A goal developed by the State energy commission is the installation
of solar water heating and space conditioning systems in 20 percent of
all residential and commercial buildings in California by 1985. This is
the equivalent of 1.5 million solar homes in California.
In order to meet this goal, the State has developed a number of con
current programs including regulatory and testing programs, devel
oped by the energy commission, and that will be underway this year.
We have a “solar task force” established in the State business and
transportation agency. It is designed to assist the builders in the State,
and also, the solar industry. We have a number of other efforts in the
State, including those undertaken by my colleague, Sim Yan der Ryn,
who established the office of appropriate technology in California, and
who is the State architect.
We have other programs in the State government.
Senator Kennedy, I have with me, as you will note in the back of my
prepared statement, a copy of the tax form for the California solar
energy tax credit.
California has now, as a result of legislation signed by Governor
Brown last year, a solar energy tax credit. An individual could take
this credit and -the credit also can be extended over several years. This
is very significant, because it aids a lower income taxpayer. I f the solar
energy credit were only good on your State income tax for 1 year, it
obviously would not be beneficial to lower income individuals, yet we
believe through the extension principle in this legislation, it will assist
a wider and more diverse range of individuals.
The 55-percent credit is available for a single installation, and there
is a 25-percent credit available for larger solar installations developed
for multiple-unit housing.
The solar energy credit can also be taken by a home builder. This was
done deliberately because we want to accelerate over the 5-year period
that this credit will be in effect in California, to the maximum extent
possible, the development of new buildings and new homes using solar
energy. We are already beginning to see in the State—I have visited
locations near Sacramento, and with Governor Brown, I have visited
many locations in southern California—where complete subdivisions
are now being planned using not only principles of direct collection of
solar energy, but also using new architectural designs that passively
use the energy of the sun for heating and also use design principles for
cooling buildings.
We believe that in the State of California we can take a leadership
role that will provide a model for the rest of the Nation. One comment
that I would like to make that I do not have in my prepared state
ment----Senator K e n n e d y . What is it going to cost, in terms of revenues;
what is the tax expenditures in California ?

74
Mr. C la r k . There was a discussion about this when the tax-credit
legislation was debated. We would certainly like to see it used to the
maximum extent possible, and the projections that I have seen that
look most reasonable, range between $40 to $80 million over this period
of time for a very large expansion of solar energy.
We are hoping that individuals will take the credit during this
period. We expect to see several hundred thousand installations.
To meet the goal of 1.5 million installations by 1985, we need to gear
up an industry that really has not existed since the early 1950’s. There
were 50,000 solar energy houses in Miami in the early 1950’s, tens of
thousands of homes in California in the 1930’s and 1940’s. It was the
cheap development of fossil fuel that drove solar energy off the market.
So we find ourselves in a unique position: To get solar energy in use
How, we will have to remove the subsidies from other fuels, or provide,
as we have in the State of California, a very special subsidy for solar
for a period of time. Because as we look out over a 10-year period, we
see very expensive energy sources, and we see a competitive market for
solar. But today, when we have cheaply subsidized fuel from central
ized sources, and when the consumer is really not paying the full costs
of that fuel, solar can’t compete.
That is why you need the credit.
Senator K en n e d y . Have you analyzed that credit vis-a-vis the Fed
eral tax credit now ?
Mr. C l a r k . Yes, and we do not think the Federal credit is strong
enough. We do not think----Senator K e n n e d y . Your purpose is to equalize it, or to tilt it even
further?
Mr. C l a r k . Yes. We want to see it used. I would add, Senator, last
summer I served on the Office of Technology Assessment review of the
“ National energy plan.” I was on the policy overview committee, and
during the week that we met and reported back to you on this plan, we
were contacted by the administration and told that Mr. Schlesinger’s
goal for solar was reduced from 2.5 million homes in the United States
to 1.6 million houses. During the OTA review, we were told by the
individuals writing the “ National energy plan” that they did not be
lieve the credits developed would be sufficient to bring a high level of
solar activity.
That was very important to me, and to the planning in California,
because we recognized this. I f we have a very----Senator K e n n e d y . What has happened to the cost of solar materials,
though, out in California ? What has been the increased cost of those
items ?
Mr. C l a r k . Surprisingly, the cost increases have not been as great as
I would have thought, based on what I was looking at, and what I testi
fied before you several years ago. In 1973, the price of solar collectors
were ranging anywhere from $15, $16, $25 per square foot. We are look
ing at costs in California today that are under $15-$20 per square foot
for modern installations. We have a diverse range of manufacturers,
and I might add. Senator, that we can see a very direct result of this
tax credit in California.
In a survey undertaken of the solar industry, we found last summer
less than 150 businesses involved in either manufacturing or sales of
solar equipment. By January of this year we had almost doubled that

75
figure, just in the solar businesses. We have businesses coming to Cali
fornia from international locations; we have businesses relocating
from the east coast to California in order to take advantage of not only
the tax credit, but really the increasing markets for solar.
Senator K e n n e d y . Isn’t that quite different from the costs of install
ing insulation, though ?
Mr. C l a r k . Y ou mean the solar ?
Senator K e n n e d y . Yes.
Mr. C l a r k . Yes.
Senator K e n n e d y . I f you have stability in terms of the market of
solar equipment, it would be changing though, I suppose.
Mr. C la r k . This may happen with solar. With insulation, there has
been some real demand in the market. There is great diversity of mate
rials, and very specific problems.
With solar, it is different. This industry really has not existed. It is
so new today that we have not yet seen the 2- or 3-year cycles indicating
problems that may develop.
Senator K e n n e d y . Right.
Mr. C l a r k . We are hoping, and one of the key factors in the plan
ning at the State level, incidentally, is to keep this industry as diverse
as possible, and prevent the monopolization that you would see if
solar energy were simply one more vestige of energy planning by the
utilities.
So, we are actively encouraging a very diverse range of businesses.
I have attached to my prepared statement some material for your
consideration from the business and transportation agency which ex
plains in some detail the activities that we have undertaken to assist
numerous small businesses in solar energy use.
Now, I would also add that this has been something in which Gover
nor Brown has been directly involved. We have held to date two major
meetings, one just 3 weeks ago, with the big builders in California,
.people who are putting in large numbers of new homes. We have held
meetings with the solar industry, and with the builders. The Governor
has personally asked many California builders to commit this year a
minimum of 10 percent of all new construction to solar energy. This
gives vou an idea of the commitment of the State of California, and the
commitment of the Governor, to see that the goals become reality.
I think it is that kind of effort that, will have to be undertaken on
a national level. We cannot treat solar energy as something to be
dismissed.
Secretary Schlesinger was quoted yesterday in the Los Angeles
Times as saving that conservation and solar energy were considered
“ fashionable” in California. It is my considered opinion that given the
role of the Department of Energy, when out of a $12.5 billion budget
they are spending only $1 million this year in “ solar commercializa
tion,” and only $3 million out of that budget next year, we are never
going to see solar become a reality in this country, because the DOE
has a self-fulfilling prophecy not to develop this technology.
And unless the change comes----Senator K e n n e d y . R. &D. is down.
Mr. C l a r k . Or we w ill not have it.
Senator K e n n e d y . I know the R. & D. is down as well.

76
Mr. C la r k . R. & D. is down, but more importantly, we have the real
possibility to use conservation and solar energy in this country, but
unless we take a very serious attitude toward this industry with this
tremendous job potential, we will not have it.
Senator K e n n e d y . What has it done for jobs? Have you done any
analysis of how this encouragement toward solar has meant more or
less jobs, and what is the nature of the type of employment?
Mr. C l a r k . Yes. The employment in solar energy has a wide range.
To give you an idea, if we were to reach the 1.5 million solar house goal
in 1985, in California, we would have an industry that will be selling
between $3.5 and $7.5 billion worth of solar collectors.
Now, that means directly $1.5 billion per year in energy savings.
You can see from those two figures alone the energy savings are tre
mendous, and obviously, that is a yearly fisrure. Project that over 10
years, and you see savings in excess of $10 billion for an expenditure of
tar 1ess than that.
We see, in other words, that looking at the marginal costs of new
energy sources, the solar investment not only pays off economically, but
it pays off in the time frame of 1980’s in conventional economics.
Now, in terms of jobs, that industry in 1985 will employ 50 000
people. That is more people, ¡Senator, than the entire current employ
ment rolls of all of California’s gas and electric utilities.
The reason for this is rather basic. Utility planning to date in the
United States has been a very centralized process. It is a hisrh tech
nology industry. Once the initial construction jobs are completed,
there is no contribution to a very labor-intensive industry.
Yet, with solar energy, and with conservation, we can create a whole
new diversified approach to energy planning.
You will note----Senator K e n n e d y . What is vour extrapolation? How do you get
50.000 ? Just briefly, if you would.
Mr. C la r k . Well, we are looking here at not only manufacturing
collectors, but we are taking the numbers of individuals that are
needed for rather mundane chores in some senses of bringing o n e
material from one place to another, of locating a new industry, of
building the types of buildings that are necessary, bringing equip
ment into the State, of individuals who are fabricating the collectors,
how many are necessary in the sales force to sell the solar equipment,
how many are going to maintain the equipment, and so on,
That, by the way, is lust a figure for the direct involvement in
*hat industry. If you notice, also in my statement, we have a summary
here of a study that has been made available to your staff that in
dicates on an energy equivalent basis how many more jobs are in
volved in solar than in combined-cycle oil or nuclear electricity equiv
alents. These numbers have been translated into electricity simplv fo**
the ease of comparing a solar energy investment with a conventional
energy investment.
You will see that a 400 megawatt combined-cycle oil plant operating
for 20 years generates 1200 man-years of labor. If we take the same
amount of energy from the solar equivalent, we have almost 35.000
man-years asociated with delivering that amount of energy in society.
With the nuclear plant of 1900 megawatts, we show almost 37,000
man-years equivalent. Yet with solar, it is 241,000 man-years.

77
Now, on those energy-job numbers, Senator, it is very hard to com
pare apples and oranges. I do not want to mislead anybody by stating'
that we can simply turn a switch on for solar and say, here is the
equivalent for another form of electrical generation. That would be
misleading.
What is important about solar energy is to look at it not from the
perspective of other energy sources, but look at it as an individual new
industry. The more solar development we have, the more assists we
have in energy supply. In your part of the country it would replace
electricity; yet in California, it would replace very expensive new
sources of natural gas or LNG. We are replacing not only non-renew
able energy and putting more income in consumers pockets in the
1980’s, but we are also creating an industry that has an average labor
intensity that is more than 10 times that of the energy industry today.
It seems to me there could be no better national investment than this
kind of endeavor.
This is what is so perplexing to me, not only professionally, but
personally, about the goals that we see from previous national admini
strations in solar energy. The entire approach has been E. & D., doing
paper studies, examining the impact of living after the year 2000. But
there has not been a significant effort to move this industry today or
even in exploring the employment figures.
We have had problems just getting the job numbers on solar energy,
or how many jobs are associated with various competing energy
sources. I am not sure where those data should come from. I would
think a good start would be the Department of Energy, and if not the
Department of Energy, then perhaps the Office of Technology
Assessment.
I would like to add that we are not just looking at solar energy in
California from the standpoint of solar collectors, but a whole variety
of technologies including going further in solar with photovoltaics
and wind-generated electricity.
I f your staif is interested in speaking with some of the individuals
who are moving the solar industry to California, I suggest they contact
Joe Dawson with Grumman Energy Systems, who is here today. The
Grumman Corp. is an example of a major Eastern corporation that is
now relocating its operations in this new energy area in the State of
California.
We see a variety of industries moving into the State. Grumman is an
example of a company that is diversifying into solar, and also, a cor
poration that is diversifying into wind generation of electricity.
We are pressing in the State a number of alternative sources of
energy that have very high job potential, and one thing that I noted
here in the testimony is that the Brown administration, has a proposal
now before the legislature in the State of California that would in
volve significant reforestation of hundreds of thousands of acres of
California timber lands in order to revitalize the land by planting
trees. We believe that we can get significant energy from waste mate
rial from agriculture, from biomass resources, wood wastes, from
cogeneration facilities at pulp mills and agricultural locations.
From those sources, we can create over 11 thousand permanent
jobs—these are forest industry jobs on the ground—through reforesta31-502— T8------- 6

78
tion; and we will have a related regional employment of 20,000 people
from this program alone.
Under proper management—and I stress that because many of the
biomass energy schemes that I have seen proposed are things that are
called euphemistically energy plantations which would involve en
vironmental despoliation of forest lands for energy.
I stress the point that we are developing a good management plan
fo r reforestation, which m ay result in the development o f between
8 - and 16,000 megawatts o f electricity energy equivalent from m a
terials that currently are either not used or underutilized today.

A number of other new energy sources we are looking into have great
job potential. Our department of water resources is the biggest power
user in the State of California, to pump water for the California water
project. The department of water resources today is vigorously pursu
ing technologies including clean coal technology, wind technologies,
cogeneration and biomass energy. I want to conclude my statement
before you this morning, Senator, by stating that these relationships
between energy supply sources and job development have not been
looked at critically by our largest institutions, neither in industry nor
government.
I am aware of only one large problem undertaken by the Bechtel
Corp. It is the only one available.
We are also looking at geothermal development, where in the State
we have 20,000 megawatts of potential energy.
Yet we would like to have better job data than we see today for our
own planning purposes, so that we can indicate where the needs will be
in terms of our local planning. But we do not have it, and it would be
very helpful if one of the results of your hearings could be a redirected
national effort in this area.
I present in my prepared statement that by increasing energy effi
ciency and promoting conservation, and supporting renewable energy
sources, I think we are looking at a totally new approach to national
unemployment. When you expand this vision, energy is not just a solar
collector or nuclear powerplant, but is closely linked to the need to
revitalize our urban areas—and as you know, the Brown administra
tion has developed a “California urban strategy.” As we look at our
rural areas and the need to revitalize forest lands, and the need to go to
urban areas and rebuild inner cities, this becomes an overall strategy.
These goals are very much related to energy, but even more im
portantly, they will provide many more jobs than any energy plan
currently considered seriously by our large institutions, including the
Department of Energy.
Thank you.
[The prepared statement of Mr. Clark, together with the attach
ments referred to, follows:]
P repared S t a t e m e n t

il s o n

Cl a r k

Thank you, Mr. Chairman, for this opportunity to present to the Committee a
viewpoint on this important subject. Governor Brown has identified the develop
ment of new energy sources and the creation of new jobs as a major priority of
his Administration. To this end, a number of programs have been developed by
California state agencies to accelerate and stimulate new energy source devel
opment.

79
A cornerstone of California’s energy policy is increased efficiency of energy
use and broad energy conservation programs. In the past, a popular theory
held that economic growth is directly tied to energy growth. However, recent
experience indicates the fallacy of this theory. California, with 10 per cent of
the nation’s population, experienced a 50 per cent decline from the historical
trend of electrical energy growth in 1977. Electrical energy sales increased 3.1
per cent, yet personal income grew 12.5 per cent. In 1977, nearly 500,000 new
jobs were created in the California economy. Increasing energy efficiency and
conserving non-renewable energy sources contributes to a healthy economy.
A recent report by the California Energy Resources Conservation and De
velopment Commission (Energy Commission) is attached (attachment A).
This report, entitled “Conservation as an Energy Resource,” indicates that
planned conservation programs in the state have the potential to reduce fore
casted 1985 electrical demand by 32 to 39.4 billion kilowatt-hours, and forecasted
natural gas demand by 2.4 to 2.8 billion therms. These figures are equivalent to
15-19 percent of the state’s electricity demand in that year, and 18-21 per cent of
the state’s natural gas demand.
The conservation programs described in this report not only reduce energy
waste, contribute to new jobs in the economy, but also save consumers hard cash.
Based on projected 1985 average costs of energy supply, it is estimated that con
servation can ‘‘supply” energy at one-fifth the costs of other, conventional sup
plies. Compared to the marginal costs of suplying new energy, conservation in
vestments provide a unit of conserved energy at less than one-tenth the cost of
additional supplies.
The conservation programs are identified in Table VI of the Energy Commis
sion document. The programs include :
Commercial and industrial building audits.
Retrofitting ceiling insulation in residences.
Utility Voltage reduction.
Non-residential building standards.
Building standards for homes.
Increasing motor efficiencies.
These conservation programs help to create new jobs in a variety of ways. The
conservation programs identified by the Energy Commission represent an excel
lent consumer investment; rates of return range from 6.9 to 64.3 pecent, far
better than a savings account. By saving consumers money, additional funds
are released to the economy, and not tied up in capital-intensive centralized
energy investments. Conservation contributes to labor-intensive sectors of the
economy directly, through the manufacture of more efficient appliances and
equipment, insulating and retrofitting homes and buildings, and the development
of new products and services.
Although the direct job impacts of the state’s conservation policies have not
been computed for the full range of measures proposed, initial indications illus
trate positive employment effects. For example, the state’s consumer appliance
standards alone would indirectly create over 1,300 jobs starting in 1985. Insu
lation retrofit programs in housing (assuming 70 percent penetration) would
create over 2,300 new jobs over a five-year period. These are only two programs,
out of a larger number of proposed conservation efforts.
In conjunction with strong conservation efforts, state programs in solar energy
development will result in a new industry, and significant employment potential.
A goal developed by the California Energy Commission is the installation of solar
water heating and space-conditioning systems in 20 percent of all residential and
commercial buildings in California by 1985. This is the equivalent of 1.5 million
homes using solar energy in the state. In order to meet this goal, the state has
developed a number of concurrent programs, including regulatory and testing
programs developed by the Energy Commission, and a Solar Task Force for
builders and industry developed by the Business and Transportation Agency.
Other important efforts are underway by the Office of the State Architect, the
Office of Appropriate Technology, the State and Consumer Services Agency,
the Resources Agency and the Public Utilities Commission.
Last year, Governor Brown supported and signed State Senator Gary Hart’s
bill, which created a solar energy tax credit. California consumers can now take
advantage of a 55 percent tax credit for the installation of solar devices, and a
25 percent credit is available for solar (and conservation) devices in multipleunit housing. The tax credit can be spread over several years, aiding lower-

80
income taxpayers. In addition it can be taken by builders of new housing, thus
contributing to the acceleration of solar energy in new building practices. At
tachment B describes the solar tax credit, the activities of the Solar Task Force,
and contains the tax form. In addition, I am providing the Committee staff a copy
of a proposed report by Dr. Ron Doctor of the California Energy Commission,
which describes the results of a joint inquiry on solar energy by the Energy
Commission and the Public Utilities Commission.
The installation of 1.5 million solar units by 1985 in California would result
in the savings of 300 million cubic feet of natural gas per day, the equivalent in
electricity being 15 billion kilowatt-hours per year. This is equivalent to the in
stallation of $3.5 to $7.5 billion worth of solar collectors. Not only would a new
industry be created, but consumers would save up to $1.5 billion per year in
reduced energy expenditures.
The employment effects of reaching this solar goal are impressive. The manu
facturer of collectors, maintenance, installation and sales would result in the
employment of 50,000 people year-round. This is more jobs than exist in all of
California’s gas and electric utilities today.
According to the state’s Employment Development Department in a recent
draft study, solar installations are most labor-intensive than fossil fuel or
nuclear plants. The decentralized development of solar energy is not only more
labor-intensive, but this development provides more local and in-state jobs, when
compared with central sources of supply of natural gas or electricity. The De
partment’s study contrasted the direct and indirect employment associated with
nuclear and combined-cycle oil generation of electricity with a solar “equivalent.”
The summary results are shown here :
Nuclear 1900 MW plant, 36,268 Man-years (20-year operation).
Solar equivalent, 241,055 Man-years (20-year operation).
Combined-cycle 400 MW plant, 1,237 Man-year (20-year operation).
Solar equivalent, 34,885 Man-years (20-year operation).
This staff document has been made available to the Joint Economic Com
mittee staff. It should be noted that these energy/job “equivalents” have been
translated into electricity capacity figures for convenience in understanding the
employment implications. Most of the energy displaced by large solar programs
would be in the form of natural gas, not electricity. Until large-scale programs
for converting solar energy directly into electricity are developed (such as
photovoltaic technology) the primary energy savings result in displaced lowgrade energy (heat) for w^ater and space heating applications.
The development of California’s solar programs will undoubtedly contribute
to increased employment in various sectors—not just direct employment in the
industry, but also in terms of displacing costly, non-renewable fuels. In addi
tion to direct programs for stimulating the use of solar water and space heating
technologies, state agencies are exploring the use of other alternative energy tech
nologies, including biomass energy, wind generation, solar thermal energy, and
industrial cogeneration.
Reforestation and biomass energy projects proposed by the Resources Agency
would revitalize forest lands in California, as well as provide jobs and new energy
supplies from wood wastes and other biological (and thus renewable) residues.
The Agency’s reforestation efforts would lead to the creation of 11,000 permanent
forest industry jobs and related regional employment of 28,000 persons. The
Agency projects available supplies of wood and agricultural residues, under
proper management, to supply between 8,000 and 16,000 Megawatts of electrical
power on a yearly basis. The Department of Water Resources in the Agency is
now planning alternative energy technologies to power the state’s needs for
water pumping. These plans include coal, wind and biomass energy plants.
The relationship between energy supply sources and job development have
not been sufficiently identified by federal or state agencies. The studies I mention
today represent only the beginning efforts on the part of the State of California
in identifying the enormous reservoir of new job opportunities in new energy
source development. By increasing energy efficiency, promoting conservation, and
supporting renewable energy sources, entirely new answers to unemployment
may be found. The challenge before the nation is how best to accelerate the*
development of these realistic opportunities.

81
A

ttach m ent

Conservation as an Energy Resource: Policy Implications for California
SUMMARY

Introduction
This report was prepared in response to a request from the Honorable Leo
McCarthy, Speaker of the California Assembly to discuss the potential of con
servation to “produce” energy, the advantages of conservation over traditional
energy supply sources, the specific conservation programs that are being under
taken in California, and the implications such programs have for the labor
market. This report was prepared to assist the California Legislature in resolving
energy supply issues in a manner most beneficial to the state, and attempts
to explain why the Energy Commission considers energy conservation a viable
and less-costly alternative to traditional energy supplies, and what the Com
mission and others are doing to ensure that energy conservation programs are
developed and implemented throughout the state.
Savings

An aggressive and comprehensive energy conservation program for the state of
California has, at a minimum, the potential to reduce our 1985 forecasted electri
cal and natural gas demand by 32 to 39.4 billion kWh’s (15-19 percent) and 8
to 10.8 thousand MW’s of summer peak electricity (18-25 percent), and by 2.4
to 2.8 billion therms of natural gas (18-21 percent). The conserved energy, in
effect, constitutes a source of supply available for use throughout the States
economy, and at a lower cost.
For example, by 1985 natural gas could be saved at a cost of about 10 cents
per therm, which is one-fourth of the expected price the consumer may have to
pay for new gas supplies. Conservation probably cannot offset the total need for
added energy supplies, but it should be viewed as part of the supply mix.
The conservation programs outlined in this report reduce energy waste by in
creasing the efficiency with which we use energy. Rather than curtailing energy
use to meet short-term energy shortages, the conservation measures described
here are aimed at improving our long-term ability to do better with less, and
save money in the process.
Conservation pays. The cumulative effect of energy conservation in the State of
California will be to save both energy and money. The magnitude of the annual
dollar savings possible from the conservation measures discussed will range
between 3.1 to 3.8 billion dollars by 1985 (in 1985 dollars). This is roughly equal
to an average annual savings of $140 per California resident.1
Cost-Effectiveness
As an alternative to utility expansion, conservation investments are less costly
than conventional sources of energy supply. Based on 1985 average costs of energy
supply, it would take roughlv a five dollar investment in such sources of energy
to equal what a one dollar investment in conservation could save. When com
parecí to the marginal cost of supplying energy from increasingly more expensive
sources, conservation investments are even more cost-effective, with some conser
vation investments providing a unit of conserved energy at less than one-tenth
the cost of additional supply.
Energy conservation programs promoted by the Commission are cost-effective
to the individual consumer, who can obtain an excellent return on investment in
conservation measures. Many of the measures which can be undertaken by in
dividuals to conserve energy in their homes have average annual rates of return
of between 6.9 percent and 64.3 percent after taxes. This is much better than after
tax earnings on other safe investments. Like a passbook savings account (at &.83
percent). After the initial investment is recouped, the savings from reduced
utility bills continue as “dividends” which are not subject to taxes and which will
increase as energy prices rise.
1 Average electric prices are from Vol. 2 of CBRCDC 1977 Biennial Report. Average gas
prices are CPUC estimates from Vol. I of their staff report in Case 10342 (LNG terminal)
for gas supplied by traditional sources. A 6 percent inflation rate was used. Based on
Department of Finance estimates, the population will be 2.44 million people in 1985.

82
Additional "benefits
Since energy conservation measures can reduce energy waste and slow the
growth in energy demand, their aggregate effect will be to reduce our need for
additional sources of fossil fuels and for new electricity generating facilities. In
turn, this reduced need will lead to fewer adverse impacts associated with the pro
vision of additional energy from conventional sources. Implementation of a vigor
ous, comprehensive conservation program for California will have a beneficial
impact on natural resources, the environment, the economy, and utility operation.
Among the objectives which can be achieved through energy conservation are
the following:
Positive effects on employment.—The production of energy is highly capitalintensive. Conservation, however, can channel resources into more labor-intensive
sectors of the economy—through the manufacturing of more efficient appliances
and equipment, insulation and other retrofitting of residential and commercial
buildings, and new design concepts to capitalize on energy efficiency. This process
will eventually result in an increase in goods, services, and employment using less
energy, with the possibility of additional beneficial impacts on employment among
the lower-skilled. The indirect impacts of conservation will be even more pro
nounced acting as a stimulus to the economy by making available capital that
would otherwise have been invested in energy supply, and by increasing the
disposable income of consumers through a reduction in their energy expenditures.
Reduced capital investment in electricity generation.—The five major utilities
are planning to spend over 22 billion dollars to add 14,000 MW of new generation
capacity between now and 1985. Including associated transmission and distribu
tion costs, this is equivalent to $1,600 per kilowatt of generating capacity, or
roughly $.30 per kilowatt-hour of electric energy (1985 dollars). Conservation
programs can displace the need for over half of this planned additional generat
ing capacity at far lower cost.
Reduced dependence on uncertain energy supplies.—New fossil fuel sources are
characterized increasingly by the remoteness of their place of origin, the enor
mous scale and technical complexity of their extraction and transmission, and the
acceleration of their costs. These factors lead to a greater risk of supply interrup
tions and price escalations. In addition, conservation can help reduce our depend
ence on fuels imported from other countries, beneficially affecting our balance of
trade and reducing inflation.
Increase efficiency and cost-effectiveness of utility operations.—Conservation
measures can lower utility operating costs by shifting demand from on-^peak to
off-peak hours, by delaying or avoiding the need for expensive capacity additions,
and by allowing retirement or reduced operation of low-efficiency, fossil-fueled
generating facilities. Since cost-effective conservation measures save a unit of
energy at a less cost than supplying an additional unit, ratepayers will benefit. In
addition, energy conservation as a “source of supply” has advantages over conven
tional central station electric generation or natural gas supply terminals because
it is more readily adaptable to changing conditions and unpredictable circum
stances, it is more reliable, and it is subject to fewer uncertainties.
Minimization of stress on the environment.—A reduction in energy growth will
allow decreases in the negative environmental impacts associated with the extrac
tion, processing, transport, generating and consumption of energy.
Slow-down in the use of non-renewable resources.—By reducing the energy
growth rate, conservation measures can help avoid ¡shortages in our fossil fuel re
sources at the same time as we increase our use of alternative forms of power
generation which are non-polluting and make minimal use of finite resources.
The role of energy prices
In the past, energy efficiency was undervalued, due to declining average unit
cost for energy. An era of cheap and abundant energy encouraged energy inefficien
cies to be built into our way of life. It is now very apparent that our society must
reverse this trend and reinstate the wise use of energy as a major consideration in
land-use planning, appliance and equipment design, industrial processes, and
building design and construction.
Simultaneously, conservation must become the backbone of the energy supply
planning process and be compared, step-by-step, with new supply alternatives in
terms of resource and capital requirements, environmental and social impacts,
and contribution to the diversity and reliability of the supply system. Neverthe
less, energy conservation as a supply planning tool is still undervalued by the

83
utility industry, partly because it is a new approach to utility planning, and partly
because it is not as readily added to the rate base or as capable of providing a
guaranteed return on investment.
Utility pricing structures encourage the undervaluation of conservation by
their customers, as well. Currently, customers are not charged for energy based
on the cost of supplying additional, “new” energy. Instead, the price of expensive
increments of additional energy are averaged in with existing, lower-cost energy.
This average-cost pricing tends to distort the allocation of capital away from an
optimum balance between investments in new energy supply and in energy con
servation, in effect creating a “hidden subsidy” for the continued wasteful and
inefficient consumption of energy.
Pricing energy at its incremental, or marginal, cost is one way to eUminate this
hidden subsidy. Another way is to use incentives, financed by taxes or utility
rates, to encourage customer implementation of conservation measures. A clear
case can be made for the ratepayer to bear a portion of the cost of conservation
measures.
Consider the following example. When a gas-heated home is insulated, the
owner saves an average of about $54 per year (based on an average cost of 184 per
therm). The gas saved can be sold and used productively elsewhere in the econ
omy. If this amount (300 therms) of gas had to be purchased as an additional
source of new supply, it would cost from $126 to $270 (42^ to 90^ per therm will
be the delivered price of new gas). The difference between these amounts, up to
$216 each year, is the 'benefit to all ratepayers from insulating that one home. Un
til the house is insulated, this represents, in effect, a “hidden subsidy” being paid
to the customer not to insulate, since the residential customer is not ipaying the
full replacement cost of the gas being wasted in the form of excess heat losses from
the ceiling. As long as the conservation measure saves a unit of energy at a lower
cost than the cost of a unit of additional supply, then conservation is preferable
for the customer class as a whole since this cheaper “ source” will meet the same
ultimate needs for a warm house, hot water, cooking, and so forth.
Usage patterns and trends
The amount of energy that we are using and how we are actually using that
energy are two very important elements in the assessment of our current and fu
ture energy position. The use of energy, and of electricity in particular, has grown
rapidly in California. Total energy use increased by 14 percent from 1968 to .1973,
considerably faster than population growth in the same period. During just one
year, 1975, energy use in California grew by 4 percent. Historic growth rates,
if projected to remain constant for the next two decades, would imply a need for
huge commitments of resources and capital to provide the required fuel and gen
erating capacity. The consequences of policies designed to meet a rapidly increas
ing demand for energy will adversely affect our environment, health, resource
base, financial position, and vulnerability to sudden supply interruptions.
The negative environmental impacts associated with the extraction, processing,
transport, generation and consumption of energy are well documented. The major
impacts are in the areas of air and water pollution, nuclear safety issues and
land use, all of which will be aggravated with increased energy production.
Increasing energy demand is bringing California and the rest of the nation face
to face with resource scarcity. California consumes about 10 percent of the energy
used by the United States as a whole. Like the U.S. California faces major medi
um to long-term supply problems. Fuels used to generate electricity include
natural gas, petroleum, uranium and coal. The first two sources have important
properties that make them valuable for uses other than generating electricity or
raising steam. Petrochemicals, for example, are used in plastics, pharmaceuticals,
and in fertilizers for agriculture. Given technological change, it is conceivable that
new and more socially beneficial uses will be discovered for these finite resources.
Despite being a major oil and gas producer, we are highly dependent on supplies
from other states and countries, importing almost half the energy used in 1976
from out-of-state.
Although the western states are in a more advantageous position in the short
term with respect to oil supply (due to a ‘surplus” from the development of
Alaskan oil), California faces a projected decline in gas supplies from traditional
sources while major new gas supply projects will provide only about 50 percent
of California’s gas needs through the 19S0’s and beyond.2 The new sources of gas
2 CERCDC, Biennial Report, 1977, Vol. 4, Fossil Fuel Supply Issues, p. 31.

84
supply for California will differ from traditional resources in that they will be
physically more distant from the point of consumption, require greater capital
investments, require pipelines and shipping terminals of an unprecedented scale
and technology, and entail higher delivered costs.
Coal, which had declined in use in the twentieth century, is once again taking
an important role in the nation’s energy supply planning. It is our most abundant
fossil fuel, but severe environmental and safety impacts are associated with its
extraction, processing and combustion.
High-grade uranium ore is in very limited supply world-wide, and at some point
in the future uranium fuel costs are likely to skyrocket, affecting both the eco
nomics and growth of light water nuclear reactor use. The successful development
of the breeder reactor is regarded by some experts as a solution to this problem,
because it produces more fuel than it consumes. The breeder program has been
subject to much controversy, so it is difficult to estimate if or when this technology
will begin to alleviate the depletion and rising costs of uranium.
While water to produce electricity is a renewable resource, additional sites for
hydroelectric facilities are no longer available, unless we decide to flood environ
mentally sensitive and aesthetically valuable areas.
The choices remaining—at least when considering only conventional supply
options—are not pleasant ones.
Due to the remoteness, enormous scale, and technical complexity of new sources
of energy supply, there is an increased risk of supply interruptions and uncer
tainties—including fluctuations in the costs of supply. Cost escalations associated
with the provision of additional energy are difficult to predict. Last year alone
California consumers paid almost $6 billion for natural gas and for electricity,
equivalent to a payment of $275 by each person in California.3 Escalation figures
for coal costs are about 6 percent per year. Residual oil for use in power plants
may double in price between now and 1985. Uranium to fuel nuclear power plants
ha« more than quintupled in price during the last four years. Gas prices could
rise by 420 percent by 1985.4 In addition to fuel costs, the capital costs associated
with new generation may have annual escalation rates as high as 26 percent for
nuclear plants and 13 percent for coal units.5
In a tight money market, capital can be viewed as a scare resource also. This is
of particular relevance to utilities, because the energy industry is very capitalintensive. Traditionally, the energy industry has consumed the largest share of
all investment capital in the nation. The Ford Foundation Energy Policy Project
estimates have placed the national commitment of capital for new generating fa
cilities at 30 percent of total investable capital between now and the year 2000.
This means that other sectors of the economy will have a decreasing share in
investment and growth. It also implies that consumers will be forced to finance
expansion of the energy industry through higher energy prices and higher interest
rates.
Capital is also needed—though at a much smaller scale—for conservation ef
forts, so that consumers and businesses can replace inefficient energy uses with
better equipment, technology and practices. The commitment of huge amounts
of capital to expand energy supply decreases that available for investment in
energy conservation, as well as for other valuable purposes like the development
of alternative energy technologies. Many of the beneficial impacts derived from
energy conservation can also be obtained from the implementation of alternative
energy sources, such as solar, wind, biomass and geothermal. The Commission is
actively pursuing these options, as well.
Choosing to continue the rapid growth of traditional supply alternatives means
foreclosing future options. Conservation allows us to keep these options open,
while at the same time meeting at least part of future energy needs at a lower
dollar cost, and with less environmental harm. Conservation will also generate at
least as many jobs, and reduce or shorten uncertainties in energy supply. The
remainder of this paper explores this conservation potential in California, some
of the major ways to achieve it, and what it will cost relative to conventional
sources of supply.
8 Staff estimate based on CPUC and Department of Finance data.
4 See references b and d of Table IV, p. 28.
5 I. C. Bupp and R. Treitel, “ The Economics of Nuclear Power : DeOmnibus Dubitandum,”
Harvard Business School, December 1976.

85
Conservation as a source of energy supply
Energy is not consumed for its own sake, but for the services that it renders
to both consumers and to the industrial and agricultural sectors. As used by
the Energy Commission, the term “energy conservation” means the elimination
or reduction of waste in energy use.6 By increasing the efficiency with which we
use energy, we are able to obtain a greater amount of productivity from a given
amount of fuel. Very simply energy conservation can allow us to get the same
results, or better, with less energy use.
Operationally, this means that money can be saved in manufacturing, building
operations and many other processes by utilizing less fuel to accomplish the
same amount of productivity. Conservation does not mean energy curtailments
or doing without. In fact, by making the best use of the energy supplies available,
conservation can actually forestall the need for gasoline rationing, forced shut
downs of factories, uncomfortably cold homes, and life-style changes associated
with “belt tightening.”
Wherever there is wasteful use of energy in the economy, energy conservation
can reduce or eliminate inefficiencies, permitting energy that was formerly
wrasted to become available for productive use throughout the economy. Thus,
as long as there is wasteful or inefficient energy use anywhere in the economy,
energy saved through conservation measures represents a genuine source of en
ergy supply—one which has excellent characteristics of flexibility, reliability,
economy and minimal environmental impact.
If there are conservation measures that can save a unit of energy at less cost
than new supply, then it makes economic sense to implement these measures be
fore providing new energy from conventional supply sources. The policies of the
Energy Commission recognize this clear fact, urging that cost-effective conserva
tion measures be implemented in preference to further depletion of scarce
resources or the construction of new power plants.7 By this means, the essential
benefits derived from energy use can be obtained at least cost—both dollar cost,
and environmental and social impact. This does not mean that all energy needs
in the foreseeable future can be met with conservation, but that conservation
should be part—a preferred part—of the supply mix.
Using energy efficiently must become a basic component of our energy consump
tion patterns, particularly when we consider the future costs of obtaining energy.
Not only will energy prices increase, but, as we must drill deeper and trans]>ort
further, we are expending more and more energy to obtain energy and thereby
gaining less and less as a return on our “energy investments”
It is the Commission’s policy that conservation become an integral part of
the energy supply planning process, so that conservation is compared, step-by-step
with other supply alternatives in terms of resource use, capital requirements,
net energy, need for transmission systems, environmental and social effects, and
contribution to system diversity and reliability.8 Proposals for additional con
ventional supply resources are not justified unless they result from just such a
comprehensive planning process.
Inefficiencies in present energy use patterns
The reasons for our present inefficient energy use patterns are many. The
energy supply industry has just emerged from an era in which technology,
economics, regulation, supply arrangements, and politics all pointed in the
direction of continued growth in conventional energy supplies. In the past,
economies of scale, improvements in energy technology, and the tapping of new
oil fields made possible declining average unit costs for energy. Since increased
fuel production and sales generally meant lower costs to the utilities and their
customers, energy suppliers had the incentive to expand and to encourage more
energy consumption by their customers.
In an era of cheap and seemingly inexhaustible energy supplies, it was not
considered economically rational to place energy efficiency about “first costs” or
other operational costs. Since fuel operating costs were so low, the major costs
associated with designing structures, equipment and machinery were the costs
of materials and the labor to build them. As a result, a design philosophy
¡developed which sought to minimize these “first costs,” rather than any energy
inefficiencies. This tendency was, and is, encouraged by the fact that those making
the decisions on how to design a building or piece of energy-using equipment
« OTCRCDC. Biennial Report, 1977, Vol. 3, Opportunities for Energy Conservation, p. 16.
*/JWd.,p..41.
s Ibid., p. 42.

generally do not pay the cost of the energy to operate it; thus they have little
incentive to build it efficiently.
This minimal first-cost design philosophy is best illustrated in our current
stock of thermally inefficient homes and commercial buildings. Since operating
costs were largely ignored in order to reduce construction costs, many of these
existing buildings have minimal insulation and inefficient heating and air con
ditioning equipment.
First costs, however, do not reflect the real cost of the building to the owner
or tenant. Initial costs must be considered along with interest, maintenance,
and operating costs. When energy was cheap and abundant, consumers were
generally poorly informed or didn’t care much about the energy and dollar savings
which could accumulate from a house built with energy conservation in mind.
Since there was little market demand for energy efficient housing, many homes
constructed prior to 1960 have little or no attic insulation and 110 insulation in
the walls or under floors.
Energy inefficiency became a way of life to an economy fueled with inexpen
sive, plentiful energy. In addition to buildings, land-use patterns, transportation
systems and industrial equipment all reflected the availability of cheap energy.
Now, while the energy picture has changed considerably in a very short time,
the patterns of consumption will tend to adjust much more slowly because they
are built into our economy and way of life.
The energy supply picture began to change in the late 1960’s. Circumstances
which had previously favored utility and oil company expansion, based on
economics of scale, now began to reverse this trend. The size of individual
turbine generators reached an upper limit imposed by the strength of materials
used. Simultaneously, concern over environmental problems related to energy
generation increased—air and water pollution standards were imposed. The
advent of nuclear power imposed fresh problems associated with operating a
new power technology. Larger amounts of capital were required for new con
struction, and the electric utility industry’s ability to raise this capital in
private security markets diminished.
Within a decade, utility economics has undergone a metamorphosis. For ex
ample, electric and gas rate structures had traditionally provided for progres
sively lower unit prices as a customer’s volume increased. This type of ’’declining
block” rate structure assisted the utility industry during its expansionary period
by promoting greater energy usage. This income was used to finance large new'
plants which in turn allowed costs and rates to be further reduced. In the past,
utility rates may have reflected declining costs, however, new energy supplies are
no longer cheaper than existing supplies; they are more expensive. The replace
ment cost of natural gas is now more than 70 percent above the average price; for
oil the difference is approximately 45 percent; and for electricity, nearly 40 per
cent. Maintaining price structures that reflect energy costs of the past in an era of
increasing costs underprices new energy, gives ocnsumers incorrect price signals,
and encourages the inefficient use of energy.
Just as the purchase price of a building or an appliance is usually not indica
tive of the life-cycle costs of operation or maintenance, the energy price that
appears on the consumer’s utility bill is often not indicative of the cost to the
utility of supplying an amount of power at a given time. Electrical demand, for
example, has two dimensions: magnitude and time. The magnitude of energy use
is affected by wasteful consumption, such as that caused by an inefficiently-de
signed air conditioner. The timing of energy use is related to daily or seasonal
patterns of consumption, such as the operation of that air conditioner on a hot
summer afternoon.
Both the amount of energy that is used and the time that it is used are related
to fuel waste and the need for building additional generating capacity. Baseload
(minimum energy demand that occurs year-round) is best satisfied by generating
equipment which is most economical when run for prolonged periods of time,
while peak load (highest power demand) is generally satisfied by equipment
which may be less efficient to run, but which is not called upon to operate for
long periods, and is cheaper to build.
Thus, because of high peak demands during a relatively few hours per year,
the utility must make capital investments in generating facilities which stand idle
much of the year, and, when running, waste fuel. The higher costs of operating
the relatively inefficient peaking units has never, with the exception of very
large commercial/industrial customers, been made evident to the consumer, who
has therefore had little knowledge of how the timing of his electricity use af

87
fected utility operating costs and the need for constructing additional capacity.
Although not as widely recognized, there is a corresponding annual “peak load”
problem in the demand for gas.
As energy prices begin to reflect the higher costs of providing additional sup
plies, consumers will discover that past energy use patterns are too expensive to
continue, and many will begin to modify wasteful personal habits, and pay more
attention to the energy costs—or energy efficiency—“built into their next new
home or appliance. Other countries, faced earlier with higher energy prices and
supply problems, have learned to live well with less energy consumption by driv
ing smaller cars, using more mass transit, more insulation and tighter construc
tion (having more efficient industrial processes, and using cogeneration and dis
trict heating. Sweden, for example, uses less than two thirds as much energy
per capita as the U.S., at a comparable standard of living. Higher efficiency is the
single most important reason for the lower energy use in Sweden.8
Governmental action can begin to move society in this direction now, to smooth
the transition from a cheap-energy economy already in our past, through an
economy of limited and expensive energy resources, to an economy based on re
newable energy resources. Rapid increases in energy prices could cause severe
economic dislocations, but the worst problems of adjustment can be mitigated
by energy conservation measures taken now, to reduce energy waste and slow
the growth of energy demand. If this is done properly, it will represent an
economic bonus rather than a burden.
Costs of conservation relative to conventional supply
Conservation of energy can “produce” a unit of energy at less cost than con
ventional sources. As illustrated in Table I, conservation measures save energy
at a less cost per unit than traditional energy sources, whether supplied at
average or marginal cost prices. Such comparisons, however, require consideration
of a broader context.
With respect to the individual customer, dollar savings from conservation
versus traditional growth in energy consumption reflect the historical, average
cost of energy. This undervalues the impact of conserving energy in several ways.
First, the price the consumer pays for energy only accounts for the dollar ex
penses of producing and delivering the energy in a suitable form. The market
place does not value non-dollar costs, such as environmental, health or national
security impacts of producing and delivering the energy. Second, the next incre
ment of energy supply, which could be avoided by implementating the conserva
tion programs, will be more expensive than historical costs. Third, the season
and time of day of the savings is also a factor. If the savings occur during the
on-peak period, the true cost of on-peak energy is typically greater than average
cost. Generally, electric utilities bring their most inefficient, highest operatingcost plants on line to provide the marginal kilowatt-hours required to meet peak
demand. Moreover, operating capacity build to meet peak needs may sit idle dur
ing off-peak periods, representing a waste of resources and an expense to rate
payers. If the load can be shifted to more closely approach that of off-peak hours,
there is potential for retiring the most costly capacity unit currently used, thus
reducing average cost and the price of electricity.
9 Lee Schipper and Allan J. Lichtenberg, “Efficient Energy Use and Well-Being: The
Swedish Example,” Science, V. 194, No. 4269, (December 3, 1976).

TABLE I.— COST COMPARISON OF SELECTED CONSERVATION MEASURES/PROGRAMS WITH EQUIVALENT GENERATION
Average annual energy savings
Individual conservation measures, utility
or statewide programs

Kilowatthours

Insulate an uninsulated single-family 5.00 0
home in northern California.

Therms
.

Insulate an uninsulated single-family 3.00 0
home in southern California.
Difference between an efficient refrigera 600__........ .
tor and a standard model.
P.G. & E. commercial/industrial audits. - 7.000 to 9,300
S.D.G. & E. pool program____________
Statewide water heater program (insula
tion and flow control).

115X106 (53
MW).
410X10« to
710X10«

Anmnnt inwActfirf
hw 19
1QQR
Mfnuuni
invvSivU dy
oj
(1978 dollars)

Costs/lifetime energy savings
(1978 dollars)

Average cost of equivalent
supply (1978 dollars)

Marginal cost of equivalent
supply (1978 dollars)

360.............. .. $325 per customer...........

$0.003 per kWh or $0.045 per $0.042 per kW h1or $0.20 per $0.056 to $0.131per kWhs
therm.
or $0.43 to $0.64 per
therm2.
therm.4
215............. .. $290 per customer.... ......... $0.005 per kWh or $0.067 per $0.05 per kWh i or $0.20 per $0.056 to $0.131 per kWh 3 or
therm.
$0.43 to $0.64 per therm.4
therm2
$105 per customer........ ..... . $0.009 per kWh____ _______ $0.04 per kW h*......... ....... $0.056 to $0.131 per kWh.3

22 0 X 1 0« to
350X10«.

$0.042 per kWh i ............... $0.056 to $0.131 per kWh.»
$25.6X10« (utility and cus $0.028 to $0.037 per kWh
tomers).
$527,000 (utility and cus $0.001 per kWh____ ______ $0.052 per kWh i ............... $0.056 to $0.131 per kWh*
tomers).
$151X10« (utility and cus $0.003 to $0.004 per kWh or $0.04 per kWh« or $0.35 per $0.056 to $0.131 per kWh 3 or
tomers).
$0.043 to $0.068 per therm.
therm.
$0.43 to $0.64 per therm.4

1 Forecast average 1985 prices are from ERCDC’s biennial report, vol. 2, p. 64, and converted to
1978 dollars using (1.1434) times (1976 dollars).
* Average residential gas prices are from table V of this report.
* Marginal electric p'ices are from “Comparative Cost Analysis” (supporting document No. 33
to staff summary report for AB 1852 proceeding [77-NL-ip, p. 3, The $Q.056/kWh is the low estimate

for coal or combustion turbine plants; the $0.0131/kWh is the high estimate for a combined cycle
plant. The medium estimates range between $0.079 and $0.087 per kWh.
4 Marginal cost of natural gas is the range of city-gate costs from supplemental sources shown in
table IV of this report and increased by % to account for costs of delivery to final end user.
5 IBID; a sales-weighted average was used to find statewide average price.

00
00

89
Gas companies also have a peaking “problem” , since they must maintain back
up storage capacity to meet maximum demand. There are two aspects to this
problem of gas storage. Enough storage must be maintained to meet daily peak
demands in the winter, so capital is tied up in storage units required only part
of the year. Since gas decomposes with age, the reserve to meet peak demand
must be continually turned-over, so the excess over average firm demand is sold
to low-priority customers. This represents an inefficient use of a scarce resource.
If the maximum demand were lowered, storage costs and sales of excess gas
could be reduced.
Even overlooking these aspects, a direct expenditure for conservation measures
by the individual is warranted from an economic standpoint. Table II illustrates
returns to the consumer possible from expenditures in conservation. For example,
based on a survey of the Sacramento area, the Commission estimates that it
could (though not necessarily) cost at a maximum an additional $105 to purchase
the most energy-efficient refrigerator instead of a standard model. This invest
ment would yield annual savings of $31 per year, based on Northern California’s
projected prices in actual dollars, and yield on the average an annual rate of
return over five years of 16.6 percent after taxes. Spending $365 to insulate an
uninsulated home in Northern California wTould yield a 38 percent (electric sav
ings) or a 21 percent (natural gas) average rate of return over five years due to
lower heating bills. Comparable returns from conservation measures are possible
in the rest of the state. And these returns generally provide more disposable in
come to consumers than equivalent dollar expenditures on traditional investments
such as savings, stocks, or bonds. Putting $2C0 into a passbook savings account
with a 5.25 percent annual interest rate yields an average annual rate of return
or only 3.83 percent after taxes. Investing $1,000 in corporate bonds, with an an
nual interest rate of 8.25 percent will yield an annual rate of return over five
years of only 6.02 percent after taxes. Assuming a 12.5 percent annual interest
rate from an investment of $1,000 in the stock market, the consumer could have
an annual rate of return over five years of only 11.96 percent after taxes.
Compared to these investments, conservation really does pay.
TABLE II.— COMPARISON OF EQUIVALENT INVESTMENTS! BY ENERGY CONSUMERS

Type of investment
Insulate an uninsulated single-family
home in northern California............
Insulate an uninsulated single-family
home in southern California... ...... .
insulate an underinsulated single-family
home in northern California...........
Insulate an underinsulated single-family
home in southern California............
Difference between an efficient refrigera
tor and a standard model...... ........
Water heater retrofit.... ...................
Solar water heater system with tax creditPass book account at 5.25 percent annual
interest rate................... ..........
Savings certificate at 7.5 percent annual
interest rate........... .............. .....
Corporate bonds at 8.25 percent annual
interest rate........ .............. .......
Stock market at an average 12.5 percent
annual interest rate......................
Municipal State bonds at 5.25 percent
annual interest rate.....................

Average annual rate
of return after taxes
over 5 years2
(percent)

Average annual
dollar savings
over 5 years

Annual energy
savings
Amount
invested

Kilowatthours

Therms

Electric
ity

Gas

$325

5,000

360

$263

290

3,000

215

199

262

1,300

200

700

105

600

365

2,000

2,100

180

200

Electric
ity

Gas

$107

38.2

21.3

34.6

16.9

18.1

8.5

16.6

6.9

36
<6
3 53
4 57

3 16.6
4 20.8
342.1
4 47.7
310.5
4 10.8

320.1
421.0
3 8.5
48.7

331
4 40
3 19
4 24
3 110
U19

3.83

2,000

5.47

1,000

6.02

1,000

11.93

1,000

5.25

» Conservation activities result in savings that accrue to consumers in the form of reduced utility bills. The increase in
consumers’ disposable income generated by energy savings from conservation is similar to the return from an equivalent,
more traditional investment. Although a traditional investment produces a dollar return, conservation diverts money from
payments for energy and allows the consumer to spend the savings on other goods and services.
2 Compound interest calculation. Capital gains tax assumes that 5 percent of the realized long-term gain is taxed at a
rate of 27 percent and 7 ^ percent of the gain is taxed at a rate of 13p£ percent.
3 Northern California (P.G. & E. rates).
* Southern California (SCE or SoCalGas rates).

90
With regard to the utility system, the cost of conservation measures is most
appropriately compared with the marginal supply cost. The marginal supply cost
is the cost of the most expensive existing or proposed new supply, and is higher
than the average supply cost used as the basis for setting rates. Further, the
costs that should really be compared are those at the point of end-use, where the
social benefit is actually taking place.
This means that costs beyond those directly incurred to generate a given
amount of electricity (i.e. the busbar cost) must be included, a factor neglected
in many analyses. In addition to the busbar cost of the most expensive plant, the
following must be incorporated in comparing energy supply to the costs of con
servation. The first is the cost of reserve capacity, including the fixed charges for
the investment. Next are the construction costs and fixed charges on the invest
ment for transmission and distribution lines. As shown in Table III, these costs
range between 20 and 60 percent o f the total cost of capacity. Third are costs for
transmission and distribution losses, which average 10 percent of the busbar cost
of electricity. A truly accurate assessment of the costs of supplying additional
power would include externalities such as environmental, health and safety costs.
However, these non-dollar costs are difficult to value for any analysis.
TABLE III.— PLANNED UTILITY PLANT EXPANSION,* 1977 THROUGH 1985
Planned plant expansion, 1977-85

Installed capacity in 1976
MW

10® Amount2

Percent
T. & D.3

P.G. & E.S..............
SCE....... .............
S.D.G. & E _ ............
S M U D ..................
LADWP.................

14,048
12,167
2,062
1,519
5, 720

$5,146
4,557
786
736
2,049

64
62
62
28
58

Total............

35, 516

13,274

10® Amount *

6,645
5,431
1,231
250
487

$8,175
9,458
2, 602
776
2,049

14,055

23,060

Percent
T. & D.3
37
21
34
62
51

1 From “Summary of Electric Utility Data Submittals Under the California Energy Commission’s June 1977 Order Securing Information (77-622-14),” Dec. 30,1977, by the Energy Assessment Division, ERCDC. This is a compilation of tables
3 to 7, 21 to 25, and 28 based on utility submittals.
2 1976 dollars. Includes value of generation facility, transmission, and distribution lines.
s Percent of value or planned expenditure that is for transmission and distribution lines.
4 Current dollars; that is, 1980 valeres are in 1980 dollars, etc. Includes expansion of generation facilities, transmission and
distribution lines. Annual escalation rates vary by type of plant and for power line construction. The utliities optimistically
choose rates which are much lower than recent historical escalations.
$ Does not include SMUD.

The price consumers pay for natural gas is also not the appropriate comparison
to the cost of gas conservation options. The current consumer gas prices are
equivalent to the “city-gate” costs, plus distribution costs, plus gas taxes, plus
overhead and profit. However, the “city-gate” costs are an average of the costs
of old gas and more expensive new gas (either from new contracts or new fields)
delivered to the utility. As with electricity, the correct comparison to conserva
tion options is the most expensive source of supply that would be displaced. This
cost would be that of the most expensive new gas delivered to the utility plus the
costs for distribution, taxes, overhead and profit margin. Costs of externalities
such as environmental, social, and health impacts should also be added, but again
are difficult to quantify.
In addition to the preceeding costs, there are other factors that should be con
sidered when comparing conservation to new supply on a utility system basis.
Conservation has a great advantage over conventional central station electric
generation or natural gas facilities in terms of flexibility. Flexibility, the ability
to readily adapt to changing and unpredictable circumstances, is generally lack
ing in conventional, central energy distribution systems. Foreign oil or gas em
bargoes, drought, unexpectedly severe winters, and other unforeseen resource
scarcities can adversely affect energy supply from conventional sources. Other
sources of change include legislation, social policy, and foreign relations, which
can change drastically within the lifetime of an electric generating plant or na
tural gas facility, and thus greatly alter the usefulness and economics of that
facility.

91
Conservation is inherently more reliable than large electrical generating fa
cilities, which are subject to unplanned outages. When the occasional failures
of transmission and distribution systems are included in the comparison, as they
must be, the advantage of conservation in terms of reliability is considerably
greater. Because of the reliability problem of electrical generation, utility plan
ners assume that to meet a demand growth of one hundred megawatts by con
structing a large power plant requires that another fifteen or twenty megawatts
of generating capacity be built as reserve margin. Saving the same one hundred
megawatts of electric power through conservation demands no comparable re
serve margin. Similarly, efficiency losses in the transmission and distribution sys
tem may use up another 10 percent or so of the power generated at a central sta
tion, before it reaches the end-use consumer. End-use conservation does not suffer
this efficiency loss.
Another advantage is that conservation measures are much less capital-intensive than conventional supply options. Conservation measures can be undertaken
fairly rapidly, with saturation times of a few years, while large generation fa
cilities or natural gas lines and terminals can require development and construc
tion times of ten years before supply is available. To produce the same level of
energy supply, conservation programs require less capital for a shorter period of
time, thus improving the utility companies’ financial security.
A common objection to conservation that needs to be addressed has to do with
the question of uncertainty. It is sometimes said that because of the lack of
prior experience or difficulties of measurement we cannot be certain of either the
cost or the effect of a conservation measure, and therefore we should hesitate
before giving preference to investments in conservation. However, the uncertain
ties associated with conservation are dwarfed by the uncertainties surrounding
conventional supply options. These factors include fuel availability and prices
that are quite unpredictable (as experienced in 1973-74), major changes in our
environmental knowledge (witness the persistent uncertainties surrounding
Diablo Canyon), and the anticipated overruns in capital cost that have been
typical of recent power plant construction. In addition, most of the conservation
measures currently proposed have such a wide margin of advantage that they are
almost certainly more economic despite any conceivable uncertainties. Even if tlie
dollar cost of conservation were as high as the busbar cost of electricity genera
tion, the weight of transmission cost,* system unreliability, and social and environ
mental impact would render conservation cost-effective with a high degree of
probability.
The utilities are planning to spend over 23 billion dollars for 14,055 MW of
added generating capacity, transmission lines, land distribution lines by 1985.
(See Table III). Conservation programs (shown in Table VI) could reduce peak
demand by 8,000 to 10,800 MW and overall consumption by 32 to 39.4 billion kWh.
Costs for electricity conservation range between $.001 and $.06 per kWh and $13
and $300 per KW. While a direct comparison must include operation, maintenance,
and environmental costs, this illustrates that conservation is a less expensive
alternative to traditional electrical generation. Similarly, conservation programs
will save at minimum 2.4 to 2.8 billion therms of natural gas at approximately 10
cents per therm by 1985. Natural gas costs to the utility are optimistically ex
pected to range between 16 and 20 cents per therm by 1985 (average costs in 1977
dollars, Table IV) with new gas supplies costing between 30 and 45 cents per
therm. The prices to the consumer, based on average utility costs, are expected to
be 32 to 40 cents per therm, in 1978 dollars. (Table V) .
Because average rather than marginal cost pricing is used, gas and electric
rates schedules allow a “hidden subsidy’’ for the continued wasteful and ineffi
cient consumption of energy. Today, with increasing marginal cost of electric
power generation and of new gas supplies, the continued use of average-cost pric
ing means that the average rate-payer is presently subsidizing the marginal user,
such as the underinsulated house. The difference between the marginal dollar
savings to the utility from conservation and the individual customer’s dollar
savings on his or her utility bill is the “hidden subsidy” This is the maximum
amount that the utility company, using revenues from all rate-payers, could
afford to pay to encourage implementation of conservation measures.

92
TABLE IV.— COSTS OF NEW GAS SUPPLIES* BY LOCATION
[1978 dollars per therm]
1977
Traditional sources:2
El Paso...... ....................................
Transwestern............... . ...................
Californian. ..................................... ............
Supplemental sources:4
Alaskan North Slope— ...................... .
Mexican.. .................................... .
Algerian LNG....................................
Indonesian LNG................................
South Alaskan:
Phase 1 only..... .........................
Phase 1 and II.............................
Average costs of old plus new g a s:3
Southern California Gas Co...................... ........
PG&E Co.... .......................................

30.12-. 24

1980

1985

1990

0.23
.28
.20

0.27
.33
.21

0.30
.35
.24

.38
.32
.36
.38

.32
.32
.33
.35

.48
.39

; 39
.34

.17
.21

.20
. 19

.32

.12
.17

.14
.20

1 This table shows the costs of new gas delivered to the utility, which is normally referred to as the city gate rice. This
does not include the utility cost to deliver the gas to the final end user, which makes up over % of the price the penduser pays.
2Vol. I of CPUC staff report for case No. 10342— “The Decline in Natural Gas Available,” Sept. 30,1977.
3 Henry Lippitt of the CPUC, Apr. 12,1977 report.
4 Vol. II of CPUC staff report for case No. 10342— “The Decline in Natural Gas Available,” Dec. 15,1977.
5 This is the average cost the utility would pay for gas, the rolled-in city gate cost, from traditional sources. This is used
as the basis for the utility rates, which also cover costs of delivery to the final end-user. The source is the same as note 2.
Note: Prices for gas delivered to the utility are normally shown in dollars per MCF. However, for comparability to other
tables, these were converted to dollars per therm, using 10.5 therms per MCF.

81-502— 78-

TABLE V.— FORECAST RESIDENTIAL GAS AND ELECTRIC PRICES i
(Expressed in constant 1978 dollars]
Electricity (cents per kilowatt-hour)
Year
1975-------------------------- 1980-----------------------------1985-----------------------------1990--------------------- ------ 4.71
1995------------------------------

P.G. & E.

SCE

S.D.G. & E.

3.44
4.67
4.85

5.12
5.86
6.34
6.45
7.24

4.66
5.52
5.76
5.84
5.31

+ 4 .6 2

Natural gas (dollars per MCF)

SMUD
2.12
1.84
2.20
1.71
1.98

LADWP

P.G. & E.

S.D.G. & E.

4.27
5.30
5.43
3.96
3.96

1.93
2.90
3.39
3.70
4.10

2.29
3.02
4.17
4.59
5.19

Natural gas (dollars per therm)
SCE
2.09
2.77
3.82
4.20
4.75

P.G. & E.
0.18
.28
.32
.35
.39

S.D.G. & E.
0.22
.29
.40
.44
.49

SCG
0.20
.26
.36
.40

.45

ELECTRICITY AND GAS PRICES COMPARED a (ABOVE PRICES CONVERTED TO DOLLARS PER 10« BTU)

[Expressed in constant 1978 dollars]

Electricity (dollars per 10« Btu)
Year

P.G. & E.

SCE

1975.......................... ............................ ............................... ............1.01
1980_____ ____ __________ ______ ____ ________ ____________________ ________ 1.37
1985-------- ---------- ------------------------------------------------------------------ ------------1.42
1990____ __________ ____ ____________ _________ ___________________ ________ 1.38
1995--------------- -------------------------------------------------- ---------- ---------------------1.35

1.50
1.72
1.86
1.89
2.12

1 The residential sector generally pays higher prices for gas and electricity than any other sector.
The prices shown are based on an average of the costs of gas and electricity from existing and new
sources. Costs for supply from new sources will be significantly higher than the prices shown. In
addition, these prices do not take inflation into account and are expressed in constant 1978 dollars. If
*.hese prices were expressed in current dollars (that is, 1980 amounts in 1980 dollars, etc.), they would

S.D.G. & E.
1.36
1.62
1.69
1.71
1.56

Natural gas (dollais per 10» Btu)
SMUD
0.62
.54
.64
+ .5 0
.58

LADWP
1.25
1.55
1.59
1.16
1.16

P.G. & E.
0.18
.28
.32
.35
.39

S.D.G. & E.

SCG

0.22
.29
+ .4 0
.44
.49

0.20
.26
.36
.40
.45

be 80 percent higher in 1985, and 220 percent higher in 1995 if inflation was 6 percent. The prices are
taken from ERCDC's “ Energy Conservation Design Manual for New Residential Buildings,
2 Conversions were made using the following relationships: 10.5 therms per MCF; 105 Btu per
therm; 3,412 Btu per kWh; 1.05 x 10« Btu per MCF.

94
Employment effects of energy conservatism
Historically, the number of persons employed ¡and the size of economy, as
measured by the Gross National Product (GNP) have grown ias energy consump
tion has increased. It has often been assumed that growth in energy consumption
is directly iand causally related to the growth in GNP and employment, i.e. that
the economy is either stimulated by increased energy supply or hampered by
slower growth in energy consumption. Therefore policies promoting the historical
growth rates of energy supply have been justified as leading to a sound economy
and full employment.
These assumptions have arisen from a misreading of the facts, a misunder
standing of why energy use grows »and how economic growth is stimulated or
slowed. As well, there has been a tendency to confuse the effects of sudden supply
disruptions with the quite different long range impacts of a slowdown in the
growth of energy demand through cost effective conservation. Slow energy
demand growth, if resulting from conservation, may be a sign of a healthy econ
omy ; while unrestricted growth in energy use, if the use is wasteful and ineffi
cient, may be a real indicator and cause of economic disaster.
Recent economic studies question the validity and prudence of projecting future
energy needs, the state of the economy, and employment trends on the basis of
past performance. For example, a report done by a UCLA economist for the
Energy Commission states that “energy input can be uncoupled from the national
output not only by product mix shift or thermal efficiency improvements but also
by increases in productivity.” 10A major study by the Ford Foundation found that
although there is some relationship between growth in GNP, energy and employ
ment, it cannot be assumed that the same ratios of growth will apply in the
future.11 Furthermore, employment and energy growth statistics for the State
of California contradict previous ideas about the nature of the relation between
energy consumption and employment. Governor Brown announced in his stateoi-state address that almost one-half million new jobs were created in California
during the past year, with only half the energy growth rate of five years ago.
The economic analyses of the Ford Foundation study found that a substantial
reduction in U.S. energy input, as compared to historical energy demand patterns,
can be accomplished without major economic cost in terms of reduced total real
output, reduced real incomes, increased inflation or reduced employment. While
it is true that a sudden and unexpected energy shortage can cause, and has
caused, unemployment, a long-term slowing of energy growth signalled by clear
government policy commitments to energy conservation and efficiency would not
have a detrimental effect on employment levels. As the price of energy continues
to rise employment may actually increase as labor is substituted for capital and
material inputs.
The energy production industry itself and the economy’s energy-intensive in
dustries12 have continuously become more capital-intensive while providing a
smaller share of the nation’s jobs. Nationally these industries consume approxi
mately one-third of total U.S. energy and provide 10 percent of the total employ
ment. In considering the impacts of the energy industry on California’s economy,
it is important to note that these sectors are among the least labor-intensive.
When compared to 368 sectors of the national economy in terms of employment
per dollar of value added, California’s energy sector ranked in the lowest five
percentile.13
Conservation activities, on the other hand, are relatively labor-intensive and
offer the least expensive and most cost-effective way to expand “supply” In addi
tion to an expansion in those industries that manufacture conservation “hard
ware” such as insulation, IID’s and other energy saving devices, there will also
be an increasing need for conservation “services”, such as energy management
surveys. The employment impacts are even larger as a result of the secondary
effects. For example, a ceiling retrofit program would not only increase employ 10 Sidney Sonenblum, “Perceptions About the Relation Between Energy and the Grosa
National Product,” UCLA.
u Ford Foundation, A Time to Choose, Final Report by the Energy Policy Project (Cam
bridge, M ass.: Ballinger Publishing Co., 1974).
12 An energy-intensive industry is defined here as one whose ratio of total energy con
sumed to total output produced significantly (at least by a factor of 4) exceeds the average
energy/output ratio for the total U.S. manufacturing.
13 Lawrence Berkeley Laboratory, “Analysis of the California Energy Industry,*” (LBL—
7), July, 1976. The energy industry in California consists of four major sectors: oil and
gas extraction, petroleum refining and related industries, electric utilities, and gas utilities.

95
ment in the manufacturing and installation of insulation (primary effects), but
also in those industries that manufacture machines or materials used in the pro
duction of insulation (secondary effects).
Most important, however, conservation efforts stimulate the economy and em
ployment through the savings that accrue to consumers in the form of reduced
utility bills. The on-going savings in energy conservation tend to be spent on addi
tional goods and services which create more jobs (indirect effects). Indirect
employment effects are often more Significant than one-time direct impacts since
the former continues indefinitely with the energy savings. Furthermore, since
conservation reduces the need for huge investments in additional energy supply,
more capital will be available to stimulate other, more labor-intensive sectors of
the economy, such as residential construction.
Employment impacts from promoting conservation are difficult to quantify,
especially in the case of secondary and indirect effects. To date, the various
studies assessing the statewide employment impacts of conservation programs
are generally incomplete in scope and based on the limited economic data avail
able. Moreover, as none of the studies have calculated indirect employment effects
or secondary impacts, existing estimates tend to undervalue the positive employ
ment and economic impacts of conservation. As an example, the Conservation
Division calculated that appliance efficiency standards would indirectly create
over 1,300 jobs starting in 1985.14The magnitudes for other conservation programs
could be substantially larger.
CERCDC employment studies, on the other hand, have begun to evaluate pos
sible job impacts for various programs, under more than one scenario. For ex
ample, we have estimated employment impacts for both a mandatory and a non
mandatory residential ceiling retrofit program.
A mandatory program with a goal of retrofitting within five years 90 percent
of the insulatable residences (where cost-effective) would result in direct addi
tional employment impacts of approximately 5,700 person years (PY) in manu
facturing and 5,850 person-years in installation. Job impacts would be significantly
lower in the absence of a mandatory retrofit program, accompanied by tax (or
other) incentives. There are several reasons for this, most notably the acknowl
edged ineffectiveness of alternative approaches in penetrating the rental market.
Rentals comprise an estimated minimum of 25 percent of all insulatable dwell
ings; however, tenants and owners will not benefit from the savings and the
renants do not own the property. Moreover, even with very effective promotional
and incentive campaigns, the penetration into the owner-occupied sector would
likely be slower without a mandatory program and tax incentives, stretching
out the person-years and reducing the actual job creation. Assuming a 70 percent
penetration of owner-occupied dwellings in five years from a purely voluntary
program, we estimate the direct impacts at 3,280 PY in manufacturing and 2,770
PY in installation. Converting these estimates into permanent jobs over the
projected five-year period results in :
Mandatory retrofit:
Jobs
Manufacturing__________________________________________________ 1,150
Installation_____________________________________________________ 1,170
Voluntary retrofit:
Manufacturing _________________________________________________
656
Installation_____________________________________________________
554
Well-designed conservation programs can accomplish more than a reduction of
energy waste. Conservation programs can achieve other objectives such as the
freeing of capital for investments, redressing our balance of payments deficit and
creating job opportunities, especially for the low skilled worker. Choosing to
34 To calculate the indirect impacts of the appliance efficiency standards, for example, the
cost of conservation must be subtracted from the savings in energy consumption in order to
determine the change in consumers’ disposable income. The number of jobs created by money
diverted from energy expenditures to other goods and services is calculated by taking the
ratio of jobs per dollar spent on average purchases, about one job per $17,000 spent (this
figuré was calculated by Bruce Hannon, Director of the Energy* Research Group, Center for
Advanced Computation, University of Illinois at Champaign-Urbàna), and multiplying it
by the change in consumers’ disposable income due to appliance efficiency standards. The
change in disposable income is calculated by subtracting the increase in the price of an
appliance from the savings of reduced utility bills. After taking into account the payback
for price increases of efficient appliances, the indirect job impacts of the appliance stand
ards would occur approximately seven years after the standards become effective.

96
implement conservation programs may have a significant effect on the problem
of structural unemployment by creating jobs for the younger, more inexperienced
or less highly educated worker. Our employment impact analyses will begin to
address the manpower needs associated with the implementation of conservation
programs and attempt to optimize these positive employment effects by develop
ing other strategies to complement them. In the 1970 Biennial Report to the
Governor, CERCDC will be looking closely at such factors as the California in
dustries most likely to be affected by conservation programs, subsequent changes
in skill levels, job dislocations, and job permanence. By considering the broad
range of economic consequences induced by conservation activities, we can formu
late policies and design programs that promote the economy and welfare of
Californians.
Conservation strategies
Policy -tools for governmental intervention to reduce energy waste and slow the
growth in energy demand range from purely voluntary information programs
to mandatory standards. In between are economic incentives, such as tax credits
or surcharges. Each approach has a role in the achievement of energy conser
vation.
Voluntary policies make use of positive actions performed through the public
or private sector to benefit the public interest. Voluntary policies carry no sanc
tions, but operate through the provision of services or inducements which promote
more informed energy-use decisions or which provide assistance to consumers to
undertake energy-conserving actions.
Although voluntary methods of achieving desired goals are generally preferred,
a total reliance on voluntary means does not always prove effective. For example,
where the market mechanism does not operate to encourage energy efficiency,
government intervention in the form of regulatory programs may be necessary
to overcome market forces and achieve energy savings.
Existing CERODO strategies are intended to overcome informational, economic
and institutional barriers to energy conservation. Public outreach strategies are
designed to encourage better energy conservation decision-making and help make
conservation actions easier to undertake ; incentive and pricing strategies operate
by providing economic rewards or penalties to encourage conservation ; and regu
latory strategies are used in a few, limited, circumstances to ensure compliance
with specific conservation objectives. These strategies should and are operating
together to reinforce one another and produce a coherent approach to the imple
mentation of energy conservation.
Outreach strategies
In an effort to increase the involvement of the public in energy conservation
activities, CERCDC has developed several programs which will allow us to
increase our ability to provide technical information and assistance to individuals
and organizations. The Commission’s approach emphasizes information programs
to make the public aware of the benefits, techniques, and costs of energy
conservation.
In order to influence energy use decision-making, information programs must
be based on an understanding of what motivates energy use behavior. Participa
tion of CERCDC in several survey research projects will enable us to identify
and assess public attitudes and behavior patterns that may be influenced by such
information programs.
Increasing the market penetration of “hardware” measures designed to reduce
wasteful and inefficient energy use can’t be encouraged through innovative mar
keting strategies. Due tq their established relationship with energy consumers,
utility companies have a major role to play in the dissemination of conservation
information and the marketing of conservation concepts and products. CERCDC
staff is currently working with both investor-owned and municipal utilities to as
sist them in the development of their conservation programs, as well as to initiate
data collection, monitoring, and evaluation of their programs.
In addition to the utility effort, we are also working with and assisting the
outreach efforts of other organizations such as local governments, schools, com
munity groups and trade organizations. These public and private groups can
tailor conservation programs to local needs, and can promote them through
face-to-face contact, neighborhood and/or peer group orientation, and local
credibility.

97
To support energy conservation efforts by public and private organizations, it
is the responsibility of the Commission to make available its technical and
financial resources, to guide and monitor utility conservation programs, and to
help ensure that the public is protected from inaccurate information and from
poor quality workmanship in energy conservation products or services.
Specific information programs include the development of an information
clearing house for new developments in energy conservation, the distribution
of appliance efficiency information, preparation and dissemination of “how to”
articles, case studies of energy conservation projects in the commercial/indus
trial sector, and public presentations on energy conservation topics.
In addition, education activities through formal and informal channels will
increase public awareness of the need for, benefits of, and opportunities for con
servation. Educational programs include the development of energy education
curricula for kindergarten through high school, a junior college textbook, and
the development of program materials for the vocational training of those in
volved in the energy field. New funding will establish in-service training centers
to meet the needs of teachers who have no instructional background in energy
and energy conservation. As the conservation marketing plan develops, edu
cational seminars will be designed for key groups such as loan officers, real
estate agents, investments analysts, -local government officials, etc.
A substantial marketing effort by the Commission, to complement that being
conducted by utilities and others, is presently in the planning stages. Utilizing
the services of professional marketing experts, marketing strategies appropri
ate to a public agency will be refined for targeted groups across all energy-use
sectors. Activities under this program could include the advertising of specialpurpose conservation programs, like commercial/industrial energy management
training programs, and the promotion of energy conservation ideas through the
printed and electronic media. Training films on commercial/industrial lighting
and energy management, award programs keyed to bulders and designers, incen
tive programs, residential energy utilization surveys, a new-home buyer’s guide
and other innovative mechanisms could be developed to both encourage and ac
celerate conservation investments with emphasis placed on the local level as the
focal point for action.
Facilitating conservation investments also involve a need for technical assist
ance, financial assistance, and consumer protection activities. Under the govern
ment energy management assistance program, public buildings are surveyed to
determine opportunities for energy savings, and workshops are conducted to
train building management and maintenance personnel. Technical assistance will
be provided to local governments through the training of local building officials
in the application and enforcement of residential and non-residential building
standards, through assistance to planning officials on the energy implications of
the planning process, and the training of persons responsible for reducing energy
waste in local government building operations. Technical assistance will also be
offered to citizen action groups in the development and implementation of energy
conservation programs.
The Commission is also providing financial assistance for energy conservation
projects conducted by local governments and civic organizations. Five local gov
ernments are currently operating energy conservation programs under partial
state funding. This program, which will expand in 1978-79, supports such proj
ects as preparation of an energy element of a general plan, innovative demon
stration projects, and modifications to ministerial and discretionary permitting
processes to permit increased energy conservation. Examples might be the de
velopment of energy conservation building codes which are able to take ad
vantage of special local conditions and go further than the Commission-adopted
statewide standards, or the preparation of zoning ordinances which improve the
orientation of new homes with respect to the sun. Considerable funding is also
available for outreach programs developed by citizen action groups, building
on the premise that the most effective long-term impact on the energy conscious
ness and energy use patterns of individual consumers will occur when local gov
ernmental agencies and local citizen groups are involved in the determination
and delivery of energy services.
When urging people to invest in conservation, a measure of quality control is
necessary to ensure that the public receives adequate products and services. Con
sumer protection and safety will be enhanced through setting: standards for in
sulation materials and establishing an inspection and testing program. The

98
CERCDC will also monitor and attempt to alleviate problems with the supply of
insulation materials. To protect residential consumers against fraud and poor
quality workmanship in energy conservation retrofit services or products, the
Department of Consumer Affairs will assist the Energy Commission to publicize
consumer information and investigate complaints.
Incentive strategies
Information strategies can be reinformed by incentive strategies, which op
erate through the marketplace by making certain actions more or less costly to
carry out. They allow consumers a choice of action, even though it is the energyefficient choice which will usually cost less to consumers in the long run.
While information strategies may convince a consumer to invest in energy con
servation, the actual investment may not take place if the consumer cannot afford
to raise the needed capital. Loan programs are one type of incentive that can help
address this problem, allowing consumers to substitute a one-time cost (such as
for ceiling insulation), for continued inefficient energy use and higher monthly
bills. Cash rebates and free energy-saving hardware are incentives which have
been used successfully by utilities to motivate consumers to insulate. Low inter
est loan programs provide a means of helping consumers finance the insulation,
once they have been motivated to do so.
Tax policies are another mechanism for applying incentives to conserve or dis
incentives to waste. Taxes could be placed on inefficient energy consuming prod
ucts or activities, to make their cost more reflective of the cost to society of pro
ducing additional energy. Or, perhaps better, tax deductions and credits can be
used to help encourage socially beneficial decisions. An example is the solar tax
credit enacted last year, which could be extended to cover other conservation, in
vestments. Such policies have the effect of counteracting the “hidden subsidy**
discussed earlier, which now goes to support inefficiency.
Pricing
Utility rate design and the pricing of new fuel supplies represent another op
portunity for encouraging energy conservation. In theory, utility rate structures
are based on several elements, the primary one being “cost of service” . The tradi
tional way that cost of service has been defined has been through historical costs,
which may tend to underprice current energy due to rising costs of applying ad
ditional or “incremental” amounts of energy.
Resources are most efficiently allocated when their price reflects these marginal
or incremental costs, that is, the costs of providing additional energy from the
construction of new power plants, the discovery of additional gas formations, or
the drilling of new off-shore oil wells. As pointed out earlier, since new energy
costs are usually averaged in with current supplies, the new energy is priced
lower than the real costs associated with supplying new power. As a result, con
sumers receive inappropriate price signals which encourage them to demand more
energy than if the incremental cost were reflected in the rates. “Marginal cost”
pricing allows the replacement cost of energy to be reflected in energy rates, in
turn encouraging consumers to make more socially optimal decisions with respect
to energy use.
Similarly, other rate designs can encourage energy inefficiency. “ Inverted rates/”
for example, price successive increment® of energy consumed at successively
higher prices. In other words, the more a customer uses, the higher the unit
price. Peak load pricing recognizes the importance of capacity costs (the costs to
the utility of supplying sufficient generating capacity to serve all customers at
the same time, even though some of that capacity goes unused during off-peak
times). Peak load pricing can encourage the shifting of energy consumption to
off-peak times, much as a person might alter a commuting schedule to avoid rushhour traffic. This shifting permits a more efficient use of the generating system
and can also help avoid peak overloads and brown-outs.
Regulatory strategies
Since energy conservation is a public purpose that will ultimately benefit ev
eryone, regulatory standards may be necessary to guarantee that individuals and
institutions modify their actions toward that end. Mandatory energy efficiency
standards can be applied where information, incentive and pricing strategies are
not adequate to produce technological change in the direction of energy effieney. Standards are typically needed when those who design energy-consuming
products are not the same people who use the products and would reap the en

99
ergy and dollar savings from making the products energy efficient. Thus, builders
and manufacturers have little incentive to design energy-efficient buildings or ap
pliances. Regulatory programs can overcome this market constraint by establish
ing minimum efficiency criteria for energy consuming products.
Another example is the case of rental housing. Barriers to the effectiveness of
information, incentive, and financing programs for the rental sector are built into
the structure of the market. Landlords have no incentive to undertake conserva
tion investments since they often do not pay the utility bills and would not realize
the energy and dollar savings. On the other hand, tenants are unlikely to make
such an investment in a building they do not own, especially if they do not in
tend to live there long enough to recover the cost of the conservation investment.
Mandatory requirements for ceiling and water heater insulation in existing homes
would be an appropriate and effective application of regulatory strategies to help
overcome the barriers to implementation in this particular sector.
The Energy Commission is authorized under AB 4195 to adopt standards by
July 1,1978 for a program of electrical load management for each utility service
area. These standards, which must be cost-effective, will require the utilities to
develop programs which are intended to reshape the utilities’ load duration
curves, thereby reducing the rate of growth of peak demand and saving fuel.
Conservation programs and expected sawings
Specific programs using each of these strategies are currently underway in
California. These programs, with costs and savings summarized in Table VI are
briefly outlined here by end-use sector to provide a sense of the magnitude of the
conservation supply potential and illustrate what must be done to achieve that
potential.
Commercial industrial sector
Over half of the electricity and natural gas used in the state is used by com
mercial and industrial customers. Compared with the relatively homogenous resi
dential sector, commercial/industrial end-uses and building types are varied, re
quiring differing approaches.
The most successful approach to this sector has been through building energy
management survey programs, which aim at increasing the efficiency of lighting,
heating and cooling systems, and other equipment, and at improving the opera
tion and maintenance of buildings to minimize energy consumption. This ap
proach consists of on-site building surveys by energy management analysts, along
with educational-outreach programs to train building managers and operators in
achieving optimal energy management of their buildings. Typically, the building
surveys are conducted by trained utility personnel or private energy management
consultants who recommend energy-conserving cost-saving actions to the build
ing managers. The educational outreach effort is aimed at small businesses
through the use of seminars, published case studies and advertising. Electrical
load management standards now being proposed (under Section 25403.5 of the
Public Resources Code) are expected to include a requirement that buildings with
excessively high energy consumption must undergo a building operation survey
to identify and reduce wasteful consumption.

TABLE VI.— CONSERVATION PROGRAM SAVINGS BY 1985»
Natural gas 3

Electricity2
Voluntary programs and mandatory standards
Net annual savings
(10 «kWh)
I. Commercial/industrial:
Building operation survey 5.....................................
Motor efficiency retrofit6........................................
Boiler efficiency *.................................................
II. Residential:
Ceiling instulation retrofit».....................................
Cooling load reduction9.........................................
Night thermostat setback io........ ............................
Water heater (insulation and flow control)».................
New home designi2___.........................................
Furnace I ID ana resizing retrofit«............................
III. Utilities and government:
Cogeneration 14_..................................................
Voltage reduction ........... ............... .................
State water project
........................................
State and local government facilities17......................
IV. Mandatory standards:18
Nonresrdential buildings « ....................................
Time-of-use pricing 20..........................................
Interruptible rates 2°.................................................
Motor efficiency 21....................................................
Residential buildings 22..............................................
Pool filter cycling20..................................................
Residential appliances M......................................
Residential water heater cycling 20...........................
Residential air-conditioner cycling 20......................
V. Total estimated savings (excluding SWP and cogeneration).
VI. Forecast sales in 1985............................... .............
VII. Percent of 1985 forecast saved.....................................

Summer peak
savings (MW)

Total cumulative
program costs4
10« 1978 dollars)

15,300 to 19,800____ 2,700 to 4,300........ 52.......... .
390................... . 5 8 ..................... 105 to 175.

Net annual savings
(10«therms)

Total cumulative
program costs 4
(10 * 1978 dollars)

390....................

Uncertain.

670..
200.................. Uncertain............ 230.............
97 to 193.............. (In A/C cyclers)____ 167-------------- -------------------------------72 to 120....................................... 48 to 53.............. 230 to 500...........
410 to 710........... 44 to 75.............. . 16..................... 220 to 350...........
9...................... 1.5...... ............. 1...................... 0.3 to 0.4...........
................................................................................. Uncertain.............
............... ........... (800 to 1,500).
3,600 to 6,100...... 680 to 1,800—
252.

(1,000).

1,120........

416................... .
360........... .......
875.....................
2,200 ..................
18......................
46.....................
32,000 to 39,400....
206,844_____ ____
15 to 19 percent___

Uncertain.

45 to 58...............
ERCDC................

7,700.................. Uncertain..

904.
468.
135.
0.36 to 0.38
Uncertain,

10.....................

ERCDC.

154..

( 0).

345..
62..................... 4.9 to 20____
340220................... (6)..............
400..................... 9.4 28.............
310.
760.....................C )...............
147..................... 52 28..........................................
1,440............... 287 25..................................................
8,000 to 10,800.................................. 2,400 to 2,800....
43,307.......... ............................... . 13,400...........
18 to 25 percent............................... . 18 to 21 percent..

1 These a é preliminary estimates of savings from standards with effective dates of 1977 or 1978 and
from programs beginning in 1977 through 1979. The actual savings will depend on the speed of
program implementation, the consumer response, the expertise of utility staff, and the actual charac
teristics of 1:he targeted end-use stock.
* Electricity savings are mainly calculated for the State by assuming program characteristics de
scribed in the ERCDC staff report in response to the AB 1852 legislation. Other savings are from staff
reports on building and appliance slandards, and from Federal grant applications under EPCA/ECPA
for programs aimed at State and local government.
3 Natural gas savings are very preliminary due to a lack of information on sizes and efficiencies of
natural gas end-use stock. Information is being collected for preparation of testimony before the
CPUC on the need for an LNG terminal.
4 Program, costs are the total cumulative costs by 1978, converted to 1978 dollars at a 10-percent
discount rate. Program startup dates range between 1977 and 1979. For many programs, only utilities
will incur costs. For other programs, utilities will pay advertising costs and incentives; costs of hard
ware will b€ borne by the consumer. Some programs will be partly funded by the State. Total costs of
each program are shown where possible.
* Changes in building operation aimed at lowering energy consumption can reduce annual usage
by over 40 percent according to Federal and Rand Corp> studies. These savings assume 10 to 20
percent electrical reductions in buildings surveyed by utilities, with the electrical program costs in
cluding just utility administrative and testing costs. Gas savings are from Rand, but the commission
staff is currently preparing their own estimates.
«The motor efficiency program is aimed at medium-sized motors (}£ horsepower up) to increase
operating efficiencies from 50 percent to 80 percent. The program is aimed to retrofitting or replacing
90 percent of the motors in place when the standards go into effect in 1979. Retrofitting motors is
expected to cost $75 per motor; replacing the motors wilTcost $125 per motor.
? ERCDC staff will be working with staff of the department of industrial relations (who inspect
boilers for safety) to improve boiler operating efficiencies. Negotiations are still underway on funding.
Program costs are not yet certain. Savings on all boilers will be checked by 1980, with some savings
lost by 1985 due to equipment deteiioration.
& Impact of ceiling insulation on air-conditioning loads is uncertain but under study. Heating savings
are based on reaching 90 percent of the targeted homes. The average cost to insulate an uninsulated
home is $300; for an underinsulated home it is $230.
* Peak reductions from this program are assumed to be included in savings estimates for airconditioner cyclers. Program costs are $60 per year for a single-family central air-conditioner; $35 per
year for multifamily central air-conditioner, and $35 per year for room air-conditioners, with the
program aimed at 20 percent of all air-conditioners.
u Program costs include advertising costs and setback device purchase and installation ($100
per device). No manual operation was assumed. Savings estimates are based on installing devices
in 45 percent of the homes with central systems.
h Savings estimates range from the savings from insulating all targeted units to R-6, with a 10°
setback and flow control devices, to savings from insulating to R -ll, with a 10° setback anl flow
control devices. 90 percent of the pre-1979 stock remaining in 1985 is the goal. Insulation at R-6
costs $20 ( R - ll is less, as this is a batt of ceiling insulation, whereas R-6 is a kit) and flow control
devices cost $10«

12 The new home design program is a pilot project in the southern California region to demonstrate
savings possible for climatically appropriate design. It is aimed at 5 percent of the new homes built
over a 3-year period.
13 Commission staff is exploring the potential from these programs to add intermittant ignition
devices and resize flue and burner openings on gas-fired furnaces to increase their efficiencies.
u Savings potential determined by staff and consultant studies in southern California. These
savings ar$ not included in the final total.
15 Program costs are difficult to separate from regular utility operation and maintenance costs.
i« The peak savings shown are the estimates of potential, assuming DWR will greatly reduce pump
ing on peak days and instead only operate generating facilities. These savings are not included
in the final total.
** This program to improve operating efficiencies of State and local government buildings will be
conducted by ERCDC staff, whose salaries are partly funded from the savings achieved.
is Under secs. 25402 and 45403.5, the commission is authorized to prescribe, by regulation, standards
for energy consumption by buildings and appliances and for electrical load management.
io The impact of nonresidential building standards on peak demand is uncertain since much of
the savings may be from reducing lighting and space conditioning use when the building is not
occupied. The impact of insulation in a commercial building on air-conditioning load is also uncertain
and being studied.
20These 6 standards for load management are not yet final, but should be completed by May or
June 1978. Preliminary estimates have been made for all standards except agricultural pumping.
Costs of rate changes are uncertain. Meters will cost about $500, but the cost may be split between
the utility and the customer. Costs of load management measures are being investigated as the
standards are being finalized and should be known by June.
si Motor efficiency standards are aimed at new, medium-sized motors which currently have an
average 55 percent efficiency. The standards will increase this to 80 percent at an increased cost of
$5 to $20 for a new motor.
22 Savings estimates from ERCDC 1977 biennial report, vol. 3, p. 136. Costs are uncertain; however,
the only major cost increase man be for higher levels of insulation. This will reduce annual heating
requirements by 1,300 kWh or 90 therms in northern California and 700 kWh or 50 therms in southern
California over an underinsulated house. Performance standards allow more leeway in building costs,
since proper orientation is a major factor in lowering building energy requirements.
23 Cost of this program is estimated at $10 per pool, saving 1 kW per year. In addition, each utility
may have to pay an incentive. Even a $100 incentive could cost less than 1 kW per year of baseload
capacity.
m Savings estimates from (a) ERCDC/1977 biennial report, vol. 3, pp. 133-135, (b) staff communica
tion on I ID standards, and (c) ERCDC's "Revised Staff Report on the California Appliance Efficiency
Program" (relating to space heaters, storage-type water heaters, and plumbing fixtures), November
1977. Cost increases are uncertain since appliances are currently marketed that meet the standards.
Additionally, model design typically changes frequently, especially for refrigerators, air-conditioners,
and heaters, and standards may have a minimal impact on design costs.
as Utilities will pay for the entire program cost.

102
The savings possible are very large. A PG&E program aimed at conserving
energy in their own company office showed an average 32.4 percent decrease over
the base year within two years. Operational changes by several large California
retail stores achieved 15 percent to 32 percent reductions over previous energy
consumption. CERCDC staff estimates the potential from this program as 15.3
to 19.8 billion kWh by 1985, a decrease of 7 percent to 9.6 percent over the total
forecasted electric sales. Gas savings are estimated at 390 million therms of
natural gas.
A similar program for state and local government buildings, the energy man
agement assistance program, should achieve annual savings of 252 million kWh
and 10 million therms of natural gas by 1985. This program is staffed by Com
mission personnel, whose salaries will be partially refunded from the savings
achieved. In addition, funding under the proposed National Energy Act may be
available to schools and health care facilities for energy conservation measures,
technical assistance and energy surveys, and to public buildings for audits and
technical assistance.
The need for peak generating capacity, which is often more expensive and
less efficient than baseload generating equipment, can be reduced by decreasing
non-essential electric loads in commercial buildings and industries during hours
of peak demand. This load management can be accomplished by several means,
including mechanical control systems and devices which turn off non-essential
uses during peak hours, or by altering daily schedules of electricity use. Shifting
consumption periods or installing mechanical load control devices can be en
couraged by changing electricity rate structures to provide incentives and dis
incentives to encourage shifting of electricity use to off-peak hours. Time-of-use
pricing provides an economic incentive to shift by making it more expensive to
consume energy during peak hours. Interruptible pricing provides a special rate
for customers who install load management devices which allow non-essential
loads to be turned off at peak times. Requirements for such pricing techniques will
also likely be part of the Commission’s load management standards when they are
adopted.
The effectiveness of the commercial/industrial building energy management
programs can be enhanced by pricing and regulatory strategies. The Commis
sion is exploring the possibilities of incremental cost pricing for commercial and
industrial users, which would set these customers* rates at the marginal cost of
new electrical or gas supply. “ Inverted rate” pricing, charging higher unit prices
for greater usage, is also being considered. These pricing changes could encourage
technological change toward increased equipment efficiency and serve to increase
the response to other conservation programs.
Other standards established for the commercial/industrial sector will yield sub
stantial energy savings. Effective January 1, 1978, building standards for nonresidential construction provide alternative ways of improving energy efficency
in new buildings. The expected annual savings from these standards is 154
million therms and 7,700 million kWh by 1985. The Commission is providing
training to local building code officials to assist them in the implementation of
these standards. A computer program has been prepared to assist in designing
buildings that will meet the standards, and evaluate building plans to enforce
the standards.
Motor efficiency standards are currently being studied by the Commission.
Such standards would reduce energy consumption by increasing the average
efficiency of medium sized (half-horse-power and larger) electric motors; if
implemented in 1978 and requiring a minimum motor efficiency of 80 percent, the
standards could save 416 million kWh annually by 1985. Retrofitting three-fourths
of the existing motors with potential for efficiency improvement would save an
additional 300 million kWh by 1985, but this could not be accomplished through
appliance standards.
Industrial boilers use about 800 billion Btu’s annually, a predominant use of
energy by the industrial sector, but are operated at low efficiency. However, the
operating efficiency of industrial boilers can be improved to reduce their oil and
gas consumption. The Commission, with the cooperation of the Department of
Industrial Relations* Division of Industrial Safety, is initiatins: a boiler efficiency
measurement and improvement program to improve boiler efficiencies. This pro
gram will inspect about 14,000 of the largest boilers in the state and recommend
actions necessary to improve combustion efficiency. Recommendations for alter
native fuels, and for implementation of co-generation programs will also be made.
Savings of 32 x 1012Btu/yr are expected by 1980. This would be roughly the equi
valent of 160 million therms of gas and 276,000 barrels of oil.

103
Residential sector
In 1975, the residential sector required 4.7 billion kWh of electricity and
4.4 billion therms of natural gas for heating and 4 billion kWh of electricity for
cooling. The residential sector end-uses of energy are comparatively wellunderstood and, as a consequence, programs for reducing electricity consumption
are further advanced than in other sectors. The Commission has standards in
effect for improved residential building construction and increased appliance
efficiencies. Governmental and utility-sponsored conservation programs are in
progress and are reducing energy waste in the three key end-uses within the resi
dential sector: space heating and cooling, water heating, and appliances. Other
programs, including load management standards, are well along in the planning
stai>e and will be implemented in 1978 and 1979. By 1985, electrical consumption
and peak demand could be reduced by 4.3 to 4.7 billion kWh and 3010 to 3040
MW. respectively. Natural gas consumption could be reduced by 1.77 to 2.17
billion therms by 1985.
The energy requirements for space conditioning can be reduced by a variety
of methods. A building gains or loses heat as it interacts with the surrounding
environment. Glass areas with no shading facing south or west will greatly in
crease energy requirements for space cooling in the summer. Proper orientation,
shading and operation of houses can reduce summer cooling loads. Gaps around
doors and windows are a major source of heat loss in the winter. By making a
house a better retainer of heat, the energy requirements for heating can be
lowered.
Ceiling insulation retrofit of 90 percent of existing uninsulated or underinsulated residential units by 1985 would annually save at least 200 million kWh of
electricity and 670 million therms of natural gas for space heating. At current
residential rates, this is equivalent to an annual savings of 143 million dollars
to consumers just in terms of reduced energy bills. The total program cost in
3978 dollars would be $1.1 billion dollars. The savings of natural gas alone from
this retrofit insulation program would be sufficient to heat an additional 1.3
million single-family homes built to current standards. These electrical reduc
tions in space conditioning can be enhanced by retrofitting wall insulation and
weatherstripping. Preliminary estimates indicate that wall insulation can provide
as much reduction in consumption in uninsulated homes as ceiling insulation.
Staff is planning a study on the interactions between these space conditioning
treatments to avoid double-counting savings from a wall-insulation and a
weatherstripping program.
The Commission staff is also exploring related ways to decrease wasteful
consumption of natural gas for space heating. One means is to replace pilot
lights on gas furnaces with electrical intermittent ignition devices which, by
not burning continuously, can save a large amount of gas. Resizing burners
or tlie addition of automatic flue dampers to reduce heat loss are other
possibilities.
A cooling load reduction program to reduce summer cooling requirements
through the use of window treatments, attic fans, and landscaping could save 97
to 193 million kWh’s by reaching 20 percent of the air-conditioned building stock
in the five major service areas. Night thermostat setback devices installed in
a potential seventy-five percent of households which now do not set back their
thermostats during the heating season will reduce space heating consumption by
an additional 72 to 120 million kWh’s by 1985.
Following space heating and cooling, gas and electric water heaters are the
second largest energy users in the home. They consumed 2.9 billion kWh and
1.7 billion therms of gas in 1975. Saving energy used for water heating can be
accomplished both by improving the efficiency of the water heater and by re
ducing unneeded consumption of hot water (with related benefits in terms of
water conservation and energy savings from reduced pumping and treatment
requirements). Water heater retrofit insulation involves wrapping an inexpen
sive fiberglass blanket around a water heater. Together with a 10° temperature
setback this can reduce the “standby loss” (loss to the air) of each electric water
heater by 365-520 kWh per year and by 20-30 therms per year for each gas
lieater. Wasteful consumption of hot water can be reduced by installing flow
reducers such as low-flow showerheads or showerline flow restrictors. Water
heater insulation alone or as a kit can be purchased from between $9 and $20,
and flow control devices range in price from $.50 to $10. Vigorous implementation
of these retrofit measures statewide could save between 220 and 350 million

104
therms of natural gas per year and between 410 and 710 million kWh of elec
tricity per year.
Measures to reduce requirements for space conditioning and water heating
lend themselves to marketing as a “package’’ by utilities, retailers and con
tractors. Both the Energy Commission and the Public Utilities Commission are
using their regulatory authority to ensure the aggressive implementation of
residential outreach programs by the utilities. These programs include such fea
tures as on-site energy inspections, consumer information, direct marketing and
sale of conservation hardware, and financial incentives. This effort will be com
plemented by requirements of the National Energy Act that utilities inform their
customers of suggested conservation measures, projected savings in energy costs,
and the availability of loans to help pay for installations. Under the proposed
new Federal legislation, utilities must offer to inspect all residential buildings of
four units or less, to arrange to have conservation measures installed and for
loans made available, send to the customers lists of lenders, suppliers and con
tractors, and offer repayment arrangements through the monthly utility bills.
Even if this Federal legislation passes, there will still exist problems of market
penetration for retrofit techniques. A marketing study sponsored by the Com
mission found that only 50 percent of the homeowners (not including renters)
who did not have insulation and who could install it expressed an interest in doing
so; reaching an additional 40 percent (the other half of the market) will be
difficult. As noted earlier, rental housing represents another area where the
normal operation of the market discourages insulation because landlords have
no incentive to insulate since they do not pay the utility bills, and tenants are
unlikely to make such an investment in a building they do not own. Similar
market penetration constraints exist for water heater insulation and flow con
trol devices. Legislation requiring ceiling and water heater insulation as well as
flow control devices upon changes of ownership or as a condition of utility services
would provide an effective means of penetrating the market. The program sav
ings shown in Table IV (and above) assume that the utilities pay an incentive
for retrofit ceiling insulation and the total costs for heater retrofit, but do not
reflect the additional impact of a mandatory program.
The energy needed for space conditioning and water heating in new homes
is being further reduced by the implementation of residential building standards
(Title 25). These mandatory standards will reduce annual energy consumption
by 360 million kWh of electricity and 340 milion therms of natural gas by 1985.
The standards are complemented by programs which the Commission is urging
the utilities and others to implement, such as the new home design program.
Whereas the minimum efficiency standards will eliminate the least efficient home
design and construction practices, the new home design program aims to en
courage the best practices. Within each service area, the design program, aimed
at both builders and buyers, is to be modelled partly on the former “Gold Medal
lion’’ and “Balanced Power” promotional campaigns, but will emphasize energy
efficiency rather than promoting the sale of electricity or natural gas. This pro
motional program will emphasize the “passive” use of solar energy, that is,
methods of utilizing the building structure itself to absorb and retain the sun’s
energy when it is needed for space heating, and to reject solar thermal gains
in order to minimize the building’s cooling load in the summer. Studies have
suggested energy savings of 25-75% in space conditioning is possible for homes
utilizing passive solar principles, over and above that achieved by new homes
built to meet the Commission’s minimum statewide efficiency standards.
Similarly, solar-assisted “active” systems have the potential to provide at
least 70-75 percent of each California residence’s water heating requirements,
and at least 50 percent of space conditioning requirements in those units where
it can be feasibly and economically installed. Active solar systems are most effec
tive when used in conjunction with conservation measures which help reduce
both the size and the cost of the systems. Measures like California’s solar tax
credit help overcome market constraints and institutional barriers to the pene
tration of solar systems. The effect of the tax credit will be to accelerate the
residential application of solar equipment and encourage development of eco
nomical systems with wide application for meeting water and space heating
requirements.
Improving the energy efficiencies of new appliances through the establishment
of mandatory appliance efficiency standards is another means used by the Com
mission to reduce excessive energy requirements. Standards are in effect for

105
refrigerators, freezers, and air conditioners. The Commission has also prohibited
standing gas pilot lights on central gas furnaces, household cooking appliances,
and clothes dryers. In December, mandatory efficiency standards were extended
by the Commision to include space heaters, water heaters, and plumbing fittings.
By 1985, these standards will reduce annual electrical consumption by 2.2 billion
kWh and annual gas consumption of 310 million kWh. At current energy prices,
this amounts to an annual saving of $161 million. The Commission plans to en
hance the standards with appliance efficiency labeling/information/marketing
programs to encourage consumers to purchase the most efficient appliances
among those that meet the standards.
Some of the load management principles discussed in connection with the com
mercial sector apply also to the residential sector. Swimming pool filtration sys
tems can be run during off-peak hours. For a utility like SDG&E, implementing a
pool timer adjustment program could cost the utility about $800,000, save 335
milion kWh of total energy and 60 MW of peak energy, and save the utility $2.9
million each year in operating costs.13 Statewide, this program could reduce peak
demand in 1985 by 400 MW during the summer, and annually save 875 million
kWh of electricity.
Other residential load management measures include cycling devices applied
to air conditioners and water heaters. These mechanical cyclers turn the equip
ment off and on during peak hours, often with little or no effect on comfort.
If sixty percent of the 2.4 million centrally air-conditioned homes in California
by 1985 were equipped with cyclers, peak energy demand would be reduced by
1,440 MW or more than the capacity of a large power plant. An aggressive pro
gram of installing cyclers on new and existing water heaters could reduce their
contribution to 1985 electrical summer peak demand by 150 MW. Informing
consumers about the importance of load management and how they can shift
some of their flexible energy-consuming activities to off-peak hours is being
accomplished through Commission and utility-sponsored marketing campaigns.
Additionally, rate incentives to encourage load management are being analyzed
for possible applications to the residential sector.
Utility systems
The process of generating electricity provides an opportunity in and of itself
for saving energy through improved efficiencies in power plant design and
operation and in transmission and distribution systems.
Co-generation refers to a combination of physical systems and institutional
arrangements involving industrial plants, commercial firms and utility com
panies to utilize energy in a more efficient manner. By matching up the indus
trial and commercial needs for process heat or space conditioning with the
heat exhausted from a fossil fuel-fired plant, co-generation makes more efficient
use of thermal energy than can be achieved by doing the two things separately.
Alternately waste heat from a given industrial operation may have qualities
which are suitable for generating electricity, thus making use of an otherwise
unproductive resource. Estimates have placed the statewide co-generation poten
tial in excess of 4,000 MW by 1985. Co-generation does not repreesnt a “savings”
in electricity end-use demand, but a means of using fuel more efficiently.
While a few cogenerators are operating in California, and the technologies
are well established, there are several problem areas that have tended to inhibit
implementation of much of the cogeneration potential. Utilities are concerned
that the cogeneration supply be as dependable as central station generators,
and not in any way degrade the quality of existing service. Industries are con
cerned that they may become regulated utilities, that they may not receive
a fair price for their electric output, or that they may not be able to “wheel”
power (transmit it over a utility’s power lines) to the highest bidder. For
industry-owned cogenerators there may be a financial constraint arising from
the fact that manufacturing industries normally require a greater rate of re
turn on investment than do electric utilities. Because of the desirability of co
generation in meeting the needs of the state for conservation of fuel resources and
air quality,16 there is a need to develop public policies to overcome these prob
15 This and other utility conservation program estimates are available in the Appendices
of the written testimony of Jeffrey P. Harris, Sundesert/76-NOI-2, CERCDC, July 11,
1977.
16 Phil Nesewich, “Briefing Paper: California Co-Generating Issues/’ CERCDC, January,
1978. Analyses of the air quality impacts of co-generation must be done on a case-by-case
basis.

31-502 O «» 78

106
lems. It is the Commission's intent to work with industries, utilities, the PUC
and the Air Resources Board to plan specific co-generation projects and to use
its regulatory authority to assure full utility support for cogeneration where
cost-effective.17
Voltage regulation refers to a reduction in a utility system’s maximum allowed
feeder voltages by a predetermined amount. Actual voltage to the customer would
still be maintained at the design level, but not above it, as is presently often the
case. Tests conducted by PG&E indicate that, for the commercial/industrial
sector, it is reasonable to expect as much as a one percent energy savings for a one
percent reduction in voltage. In cooperation with California utilities, the Califor
nia Public Utilities Commission is currently conducting experiments to determine
the effect of a 5 percent voltage reduction in selected substation service areas. If
the tests are successful, the PUC will direct the utilities under its jurisdiction
to implement voltage regulation programs throughout their service areas. Since
municipal utilities are outside the authority of the PUC, legislation may be
needed to require them to undertake voltage reduction programs. Statewide,
voltage reductions averaging 3 to 5 percent on the relevant circuits could effect
savings of 3.6 to 6.1 billion kWh and 680 to 1,800 MW, a very significant level
of savings.
The State Water Project (SWP), owned and operated by the California De
partment of Water Resources (DWR) is both a major user and producer of
electric power. As such, the SWP has the potential to help in reducing the annual
peak electricity demand, and therefore the amount of generating capacity needed
by utilities to satisfy demand. The reduction can be achieved through system
load management by shutting down SWP pumping for a short time on the few
days of the year when utility peak loads occur. Electricity normally consumed by
the SWP could be fed into the utility grid for a few peak hours, thereby reducing
the need for additional and expensive peak generating capacity. An equivalent
amount of energy could be returned from other utilities to the SWP at off-peak
times. According to one very preliminary estimate, a net savings in excess of
1,000 MW of generating capacity is possible by 1985. The SWP could even begin
scheduled generation and pumping activities to complement utility supply sched
uling, thus permitting utilities to maximize the use of more efficient units, re
sulting in lower average energy costs.
Transportation

Approximately 45 percent of total California energy use is in transportation,
with automobiles consuming about two-thirds of the petroleum used in the state.
California’s increasing dependence on petroleum not only for transportation but
for industrial and utility use, combined with the rising cost of oil and gasoline,
and the growing problem of air and water quality maintenance resulting from
increased oil consumption dictate the need for developing and implementing
strategies for improving transportation efficiency and saving energy.
In this regard, the Commission is cooperating with the State Department of
Transportation and other state, regional, and local agencies concerned with land
use and transportation to develop and implement a number of strategies for
saving transportation energy by increasing vehicle efficiency, raising average
vehicle occupancy levels, and reducing unnecessary vehicle miles traveled.
Current estimates of two programs now underway—transportation system
management (TSM) and ridesharing—indicate transportation energy savings on
the order of 5 percent in urban areas for the TSM concept and 2 percent in urban
areas using ridesharing. Transportation energy savings may approach 25 percent
in central business districts where TSM is applied.
Specific activities in the TSM program include: traffic operations improvements
to manage and control the flow of traffic; providing incentives for using transit
and higher occupancy vehicles, bicycles, and foot travel; controlling parking
facilities to encourage carpooling; and changing work schedules, fare structures,
auto tolls or auto-restricted zones to reduce peak period travel and to encourage
off-peak use of transportation facilities and transit services. In the long run, the
fixed world supply of petroleum suggests the need for conservation strategies that
go beyond simple efficiency improvements in existing transportation systems. The
Energy Commission is meeting this need by providing land-use planning assist
ance and funding to localities for the purpose of actively integrating conservation
into the land-use and transportation planning process.
WCERCDC, op. Cit., Vol. 3, p. 100.

107
A ttachm ent B

Essential Features of California's Solar Energy Taw Credit Guidelines
ELIGIBILITY

Passage of AB 1558 (Hart, 1977) permits California taxpayers to claim as an
income tax credit up to 55 percent of the cost o f purchasing and installing solar
energy systems, under the following conditions:
1. A solar energy system is any system that operate for the purpose of collect
ing, distributing, and/or storing heat, cold, or electricity which derives its
primary energy from the sun. Eligible systems include solar water heaters, solar
space conditioning systems, solar-assisted heat pumps, and certain energy conser
vation measures in conjunction with the solar installations.
2. The taxpayer must own and control the premises at the time the system is
installed. In the case of new home construction, this means that the homebuilder
must take the tax credit. However, the time of final “installation” could probably
be delayed so that the credit could be “passed through” to the home buyer.
3. The system must be installed between January 1, 1977 and December 31,
1980. Solar energy systems must receive required building permits.
4. The tax credit must be claimed the year in which the system is installed,
and the credit may be carried forward until used tip. The tax credit reduces tax
liability directly; it is not a deduction.
AMOUNT

Limits of the California solar energy tax credit are as follows:
1. For systems whose purchase-plus-installation costs are $6,000 or less, the
amount of the available credit is 55 percent or $3,000, whichever is less.
2. For systems whose purchase-plus-installation costs exceed $6,000 and/or are
installed on other than single-family dwellings, the amount of the credit is 25
percent of the total costs or $3,000, whichever is greater.
3. The Franchise Tax Board is in the process of deciding whether apartment
and condominium owners whose total purchase-plus-installation costs exceed
$6,000 may claim a 55 percent tax credit for each unit if each unit has its own
separate solar energy system.
4. In each case where a part of the solar energy system also serves another
main function, 50 percent of the costs for that component is eligible for the credit,
except as otherwise defined in the Energy Commission’s solar energy tax credit
guidelines.
5. Any federal solar income tax credit will deduct an equivalent amount from
the available California credit. That is, the combined effective federal and state
credits cannot exceed that allowed by the state (through AB 1558). The federal
credit would be used first.
ALLOWABLE SYSTEMS

Eligible solar energy systems include indirect thermal (active) systems and
direct thermal (passive) systems, providing that each system meet existing build
ing codes and carry the minimum warranties as defined below. Passive system
features include, among others: solar glazing and shading, solariums, thermal
ponds, thermal mass construction. Eligible passive features are described in detail
in the Energy Commission’s tax credit guidelines.
After April 1, 1978, these warranty requirements will also apply in claiming
the solar tax credit:
1. Solar Equipment Manufacturers. —The solar collector, storage unit, and heat
exchanger must be guaranteed to be free from defects in materials or workman
ship for at least three years.
2. Installers.—The solar system, any component, or assembly must be guaran
teed against defects in workmanship, materials, or installation for at least one
year after date of installation completion.
CONSERVATION MEASURES

Certain energy conservation measures must be installed in conjunction with
the solar energy systems in order for the systems to qualify for the tax credit:

108
1. Space Conditioning Systems require certain extra insulation and weatherstripping measures.
2. Domestic Water Heating requires insulation o f storage tank and low-flow
devices on hot-water outlets.
FURTHER INFORMATION

The Energy Commission solar tax credit guidelines also specify:
1. Other eligible conservation measures.
2. Eligible solar applications for hot tubs and swimming pools.
3. Requirements for other eligible solar applications.
More comprehensive eligibility requirements will be considered by the Energy
Commission by April 1, 1978. Those requirements are expected to include solar
equipment certification and required installation and system integration prac
tices. Copies o f the guidelines and criteria for the solar tax credit may be ob
tained by contacting the Energy Resources Conservation and Development Com
mission, Publications Office, 1111 Howe Avenue, Sacramento, California 95825.
Form 3805L for claiming the credit may be obtained from the Franchise Tax
Board, Sacramento, California 95867.
B erk eley S olar G roup

Berkeley, Calif., November 15,1977.
The attached material is miscellaneous information about the current state o f
solar water heating in California. The following are included:
1. Life-Cycle Cost Analysis. A 10-year analysis showing the cash flow, tax, and
discounted present value consequences o f installing a solar hot water heater.
2. Price Estimates. Data from several solar manufacturers and installers on
their current prices.
Please address any questions about this information to Bruce Wilcox.
L ife -C ycle Co st A n a l y s is

The attached table shows a 10-year cash flow calculated for a typical home
buyer who purchases a new home with a solar water heater. The following as
sumptions apply:
1. System costs $1750 installed.
2. System produces 80 percent o f the energy required to heat 80 gallons o f
water from 65 to 120°F every day. This equals 133 x 105 BTU /yr o f 3857 KWH
of electricity or 222 therms o f natural gas at 60 percent efficiency.
3. The fuel savings assume gas at $.255/therm which is the San Diego Gas and
Electric rate and that price rises at 12 percent per year. Electricity is assumed to
cost $.048/KWH which is Pacific Gas and Electric Company’s rate for non-lifeline
users. It is assumed to rise at 10 percent per year.
4. The homebuyer is assumed to have a 30 year mortgage at 9 percent with
20 percent down payment which includes the cost o f the solar system.
5. Property taxes are assumed to not apply for 4 years due to legislation now
proposed.
6. Maintenance cost after the first year is assumed to be 2 percent o f system
cost inflating at 5 percent per year.
7. The 55 percent tax credit is assumed to be 25 percent state, 30 percent fed
eral, and to benefit the home buyer at the end o f the first year.
8. The home buyer is assumed to pay 30 percent federal and 4 percent state
marginal income tax rates with interest expenses deductible. The state income
tax credit raises federal tax in the first year.
9. The present value (P V ) o f the cash flow is shown discounted at 9 percent.
10. The residual value of the system at the end o f the 10 year loan period is
equal to the remaining principal on the loan.

LIFE-CYCLE COST OF SO U R WATER HEATING

Principal
Year:
.......
0
1
2.........................
3......................... ........
4.........................
5......................... ........
6......................... ........
7.........................
8.........................
9.........................
10........................ ........

...............
...............

Interest

350 ...
10
10
11
13
14
15
16
18
20
21

126
125
124
123
121
120
119
117
116
114

Total.................
Note: See accompanying material for assumptions.

Property
tax

Total

State

0
37
39
41
43
45
47
49
52
54

0
0
0
0
43
45
47
49
52
54

350
135
172
174
176
220
225
229
234
239
244

438
0
0
0
0
0
0
0
0
0

Interest
Federal deduction

525
0
0
0
0
0
0
0
0
0

(89)
37
42
42
41
41
40
40
39
39

Electric

Gas

Tax benefits

Cost
Maintenance

Total

Savings

874
37
42
42
41
41
40
40
39
39

57
63
71
79
89
100
112
125
140
157

Cash

(350)
795
<71)
(61)
(54)
(90)
(84)
<77)
(69)
(59)
(48)
(168)

Savings

(350)...
729
(60)
(47)
<39)
(58)
(50)
(42)
(34)
(27)
(20)
2

185
204
224
246
271
298
328
361
397
437

Cash

(350)
924
69
92
112
92
114
139
167
198
232

(350)
847
58
71
80
60
69
77
84
91
97

1,789

1,184

110

P b ic e E st im a t e s

The following table presents information from a sample o f the many manu
facturers and installers o f solar hot water heating equipment in California. We
know o f at least fifty such manufacturers and there are probably many more
which we have not yet discovered. The attempt here was to get an idea o f what
typical hot water heating systems will be costing to builders, and how many such
systems can probably be produced by the solar industry, in the coming year.
The estimates contained in the table represent the installed cost o f a typical
system on new construction. Estimates are given for single installations and for
installations on 25 identical units, as in a single family tract development. We
asked for prices on a typical system to provide 80 percent solar hot water for a
family o f four, in new construction on an ordinary tract-type house. Estimates
of the size o f such a system varied from a 52-gallon tank with 32 square feet o f
collectors, to a 120-gallon tank with 74 square feet o f collectors. The most typical
systems, however, are in the range o f 80 gallons o f storage with 60 square feet of
collector, costing $1,1750 installed. For the same system, installed in 25 identical
new homes, ^he cost per system drops by around 10 percent.
It is important to note that all these estimates are very rough and the installed
price o f a hot water heating system depends on many important variables.
The production projections in the table are intended to provide some informa
tion about the industry capacity in the coming year. We have chosen not to draw
any conclusions from these projections since too many variables remain unknown.

1977
STATE OF CALIFORNIA

1----------------------------------

SOLAR
ENERGY
CREDIT

112
1977 Solar Energy C redit

SECTION I.

Page

GENERAL REQUIREMENTS

The solar energy credit may be claimed by individuals, corporations, and partnerships, but not by
estates or trusts.
A solar energy system means equipment which uses solar energy to heat or cool or produce electricity
and has a useful life of a least three years.
To qualify for the credit, a solar energy system must be installed on premises in California that are
owned and controlled by the taxpayer at the time of installation. It must be installed between Janu
ary 1, 1977, and December 31, 1980, and meet the eligibility requirements as determined by the
Energy Resources Conservation and Development Commission, 1111 Howe Avenue, Sacramento, CA
95825, telephone (800) 852-7516.
Energy conservation measures, as defined by the Energy Resources Conservation and Development
Commission, shall be eligible for the credit when applied in conjunction with a solar energy system.
Conservation measures relating to a solar water heating system shall include, but not be limited to,
water heater insulation and shower and faucet flow-reducing devices. Conservation measures relating
to solar space heating systems shall include, but not be limited to, ceiling, wall, and floor insulation
above that required at the time o f original construction.
The credit is computed on a per system basis. For instance, a taxpayer may receive maximum credit
for a system on a single-family dwelling and also another credit for a system on a swimming pool
located at that dwelling.
Condominium owners who install system(s) on premises owned cooperatively by them shall receive
the credit in proportion to the number o f households served by the system.
The basic credit is 55 percent of the cost (including installation charges but excluding interest
charges) incurred by the taxpayer up to a maximum of-$3,000. This is the maximum credit for a system
installed on single-family premises. If, however, a system is installed on other than single-family
dwelling premises at a cost exceeding $6,000, the credit shall be the greater o f $3,000 or 25 percent
of the cost (including installation charges but excluding interest charges).
The credit can only be claimed in the taxable year in which the system is fully installed. Payments
made in a prior taxable year may be included as part of the system cost eligible for the credit.
The credit for the cost o f these systems shall be in lieu o f any other deduction. The basis o f any
system for which a credit is allowed shall immediately be reduced by the amount of the credit or re
duced to its salvage value at the end of its useful life, whichever results in the lesser basis.
If a federal income tax credit is enacted for costs o f solar energy systems, then the maximum amount
allowable for state purposes shall be reduced by the amount of the allowed federal credit.
To claim the credit, form FTB 3805L must be completed and attached to your California tax return
for the income or taxable year o f the installation. If more than one system is installed, a separate
form must be prepared for each system.

113
1977 Solar Energy Credit

Page

SECTION II

ELIGIBILITY LISTS

The Energy Resources Conservation and Development Commission is developing eligibility lists
but they are not available at press time. Please contact the Commission at 1111 Howe Avenue, Sacramento,
CA 95825, telephone (800)852-7516 for technical system information or other requirements in the guidelines.

114
STATEMENT TO SUPPORT SOLAR ENERGY CREDIT
•tats of California

TAXABLE YÉAR

FO R USE BY IN D IV ID U A LS AN D C O R PO RATIO N S

FR A N C H ISE TAX BOARD

Attach this schedule to your Tax return

Year beainnina

endino

INSTALLATION DATE

NAME OF TAXPAYER
Corporate No., Social Security No., Employer No. or
Federal Employees Identification Number (FEIN) :
ADDRESS OF PROPERTY ON WHICH A SYSTEM WAS INSTALLED

DESCRIPTION AND FUNCTION OF SOLAR ENERGY SYSTEM AND CONSERVATION MEASURES (attach detailed statement if necessary)

PURCHASED FROM

INSTALLED BY

Forms should be completed for each system when more than one system is installed.
This system was installed on:
P ] Single Family Dwelling
I I Other Than Single Family Dwelling
1.
2.
3.
4.

6.
7.
8.

Cost of solar energy system including installation cost
Cost of eligible conservation measures
Total cost (add line 1 and 2) ,
Computation -- Complete (a) or (b)
(a) Enter 55% of line 3 but not in excess of $3,000, o r .................... ..
...................
(b) If the system is installed in “ Other Than a Single Family Dwelling” and line 3 exceeds
$6,000, enter greater amount of $3,000 or 25% of line 3 .
Part-year residents and nonresidents -- Complete (a) and (b)
(a) Enter percent from line 16(b) Form 540NR .
...... .........
(b) Multiply amount on line 4(a) or (b) times percent on line 5(a) and enter amount
Enter federal solar energy credit allowed (part-year residents and nonresidents reduce the federal
credit to the percent shown on line 16(b) Form 540NR . ...
------------- X -------------- %)
Tentative solar energy credit (line 4(a) or (b) less line 6) (Part-year residents and nonresidents
line 5(b) less line 6) . . . . . . . . .
Solar Energy System Credit • Compute in accordance with specific instruction, then:
(a) IN D IV ID U A LS (other than condominium owner or partner) -- Transfer the amount from line 7 to
Form 540 or 540NR, page 2, line 62
(b) CO R PO RATIO N (other than (c) below) - Transfer the amount to Form 100, page 1,
line 47(a)
(c) TWO OR MORE C O R PO RATIO N S commonly owned or controlled enter:
(1) Ratio
Total cost (line 3)
Total cost of all systems installed in California by this group of
corporations (attach sch edule)........................................................
(2) Multiply ratio times tenative solar energy credit (line 7), enter amount here and transfer
amount to Form 100, page 1, line 47(a) . .
............................................................
(d) CONDOMINIUM and P A R T N ER SH IP -- Determine amount on line 7 applicable to each owner or
partner and show the allocation below. Enter this amount on Form 540 or 540NR, page 2, line 62 or
Form 100, page 1, line 47(a).
Name
Social Security No.
Amount

FTB 3805L (12-77)

______

FOR PRIVACY NOTIFICATION
SEE REVERSE SIDE

115
PRIVACY NOTIFICATION
The Information Practices Act of 1977 (effective July 1, 1978), the
Governor's Executive Order B-22-76 and the Federal Privacy Act, require
the department to provide the following information to individuals who
are asked to (apply information!
The principal purpose for requesting tax return information it to ad*
minister the Personal Income Tax Laws of the State of California. This
include« the determination and collection of the correct amount of tax.
The California Revenue and Taxation Coda requires every individual
liable for any tax imposed fay the Code to file a return or statement
according to the form» and regulations prescribed by the Franchise Tax
Board (Sections 18401 and 18431 and the regulations pertaining thereto),
individuals filing tax returns, statements or other documents are required
to include their Social Security numbers to provide proper identification
and to permit processing of the returns (Section 18431 and the regulations
pertaining thereto).
Furnishing all the appropriate information requested by the return forms
and related data is mandatory. The Code provides penalties for failure to
file a return, failure to supply Information required by law or regulations,
failure to furnish specific information required on return forms or for
furnishing fraudulent information. Other effects of not providing all or
part of the requested Information may include the disallowance of claimed
exemptions, exclusion«, credit«, deduction«, or adiustments resulting in
increased tax liability, las« or delay in issuance of a refund far overpay«
mont, interest and penalty charges an unpaid taxes and ether disodvan

Information furnished on the return form may be transferred to other
governmental agencies as authorised by laws U.S. Internal Revenue Service,
Board of Equalisation, Office of the State Controller, Department of Benefit
Payments (will become Employment Development Department and Depart
ment of Social Services 7/1/78), local tax administrators of this State and
administrators of taxes measured by income of other states, Multistate Tax
Commission, Attorney General, Registry of Charitable Trust«, California
Parent Locator Service, Legislative Committees, Board of Control, Depart
ment of Finance, Auditor General and legislative Analyst.
For those individuals with outstanding tax liabilities, the total amount
due may be disclosed to: employers, financial institutions, County Records,
vacation trust funds and process agents for the purpose of collecting the
amount owed.
This wiH be the principal notification under the information Practices
Act and the Executive Order concerning the solicitation of information in
connection with «my tax return or tax liability of an individual. Additional
notices will be given with respect to specific information requests during
the course of tax administration activities, such as audit and investigation.
Individuals have the right to review their own records maintained' by
the Franchise Tax Board. The Operations Division of the Franchise Tax
Board is the agency requesting the information. The official responsible for
maintaining the information 1st Director, Taxpayer Services, Franchise Tax*
Board, Sacramsnto, California 95967, Telephone No. (916) 3334970.

116
STATEMENT TO SUPPORT SOLAR ENERGY CREDIT

TAXABLE YEAR

FO R USE BY IN D IV ID U A LS AN D CO R PO RA TIO N S

19 __

Attach this schedule to your Tax return

Year beainnina

endina

FOR PRIVACY NOTIFICATION
SEE REVERSE SIDE
INSTALLATION DATE

NAME OF TAXPAYER
Corporate No., Social Security No., Employer No. or
Federal Employees Identification Number (FEIN ) :
ADDRESS OF PROPERTY ON WHICH A SYSTEM WAS INSTALLED

DESCRIPTION AND FUNCTION OF SOLAR ENERGY SYSTEM AND CONSERVATION MEASURES (attach detailed statement it necessary)

PURCHASED FROM

INSTALLED BY

Forms should be completed fo r each system when more than one system is installed.
This system was installed on:
Single Family Dwelling
Q Other Than Single Family Dwelling
1.
2.
3.
4.

6.
7.
8.

Cost of solar energy system including installation cost
Cost of eligible conservation measures ,
Total cost (add line 1 and 2) , . . .
Computation — Complete (a) or (b)
(a) Enter 55% of line 3 but not in excess of $3,000, or ..
...............
(b) If the system is installed in ‘'Other Than a Single Family Dwelling” and line 3 exceeds
$6,000, enter greater amount of $3,000 or 25% of line 3 .
Part-year residents and nonresidents -- Complete (a) and (b)
(a) Enter percent from line 16(b) Form 540NR .
..........................................
...............
(b) Multiply amount on line 4(a) or (b) times percent on line 5(a) and enter amount
Enter federal solar energy credit allowed (part-year residents and nonresidents reduce the federal
credit to the percent shown on line 16(b) Form 540NR .
-------------- X --------------- %)
Tentative solar energy credit (line 4(a) or (b) less line 6) (Part-year residents and nonresidents
line 5(b) less line 6) ..
Solar Energy System Credit - Compute in accordance with specific instruction, then:
(a) IN D IV ID U A LS (other than condominium owner or partner) - Transfer the amount from line 7 to
Form 540 or 540NR, page 2, line 62
(b) CO R PO RATIO N (other than (c) below) - Transfer the amount to Form 100, page 1,
line 47(a)
(c) TWO OR MORE C O R PO RATIO N S commonly owned or controlled enter:
(1) Ratio
Total cost (line 3)
Total cost of all systems installed in California by this group of
corporations (attach schedule) ...........................................................................
(2) Multiply ratio times tenative solar energy credit (line 7), enter amount here and transfer
amount to Form 100, page 1, line 4 7 (a )..........................................................................................
(d) CONDOMINIUM and P A R T N ER SH IP - Determine amount on line 7 applicable to each owner or
partner and show the allocation below. Enter this amount on Form 540 or 540NR, page 2, line 62 or
Form 100, page 1, line 47(a).
A
B
C
Name
Social Security No.
Amount

FTB 3805L (12-77)

117
MUVACY NOTIFICATION
The Information Practices Act of 1977 (effective July 1, .1978), the
Governor'» Executive Order B-22-76 and tho Federal Privacy Act, require
tho department to provide tho following information to individuals who
are asked to supply information:
Tho principal purpose for requesting tax return information is to ad
minister tho Personal Income Tax Laws of the State of California. This
indudes the determination and collection of tho correct amount of tax.
Tho California Revenue and Taxation Codo requires every individual
liable for any tax imposed by tho Codo to file a return or statement
according to the forms and regulations prescribed by tho Franchise Tax
Board (Sections 18401 and 18431 and tho regulations pertaining thereto).
Individuals filing tax returns, statements or other documents are required
to include their Social Security numbers to provide proper identification
and to permit processing of the returns (Section 18431 and tho regulations
pertaining thereto).
Furnishing all the appropriate information requested by the return forms
and related data is mandatory. Tho Code provides penalties for failure to
file a return, failure to supply information required by law or regulations,
failure to furnish specific information required on return forms or for
furnishing fraudulent information. Other effects of not providing all or
part of tho requested information may include tho disallowance of claimed
exemptions, exclusions, credits, deductions, or adjustments resulting in
increased tax liability, loss or delay in issuance of a refund for overpay
ment, interest and penalty charges on unpaid taxes and other disadvan
tages to tho taxpayer.

Information furnished on tho return form may bo transferred to other
governmental agencies as authorised by law: U.S. Internal Revenue Service,
Board of Equalisation, Office of the State Controller, Department of Benefit
Payments (will become Employment Development Department and Depart
ment of Social Services 7/1/78), local tax administrators of this State and
administrators of taxes measured by income of other states, Multistate Tax
Commission, Attorney General, Registry of Charitable Trusts, California
Parent locator Service, Legislative Committees, Board of Control, Depart
ment of Finance, Auditor General and Legislative Analyst.
For those individuals with outstanding tax liabilities, the total amount
due may be disclosed to: employers, financial institutions. County Records,
vocation trust funds and process agents for the purpose of collecting tho
amount owed.
This will be the principal notification under the Information Practices
Act and the Executive Order concerning the solicitation of information in
connection with any tax return or tax liability of an Individual. Additional
notices will be given with respect to specific information requests during
the course of tax administration activities, such as audit and Investigation.
Individuals have the right to review their own records maintained' by
the Franchise Tax Board. The Operations Division of the Franchise Tax
Board is tho agency requesting the information. The official responsible for
maintaining the information is: Director, Taxpayer Services, Franchise Tax*
Board, Sacramento, California 95867, Telephone No. (916) 355-0370.

118
1977 Solar Energy Credit

SECTION III.

P age

TAX CREDIT FORM INSTRUCTIONS

GENERAL INSTRUCTIONS
To qualify, the type of system installed must meet specified criteria (See Section II .) Copies o f the com
pleted FTB 3805L must be attached to all returns claiming a solar energy credit. A copy of the same form
must also be attached to the returns for partnerships and condominiums that are allocating the credit to other
taxpayers. Complete a separate form for each solar energy system.
SPECIFIC INSTRUCTIONS
Line 1.

Enter cost of solar energy system including installation cost (do not include interest) incurred on
premises in California which are owned and controlled by you at the time of installation.

Line 2.

Enter cost of energy conservation measures applied in conjunction with a solar energy system to re
duce the total cost o f backup energy requirements. Eligible conservation measures installed with
solar space heating shall include, but not be limited to, ceiling, wall, and floor insulation above
that required by law at the time o f original construction. Eligible conservation measures installed
with solar water heating shall include, but not be limited to, water heater insulation jackets, and
shower and faucet flow-reducing devices.

Line 4.

Compute and enter (a) or (b):
(a)

Complete this line if you installed a solar energy system in your residence, residence swim
ming pool or if installed in “ other than a single-family dwelling” and the total cost does not
exceed $6,000.

(b)

Complete this line if you installed a solar energy system in “ other than a single-family dwelling”
such as an office, warehouse, car wash, etc., and the cost exceeded $6,000.

Line 5.

Part-year residents and nonresidents must reduce the amount on line 4(a) or (b) to the same ratio
that California income bears to total income. Enter the amounts as requested in 5(a) and (b).

Line 6.

If a federal solar energy income tax credit is enacted, enter the amount on line 6. The federal credit
(if enacted) shall reduce the State credit so that the combined credit does not exceed the dollar
limitations explained at Item G Section I. Part-year residents and nonresidents must reduce the
federal credit to the same ratio that California income bears to total income.

Line 8.

Complete as follows:
(a)

INDIVIDUALS (other than condominium owners or partners) complete line 8(a) subject to the
general limitation that the maximum allowable tax credit for solar energy systems cannot
exceed the tax (540 or 540NR, line 19) less the sum o f the credit for personal exemption
($25 or $50), the credit for taxes paid to other states (540 or 540NR, line 63), and the credit
for child and dependent care expense (540 or 540NR), line 64). Excess solar tax credit may
be carried over to succeeding years.

(b)

CORPORATIONS complete as instructed subject to the general limitation that the solar
energy credit does not apply against the minimum franchise tax plus the tax on preference
income.

(c)

TWO or MORE CORPORATIONS commonly owned or controlled must prorate the amount of
the credit in the ratio to which the cost of such system bears to the total cost o f such
systems for all commonly owned corporations.

119
1977 Solar Energy Credit

(d)

Page

COMDOMINIUM and PARTNERSHIP — Individuals are allow ed credit for the proportion their
household bears to the total number o f h ou seh old s; for exam ple, if your household is one in
cluded in a total o f 40 household s served by the solar energy system , you should enter 1/4 0
o f line 7.
Partners are allow ed credit for their d istributive share from the partnership.
Condominiums and partnerships must file a separate form F T B 3805L with their returns and
d is c lo s e the distribution to each a ffected taxpayer. Each partner or owner must file a copy
o f the F T B 3805L with their tax return and their total credit is su b ject to the general limita
tions stated at lin es 8 (a ), (b ), (c ).

N O TE :

(1)

The credit for such c o s t shall be in lieu o f any deduction to which the taxpayer otherw ise

(2)

The b a s is o f any system for which a credit is allow ed shall either be reduced to its salvage
value at the end o f its useful life , or reduced by the amount o f the credit, whichever results

(3)

R ecord s must be retained in accord an ce with appropriate statutes to substantiate the credit,
credit carryover, and b a s is .

may be entitled, if any.

in the le s s e r b a s is .

LOCATION OF FRANCHISE TAX BOARD OFFICES

Bakersfield
El Mont*.
Fresno.....
Long Beach
Lot Angelet .
Oakland..
Sacramento
San Bernardino
San Diego...
San Francisco
San Jot*..
Santa Ana
Santa Barbara .
Santa Rota..
Stockton....
Van Nuys ..

Address
... 1300 Seventeenth Street...
. 9660 Hair Drive....
...2550 Mariposa Street...
.. 3530 Atlantic Avenue.....
---- 3200 Wilthire Boulevard
..— 1916 Broadway.
---- 1912 1 ¿treat
-.330 North O Street .
...1350 Front Street ...
-. 345 Larkin Street
.1570 The Alameda
-.28 Civic Center Plaza ..
.41 Hitchcock Way
...447 College Avenue..
.. ...31 E. Channel Street______
------ 8155 Van Nuyt Boulevard.-.

Zip
Code
_93301
91731
..93721
...90807
...90010
...94612
.95814
..92401
-92101
„94102
...95126
92701
.93105
..„95402
...95202
-91402

Sacramento Metropolitan Area *

.. Information .

Arm Codes 20», 408, 415, 707, and 916
(except Sacramento)
Area Codes 213, 714, and 805..

.. Information

* Alto from outtide California, but coll« are n<
OUT OF STATE OFFICES:
Chicago, I I ....
New York, NY...

...Information .

(916)
(916)
(800)
(800)
(800)
(800)

355-0370
322-8932
852-7050
852-7700
852-5711
852-7700

120

California’s New Generation of
Energy Efficient StateBuildings
The first three projects under the aegis of the new state archi
tect’s office break some significant new ground. By Allan Temko

Saving is the name o f the political game in
Sacramento, where it is no secret that
Governor Jerry Brown hopes to dethrone
Jimmy Carter in a campaign that may
hinge on energy conservation. The austere
governor (w ho has also been called a
“ phony Spartan” ) clearly believes that the
surest approach to the White House is not
by way o f Middle Eastern oil fields, but
by reversing the wasteful use o f the U.S.
environment. Hence his “ small is beauti
ful” parsimony which, although widely
publicized and apparently popular, at
first consisted mainly of relaxed rural
building codes and scrimping on existing
social programs.
Lately, however, he has been willing
to unbuckle $90 million for adventure
some office construction by the state; and
if he does challenge Carter three years
from now, he will be able to point proudly,
on national T V , to a remarkable group o f
energy efficient public buildings which
Sim Van de Ryn, his equally remarkable
state architect (see June ’76, p. 4 1 ),
should have ready just in time for the
primaries.
Van der Ryn and his staff have actually
designed only one o f the buildings. But he
is responsible for the philosophy underly
ing all three, which rely heavily on passive
technology, and are reckoned by Van der
Ryn to need as little as 25 percent of the
electricity and gas required by conven
tionally airconditioned structures in
Sacramento's hot Central Valley climate.
Yet the new state buildings promise to
be much more than technical feats— or
rather antitechnocratic lessons. They
also happen to be significant works of
social architecture, which compare favor
ably with superior design in the private
sector and are rare in governmental build
ing. In strikingly different ways, for their
concepts are not at all identical, the three
buildings have been designed according
to human needs, going far beyond mere
temperature comfort, including the in
dividual’s need to be more than a
bureaucratic cipher.____________________
M r. Temko, an architectural historian, is
critic for the San Francisco Chronicle. He
is a frequent contributor to the Jo u r n a l .

All of these unexpected developments,
not on a “ small is beautiful” scale, but in
buildings ranging from 200,000 to
350,000 square feet, amount to a vindi
cation o f the unorthodox outlook of Van
der Ryn, whose appointment as state
architect two years ago at the age of 40
had generated mixed feelings among
California architects.
Not only had he avowedly given up on
architecture with a capital A, but he had
ceased even to practice the modest hu
manistic architecture— notably housing
for college students, the elderly and
migrant farmworkers— which had given
him and his partner Sanford Hirshen
national reputations.
At the time o f his appointment, Van
der Ryn was a counterculture ecologist,
far-out Berkeley professor, veteran o f the
battle for People’s Park and founder of
the communal Farallones Institute which
sought to relate physical environment
with “ biological concerns.” He was con
centrating on recycling, frugal plumbing,
bohemian “ wood butcher” construction
and contemplation at Zen centers such as

Tassajara Hot Springs in the uppermost
reaches o f the Carmel Valley where he
met Jerry Brown.
In the political infighting that followed
his appointment, Van der Ryn showed
himself more adroit than anyone expected
and had the advantage o f an acute short
age of office space in Sacramento, the re
sult of a moratorium imposed on state
construction by Brown’s predecessor Ron
ald Reagan, who had adopted the finan
cially and architecturally disastrous policy
of leasing private real estate instead.
Therefore, the legislature gave almost
routine approval to financing for three ur
gently needed buildings, together with
two others that will follow soon, suggest
ing— at a cost o f $90 million for the five
—that “ small is beautiful” is a relative
term after all.
But the buildings were to be anything
but ordinary. Rather nervily, Van der Ryn
decided to do the first building himself,
aided by a few top assistants brought in
specially for the job. He thought he knew
’ best what he hoped to achieve in new
standards for both pleasant working con
ditions and economical energy consump
tion: objectives which he, o f course, per
ceived as totally compatible. The blocksquare site near the capitol suited his
intention to go lowrise, anticipating the
four-story limit of his downtown plan,
and allowed him to wrap a carefully
shaded building around a great skylit
court, which is the key to the whole
concept.
Such courts, invented by the 19th
century, have reappeared in many differ
ent kinds of buildings during the past 15
years, from Kevin Roche’s magnificent
enclosed garden for the Ford Foundation

121
to John Portman’s festive and theatrical
hotel atriums. But all of these spaces im
pose heavy loads on airconditioning sys
tems. Van der Ryn, to the contrary, hoped
to achieve just the reverse by taking ad
vantage of a special condition o f the Sac
ramento climate: the steep and rapid fall
in temperature at night, when ocean
breezes blow up from San Francisco Bay
through the Carquinez Straits to cause a
drop of 30,35 or even 40 degrees after
torrid summer days. Although winter pre
sents no problem in Sacramento, since
heating needs are scant, from June to
September the thermometer often tops

100.
Consequently Van der Ryn and his
gifted young architects and ecologists
adopted a regionalist strategy of cooling
the building at night by opening vents'to
trap the breezes, and drawing those
through the structures during the day by
fans o f a fairly standard high-velocity
airconditioning system. At the same time,
hot daytime air is expelled; and the
H VAC's full refrigerating capacity, in
tended merely as a back-up, will go into
action only under extreme conditions.
In an added touch, the cooling process
will be “ supercharged” by an auxiliary
battery: a 660-ton rock bed sunk in the
landscaped court, which is also hooked
up to the HVAC, and will assume 25
percent of the cooling job.
The variegated facade, large interior
court and energy related elements of
the Van der Ryn-Calthorpe design, to
he cooled by trapping night air and
drawing it through the building during
the day, without conventional aircon
ditioning.

The spacious court, 92 feet square and
nearly 60 feet high at the crests of the
saw-tooth skylight, surrounded by ample
balconies— actually, galleries which re
place corridors that are the bane o f bu
reaucratic buildings— is planned as a
social center and informational focal
point. It will have cafe-like dining and
seating areas, banners hung from the hefty
glu-lams spanning overhead, full-sized
trees and luxuriant plants: quite an order
for a state office building. The court, o f
course, will also act as a reservoir o f cool
night air which the architects hope will
remain pleasant on very hot days, even

though some skeptical engineers doubt it.
Only the finished building— as in all of
these frankly experimental projects— will
prove who is right.
Whatever its energy conserving role,
the success or failure o f the central space
—surely the most generous in a California
public building since the magnificent ro
tunda o f the San Francisco city hall was
built half a century ago— will depend on
its play of light. It cannot hope to equal
the splendor and sensitivity o f Arthur
Brown’s masterpiece, but nevertheless
may be very impressive in its own right.
This is a far cry from wood-butchery—

122
maybe too far for Van der Ryn and his
chief designer Peter Calthorpe, neither of
whom had previously tackled so ambi
tious a concept. In spite of a certain
heavyhandedness that seems locked in the
design, if the court becomes what they
wish, it will be suffused by a dappled lum
inous softness, filtering downward through
the operable shades of the southwardslanting skylights in summer, balanced
by the unshaded northern lights. In win
ter. it will be flooded by sunlight that
should keep the building warm until
after dusk. These designers are not afraid
of natural light. On the contrary, they ob
ject strenuously to excessive artificial light
because of its burdensome heat load, high
cost and glare.
What the Californians do want is to
prevent direct sunlight from penetrating
their buildings in hot weather. Here com
mon sense prevailed, forgotten in the airconditioned age, but long known to Cen
tral Valley residents who from pioneer
times have blocked out the sun with thick
construction (never better than in old
adobes), and also by awnings and other
external sunbreaks such as old farmhouse
verandahs.
Such logic has inspired a vigorously
indented, broken-up exterior, which will
vary on all four elevations according to
solar conditions and be fitted with cheerful-looking movable canvas sunshades—
probably in orange or another bright
color— that can be raised and lowered at
will by the building’s occupants. There
fore, the facades will be constantly chang
ing in mood, but they are crudely drawn,
and complicated by a constructivist
esthetic, calling for bulky, coarsely
jointed concrete sunbreaks and trellises.
Some are cumbersome protrusions of the
structure itself, meant to express the
building’s thermal properties, but which
clamor unnecessarily for attention, and
may end up simply looking a mess.
It can be argued that such fragmenta
tion divides into intelligible human por
tions what otherwise might be the for
bidding mass of the building. The sunresistant devices shade informal terraces
where, because o f the overall disorder, it
will not matter much if individuals “ do
their own thing,” putting out porch furni
ture and art as they often do on the decks
o f California houses.
With 76-foot-wide office spaces,
whose windows face the court, no desk
is farther than 38 feet from natural light.
This should make for a relaxed air, which
will be enhanced by task lighting.
On balance, then, this structure which
began primarily as a demonstration of low
energy design, promises to be a very de
cent building, flawed as a formal work of
architecture, but profoundly humane in
other ways. It will be fascinating to see
what Van der Ryn’s office will do in a
smaller office building, occupying only

half a block, which they are designing for
a nearby site.
Perhaps the latter will profit from the
state capital's second and more elegant
example of an energy efficient project. At
350,000 square feet and a budget of $17
million, it is the first major office building
designed by Robert Marquis & Associates,
hitherto chiefly known for exemplary
housing such as St. Francis Square in San
Francisco. The new building will be the
headquarters of the state department of
justice, headed by Attorney General
Evelle Younger, a conservative Republi
can who may oppose Brown when he
runs for re-election next year.
Interestingly enough, Younger had in
tended to buy canned architecture rather
than go through a distressing experience
with the state architect's office, with which
he had become painfully familiar under
its former regimes. It even made some
sense to him to order prefabbed industrial
structures because a big part of the justice
facility would be only a shell for its giant
computers.
Van der Ryn, given to wearing ker
chiefs and country clothes from L. L.
Bean, might seem to be the last person to
carry weight with Younger, but he per
suaded him to make a serious useroriented architectural statement and also
attempt to cut gas and electricity needs
by 65 to 75 percent.
The investigation of user preferences in
the justice department began in Van der
Rvn's office, where a gifted young con
sultant, the architect-programmer Bobbie
Sue Hood, undertook the monumental
task of interviewing almost all the em
ployees in what, so far as I know, was an

The justice department building
began with an elaborate program
based on employee interviews.
unprecedented preliminary effort in the
design o f a government building.
From this research she came up with
a schematic diagram, setting forth “ re
quired relationships between major com
ponents,” which was not so much a pro
gram as a physical prescription for
architecture which— because of her own
inexperience in actual building— was in
many respects naive.
In fact, by calling for a campus-like
arrangement o f square “ doughnut” build
ings surrounding courtyards, and— for no
compelling reason— specifying the height
of different elements, entrance locations
and circulation patterns, she was overprescribing architecture that needed much
study by thoroughly professional de
signers.
The Marquis firm found many of her
recommendations simply unworkable,
such as her notions o f future expansion

(which obviously couldn’t take place on
all four sides of each doughnut) ,.as well
as her inaccurate estimates o f circulation
square footage. All this had to be redone,
and probably shouldn’t have been done in
such detail in the first place.
Furthermore, the concept had to be
made architecture, with a capital A , some
thing which had escaped Van der Ryn
and Hood. And when Marquis and his
senior designers Jim Caldwell and Jacques
De Brer finally developed a plan for the
large empty site on the old state fair
grounds, at the edge of town, it bore little
resemblance to H ood’s original scheme.
Instead, it was a richly urbane con
tinuum of spaces that differed consider
ably in size and mood, deftly changing
from one to two stories and organized
around a variety o f spaces that are at
tuned to both the working patterns and
individual wishes o f the department’s
several divisions. All this is connected
internally by a lucidly planned grid of
“ streets”— really, lofty skylit corridors
with cantilevered upper galleries— which
pass through “ neighborhoods.” Their
outdoor courts are the readily identifi
able “ turf” of the various agencies. These
spaces can be used as volleyball courts,
Ping-Pong areas, flower gardens, vege
table patches or simply quiet patios.
These “ streets” converge at a large cen
tral court which Marquis chooses to call
a “ town center” ; and although the no
menclature may seem pretentious, it may
in the end accurately describe the social
core of this immense legal and judicial
operation which badly needs humanizing.
This, I’m happy to report, the Marquis
firm is continuing to do in lively ways. It
has continued interviewing users, and
publishes some of the results in a news
letter which also reports on the design as

Light colored reflective finish
3Vs-inch rigid insulation I
Light colored alumini
sandwich panels
(high reflectance)

Exterior 3-inch insula)

THERMAL PERFORMANCE

The state justice department building by
Marquis Associates will be organized
around a large skylit central space and
cut through by lofty corridors (upper
right). Energy elements are similar to
those in the Van der Ryn design.
it develops. A cynical commentator— I,
for instance— might note that some of
this is little more than a sociological
smoke screen, manipulating the collective
client so that the architects merely are
obtaining endorsements for what they in
tended to do in the first place; but some
o f the research has been undeniably help
ful. The main point, perhaps, is that all
the employees feel they have a stake in
their environment, and are genuinely de
lighted that anyone noticed them at all.
This building is not yet fully designed;

LIGHTING PERFORMANCE & QUALITY

and 1 hope that it will have the dash, ele
gance and warmth that Marquis and
his associates are striving to give it. The
passive energy features are closely
analogous to those in Van der Ryn's
building, relying on night air for cooling.
The system might be even more effective
because the cold air will circulate through
a plenum above a hung ceiling, thereby
bringing it in closer contact with the
structure; and there are many other re
finements attributable to mechanical engi
neer Fred Dubin of New Y ork City— one
of the chief pioneers in the field.
It will also be fascinating to see if the
building's fixed brise soleils in the courts
are more successful, or less, than Van der
Ryn’s movable canvas shades, and if an
almost windowless exterior (whose pre
fabricated metal curtain wall can be

dismantled for expansion in almost every
direction) will be decisively less accept
able than an outward-facing building. E.
O. Tofilemirc, a specialist in such enclos
ures, who has worked with designers as
meticulous as Philip Johnson and Richard
Meier, is the consultant for these facades.
One wonders how finely a humanistic
Bay Area office will execute such rigorous
technological ideas. For much, in the state
buildings, will depend on fastidious de
tails, good furnishings, sensitive use of
color and above all a sense of architec
tonic command— not abstract control.
The third o f the energy efficient Cali
fornia state office buildings could become
a first genuine great ecological work of
this new architectural era. It is the winner
of a competition conducted by Van der
Ryn— by all odds the most thoughtful

A competition yielded a pair
of outstanding designs and
a split over them on the jury.
ever held in the state— in which no fewer
than 41 private firms entered, proving
that energy efficiency is now a potentially
lucrative business. Some of the contest
ants spent tens o f thousands o f dollars on
their submissions.
The winning design, lo and behold, is
by one o f the biggest architectural and
engineering conglomerates in the country,
Benham-Blair & Associates, whose SSO
employees are distributed in 11 regional
offices, including Los Angeles and San
Francisco.
The concept by Benham-Blair’s chief
designer, Buford Duke, calls for an im
mense solar collector— 240 feet across
and 60 feet high— as a superb symbolic
touch for a building that otherwise is
largely underground, somewhat reminis
cent of the Oakland Museum. But it has
a long way to go before it is in that class.
The intelligent process by which the
competition was conceived deserves a
word of explanation. The entrants were
asked to meet energy performance stand
ards, and were required to justify their

designs by the same kind of thermal and
light-metering model tests that Van der
Ryn’s staff had used in designing their
prototypical first building. The six final
ists in the two-stage competition were
given the additional task o f evaluating
their results scientifically in complex
computer print-outs that filled thick
volumes.
These were scrutinized by a jury
chaired by William Caudill, FA IA, of
Houston, one of the chief begetters of the
present concern with sun control prob
lems. The jurors split three to two. Van
der Ryn and Dubin cast the two negative
votes, primarily because the design broke
almost completely with the direction the
state had been following in the other new
buildings, which will use rooftop solar
collectors only for heating water, and de
pend on night air for most o f the cooling.
Forty o f the 41 contestants, including
the second prize winner, adopted a similar
strategy, which seemed virtually imposed
by the competition instructions. The win
ner is a passive earth-covered building
whose surface would be an urban park,
overlooked at its far end by a huge solar
collector slanting upward at a 45-degree
angle to be the principal external ele
ment o f a six-story office building. The
collector would provide the energy neces
sary to cool the entire complex.

As a symbol, it should be one of the
most powerful architectural proclama
tions of a new age. Yet at this stage there
is much that is plainly wrong with the
design. The collector, as proposed, seals
the front of the above-grade structure
which should be opened to overlook the
park. The park itself, perforated by sunk
en courts, needs much more thought.
Nevertheless, these shortcomings may
be rectified, although perhaps not at a
cost the state is willing to pay. The project
would give Sacramento a free inner city
park which should be an oasis for thou
sands o f state employees encased in mam
moth surrounding structures, including a
real brute that went up in the 1960s,
which the solar collector will mercifully
mask.
Unfavorable critics of the scheme, in
cluding Van der Ryn (even though he
wants it built), also question its efficiency,
for Benham-Blair and their consultants,
Westinghouse Engineers, project savings
of 50 percent, half o f what Van der Ryn
claims for his approach. He and his staff
Benham-Blair’s competition winning de
sign places most office space under a park,
with light coming through a central mall
and four courts. A bove grade is a solarwalled structure and housing blocks will
be added at a later stage (see plan).

125

126
—to whom the jury’s decision almost
amounted to religious heresy— point out,
too, that the winner does not fully comply
with the new capitol area plan, as stipu
lated in the competition. The plan indi
cated a design that could be built in quarter-block modules, 160 feet square, in ac
cordance with a mixed use concept in
cluding 40 or 50 housing units on the site.
Benham-Blair placed some unconvincing
circular housing elements on the model,
but the park looks far better without
them.
Was not the state architect’s opposition

based, in part at least, on fear— even
hatred— of a grand design? For he and
the governor, reacting against the insen
sate architectural “ mono-culture” that
big government imposed on Sacramento
in the last decade, leaving it virtually un
peopled after 5 P.M., now want to trans
form the dismembered cityscape into a
closely-knit “ village in the modern sense.”
But great regional capitals— Edinburgh
comes to mind, and Bordeaux— do not
have a village air. They are nobly urbane
centers o f cultivated life which possess au
thentic grandeur that can lift up the hearts

of people of all ages and backgrounds.
in fairness to Van der Ryn, however,
the competition runner-up which he much
prefers to the winner, might have accom
plished something as valuable: a new kind
of vernacular which could move across
the city in a charming yet orderly way.
For it did virtually everything he hoped
for— indeed, everything he had done in
his own building, only better, turning his
coarser brand o f design, so help me, into
capital A architecture. Its exquisitely or
ganized interior courts, meant as centers
of exuberant social life as well as reser
voirs of cooling air, covered with retract
able skylights and splendidly surrounded
by stepped-back balconies, show a direc
tion that should also be followed.
Not surprisingly, the entry was signed
by Elbasani, Logan, Severin, Freeman, an
innovative firm which has won or done
well in several notable competitions. But
they were acting chiefly as licensed archi
tects of record for three extraordinary
talented students of Donn Logan at
Berkeley: David Baker, Philip Banta and
Anthony Cutri.
They are $7,500 richer today with their
second prize money, but an even greater
prize came to Elbasani, Logan, Severin,
Freeman with the commission to design a
new state office building in San Jose,
giving them the chance to fully explore the
possibilities of the competition entry. □

The competition runner-up by Elbasani,
Logan, Severin, Freeman, organized
around a series of handsome courts with
retractable skylights, closely followed
Van der Ryn’s concepts in regard to both
energy and the overall design of the capital.

Reprinted with permission from AIA Journal December 1977
© 1977 The American Institute of Architects

127
Senator K e n n e d y . OK. I am going to submit some written ques
tions to you. You have made an excellent statement. It is very, very
helpful to us, and a very exciting program has been developed in
California.
We are going to watch it with great interest, and I think you have
helped sharpen the issues here this morning with your statement,
particularly in its relationship to how you view the California plan,
and the job issue, which is the primary focus of our hearings, and also
from the energy point of view, let alone tying this into the general
issues of urban policy.
So, I want to thank you very, very much for being with us. I am
going to submit some written questions to you, if I could, for you to
answer. I want to thank you very much for taking your time to be
with us this morning.
Mr. C la r k . Thank you.
[The following questions and answers were subsequently supplied
for the record :]
R espo nse

W ilso n

Clabk

to A d d it io n a l W r it t e n
S e n at or K e n n e d y

Q u e s t io n s

P osed b y

S ta te of C a l if o r n ia ,
G o v e rn o r’s O f f i c e ,

Sacramento, May 26 , 1978.
Hon. E dward M. K e n n e d y ,
Russell Senate Office Building,
Washington, D.G.
D ear S enator K e n n e d y : It was a pleasure to appear before your committee
and I am pleased to enclose responses to the questions posed in your letter of
April 7, 1978.
Question I. What are you doing to insure quality products and keep consumer
fraud to a minimum?
Answer. The State of California has recognized the need to build consumer
confidence and to insure quality in materials and installation. The state will
shortly begin to certify collectors which are being sold in California. We also
have established a warranty system, which operates as follows :
After June 15, 1978, every solar collector, storage unit and heat exchanger
within a storage unit sold by a manufacturer, distributor or retailer to a retail
buyer for use in an indirect thermal system shall, in order to qualify for the
state tax credit, be covered by a manufacturer’s warranty which shall contain,
but is not limited to, the following terms :
That the solar collector, storage unit, or heat exchanger within a storage
units, is free from defects in materials or workmanship.
That, except as provided in 2603 (e) (1) (c), in instances of defects in materials
or workmanship which become evident within three years from the date of in
stallation completion, the manufacturer shall remedy the defect in the collector,
storage unit or heat exchanger within a storage unit, including if necessary, re
pair, or replacement at the site, without charge and within a reasonable time.
That in instances of corrosion of a collector’s absorber plate or other coolant
passages which becomes evident within three years of the date of installation
completion, the collector manufacturer shall remedy the corrosion defect. Dur
ing the first year of the warranty period, the manufacturer shall remedy the
corrosion defect without charge. During the remainder of the warranty period,
the corrosion warranty shall cover the cost of all parts, delivered to the site, nec
essary to remedy the corrosion defect, including the cost of furnishing a new
collector if necessary.
The manufacture’s warranty shall also provide for field inspection at no charge
to the retail buyer, to verify failure, establish probable cause and determine
corrective action required. However, the manufacturer’s warranty may provide
that the reasonable costs of the field inspection during the second and third years
of the warranty period shall be at the buyer’s expense, if the field inspection is
requested by the buyer and there is not actual defect in the warranted product.
The manufacturer’s warranty may specify reasonable installation and mainte-

128
nance procedures, including specification of incompatible components, and may
specify reasonable use conditions for the warranty to be effective. However,
no warranty shall be violated or in any way reduced by conditions that may
occur in normal operation of the system.
In addition, the Department of Consumer Affairs has established a toll free
hot-line for solar complaints that will perform activities in these areas:
(a) Complaint mediation;
(b) Consumer protection service;
(c) Advertising substantiation.
Under the Contractors State Licensing Board (SCLB), a part of the Depart
ment of Consumer Affairs, a consumer protection program in solar and insula
tion was established. Included in the schedule is a five point program to improve
consumer information, develop reliable procedures for complaint handling, work
shop training for deputies in solar technology. The SCLB is also examining the
impacts of a solar license for installers.
The California Energy Commission is currently developing a Testing and In
spection Program for Solar Equipment (TIPSE) to be implemented May SI,
1978. Through this program accredited private laboratories would test solar
equipment to determine if it meets certain minimum criteria set by the Energy
Commission. It would be up to the manufacturer whether or not they wanted
their equipment tested, but it would be to their advantage to be able to tell a
potential customer that their product meets state standards.
The final program aimed at increasing consumer confidence is the T-label
program being developed by the California Energy Commission in conjunction
with the California Solar Energy Industries Association (CAL SEIA). Through
this prgoram a manufacturer whose solar equipment meets the criteria for the
solar tax credit could receive labels to place on his product assuring a customer
that he would be able to receive the tax credit.
Question 2. Do you plan to make solar even more attractive by eliminating
tax breaks and subsidies to utilities and other large users of fossil fuels?
Answer. Governor Brown has just formed a solar advisory council (SolarCal)
which consider all aspects of solar policy for California, including the possi
bilities of additional financial incentives. My own belief is that utilities will
become more involved in promoting and financing solar installations, and this will
result in the rapid growth of solar, whether or not tax breaks and fossil fuel sub
sidies are eliminated. I believe that such advantages should be extented to solar
as well and that energy pricing mechanisms should more clearly recognize the
need to conserve non-renewable fuel sources. A copy of the Executive Order estab
lishing the Council and Office is attached.
Question $(a). How will the proposed reforestation program work to produce
energy?
Answer. Forestry management practices create large quantities of wood resi
dues, logging slash, and precommercial thinnings. In the past, these wood wastes
have posed a disposal problem to logging companies and lumber mills, as well as
an air quality problem due to their subsequent in field burning. Obviously, increas
ing forestry production concurrently increases wood wastes. Research by the
California Department of Forestry and the California Energy Commission indi
cate this concentrated waste material is an encellent fuel source available now.
In fact, several lumber companies are currently using wood residues to supple
ment energy consumed in mill operations.
In addition to wood waste generated from accelerated forestry management,
there are some provisions included in the program for using non-commercial
species of trees, plus planting and management of fast-growing trees for direct
energy conversion. Funding is a limiting factor, however, and forestry practices
that produce valuable products and an energy source would maximize our invest
ment. Presently $29 million is proposed for the entire forest improvement pro
gram, whereas $77 million was originally envisioned. Implementation of how much
is to be earmarked for each of the three parts will be solidified through the
legislative process.
Question 3(6). Do you see wood as ia potential fuel source for California?
Answer. A simple answer to this question is yes. The attached table arrays
the gross potential for power derived from wood sources. The total (do-able)
energy potential has been estimated between 18,968-16,557 MW, a large range,
but impressive numbers indeed.

129
Question 3(c). What is its jabs impact?
Answer. The California Energy Commission has estimated that within three
years 150-200 MW of power derived from wood and agricultural wastes could be
on line and would generate between 3,800-3,850 jobs. The breakdown of job cate
gories includes: Manufacturing 1,200-1,220; construction 2,400-2,422; and opera
tion and maintenance 200-210.
We are embarking on a new era of economic and employment stimulation,
coupled with not only emerging alternative energy developments, but also with
energy use patterns. Wood energy and reforestation represent some key pieces to
our long-term survival puzzle, each reinforcing the other as well as enhancing
other natural systems-based options. By merely extrapolating classic job equa
tions from MW output, we aren’t including the full impact and potential of the
resource.
GROSS ENERGY POTENTIAL OF WOOD RESIDUES IN CALIFORNIA
Annual potential
(million dry tons)
Category
Mill residue.................. .
Woods residue..............
Conifer thinnings...........
Dead and dying trees.......
Commercial hardwoods___
Noncommercial softwoods Noncommercial hardwoods.
Chaparral...................
Urban residues._________
Orchard prunings.............

Acreage Volume

167,000
16,700,000
16,700,000
2,837,000
7,532,000
1,319,000
7,554,000

Total.................. .
Btu equivalent (in 1018 Btu) (d)...........

tion

7.7 million dry tons (b)......... ..........
6.5—8.5 million dry tons (c).
.............
15-30 tons/acre..................
100
1.3 billion board ft/yr............ ...........
60-120 tons/acre.................
90
1-3 tons/acre/yr.................. ...........
4C-S0 tons/acre..................
20
10-20 tons/acre...................
20
..........
..........

Low
1.0
4.5
2.5
2.5
1.9
7.5
2.6
3.8
4.3
2.0

..........
32.6
..................59

High

Megawatt (a)
equivalent
Low

High

2.0
6.5
5.0
2.5
3.8
22.5
4.0
7.6
4.3
2.0

275
1,238
688
688
523
2,063
715
1,045
1,183
550

550
1,788
1,375
688
1,046
6,187
1,100
2,090
1,183
550

60.2
1.09

8,968

16,557

(a) Assumes a powerplant with a thermal efficiency of 25 percent and a load factor of 55 percent.
(b) A large amount of this volume is presently being used in the pulp industry and as a fuel at lumber mills which is
reflected in the annual potential columns.
(c) 2 million tons presently being used; does not include pieces less than 4 inches in diameter.
(d) 18 by 10* Btu/dry ton of wood.
Source: Modified version of estimates developed by Al Groncki, U.S. Forest Service (memo dated Nov. 10, 1977).

Quantification techniques are just being derived to account for the total eco
nomic and social benefits of all forms of alternative energy. This is a very excit
ing endeavor and I welcome the opportunity to share this with you.
Question 4(a). How is the State helping low-income groups to provide for their
own energy needs and also create jobs for the unemployed in fcheir communities?
Answer. California has made a major commitment to the development of solar
technology both as a new source of energy and as a new industry which will
provide thousands of jobs in the next several years. In order to meet the demand
for qualified personnel, the state, local governments, private groups, labor orga
nizations, and educational institutions have undertaken training and educa
tional programs which range from one-day public information seminars to
graduate degree programs in solar engineering.
A state-wide effort to bring unemployed and underemployed Californians into
the solar industry has been initiated. The Governor’s Office of Appropriate
Technology and the SolarCal Office are developing for CETA a comprehensive
curriculum for solar technicians which will establish a series of skill standards
and learning methodologies for local programs throughout California. This
program is being developed in conjunction with industry and labor groups, and
can be replicated for use anywhere. The curriculum will aim primarily at the
unskilled and unemployed and will feed into union apprenticeship, and junior
college and university programs. We expect that a second phase of this project—
that of training trainers in the field of solar technology and in use of the curricu
lum—will be initiated by Sonoma College in September, 1978.
As part of California’s urban strategy, the state will retrofit up to 500 lowincome residential units in Oakland with solar domestic hot water systems, and
train 20 unemployed Oakland residents in solar technology. This program is
unique in that it is the first application of the state-wide CETA-sponsored cur
riculum, and the first fully cooperative solar project involving organized labor,

130
solar equipment manufacturers, small solar businesses, and state and local gov
ernment in a job development and retrofit program. It will result in increased
local self-reliance and new job and business opportunities in the inner city.
Another major effort in solar training is being put together by the Sheetmetal
Workers International Association. They are developing a training program,
complimentary to the state program, to train their apprentices and journeymen
in solar technology.
Community colleges, colleges, an universities throughout the state are offering
over 150 different solar-related courses; and weekend seminars are being held for
do-it-yourselfers, dealing with solar hot water heaters and solar greenhouse con
struction. The following listing represents solar-related training programs in
California:
Office of Planning and Research: Dr. Ron Lipton, Sacramento, CA. Contract
period: March 1,1978 to February 28,1979, funding: $77,182.
Provides development of a master training curriculum for solar technicians for
use by training agencies. Provides consulting services for local groups in estab
lishing and administering solar technician training programs. Sets up state
clearinghouse for information regarding solar technician training.
Proteus Adult Training, Incorporated: William M. Maguy, Visalia, OA. Con
tract period: February 21, 1978 to February 29, 1979, funding: $159,925.
Project will undertake Solar Retrofitting at Porterville State Hospital and
in low income farmworker homes. There will be ten participants.
San Bernardino Westside CDC: Valerie Pope, San Bernardino, Ca. Contract
period: December 1,1977 to November 30,1978, funding: $331,795.
Project consists of 20 percent classroom training and 80 percent work experi
ence. Participants will receive training and work experience in the manufactur
ing and installation of solar energy panels and other related energy conservation
equipment. Training will also include sheet metal and machine shop work.
San Bernardino Westside ODC: Valerie Pope, San Bernardino, CA. Contract
period: October 1, 1976 to November 30, 1977, funding: $258,104—-Total funds
obligated.
This project was designed to provide work experience to the disadvantaged in
the technological field of solar energy, specifically, winterization, rehabilitation,
and retrofitting. A central solar collector was designed and constructed, and ten
homes were rehabilitated, insultated, and retrofitted with solar heating apparatus.
California State College, Sonoma: Rita Garant, Rohnert Park, CA. Contract
period: August 1,1976 to July 31,1977, funding: $92,558.
The goal of this project was to provide skills development for CETA eligible
persons in solar energy technology at public facilities. Trainees were educated
in all relevant aspects of solar energy technology including climatology, etc.
Center for Employment Training, Solar Energy Project, Robert Johnson, San
Jose, CA. Contract period: January 1, 1977 to June 6, 1977, funding: $45,894.
This subgrant provided add-on resources to make it possible for migrant and
seasonal farmworkers being trained to be building maintenance workers to learn
to fabricate and install solar water heating systems. Our subgrant included $21,000 California Energy Commission funds for materials. Participants were en
rolled under a grant to CET from Proteus, Incorporated, who received their
basic funds from the State CETA Office/La Cooperativa.
Question 4( b) . Do you support Assembly Bill 2841 which calls for training lowincome persons in energy-related areas?
Answer. This bill is in the process of major revision. In concept we strongly
support the idea of a publicly-funded training program. The details remain to be
worked out and we are cooperating with the legislature to insure that an
efficient mechanism for operating high-quality solar training programs are
developed.
Questions 5 (a) and (b). Do you see a necessity to mandate the use of solar
devices on new homes? Do you think Minnesota’s law requiring existing homes
to have a certain amount of insulation before being sold is applicable to
California?
Answer. Both the California State Public Utilities Commission (PUC) and the
California State Energy Resources Conservation and Development Commission
(ERCDC) are looking into the problems associated with mandating energy ef
ficiency in homes.
Recently the PUC made a recommendation that after 1981 public utilities be
allowed only to hook up to new homes which are properly insulated. The ERCDC
has published a report, “ Solar Energy in California: Residential Thermal Appli

131
cations” in which they recomend that the legislature enact legislation clarifying
the Commission's ability to direct energy efficient design for new housing. How
ever, no direct action is being taken at this time in California.
I hope this information is useful to you. We are most concerned that the nation
begin a major effort to develop alternate energy sources and new jobs. California
has already begun, and we would be happy to cooperate with you in any way
possible.
Sincerely,
W il s o n C l a b k ,

Assistant to the Governor for Issu e s and Planning.

Enclosure.
O ffic e

of t h e

G overnor ,

Sacramento, Calif., M a y 3, 1978.

Gov. Edmund G. Brown Jr. has signed an Executive Order creating a SolarCal
Office in the Business and Transportation Agency. The executive order also
creates a SolarCal Council to advise the governor and the SolarCal Office.
In the executive order Gov. Brown said the SolarCal Office will provide “a
focal point within the state government to assist in the maximum feasible
commercialization of solar energy.”
He said the Council will advise the Governor and the SolarCal Office on the
means to achieve rapid development of solar energy in the state.
The Council also is charged with developing administration policies and plans
for maximum feasible solar commercialization, making information available to
the public about the use and benefits of solar energy and promoting cooperation
in solar energy development in California with the federal government as well
as public and private interests.
The governor appointed Sim Van der Ryn, California’s state architect as chair
man of the council; Wilson Clark, the governor’s assistant for issues and plan
ning, as executive secretary of the council; and Jerry Yudelson, as director of
the SolarCal Office.
Council members serve at the pleasure of the governor and receive no compen
sation.
Attached is the executive order and a list of the appointed members.
E xecu tive D epar tm e n t , S t a t e

C a l if o r n ia

EXECUTIVE ORDER B—43—78

Whereas, Rapid solar energy development and commercialization creates jobs,
stimulates economic growth, conserves scarce fossil fuels, provides a safe, clean
and renewable energy resource, and reduces utility costs to commercial, industrial
and private consumers; and
Whereas, The State, already the national leader in solar energy, can further
develop solar commercialization and business development projects by coordinat
ing solar energy activities and policies of State agencies; and
Whereas, The solar industry as well as consumers, labor and business groups
look to the State for assistance in economic and business development, public
information, and coordinated public participation in State solar policy develop
ment; and
Whereas, the Secretary of the Business and Transportation Agency is the
Governor’s principal liaison with the business community.
Now, therefore, I, Edmund G. Brown Jr., Governor of the State of California,
by virtue of the power and authority vested in me by the Constitution and
Statutes of the State of California, do hereby issue this order, to become effective
immediately:
1. There is established in the Business and Tranportation Agency the SolarCal
Office, to provide a focal point within State government to assist in the maximum
feasible commercialization of solar energy. The Secretary of Business and Trans
portation Agency is directed to establish the position o f Director of the SolarCal
Office, who shall be appointed by and serve at the pleasure of the Governor.
2. There is established a SolarCal Council to work with the SolarCal Office.
The Chairman of the Council shall be the State Architect, and the Executive Sec
retary of the Council shall be the Governor’s Assistant for Issues and Planning.
The SolarCal Council shall consist of members who shall be appointed by and
serve at the pleasure of the Governor. Additional members will be appointed from
State government to serve ex-officio.

132
3. The SolarCal Council shall have the following responsibilities:
Advise the Governor and the SolarCal Office on the means to achieve rapid
development of solar energy in the State;
Develop Administration policies and plans for maximum feasible solar
commercialization;
Make information available to the public about the use and benefits of solar
energy; and
Promote cooperation in solar energy development in California with the
federal government as well as public and private interests.
4. The Director of the SolarCal Office shall have the following responsibilities.
Assist the SolarCal Council in meeting its responsibilities;
Implement the State’s solar energy policies and plans;
Advise the Governor and the Secretary of the Business and Transporta
tion Agency on the concerns of the solar business community, particularly
those of small businesses;
Develop and implement projects in solar commercialization;
Coordinate the solar energy activities of state agencies.
5. All State agencies, departments and commissions are hereby directed to
assist and cooperate with the SolarCal Office and the SolarCal Council in car
rying out their responsibilities.
In witness thereof, I have hereunto set my hand and caused the Great Seal of
the State of California to be affixed this 3rd day of May, nineteen hundred and
seventy eight.
E dm u n d G. B bo w n , J r.,
Governor of California»

Senator K e n n e d y . Our next witness is the Secretary of Labor, Ray
Marshall.
Secretary Marshall, we are delighted to have you here as we focus in
this particular hearing on the issues of jobs in this country. We take
note that your background and experiences for years prior to coming
with the administration has been focused upon jobs in rural areas, and
also, on minorities, and it has been a career that has been committed
toward development of employment and job opportunities.
We appreciate your coming this morning, and after you have intro
duced your colleagues here, perhaps you should take 2 minutes, if you
would, and just tell us—we know you have been working night and day
on the coal strike and we won’t let you get by without just making
about a 2-minute comment—about what you think the possibilities are
in terms of ratification of the new agreement.
STATEMENT OP HON. F. BAT MARSHALL, SECRETARY OF LABOR,
ACCOMPANIED BY ARNOLD H. PACKER, ASSISTANT SECRETARY
FOR POLICY, EVALUATION, AND RESEARCH; RON KUTSCHER,
ASSISTANT COMMISSIONER, BUREAU OFLABOR STATISTICS; AND
WILLIS NORDLUND, SPECIAL ASSISTANT TO THE UNDER SECRE
TARY OF LABOR

Secretary M a r s h a ll. Thank you, Mr. Chairman.
I have with me today, on my immediate left, Arnold Packer, who is
the Assistant Secretary for Policy, Evaluation, and Research. Next to
him is Ron Kutscher, Assistant Commissioner of the Bureau of Labor
Statistics. On my right, Willis Nordlund, Special Assistant to the
Under Secretary of Labor.
After three contracts, Mr. Chairman, you would think we would
have more experience, and therefore, build a record to be able to pre
dict the outcomes of these negotiations* [Laughter.]

133
But this is a situation in which each event seems to not necessarily
have much relationship to the preceding one.
I am, however, hopeful as most observers of this most difficult proc
ess are, that we will get a settlement.
We think this outcome is the only way to resolve the conflict. That is
one of the reasons we worked so hard for a negotiated settlement.
As you know, all other outcomes are only partial, incomplete solu
tions at best. The parties in the coal dispute must resolve their prob
lems themselves. Our objective has been to relieve as much pressure on
the public as possible while the parties negotiate their settlement.
I think we have achieved that outcome.
Now, the principal parties who are concerned with the dispute have
considerable motivation to negotiate and resolve it themselves. They
see, as we do, that all other outcomes are less desirable for them and for
the country. Therefore, we are watching hopefully that the dispute will
be resolved.
I think, however, that the total strike does emphasize the importance
of labor matters, and labor-related matters, to our energy policy. Long
before the strike actually took place, we had started preparing for a
tripartite approach to the resolution of some of the basic underlying
problems in the coal industry, particularly the eastern bituminous
coal industry, because it is clear that this immediate conflict is dealing
mainly with symptoms and not with the basic underlying causes.
That is the reason that the President has proposed to create a com
mission on the coal strike to try to deal with some of those long-range
problems that simply manifest themselves as symptoms in this partic
ular conflict.
We think that that is extremely important as a part of the policy
that we are evolving, and that we had started long before the strike
took place, because it was clear to all who knew the situation in that
industry that we were going to have problems, and that there are the
long-standing underlying forces that we would have to deal with, and
that they cannot really be dealt with during the heat of negotiations.
That has been one of the basic problems that we face.
Senator K en n ed y . I won’t let the opportunity go by without making
a comment about the importance of the health issue in terms of the
considerations of the contracts.
The polls used by some show that it is not a current issue or a matter
of great importance to people. Others polls show that it is.
But it certainly seems to me as someone who tries to follow that
issue that that is a matter of considerable importance and consequence
in consideration of the negotiations.
Secretary M a r s h a ll. We think that it is obviously extremely im
portant to coal miners. Safety and health also have been a major issue
there. They are justifiably concerned about the safety and health of
their work because it is a dangerous occupation. It is one of those areas
where the tripartite approach seems to be a good one.
The Government has partial responsibility for mine safety and
health. The Department of Labor assumed responsibility for mine
safety and health on March 9.
We believe that there is a lot that the parties working together could
do to improve mine safety and health. We do not believe that it is pos

134
sible to have an adequate solution to that problem without cooperation
among labor, management, and Government.
We also believe that some of the other problems that the industry
has are directly related to the safety and health issue. This is an
important problem and an important cause of the so-called wildcat
strike, for example. I f we can do something about the safety and
health problem, then I think we would do something to reduce the
incidence of wildcat strikes.
So that they are all very closely interrelated, and it is also clear we
are not likely to be able to make at least eastern coal a very important
part of our energy policy unless we deal with some of these long-term
problems.
Senator K e n n e d y . O K , Mr. Secretary.
We look forward to your testimony.
You understand, Mr. Secretary, we are interested in the type of
analysis that goes into fashioning a National energy policy, as related
to the issues of jobs and employment.
I think all of us are very mindful that this was a policy that was
developed in a relatively short period of times—over 90 days time.
There were a variety of agencies that had an input into it. It is one
of the important factors as we as a country deal with the problems
of continuing unemployment and look to the future in terms of
employment possibilities.
What kind of analysis went into the fashioning of the energy pro
gram from the point of view of employment ? It seems to me that we
in the Congress have probably not given it the kind of attention we
should have.
I am not sure that the administration gave it the kind of attention
that it should have. We are very much interested in what is happening
now; what did happen in the past; what kind of priority this will
have in the future as you move along; and what ought to be done by
the Congress in dealing with this issue ?
We are very much interested in your comments. As the person who
has the primary responsibility within the administration, we are
interested in your views on this issue.
Secretary M a r s h a l l . Thank you, M r . Chairman.
I agree that it is extremely important that we analyze the employ
ment impact. I think it is also important to recognize that there are
some areas of employment impact that are very difficult to analyze.
We have thought a lot about them, but we need more information,
particularly at the subnational employment levels. We have done more
work on national impacts of energy policy than we have trying to
determine the subnational—regional and sectoral—impacts. We be
lieve in the Department of Labor that a sectoral approach is extremely
important, and we are developing it.
We did, during the development of the energy policy, have ex
pressed concerns, and provided what analysis we were able to provide
at that time of the employment impact.
The prepared statement that I have provided for the record out
lines a number of the basic energy employment relationships. It tries
to show where we stand with respect to our understanding of the crit-

m
ical relationship between energy and employment and what remaining
problems and issues we think should be addressed.
Specifically, we first discuss the near-term impact on employment of
sharply higher energy prices, particularly as they place unexpected
burdens on certain industries and regions.
Second, we examine the relationship between energy conservation
and employment as a critical element in our national energy policy.
Finally, my prepared statement examines the long-term adjustment
problem and the Department of Labor’s role in this adjustment.
The most dramatic impact of energy on employment has come from
the sharp increase in all energy prices as a result of the initial quad
rupling of OPEC oil prices. The immediate effect of this action was
substantially increased inflation which, in turn, was a major contribu
tor to the massive recession of 1973-75.
This country and indeed the economies of other industrial and
developing countries are still recovering from this impact which re
sulted in the highest rates of unemployment experienced by this
country in the postwar period. While we have been fortunate to make
substantial progress toward recovery, many countries are still experi
encing substantial unemployment due to the failure of OPEC to re
cycle funds received for oil exports into employment generating
productive activities.
In essence, the OPEC “tax” on energy has led to higher world sav
ings rates which, combined with the fear of inflation, has led many
countries to follow restrictive macroeconomic policies resulting in high
and ever rising unemployment. Until these oil bill funds are effective
ly recycled, the world unemployment problem will plague us with
such attendant problems as increased pressure on trade practices and
monetary stability.
We emphasize this, Mr. Chairman, because it is clear that the
United States will have great difficulty dealing with either the energy
or the employment problem unless we consider it in the international
context.
Domestically, this high employment impact has been addressed rela
tively effectively through the correct application of macroeconomic
policies. Specifically, this administration has implemented its fiscal
stimulus package and has proposed further tax cuts to compenstate
for the loss in spending power. The administration’s longer term com
mitment to achieving full employment is evident in its strong support
of the Humphrey-Hawkins legislation now before the Congress.
The macroeconomic effects of higher energy prices on employment
are clearly the most significant in terms of magnitude. However, the
sharp increase in energy prices has also brought disruptions within
particular industries and regions. For example, we have seen severe
dislocations that adversely impact specific areas of our country as
we rapidly expand the production of coal, gas, oil, uranium, or vir
tually any other large energy resource. The “boomtown” syndrome in
Western coal development is indicative of this problem. The problems,
of course, transcend just labor market dislocations and include the
availability of housing, roads, schools, parks, hospitals, et cetera,
public attitudes toward new residents, the ability of local communities

136
to improve tax systems, adequate information for rational decision
making, and many others.
THE RELATIONSHIP BETWEEN ENERGY CONSERVATION AND EM PLOYMENT

One key near-term method of adjusting to higher energy prices is
conservation of our scarce energy resources. Since conservation is
such a key element, and since its impact on employment is not well
understood, 1 would like to turn to this critical relationship.
Historically, there has been a close relationship between this coun
try’s production, energy consumption, and employment. Some believe
that these variables are inextricably intertwined and that a reduction
in energy must inevitably lead either to cutbacks in production and
employment or substituting “cheap” labor to make up for this loss in
energy. For example, it is frequently believed that reducing energy
usage by a factory would force the managers to send part of their
work force home or perform jobs that were done by machines and
energy by hand. These relationships have grown out of the belief
that conservation is synonymous with curtailment.
I want to emphatically distinguish between these two actions and
their opposition impact on employment. Energy curtailment such
as experienced during the OPEC oil embargo clearly resulted in
employment cutbacks as producers were unable to adjust their pro
duction process to such unplanned, immediate reductions in energy
supply. However, conservation is the planned, more efficient use of
our scarce energy resources. Thus, while conservation results in re
duced energy use, its impact will be job creating.
Conservation programs are likely to result in net job creation for
two reasons. First, to the extent that conservation entails insulating,
weatherizing, maintaining, upgrading, or in some other manner im
proving the efficiency of a building or machine, jobs will be created
in these activities. Second—and even more important—is the indirect
impact resulting from the fact that energy production and distribu
tion—except for coal—are very capital intensive, as can be seen from
the table in my prepared statement.
To the extent that consumers spend less income on energy resources
and more income on more labor-intensive alternative goods and serv
ices, employment will increase. We are just beginning to gather data
on this relationship, but I am convinced that it will in the long run
have a substantial impact on employment.
In the coming years, aided by the knowledge that energy conserva
tion measures enhance job opportunities, we expect individuals and
corporations to continue to seek more efficient ways of utilizing energy.
We already see numerous examples of new energy conserving tech
nologies in such areas as better insulated buildings, more efficient elec
trical machinery, and energy-saving refrigerators.
I want to assure this subcommittee that I fully support the conserva
tion component of the proposed national energy policy. I believe that
properly implemented it can assist in achieving our employment goals.
It makes good sense in terms of improving our efficient use of energy,
of extending the supply of nonrenewiable energy resources, of en
vironmental impact, and of employment.

137
THE DEPARTMENT’S ROLE IN CONSERVATION

During the past 2 years the Department of Labor has stepped up
its efforts to create conservation-related employment. Comprehensive
Employment and Training Act (CETA) prime sponsors participate
with agencies in the Government in weatherization activities particu
larly for the homes of low income and elderly persons. These projects
include installing insulation, storm windows, plastic wall coverings,
weather-stripping, wrapping pipes, caulking, minor roof repairs,
and repairing holes and cracks in walls.
Other CETA participants are employed in “energy audits” in which
houses are checked to determine the extent of avoidable heat loss.
Still others are involved in education/demonstration efforts to in
form others about substantial fuel savings available through proper
weatherization and how to go about securing these services. We esti
mate that CETA sponsors have joined forces with the Community
Services Administration (CSA), and the Department of Energy
(DOE) to weatherize over 100,000 homes in the last 3 years. In terms
of jobs, we estimate that about 16,000 weatherization jobs have been
created. We plan to continue this program as evidenced in a memoran
dum of understanding between the Department of Labor, the Depart
ment of Energy, and the CSA which commits our agencies to
continuing joint efforts in the weatherization area.
The emphasis on conservation is extremely important, but there are
limits to such actions in terms of known technology. Energy demand
continued to rise. Conservation can accommodate part of this increase,
but barring some dramatic technological breakthrough we must work
to expand energy production as well.
This task involves both increasing domestic production in estab
lished energy sources and developing alternative sources of energy.
While I am not in a position to endorse any mix of potential energy
options, I am sure of two things: First, alternatives to nonrenewable
fossil fuels must be developed; second, the employment consequences
of different energy mixes will be substantial and we must plan for these
impacts on our work force.
The Department of Labor through its employment and training
programs is engaged in a variety of activities to assist industries and
individuals in adjusting to changing employment patterns in the
industry. Literally, thousands of workers have received skill training
through local and national CETA programs and were placed in
energy-related industries. I would like to emphasize that this has been
one of the main objectives we have had with the CETA program, to
try to achieve as many national objectives simultaneously as possible.
The weatherization program, for example, indicates that we do some
thing to help with our energy problem, do something to help the lowincome people, and at the same time provide jobs. Therefore, this mul
tiple objective we believe, wherever we can achieve multiple objectives
in these programs, we should strive to do it. Therefore, we concen
trated attention on the energy area for that reason and have, therefore,
trained a large number of people for our energy-related jobs.
Senator K e n n e d y . The real complaint, Mr. Secretary, is that you
are planning 100,000 homes in 3 years. We have 14 million homes that;
need weatherizing. Canada is planning to do all of their homes in 8
8 1 -5 0 2 — 7S-------- 10

138
years. CETA is a worthwhile program; it has been successful. It is
successful up our way, but you know it is a pretty cautious step, I
would think.
Secretary M a r s h a ll. I think the reason it would appear less cautious
than it might is that all the weatherization done in the country will
not be done through our program. We have been trying to concentrate
on the homes of low-income people. The CETA system, you know, is a
decentralized system and therefore what gets done in the local areas
depends largely on what the local prime sponsors elect to do. What
we have done at the national level is simply assist them.
Senator K e n n e d y . The fact is the tax incentives provided are focused
in terms of middle- and upper-income people. The winds of weatheriza
tion programs you are talking about are going to include low-income
groups.
Secretary M a r s h a ll. That is right.
Senator K e n n e d y . And I think it is a very cautious step. We are
for it and I am strongly supportive of it. But, the spinoff in terms of
employment would be extremely modest.
Secretary M a r s h a ll. What we expect to happen is that as the over
all level of unemployment goes down and you get more and more of
the unemployed back to work in the private sector, the importance of
these kinds of programs in the total CETA effort are likely to rise.
But again, the nature of the CETA system makes it very difficult for
us to force activity into a particular area. We could, however, do
that with our national program. We are trying to develop some pro
grams that are energy-related that might be national rather than
going entirely through the CETA system. One is to try to do some
things to improve railroad beds. This has significant energy implica
tions because I am told by the experts that one rail line has the trans
portation equivalent of nine superhighways. That kind of activity*
done at the national level, could do a lot to improve energy utilization.
The Department is undertaking two employment initiatives that I
feel hold considerable promise for improved safety and productivity
in the mining industry. I feel these are particularly important in light
of the Department’s new responsibilities for mine health and safety.
One initiative is the development of a miner’s apprenticeship program.
As you know, most miners acquire their skills through various on-thejob training activities. The quality of these programs is widely varia
ble. Therefore, we have developed a systematic, modular training
program for miners that will provide a standardized curriculum. We
are convinced that this approach will insure an adequate supply of
well-trained miners for expansion in the mining industries.
A related initiative involves the training of migrant and seasonal
farmworkers for coal-mining jobs. A consortium consisting of Wabash
College in southern Illinois, the United Mine Workers of America,
and the coal operators is sponsoring this Department of Labor-funded
project. They have joined together to insure that there are guaranteed
jobs for the trainees—including about 40 percent female enrollees—
at a starting salary of $15,000 per year. About 400 trainees are expected
to be involved in this project.
The Department of Labor is also becoming involved in the emerging
energy industries. For example, a growing number of CETA sponsors

139
have begun programs in the solar industry and other alternative energy
technologies. In California we are training solar water heating tech
nicians with the help of Sonoma State College’s School of Environ
mental Studies. In San Jose, former migrant farm workers are being
trained as solar technicians as part of a broader maintenance course.
In Nevada, CETA and private industry have combined to train direc
tional drilling technicians.
As a result of the administration’s solar technology, we have pro
posed to the Department of Energy and the Community Services
Administration that they join with us in a pilot project in solar
utilization and employment. The program would operate through the
CETA system on guidelines more or less similar to the weatherization
program. The project would seek to develop low cost home applica
tions for solar energy, train CETA enrollees for solar-related jobs, and
overcome structural barriers to efficient use of solar energy.
To the extent the project shows solar energy to be practical, we
could explore solar retrofitting programs for low income and elderly
homeowners. Such programs could be a positive impetus to the solar
energy industry by enlarging the total demand for solar devices and
by contributing to the supply of skilled labor.
In terms of employment impact in the long run, the most crucial
factor is that the country move as rapidly as possible from our depend
ence on foreign oil to the use of the lowest cost, reliable domestic
energy sources consistent with safety in production and concern for
those individuals facing employment adjustments. Long-run energy
supply policy, however, should not be based primarily on the number
of people alternative energy industries would employ. However, our
policies should reflect great concern for those required to make adjust
ments. Indeed, the policy of “gradualism” in price decontrol explicitly
recognizes the potentially disruptive effects of instant decontrol on
employment.
As we develop the long-run strategy, the direction of adjustments
and the new patterns of energy demand and production should become
more apparent. At this point, the Department of Labor can play a
major supportive role by assisting the labor market adjustment
process. We can examine in more detail areas in which there may be
skill shortages in particular occupations. We can determine which
sectors will enjoy increased demand for their output—and hence
increased employment—as a result of anticipated conservation actions.
We can intensively examine which industries will experience employ
ment declines and what actions can be taken to assist displaced workers
through retraining, upgrading, and relocation. We will attempt to
determine whether these changes will engender regional shifts in
employment and production.
Anticipating these questions, the Department initiated a research
program in the area of energy and employment.
Our basic research element was a broad base review of energy models
to see which ones were best adapted to answering specific energyemployment questions. We anticipate further work in this area to
sharpen our insight an enable us to better plan our programs to assist
in the adjustment effort. Research has also been done on the geographic
employment effects of changing energy prices. Armed with such re

140
search into the energy-employment relationship, the Department can
better harness its existing programs such as the labor market infor
mation system, the occupational analysis program and the Employ
ment Service Job Matching Service to facilitate the process.
Such research will also help us develop new initiatives to assist in
improving the smooth functioning of labor markets. One initiative is
already at an advanced stage of development. The Department has
cooperated with the Department of Energy and the Tennessee Valley
Authority on the design and implementation of the construction man
power demand system (CMDS). This system is producing data on
occupational and geographical specific employment needs in the powerplant construction industry over the next 5 years.
In addition to our internal analytical efforts, interdepartmental
coordination will be pursued and strengthened. I will encourage joint
programs with cither agencies such as the Departments of Energy;
Commerce; Housing and Urban Development; Health, Education, and
Welfare; and Transportation in the areas of energy-related employ
ment programs.
It is my firm belief that our energy policy must be consistent with
our employment policy. As the country adjusts to dramatically higher
energy prices, we must examine our own energy sources and put them
to the most efficient use.
To assist in the adjustment process, both in the near-term and long
term, the Department of Labor can smooth the transition in specific
labor markets facing technological or structural shifts. Given the
proper balance of monetary and fiscal policy and structural programs,
we can enjoy the benefits of safe, reliable, and lowest cost energy that is
available in a full-employment economy. In working toward these
goals, broad coordination and cooperation will be required.
Mr. Chairman, I would be happy to try to answer your questions.
[The prepared statement of Secretary Marshall follows:]
P repared S t a t e m e n t

on.

R a y M arsh all

Mr. Chairman and members of the subcommittee, it is a pelasure to be here
today to give you my view on the effects of energy policy on employment and to
discuss what measures can be taken to provide more jobs as we create and con
serve energy.
During the last several weeks the coal situation has dramatically brought to
light the importance of labor resources in the National Energy Plan (NEP) out
lined by the President in April of last year. I believe that the dialogue on national
energy issues, for the most part, has omitted serious consideration of the po
tential employment impact of the proposed NEP. In determining the best strategy
we must have a clear understanding of the energy-employment relationships.
The impacts on potential employment are significant since, particularly in the
long run, different energy strategies may yield significantly different employ
ment consequences. For this reason, it is important to consider the employment
consequences of a particular energy strategy before committing ourselves to that
strategy.
Today, I plan to outline a number of basic energy-employment relationships,
where we stand with respect to fully understanding this critical relationship, and
what remaining problems and issues should be addressed. Specifically, I would
like first to discuss the near-term impact on employment of sharply higher energy
prices, particularly as they placed unexpected burdens on certain industries and
regions. Second, I will examine the relationship between energy conservation
and employment as a critical element of our NEP in adjusting to higher energy
price**, in tiie near-term. Finally, I will examine the longer term adjustment prob
lem and the Department’s role in this adjustment.

141
THE NEAR-TERM IM PACT OF HIGHER PRICES ON ENERGY-EMPLOYMENT

The most dramatic impact of energy on employment has come from the sharp
increase in all energy prices as a result of the initial quadrupling of OPEC oil
prices. The immediate effect of this action was substantially increased inflation
which, in turn, was a major contributor to the massive recession of 1973-75. This
country and indeed the economies of other industrial and developing countries
are still recovering from this impact wiiieh resulted in the highest rates of un
employment experienced by this country in the postwar period. While we have
been fortunate to make substantial progress towards recovery, many countries
are still experiencing substantial unemployment due to the failure of OPEC to
recycle funds received for oil exports into employment generating productive
activities. In essence, the OPEC “tax” on energy has led to higher world savings
rates which, combined with ¡the fear of inflation, has led many countries to fol
low restrictive macroeconomic policies resulting in high and ever rising unem
ployment. Until these oil bill funds are effectively recycled, this world unemploy
ment problem will plague us with such attendant problems as increased pressure
on trade practices and monetary stability.
Domestically, this employment impact has been addressed relatively effectively
through the correct application of macroeconomic policies. Specifically, this Ad
ministration has implemented its fiscal stimulus package and has proposed
further tax cuts to compensate for the loss in spending power. The administra
tion’s longer term commitment to achieving full employment is evident in its
strong support of the Humphrey-Hawkins legislation now before the Congress.
The macroeconomic effects of higher energy prices on empolyment are clearly
the most significant in terms of magnitude. However, the sharp increase in energy
prices has also brought disruptions within particular industries and regions. For
example, we have seen severe dislocations that adversely impact specific areas of
our country as we rapidly expand the production of coal, gas, oil, uranium, or vir
tually any other large energy resource. The “boomtown” syndrome in western coal
development is indicative of this problem. The problems, of course, transcend
just labor market dislocations and include the availability of housing, roads,
schools, parks, hospitals, etc., public attitudes toward new residents, the ability of
local communities to improve tax systems, adequate information for rational de
cisionmaking, an many others.
THE RELATIONSHIP BETWEEN ENERGY CONSERVATION AND EMPLOYMENT

142
Output per
worker hour
(1972)

dollars
Industry :
76.0
Petroleum refining-----------------56.7
Gas utilities__________________
49.3
Pipeline transmission_________
32.0
Electric utilities______________
26.3
Crude petroleum, natural gas_.
17.5
Oil, gas-drilling, exploration---17.3
Median value for all industries.
13.9
Coal mining__________________
Source : BLS, industry manpower factors.
To the extent that consumers spend less income on energy resources and more
income on more labor intensive alternative goods and services, employment will
increase. We are just beginning to gather data on this relationship, but I am
convinced that it will in the long run have a substantial impact on employment.
In the coming years, aided by the knowledge that energy conservation meas
ures enhance job opportunities, we expect individuals and corporations to con
tinue to seek more efficient ways of utilizing energy. We already see numerous
examples of new energy conserving technologies in such areas as better insu
lated buildings, more efficient electrical machinery, and energy saving
refrigerators.
I want to assure this subcommittee that I fully support the conservation
component of the proposed NEP. I believe that properly implemented it can
assist in achieving our employment goals. It makes good sense in terms of im
proving our efficient use of energy, of extending the supply of nonrenewable
energy resources, of environment impact, and of employment.
THE DEPARTMENT’ S ROLE IN CONSERVATION

During the past two years the Department of Labor has stepped up its efforts
to create conservation related employment. Comprehensive Employment and
Training Act (CETA) prime sponsors participate with agencies in weatherization activities particularly for the homes of low income and elderly persons.
These projects include installing insulation, storm windows, plastic wall cover
ings, weather stripping, wrapping pipes, caulking, minor roof repairs, and re
pairing holes and cracks in walls.
Other CETA participants are employed in “energy audits” in which houses
are checked to determine the extent of avoidable heat loss. Still others are in
volved in education/demonstration efforts to inform others about substantial
fuel savings available through proper weatherization and how to go about
securing these services. We estimate that CETA sponsors have joined forces
with the Community Services Administration (CSA), and the Department o f
Energy (DOE) to weatherize over 100,000 homes in the last three years. In
terms of jobs, we estimate that about 16,000 weatherization jobs have been
created. We plan to continue this program as evidenced in a memorandum of
understanding between DOL, DOE and CSA which commits our agencies to con
tinuing joint efforts in the weatherization area.
ASSISTIN G IN EMPLOYMENT ADJUSTMENTS IN TH E ENERGY SECTOR

The emphasis on conservation is extremely important, but there are limits
to such actions in terms of known technology. Energy demand continued to rise.
Conservation can accommodate part of this increase, but barring some dramatic
technological breakthrough we must work to expand energy production as well.
This task involves both increasing domestic production in established energy
sources and developing alternative sources of energy. While I am not in a po
sition to endorse any mix of potential energy options, I am sure of two things:
first, alternatives to nonrenewable fossil fuels must be developed; second, the
employment consequences of different energy mixes will be substantial and we
must plan for these impacts on our workforce.
The Department of Labor through its employment and training programs is
engaged in a variety of activities to assist industries and individuals in adjust
ing to changing employment patterns in the industry. Literally, thousands of

143
workers have received skill training through local and national CETA programs
and were placed in energy-related industries. For example, welders were trained
for the Alaska pipeline, offshore drill rig construction and maintenance workers
for the oil industry, mine maintenance mechanics for the coal industry, operating
engineers for oil and gas companies, and craftworkers for shipyards building oil
and liquified natural gas tankers, coal barges and other energy related transpor
tation equipment.
The Department is undertaking two employment initiatives that I feel hold con
siderable promise for improved safety and productivity in the mining industry. I
feel these are particularly important in light of the Department’s new responsi
bilities in mine health and safety. One initiative is the development of a miner’s
apprenticeship program. As you know, most miners acquire their skills through
various on-the-job training activities. The quality of these programs is widely
variable. Therefore, we have developed a systematic, modular training program
for miners that will provide a standardized curriculum. We are convinced that
this approach will insure an adequate supply of well-trained miners for expan
sion in the mining industries. A related initiative involves the training of migrant
and seasonal farmworkers for coal mining jobs. A consortium consisting of Wa
bash College in southern Illinois, the United Mine Workers Association, and the
coal operators in sponsoring this Department of Labor funded project. They have
joined together to ensure that there are guaranteed jobs for the trainees (includ
ing about 40 percent female enrollees) at a starting salary of $15,000 per year.
About 400 trainees are expected to be involved in this project.
The Department of Labor is also becoming involved in the emerging energy in
dustries. For example, a growing number of CETA sponsors have begun programs
in the solar industry and other alternative energy technologies. In California we
are training solar water heating technicians with the help of Sonoma State Col
lege’s School of Environmental Studies. In San Jose, former migrant farm work
ers are being trained as solar technicians as part of a broader maintenance course.
In Nevada, CETA and private industry have combined to train directional drilling
technicians.
As a result of the administration’s solar technology, we have proposed to the
Department of Energy and the Community Services Administration that they
join with us in a pilot project in solar utilization and employment. The program
would operate through the CETA system on guidelines more or less similar to the
weatherization program. The project would seek to develop low cost home applica
tions for solar energy, train CETA enrollers for solar related jobs, and overcome
structural barriers to efficient use of solar energy.
To the extent the project shows solar energy to be practical, we could explore
solar retrofitting programs for low income and elderly home owners. Such pro
grams could be a positive impetus to the solar energy industry by enlarging the
total demand for solar devices and by contributing to the supply of skilled labor.
LONG-TERM ADJUSTMENTS

In terms of employment impact in the long run, the most crucial factor is that
the country move as rapidly as possible from our dependence on foregin oil to the
use of the lowest cost, reliable domestic energy sources consistent with safety
in production and concern for those individuals facing employment adjustments.
Long-run energy supply policy, however, should not be based primarily on the
number of people alternative energy industries would employ. However, our
policies should reflect great concern for those required to make adjustments.
Indeed the policy of “gradualism” in price decontrol explicitly recognizes the
potentially disruptive effects of instant decontrol on employment.
As we develop the long run strategy, the direction of adjustments and the new
patterns of energy demand and production should become more apparent. At this
point, the Department of Labor can play a major supportive role by assisting the
labor market adjustment process. We can examine in more detail areas in which
there may be skill shortages in particular occupations. We can determine which
sectors will enjoy increased demand for their output (and hence included em
ployment) as a result of anticipated conservation actions* We can intensively
examine which industries will experience employment declines and what actions
can be taken to assist displaced workers through retraining, upgrading, and
relocation. We will attempt to determine whether these changes will engender
regional shifts in employment and production.

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Anticipating these questions, the Department initiated a research program in
the area of energy and employment. Our basic research element was a broad base
review of energy models to see which ones were best adapted to answering specific
energy-employment questions. We anticipate further work in this area to sharpen
our insight and enable us to better plan our programs to assist in this adjustment
effort. Research has also been done on the geographic employment effects of
changing energy prices. Armed with such research into the energy-employment
relationship, the Department can better harness its existing programs such as
the Labor Market Information System, the Occupational Analysis Program and
the Employment Service Job matching service to facilitate the process.
Such research will also help us develop new initiatives to assist in improving
the smooth functioning of labor markets. One initiative is already at an advanced
stage of development. The Department has cooperated with the Department of
Energy and Tennessee Valley Authority on the design and implementation of the
Construction Manpower Demand System (CMDS). This system is producing data
on occupational and geographical specific employment needs in the power plant
construction industry over the next five years.
In addition to our internal analytical efforts, interdepartmental coordination
will be pursued and strengthened. I will encourage joint programs with other
agencies such as the Departments of Energy, Commerce, Housing and Urban
Development, Health, Education and Welfare, and Transportation in the areas
of energy related employment programs.
CONCLUSION

It is my firm belief that our energy policy must be consistent with our employ
ment policy. As the country adjusts to darmatically higher energy prices, we
must examine our own energy sources and put them to the most efficient use.
To assist in the adjustment process, both in the near-term and long-term, the
Department of Labor can smooth the transition in specific labor markets facing
technological or structural shifts. Given the proper balance of monetary and fiscal
policy and structural programs, we can enjoy the beenfits of safe, reliable, and
lowest cost energy that is available in a full employment economy. In working
towards these goals, broad coordinaton and cooperation will be required.

Senator K e n n e d y . Thank you very much.
I think these concluding' statements give us some additional hope
when implemented in terms of our energy program and its relation
ship with employment. We are going to hear from some of those who
will follow you, Mr. Secretary; some of the leaders of some of our
unions who have been the most concerned about employment, who
would think that we ought to develop an employment impact state
ment in terms of energy and energy alternative systems.
We have environmental impact statements which are required in
terms of various governmental activities that will impact the environ
ment. We are at a point where over the period of the next few years
we are going to make major watershed decisions at the national policy
level, in the Congress and in the executive branch in moving this
country to try to meet the challenge of our energy crisis.
First of all, do you support that concept and do we have the kind of
data which is necessary and essential to do it? I f we do, are you going
to do it? I f you don’t what are we going to do about it?
Secretary M a r s h a ll. I support the concept. I think the answer to
the second part is that we do not, but we should develop it. We have
particularly inadequate information on the subnational level. We can
do things that predict what will happen in the whole country but be
cause of the possibilities of substitution and relocation it is very dif
ficult to pinpoint where that activity is likely to take place. If you are
going to plan for particular labor markets, it becomes very important
to do that.

145
Now, as I mentioned in my prepared statement, we have underway
several efforts to try to get better data and to make a better determina
tion. I don’t think that we need necessarily to achieve perfection in
this area. My view has always been that, first, you will never get per
fection in any kind of economic analysis because you never get completely adequate data. Therefore, you have to make the very best use
of the data that you already have. I think we should start with that
immediately, looking at it, and analyzing it, and getting the best fix
that we can on the employment implications of different kinds of
energy development.
Senator K ennedy . We had some very interesting testimony yester
day, from Mr. Benson, for example, that compared the employment
impact of the move toward nuclear power on Long Island, versus solar
power, pointing out that there was close to three times as many jobs
created by the use of solar energy in this area. We have also heard im
pressive testimony this morning about the practical impact on em
ployment in the State of California by moving more dramatically in
the area of solar energy. It just seems to me that if you say: “We have
problems in doing the kind of careful evaluation with the greatest
degree of precision,” then I think we ought to be able to, in reviewing
that testimony and the practical experience that is taking place in
some area, be able to form some initial impressions on this that ought
to have an impact on decisions by the administration in the develop
ment. of alternative energy systems.
Secretary M arshall. Well, I think we should be able to examine
those and determine the employment impacts.
Senator K ennedy . H ow are we going to do that ? All of us. I think,
are mindful that in the announcement of the energy program last year
that there was very, very, little reference in terms of the specific em
ployment impacts. There were general comments with respect to mac
roeconomic implications, but very little in this type of analysis of what
we can expect now and in the future ?
Secretary M arshall. In the Department of Labor we are very much
concerned about the employment impact, of course, and have these
efforts underwav that I mentioned in mv study. In addition, we also
collect studies that other people have done, analyze those and try
to draw whatever inferences we can from the employment impacts
they have discovered.
I think that it makes sense in the long run to develop solar energy.
It is a much less labor-intensive source of energy, but it would have
positive employment effects.
Senator K ennedy . Well, do you have or does your Department now
have the abilitv to proiect labor demand for each energy system pres
ently in operation or future renewable energy technologies or various
conservation strategies ?
Secretary M arshall . We don’t have the ability to do it with preci
sion. Therefore, I would say that it would be very difficult for us to
rely on what we are able to do at this point, expect in one area where
we have made the greatest advances and that is in the construction in
dustry. Construction of powerpi ant facilities and the demand for labor
in that industrv has been developed significantly by this interdepart
mental cooperative effort.

146
Senator K e n n e d y . Can we expect in any energy proposal that would
be sent to the Congress an employment impact comment or statement
in the future?
Secretary M a r s h a ll. Well, I think that you can expect that we will
do the best that we can with that and indicate the limitations of what
ever statement we do make.
Senator K e n n e d y . Obviously we have existing directions that we
will be facing over the period of these next few weeks and months.
Initiatives by the administration, for example, expansion of the invest
ment credit program, can or may, in terms of its tax implications, fur
ther imbalance the fashioning and shaping and development of alter
native energy systems, but has very marginal impact in terms of em
ployment. As one who has had serious reservations in any event about
that particular program, we see where about 95 percent of the invest
ment credit has gone to the major 500 corporations, and the increase
over the period of the last 9 years has been about 72,000 jobs, a 0.15-per
cent increase in employment.
Again, the significant increase in the expansion has been outside o f
the top 1,000 corporations.
The thing we are concerned about, both with the recommendations
that the administration is making in terms of tax policy and in terms
of energy policy, is that we are just not having the kina of hard, real
istic analysis about the specific employment impact. I think it is fair
enough to say that we have heard before this committee many hours
of testimony from the Council of Economic Advisers about the mac
roeconomics but not the precise analysis of the impact of various alter
native energy systems and conservation programs; and what it will be
over any reasonable period of time of expectation. It seems to me that
we are entitled to that type of analysis. I believe you believe the same
thing. Maybe some of these ought to be directed toward Mr. Schlesinger
rather than you. But, I want to make sure that we have a strong rec
ord in terms of this part of our hearing.
Secretary M a r s h a ll. I do agree that we ought to do that.
Senator K e n n e d y . Have you been asked by the Department o f En
ergy for this type o f analysis ?
Secretary M a r s h a ll. During the time that we were putting the energy program together we gave our suggestions about the employment
impacts and this was one of the things Mr. Packer and Mr. Nordlund
tried to concentrate heavily on.
Senator K e n n e d y . The perfect energy system or the macroeco
nomics?
Secretary M a r s h a ll. Well, we would try and look at both. Maybe
Mr. Packer would enlarge on what he has been doing and what the
Department of Labor has been doing, specifically with respect to that.
Senator K ennedy. OK.

Mr. P a c k e r . OK, the problem is, of course, extremely complicated.
Frequently, more highly labor-intensive energy sources will be more
expensive.
We have a concern over inflation and the balance of payments----Senator K e n n e d y . But shouldn’t we, in the Congress, be able to
make some choice about that? When you send up your proposal
shouldn’t we be able to make some kind of judgment about whether it is
going to be jobs or inflation ? We are entitled to that.

147
Secretary M arsh all . The price-of-employment factor.
Mr. P acker . That is right. The CBO did make an estimate of the
price-employment impact and so did we. We worked with the Depart
ment of Energy to see what that balance would be.
Senator K e n n e d y . But not perfect alternative energy systems, was
it?
Mr. P acker . We did take a look at, for example, the program that
was proposed but there was no attempt that I am aware of to see what
would happen, for example, if you really drove the price of oil up and
tried to subsidize other sources of energy. But that was because there
was a general feeling—and I think analysis would bear that out—that
any of those alternative approaches which were higher cost would
ultimately lead to less employment than one that was balanced.
Senator K e n n e d y . Have you give us that kind of information ? Is
that your own personal view or is that based upon data that has been
developed and submitted to the Congress ?
Mr. P acker . Well----Senator K e n n e d y . I mean, for example, in terms of the high cost o f
energy, did you analyze the present cost in terms of tax expenditures
in the area of the petroleum industry or in terms of the utilities, and
compare that to what it would be for solar? I don’t ever remember any
kind of such analysis as that being asked for; and perhaps the job im
plications are going to be in this as well.
Mr. P acker . That is correct.
Senator K e n n e d y . Well, the important thing, I think, is to try and
see if you can’t get some agreement about where we are going to go
now and in the future. I don’t think the Congress really demanded
such an analysis of you people. We have not really demanded it, for
example, in the competitive impact of the national energy program.
Nothing was done effectively on that. I don’t think it was really done
for the precise job aspects of it, and I think what we are trying to do
is to see how we are going to deal with it now based upon what our
energy policy was or is at the present time and what we will do in
the future.
Mr. P acker . I think we have looked at broad alternatives in that
direction. For example, high conservation programs that emphasize
conservation; ones that emphasized more intensive capital utilization.
In the broad shifts, one does not find very dramatic changes in em
ployment.
Senator K e n n e d y . Y ou are reaching conclusions now? I would like
to have you submit that kind of data that would show that. It is obvious
from your own response you don’t believe in it because you are reach
ing your own kinds of conclusions and we have heard very detailed
analyses of various energy systems related to particular areas with
their exact job implications. We are trying to find out whether there
is a similar kind of an analysis that can be done in a broad stroke with
respect to national alternative energy policies whether it is in the alter
native energy or in the field of conservation.
I think your response would indicate that you don’t believe that
there is great swings on it. We have heard very important testimony
that there is a very important swing on it. Now, I mean that might not
be right and we are not analyzing it in that respect, but it was impres

148
sive testimony. And we are asking whether we can expect to get analy
sis on the alternative energy systems from an employment point of
view. I think we are entitled to that.
Mr. P acker . I really was referring back to the studies that were
made since 1974, in the previous administration, for example, they had
done some work on alternative broad policies. Every one of those that
I have found indicated that the pace of change, the overall macro
effects, swamped the differences. I think I have seen some of the sources
of studies you referred to, Mr. Chairman, and they never get com
plete. For example, surely it would be more employment-generating
to put big solar apparatus on homes, but one has to wonder, unless the
Government is going to subsidize those, what that will mean to the
selling of homes themselves if homes are more expensive. And as you
trace through those things, the different kinds of studies I have seen
over a period of 4 years since 1974, always show that the assumptions
are such that you don’t get the kinds of changes that you might think.
The most important thing is that the price of energy has been the
most important characteristic of the employment effects of alternative
policies. The price of energy has been the major determinant of the
employment effects in the studies that I have been familiar with. We
can certainly provide to the staff the substantial studies.
Senator K e n n e d y . Have you done analysis of what the conservation
would be in terms of jobs versus new production for the same amount
of barrels of oil ?
Mr. P acker . Yes; we know that up to a point and I think we are close
to it, conservation is more employment-intensive.
Senator K e n n e d y . Well, have you got that type of analysis? Have
you done that type of analysis ?
Mr. P acker . We can find that for you. I don’t have it at my finger
tips. Some of it may be a couple of years old.
Senator K e n n e d y . I s it important for both the administration and
the Congress who are examining national energy policy, is it important
to have that type of analysis ?
Mr. P acker . Yes; it is.
Senator K e n n e d y . It has to come from the Department of Energy,
I suppose, but it has to be shaped in terms of the Department of Labor.
Now, what I would like to know is whether you think it is important
to do.
Mr. P acker . Yes; it is important. I think much of it has been done.
It certainly could be improved extensively, but I think you will get the
broad outlines of answers to the questions you are asking. We will get
back to the Department of Energy and provide your staff with the
analyses that have been done and perhaps talk to them about further
analysis you think is appropriate.
Senator K e n n e d y . Well, it isn’t just what we think is appropriate. It
is, hopefully, what you think is important, too, in the Department of
Labor from an employment point of view.
Mr. P acker . Y es.
Senator K e n n e d y . If you don’t think it is terribly important you
are just responding to us. I think that is somewhat indicative, which is
a disappointing attitude, very frankly. It seems to me that we would
expect that from the Department in terms of fashioning and shaping

149
the policy. Just like we expect from the Justice Department what the
competitive impact from an antitrust point of view will be on an energy
program. And you are the ones that have got both the information and
I think the responsibility to have that. Now, whether Schlesinger is
going to ask you to ignore it, is one thing; but if you don’t believe that
it is important and you are going to give us warmed-over analysis of
old studies, then save yourself the' time and don’t bother.
Mr. P acker . My own personal and thought-through position after
working on this problem for 4 to 5 years, is that we have worked closely.
I have worked personally, on the energy-employment situation and I
am fairly well convinced that we are close to tlie appropriate policy
in employment terms. We have done studies over a period of time and
we have looked at the old studies. The new programs are not so sub
stantially different from what has been analyzed before to make me
change my mind. But you are right about our responsibility. We would
be very active and very forthright if we thought that the energy poli
cies were being done without full consideration of the employment
aspects of it.
Senator K e n n e d y . What is your analysis, for example, in the ex
panded investment credit concerning the major energy producing
companies ? What will that mean in terms of employment ?
Mr. P acker . Y ou are talking about the overall investment tax credit ?
Senator K e n n e d y . Yes; the one that will be sent up by the admin
istration, the expansion of it.
Mr. P acker . As you know, there are----Senator K en n ed y . No ; what is your analysis ?
Mr. P acker . I have never found the investment tax credit in my
analyses to be as potent as some other people have. But there is a wide
difference. The evidence is certainly mixed enough that I would think
anybody who was 100-percent certain about the employment impact
would be mistaken. Again, I don’t think we have oversold those em
ployment impacts compared to the other alternatives. We generally
know that a tax reduction is going to work out to about 3 to 1, personal
to corporate. If you are going to give a corporate tax cut, investment tax
credits are, in my judgment, the most employment-generating tax cuts
you can have in the corporate field. They are the most effective. And
given the usual practice of a 3 to 1 ratio with personal to corporate in
come tax cuts, I think the investment tax cut is appropriate from an
employment point of view.
Senator K e n n e d y . Mr. Secretary, my time is up on this. I don’t
know whether I have been able to make myself clear.
Secretary M arsh all . Oh, I think it is clear.
Senator K e n n e d y . I hope you can understand what we are driving
at in terms of how we would like to work with the Department.
Secretary M a r s h a ll. Let me say. Senator, I think that what you are
trying to say is clear; it is to me. And I think that we share your con
cern and that is one of the reasons we have initiated these studies to
find as much as we can about the employment impact. But what we do
in g o in g about trying to get answers to questions is first see what other
people have done; determine where the gaps are; and, then determines
what kinds of things we need to do to be able to fill those gaps. That
is the reason we have an ongoing research program, to attempt to do
that.

150
The second point is that we agree very completely that we should
interact with the Department of Energy and we have been doing so. We
have cooperated very closely with them both on our research programs
and in particular areas. We have, for example, an interdepartmental
committee on the coal industry to look at those problems. In addition
we are focusing on energy and employment problems generally.
So, we have looked at all those. As I said at the outset, however, we
áre not satisfied with the answers that we get.
Now with respect to the investment tax credit, we clearly don’t be
lieve that we can rely very heavily on that for our overall employment
policy and that is the reason that we give major emphasis to the direct
or selective employment programs. We think that if you refine the
analysis further you will find that if you are looking at tax cuts, then
the investment tax credit becomes effective relative to other things
that you could do. If you look at the various ways you could reduce
unemployment it becomes a much more expensive way to reduce unem
ployment than the direct programs we rely most heavily upon.
»Senator K e n n e d y . The chart you see is the analysis done for Long
Island of nuclear plant employment compared to conservation and
solar energy use from the jobs point of view. The final conclusion is
there is a 270-percent difference for the same kind of capital invest
ment. That was done in a narrow area but on two major kinds of energy
systems.
As I say, it is very detailed and there is a lot of information provided
in there. But it is the kind of analysis that in a more general kind o f
way I would hope as we are fashioning an energy policy that we would
be able to get for alternative sources of energy, so that we know. As
the Congress makes decisions on various alternative systems, as well
as in the areas of conservation, what the employment impacts are going
tobe.
I think, Senator McGovern, you are next.
Secretary M arshall . I think this job analysis is a good beginning
but there are a lot of other things we would like to know, like what
kinds of jobs are being created and how transferable they are.
Senator K e n n e d y . That is right and that is important. It’s import
ant whether the jobs are created in the community and whether those
are unskilled jobs—whether they are skilled jobs. That is the kind o f
thing that we ought to have so that we know. Maybe we can make some
judgments that we are prepared to go for somewhat more costly sys
tems if in the longer run it is going to be cheaper in direct moneys in
terms of other kinds of employment problems, maybe not.
Secretary M arshall . We agree with that.
Senator K e n n e d y . But that is the kind of analysis we need so we are
able to legislate in an informed way.
Senator McGovern.
Senator M cG overn . Thank you, Mr. Chairman; and thank you
for your statement, Mr. Secretary.
Mr. Marshall, in the opening pages of your prepared statement
you lay the foundation for your own view that much of the unem
ployment problem in the country today stems from the very sharp
rise in energy prices after 19f3, the inflation that caused, and
the failure of the OPEC countries to recycle the profits from those
sharp increases in oil prices. You state specifically that the adminis

151
tration has attempted to counter that with its fiscal stimulus pack
age, along with the $25 billion tax cut. I wonder if you, as Secretary
of Labor and as a professional economist, have come to the view that
we will have greater impact on reducing unemployment through a
tax cut method than we would if we pursued some of the other pos
sibilities you have mentioned this morning. You have referred, for
example, to the upgrading of the rail system in the Nation. Making
reference to the efficiency of rail transport you noted the fact that
you get more performance out of a mile of track, than you do 9 miles
of superhighways. What, in your judgment, would be the relative
impact on the employment situation of investing that proposed $25
billion tax cut in an alternative way ? For example, in public invest
ment, say in rebuilding the rails, and providing support for the con
struction of solar collectors across the country, and the retrofitting
of public buildings, stepping up what you are now doing in the way
of insulating homes as well as other buildings? Wouldn’t we really
get more jobs and more economic stimulus out of carefully selected
public investment of that kind than we would out of the tax cut ?
Secretary M a r s h a ll . Yes; you do get more impact out of direct
expenditures, if you are concerned mainly about employment, than
you do out of tax cuts.
Senator M c G o v e r n . Eight.
Secretary M a r s h a ll. Our basic view is that you need a mix. How
much it costs to create a job through direct expenditures depends, of
course, on what kind of expenditure you undertake. I f it is a highly
capital-intensive activity, it yields few jobs relative to the amount
of money committed.
Senator M c G o v e r n . The kinds of things we are talking about here
are not capital-intensive, however.
Secretary M a r s h a ll . That is right. That is the reason we advocate
to continue to build up a substantial public service employment pro
gram. As you know, in the last year we have more than doubled that
program and our proposal for the future relies heavily on doing those
kinds of things. We believe that we ought to do those within the limit
of our ability to mount effective programs and to be sure that the
work done is meaningful work and that the programs are adequately
administered. We believe that is the way. Our general analysis is
that through macro policies, if we didn’t do anything else, we could
get unemployment down to about 4.8 percent without any inflation
ary impact from what you do as a result of that program.
But using these direct expenditures which create jobs for much
lower cost and are much more targeted, we can close that gap and
move to 4-percent unemployment contemplated by the HumphreyHawkins bill and still that would not be inflationary because of any
thing you do in the program. Now, you might get inflation, and that
doesn’t mean inflation might not be a problem; but our analysis
doesn’t suggest that is anything that we do as a part of that effort.
So that we believe that you need the general policies to stimulate the
private sector and to get jobs there, but that we also need to give heavy
reliance on public programs and our recommendations are that they
continue to be improved.
Now we also believe that the link needs to be perfected. That is, we
need to perfect the relationship between public jobs, public service

152
programs, and the regular economy, so that you don’t just get one cate
gory of people who build up in the public service employment and
training and work experience program but try to provide ways to
move them out. Now, the general stimulus of the economy should make
business sufficiently good that people in the public programs can move
into the regular economy.
Senator M c G overn . Let’s just look again for a moment at the matter
of the rail system in the country. I think any good energy policy not
only has to produce more energy but it also has to address the prob
lems of unemployment and inflation in the country. It strikes me that
one area that is very fruitful, very hopeful to do all of these things in
a kind of a package, would be to commit ourselves more vigorously
than we have to upgrading the rail system. I heard President Meanv
say the other day that there were 7,000 derailments in the United
States last year. The track beds in my State are so bad that we have
had to slow the trains down to about 7 or 8 miles an hour. We have
even had two trains that fell off the track in South Dakota while they
were standing still. [Laughter.]
We talk about the United States being No. 1, and maybe we are in
some categories, but we must be about No. 19 in our rail system. Yet,
here you have a transportation system in this country as a whole which
is burning about 9.5 million barrels of oil every day; we know that the
rail system is the best way to move heavy goods efficiently, maybe even
to move large numbers of passengers if we had a decent system—I am
just wondering if we ought not to take a very critical look at the size
of that tax reduction and consider diverting part of it into upgrading
our rails, or other things of a similar nature. That’s just not public
service employment. This could be worked out in concert with private
industry. You would get a more efficient use of energy, No. 1; second,
you would produce literally millions of jobs, I think, both skilled and
unskilled; third, we are told this is a more environmentally safe means
of transportation and if it is cheaper it also combats inflation; and it
just strikes me that it is a lot more—that it is a more solid way to ap
proach the economic and energy problems of the country than handingout a small tax cut to everybody. I would like a tax cut, too, but you
know we could fritter that away in a hurry and in the end have very
little to show for it, whereas carefully directed investment of this kind
I think would help everybody.
Secretary M arshall . Yes: we agree. We have been trying to do a
number of things to accomplish that. It has one other advantage. Most
of the jobs in the railbed rebuilding program, particularly in the
Northeast, would be located where you need them: that is they would
be located in areas of verv high unemployment. We have been explor
ing a program with ConRail, for example, because ConRail is in the
area of special need. But. the need that you indicate is all over the
country. We have been trying to locate needs where jobs can be created
near where people live. That has been one of the reasons that we have
pockets of high unemployment. A railbed reconstruction program
would have that effect. We have also been exploring and working with
the Department of Transportation in developing a policy to deal with
that .irenerallv. Immediately, our concern was to use as much of the
CETA resources as we could because they are designed to put unem

153
ployed people to work immediately and we are trying to concentrate
those heavily on the disadvantaged. One serious problem with the dis
advantaged in the large cities, particularly of the Northeast, has been
that the jobs are growing outside areas where people live. So that pro
gram would have that added advantage.
Senator M c G overn. M r. Secretary, notwithstanding the chart Sena
tor Kennedy referred to, indicating that you get more of a job impact
out of solar development than you do out of nuclear construction, do
you have the feeling, as I do, that we are drifting toward a nuclear
future much more than we are toward solar development, unless there
is some reversal in the present energy policies the administration is
pursuing. I don’t really see much indication in that administration
energy package that there is a serious commitment to the development
of solar power in this country.
Secretary M a r s h a l l . Well, I thought that we did have a serious
commitment to develop solar energy. It seems to me that some of that
requires research and technology so that we know more about it, but
also proceeding to use effectively what we already have.
Senator M cG overn. Well, there was a lengthy piece that appeared
in the Outlook section of the Washington Post a couple of weeks ago
by M r. Dennis Hays. Let me read a couple of observations here and
I would like your comments on this. Ho says that. “ Solar, wind and bio
logical energy sources combined will receive less than one-fifth as
much as is directly spent on nuclear fission.” This is talking about the
President’s current budget.
“Renewable energy sources will receive $200 million less than
breeder reactors alone.”
Then he makes this conclusion: “ Tn fact, after adjusting for inflation
the Federal solar budget is $40 million lower this year than it was last
year.”
Now, granted that you can argue that there is something in there
for solar development, if those analyses are anywhere near right it is
really a pretty feeble commitment, isn’t it ?
Secretary M a r s h a l l . Well, what I would want to know before I
concur would be what other people are doing. It doesn’t seem to me
you can measure the impact of a Federal program entirely in terms of
how much, we spend on it. We need to know what our expenditures are
relative to others. For example, in our own area, one of our most ef
fective training programs is apprenticeship training. However, the
Federal Government spends very little on it because most of the work
is done by others. I think in the solar area that the States are doing
some things and there is a lot of private activitv. Before you could
conclude that this shows inadequate attention to it, if the Federal ac
tion is designed to serve as a catalyst to other activities, you immedi
ately develop the things you know more about. It seems to me that what
we really need is to develop diversity but to move ultimately to as
rapid development of solar energy as we can reasonably promote.
But I am not familiar or conversant with the total expenditures that
are going on in these different areas so I don’t know whether that
amount is the right amount to stimulate adequate solar development.
Senator M cG overn. Just one more question, Mr. Secretary. I was
impressed with the line of questions that Senator Kennedy directed at
3 1 -5 0 2 — 78--------11

154
you and your associates as to whether you have the capability to give
us some estimates on the various labor impacts of the different energy
strategies. There is a document that just came to my attention. I think
it was just released, “Jobs and Energy,” put out by a group calling
itself “Environmentalists for Full Employment.”
They quote a number of things and I will give you one sentence
typical of the kind of things they are trying to pull together. They
say the Senate Commerce Committee staff has estimated that 1.6 bil
lion in interest subsidies and loan guarantees for conservation retro
fits would generate 400,000 jobs.
I would just like to pin down, if I can, what your answer was to
the general line of questioning that Senator Kennedy was developing.
What detailed analyses can you provide on the labor impact of various
energy strategies in the near future and in the mid-term future. In
other words, do you have that capability ? If so, can that information
be made available to us?
Secretary M a r s h a ll. We do have capability to provide answers. I
indicated that we are doing some analysis there. We are not entirely
satisfied with the level of that analysis and we are trying to perfect
it. Let me ask M r. Kutscher from BLS who has worked hard on this
tell you what he is involved in at the Bureau of Labor Statistics.
Mr. K u t s c h e r . I think that, as the Secretary mentioned in his testi
mony, our capability is mainly at the national level and not to do
State or area analyses. But we do have a 160-sector model-----Senator K e n n e d y . I f you would yield. I think the Senator’s ques
tion deals with the systems, though. We are not asking what it is going
to be in Framingham or Pocatello, but in terms of the energy systems;
that is what the question is.
Senator M cG o v e rn . Just to illustrate that, supposing you were to
consider an energy future that was based rather substantially on the
development of renewable sources of energy, solar power, wind pow
er, geothermal, conversion of waste materials to energy—what, for ex
ample, would be the job-creating impact on an energy design of that
kind as over against one that relied primarily on the more conven
tional sources of energy and possibly heading eventually toward
greater reliance on nuclear power?
What would be the implications nationally of a nuclear future as
over against a solar future in terms of jobs? Which one produces
the most jobs, which one is the least inflationary, which one is the
most environmentally safe ? Aren’t those the kinds of studies that the
Department ought to be undertaking in conjunction with the Energy
Administration ?
Mr. K t jts c h e r . I think thev are important. I think we are much
more capable of answering the job impact on conventional energy
sources than we are on the new energy sources such as solar and wind
where very little data are available at the present time.
Secretary M a r s h a ll . In other words, there is not even an SIC code
for many of these areas, and those need to be developed and we need to
get experience in the relationship between the development of the
energy source and the employment effect.

155
Senator M c G overn . Mr. Secretary, couldn’t the Department give
more emphasis and attention on at least trying—recognizing the data
that is available—trying to come up with some answers ?
Secretary M a r s h a l l . Yes.
Senator M c G overn . I think the energy question is extremely im
portant, but I think the unemployment thing is so critical and so pain
ful that if we can relate these two issues together in a way that devel
oping the best possible energy policy would also create the maximum
number of good j obs, this is really what we are about.
Secretary M a r s h a l l . That is right. I agree completely, Senator.
Senator M c G overn . Thank you, Mr. Chairman.
Senator K e n n e d y . Senator Javits.
Senator J a v it s . Thank you very much. I am grateful to my col
leagues for having scheduled these hearings, because I wanted to get
a sense of proportion. It is one thing to get jobs out of energy, that’s
fine, but it is another thing to relate energy supplies with this great,
drastic, unbelievable loss of jobs, which the Secretary says is heavily
attributable to the increase in price and energy curtailment. There
fore, instead of turning the pyramid on its point, I would like to have
your appraisal of what the relationship is between greater supplies
of energy as compared with the prospects of employment, in view
of the fact that you pointed out that highly expensive energy costs
us drastically in terms of employment. Now, I am cognizant of the
conservation aspects. I am as devoted to conservation as any of my
colleagues, and insofar as that produces jobs—great; but what I am
talking about and asking you is that, as the Secretary of Labor,
where must our focus be? Should it be on producing energy which
will produce the most jobs in the energy production, or on producing
energy so that in all the fields supplied by energy production we get
more energy available for greater expansion that will produce in
finitely more jobs than what we now produce, whether out of nuclear
or out of solar—leaving aside the problem of conservation ?
Secretary M a r s h a l l . I think you have to concentrate on producing
energy.
Senator J a v it s . It should be our highest national priority ?
Secretary M a r s h a l l . With our energy policy; through other means
we can concentrate on reducing unemployment.
Senator J a v it s . Do you believe that the reduction in the cost of
energy has an even greater relationship to unemployment than the
number of people used to produce energy ?
Secretary M a r s h a l l . I think our analysis shows that, too; yes.
Senator J a v it s . N o w , you say that you think your analysis shows
this relationship. I think we have to have it on record.
Secretary M a r s h a l l . Yes.
Senator J a v it s . To present a balanced picture.
Secretary M a r s h a l l . Yes, my statement shows that.
Senator J a v it s . Y ou are satisfied that your statement is adequate in
terms of evidence ?
Secretary M a r s h a l l . Well----Senator J a v it s . I think that your statement mainly draws
conclusions.

156
Secretary M a r s h a ll. Well, yes, I think that conclusion can be fully
supported by the evidence.
Senator J a v its . Would you be kind enough, then, to submit whatever
will buttress that conclusion in terms of such findings as you have
made?
Secretary M a r s h a ll. Yes.
Senator J a v its. Would you do that ?
Secretary M a r s h a ll. Yes.
Senator J a v its. Mr. Chairman, I ask unanimous consent that it will
be included.
Senator K e n n e d y . It will be included.
[The following information was subsequently supplied for the
record:]
S u p p o r t in g I n f o r m a t i o n
and

R e l a t io n s h ip B e t w e e n
I t s I m p a c t on E m p l o y m e n t

on t h e

the

C ost

nergy

The importance of the impact of a rise in the cost of energy on unemployment is
illustrated by the following analysis. In 1977 the bill for imported oil amounted to
approximately $45 billion. More than 80 percent of this amount represents in
creases in the price of the oil stemming from OPEC’s initial quadrupling and
subsequent increases in crude oil prices. Analytically the impact can be seen as a
“tax” of roughly $35 billion by OPEC on the American public.
The usual deflationary impact of a $35 billion tax increase, assuming no off
setting action, would translate into roughly half a percentage point of higher
unemployment or roughly a half million workers.
Alternately, we can examine the impact in terms of the cost of “wringing out”
the additional inflation stemming from the energy price increase through a defla
tionary macroeconomic policy. Thirty-five billion dollars represents roughly 1%
percent of GNP or a similar amount in terms o f an increase in overall prices.
Assuming a price multiplier of two, the ultimate impact of the $35 billion “price
increase” would result in an increase of an additional 3y2 points of inflation. To
“wring out” 1 point of inflation through deflationary policies requires a decrease
in GNP of roughly $80 to $100 billion. Hence, the cost of wringing the 3% points
of inflation would mean contracting the economy by roughly $300 billion. Such
an action would result in a dramatic increase in the level of unemployment.
Yet another way of examining the impact of the increase in OPEC oil prices
on U.S. employment is in terms of its deflationary effect on the world economy.
Over the period 1953-1973, U.S. real export demand grew at an annual rate of
6.7 percent. This growth in real exports reflected a substantial increase in the
volume of world trade and resulted in the increasing importance of this sector in
the U.S. economy. Specifically, real exports as a percent of real GNP grew from
3.8 percent in 1953 to 7.1 percent in 1973. This increased growth in exports by
1973 accounted for additional in U.S. employment of roughly 2y2 million wrorkers.
The year 1973 marked the cyclical peak of the economic expansion both in the
U.S. and the OECD countries. Following an increase of 5.9 percent in the 1973,
real growth in all OECD countries fell to 0.2 percent in 1974 and declined by 0.9
percent in 1975. In the U.S., after increasing by 5.5 percent in 1973, real growth
declined by 1.4 percent in 1974 and by 1.3 percent in 1975. The world recession
and the continuing weakness in the export demand for U.S. products in major
industries countries has means that U.S. real exports grew at an annual rate of
only 2.8 percent since 1973.
Had real export demand increased at the 6.7 percent pace experienced in the
1953-73 period, U.S. exports w^ould have advanced to $113.3 billion or 15.8 percent
above actual levels reached. An additional 15.8 percent billion in exports would
have resulted in 1977 real GNP being 1.2 percent higher than actually experienced.
In terms of the unemployment rate, the direct effect this added growth translates
into a 0.6 percentage point reduction in the unemployment rate. Thus, rather than
the 7.0 percent unemployment rate experienced in 1977, continued growth in real
export demand would lead to an unemployment rate of 6.4 percent or roughly
an additional half million workers employed.

157
Senator Javits. The other thing is the relationship between the
Labor Department and the Department of Energy. I gather you have
one ongoing study—in your prepared statement—on this particular
subject. You speak about the construction manpower demand system.
This system is producing data on occupational and geographical spe
cific employment needs in the powerplant construction industry over
the next few years. Isn’t it a fact you have to have a very close inter
connection with the Department of Energy in order to estimate what
labor will be needed in a particular skill, et cetera, and to plan for
that?
Secretary M a r s h a ll. Yes, and we do have a very close relationship.
Senator Javits. Y ou do.
Secretary M a r s h a ll. Yes.
Senator Javits. Therefore, you are satisfied that the two depart
ments coordinate in terms of future outlook for the labor pool of the
United States?
Secretary M a r s h a ll. Yes, we are working very closely with them.
Senator Javits. Y ou have already ?
Secretary M a r s h a ll. Yes.
Senator Javits. Is there any data you can give us on that score?
Secretary M a r s h a ll. On the----Senator Javits. On, for example, if the Labor Department follows
the recommendations of the Department of Energy can the Labor
Department tell whether or not the labor supply of the United States
will be adequate or inadequate?
Secretary M a r s h a ll. Yes, we can provide information on that.
Senator Javits. I think that this is a very important point, and
would you explain—and a^ain I ask unanimous consent, Mr. Chair
man, that it appears in the record.
Senator K en ned y. Without objection, so ordered.
[The following information was subsequently supplied for the
record:]
The Departments of Labor and Energy are working to develop a closer rela
tionship in assessing the impacts of energy policy on employment and training.
Although substantial areas of improvement do exist, the present relationship
must be viewed in context of the relative newness of the Department of Energy
and the reorganization efforts underway at the Department. Over the coming
months and years, however, we are expecting to develop an ever closer relation
ship between the two Departments.
The Construction Manpower Demand System (CMDS) provides a good ex
ample of the benefits of a cooperative working relationship. Developed and im
plemented under a joint arrangement between DOL and DOE, the CMDS is a
computer based management information system designed to provide user® with
reliable forecasts of the future volume, composition, geographic distribution, and
associated capital and labor requirements of construction «activity. Initial imple
mentation of this system has focused on the needs of energy related construction,
and a report has already been prepared ¡showing the employment requirements,
by location and occupation, of anticipated power plant construction between
1977 and 1981. The Department anticipates that DOE will be provided with on
line access to the entire CMDS energy project file which will contain continuously
updated information on every major energy/construction project underway or
announced.
Capability for more general «analysis of energy/unemployment relationships is
provided by the Office of Economic Growth within the Bureau of Labor Statistics.
This office has been developing a close working relationship with the Energy

158
Information Agency, the statistical collection and analysis arm of the Depart
ment of Energy.
The BUS economic growth projections model can evaluate the energy require
ments implicit in alternative patterns of economic growth and alternative energy
policy scenarios. The model is also capable of estimating the change in the future
employment requirements of major industries which result from changes in
energy availability. Analysis from the output of this model has been used for
examining interagency evaluations of the impact of the coal strike.
The Office of Economic Growth, in consultation with the Department of
Energy, has also developed in model form the energy requirements of 160 different
industries, providing a basis for ranking the industries according to their depend
ence on a particular type of major energy source for maintenance of output and
employment. This procedure allows identification of those industries most likely
to be affected by curtailments of various energy sources, taking into account not
only the direct use of energy but also the indirect energy needed to produce the
goods and services used in the course of producing that sector’s output.
There is also growing DOI^DOE cooperation in the planning and implementa
tion of training programs. In the area of weatherization, one program has pro
vided for the insulation of some 100,000 homes of the elderly and low income
families. Labor for the program is provided by workers being trained under the
Department of Labor’s CETA program, while materials are contributed by the
Department of Energy and the Community Service Administration. Another
CETA project being run jointly with the Department of Energy involves the
training of former farmworkers for jobs in the nuclear energy field. The Depart
ment of Labor’s Job Corps is currently engaged in discussions with the Depart
ment of Energy about the possibility for additional energy related training
projects for disadvantaged youth.
Finally, consultations are underway between the Departments of Labor and
Energy concerning an interagency memorandum of understanding which would
provide for a high level steering committee to insure coordination in areas or
mutual interest to the Departments.

Senator Javits. Finally, Mr. Secretary, I must say I feel a lot less
like a voice in the wilderness when I see your conclusions about what
the quadrupling of the OPEC price did to us and also the admitted—
I will admit it, but you argue and I have argued for months—failure
o f OPEC to effectively recycle its funds into employment-generating
and productive activities. I think it is one of the great failures of our
policy, it is one of the great failures of harmonizing our policy with
that of the other industrial countries of the world, and it will bring
on—and I have said this 20 times and I say it again—a serious reces
sion or depression in 1979-1980 unless we move to correct it. I won’t
ask you to agree with me about the last part of that, but I do greatly
appreciate your giving your findings as to what is really eating at this
economy in terms of employment and in terms of its productivity.
Would you care to make any estimate of what would happen in terms
of U.S. employment if there was a basic policy change in the OPEC
countries, which are producing such huge surpluses, toward a recy
cling of their funds into employment-generating productive activities,
to use your words; and would you specify some of those? Did you
actually have particular productive activities in mind when you wrote
that portion?
Secretary M a r s h a ll . I think there are a number of outcomes you
would see. O f course, it depends on where the OPEC savings, the
income they have derived from the higher price of oil, were invested
and in what kinds o f activities you increased in different countries.
But clearly, if it was reinvested, say, in the industrial countries, then
what would happen would be that unemployment would decline in
those countries. One of the problems you have in Western Europe is

159
rising unemployment as a result of the higher prices of oil which
drains resources out of those economies and into the OPEC economy.
I f they had declining unemployment and more expansion in Western
Europe it would help our balance of payments considerably. But one
of our balance-of-payments problems derives directly from the lagging
economies in Western Europe, Japan, and other industrialized coun
tries of the world.
I f the investments were recycled into the less developed countries
and into the kinds of activities that were less competitive directly with
■the manufacturing employment in the United States, for example, and
more designed to promote the balance in those developing countries
between rural and urban areas, then that effect would be to greatly
reduce the international competitive position in many manufacturing
activities particularly low wage textiles, garments, shoes, in those
areas.
It would also greatly reduce the tendency for people in those
developing countries to leave those countries and come into the United
States illegally. That would help, I think, significantly reduce the
pressure either from low cost goods or people who are unable to get
jobs in those countries, going to those countries. So that the net effect
of that, in other words, would be instead of those less developed
countries having to try to produce low cost manufactured products in
order to get the resources to pay the higher oil prices, they would be
able to get the resources from investment activity rather than export
activity and that that would greatly improve their activities. I do be
lieve unless that happens some way, that we are not likely to be able
to have a healthy international economic environment.
Senator Javits. Y o u encourage me greatly to continue the position
which I have taken. In sum, Mr. Secretary, you would place high
priority upon the United States using its position everywhere—eco
nomically speaking, diplomatically, politically, socially, and in terms
of security—to influence our industrialized trading partners to join
us in the effort to bring about these results, that is, to bring about
intelligent and orderly investment of these vast surpluses either in
the developed or in the developing world or in both.
Secretary M a r s h a ll. Yes.
Senator Javits. And, of course, at the very least to maintain the
stability of the price of oil with a sense of responsibility toward the
world-----Secretary M a r s h a ll. Yes.
Senator Javits [continuing]. In view of its admittedly uneconomic
nature.

Secretary M a r s h a ll. Yes.
Senator J avtts. Thank you very much, Mr. Secretary.
Senator K en ned y. Thank you very much, Mr. Secretary.
Secretary M a r s h a ll. Thank you, Mr. Chairman.
Senator K en n ed y . Next we have Mr. William Winpisinger, presi
dent, International Association of Machinists and Aerospace
Workers; Mr. Anthony Mazzochi, vice president, Oil, Chemical and
Atomic Workers International Union; and Mr. Edward Carlough,
president, Sheet Metal Workers International Association,
Washington, D.C.

160

Would you gentlemen be good enough to come up as a panel.
Mr. Ruttenberg, we are glad to have you as well.
Mr. R u tte n b e rg . I am substituting for Mr. Carlough, Senator
Kennedy.
Senator K e n n e d y . Fine. We will start off, if we could, with you,
Mr. Winpisinger.
STATEMENT OF WILLIAM W. WINPISINGER, PRESIDENT, INTER
NATIONAL ASSOCIATION OF MACHINISTS AND AEROSPACE
WORKERS

Mr. W in p isin g e r. Thank you very much, I am William Winpi
singer and I am president of the International Association of Ma
chinists and Aerospace Workers. I very much appreciate the
opportunity extended to me this morning as part of this panel to
express some views on the subject of these hearings.
It seems to me, it is a timely opportunity because in my judgment
there seems to be at work in our land today a virtually perverse law
which suggests that public enlightenment and understanding of the
energy problem is inversely proportionate to the amount of verbiage
and rhetoric spouted by all the corporate international spokespeople.
The more we are told, it seems, the less we know, the more heat, the
less light; the greater supply, the higher the price; the more we talk
about energy independence, the more we depend on foreign crude;
the more we are told to rely on the hallowed free marketplace, the
greater degree of concentration and monopolization; the more energy
companies advertise, the more their credibility is destroyed; the more
energy the consumers use, the lower their utilities rates. We are urged
to conserve, but penalized with higher prices if we do; it just seems
in the whole world of energy up is down, front is back, peaks are
valleys, and the rich are getting richer and the poor, poorer.
I think that as the Congress, through the work of this committee,
goes about addressing solutions, with that kind of a backdrop, that
it is a commendable exercise indeed, and I think it is the very first
time that anyone in Government has sought to focus on how those
decisions are going to impact upon jobs and future employment
opportunities.
I will make my oral remarks as brief as possible. I will cover a
detailed and lengthy prepared statement which I now offer for inclu
sion in the record.
Senator K e n n e d y . It will be printed in its entirety.
Mr. W in p isin g e r. Thank you. I think it is no secret that the mem
bership of the group I am privileged to represent is employed in
virtually every sector of the industrial complex of our country and
in almost every instance they are industries which are highly sensitive
to energy sources, supplies and prices.
The national energy policies or in many cases, the lack of them,
directly impact on the jobs, incomes and security of the I AM members
working in them.
Regrettably, it is not possible to report in any definitive way or to
quantify even by sector of industrial occupation category, just what
the extent of energy impact is on the IAM membership, except in a

161

very, very negative way. We learned, for example, that some 15 to 18
thousand IAM members in Ohio were idled from work for approxi
mately two weeks during the natural gas shutoff in the winter of
1976/77. In 1974, during the oil embargo, we learned that 2,000 air
transport workers were idled when the airlines used the scare as an
excuse to curtail marginally profitable or totally unprofitable flights
and schedules. We also learned during the embargo scare that some
8,000 civilian aircraft manufacturing employees suffered reduced
worktime, layoffs and loss of income, due to an emergency low priority
for fuel for civilian light aircraft aviation purposes.
Not only do we not know the impact of energy inputs and alterna
tive energy sources on employment within industries where we have
members, we are appalled to learn that there is no definitive analysis
or study for our Nation on a macro basis. The Department of Energy
has made no such study. It was revealed moments ago that the Labor
Department has none. The Office o f Management and Budget has
made none. The Commerce Department has no study. The Bureau of
Labor Statistics has no study. And the Congressional Research Service
has no energy/employment analysis or studies available.
In effect, Mr. Chairman, what we have is the evolvement of a national
energy policy, albeit, I think far from coherent, that concerns itself
with control, allocation, prices and profits, but utterly fails to take
into consideration its impact on the human factor of production.
We can develop the most profuse energy production and utilization
program conceivable, but if it results in widespread displacement of
human labor, what good will it do?
Indeed, productivity is linked directly to industrial energy consump
tion. Energy displaces labor. And, herein lies the dilemma of IAM
members and working people in general. As the productivity index
goes up, jobs and job opportunities appear to decline.
I think there is plenty of evidence before this committee to indicate
that. Further, I think it is no longer safe to say as we often used to do,
that displaced production workers will find employment in service
industries. Will they find employment as supermarket clerks? Boxed
beef and packaging machinery are replacing meatcutters and stock
room clearks. As bank tellers? Again, I doubt it, since electronic fund
transfers and automatic driveup windows are taking over. Centrex
has already replaced all of our telephone operators. So has taped and
prerecorded messages. And computerized switching and billing systems
are displacing thousands of other types of services employees.
Tn my organization, direct job loss is coming about in the highly
skilled stamping, machine tool and tool and die industries through
numerical control—computerized—tools and automated control panels.
The energy required to operate that whole range of machines is elec
tricity, and the electric consumption is on the increase. But the number
of iobs decreases. At least in recent years.
I think the point is, that increased energy consumption may not
create jobs in the economy. There may not be a correlation between
energy growth and employment growth. Certainly it is true in certain
microeconomic instances, as you have heard.
At this stage of the game, on a macro basis, no one knows for certain,
as you demonstrated with the Secretary. I think we should know. It is

162

time, perhaps, to begin focusing on energy efficiency, rather than labor
efficiency. A good share of the energy problem may be found in waste
ful, expensive and mismatched uses of energy. Such a focus may save
jobs as well as energy.
Lack of any reliable energy—employment impact data not only in
hibits the deliberations and proceedings of this distinguished commit
tee, but, I think, it also impedes development of a comprehensive na
tional manpower policy and achievement of a full employment
economy. It would seem the latter, that I, among many, assumes would
be the most important thing, what really matters in our country today.
It would seem reasonable to suggest that the Bureau of Labor Sta
tistics in the Department of Labor and the Department of Energy
form statistical analysis and support groups to provide the Executive,
the Congress, and the public with reliable energy impact data.
Similarly, it would seem reasonable to expect that national energy
programs emanating from the White House would include employment
impact analyses, and that future energy development, conservation and
conversion proposals and programs would contain job impact analyses.
Beyond prices and rates, which are largely noncompetitive today, there
is no way for working people and trade unions to compare the relative
merits of one energy source with another.
But working people are not only concerned with their jobs, they are
also concerned with the prices they pay for home energy uses. There
was a time when nonprofit consumer-owned and publicly owned power
and utility agencies and systems provided a cost yardstick, against
which costs and rates o f private investor-owned utilities could be
measured. In that way consumers and regulatory agencies had some
objective means to determine when excessive consumer rates and cost
increases were occurring.
That yardstick principle has been seriously eroded over the past
couple of decades. I f measurement of energy efficiency is to be realized,
if working people are asked to sacrifice their jobs to greater energy in
puts and if consumers are to be asked to pay for energy development,
conservation, and conversion projects, then it is only fair that they be
given information which comes from a source other than the energy
companies and utilities themselves. We would recommend, therefore,
that Department of Energy, or perhaps SEC or FTC, makes this data
available on a regular and timely basis.
Working people are also dependent on energy for transportation
to and from work. Gasoline and oil prices are a large part of their
so-called costs of doing business, if you will. Energy orthodoxy requires
them to continue relying on gasoline for the bulk of their transporta
tion needs, at least until the year 2000. Any new technologies with
respect to auto fuels is not seriously considered, although conservation
measures such as speed limits and fuel consumption (MPG) standards
are.
Meantime, the petroleum glut has not noticeably reduced gasoline
pump prices, which soared 77.4 percent from the beginning of the
OPEC embargo through the first half of 1977. Profits of leading oil
companies during the same period increased an average of 103.4 per
cent, while average weekly earnings for workers increased 38.5 percent
over that nearly 6-year period.

163
It is amazing to us haw the economics of scarcity and the law of
supply and demand inevitably rebound to the profit ledgers of the
energy companies and to the glory of free enterprise.
Growth demand for energy is based on orthodox assumptions related
to population and GNP growth. The assumption is that energy de
mand increases exponentially over time, and muât, if the production of
goods and services is to keep pace with increases in the number of
people and their needs and demands.
In the near future, that is up until the year 2000, it is assumed by
orthodox analysts that energy supply wili lag ¡behind demand. How
they can be certain is questionable. Available figures describing supply
and reserves of fossil fuels and uranium appear to be under the control
of and dominated by the energy companies. It is to their advantage
to understate reserves and current production. It is further assumed
that up until the year 2000, the major portion of our energy supply
must come from known and developed technologies. This assumption
is based on an historical precedent that 20 to 30 years are required from
development of n new technology to its commercial application.
Hence, according to the orthodoxy, in the near future, our energy
supply must continue to come from fossil fuels, nuclear reactors, and
to a very limited extent, already developed hydroelectric power.
Orthodox thinking gives littie credence to geothermal, wind or solar
power in our energy future. Also neglected are synthetic products pro
duced from coal, biomass energy, cogeneration, energy produced from
solid waste disposal plants and the potential of space solar power.
It is obvious that the current so-called energy crisis gives us an un
paralleled opportunity to develop a rational, fair, democratically con
trolled, national energy policy. Given the assumptions of orthodox
economists and energy experts, we have no choice but to proceed with
development of all energy sources. We can continue to develop large
scale centralized systems, such as most fossil and all nuclear systems
are, and we can develop decentralized and local systems with small
scale technology inherent in solar, biomass, cogeneration and solid
waste disposal.
We can continue to develop all sources with private investment, but
we can also developed energy sources with direct public investment.
The latter holds out the prospect of, not only increasing supplies, but
providing consumers once again as well as Government regulators
with the cost and financial data, against which the performance and
prices of the private sector can be measured. In effect, we can restore
the yardstick principle to the energy industry and gain thé benefit of
competitive influences.
We also have a tremendous opportunity to dovetail the development
of the new energy sources, such as solar, cogeneration, biomass, small
hydro and wind, with a national manpower policy and full employ
ment program. Development of the new sources, launched on a fullscale basis, would create several million jobs in direct employment,
with the ripple effect adding a great many more employment
opportunities.
Full-scale development of alternative energy sources would pro
vide job opportunities for the hardcore, low-skilled and semi-skilled
unemployed. It would also open up employment for skilled building

164
tradespeople, mechanics, technicians, engineers, architects and
scientists.
Probably no other program could be designed to better serve the
national interest and the people’s interest, than achieving full em
ployment through development of alternative energy sources.
We must be wary, however. The giant energy companies, already
vertically and horizontally integrated, are casting covetous eyes upon
the alternatives, particularly solar, and I guess staking out a claim
on buying the sun. I don’t think we can permit that to happen. Of all
sources, solar power must be the people’s power.
As a general statement, when the survey of growth demand, de
velopment status and prospects for future energy from all sources is
completed, one can only conclude that all sources must continue to be
developed, with as much public benefit emphasis as possible. Until
employment impact analyses are made, until supply, demand, reserve
and private cost and financial data are reliably reported, then work
ing people have no choice but to accept the assumptions of orthodox
economists and energy experts.
For if the lights do go out, or the power is shut off, or the oil does
stop flowing, working people will be the first to find it out.
Thank you very much.
[The prepared statement of Mr. Winpisinger follows:]
P repared St a t e m e n t

il l ia m

W . W

in p is in g e r

Mr. Chairman, members of the committee, my name is William W. Winpisinger.
Since July 1977,1 have been priviliged to serve as International President of the
International Association of Machinists and Aerospace Workers.
IAM membership is found in nearly every sector of the U.S. industrial com
plex—aerospace, air transport, automotive, construction, electronics, light manu
facturing, metals fabrication, machine and machine tool, tool and die, maritime,
shipbuilding, nonferrous metals and mining, and railroads.
All these industries are highly sensitive to energy supplies, sources and prices.
The nation’s energy policies, or lack of them, directly impact the jobs, income
and security of IAM members employed in them.
Regrettably, it is not possible to report in any definitive way, or to quantify
by sector of Industrial Occupation category, just what the extent of energy impact
is on the IAM membership; except in a negative way. We learned, for example,
that some 15 to 18 thousand IAM members in Ohio were idled from work for
approximately two weeks during the natural gas shut-off in the winter of 1976/77.
In 1974 during the oil embargo, we learned that 2000 air transport workers were
idled when the airlines used the scare as an excuse to curtail marginally profitable
and unprofitable flights and schedules. We also learned during the embargo
scare that some 8000 civilian aircraft manufacturing employees suffered reduced
worktime, lay-offs and loss of income, due to an emergency low priority for fuel
for civilian light aircraft aviation purposes.
Not only do we not know the impact of energy inputs and alternative energy
sources on employment within industries where we have members, we are
appalled to learn that there is no definitive analysis or study for the nation
on a macro basis. The Department of Energy has made no such study. The Office
of Management and Budget has made no study. The Commerce Department has
no study. The Bureau of Labor Statistics has no study. And the Congressional
Research Service has no energy/employment analysis or study.
In effect, Mr. Chairman, what we have is the evolvement of a rational enenry
policy, albeit it is far from coherent, that concerns itself with control, allocation,
prices and profits, but utterly fails to take into consideration its impact on the
human factor of production.
We can develop the most profuse energy production and utilization program
conceivable, but if it results in widespread displacement of huamn labor, what
good will it do ?

165
As Richard Grossman and Gail Daneker have pointed out in their study, Guide
to Jobs and Energy, industry has historically substituted energy for labor. After
substitution for labor in each process of the production chain, the total number
of workers needed for production decreases.
This fact alone seems to contradict the current industrial management argu
ment, and of government spokespeople, too, that “more energy leads to more
jobs.”
According to Grossman And Daneker, greatly increased energy consumption in
primary metals; stone, clay and glass; food; chemicals; and paper products
has resulted in static or declining employment over the past 20 years. They note
the same for steel, aluminum, and agriculture. They also note that between
1961 and 1973, electric utilities increased their kilowatt output by about 130
percent, their revenues by 260 percent, their construction costs by 340 percent.
But employment in electric utilities increased only 21 percent.
Indeed, productivity is linked directly to industrial energy consumption.
And, herein lies the dilemma of IAM members and working people in general.
As the productivity index goes up, jobs and job opportunities appear to decline.
Further, it is not longer safe to say, as we often do, that displaced production
workers will find employment in service industries. Will they find employment
as supermarket clerks? Boxed beef and packaging machinery are replacing meatcutters and stock room clerks. As bank tellers? Electronic fund transfers and
automatic drive-up windows are taking over. Centrex has already replaced
telephone operators. So has taped and prerecorded messages. And computerized
switching and billing systems are displacing thousands.
In the IAM, direct job loss is coming about in the highly skilled stamping,
machine tool and t/»ol and die industries through the Numerical Control (com
puterized) tools and automated control panels. The energy required to operate
these machines is electricity, and electric consumption is on the increase. But
the number of jobs decreases.
The point is, increased energy consumption may not create jobs in the economv.
There may not be a correlation between energy growth and employment growth.
Certainly it is true in certain microeconomic instances.
At this stage of the game, on a macrobasis no one knows for certain. But we
should know. It is time, perhaps, to begin focusing on energy efficiency, rather
than labor efficiency. A good share of the energy supply problem may be found
in wasteful, expensive and mismatched uses of energy. Such a focus may have
jobs as well as energy.
Lack of reliable energy— employment impact data not only inhibits the delib
erations and proceedings of this distinguished committee, it also impedes de
velopment of a comprehensive national manpower policy and achievement of a
full employment economy. The latter, one assumes, is what really matters.
It would seem reasonable to suggest that the Bureau of Labor Statistics in the
Department of Labor and the Department of Energy from statistical analysis and
support groups to provide the Executive, the Congress and the public with reliable
energy impact data.
Similarly, it would seem reasonable to expect that national energy programs
emanating from the White House would include employment impact analyses,
and that future energy development, conservation and conversion proposals and
programs would contain job impact analyses. There is no other way for working
people and trade unions to compare the relative merits of one energy source with
another.
But working people are not only concerned with their jobs, they are also con
cerned with the prices they pay for home energy uses. There was a time when
non-profit-consumer-owned and publicly-owned power and utility agencies and
systems provided a cost yardstick, against which costs and rates of private in
vestor-owned utilities could be measured. In that way consumers and regulatory
agencies had some objective means to determine when excessive consumer rates
and rate increases Were occurring.
That yardstick principle has been seriously eroded over the past two decades,
an erosion due in no small part to a lack of access to valid investor-owned cost
and financial data. If measurement of energy efficiency is to be realized, if work
ing people are asked to sacrifice their jobs to greater energy inputs and if con
sumers are to be asked to pay for energy development and conversion projects,
then it is only fair that they be given information which comes from a source
other than the energy companies and utilities themselves. So we would recom

166
mend that Department of Energy or perhaps SEC make this data available on a
regular and timely basis.
Working people are also dependent on energy for transportation to and from
work. Gasoline and oil prices are a large part of their “costs of doing business.”
Energy orthodoxy requires them to continue relying on gasoline for the bulk of
their transportation needs, at least until the year 2000. Any new technologies
with respect to auto fuels is not seriously considered, although conservation
measures such as speed limits and fuel consumption (mpg) standards are. Mean
time, the petroleum glut has not noticeably reduced gasoline pump prices, which
soared 77.4 percent from the beginning of the OPEC embargo through first half
of 1977. Profits of leading oil companies during the same period increased an
average of 103.4 percent, while average weekly earnings for workers increased
38.5 percent over that nearly six-year period.
It is amazing how the economics of scarcity and the law of supply and de
mand inevitably redound to the profit ledgers of the energy companies and the
glory of free enterprise.
ENERGY OVERVIEW AND COMMENTARY

Growth demand for energy is based on orthodox assumptions related to popu
lation and GNP growth. The assumption is that energy demand increases ex
ponentially over time, and must, if the production of goods and services is to keep
pace with increases in the number of people and their needs and demands.
In the near future, that is up until the year 2000, it is assumed by orthodox
analysts that energy supply will lag behind demand. How they can be certain is
questionable. Available figures describing supply and reserves of fossil fuels and
uranium appear to be under the control of and dominated by the energy com
panies. It is to their advantage to understate reserves and current production.
It is further assumed that up until the year 2000, the major portion of our energy
supply must come from known and developed technologies. This assumption is
based on a historical precedent that 20 to 30 years is required from development
of a new technology to its commercial application.
Hence, according to the orthodoxy, in the near future, our energy supply must
continue to come from fossil fuels, nuclear reactors, and hydro electric power.
The fallacies of these assumptions appear to be be several. First, there is cur
rently an oil glut, due to stepped up domestic discovery, Alaska pipeline and
North Sea oil production, and the federal strategic petroleum stockpile program.
(Energy Preparedness).
Second, the production of coal and conversion from natural gas to coal-fired
industrial and electric generating plants has increased. Western strip mining of
low-sulfur coal has increased and, until the recent strike by coal miners, eastern
deep mining operations were on a sharp upswing.
Third, natural gas reserves, according to industry sources, appear to be declin
ing, but, natural gas producers argue, if prices are deregulated, then they can
greatly increase their supply. Apparently, the answer to this riddle will become
known when Congress makes its decision on deregulation. If natural gas prices
are deregulated, then one is left to surmise that the producers will release a new
set of supply figures, which will relieve the natural gas shortage. How much
natural gas may actually be in the ground, will probably remain a mystery for
decades, or until someone other than the producers make the surveys, gather and
report the statistics. In any case, following the producer's logic, we should expect
increased natural gas production in the near future, if the price they are exact
ing is met. The issue clearly is one of price in the near term, rather than supply,
and the shortage is in the figures, not in the ground.
In the case of nuclear energy, fission currently provides about nine percent
(some sources say one percent—it depends upon whose figures one uses) of na
tional needs. Industry and government proponents of nuclear power project that
it will provide 20 percent of total electrical energy by 1985 and about 50 percent
by 2000. These projections are based on the assumption that there are sufficient
domestic uranium reserve to feed some 232 planned nuclear plants, an assumption
which may be open to doubt, if Canadian sources of uranium cannot be tapped.
Again, the energy companies supply their own figures, so there is no objective
way of knowing the extent of uranium reserves. Some existing fast breeder re
actors are already judged to be technologically outdated, but industry and ortho
dox experts are touting fission on the basis that, by the time uranium reserves are
depleted, a breeder reactor which converts unusable uranium into plutonium, will

167
be on the line in force. In the meantime, the federal government will have to have
overcome critical safety and waste disposal problems. This is a little bail-out pro
gram destined to cost taxpayers several billion dollars by 1985, the earliest
possible date for permanently disposing of nuclear wastes, according to OMB.
But again we have a basic contradiction between the orthodox economic as
sumption of scarcity on the one hand, and industry assurances of a plentiful
supply of nuclear energy on the other.
It is the kind of double-think and contradiction that permeates the economics
of the entire energy industry.
As for nuclear fusion, there is no known way to control the one-million degree
heat and energy release that would make it useful. For this source, the ex
perts are right. There won't be a significant increase in supply of energy.
Orthodox thinking gives little credence to geothermal, wind, and solar power,
in our energy future. Noxious gasses, excessive salinity and land surface col
lapsing are said to prevent substantial geothermal development. Wind once gen
erated electricity and pumped water on millions of American farms, but it is
now argued that to generate one megawatt of power requires a windmill of 180
feet in diameter on a 200 foot tower, with an average wind velocity of 30 miles
per hour. Thus, thousands of towers would be needed to replace one coal gen
erating plant. Perhaps, but think of the jobs that could be created in manufac
turing if farmers went back to using their own individual windmills.
Solar energy gets more attention then geothermal or wind, but even so, it is
predicted that by 2000, only one-third of new construction and one-third of old
construction will be fitted with solar heating systems. It is conceded by the
orthodoxy that solar heating will play an increasingly larger part in meeting
future energy needs, but we are cautioned not to be overly optimistic about solar
heating systems, since the energy supplied for this purpose would be only about
five percent of the national energy need.
There is a curious observation to be made in this survey of the orthodox as
sumptions underlying our present energy policy. Apparently there is no prospect
of supply ever catching up with demand. Of the fossil fuels, it is said the petrole
um supply will be exhausted, possibly within 30 to 40 years; natural gas supplies
will be exhausted, possibly in 10 to 20 years; coal will be exhausted, possibly with
in 300 to 500 years. Hence, we can see why the President’s National Energy Plan
puts so much emphasis on coal.
About nuclear power, it is said that conventional fission reactors will exhaust
their low-cost fuel supply (uranium) possibly within 30 to 40 years. Fast breeder
reactors are thought to be able to greatly extend the potential fuel supply (pluto
nium) of fission reactors, but none say it will be low cost and safety and waste
disposal problems, as well as the President’s non-proliferation desires, must be
solved. Fuel supply for fusion reactors is virtually unlimited, at what cost is
unknown, but fusion’s feasibility is still to be proven.
It is said that the number of sites for future hydroelectric power is extremely
limited, but overlooked is the fact that only 800 of 50,000 dams in the U.S. are
licensed to produce power. Thus, there would appear to be a great deal of poten
tial if existing dams were to be fitted with trubine generators. That would create
a considerable number of jobs in electrical machinery and electrical equipment
manufacturing, construction and maintenance. Power generated at small dams
could be used for individual industrial units or possibly even individual farm
needs. Or it could be used as peaking power for larger systems.
Neglected in the orthodox survey of power sources are synthetic petroleum
produced from coal, although a number of energy companies are currently en
gaged in government-funded synthetic research and development projects. It is
conceivable that synthetics will supply a significant portion of not only energy
needs, but petrochemical needs in the near future. Coal gasification demonstration
projects are already in existence. Synthetic motor oil is on the market in limited
supply and petroline, a synthetic gasoline, may be marketed next. DOE Secretary
Schlesinger has unofficially put priority on creation of a liquid fuel replacement
for the transportation sector.
All liquefied natural gas (LNG) does not have to be imported. There are remote
areas of the U.S. where it might be economically feasible to process it, too.
Overlooked also is biomass energy, which could be a significant source of energy
on farms and ranches and in small rural communities, assuming they are given
the means and initial funding to construct and operate biomass plants. Loans
and grants are now available for rural and small community water and sewer

168

systems. Electric generation from Biomass and solid waste disposal plants could
similarly be funded, thus creating jobs and job opportunities in thousands of
depressed rural communities. And the research and development, design and
engineering, construction and manufacture of these small generating plants would
create thousands of jobs upstream.
But one should focus more closely on the development and utilization of solar
energy. There are two basic systems for solar energy production. One is at hand
and familiar. That is terrestrial solar power. The second is in the research and
development stages and futuristic. That is Solar Power Space Satellites.
First, all the technology necessary is in hand for terrestrial solar power de
velopment for hot water heat and building heat. Many firms are already market
ing solar home heating and hot water heating systems. The American Solar
Energy Association has outlined a comprehensive federally assisted program to
have 11 million homes in America fitted with solar hot water systems by 1985.
This contrasts with President Carter’s goal of 2.5 million homes by 1985 and DOE
Secretary Schlesinger’s goal of 1.3 million solar homes by 1985.
The State of California, by the way, is well on the road to solar home heating
and will have more solarized homes in 1985 than the entire nation.
In Japan, 2 million homes have solar hot water heating. Israel has 200,000
solar homes. And Australia requires that solar heating units be installed on all
new buildings constructed in the energy-short northern provinces.
There is absolutely no reason why technology should be used as an excuse to
delay or prevent the installation of solar hot water and building heating systems.
It must be promising, for an energy giant such as Exxon to already be in the
business. And a giant aerospace firm, Grumman Corp., is on the market with solar
passive and active building heat systems. (A passive system stores energy where
sunlight strikes building walls or floor or roof and is capable of providing 80 to
100 percent of a structure’s space conditioning requirements, but cannot easily
be added to existing structures. An active solar system can be bolted onto roofs
or walls of existing buildings and can supplement conventional furnaces, by
moving, with fans and pumps, solar heated air or liquid to storage areas, from
which the heat can be withdrawn as needed).
Solar is also being applied industrially, at a soup canning plant and in laundries
and car washes in California; at a fabric drying plant in Alabama; at a concrete
block factory in Pennsylvania; and for pasteurization at a brewery in St. Louis.
According to the American Solar Energy Association, the potential for solar
application is 45 million homes, 10 million apartment houses and 15 million com
mercial and farm buildings, which could be retrofitted, and 2 million new
structures built each year.
The beauty of solar is that it is renewable, nonpolluting and its installation is
labor intensive.
In fact, the Solar Energy Association, in testimony before the House Com
mittee on Small Business, has very forcefully demonstrated that conversion to
solar energy can be looked upon as major employment program for the hard core,
low and semiskilled unemployed. But a major solar conversion effort would also
provide thousands of jobs for skilled carpenters, sheetmetal workers, plumbers
and other building tradesmen who are suffering from chronically high unemploy
ment. Upstream from installation, thousands of fabricating and manufacturing
jobs would also be created.
The Solar Heating and Cooling Demonstration Act of 1974 has been in opera
tion for three years now. The technology and reliability of solar heating and
cooling have been proven. The major barrier to an all-out solar conversion pro
gram is front-end money for mass production and marketing and initial installa
tion costs for consumers. In terms of employment, taking the strain off the ad
vertised “shortage” of fossil fuels, and nuclear power, it is sound economic and
common sense for the federal government to boost solar power on a massive scale.
There are two precautions that should be taken however. One is that the giant
energy companies are already casting a covetous eye upon solar. This is in line
with their “total” energy concept. The established energy companies should not
be permited entry into the solar industry. If they are permitted entry, it will
be just a matter of time before history repeats itself and the cost of solar power
will be pegged to the monopolistic price of petroleum, natural gas, coal and
uranium. Solar power must be the people’s power. Solar power must restore the
low-cost competitive yardstick that has been missing from the energy scene for
over two decades.

169
The second precaution is that, in its infancy, the solar power industry will be
highly susceptible to confidence games, quick buck artists, and sham manu
facturers and installers. The industry and consumers must be protected against
these opportunists and predators, through an enforceable licensing system at the
state and local levels. Warranties for work, parts, service system performance
and safety must be strict and adhere to standards promulgated and for review
by the Consumer Product Safety Commission, Bureau of Standards, and Housing
and Urban Development Department.
¡The far term future for solar power may be further augmented by the Solar
Power Satellite. Futuristic in concept and design, the Solar Power Satellite is
at least as feasible at this stage, as is nuclear fusion. Simply put, the idea is to
put a large satellite in geosynchronous orbit some 22,000 miles above the earth.
In that orbit, the sattellite is constantly illuminated by the sun. The solar rays
are converted to electricity by an array of solar cells or photovoltaic cells, which
generate electricity directly when sunlight falls on them. The electricity is then
transmitted to an Earth receiving site, from where the power distribution system
will fan-out to communities and homes. It can be tied-in with existing trans
mission and distribution systems. Huge an heretofore unknown amounts of
electric power can be generated by this method— several satellites could produce
more electricity than all other alternative sources combined now produce.
Barriers to Solar Power Satellites becoming reality are large. The first is a
safety and environmental problem stemming from the microwave beam which
would transmit the energy from space to the earth collector. Microwaves can be
extremely hazardous if not kept within minimal strength tolerances. Microwave
environmental-effects experiments have yet to be completed and the danger
eliminated. A second barrier is the cost of the program. Such an undertaking is
similar in scope and cost to the Apollo program, or from $60 to $80 billion. At
this early stage, electric power from the Solar Space Satellite is not cost-com
petitive with other sources.
Since the technology to develop the system is at hand, and since its develop
ment would provide socially useful employment for a large corps of highly
trained scientists and engineers and highly skilled technicians and craftspeople,
research and development funding by the federal government ought to be en
couraged, and expanded. Currently some 12 or 15 aerospace firms have been
or are involved with Solar Power Satelites. However, if solar power is to be the
people’s power, one would expect such a vast publicly funded program to be
federally-owned and operated, rather than the property of a few private cor
porate giants.
As a general statement, when the survey of growth demand, development
status and prospects for future energy from all sources is completed, one can
only conclude that all sources must continue to be deveoped, with as much public
benefit emphasis as possible. Until employment impact analyses are made, until
supply, demand, reserve and private cost and financial data are reliably re
ported, then working people have no choice but to accept the assumptions of ortho
dox economists and energy experts.
For if the lights do go out, or the power is shut off, or the oil does stop flowing,
working people will be the last to know and the first to find it out.
CONSERVATION

Meantime, there are certain conservation measures which can be undertaken
to prolong the life of nonrenewable resources, and hopefuly will delay further
increases in energy prices.
A functional definition of conservation is taken from Dr. Duane Chapman, in
Energy Conservation, Employment and Income, published last year.
“Conservation in a philosophical sense has taken two partly contradictory
meanings, one emphasizing the preservation of natural environments and the
other giving its concern to the public interest in the proper management and
development of natural resources.”
Energy conservation, therefore, is not simply a matter of “returning the earth”
principles. It is not a no growth economic principle. It is not a return to the
horse and buggy days or some idyllic and pastoral early 18th Century never-never
land.
Energy conservation is not abandonment of the nation’s technology base,
nor the impediment to future technological development. It is not lower living
standards or a downgrading of skills and wage and income levels.

31-502— 78--- 12

170
It may be development and mass marketing of the electric automobile. It may
mean the upgrading of skills and income levels of mechanics, tradespeople and
workers in general.
Energy conservation is more than turning-off lights, abiding by speed limits,
setting the thermostat at 65° and wearing warm wollen sweaters indoors. It
is corporate responsibility to refrain from non-competitive and price gouging
practices. It is corporate responsibility to serve the consuming public first, at
the expense, perhaps, of profit maximization. It is government responsibility to
regulate the regulated in the interest of the public and social accounting system.
Energy conservation is a greater sharing of privately held, whether usurped
or purchased, resources, with members of the public at large.
CONTROL OF ENERGY COMPANIES

If we are to get a handle on the mind boggling dimensions of the energy issue,
then we must somehow rise above the laws of economics that are distorting the
discussion.
We must, instead, raise the issue on ethical grounds. We must infuse and ele
vate the discussion, to the plane of justice and equity. These human values must
become the common denominator in solving the energy crisis.
With that understood, we can then reduce the problem to five manageable
components. These five components of the energy problem are:
Control, allocation, prices, profits, sacrifice.
Control is the key to the other four elements.
The energy companies seized control of the oil industry at the turn of the
century. That is well known. What may be less well known is that they became
multinational oil companies after World War I, when they, with considerable
and indispensable help from the U.S. State Department, gained valuable con
cessions in the Mideast. They were in Mexico before that. One of the historical
amazements of that turbulent period in Mexican history is that the American
oil interests were able to prevail upon both sides of the Mexican civil war to
preserve their oil fields and pipelines. Apparently that is what General Pershing
was doing down there. In reality, the Punitive Expedition was an oil preserva
tion operation.
Another measure of the control and power of the oil interests occurred during
World War II. Allied Forces were alarmed by fuel shortages. The Roosevelt Ad
ministration proposed public acquisition of the holdings in Saudi Arabia. That
made eminent sense in terms of national security and the war effort. But it didn't
make sense to the American oil interests. Operating from within the war councils,
they torpedoed that proposal, and another, which called for construction of a
government-owned refinery and pipeline in the Middle East. They termed public
ownership as “fascist" and argued it would shackle “free enterprise.” Standard
Oil of California, Texaco, Jersey Standard and Mobil blocked the effort. Their
concern was not the war effort, rather it was control over the supply of crude
and the mischief it might cause to their pricing policy if the government delivered
and sold to independents outside the fraternity.
Now Franklin D. Roosevelt was a powerful President. World War II was a
powerful cause. But the oil companies were more powerful than all.
These are but two of many historical examples which demonstrate what we
mean by control, with control meaning power. The oil companies have it and the
government and people do not.
Currently, the multinational energy companies maintain and perpetuate their
power through the manipulation of at least five levers of power.
First, Exxon, Mobil, Gulf, Standard of California and Texaco are, for all prac
tical purposes, part and parcel of the OPEC Cartel. Along with British Petroleum
and Royal Dutch Shell, they comprise the “seven sisters,” who’ve dictated pro
duction, distribution, sales and prices since the 1920s, for Iraq, Iran, Saudi
Arabia, and Kuwait.
All are vertically integrated, i.e., they not only drill and pump crude, but they
refine, transport and sell petroleum products through their own retail outlets.
“From the wellhead to the gas pump” is the common expression.
In spite of the Arab embargo, in spite of the takeover of the oil land them
selves, by the Saudis, the Iranians and others, in spite of the OPEC countries
arbitrarily increasing the price of crude fourfold, in spite of all this, Exxon,
Mobil, Standard of California, Gulf and Texaco remain in the Middle East doing
business as usual and enjoying the new artifically high world prices for oil.

171
And to remain there, they have had to influence, if not dietate, U.S. foreign
policy, while assuaging the chauvinistic temperaments of kings, shahs and shieks.
The companies are in Venezuela and Canada, too, and in Algeria and Indonesia
and Alaska and the North Sea and the Antarctic. But they have used the OPEO
Cartel as a scapegoat to absolve themselves from any responsibility for the en
ergy crisis and all the while they are part of it and reaping its benefits.
A second lever of power used by the energy companies is the joint venture.
There are domestic joint ventures and foreign joint ventures. There are horizontal
joint ventures and vertical joint ventures. There are temporary and permanent
joint ventures.
All are used for one primary purpose: to reduce the rigor and risks of com
petition.
The joint venture is not a subsidiary; it is a step child; it is a separate corpo
rate enterprise in which the bulk of the stock is owned by two or more parent
companies.
Their are joint venture pipelines; joint venture refineries; joint venture ex
ploration companies and joint venture bidding combinations for offshore and oil
shale leases. The Alaska Pipeline is a joint venture.
This joint activity would seem to be prima facie evidence of anti-competitive
abuses. Yet Congress and the Department of Justice are amazingly tolerant. No
one know how many joint ventures there are among oil companies. Experts
agree there are hundreds.
Experts also agree that joint ventures avoid competition; provide a common
meeting ground for supposedly competitive firms; result in the exchange of in
formation and production and marketing planning; concentrate economic power;
and foreclose economic participation on the part of alternative businesses and po
tential competitors. And, needless to say, joint ventures have not led to lower
prices for petroleum products.
Such behavior amounts to merger, which could be prosecuted under the anti
trust laws. In fact, it has become clear, in view of the current energy debate,
that we are dealing with one giant petroleum octopus with only its tentacles
labeled Exxon, Gulf, Texaco, etc.
The third lever of control and power exercised by the energy industry is the
interlocking directorate.
The Clayton Act states, “no person at the same time, shall be ia director in
any two or more corporations ,
which are engaged by virtue of their business
and location of operations, as competitors.
Tell that to the energy cmpanies.
Primary interlocks occur between oil companies and other energy companies.
General Dynamics, you may be surprised to learn, is a major coal producer, and
has a director sitting on the board of Diamond Shamrock Oil Company, Republic
Steel is also a big coal producer, and shares a director with Standard of Ohio.
Republic Steel and Marathon Oil are also interlocked through one director.
In utilities, we find interlocks between Mobil and Consolidated Edison, Stand
ard of Indiana and Commonwealth Edison, Standard of Ohio and Detroit Edison,
and Getty Oil and Southern California Edison.
Imagine an environmentalist walking into a Con Ed board meeting and sug
gesting it switch to solar power, with the Mobil Oil director sitting there!
There’s more. The oil companies are locked into uranium mining and milling
companies, liquefaction and even solar energy research and development firms.
And, to a lesser extent, natural gas.
The glue that binds this welter of corporate relationships together is— money.
And money is the fourth lever the energy companies use to consolidate and ex
pand their power.
At last count, fourteen banks were tied to 18 of the largest oil companies,
through interlocking directorates. All the big names are involved: Exxon and
Morgan Guaranty; Exxon and Chase Manhattan; Exxon and Bank of America;
Gulf and Mellon National: Mobil and Chemical Bank; Mobil and First National;
Texaco and Continental Illinois; Texaco and Chemical; Atlantic Richfield and
Chase; Atlantic Richfield and First Chicago. There are dozens more. A diagram
showing the lines running from oil companies to banks and back, looks like a
piece of string art.
Banks aren’t the only financial tie with the energy companies. Insurance com
panies, investment companies and foundations are very much a part of the com
plex, too.

172
For example, Continental Oil Company (Conoco) has primary interlocks with
Bankers Trust Company, Morgan Guaranty and Continental Illinois Bank &
Trust. These banks, in turn, have interlocks with insurance, investment, and
other energy companies.
In case of the Conoco and Morgan Guaranty tie, secondary interlocks occur
with four of the nation’s largest insurance companies—John Hancock, Aetna,
Metropolitan and Penn Mutual: two coal companies, three other major oil
companies, two large utilities, and a gas pipeline.
That’s all under the Morgan roof. Conoco has two other banks tied-in, in simi
lar fashion.
Multiply this network by all the major oil companies, and some idea can be had
of the enormous concentration of weatlh and power centered in the industry.
Interlocking directorates make it all possible.
It is difficult to perceive the lines of distinction and ownership between banks
and energy companies. Ordinarily, one might expect it is the banks who ultimately
call the shots. But when it is realized that literally millions of dollars in em
ployee benefit funds are deposited by the energy companies, in the major banks,
then the lines of authority and distinction become even more blurred. In effect,
what we have is a siameze octopus, with the economy wrapped in itsi clutches.
There is one more lever of power employed by the companies and banks, virtu
ally invisible, but essential to the economic and political hegemony. It is the
accounting firm.
A mere seven firms audit the books of the largest oil companies. The services
these firms render go beyond accounting and auditing, to include tax assistance.
They perform well in the latter function. The multinational energy companies
haven’t paid taxes on their foreign profits for years and, in reality do not pay
taxes here at home, since they are, in essence, tax collectors, who pass the cost
of taxes onto consumers, in the form of prices. They also receive all investment
tax credits enjoyed by other members of the corporate world.
The “Big Seven” accounting firms also design data processing and information
systems, do consulting, executive recruiting and pension and investment plan
ning for the companies.
The advantages of this concentration are fairly obvious. A uniformity of prac
tices and procedures is established, which tends to reduce the industry to
conformity.
Data for revenues, operating costs and other financial figures are closely
guarded as inside and proprietary information, not to be divulged for public
consumption or government regulatory purposes. There are ample cases where
the energy companies and their banking trusts have refused to open their books
to the Securities and Exchange Commission and even the Congress.
Finally, there remains the possibility that accounting firms are used as conduits
for the flow and exchange of information and policy among and between the
members of the energy-financial sodality.
These then are the levers of power used by the energy interests to control
and monopolize the industry, victimize the economy and command the govern
ment.
To summarize, there are five:
The OPEC Cartel Arrangement
The Joint Venture
The Interlocking Directorate
Banking and Financial Institution Interties
The Accounting Firm Fraternity
Political contributions and the interchange of corporate with federal energy
agency personnel are two highly visible abuses of power, but presumably are com
monly known. Why belabor the obvious?
We can deduce from this didactic discussion, several generalizations.
The first is that structural challenges to and changes in the private control of
energy investment are probably preconditions to the political possibility of solving
the energy crisis in an equitable and just manner.
This is why we need continued regulation of natural gas and home heating
fuels.
This is why we must insist on full financial disclosure from energy companies.
It is why we must look to the rejuvenation of federal anti-trust prosecutions
in the energy industry.
It is why we must insist on horizontal and vertical divestiture of the energy
giants.

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It is why we must look toward public, as opposed to private development of
alternative energy sources.
What has been described in this analysis of corporate control and power is a
kind of reactionary socialism, which makes the future of American contingent
upon investment decisions by and in behalf of a few corporate entities and ex
tremely wealthy people.
When this or next winter’s excessively high fuel bills come rolling in ; when the
gas pump prices increase and the electric rates soar through the fuel adjustment
clause, it won’t be the perpetrators of this energy scandal who will sacrifice and
suffer.
Since the crisis of 1973/74, average weekly earnings of working people have in
creased roughly 6 percent per year. Energy company profit increases have out
stripped wage increases nearly threefold—averaging 17 percent per year. The
inequity for working people is bad enough.
For the seven million or more unemployed it is tragic. And unconscionable.
There is a fundamental and human right to the basic necessities of life. The
energy cisis is denying this right to millions of Americans.
It remains for public spirited and progressive citizens to remind the nation’s
policy makers and the public, that the sun and solar energy belong to the
people, not the energy companies; that the waters of the ocean and rivers belong
to the people, not the monopolies that the children of the ghettos have as much
claim to ownership of pubic lands, oil shale and offshore oil deposits, as do a
few private investors.

Senator K ennedy . That was an excellent statement and testimony.
Just before hearing from you, Mr. Mazzocchi, this point was perhaps
well illustrated in the advertisement in the Washington Post last week.
I don’t know whether you say this.
Mr. W i n p t s in g e r . Is that th e same atrocity that I have here ?
Senator K ennedy . Maybe that is where I got it from. But the
petroleum industry has never been shut down, not even for a day and it
makes the point, to extract energy from the Earth the primary require
ment is manpower. It must somehow save the needs for this manpower
even if it shuts down for 100 days. In other words, the petroleum in
dustry is capital intensive, it does not need a lot of manpower to extract
the energy from the Earth, and it continues on.
Mr. W inpisingek . I could toss in that it does need large chunks o f
money to search for and find oil and gas.
Senator K ennedy . That is right.
Mr. W i n p i s i n g e r . That ought to be tossed out on the basis of false
and misleading advertising.
Senator K ennedy . Truth in advertising, yes. But it points up, as
your statement has, the dimension of this whole employment issue.
Mr. Mazzocchi, I would like to ask you to proceed next.
STATEMENT OF ANTHONY MAZZOCCHI, VICE PRESIDENT, OIL,
CHEMICAL & ATOMIC WORKERS INTERNATIONAL UNION, ACCOMPANIED BY FRANK COLLINS, CONSULTANT ON ENERGY
MATTERS

Mr. M azzocchi. I would like to express my appreciation and that
of my organization for this committee focusing on what we consider a
pivotal question, the relationship between jobs and bhe exercising of
energy options. I will try to make my remarks as brief as possible and
submit our prepared statement for the record.
In a lengthy congressional debate on energy policy, there has been
very little attention paid to the connection between energy policy and

174
levels of employment. Similarly the national energy plan presented
by the administration had little to say about the impact of the plan on
the working people of tihe country. TTiere has been a great deal of dis
cussion about the impact of these incentives—meaning large increases
in energy prices—on the consuming public. However, this subcommit
tee’s hearing is the first organized congressional consideration of the
impact of the proposed new energy policies on employment oppor
tunities for American workers, millions of whom are unemployed at
the present time.
I f we are to create jobs through energy policy, the Government must
begin by requiring every energy proposal be accompanied by a formal
jobs impact statement. This procedure would give the Congress and the
administration an essential guideline for making choices between alter
native energy technologies.
Even more importantly, employment impact statements must be re
quired for energy policy proposals which effect going industries. An
enormous energy industry already exists. It has more than 1 million
workers and capital plant worth hundreds of billions of dollars. In
addition, large industries such as the automobile and petrochemical
industries are interlocked with the primary energy industry. Com
paratively modest changes in energy policy could carry price tags of
tens of thousands of jobs. Until energy policy stops being made in an
information vacuum concerning employment impact, we are not going
to create jobs through energy policy.
The so-called energy crisis of the past several years has turned out to
be political and economic rather than one of actual shortages. The
Arab oil embargo gave us a short-lived scare, now almost forgotten.
The natural gas shortages of last year were mainly due to factors such
as poor planning and diversions of interstate gas into intrastate use
at higher prices.
The immediate crisis is political and economic and it centers around
imported oil. Without the sudden quadrupling of the prices of OPEC
oil, we would not be meeting here today. Without the OPEC price in
creases, there would be no general perception of an energy crisis except
for a few ecologists crying aloud in the wilderness about shortages in
the long-term future.
As the immediate energy crisis is political and economic, it is neces
sary to look at the history of the past few years before making grand
decisions. Following the OPEC price rises in 1973-74, most of the
countries of the world, including the United States, sank into the
deepest recession since the Great Depression. Unemployment rose to
the highest levels since the 1930’s. Clearly, high energy prices were not
good for workers. Since its peak in 1975, unemployment by official
count has dropped less than 30 percent. High priced energy is the real
meaning of the energy crisis.
Under these circumstances, it is strange that the No. 1 pre
scription for U.S. energy policy would be the further raising of energy
prices. The arguments in support of higher energy prices are not for
one minute concerned about possible recessionary effects of the continu
ing high levels of unemployment. Instead the propaganda for higher
prices says (1) that producers need more money before they will go out
and produce more energy and (2) that the way to conservation is
through higher energy prices.

175
The argument that higher oil prices are required to encourage the
companies to explore for oil is clearly self-serving. The price for newly
developed domestic oil is now almost four times its preembargo price.
How much more do the companies need to go to work ?
The argument that higher energy prices are needed to conserve
energy leaves us cold. Energy prices to the consumer have already
doubled and tripled. The result was a recession. All that this kind of
energy conservation means is that lower paid workers are expected to
cut back because they cannot afford to pay ever higher prices while
the affluent remain untouched.
The way to energy conservation is not high prices but well conceived
programs to cut down on energy waste. A few of these programs have
already been partially legislated. These include the regulations requir
ing annual improvement of the energy-efficiency of automobiles, the
home insulation program and aid for public transportation. Much
more needs to be done.
Energy conservation cannot do the whole job. In the long-term
future, United States and world resources of the fossil fuels (oil, gas,
and coal) will be eventually depleted. I f alternative sources of energy
are not deveoped. depletion means that the world will sink deeper and
deeper into economic recession as the prices of remaining low-grade
resources rise in response to higher costs of extraction.
But what is the time scale? Must we have a crash program for the
development of alternative energy technologies or do we have more
time?
The answer to whether we must have a crash program or proceed in
a more deliberate way requires that we know exactly where we stand
on the time scale of the eventual depletion of fossil fuel resources.
Especially oil and gas. Where we stand depends, not on the dubious
arithmetic of the amounts of oil and gas in place, but by how much
it actually costs to get them out. These costs are not public information.
The companies refuse to reveal the details of their bookkeeping on
the costs of exploration, development and production. The data are
withheld on the grounds that they are proprietary information. Unless
and until these data are forthcoming, Congress is really not in a
position to know the degree of urgency of the energy crisis.
Policy for the funding of research and the commercial development
of the various energy alternatives is a critical matter. It involves
choices, choices of the most desirable kinds of energy to promote and
choices of their priorities. Congress is in a difficult position in making
these choices. Large sums of research and development money are in
volved and the merits of the various options can be lost in the scramble
of large corporate interests for contracts. It is therefore important that
Congress construct durable criteria for judging the merits of com
peting energy options.
In assessing energy policy, it must be kept in mind that energy is
only an intermediate. It is one of the means to the satisfaction of
human needs. Therefore, energy policy is not an end in itself and the
choice of energy options must be regarded as an avenue to broader
national goals. The promise of ample energy supplies will do little to
advance our society if increasing numbers of Americans are unem
ployed, the poor are poorer and the quality of life is degraded.

176
We propose three criteria for judging the desirability of an energy
technology.
The first requirement is that it be safe, safe for the health of
workers and the public and that it impose minimal disruption on the
natural environment, beginning with its extraction from the earth.
Full employment is of little use to a worker sick in the hospital or
dead in the graveyard. We will not accept the proposition that
workers’ health and the natural environment must be further de
graded in order to provide more energy. Health, safety and environ
mental concerns must be engineered into any new energy source. If
an energy source is found to be inherently unsafe or highly destruc
tive of the natural environment, then that energy source must be
abandoned.
The second requirement is that the new energy source be reasonably
priced. One of the bases of America’s historic prosperity has been
its abundance of natural resources including low-priced energy. An
energy policy based on the alleged virtues of high-priced energy can
only produce economic erosion and destroy existing jobs. It is essen
tial that each energy policy be carefully examined with respect to
the cost of a unit of energy to be ultimately delivered. This is par
ticularly true in the case of new energy sources that are heavily
subsidized in the course of commercial development. Some of these
can turn out to be high-priced and uncompetitive, once the subsidies
are removed.
The third requirement is that an environmentally acceptable and
reasonably priced source of energy be also a fruitful source of jobs.
Otherwise, we would not be creating but are destroying jobs through
energy policy. We need to look at the wages and salaries content of
a unit of energy delivered to the consumer. Where the energy source
is capital intensive, we will find that the energy cost is largely made
up of interest on borrowed money, profits on invested capital, and
royalties. Interest, profits and royalties do not produce jobs. Returns
on capital must first be subtracted from the consumers energy dollar
before calculating the percentage that goes into pay for workers or,
in other words, into jobs creation.
Finally, the largest jobs drain is our dependence on massive
amounts of imported oil. OCAW calculations indicate that these
imports are equivalent to the export of as many as 150,000 American
jobs. In part, the high level of imports is due to existing Government
policy. Amazing as it may seem, the foreign operations of U.S. based
multinationals are in effect subsidized by the U.S. Treasury. These
subsidies are in the form of foreign income tax credits, tax deferrals
and other benefits not available to domestic operations. State taxes
receive no equivalent consideration.
E'arly in January this year, IRS finally admitted that the per
barrel “income tax” of many of the OPEC countries was legally
invalid as a basis for a dollar-for-dollar income tax credit and that
henceforth it would not be acceptable. Even if the tax credit is not
restored by rewriting the tax laws of the various OPEC countries,
other U.S. tax credits remain. I f I were a multinational oil company,
I would want to produce oil abroad where the U.S. Government poli
cies help make it more profitable instead of here in the United States.

177
In concluding, I will say again that the current energy crisis is
more a matter of energy prices and profits than of actual energy
shortages. Where we stand with respect to the eventual depletion of
fossil fuels, particularly oil and gas, is unclear because the energy
companies do not let the public in on their bookkeeping. For the fund
ing of alternative energy technologies, proper criteria must be estab
lished. The energy source must be reasonably priced, be benign with
respect to impact on workers and the environment and create jobs
rather than destroying them.
Thank you.
[The prepared statement of Mr. Mazzocchi follows:]
P repared S t a t e m e n t

nthony

M azzocch i

The convening of these hearings is a significant occasion as it is the first
concrete step that Congress has taken to explore the effect of energy policy
on employment. The final form of the energy legislation that Congress passes
is highly important to labor, particularly to the Oil, Chemical and Atomic
Workers International Union. This legislation will have major effects on
employment in the primary energy industry and in all industries that are de
pendent on reasonably priced energy.
It is disheartening that, in the lengthy Congressional debate on energy policy,
there has been very little attention paid to the connection between energy policy
and employment. Similarly, the National Energy Plan presented by the Adminis
tration had little to say about the impact of NEP on the working people of the
country. On the other hand, there has been much consideration of the financial
incentives to the energy industry supposedly needed to elicit the production of
more energy supplies. There has been a great deal of discussion about the
impact of these incentives (meaning large increases in energy prices) on the
consuming public. This Subcommittee’s hearing is the first organized Congres
sional consideration of the impact of the proposed new energy policies on employ
ment opportunities for American workers, millions of whom are unemployed at
the present time.
If we are to create jobs through energy policy, we must begin by requiring
that every energy proposal be accompanied by a formal jobs impact statement.
The direct and indirect effects on jobs of a new piece of legislation are usually
not obvious and must be carefully traced through all their possible ramifications.
An enormous energy industry already exists. It has more than one million
workers and capital plant worth hundreds of billions of dollars. In addition,
large industries such as the automobile and petrochemical industries are inter
locked with the primary energy industry. A new energy policy can set up a chain
of events affecting employment all down the line. As examples, a large increase
in the price of natural gas or an industrial gas users tax could price a given
petrochemical out of the world market. High priced natural gas would lead
to high priced nitrogen fertilizer affecting the viability of many agricultural
operations at a time when farmers are in economic distress.
The ripple effects of a given item of energy policy on employment in industries
once or twice removed require to be mapped out. Calculations of jobs gained
or lost as against energy or oil imports saved should be an essential ingredient
of energy decision-making. A jobs impact statement attached to each energy
policy proposal could prevent costly mistakes in legislation from being made.
When we turn to the alternative energy technologies proposed for the longer
term future, a thorough analysis of the jobs impact is even more essential. Here,
we propose to spend hundreds of billions of dollars over the years and set
this nation on courses that are not easily abandoned or reversed. For this, we
should be asking ourselves three questions. Is the proposed technology really
feasible and safe? Is it economically viable and consistent with a healthy
economy? Would the proposed technology contribute to the goal of full employ
ment for our people? It is the last question that must be satisfactorily answered
in a jobs impact statement before large funding of an alternative energy tech
nology is undertaken.
First consideration must be given to the existing energy industries before
proceeding to the alternative energy technologies that will be the energy sources

178
of the longer term future. At the present time, the energy consumed in the United
States is made up approximately as follows: oil, 43 percent; gas, 32 percent;
coal, 19 percent; nuclear, 3 percent; and other (including hydroelectricity) 3
percent. Oil and gas alone account for three-quarter of the energy consumed
in the U.S. and, when coal is added, the fossil fuels make up 94 percent of total
consumption. These fuels will supply the bulk of our energy during the rest of
this century and possibly much longer than that.
The status of oil and gas is different from that of coal. U.S. reserves of coal
have been estimated to be sufficient for several hundred years at the present
levels of consumption. The potential resources of oil and natural gas are smaller.
However, there is no general agreement as to the approximate amounts of the
potential resources in the United States or in the world as a whole. The conserva
tive view is that world demand for oil will exceed available supplies by the late
1980’s. However, some other qualified observers are of the opinion that oil supplies
will be adequate for a much longer time. For instance, Grossling, a geophysicist
with the U.S. Geological Survey, says that it is possible that the magnitude of
oil resources may turn out to be two or three times conventional estimates.
Estimates of natural gas resources are similarly vague. Mobile publicly expresses
no concern about oil and gas supplies for the middle term future. All that is
needed they say is deregulation to provide the necessary incentives for explora
tion and development.
The problem of the public being able to determine the probable magnitude of
the resources of oil and gas is complicated by the fact that the fundamental
geophysical data on which all estimates are based is not public information. All
calculations of oil reserves and potential resources rely on generalized informa
tion furnished by the oil companies. The detailed geophysical data behind this
information are proprietary. The oil companies have successfully resisted all
Governmental efforts made so far to obtain these vital data. One thing is clear,
however, the commercial interests of the companies are best served by the under
statement of both reserves and the probabilities of future discoveries.
The lack of dependable and unbiased estimates of the oil and gas resources
of this country and of the world places policy makers in a most difficult position
with respect to the funding of alternative energy technologies. If the pessimists
are correct that oil and gas will not be available in adequate quantities only
ten years hence, the policy response ought to be to place the economy on a war
time footing with respect to the development of alternative sources of energy.
A quasi-wartime basis for energy research, development and commercialization
implies the expenditure of vast amounts of money beyond present expectations.
It implies haste with all the waste of money that crash programs entail. A
longer time before the eventual depletion of oil and gas resources would enable
a more deliberate and better considered approach to our energy future. The
quantification of our probable resources of oil and gas is therefore one of the
most crucial tasks facing this country today.
It is to be emphasized that the present “energy crisis” has turned out to be
political and economic rather than one of actual world shortages. The Arab
embargo cut off oil supplies for a time, but it did not represent any resource
shortage. In fact, the subsequent higher prices for crude oil led to a glut of
supplies which still persists and the natural gas shortages of last year in the
United States were more due to factors such as poor planning and diversion of
interstate gas into intrastate use at higher prices than to insufficient supplies at
the wellhead.
The immediate crisis that we face centers around imported oil. Without the
quadrupling of the posted prices of OPEC oil in 1973-1974, there would be little
public perception of an energy crisis. Had the pre-1973 posted price schedule
continued to this day, it would be difficult to persuade the American public that
there was any urgency at all about energy supplies. Without the quadrupling of
oil prices, it is highly unlikely that the prices of natural gas, coal and uranium
would have shot up as they have.
Without the OPEC oil price rises, only a few ecologists would be crying aloud
in the wilderness about energy shortages in the long term future. The ecologists
are right. Eventually the supplies of all of the fossil fuels will be depleted. But
that time has not been convincingly demonstrated to be imminent.
The events of the past five years serve to emphasize the important points
that the United States is dependent on imports for almost one-half of its needed
oil and that domestic supplies of natural gas may not be overly abundant. As
pointed out earlier these two sources make up three-quarters of U.S. energy

179
supply. Oil and gas are at the core of the energy problem and other energy
sources are peripheral at the present time.
The remedies to be undertaken are subjects of great controversy. Tens of
billions of dollars are involved and thousands of jobs are potentially at stake.
Congressional decisions on energy will have major consequences on the general
economy which can be beneficial or disastrous depending on the route taken.
Under these circumstances, it is essential to look at the history of the past few
years as a prelude to energy policy making.
Following the quadrupling of the price of OPEC oil in 1973-1974, most of the
countries of the world, including the United States, sank into the deepest reces
sion since the Great Depression. Unemployment in the industrially developed
countries rose to the highest level since the 1930,s.
There seems to be little disagreement among economists that the higher prices
for oil either triggered the recession or were wholly responsible for it. Clearly,
the higher prices being charged for energy were not good for business (aside
from the energy industry) and not good for workers.
While industrial activity has improved since the 1975 trough of the recession,
there has been only a modest improvement in the unemployment situation. In
the United States, the unemployment reported by the Bureau of Labor Statistics
has dropped by less than a third from the recession maximum. Furthermore,
high levels of unemployment still persist in some countries previously noteworthy
for their low levels of unemployment.
The United States is the only Western country that has regulated the prices
of domestic oil and has successfully kept oil prices below the levels prevailing in
other countries. The United States is also the country that has made the most
significant recovery from the “oil recession.”
Under these circumstances, it is strange that the number one prescription for
a new energy policy should be the further raising of energy prices. Higher
energy prices were the cause of the post-oil embargo economic decline and
worldwide increases in unemployment. Before higher prices for oil and gas in
the United States are even considered, critical macroeconomic studies should be
carried out to assure ourselves that higher energy prices will not cause a repeti
tion of the 1975 recession. These studies are not being made, at least, not visibly.
OCAW fears that the implementation of higher oil and gas prices as an energy
policy alternative could be the forerunner of a major recession.
The rationale for higher prices is (1) that producers need additional economic
incentives to produce more and (2) that higher prices will promote conserva
tion. We believe that neither of these arguments are valid in the light of the
history of the past several years.
With respect to additional price incentives to the oil and gas companies, the
present upper tier price of $12.18 for new oil (that developed after 1973) is
more than triple its pre-embargo price. The oil companies in 1973 undoubtedly
would have regarded a wellhead crude oil price increase of 30% to have been a
bonanza. In contrast to the tripling of the crude oil price, the cumulative infla
tion of the consumers price index between January 1, 1974 and January 1, 1978
was 26 percent. It can be fairly asked what kind of a price increase would the
oil and gas companies regard as an adequate incentive. Is there no upper limit?
According to the Oil and Gas Journal, $10.5 billion will be invested in U.S.
drilling and exploration in 1978, an increase of 12.3 percent over 1977. Expendi
tures for drilling and exploration in 1977 represented an increase of 17.1 percent
over 1976. While some of this was absorbed by inflation, these increases in
drilling activity have been sufficient to result in drilling rig shortages. It is not
at all clear that still higher prices for crude oil and natural gas would promote
much more drilling.
The Subcommittee on Energy of the Congressional Joint Economic Commit
tee has issued a study dated September 19, 1977 entitled “The Economics of the
Natural Gas Controversy”. The following graph is reproduced from page 45
of this study.
While there is some discrepancy in figures between the Project Independence
Blue Print-1973 and the National Energy Outlook-1976, the conclusions are
similar. There would be little increase in natural gas production with large price
increases in the long term. A further cost-benefit analysis is needed which would
relate the benefits of more oil and gas production to the cost of more expensive
energy to the consuming public and the recessionary influence of higher fuel
prices.

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Chart 1

Long Term Effect of Price on Natural Gas
Production in 1S35 - RSon Associated Gas

It should be clear that whatever the outlook for the oil and gas reserves of
the United States States, energy conservation is important.
In the long run, conservation of every form of energy will be forced on us
by the constraints of nature if we do not succeed in reducing demand by social
means. Particularly with respect to the fossil fuels, there is no advantage to
unrestrained growth of consumption. This will only hasten the day of eventual
depletion.
Energy conservattion is now a matter of national policy. The question re
maining is how it is to be effected. Here the oil and gas companies and the
Administration are in accord: The main highway to conservation is through
much higher prices for energy.
It is true that higher prices for energy will temper demand. Oil demand did
lessen after the massive OPEC price boosts, but at the cost of a recession and
high unemployment.
The concept of conservation through arbitrarily higher prices is rationing by
way of the ability to pay. Poorer workers are forced to cut back while the
affluent are untouched. Not only are the poor unable to pay more for energy,
but they pay a larger fraction of their income for energy compared to more
effluent groups. In a 1972-1973 study (3), the following figures were obtained:

Income status
....................................
Lower middle..................................................... ....................................
Upper middle..................................................... ....................................
Well cff............................................................ ...................................

Average
income

Percent
spent on
energy

$2,500
$8,000
$14,000
$20,000

15.2
7.2
5.9
4.1

With respect to individual consumers, the policy of arbitrarily high energy
prices is a meat axe approach to conservation. The policy seeks to enforce frugal
ity among a certain fraction of the population. But simply dioing without and re
ducing consumption is a way to recession and unemployment resulting from re
duced output.
Pricing, to be sure, has a definite role to play in a conservation policy, but it is
one that must be specifically designed to achieve specific results. The existing pric

181
ing policy of most utilities, that is, of charging less per unit for using more is a
economic policy designed to encourage waste. The effective way to long term
energy conservation is to provide realistic and attractive alternatives to the con
sumption of energy to all consumers. This is also the effective way to promote
switching from a fuel in short supply to a more abundant fuel.
Consumers are locked into their pattern of energy consumption, into the way
that they heat their homes and commute to their jobs. Pilot lights waste 20 to 30
percent of the gas supplied to cooking stoves, but electronic devices for ignition
are not generally available, either on new stoves or for retrofitting. The immediate
problem of conservation in today's industrial society is more one of providing
technological fixes than one of altering life styles.
Let us illustrate by an example. For the most part, the use of automobiles is un
avoidable in most suburban and rural situations. Public transportation does not
exist or else is intolerably inconvenient. There is no realistic alternative to driv
ing to work and driving for necessary family business and recreation. The arbi
trary raising of gasoline prices for necessary transportation constitutes a new
kind of tax on consumers, lessening their purchasing power for other commodities
and services, without materially contributing to conservation.
In contrast to the simplistic policy of high gasoline prices to conserve energy,
the mandatory improvement of new automobile efficiency under the Energy Policy
and Conservation Act of 1975 will reduce gasoline demand on a long term basis
without undue consumer hardship. Similarly the provision of a convenient public
transportation system by rebuilding and by the creation of new facilities will in
time provide a viable alternative to our excessive dependence on the automobile,
as well as creating thousands of new jobs.
Throughout, this nation’s energy policy must be one of specific programs aimed
at specific targets. There are, for example, two methods of approaching the con
servation of energy used for space heating. One is to arbitrarily raise the cost of
fuel so that the citizens of moderate means must do without, turn down the therm
ostat and be cold. This is the path to reduction in economic activity and de
creased employment. The other way is to insulate and weatherproof by a combina
tion of mandatory regulations for builders and economic incentives for retrofit
ting, such as guaranteed loans for homeowners. The second is the path to in
creased employment in the construction and the building materials industries.
As previously pointed out, the current energy crisis is one of high rates of im
ports of crude oil and high OPEC prices rather than one of actual shortages at the
present time. The United States is dependent on imports for almost one-half of its
needed oil and these imports are not dependable. Another embargo could be im
posed or another series of artificial price increases could be decided on by OPEC.
The growing trade unbalance is primarily due to our large imports of oil and it
is responsible for the weakness of the U.S. dollar. At last year’s high prices of
foreign oil, the United States had an international trade deficit of approximately
$28 billion resulting from oil purchases of almost $45 billion. At the old prices of
crude oil and the same volume of exports, the U.S. would have had a substantial
trade surplus. Returns on American investments in foreign countries reduced the
adverse cash unbalance, but the amount of $17 billion was still outstanding.
Imports of crude oil and oil products last year were equivalent to the export of
more than 150,000 oil workers jobs overseas. This loss of jobs was partly bal
anced by the creation of jobs by exports from the United States to all countries.
However, the adverse trade balance of $28 billion clearly indicates that more jobs
were lost than gained. The first step to creating jobs through energy policy is the
reduction of the present high volume of oil imports.
In part, the high volume of imports is due to existing Government policy.
Amazing as it may seem, the foreign operations of U.S.-based multinationals are,
in effect, subsidized by the U.S. Treasury. These subsidies are in the form of for
eign income tax credits, tax deferrals and other benefits riot available to domestic
operations where State taxes receive no equivalent consideration.
Foreign tax benefits and other favorable tax treatment of the multinational
oil corporations by the U.S. Treasury Department, riot only reduces employment
for U.S. workers, but the Federal tax losses are made up by additional taxes on
the workers along with the rest of the taxpaying public. These lost revenues over
the years have amounted to many billions of dollars. The foreign tax to the U.S.
multinationals for oil produced in Saudi Arabia alone amounted to $2.1 billion in
1975, creditable against U.S. taxes.
The per barrel taxes paid on “equity” crude (that is, crude owned by the multi
national) to the OPEC governments should never have been creditable on U.S. tax

182
returns as foreign income taxes at all. These are not income taxes on total operat
ing profits above costs but are some specified fraction of the posted price of a
barrel of oil. As a per barrel tax, the socalled income tax has been a royalty, mas
querading under another name.
Early in January this year, IRS finally ruled that the per barrel “income tax”
was invalid as a basis for a dollar-for-dollar income tax credit and that hence
forth it would not be acceptable. Even if this tax credit is not restored by rewrit
ing the tax laws of the various OPEC countries, other U.S. tax credits remain
which favor the foreign operations of U.S. multinationals as against their domes
tic operations.
The deferral of U.S. income tax until foreign profits are repatriated is another
tax policy benefitting multinational oil corporations as against domestic com
panies. If the profits are never repatriated, then the multinational escapes U.S.
income tax on the profits completely. Besides the clear subsidization of overseas
production by tax deferrals, the deferral policy is an open invitation to the multi
nationals to capitalize overseas exploration and development instead of bringing
the money home to finance these activities here.
President Carter has called upon Congress to pass needed legislation to abolish
tax deferrals. It is to be hoped that this necessary legislation will be speedily
passed.
As a vitally needed step in a jobs-oriented energy policy, it is essential that all
remaining foreign tax benefits to the U.S. multinational oil companies be elimi
nated by IRS or Congressional action. Otherwise, government energy policy will
continue to be in the position of subsidizing multinational operations abroad and
subsidizing the export of U.S. jobs.
Let us now turn to the current pricing policy for crude oil. Under the crude oil
entitlements program of the Energy Policy and Conservation Act of 1975, refiners
pay the same for crude oil regardless of source. At the wellhead, the price for old
oil (defined as that first »produced before January 1,1974) is $5.72 per barrel and
that of new oil (first produced after January 1,1974) is $12.18. The average price
of foreign oil is $14.61 delivered to an American port. Domestic stripper oil (oil
produced from wells with a field average of less than ten barrels per day) has
been released from controls and has an average wellhead price of $14.58. North
Slope Alaskan oil, because of high Trans-Alaskan Pipe Line transportation costs
is.handled so as to bring Alaskan oil on the West Coast into approximately parity
with imported oil.
The entitlements program establishes a uniform price of crude oil to refiners
(currently $12.36) in the following way. Refiners using the old oil buy entitle
ments costing the difference between $12.36 and the wellhead price of old oil. Re
finers using other kinds of oil, receive entitlements benefits equal to the difference
in price of the oil that they are buying and $12.36. The uniform price to refiners is
calculated so that the entitlements payments and benefits balance each other out.
The base prices and the uniform price to refiners are being revised upward each
month, with the values of the entitlements being shifted accordingly.
The effect of the entitlements program is to equalize the prices of domestic and
foreign crude to refiners. Thus there is no incentive for an independent domestic
refiner to buy domestic oil as against foreign oil under existing U.S. policies. The
refiner’s choice will be controlled by crude quality and transportation costs from
the domestic wellhead or from the port of entry in the case of foreign oil.
A domestic refinery owned by a multinational oil company with both foreign
and domestic crude oil production facilities may buy from either source. The
multinational will charge itself an artificial transfer price for its foreign crude.
The transfer price is an internal bookkeeping number and it may set arbitrarily
at any figure suiting the convenience of the company. The transfer price need
have no relation to actual costs plus fair profit. In general, the multinationals
will set the transfer price for foreign crude for their refineries at the prevailing
market prices. They may, in fact, determine the market price. The market price
for delivered foreign crude may differ considerably from the OPEC “posted
price” plus transportation.
Under the entitlements program, the domestic refineries of a multinational
will nominally pay the same for crude whether it is domestic or foreign. The
decision of a multinational refinery as to whether to buy domestic or foreign will,
of course, be determined by which crude yields the highest profits to the company.
With foreign tax credits and other economic benefits, the foregin crude may
effectively cost the multinational less than domestic crude. In this case, the

183
profit yield to the oil producing division of the multinational may be expected to
be greater in the case of market-priced foreign crude than domestic price-con
trolled crude, particularly in the case of old oil. This means that there is a
substantial economic incentive to the multinationals to import rather than to
produce crude domestically.
An energy policy for creating new jobs (and saving present jobs) must be
constructed so as to remove the economic incentive for importing oil instead of
producing it domestically. One way would be to adjust the entitlements program
so that refineries owned by multinationals pay more for foreign oil than for
domestic. This would be, in effect, a multinational refiners reverse bias. The
principle of the small refineries bias, whereby small refiners pay less for crude
than the general refiners uniform price, is now well established so that no new
concept is envolved. There are, of course, other ways in which the existing higher
profitability of foreign crude to the multinationals might be dealt with.
The crude oil equalizations tax (COET) proposed by the Administration
would not solve the problems of the high volume of imports brought about by the
greater profitability of foreign crude compared to domestic. The purpose of COET
would be to bring domestic crude oil prices up to the world level through the
mechanism of wellhead taxes. COET would thus continue the present equalization
of the nominal prices of foreign and domestic crude oil using taxation instead
of the present entitlements payments. The incentives for the multinationals to
import crude oil instead of producing it domestically would remain just as strong
as at present. In short, COET would do little or nothing to change the current
high levels of crude oil imports. Any reduction of imports as the result of COET
would occur only as the result of some consumers being unable to buy oil products
at the higher prices.
Imports of crude oil primarily affect employment in the producing end of the
petroleum industry. Imports of refined products reduce U.S. employment in both
production and refining.
It is a fact that domestic refining is more costly than foreign refining. This is
because of higher American wages and other socially desirable benefits such as
regulations to protect the health and safety of workers and regulations against
environmental pollution. In addition, the foreign refining operations of U.S.-based
multinationals receive favored U.S. tax treatment not available to domestic re
finers. The tax benefits to foreign refining operations of the multinationals include
the foreign income tax credits and tax deferrals mentioned earlier in this
statement in connection with foreign crude.
At the present time, around 25 per cent of imported petroleum arrives in the
form of refined products. This compares with approximately 60 percent in 1973
before the institution of the crude oil entitlements program. The reason for the
decline in the percentage of refined products arises from the operation of the
present entitlements program. Imported crude receives a $2.01 entitlements bene
fit while refined products, with some exceptions, do not receive entitlements bene
fits. Accordingly, the entitlements program provides a $2.01 advantage for import
ing crude oil and then refining it in the U.S. over importing the refined products.
The $2.01 advantage is sufficient to offset the higher costs of U.S. refining
compared to foreign refining.
The abolition of the entitlements program through the adoption of COET, or
otherwise, would eliminate the $2.01 advantage for refining oil in the United
States. The lower costs of refining abroad would restore the pre-1974 situation
with the multinationals bringing in a flood of foreign refined products.
Rather than creating jobs through energy policy, the abolition of the entitle
ments program would decrease the utilization of domestic refining capacity and
eliminate jobs. Therefore, if COET is passed, or if entitlements are abolished
through other legislation, it will be necessary for the Congress to take steps to
maintain the utilization of U.S. refining capacity and maintain refining jobs.
There are several ways that this might be done. The Haskell bill, S. 2012, pro
vides one such avenue. Under this bill, if the Secretary of the Treasury found
that imports or refined products were impairing national security related to the
maintenance of an economically viable domestic refining capacity, the Adminis
tration would be authorized to impose fees or tariffs on oil product imports.
OCAW strongly supports S. 2012.
To sum up the OCAW position on jobs and oil policy, we do not see still higher
prices for oil as effective either for stimulating new oil production or as a Drac
onian measure for conservation. The price increases that have already taken

184
place have by now produced a drilling boom. Conservation enforced by higher
product prices raises the danger of a new recession and is inequitable, the burden
falling on the poorer workers. Conservation of oil is better achieved through
the development of realistic alternatives to oil consumption in place of merely
cutting back. Conservation through realistic alternatives to consumption would
produce jobs, while frugality through higher prices will surely decrease jobs.
The case of natural gas differs considerably from that of crude oil. The United
States is nearly independent of gas imports at the present time. In fact, on a
BTU basis, one-third more natural gas is produced in the U.S. than crude oil.
Imported natural gas consists of some diminishing quantities of pipeline gas
from Canada and small quantities of liquefied natural gas (LNG) from overseas.
Natural gas, therefore, does not contribute in a significant way to the U.S.
unfavorable balance of trade.
As in the case of crude oil, there are fears of inadequate supplies of natural
gas in time to come. As in the case of crude oil, it is difficult to come to firm
conclusions as to the size of U.S. potential gas resources. This is for the same
reason. The basic geophysical data on which estimates are made is regarded by
the companies as proprietary information and withheld from the public.
Independent assessment of the actual size of present reserves is impossible in
the absence of the detailed geophysical data. Here, the companies have an eco
nomic motive for understating reserves since a 1969 Court decision tied allow
able FPC wellhead gas prices to the amount of recoverable gas in a field: the
smaller amount of recoverable gas, the higher the price. Further, it is even pos
sible to reduce the quantity of recoverable gas previously reported in a reservoir
by revising downward the percent recoverable.
The same considerations apply to estimates of the probable size of natural
gas resources that may exist in various regions of the country. While no field can
be said to be discovered until it is actually successfully drilled, present technology
of seismic measurements can yield fair advance estimates of the probability of
gas (or oil) being present, and the likely amount. These measurements are not
available to policy makers so that gas policy is being made in the dark.
It is not clear how much of the 1976-1977 gas shortages were due to inadequate
stored supplies, inadequate pipeline capacity, diversion of interstate gas to intra
state use, illegal industrial use of interstate dedicated gas and newly developed
gas withheld from the market in the hope of higher prices. Whatever the cause,
the winter gas shortages caused the layoffs of tens of thousands of workers, illus
trating the close connection between jobs and continuity of gas supplies.
The pricing and allocation of natural gas has been under regulation for a
decade. In contrast, existing regulation of oil prices dates back only to 1974.
Thus, legislatively, the case of natural gas has long been recognized to be differ
ent from that of oil. Natural gas production, transportation and distribution have
been treated as being integral parts of a general public utility. This is for good
reason. At no stage do the forces of free market competition effectively come into
play.
A local gas utility has a limited or no choice of the pipeline from which it re
ceives its natural gas. The gas pipeline has gathering lines connected to a limited
number of gas producers. The local utility has no access to the totality of gas pro
ducers in this country. Thus, there can be no general competitive bids from the
producing industry as a whole. This situation can be defined as a natural mo
nopoly. It contrasts markedly from the case of coal where a buyer has a much
larger choice of sellers.
Up to the present point in time, the Federal Power Commission (FPC) and
now the Federal Energy Regulatory Commission (FERC) have established well
head natural gas prices that are cost-based. This means that the price is set at
cost plus a just and reasonable profit reckoned at 15 to 18% before taxes. De
regulation would mean that the producers would be free to charge what the mar
ket would bear to distribution systems that have little or no choice of alternative
suppliers. There is little recourse available to consumers against unjustifiably
high gas prices.
Deregulation of natural gas prices has been strenuously lobbied by the gas pro
ducers who argue that additional price incentives are needed to promote explora
tion and development of new gas supplies. OCAW believes that adequate incen
tives already exist under the present policy of cost-based pricing. We recognize
that gas and oil drilling is a risky business. Dry holes are part of the risk. It is
reasonable that losses from these risks be included in the overall balance sheet

185
upon which cost-based pricing is calculated. Additional allowances for risk are
possible without abandoning the important principle that wellhead gas prices be
established on cost plus fair profit.
As stated in the foregoing, OOAW is opposed to high gas prices as a mechanism
for achieving conservation, either by individual consumers or by industry.
Individual consumers, at least on any short-term basis, are locked into their
existing uses of gas by their installed appliances. If a program of limiting the
residential use of gas is to be established, it must be a program for retrofitting
existing appliances to improve their efficiency or for providing for their replace
ment by appliances using other fuels.
Even for industrial gas users, legislative attempts at enforcing conservation by
higher prices or special taxes can easily miscarry. The technology of many indus
tries makes the substitution of gas by coal difficult or impossible. Further, the
uncontrolled price of coal may rise in parallel with the price of gas.
These higher costs would naturally be passed on to the ultimate consumers,
thus contributing to continuing inflation. In the case of petroleum refining, petro
chemicals and some other industries, further rises in prices would make them
less competitive against foreign products.
Again, the way to conservation is through specific programs aimed at specific
targets. There are wide disparities in the abilities of industries to shift from
gas to alternate fuels. The ability of an industry to shift its fuel use will depend
on the category of industry, the specific use of gas within the industry and the
geographical location of the particular plant. Fuel substitution programs using
the regulatory mechanism can be fine-tuned to take due account of these specific
factors. A program of higher prices would take account of none of them.
Coal and uranium, as energy sources, are best examined together. Most of the
coal consumed outside the steel industry and all of the uranium outside weaponsmaking and research are used for producing electricity. The jobs impact of coal
and uranium are both linked to the jobs impact of electricity as a form of energy.
Electric power is both thermodynamically wasteful and highly capital intensive.
Both of these facts reduce the number of jobs made available per unit of elec
tricity delivered.
Heat can only be partly converted into mechanical work. The rest of the heat
not converted is lost to the environment (thermal pollution). Heat engines, heat
turbines and the like have thermal efficiencies ranging from 5 to 40 percent. The
generation of electricity is a form of the conversion of heat into the ability to do
mechanical work. Approximately two-thirds of the heat used in the generation of
electricity by a thermal power plant is typically wasted due to thermodynamic
loss.
It follows that the use of electricity as a simple heat source, as in space heat
ing, is very wasteful. The conversion of $12 per barrel oil into electricity at 40%
efficiency amounts to a fuel expenditure of $30, not counting the other costs of
electricity generation and distribution. The use of heat pumps instead of electrical
resistance heaters can eliminate much of the thermodynamic energy loss, but
only at the price of an increase of capital intensiveness due to heat pump costs.
It is obvious that considerable energy conservation could be obtained by reserv
ing the use of electricity to high grade uses such as driving motors, electrolysis
for metallurgy, electric lighting, etc. where fossil fuels cannot be used directly.
High grade uses of electricity account for less than 10 percent of U.S. energy
consumption compared to a total of 28 percent going into the production of elec
tricity for all uses.
In terms of capital costs per unit of energy delivered, electric power is the most
capital intensive form of energy. For the delivery at ten trillion BTU per year of
new industrial energy, nuclear electric power requires an investment of $950
million, coal electric power $700 million and natural gas $190 million. (Oil and
Gas Journal, May 29, 1978, p. 29) The direct capital expenditures provide jobs
for construction workers and workers in the equipment industries. The indirect
capital costs, such as interest on borrowed money and profits on equity, may
amount to three or four times the cost of the power station over its useful life of
30 to 40 years. Indirect capital costs do not directly provide jobs. From the stand
point of the creation of new jobs, it is clear that the least capital-intensive source
of energy is to be preferred.
Whether uranium or coal is the most economical fuel for the generation of
electricity is yet to be determined. Fuel costs are lower for nuclear power plants
but capital costs are higher, offsetting the lower fuel costs. Uranium, in spite of

31-502— 78--- 13

186
its earlier promise, appears to be now merely competitive with coal instead of
being clearly less expensive. Due to recent lessened demand for electricity,
planned electric generation has been cut back. Projected nuclear facilities have
been cut back more than fossil fueled ones. However, because of the ability of the
public utilities to pass on increases in fuels costs, it is likely that decisions involv
ing coal vs. nuclear are being made on bases other than direct fuel costs. These
include the longer lead-times required for nuclear power stations compared with
coal ones and fears regarding political decisions on nuclear weapons proliferation,
reprocessing and nuclear waste disposal.
From the standpoint of the health and safety of workers, the question of coal
or uranium as the preferable fuel is far from being resolved.
The health and safety hazards of coal are well-known and have been tolerated
for centuries. Scores of coal miners die annually from accidents and thousands
more die prematurely from black lung and other occupational diseases. The emis
sions from coal burning plants are deadly, contributing to lung ailments and
untimely deaths in industrial areas.
The hazards of the uranium fuel cycle are less clear. The immediate short
term costs in lives and health of nuclear workers are less than coal. But the
typical nuclear diseases are leukemia and cancer. These may take 20 to 30 years
to develop from exposures to low level radiation. Thus the ultimate costs of
nuclear power to the health and safety of workers and of the general public are
still undetermined.
The world’s resources of the fossil fuels and of uranium are finite in amount.
While there may be no imminent dangers of scarcities of these fuels, it is clear
that, at some future time, these resources will be depleted. There will be no exact
time of depletion. Mineral resources are not like oil in a barrel. Instead, as the
exhaustion of a resource nears, real scarcities drive the price upward, making
it worthwhile to expend more money and effort in exploring for and extracting
lower grade deposits and deposits in more inaccessible locations. Eventually a
fuel will become more costly than some new energy source and will be replaced
by it.
Interesitingly, no fuel in general use has yet been historically replaced by
another fuel because of resource depletion. Wood was replaced by coal because
coal was more convenient and ultimately cheaper. In turn, coal has been largely
replaced by oil and gas, largely on the grounds of convenience, but also because
oil and gas can serve purposes for which coal is not suitable. This displacement
has taken place in spite of the fact that oil and gas deposits originally in place
were less than recoverable coal deposits.
The above raises the point that no energy resource or technology can be a
one-to-one replacement for a given energy resource. This means, above all, that
no one energy source or technology can be a universal replacement for the sev
eral energy sources now in widespread use. Electric power cannot easily serve
all of the uses of oil and gas as, for example, the motive power of automobiles.
Coal, in many cases, is not a good substitute for gas, no matter the cost.
Because of their physical properties, oil from shale and oil and gas from coal
are likely successors to crude oil and natural gas at some future time. Their cost
stands in the way of this replacement occurring before the prices of oil and
Natural gas are driven up by resource depletion. Coal and oil shale resources are
are large, but in the long run, these too will be exhausted.
Eventually, all energy will have to be derived from essentially inexhaustible
sources, These include breeder reactors, fusion reactors, solar and geothermal
energy. Solar energy, as well as direct radiation, includes indirect solar sources
such as biomass, including wood, and the winds. Further, it is quite possible that
other inexhaustible energy sources may be discovered and commercially developed
in the course of time.
Prototype commercial breeder reactors of the uranium, liquid metal cooled
type have been constructed in the U.S., U.K., U.S.S.R. and France. The U.S.
Fermi I reactor had a near meltdown because of a construction blunder and was
abandoned in 1971. The later breeder reactors in Europe are still in the develop
mental stages and their economics and safety have not yet been completely demon
strated. At this point in time, it is difficult to say whether breeder reactors will
become a viable source of energy. It is clear, however, that breeder reactors would
be even more capital intensive than present uranium fission reactors, meaning
more interest on borrowed money and profits to owners and fewer jobs.

187
Nuclear fusion would combine nuclei of hydrogen and its isotopes to produce
helium with the release of enormous quantities of energy. The technical feasi
bility of a sustained fusion reaction has not yet been proven in 'the laboratory.
There is no clear evidence that present experiments are even on the right track.
If sustained fusion reactions become successful, it will be probably at some dis
tant point in the future. From present indications, however, fusion reactors
would be the most highly capital energy source of all and, therefore, create
fewer jobs.
Solar energy in its direct and indirect forms, is being urged as the most promis
ing candidate as an inexhaustible source of energy to replace present declining
energy sources. There is much to recommend this point of view. Solar radiation
reaching the earth’s surface is manyfold larger than all present energy needs,
and it is non-polluting.
Solar energy is not a new technology. It is a fundamental part of the ecology
within which man and all his works are embedded. We could not exist one day
without solar radiation. For thousands of years, our activities have revolved
around the use of solar energy. In agriculture, beyond photo-synthesis, the sun
has been used for drying crops and many other purposes. Regional housing has
been designed to take advantage of natural solar heating and to exclude the sun
and to promote air convection cooling in hoit weather. The use of solar energy
has been greatly reduced during the last century because of the convenience and
lower labor costs of energy derived from fossil fuels.
Solar energy, as popularly understood, has two meanings. One is to increase the
utilization of traditional uses of the sun. The second is to take advantage of
advanced technology to use solar energy in new ways. It is with the second, its
advantages and drawbacks, that we are here principally concerned.
The most promising immediate direction for solar energy utilization is for
simple heating purposes. More than one-quarter of the energy of fossil fuels is
now used for space heating and industrial heating. With the use of comparatively
simple technology, much of which already exists, much of this heating could be
•done by solar energy. Back-up systems would have to be provided where heating
may be required at times when solar radiation is not available.
From the technological standpoint, solar cooling is not as straightforward as
solar heating. For cooling, a simple solar heat engine is required to power a
heat pump to remove heat from space to be cooled into the warmer environment.
Again, a back-up system is needed if cooling is required in the absence of sunlight.
In the early uses of the fossil fuels their prime advantage was their easy con
version into motive power, even with low thermodynamic efficiency. This con
vertibility of heat into motive power laid the basis for the industrial revolution.
Direct solar energy is less easily convertible into motive power, while quite
feasible.
There are two avenues for this conversion. The first is by way of photo-voltaic
cells. Efficiencies of at least 15 percent are obtainable with present devices. This
compares quite favorably with the efficiencies of most fossil fueled heat engines.
However, at this time the efficiency of photovoltaic cells is less than the efficiency
of conventional electric power plants which operate at an effiiciency of 30 percent
or more. New research findings indicate that the conversion efficiency of solar cells
can be greatly improved.
The main difficulty with solar photovoltaic cells is that the electric power that
they produce is low voltage direct current. This current must be electronically
converted to alternating current and then stepped up to high voltage current
by a transformer. This is necessary so that it can be compatible with conven
tional electric current for its end uses. A second difficulty is that the sun’s radia
tion is variable so that either high cost storage batteries are required or a con
ventional electric power plant must be used for back-up.
The second way of using direct solar radiation to generate electricity is to con
centrate the sun’s rays to drive a heat engine which then drives an electric gen
erator. This can be done on a small or a large scale. Here there is no difficulty with
the compatibility of the current generated with that from conventional sources.
But, again, back-up power is required because of the variability of solar energy
inputs.
A highly imaginative proposal for solar electricity is that of a solar power sta
tion on a satellite located in a stationary orbit. The power generated would be
beamed via microwaves to a terrestrial receiving station. In space, beyond the
atmosphere and weather disturbances, the sunlight available for conversion

188
would be much greater than here on earth. From the standpoint of jobs creation,
the solar satellite would be highly capital intensive and would provide few jobs
per billion dollars invested.
For most of its proposed uses, solar energy is well adapted to local small scale
technology and thus avoids the large scale capitalization problems of the fossil
fuel and conventional electric power. However, it cannot be denied that solar
energy is also capital intensive. The main outlays are for the original costs of
construction. Solar equipment requires essentially no operating labor and very
little maintenance labor. The scale of most solar installations, as now proposed,
is small. Solar technology is thus well adapted to individual ownership as con
trasted to large scale corporate ownership.
As pointed out several times in the foregoing, solar energy devices of all kinds
present a problem for many of their uses because of variability of solar inputs.
Back-up energy systems are thus required for the periods when solar radiation is
not available. This means that solar energy introduces the problem of duplicate
capitalization : one set of capital requirements for the solar system and one for
the back-up system. For electrical systems, the generation of large quantities of
solar electricity would place a high fluctuating load on the back-up system. This
would mean a low base-load on the back-up system and therefore higher costs
of electricity. The capital costs per hour of the conventional electric power plant
continue whether the plant is operating at capacity or not.
There are many other alternative energy technologies, such as geothermal.
Little purpose would be served in going into them in a statement intended to be
brief. Most of these alternative technologies have not been sufficiently developed
at this time to permit sound evaluations of their future possibilities for providing
mass sources of energy and of their jobs impact.

Senator K e n n e d y . Mr. Ruttenberg, we will hear from you.
The one thing I had hoped that you might cover, as former Assistant
Secretary of Labor, is whether this kind of information for this labor
impact is available. Can it be done ? We have heard quite unsafe re
sponses on that, quite frankly, earlier today. Is there at least sufficient
information to begin the process? We don’t expect it to be definitive, if
we have to develop, obviously, the techniques for doing that, it is going
to be ongoing and continuing:. It has not been done, certainly it has not
been done effectively. That kind of information for iobs impact state
ment, is that available now ? I would hope you could refer to that and
we could hear from the others. Why don’t you proceed with vour
testimony.
Mr. R ttttenberg. Yes, thank you.
Senator K e n n e d y . Perhaps you could summarize, we are going to
vote at twelve and I want to move through and, get to some questions.
STATEMENT OP STANLEY H. RTTTTENBERG, PRESIDENT, RTJTTENBERG & ASSOCIATE, WASHINGTON, D.C., ON BEHALP OP EDWARD J. CARLOTJGH, GENERAL PRESIDENT, SHEET METAL
WORKERS’ INTERNATIONAL ASSOCIATION

Mr. R tjttenberg. I am here substituting for Mr. Carlough who would
like to have been here, but his general executive council meeting which
was supposed to have been over, continued over to today and he asked
me at the last minute to substitute for him.
We have a much longer prepared statement which I will submit for
the record. There is a much shorter oral statement which Mr. Carlough
was going to read and in view of the time factor here today, Senator, I
will also try to condense it even further, and then also make a comment
about the manpower issue which you have raised.

189
Let me just read what Mr. Carlough would have said in part.
Mr. Chairman, the Sheet Metal Workers International Association
appreciates this opportunity to make our views known about the im
portance of relating employment policies to our national energy
program.
Our position is clear : Full employment and an effective energy plan
go hand-in-hand. We can’t solve the energy crisis until we first deter
mine the labor impacts of the various energy alternatives before us.
Our union believes that each of these alternatives should be evalu
ated in terms of its employment impact so that we can choose those
which meet both our energy and our employment needs.
I might interrupt to respond to your question briefly, Senator. We
do not now have within the Federal Government the basic kind of data
and information which is essential to answer the kinds of questions
which you were directing this morning to Secretary Marshall and to
Assistant Secretary Packer. I think it is vital, that there be some
resources placed into the effect to develop the employment impacts
of alternatives sources of energy, both geographically and as between
the varying types of energy sources.
I would hope that one of the things that would flow from this hear
ing would be a request, a demand, upon the administration to begin
producing this kind of information.
We are also, as the Sheet Metal Workers Union, strong supporters
of solar energy as a major part of our national energy policy. Our
union wants the Federal Government to give more support to this
most promising of energy alternatives.
We are deeply concerned that the administration has chosen to cut
Federal expenditures for solar energy at a time when funds should
be doubled. The proposed budget for fiscal year 1070 slashes solar
heating and cooling—the most promising and the most significant
solar technologies—by $20.5 million. When adjusted for inflation.
Senator McGovern made the point earlier, it is some $40 million. If
the President had his way, a good part of that money will go instead
to windmills.
Clearly, the administration has its energy priorities mixed up. I do
not deny the usefulness of wind energy, but the need to reduce our
dependence on oil and gas demands that we put more Federal money
where it will have the most impact—into solar heating and cooling.
To achieve these goals, there are many choices available. We can
harness nuclear power, sun power, wind power, ocean power, and
much more. Each of these alternatives has its own unique impacts on
labor. Unfortunately, very little has been done to provide useful data
about those impacts.
It is essential that the administration and Congress get informa
tion ahout the many construction and operational jobs which will be
created, what skills will be needed, how long the jobs will last, the
availability of manpower, and the regions of the country where the
jobs will be created.
Accordingly, Mr. Chairman, we recommend that Congress place
the responsibility for measuring the employment impact of energy
policy alternatives in the hands of the Federal asrencv most capable
of performing that task. This should be the Bureau of Labor Statis
tics—which collects a wide variety of labor data—or the Energy In

190
formation Administration—which has statutory responsibility for
measuring energy employment impacts. And my preference would be
the Bureau of Labor Statistics. In addition, we recommend that—in
the future—no major energy legislation be adopted until its employ
ment impact has been determined.
As the national energy debate has proceeded, both the President
and the Congress have bounced from impasse to impasse without the
benefit of much vision. It is time the blindfolds were removed. We
need only look up to the sky for what must certainly be the most
promising of new energy sources—the Sun.
The sheet metal workers first gave their support to solar power al
most 20 years ago. At that time, we noted that the tremendous de
mands being made on fossil fuels were the best reason to devote our
attention to solar energy.
In the years since then, our union has been one of the most vocal
proponents of solar energy in the Nation. In 1975, we recommended
two studies which showed the positive relationship between energy
policy and employment. These studies helped us to adapt our trade
to solar technology. We have produced a film and installed all kinds
of solar heating around the country which have proved the practical
ity and efficiency of solar energy. The national training fund of the
sheet metal and air-conditioning industry—which is a labor-management training effort jointly supervised and administered by the
Sheet Metal and Air Conditioning Contractors’ National Association
and our union—has cooperated with the Department of Energy in
a comparison of the performance of air and liquid residential solar
heating systems. Although more research is needed, preliminary re
sults indicate the superiority of air over liquid solar systems.
Mr. Chairman, while we await the final results of this research, it
is a misdirection of Federal funds for the Department of Housing
and Urban Development to give preference to solar liquid systems.
But that is exactly what they have done with grants under a $4.6 mil
lion demonstration program announced a year ago.
We urge this committee and Congress to call upon HUD and the
Department of Energy to grant equal status to air and liquid solar
systems when allocating Federal funds.
Throughout the remainder of this century, our objective must be to
reduce our reliance on oil and gas. Both solar and nuclear power are
ready and waiting to help us meet that objective. Nuclear technology
is already in commercial use. The technology for solar heating and hot
water systems is fully developed. And solar cooling and power tech
nology is on the horizon. Both nuclear and solar energy can be an im
portant part of our national energy plan. Solar systems have many
advantages which are discussed in our prepared statement.
To harvest the advantages of solar energy will require a strong
Federal commitment. That commitment shouid include the following
measures:
(A ) We must establish a national solar energy task force to set
solar objectives and recommend the policies necessary to achieve those
objectives.
(B ) We must make a commitment to the maximum possible use of
solar energy in new and existing buildings.

191
(C)
We must provide tax credits for the residential and commercial
installation of solar equipment, along the lines of legislation now
pending before Congress.
In conclusion we recommend that the Federal Government promote
energy conservation by encouraging the retrofitting of existing build
ings and the installation in new buildings of energy conserving ma
terials and equipment, including heat recovery and variable volume
systems.
Mr. Chairman, I am proud of the lead which the Sheet Metal
Workers’ International Association has taken to actively support
energy policies which are good for the American economy and good for
the American people. I will be happy to answer any questions which
you and the other members of this subcommittee may have.
I have rushed hurriedly through this, Senator McGovern, because I
realize the time factor. 1 skipped over much of the already-reduced
condensed statement.
[The prepared statement of Mr. Carlough, submitted by Mr. Ruttenberg, follows :]
P re p a r e d S t a t e m e n t

E dward

C arlough

Mr. Chairman, the Sheet Metal Workers’ International Association appreciates
this opportunity to make our views known about the importance of relating
employment policies to our national energy program.
Our position is clear : Full employment and an effective energy plan go handin-hand. We can’t solve the energy crisis until we first determine the labor impact»
of the various energy alternatives before us.
What is needed is a qualitative discussion about the economic impacts of each
of these alternatives. Our union believes that each should be evaluated in terms
of its jobs impact so that we can choose those which meet both our energy and
our employment needs.
We are also strong supporters of solar energy a major part of our national
energy policy, and we believe that the Federal government must give more
support to this most promising of energy alternatives.
The United States is in the grip of two crises which are closely intertwined. On
the one hand, we are relying more and more on scarce energy supplies ; on the
other, our economy continues to be plagued with high unemployment and in c r e a s
ing inflation. The solution to both of these crises demands equal priority.
Nearly three-fourths of all energy consumed in the United States comes from
petroleum and natural gas. During the years which have followed the Arab oil
embargo, we have actually increased our reliance on petroleum as a fuel source.1
Of even greater significance is our expanding need for oil imports. Prior to the
embargo, one out of every four barrels of crude oil refined in the United States
came from foreign sources. Today, the figure is approaching one out of every two
barrels.®
Over the past four years, domestic demand for petroleum has increased by
almost 1 million barrels a day while the price of a barrel of imported crude oil
has jumped from $2.60 to $13.85.®
Most shocking of all is our escalating reliance for oil on the very countries
which cut off our supply in 1973. Last year alone, we imported one-third more
petroleum from the Arab members of the Organization of Petroleum Exporting
Countries (OPEC) than we did in 1976. We are now importing 72 percent more
petroleum from the Arab countries than we did in 1973.*
The spiraling price of oil since 1973 has fueled inflation, dampened consumer
purchasing power, and—most important of all—it has been a direct cause of unacceptably high levels of unemployment.6
1 See Table 1.
2 See Table 2.
8 TT.S. Department of Energy, Monthy Energy Review; January, 1978.
4 See Table 3.
5 See Tables 4A and 4 B ; See also Congressional Budget Office, Inflation and Unemploy
ment: A Report on the Economy; June 30, 1975 ; pp. 70-73.

192
There is a close relationship between the price of energy and the price of every
thing else since all commodities and services depend on energy. Prior to 1973,
wholesale commodity prices had been increasing at the modest rate of 2 percent
a year. But, since oil prices started to escalate in 1973, commodity prices have
been inflating at 10 or more percent a year.6
This is a time when America cries out for leadership which will provide us
with a bold, but realistic, solution to an energy crisis which has already dealt our
economy a series of crippling body blows.
It is ironic that many of the loudest voices in the national energy debate have
been urging increased energy prices as a means of encouraging expanded produc
tion of oil and gas. Higher prices—and the higher profits which result from
them—may encourage the oil industry to produce more, but they will also in
evitably lead to higher inflation and higher unemployment.
In arriving at a national energy plan, there is a myth which should be put to
rest. It is the myth which places a direct relationship between increased energy
consumption and economic growth.
The proponents of this notion are wrong. The history of the last several decades
is a record of ever-expanding energy consumption, but that record has been no
guarantee of prosperity/
Increasing consumption of energy in specific industries or in specific regions
of the country has not necessarily brought about equal increases in employment
in those industries or regions. In fact, American industry has used energy to
replace labor.
In the steel industry, for example, steel output increased between 1949 and
1969 by 45 percent while the number of production jobs decreased by 20 percent.8
In the agricultural sector, where unemployment is currently one-third higher
than the economy as a whole, the use of energy for fertilizers, chemicals and
automated equipment has increased productivity, but it has also led to the loss
of more than half of all agricultural jobs over the past 50 years.®
A recent newspaper advertisement touted the fact that the petroleum industry
has never been shut down, while the coal industry is currently experiencing the
longest strike in its history. In support of oil, the ad pointed out that the “petro
leum industry is capital intensive. It doesn’t need a lot of manpower to extract
energy from the earth. [But] it does need large chunks of money to search for
and find oil and gas. . . . ” 10
Inherent in this thinking is the notion that petroleum is an attractive form of
energy because it saves labor costs. But there are capital costs, too. When these
are calculated along with other economic costs, it becomes evident that excessive
reliance on petroleum has a staggering price tag: inflation, high unemployment,
an outflow of billions of U.S. dollars to foreign bank accounts, the loss of tens of
thousands of U.S. jobs to foreign workers, an enormous trade deficit for which
oil is largely responsible,11 and the resultant weakening of the dollar on the world
money market.
Mr. Chairman, we want to see economic growth, and we also want to see
increased productivity. These are goals which are shared by both labor and
management. But the point is that some forms of energy are more efficient and
less costly to our economy than others. As we shift away from our reliance on
oil and gas, the twin goals of energy efficiency and economic benefit are both
equally important.
Each of the energy alternatives before us has its own unique impacts on labor.
Unfortunately, very little has been done to provide useful data about those
impacts. The shift away from a petroleum-based economy—which must be at
the heart of our national energy plan—will result in the loss of jobs in some
industries and in some parts of the country. But the shift to other forms of
* TT.R. Department of Labor. Bureau of Labor Statistic.
7 A Resources for the Future study has found that data “do not support the widely-held
belief that energy and Gross National Product (GNP) have crown at essentially the same
rates. . . . It seems to be questionable to assert a rigid linkage between [the two].”
Resources for the Future. Newsletter: Fall. 1976.
* Natural Resources Defense Council, Choosing An Electrical Energy Future for the
Pacific Northwest: An Alternative Scenario : 1977.
•Dennis Hayes, Energy : The Case for Conservation; Worldwatch Institute 1976.
1# Advertisement sponsored by the Delta Drilling Company in The Washington Post,
March 10. 1978.
11 In testimony before the Energy Subcommittee of the Joint Economic Committee,
Assistant Secretary of the Treasury, C. Fred Bergsten said : “The increased price of oil has
been the single most important factor underlying the adverse shift in the U.S. trade
balance.” March 9, 1978.

193

energy will result in the creation of new jobs in more industries throughout
the country.
It is essential that the administration and Congress get information about
how many construction and operational jobs will be created, what skills will be
needed, how long the jobs will last, the availability of manpower, and the
regions of the country where the jobs will be created.
Both the Department of Labor and the Department of Energy currently use a
CMDS model to measure labor impacts, but it focuses on construction jobs only.
It is equally important to know the operations and maintenance labor impacts.
In addition, there are other models in use by both the government and industry,
yet none is able to provide employment impact data for each of the major
energy alternatives on a regional basis. Only this type of disaggregated data
will be useful to energy policy planners. In addition, this is information which
will be valuable to both labor and management in planning for the future. And
it will help the American people to better understand what lies ahead as we switch
from our dependence on oil and gas.
It is important for all of us to understand that the solution of the energy
crisis need not require a reduction in the quality of our lives. Because of the
importance which job opportunities and job security have for everyone, data
about the employment impacts of energy alternatives is vital.
Accordingly, Mr. Chairman, we recommend that Congress place the respon
sibility for measuring the employment impact of energy policy alternatives in
the hands of the Federal agency most capable of performing that task. This
should be either the Bureau of Labor Statistics (which collects a wide variety
of labor data) or the Energy Information Administration (which has statutory
responsibility for measuring energy employment impacts).
In addition, in order to assure that energy employment impacts are given
adequate consideration, we recommend that—in the future—no major energy
legislation be adopted until its employment impact has been determined.
As the national energy debate has proceeded, both the President and the
Congress have bounced from impasse to impasse without the benefit of much
vision. It is time the blindfolds were removed. We need only look up to the sky
for what must certainly be the most promising of new energy sources— the sun.
The Sheet Metal Workers first gave their support to solar power almost twenty
years ago. At that time, we noted that the tremendous demands being made on
fossil fuels were he best reason to devote our attention to solar energy.12
In the years since then, we have given our active support to solar power as a
source of energy for home heating and cooling. In fact, our union has been
one of the most vocal proponents of solar energy in the nation.
In 1975, we commissioned two studies which showed the positive relationship
between energy policy and employment.“ These studies helped us to adapt our
trade to solar technology.
Today, we are actively working to promote the expanded use of solar power.
We have produced a 23-minute film which explains how we can gather, store
and use the sun’s energy, and how solar systems operate.14 And we have produced
a wide variety of printed materials to acquaint both our members and the public
with the benefits of solar energy.
The Sheet Metal Workers have also initiated or participated in several con
struction projects which have proved the practicality and efficiency of solar
energy. For example:
(1) Local 55 on Long Island, New York, and the Joint Apprentice Building
Committee of Local 80 in Michigan have both built solar powered apprenticeship
schools;
(2) Members of Local 67 in San Antonio were involved in the installation of
the nation's largest solar energy collection system at the physical education
complex of Trinity University;
(3) Members of Local 219 in Rockford, Illinois installed a solar heating system
for a drive-in bank;
(4) Members of Local 48 in Decatur, Alabama installed 672 solar collectors
for use in drying soybeans at the Goldkist Soy Facility.
u Sheet Metal Workers’ International Association, Sheet Metal Workers Journal, May,
1959.
18 Mitre Corporation, Impact of Energy Developments on the Sheet Metal Industry ;
Stanford Research Institute, Strategic Implications of Solar Energy for Employment of
Sheet Metal Workers ; June, 1975.
14National Training Fund, “Under the Sun.”

194
Mr. Chairman, these are but a few of the examples of the work which our
union’s members are doing to make solar energy a reality. In addition, the Na
tional Training Fund—a labor-management training effort jointly supervised
and administered by the Sheet Metal and Air Conditioning Contractors* Na
tional Association ( SMACNA) and our union—has cooperated with the Depart
ment of Energy to compare the performance of air and liquid residential solar
heating systems.
In the latest report on this on-going comparison project, researchers stated:
“Overall, the flat-plate air heating system provided 40 percent more solar
energy for space and domestic water heating based on gross unit collector area
than the flatplate liquid-heating system... ,
“The air system operated over a longer period of the day than the flat-plate
liquid system.. . . ” “
Mr. Chairman, we believe these preliminary results indicate the superiority
of solar air over solar liquid systems. While we await the finals results of this
research, it is a mis-direction of Federal funds for the Department of Housing
and Urban Development to give preference to solar liquid systems; but that is
exactly what they have done with grants under a $4.6 million demonstration
program announced a year ago.
We urge Congress to call upon HUD and the Department of Energy to grant
equal status to air and liquid solar systems when allocating Federal funds.
Throughout the remainder of this century, our objectives must be to reduce
our reliance on oil and gas. Both solar and nuclear power are ready and waiting
to help us meet that objective. Nuclear technology is already in commercial use.
The technology for solar heating and hot water is fully developed. And solar
cooling and power technology is on the horizon. Both nuclear and solar energy
can be an important part of our national energy plan.
Based on current policies, it has been estimated that all forms of solar power
will supply between 22 and 25 percent of U.S. energy demand by the year 2020.
Sixty percent of that share will be devoted to the heating and cooling of build
ings.16 With the kind of expanded solar effort which the Sheet Metal Workers
support, solar energy could make a far greater contribution to alleviating
our reliance on oil and gas.
For example, President Carter has set a goal of two and a half million solar
heated homes by 1985. That is a goal which we believe is both highly desirable
and attainable. But, we also note that at least one energy expert (who will be
appearing before this subcommittee) has stated that California alone will have
more solar collectors installed in homes by 1985 than is forecast for the entire
nation.17
In short, Mr. Chairman, solar energy isn’t science fiction. We don't need to
waste another day waiting to reap its benefits. Let me list a few of the most im
portant ones:
(1) Solar energy is available everywhere.— The sun's energy can be tapped in
one form or another everywhere. It can be tapped when the sun shines or when
the wind blows. Organic matter can be converted into power, and the temperature
differences within oceans can be harvested to produce power. Each of these is a
form of solar power.
(2) Solar energy is renewable .— Unlike almost all other fuels, solar energy is
renewable. In fact, for the next several billion years, it will be inexhaustible.
(3) Solar energy is not controlled by the giant corporations.—The solar in
dustry consists primarily of small businesses, unlike oil and gas which are con
trolled by a few large corporations. By relying more and more on solar energy,
we will over time break the monopolistic hold of the oil companies on our national
energy policy.
(4) Solar energy is environmentally sound.—No form of energy receives more
support from environmental organizations than solar energy.
(5) Solar energy is safe.— From the standpoint of both the public and those
who must work with solar equipment, solar energy is safe.
15 Solar Energy Applications Laboratory^ Colorado State University, A Performance
Comparison Between A ir and Liquid Residential Solar Heating Systems; January, 1978.
16 H. Craig Petersen, National Science Foundation, Sector-Specific Output and Employment Impacts of a Solar Space and Water Heating Industry; December, 1977; p. 2. Also,
General Accounting Olfice, The Magnitude of the Federal Solar Energy Program and the
Effects on Different Levels of Funding ; February 2,1978 ; p. 3.
17 Wilson Clark, energy adviser to Gov. Jerry Brown of California, as quoted in Dennis
Hayes, ‘'We Can Use Solar Energy Now,” The Washington Post, February. 26, 1978.

195
(6) Solar energy will let us reduce our oil imports and our trade deficit.— Our
trade deficit for last year amounted to over $30 billion.18 in the same year, we
spent $45 billion on foreign oil. In 1972, our expenditures for foreign oil were
Less than $5 billion.19 Not only is our dependency on foreign oil causing a serious
capital drain, but we are losing tens of thousands of jobs, as well. Using even the
conservative estimates of solar energy's potential, we can reduce our oil imports
b y five to six percent within the next seven years and we can get back many
of the jobs which have beten lost.20
(7) Solar energy makes use of available manpower in regions o f the country
where jobs are needed the most.—The skills required for installation of solar
equipment are very similar to those required for conventional construction proj
ects.21 For the fabrication component, work opportunities will include glazing,
metal extrusion, and component assembly—all skills which are presently in use
within the industry. Our National Training Fund has already undertaken pro
grams to retrain our journeymen and train our apprentices in the techniques
required by solar technology.
Initial installations of solar equipment are likely to take place in the South and
Southwest. It is precisely in these areas where construction unemployment is
high. Over the long run, solar energy is expected to be competitive with other en
ergy forms in all parts of the country. The result will be solar jobs as geo
graphically dispersed as the building industry.23
(8) Solar energy is labor intensive.— Most solar devices are manufactured
from inexpensive materials often using small and relatively uncomplicated equip
ment. Much of the work involving the installation of isolar equipment requires
direct, on-site labor. These factors combine to make solar energy more labor in
tensive than any conventional form of energy.28 Not only is this greater labor in
tensity evident in the construction phase, but it actually increases during the
operational phase of the solar system.
Mr. Chairman, nationwide, we estimate that about one out of every five sheet
metal workers is presently unemployed. In some areas of the country, the jobless
rate for our trade is much higher. Unemployment throughout the rest of the con
struction industry is also quite high. What makes solar energy attractive is that
it not only creates jobs, but it also is one of the most effective alternatives avail
able for meeting our energy needs.
Mr. Chairman, I have listed some of solar energy’s potential and its ad
vantages. For many years to come, it will be a supplement to oil, natural gas,
coal, and nuclear power. What is most important is that we adopt policies which
encourage the transition from an economy based on oil and gas to one based on
alternative sources of fuel.
In making this transition, energy prices should not be the primary tool. If the
decision is made to increase the price of oil and gas to make alternative forms
of energy more cost-competitive, it will be moderate and lower income Ameri
cans who will bear the burden.
We must, instead, hold down the prices of conventional fuels while, at the same
time, providing stronger Federal incentives for alternative energy sources.
With a sustained Federal commitment to solar energy, for example, the day
will not be distant when homes, schools and office buildings will be heated and
cooled by the sun. Shopping centers and industrial parks will have much of their
power needs met by decentralized solar systems; and more centralized systems
will provide the power which communities need to turn on lights, operate resi
dential appliances, and run machinery.
Let us understand, however, that we will never reach this goal without strong
Federal commitment including the following measures:
(A)
We must establish a National ’Solar Energy Task Force to set solar objec
tives and recommend the policies necessary to achieve those objectives.— The
Task Force should consist of representatives of government, construction labor
•and management, industrial and commercial consumers, other consumers, the
financial and insurance industries, and equipment manufacturers.
18 See Bergsten testimony, note11 supra.
19IUd. Bergsten also stated that $36 billion of the $45 billion we spent on foreign oil was

due to higher prices.
30See General Accounting Office, note 16, supra.
21 Office of Technology Assessment, Application of Solar Technology to Today’s Energy
Needs, revised edition.

22IUd,

23 See Table 5 for an example of solar’s labor intensity.

196
(B) We must make a commitment to the maximum possible use of solar energy
in new and existing Federal buildings. There could be no greater sign of Federal
buildings. There could be no greater sign of Federal support for solar energy
than the installation of solar equipment in the White House, in congressional
buildings, and in the Supreme Court. Both the Sheet Metal Workers and con
tractors stand ready to offer their services to this most vital of projects at cost.
(C) We must provide tax credits for the residential and commercial installa
tion of solar equipment along the lines of legislation now pending.
( D ) We must establish a National Solar Bank to—
(1) provide cheap loans or grants to lower income families to encourage
them to take advantage of solar energy tax credits ;
(2) provide low-cost financing to homeowners and small businessmen seek
ing capital to install solar equipment ;
(3) provide low-cost financing to farmers seeking capital for agricultural
applications of solar energy.
(E) adopt legislation which encourages the incorporation of both passive and
active solar systems in new homes and the retrofitting of existing homes with
«olar equipment.
(F) make sizable increases in Federal funds for solar energy, with an em
phasis on further development and commercialization of solar power for heating
and cooling as well a*s decentralized solar systems.
At ia time when we should be expanding energy research and development, the
President’s proposed budget goes in the opposite direction. In defense of reduced
It & D spending, the administration states :
“ [The slowdown results from] the need to avoid overtaking activities that are
more appropriately those of the private sector such as developing, producing,
and marketing new products and processes, as in the case of solar heating.
.” 2i
The same proposed budget puts the administration on record as encouraging
technological innovation by American industry. These two statements are con
tradictory. If we are to encourage technological innovation in American industry,
then the Federal government will have to make major increases in its research
and development expenditures.
What we need for solar energy is the kind of massive Federal program which
produced synthetic rubber, harnessed the power of the atom, and put a man on
the moon. Instead, the President has slowed down solar research and develop
ment expenditures and reduced overall expenditures for solar energy from
$389.9 million to $373.58 million. The most promising of solar technologies— heat
ing and cooling—were slashed by $20.5 million, and a good part of that money
was put into windmills.
This is a gross misallocation of Federal resources which can only cripple the
national solar energy effort. We urge the Congress to make significant increases
in the administration’s proposed solar energy budget.
Mr. Chairman, the same dual concern for energy and employment policies
which prompt us to support solar energy is also the basis for our support of
nuclear power. Solar energy will never be able to supply one hundred percent of
our energy needs. Both now and in the years to come, we need expanded sources
of electrical power. Nuclear energy stands as a proven, available source of elec
tricity which can help us reduce our reliance on oil and gas.
There is another aspect of our national energy policy which is of special interest
to the Sheet Metal Workers. We can make significant energy gains through con
servation. By conservation, I mean the efficient use of fuel.
Far too much energy is lost through inefficiency. The sheet metal industry is
already making use of skills and technology which have produced impressive
conservation results. The use of variable volume systems, for example, has re
duced steam consumption by some fifty to sixty percent.25
We recommend that the Federal government promote energy conservation by
encouraging the retrofitting of existing buildings and the installation in new
buildings of energy conserving materials and equipment, including heat recovery
and variable volume systems.
Mr. Chairman, I am proud of the lead the Sheet Metal Workers’ International
Association has taken to actively support energy policies which are good for the
American economy and good for the American people.
84 Special Analyses, Budaet of the United States Government, Fiscal Year 1979; p. 307.
* Sheet Metal Workers Journal, February, 1977 ; pp. 2-3.

197
TABLE 1.— DOMESTIC ENERGY CONSUMPTION BY PRIMARY ENERGY TYPE
[In percent]

Year
197 3
197 4
1975
197 6
19772......................

Coal

Natural
gas

Petroleum

Hydroelectric power

17.8
17.8
8.2
18.3
19.3

30.2
29.9
28.3
27.4
25.3

46.8
46.1
46.4
47.3
48.8

4.0
4.5
4.6
4.1
3.1

Nuclear
electric
power

Tota

100.0
100.0

1.2
1.7
2.6

»100.1

2.8

‘ 99.9
100.0

3.5

i Does not add to 100 due to rounding.
* 1st 10 months.
Source: U.S. Department of Energy, Monthly Energy Review; January 1978; p. 46.

Table 2.— Imports as a source o f U.S. crude oil requirements
Imports as a
percent of
demand1

Year:

1973
1974
1975
1976
1977

26.1
28.7
33. O
39. 4
45.0

- ______________________________

1 Demand measured by Crude Oil Input to Refineries.
Source: U.S. Department of Energy, Monthly Energy Review; January 1978; p. 6.

Table 3.— U.S. direct and indirect oil imports from Arab OPEC countries
[Thousands of barrels per day]

Arab import»

Y ear:

1973
1974
1975
1976
19771 ____________________________________________________________

4,390. 9
4,669. 3
4,753.0
6,079.9
7,620.5

1 First seven months.
Source: U.S.Department of Energy; Monthly Energy Review; January 1978; p. 10.
TABLE 4A.— CONSUMER PRICE INDEX, 1962-77

Year
1962....................................................................................................
1973................................................................................ ..................
1977........................................... ..................... .................. ................
Source: U.S. Department of Labor, Bureau of Labor Statistics.

Index of all
items

Average in
crease per
year over
incremental
period
(percent)

90.6
133.1
181.5

4.3
9.1

198
TABLE 4B.— PERSONAL CONSUMPTION EXPENDITURES, 1967-77

Year
1967....... ....... .............. ................. .
1973....................................................
1977....................................................

Amount »

Average in
crease per
year over
incremental
period
(percent)

$603.2
1,235.0
1,337.6

17.5
2.1

1 In 1972 dollars.
Source: U.S. Department of Commerce.
TABLE 5.— COMPARISON OF LABOR REQUIREMENTS FOR A CONVENTIONAL COAL PLANT AND 2 TYPES OF SOLAR
ENERGY SYSTEMS»
[In man-hours per megawatt-year]

Construction
jobs

Labor function

Operating and
maintenance
jobs

Total jobs

COAL PLANT
800-MWe coal plant................................. ............................
Coal strip mining..................................... ............................
Coal transportation.................................. ............................
Electric transmission................................ .............................
Electric distribution.................................. .............................
Steel and concrete production..................... .............................
Turbine/generation manufacture.................. .............................

270
20
20
50
140
10
170

320
370
150
I
540

590
390
170
51
680
10
170

Total........................................... .............................

680

1,380

2,060

1,200

800- 2,500'
1,200
1,200

1,200

3,20C- 4,900

6,800

2,600- 3,300
1,800- 4,600
6,800

6,800

11,200-14,700 '

SOLAR SYSTEMS
1. Solar hot water heaters:
(a) Manufacture collector.................. .............................
(b) Install collector......................... .............................
(c) Routine operation and maintenance.
(d)

800-2,500
1,200

Total*............................ .............................

2,000-3,700

2. Photovoltaic system:
(a) Manufacture collector and cells . .............................
ib) Install collector......................... .............................
(c) Operate system.........................

2,600-3,300
1,800-4,600

(d)

Total*............................ .............................

4,400-7,900

»Systems compared are capable of producing equivalent amounts of energy.
* Total does not include manpower requirements for backup systems. In the case of both solar systems, add 340 manhours for the construction phase.
Sources: Labor requirements for coal plant taken from Bechtel Corp., “ Resources Requirement, Impacts, and Potentia
Contraints Associated with Various Energy Futures,M November 1976. Labor requirements for solar systems taken from
Office of Technology Assessment; see footnote 21.

Senator M c G o v e r n [presiding]. We appreciate that, Mr. Ruttenberg. There are rollcalls slated that we will have to go to in a few
minutes.
I just had a few questions that I wanted to direct to members of
the panel.
Mr. Winpisinger, on the solar energy question, which intrigues me
more and more as a real possibility for energy development in this
country, you have made a passing reference to the fact that nobody
owns the Sun, that that is the people’s source of energy. What, in your
view, is the real reason why we have been so slow to move on solar
energy development?
Mr. W i n p i s i n g e r . I think largely because essentially the people
do own it at the moment, Senator, that it has not been committed to>

199
any private development and as long as public development is in the
offing, it is discouraged by the very system in which we live.
Senator M c G o v e r n . In your view, if we are going to move vig
orously in that field, is it going to have to be primarily a Federal
initiative ?
Mr. W i n p i s i n g e r . I think that would be the spur. I f the Federal
Government were to initiate some moves in that direction, the private
capital would be attracted immediately to get a piece of the action*
so to speak. But I don’t think anyone is going to move in that direction*
least of all the current purveyors of energy who own it all at the
moment because they have not sold all their oil yet. And a competing
form such as solar is going to detract from perhaps the pricing o f
fossil fuels.
Senator M c G o v e r n . I noticed yesterday that M r . Williams work
ing with scientists in Princeton University has developed a proposal
calling on the Federal Government to look into the possibility of a solar
satellite system that presumably could tap solar energy and beam it
to the earth. Are you familiar with that possibility ?
Mr. W i n p i s i n g e r . Yes, sir. As a matter of fact, I suspect later in this
session of the Congress, we will be in testifying on a modest appropri
ation of money to prove out some preliminary R. & D. on solar power
satellites. It is useless to commit huge amounts of money unless you
prove out as you go along what you are doing. We encourage its devel
opment and the potential conquering of many technological barriers
that there may be. Right now, the private interests, nonenergy inter
ests, by the way, tell me it is a very promising concept and they are
asking now for $25 million from the Congress to prove out the R. & D.
Senator M c G o v e r n . I was struck by the statement that some of these
scientists seem to be highly regarded people in their field and would
say that if their present hopes, their present speculations about this
can be proved, our energy problems could be over.
Mr. W i n p i s i n g e r . They tell me that we could—that one solar power
satellite they have in mind at the moment—of course it is going to get
bigger and better as it is proven out—but one they have in mind at
the moment, would supply sufficient energy for the State of Florida,
or, conversely, the city of Chicago. This satellite could be parked in
geosynchronous orbit over the Pacific Ocean and endanger no land
mass. It would be a source of the least international controversy, be
cause other nations could park their satellites to bear reflection on
their own land mass. Ownership of land mass is not at issue. It 1ms
a rather exciting potential.
But there are some technological barriers which I fear are not yet
overcome. They have to be fully proven out. This is why we have
adopted a posture of caution and have asked the Congress to appropri
ate enough money to find out if the barriers can be broken. I f we
get the solar power satellite system nailed down, it promises a non
polluting renewable energy source which could supply us forever.
Senator M c G o v e r n . Mr. Mazzocchi, following up on that same gen
eral area, you have referred to the solar energy possibilities, too. Do
you have the feeling as I do that some of the figures that we are work
ing with on solar energy are out of date? There is a general im
pression that the cost of going the solar route is so high that it is not

200

feasible. I am wondering if a lot of those figures don’t antedate the
increase in other sources of fuel going back to the 1973 period. We
have had a quadrupling of oil and gas prices since 1973, and do you
have any information that maybe we are operating without dated
statistics as to comparative costs of solar energy ?
Mr. M a z z o c c h i . I don’t have statistics. I just have deep suspicions
and cynicism. If the energy industry could float a meter up to the
Sun, you would have solar energy tomorrow. That’s been our experi
ence with the industry.
I think Brother Winpisinger answered that as to why we don’t
have solar at the moment. I would like to make one other comment
on something Senator Kennedy said, he held up an ad which had
been placed in the paper. I think it is a classic expression by the in
dustry where it proves it certainly is capital intensive, but there is one
subsidy they speak of and that is the subsidy they operate simply be
cause we are subsidizing them with our health. Petroleum refining
counties in the United States have the highest incidence of cancer in
the country.
That is no coincidence. That is a subsidy the public and workers
give the energy industry to produce an abundant product with mini
mal manpower. In the oil industry, oil refining is cancer producing
simply because it went from a higher labor intensitivity to capital
intensive, someone is paying. The workers are paying. What we have
socialized in the country which no talks about is misery. We are in
troducing all the people to the health care system which the public
generally pays for but their introduction to that health care system is
the creature of the energy industry. So that cost has never been figured
in on the price of the product. We see it because we live with it. As
shown by the petroleum counties’ higher cancer incidents, energy
workers’ cancer is now becoming epidemic, that is a cost somebody is
paying for. We are giving 5 and 10 years of our lives and more to
produce this product, and if we had a health impact statement, we
say you would find out that a lot of the industry is really an industrial
welfare basket case. I f you would figure that subsidy and you really
measured the costs, then you would have some true comparisons with
alternate sources of energy.
S e n a t o r M c G o v e r n . I t h in k t h a t is a n in t e r e s t in g a n d v a lu a b le
o b s e r v a t io n .

Mr. Ruttenberg, you referred to the need for more information on
the labor impact in various energy strategies, the line of questioning
Senator Kennedy tried to develop earlier. Are you aware of the fact
that we can’t get those statistic« trom the Department af Labor Sta
tistics? I agree with you that that is the office that ought to have them,
but inquiries from our office, from my staff and others as to what the
labor impact is of various energy strategies have also drawn a retort
from the Department that they don’t have that information; that
they are responsible for construction manpower statistics, but they
don’t have anything of any consequence relative to the various energy
proposals.
Mr. R u t t e n b e r g . For examule, Senator, the CMDS model that’s
been developed and which the Department of Labor and the Depart
ment of Energy both cooperate in working on, measures only the con

201
struction jobs involved. It does not measure the secondary impacts of
the operations of the programs and the maintenance of the programs.
We are sadly lacking in the kind of data which is essential to really
get a full picture of the employment impacts of varying types of
energy.
It’s a sad commentary that really the one basic study which has
been made by the Department of Labor is on what the energy impacts
were during the embargo back in 1974. And when you look for any
further update materials, it is non-existent. That is why Mr. Packer
this morning was talking about 1974 and studies back then. We need
to put resources into this area. It cannot be done without money,
Senator.
Senator M c G o v e r n . Maybe through the influence of you gentlemen
and your associates in the labor movement and through the efforts of
this committee and others, we can get a little more efforts focused in
that direction.
Mr. Rtjttenberg. We need to get some appropriations for this area.
Senator M c G o v e r n . Thank you very much, gentlemen.
I would like to call Mr. Nicholas Carbone, the Hartford City Coun
cil, to the witness stand. He is one of the most outspoken and one of the
most respected spokesmen for the cities. He is a strong advocate of com
prehensive planning to meet urban problems and has created in Hart
ford a new agency to create jobs through energy conservation. I want
to congratúlate you for your initiatives in this field.
As you gathered in listening to the line o f questioning here this
morning, this committee is urgently interested in the job impacts
of energy conservation and all of the various energy strategies. I want
to apologize on behalf of the subcommittee that we kept you so late
today and now we have run into a rollcall which is about half way over,
but I will stay until the second bell rings and maybe a couple minutes
beyond. Could you just give us a summary of your statement and then
submit the prepared statement for the record and we will see that it is
printed in its entirety.
STATEMENT OF HON. NICHOLAS R. CARBONE, COUNCILMAN, HART
FORD CITY COUNCIL, HARTFORD, CONN.

Mr. C a r b o n e . Thank you, Senator, and I know you are pressed for
time. I would like to say that the energy policy has to be a keystone of
an urban policy, as well as a jobs policy. I think the passage of the
Humphrey-Hawkins Act is critical to this whole issue; I would just
like to state that because I believe so strongly in it. There are three
principles we have to look at when we look at an energy policy, and
a couple of facts. Waste of energy eliminates jobs; capital intensive
production of energy eliminates jobs; lack of a comprehensive national
and urban growth policy wastes energy and destroys cities; energy
consumption and energy waste affect job loss.
I think the inflation that is taking place in this country since 1974
documents that. Our own city burget went from $94 million to $130
million. That’s a 50-percent increase in our budget. But due to in
flation, our current budget in terms of 1971 dollars—buys only $64
million worth of goods and services.

31-502 O

78 ■■ 14

202
That has caused us to reduce our services to our residents, we’ve
reduced our work force by 20 percent. At the heart of these cutbacks
is the inflation wrhich has been caused by the rising cost of energy. It is
no accident that double digit inflation started with the price increases
of energy in 1971-72.
The second point is, there is a capital shortage in this United States
and yet we are wasting the capital that is already in place. It would
cost $8 to $10 billion to replace Hartford—our parks, public buildings,
private buildings, sewers.
Senator M c G o v e r n . Just for the city of Hartford ?
Mr. C a r b o n e . Just for the city of Hartford. The capital cost of
replacement would be $8 to $10 billion. Yet, we are facing the abandon
ment of the city because we are unable to maintain our capital invest
ment. Capital has been diverted from the cities and diverted from
private investment into the high cost of producing nuclear power. And,
as we all know, nuclear powerplant costs have tripled in cost. In Con
necticut, the first nuclear powerplant cost $300 million. Today a new
nuclear powerplant costs $1.6 billion. That capital used to build the
nuclear powerplant is not available for housing and other urban
needs.
A Touche Eoss study just completed concerns capital investment
in inner cities. This study, done by a private sector firm, includes
statistics on 66 cities and I recommend that the subcommittee look at
that set of statistics.
[The prepared statement of Mr. Carbone follows:]
P repared S t a t e m e n t

H on . N ic h o l a s R . C arbone

I am pleased to join you today to discuss the role of energy policy in job
creation. Our national energy policy is new and incomplete. In two weeks Presi
dent Carter will announce America’s first explicit urban policy. Behind both
strategies and programs at the Federal, State, and local levels must lie a
response to our Cities’ greatest need: Jobs. Our urban policy must be an invest
ment strategy which creates employment opportunities.
Energy policy must also be shaped to play a central role in the task of urban
job creation. As Congress moves closer to the historic adoption of the HumphreyHawkins full employment bill, the planning tools to create full employment must
be utilized to shape our energy policy as a powerful instrument for economic
growth.
The board principles of an energy/jobs policy must be fashioned at the
national level in cooperation between the Congress and the administration. But
numerous State and local governments already have developed prototypes of
energy programs that are putting people to work. We need to examine those ideas
and implement the best of them in other States and local communities. That effort
will require a partnership between all three levels of government.
That partnership must work together to redefine the impact of energy policy
on Americans. Energy policy has come to imply penalties, sacrifice and prohibi
tions that affect some people more severely than others. In the atmosphere of
mistrust and resentment that follows, it is difficult, if not impossible, to rally
public understanding.
Energy policy does not have to mean unequal treatment and an unfair set
of personal sacrifices. Energy conservation can be perceived as a positive step
towards eliminating waste and creating jobs for Americans. According to Donald
Gilligan, former assistant director of the New York State Energy Office: “The
Northeast could increase its energy consumption by 40 percent over the next
decade without a single new energy source— by simply eliminating waste.”
Energy conservation offers local officials and individuals opportunities to increase
our options to reallocate capital and natural resources away from wasteful
energy uses to job creating activities.
There are 3 basic principles which underline this theme.

203
1. Waste of Energy eliminates jobs.
2. Capital intensive production of energy eliminates jobs.
3. Lack of a comprehensive national and urban growth policy wastes energy
and destroys cities.
Energy consumption and energy waste affect job loss.
In order to understand that relationship, let’s look at how inflated costs have
limited local government’s ability to deliver services. Hartford’s experience is
typical. Since fiscal year 1971-72, Hartford’s budget has increased from $94
million to $130 million. During the same period the consumer price index increased
50.5 percent—shrinking the value of today’s dollar. Our total current budget
would equal only $64 million in 1971-72 dollars, and in 19*1-72 we were spending
$94 million for city services. We have cut back in several ways. We have cut
back through layoffs and attrition; our number of man years has been reduced
by 20 percent. We are also delaying replacement of equipment such as street
sweepers—which rose in price from $15,000 to $25,000 in five years.
And, at the heart of these inflationary price increases is the rising cost of
energy. Since 1971, the cost of fuel oil has gone from 12 cents a gallon to 40 cents
a gallon—a 228 percent increase. The price of gasoline has increased by 168
percent and electricity by 71 percent.
As Barry Commoner points out:
“It is no accident that we first experienced double digit inflation when the
previous constant price of energy not only drives all prices upwards—it creates
uncertainties that delay new industrial investment. It forces economic disloca
tions that costs jobs. It is a prescription for inflation and unemployment. Here,
then is the real meaning of the energy crisis. It is not a distant prospect of
someday running out of energy. Bather, it is the immediate prospect of economic
catastrophe.”
How can we as a nation avoid that economic and social catastrophe? Massive
multi-billion dollar projects such as the Alaskan pipeline don’t seem to be the
answer. Neither do proposals to build networks of huge nuclear power plants.
Nuclear powerplants, Commoner points out, have had to meet a whole series of
new safety and environmental protection requirements that were not built into
the original design. These refinements have helped push up the costs of a nuclear
power plant by 130 percent in five years. Since waste and reprocessing problems
are still unresolved, nuclear power plant costs will continue to increase. In
Commoner’s words:
“That explains why nuclear power is the most expensive energy source.” and
“that is why utilities constantly demand higher rates to raise the huge amounts
of capital needed to build nuclear powerplants.”
Our country also faces severe limitations in the availability and cost of capital.
Given the shortage, we must make a choice—will we use the bulk of our capital
to build costly nuclear powerplants to produce costly electrical power? Or will
we use our capital in ways that will reduce our energy costs, put our people to
work, rebuild our cities and improve the quality of life for most Americans?
If the American people believed that the latter choice were realistic, they would
demand that we make it. I believe that that option is realistic, that we can
achieve those goals—if we are willing to implement a sensible energy policy.
We must help the American people understand that the lack of a comprehensive
national and urban growth policy not only destroys cities, it saps our Nation’s
strength through unnecessary waste or energy. What are the energy costs of un
balanced growth? What are the energy costs of the destruction of our North
eastern and Midwestern cities? In Hartford, we have estimated that the total
capital cost of replacing our city is 8-10 billion dollars including private and
public buildings, parks, streets, sewers, etc. It is ironic that the lack of a national
urban policy is systematically destroying this capital base—by forcing people to
leave to seek employment; and by underfinancing local governments so that we
are unable to maintain our capital investment.
It is ironic that while we all decry the waste of energy, and while we decry
the shortage of capital, we are wasting these resources and harming our environ
ment through the absence of a growth policy.
The cost of new housing is exploding yet as we all know, the cost of rehabilita
tion is dramatically less than the cost of new construction. We also see a water
crisis is developing, which I believe could someday overtake the energy crisis in
importance in parts of our country—and coincidentally provide the Northeast
with the advantage of an unparalleled natural resource. We also see the crisis

204
in the mushrooming capital budgets in areas of high growth, placing unnecessary
demands on local taxpayers. All of these phenomena are due to a lack of a com
prehensive national growth policy.
We need a national growth policy not only to save our Northeastern cities but
also to save energy. We must understand that cities are inherently energy con
serving. Buildings are closer together, reducing energy costs. Apartment dwell
ings are lower in energy costs per unit than detached houses. Public transporta
tion is more readily available and financially posisible in cities and the commuting
from home to job is shorter.
Given the principles that wasted energy elminates jobs, that capital intensive
production eliminates jobs, and that the lack of a national urban policy elimi
nates jobs and hurts our cities, what should we do? Our cities are already taking
innovative steps towards a comprehensive energy policy at the local level—but
they need assistance from Washington. Unfortunately the Schlesinger plan would
shift the emphasis away from local governments and put the responsibility in the
hands of state governments. There is a role for the cities, of course, but local
government holds the responsibility for building codes, zoning laws and a variety
of regulations that have direct impact on energy conservation.
The Schlesinger plan also would place emphasis on the role of private utility
companies in retrofitting, weatherization and financing. There are two major
flaws in this. First, it does not recognize the role of public utilities in the delivery
of water and sewer services. Secondly, electric and gas utility companies need
increased revenues to maintain the debt service on existing and future capital
expansions. Conservation efforts that have lowered demand also reduced reve
nues and utilities have responded with rate hikes. Putting conservation in the
hands of utility companies would seem to place consumers in the midst of a nowin conflict of interest.
Further, the present winterization effort, deals primarily with middle and up
per income people. Tax credits will help the homeowner conserve energy and
save money, but the tax credit will not assist the urban poor and the working poor
concentrated in apartment dwellings.
As energy costs rose, landlords in Hartford began shifting the cost of energy
to their tenants, so that 75 percent of Hartford’s tenants now bear the responsi
bility of paying for their own heat and hot water. This is almost always the case
in our poorest neighborhoods. When landlords are not paying heating bills, the
tax credit won’t motivate them to invest in insulation, storm windows or more
efficient boilers. The tenant who is paying the heating bill can’t get a tax credit
even if he or she can afford to winterize the apartment.
As a result of this situation, at least 50 percent of our multi-family units won’t
be winterized nor will they utilize new technologies such as solar collectors.
The Community Renewal Team of Hartford, which operates our winterization
program for poor people, estimates that we need $10 million to insulate all sub
standard living units occupied by the poor in the Hartford region. Last year
CRT’s total budget for insulation was $120,000—approximately 1 percent of the
total need.
But, the Schlesinger program is not an energy program for cities nor is it an
energy program which places priority on job creation. Let me cite some specific
examples of the ways in which energy policy can be used to create jobs. The city
of Hartford is establishing a Community Energy Corporation which will hire and
train unemployed city residents to retrofit and audit existing structures. We will
work on public buildings and hope to branch into homes and apartment buildings
in the city and in surrounding suburban communities. We are attempting to
change state legislation so that our regional water bureau could contract with the
energy corporation to retrofit homes within its jurisdiction. The publicly-managed
water bureau can act both as a technical resources and as a capital source for
money borrowed at public rates. Secondly, within CEC funds that would be ordi
narily considered a profit will be used by the public corporation to conserve
energy in poor people’s homes and apartments.
It is estimated that the Community Energy Corporation, with a public invest
ment of $125,000, can winterize 1,200 homes on a cost basis. This will create 15
jobs for city residents at a cost per house of $106.00. This results in a total cost
per job of public money of $8,400 in the first year. Compare this figure of less than
$10,000 per job for CEC with the average cost of job creation for nuclear power.
Compare this figure with the $40,000 required in capital to create a manufactur
ing job. Clearly, energy conservation is job intensive. In addition, the skill pro

205
file of winterization makes it a profession accessible to those suffering from struc
tural unemployment.
The second cornerstone of a job creating energy policy must be a massive Fed
eral, State, and local partnership to create a solar industry on a job intensive and
decentralized basis.
In California, the campaign for economic democracy has sponsored SOLAR
cal—a legislative package submitted to the California Assembly. SOLAR cal is a
package of 12 bills of which four are central. SOLAR cal would make available,
through the utilities, consumer loans at low interest rates. These rates would be
set by the Public Utilities Commission and monthly installments on the loan
would be no higher than present monthly utility bills.
SOLAR cal would create a public not-for-profit corporation which would use
State and Federal dollars to make loans to small businesses for the produc
tion and installation of solar energy. The $10 million in equity would stimulate
the growth of solar energy and capital would be made available to small en
trepreneurs and community based organizations. Also, SOLAR cal would estab
lish the use of state CETA funds to finance the training of personnel for local
community development private corporations that would manufacture and install
solar equipment. CETA would be used as a way of allocating jobs in the Solar
industry to those who most need them. Finally, SOLAR cal would create a com
mission to provide a plan to solarize California. The California Center for Public
Policy has estimated the net number of jobs that would be created in California
alone, through the promotion of solar energy. Let’s assume a 75 percent retrofit
of homes for solar space and water heating; and 100 percent solar space and
water heating in new residential and commercial construction. It is estimated that
the SOLAR cal proposal would create a new number of 378,000 new jobs over a
10 year period beginning January 1,1981.
CEC and SOLAR cal share two basic assumptions. One, public guidance and
public control are the cornerstone of the national energy industry. We cannot
afford to have ownership of the sun in the same way we have monopolistic
ownership of petroleum by an industry unresponsive to the needs of our people
or even the controls of our Government. Secondly, SOLAR cal and CEC are based
around the principle that energy policy and planning can create jobs for the
structurally unemployed.
There are other important national examples. In Springfield VT, local officials
plan to use seven old mill dams to generate electricity for that town’s 10,000
residents. Local officials predict that a series of hydro-electric plants will cut the
town’s electric bill in half. This plan could be duplicated in small towns and in
big cities all across the country. The U.S. Army Corps of Engineers reports that
at least 48,000 untapped dam sites could be used to develop electricity. Just 10
percent of the 3,000 dam sites available in New England could supply enough elec
tricity for the entire city of Boston. Hydro-Electric power is safe, non-polluting,
relatively inexpensive, produced from a renewable energy source and can re
duce the cost of energy for industrial production—helping to hold down inflation.
Wilton, Maine is looking to relatively new technology of solar energy. Wilton
is constructing a sewage treatment plan that would use solar energy to heat the
building and fuel the process. Methane gas will be produced as a by-product and
stored as a back-up fuel. In addition, Portland, Oregon has studied a capital
improvement program to see how long-range physical plans for the city could be
developed that would accomplish the two goals of reducing city government en
ergy costs while stimulating energy efficient development patterns. Dallas, Texas
has developed a set of energy efficient building design standards for all new fa
cilities and structures that are being renovated.
Since energy affects virtually every aspect of our lives—social, economic, politi
cal and cultural—a city comprehensive energy plan needs to touch all levels of
municipal policy including zoning, land use building codes, transportation, eco
nomic development and education. In Hartford we are looking at how we
might revise our zoning and land policies. We plan an economic multiple use of
structures so that people can work, shop and entertain themselves in the same
complex. We are looking at our building codes to determine whether or not the
city could require an energy audit on any building that is sold so that energy
deciencies would have to be corrected before transfer of title. The proposal
would guarantee that every structure in the city over time would be completely
retrofitted.
This city energy policy is being managed by a new standing committee of the
council which involves all nine members. They are actively involved in the study

206
of all aspects of our energy policy including zoning, land use, transportation and
job creation.
In conclusion, we must examine what we can do next. What should be the roles
of the Federal, State and local governments? We need a partnership that involves
all three levels of government so that we can create a system which conserves
energy, creates jobs and improves the quality of urban life. The National League
of Cities has called for Federal assistance to cities in the form of direct Federal
subsidies, and energy extension service, a general revenue sharing plan, and local
energy conservation and development banks. The SOLAR cal proposal creates a
state role in planning, land use management and as a public capital source.
The city of Hartford has created a public capital source as an attempt to engage
a city in intelligent energy planning. Hopefully, the President’s requirement of a
State urban strategy as part of the urban policy will create growth policy.
Finally, whatever is done must be based on the following four principles of
action. These principles share a common goal. An energy policy should create
jobs, not waste capital. An energy policy should create jobs for those in greatest
need, the structurally unemployed. These principles for action are:
1. We should utilize energy sources which are job intensive as a strategy for
full employment.
2. A new capacity for State and local government to manage an energy service
must be created at a level equally important with existing public services, police,
fire and education.
3. Energy growth must be based upon the utilization of public capital. Public
capital will both lower the cost of energy saving and more importantly public
capital will help to decentralize the control of the energy industry.
4. A national growth and urban policy must be made an effective tool of energy.
The policy must support the survival of one of our greatest energy resources—
our cities.

Senator M cG overn. Mr. Carbone, there is an article in the Los An
geles Times that came to my attention recently in which Mr. Schlesinger is telling the State of California that their only practical hope,
their only practical alternative to economic stagnation is to go the nu
clear route; that plus coal.
Without objection, I would like to place that article in the record at
this point.
[The article referred to follows:]
[From the Los Angeles Times, Wednesday, Mar. 15,1978]
S h i f t t o A to m P o w e r U rged b y S c h le s in g e r

(By Bryce Nelson)
COMMENTS ON STATE’ S FUEL PROBLEMS ARE IMPLICIT CRITICISM OF BROWN’ S POLICIES

W a s h in g t o n . —Declaring that “California energy problems are probably worse
than they are elsewhere in the country,” Energy Secretary James R. Schlesinger
said Tuesday that increased use of nuclear power and coal are the state’s only
viable alternatives to economic stagnation.
Solar power, larger allocations of available oil and natural gas, and conser
vation cannot be counted on to provide the increased amounts of electric power
needed for future economic growth, he said.
While he did not mention Gov. Brown by name, Schlesinger’s comments were
an implicit criticism of Brown’s opposition to nuclear power and his emphasis on
conservation, solar power and other so-called “soft” energy sources, such as geo
thermal steam.
Schlesinger’s comments, in a Times interview, came against a backdrop of
rising concern in the Carter Administration that Brown could challenge President
Carter for the 1980 Democratic presidential nomination and that the governor
might use criticism of the Carter energy program in such a campaign.
Increased reliance of coal and nuclear power is an element in Carter’s national
energy plan. Both are considered anathema by many Californians, owing to the
air pollution problems associated with coal and the safety problems associated
with nuclear power.

207
“It’s all very fashionable to pretend that the problems of California’s energy
supply are going to be resolved by solar energy or by conservation,” Schlesinger
said, but “if we are going to have electric power supplies, we’re going to have to
use coal or nuclear energy in California as in other states.”
The opinions of many Californians are influenced, Schlesinger said, by the fact
that the state has “the most vigorous antinuclear movement in the country.”
Also he said, “California’s climate is delightful and therefore it leads to the
hope and to the near-term illusion that somehow or another solar energy is going
to come on quickly enough to wash away the painful aspects of facing up to al
ternative energy supplies.”
Schlesinger said that California will not be able to continue its current reliance
on oil to produce electricity—which now provides about 55 percent of the state’s
electric generation needs, according to Energy Department figures.
“We are not going to continue to import oil to burn in utility boilers— that sim
ply is a given (principle) of national policy,” he said.
Nor does Alaskan oil offer the state an alternative to imports, he said. Regard
less of the current surplus of North Slope oil in California, Schlesinger said, “oil
supplies will not be disproportionately devoted to one section of the country” in
the 1980s.
Acknowledging the air pollution problems of burning coal to produce power in
California, Schlesinger came down on the side of more nuclear power for the
state, which currently gets only about 6 percent of its power from nuclear plants.
“The advantages of nuclear power are probably as great in California as they
are anywhere in the country, simply because nuclear power provides the only form
of power production that does not contribute to air pollution,” he said.
In addition to nuclear power, Schlesinger said that only two other options could
provide California with sufficient electric power to meet future needs:
To persuade other Western states to permit construction of coal-fired plants
within their borders to provide power for California.
To accept the pollution associated with burning coal in California. “Burning
coal extensively in California itself, although that’s fairly high cost,” would in
volve “a change in local attitudes toward air pollution,” he said.
While solar energy is practical for hot water heating and space heating for
homes, Schlesinger said, “this represents a relatively small portion of our energy
budget. We do not expect to see the automobiles in California driven around by
solar energy, nor would I expect to see the industry in California powered by
solar energy.
“Solar energy is not, in the near term, going to be a source of electric power.”
Brown has said that he wants California to be a national leader in the use of
solar power, but he has also emphasized geothermal energy, coal gassification and
coal-fired plants as sources of electricity. Brown also has stressed the need for
more conservation.
Schlesinger said that “we can do a great deal through conservation but we are
going to continue to need additional energy production, and conservation will
only cut the rate of our growth requirements.”
Brown has said he will uphold the California law stating that no new nuclear
plants will be built until the U.S. government can prove that there is a safe,
permanent way to isolate nuclear waste.
Discussing another energy source, Schlesinger expressed strong reservations
about California and the nation becoming dependent on imports of liquefied
natural gas. “California could be a special case” in having a market for expensive
imported LNG, he said, “but that would be a symptom of California’s longer term
energy problem, if indeed it had to turn increasingly to such high cost sources
of energy.”

Senator M cG over n . D o you think that that is good advice to give
to a State or to a city ?
Mr. C a r b o n e . I don’t believe so. The assistant director of energy
policy in New York State has pointed out we could increase our energy
consumption by 40 percent in the Northeast without adding any new
energy sources—just by eliminating waste.
A study done by the Committee to Save Cities, which is headed by
Henry Reuss, found that European cities use 40 to 50 percent less

208

energy per capita than we do to maintain the same quality of life. So,
I think energy conservation is the first way we can create jobs and
maintain our life style.
Senator M c G o ver n . Mr. Carbone, I have to apologize to you. I do
have to race over and answer this rollcall, but would you be willing if
the committee submitted some questions to you in writing, to give us
some further elaboration and thoughts in addition <to what you have
developed in your testimony?
Mr. C a r b o n e . I would be more than happy to.
Senator M c G o ver n . I apologize to you, but we are going to have to
adjourn the hearing and I have to race to the floor.
Thank you very much.
Mr. C a r b o n e . Thank you, sir.
[Whereupon, at 12:10 p.m., the subcommittee adjourned, subject to
the call of the Chair.]

APPENDIX
Statem ent

rs.

M argaret B u s h W il s o n , C h a ir m a n ,
B o ar d o f D ir e c t o r s

NAACP

N a t io n a l

Energy and Black Employment

The NAAOP appreciates the opportunity to present its position on the topic of
energy and its effects on employment. The logical corollary, which you are also
considering and which we agree is appropriate, is the question of how to provide
more jobs through the production of energy. We do concur with the observation
by the Subcommittee on Energy that energy policy should not be made in a
vacuum but ought to evolve from the opinions, experiences, needs and resources of
all segments of our society.
Last January, the NAAOP National Board of Directors adopted a policy state
ment on energy. Its primary thrust is to protect as well as foster the creation of
jobs for black Americans. The NAAOP believes that any national policy that
does not stress -the development of new and alternative energy sources will in
crease, rather than reduce, the presently high black jobless rate.
We were heartened by the recent Department of Labor report which showed
that the unemployment rate had dropped to 6.1 percent, the lowest since October,
1974. Black unemployment at the same time fell to 11.8 percent. But, no matter how
encouraging these statistics are, the fact is that the black jobless rate still
remains twice as high as white unemployment.
Furthermore, the current jobless level continues to have a disastrous effect
upon black communities nationwide, especially within the big cities where the
evidence of poverty and broken lives are most visible. These problems of urban
decay and poverty have been aggravated in recent years by the rapid flight of
jobs from the older metropolitan centers.
In view of the extent of the current problem, we are especially concerned about
any national energy policy that unduly stresses conservation over production and
the development of alternative, low-cost fuels.
The NAAOP is convinced that America faces a critical energy shortage which
will rapidly worsen in coming years. The historical relationship between an
abundant and cheap energy supply to a vigorous and expanding economy has
been well documented. Without an abundant supply of coal, oil and natural gas,
the spectacular growth of American industry in the post-World War II years
would not have been possible.
But now, faced with the depletion of oil and natural gas resources, America
must seek alternatives. As the 1973-74 Arab oil embargo showed, however, the
U.S. has become hostage to trends and developments beyond its borders and over
which it has limited control and influence.
A meaningful and lasting response to the question of black unemployment and
inner city decay therefore rests to a considerable extent upon the form of our
government’s response to this question. That the severe black economic problem
can be corrected, the NAACP has no doubt. What is needed is the national will.
We need only turn to the period from 1961 to 1969 for an example. That was a
period of vigorous economic growth, when new jobs were created at the rate
of 2.1 percent a year compared to the 1.7 percent annual expansion of the civilian
labor force.
Blacks thus got a moderately large share of the increase in employment with
out creating sharp competitive pressures with whites. Consequently, black un
employment dropped by 400,000. So, even though unemployment among black
teenagers rose sharply, it decreased among adult males and females.
Between 1969 and 1974, however, as a result of deliberately instituted national
economic policies and the Arab oil embargo, unemployment rose from 2.8 million

(209)

210
to 5.1 million. And blacks, though comprising 11 percent of the population,
accounted for 20 percent of this increase.
The advent of another recession, the troubling problems of inflation and slow
economic recovery have led many Americans to recognize that very fundamental
steps must now be taken to ensure the continuing growth of our nation.
According to some economists, America is now in the trough of a 50-year busi
ness cycle. This sluggishness, which is also due to a large extent to natural forces
within the economic system, will drag on for as much as two decades. Thus,
instead of expanding at a healthy 7 percent a year, which is needed to have a
meaningful impact on the extensive black joblessness, economic growth will
hover around a sluggish 4 percent at best.
If this is so, and we see no reason to doubt this prognosis and projection, then
America should be prepared for considerable social unrest. The patience of black
Americans is almost at its limits.
A decade ago, the National Advisory Commission on Civil Disorders warned
that America was moving toward two societies, one white, the other black. Today,
Mr. Chairman, despite much soul searching, the division between the well-to-do
and the very poor seems to have widened. On the average, black Americans are
suffering from a jobless rate that is twice as high as that for whites; they also
earn half as much as whites on the average.
Although race has been and continues to be a significant factor in the black
unemployment picture, another reality has become evident in recent years. That is
the economic factor.
Blacks, like whites, are also adversely affected by the growing exportation of
U.S. dollars in exchange for foreign oil; blacks too are affected by the inflationary
pressures of quadrupled oil prices; blacks too are affected by the battered dollar
on world money markets; blacks too are hurt by the widespread case of nerves
that permeates the business community and slows capital investment.
And one of the key questions behind this negative economic atmosphere con
cerns America’s ability to deal forthrightly with the energy crisis.
The NAAOP sincerely hopes, Mr. Chairman, that your committee will consider
these concerns in your deliberations. For the simple fact is that any national
energy policy which imposes or tolerates obstacles to various forms of energy
development jeopardizes future supplies as a whole. The end result would ‘be, at
best, a slow growth economy which would hinder the ability of industry to expand
production and job opportunities.
As those who are most likely to be the last hired and the first fired, blacks do
have an immense stake in the development of a national energy policy.
We must at this time also express our dismay over the reality that so little
attention has been given to providing minorities with opportunities in employ
ment within the energy industry and on the policy making level in government.
We trust, therefore, that your subcommittee will give adequate attention to these
concerns.
St a t e m e n t

Clarke W

atson,

C h a ir m a n , A
in E nergy

m e r ic a n

s s o c ia t i o n

B lacks

Mr. Chairman, my name is Clarke Watson, and, as Chairman of the American
Association of Blacks in Energy, I am pleased to submit this statement to the
Committee for its hearings on the very important subject of Energy and Jobs on
March 15 and 16, 1978.1 have appended a Statement of Purpose of AABE to this
statement.
In behalf of our constituency we are especially concerned with employment
opportunities for our membership, and the economically-deprived of the United
States generally. This concern goes specifically to the younger element of racial
minority groups. In one metropolitan area of the United States after another we
see our idle youth on street corners, in unemployment lines finding no opportuni
ties to work, drinking, pushing drugs and otherwise whiling away their time in
angry or sullen frustration over their lack of job opportunities. This is not a
problem that is unique to the Black minority element of our population, but it
is found among other racial minorities as well— Chicano, Puerto Rican, Indian
and others.
As we see this, one fundamentally important consideration this Committee
must keep in mind in its consideration of what path or paths are to be recom
mended to follow or chart by our government to correct or to give relief to this

211
serious inequity is tlie need for an economic growth pattern in our country which
will afford better chances for employment for these economically-disadvantaged
minority elements. A no-growth or limited economic growth policy will only
aggravate an already serious situation.
Among other things, this means development and use of our own natural re
sources for producing electrical power without which our country will stagnate
economically, and our unemployment lines will continue, if not grow longer—
especially among our racial minorities.
The major sources of electrical power production are: oil, coal, natural gas
and uranium. There is potential for electrical power production in the use and
development of other sources of power, such as fusion, solar, tidal, geothermal,
hydroelectric and wind. However, as major sources of electrical power, this
latter group has serious limitations of supply for a long period of time as yet,
and our need for economic growth and job opportunities is immediate and ur
gent. This is not to say that these alternatives should not be explored, devel
oped and utilized as fully as possible, because our country will need every
one of them to the fullest extent possible.
In the meantime, each of the four major natural resources requires our full
utilization with the recognition that each offers its limitations or problems.
We cannot continue for a long period of time to rely on the current rate of
heavy oil imports because of world supply limitations as well as the serious
adverse economic impact on our country’s trade balance and adverse impact on
the value of the U.S. dollar. Nor can we fail to take into account the dangerous
circumstance the U.S. would face in a national emergency if these foregin imports
were severely curtailed. Better use of our oil supplies for power in the country
is essential, however, such as for mass transportation, manufacturing, agriculture
and other needed industries.
Continued reliance on the use of oil for our electrical needs will be required,
of course. But to seek to reduce our heavy reliance on imports is equally essential
in the best interests of the nation’s economic future and growth pattern.
As to natural gas, we are all aware of the limitations on supply in the relatively
near-term future. As a relatively cheap source of electricity and because of its
cleanliness, reliance on its use for electricity is necessary; in doing so, its
relative short supply must be kept in mind in seeking to meet our long-term needs.
The United States has an abundant supply of coal, and reliance on its increased
use is essential. It is not necessary to dwell on or take the time of the Committee
to express at length the concerns about environmental problems in coal use. It is
probably our most plentiful natural resource, though, for economical energy
production and must be used extensively with environmental safeguards being
considered at the same time. Yet our people need work, and we cannot afford to
ignore the economic necessity of heavy reliance on its use.
On the need to use this natural resource, it is worthwhile, in my judgment,
for this Committee to consider the adequacy of manpower supply for the mining
of coal, the need for transportation of coal on safe railroad beds and adequate
up-to-date equipment to carry the coal. The costs involved in these improvements
are potentially huge, but they must necessarily be taken into account if sufficient
consideration is to be given to fuller and better use of this natural resource as it
should be.
The current soft coal strike and second severe winter in a row, only serve to
highlight dramatically how our people will suffer economically without being
able to rely on this natural resource for electrical power. And the first to suffer
the impact are the already economically depressed of which our racial minorities
bear the disproportionately worst of the hardships encountered.
Our country also has developed its nuclear energy program and use of another
major natural resource for producing electrical power. Reliance on increased use
of uranium and nuclear power is essential for the economic growth of the United
States as the National Association for the Advancement of Colored People
(NAACP) emphasized in a recent public position statement which also included
support for advancing the development of the breeder reactor program.
Delays encountered in construction of convential nuclear plants concern us
because of the corresponding need for increased reliance on imports of resources
for fuel supply or a more limited supply of power which reduces in turn, our
possibilities for economic growth and jobs.
The use of each of our major resources for producing energy presents its prob
lems, and those problems are not unique to using nuclear power. The supply of

212
uranium in the United States is not unlimited. It too presents environmental and
health consideration, just as the use of oil, gas and coal do. We all recognize this.
Equally, we recognize its expanded use is necessary, just as other major in
dustrial nations have seen this need.
An important part of the effective use of this natural resource is continued
development of the breeder reactor program, and we, along with the NAACP,
endorse development of that program without interruption or reduced efforts.
All of this is not to say we can afford to overlook any other source of energy
supply whether it be fusion, solar, wind, tidal, geothermal, hydroelectric or
others. We need them all and with as little reliance on foreign supply as possible,
and development with as little delay as possible.
But we need jobs, and we need them now. Without an adequate energy supply
we will not have them. We cannot afford to overlook or be complacent about
using all of these sources of power for this urgent and compelling need.
Thank you Mr. Chairman, and members of the Committee for considering the
comments in this statement.
A

m e r ic a n

s s o c ia t i o n

B lacks

E nergy

(A B E )

Statem en t

P u rpose

The basic purpose of American Association of Blacks in Energy hereinafter
referred to as ABE is to advance the interests of Blacks in all energy-related
matters. These interests include:
1. Encouragement of students at the elementary and secondary level, as well
as institutions of higher learning, to pursue careers in energy-related fields.
2. To assist students with these interests with scholarships and other types of
aid.
3. Encouragement and development of Black entrepreneurship in energyrelated fields.
4. Insure that Blacks are involved at all governmental levels of policy and
decision making pertaining to energy-related matters.
5. Serve as a resource to other Black organizations requiring information or
assistance in energy-related matters.
6. Conduct seminars on energy.
7. Research and compile the current status of Blacks in energy-related fields
and businesses. Such research would include gathering information on employ
ment levels, types and kinds of Black owned energy-related businesses, and eco
nomic, social, and political impacts of energy on Black Americans.
8. Act as resource to the private energy sector as it formulates policies and
plans.
9. Encourage the private sector to be responsive to Black problems, goals, and
aspirations in energy-related fields.
10. Act as a conduit between the public and private sectors in the formula
tion of energy policy in order to insure full participation of Blacks.
BACKGROUND

The ten points articulated in the “Statement of Purpose” are in response to
areas of concern where we, as Blacks, are not yet fully involved. Following the
chronological order of the “Statement of Purpose” this portion will take up
those specific concerns.
1.
Pennsylvania University’s Wharton School of Finance in a 1972 hard-bound
text numbering some 600 pages entitled Negro Employment in Basic Industries
began its section on the petroleum industry with the following observation:
“Unless Blacks take it upon themselves to actively encourage student potential
in a more technological direction there will only be minimal gains over the cur
rent level of employment in this and the utilities industry.
“The highly intricate technology utilized throughout the petroleum industry
has virtually eliminated any demand for poorly trained or for uneducated per
sonnel . . The nature of the petroleum industry employment situation, thus,
illustrates both an accepted example of the present (Black) employment problem
and also an example of possible problems which may arise for low-skill workers
as other major industries develop similar levels of technology.” Some attempts
are currently underway to accomplish this. For example, Eastern Illinois Uni
versity in Charleston, Illinois, has established a four-year “bachelor of science
in business (energy resources management) ” program.

213
The curriculum includes principles of energy management, national energy
policy issues, energy consumer problems, international economics, energy finance
and incentives, energy and environmental law, energy marketing, chemistry for
energy management, physics for energy management, geology for energy resources,
alternative energy systems and advanced energy science.
But this is just a beginning. Elementary and secondary school curricula are
practically devoid of any materials encouraging Blacks to pursue scholastic
avenue aimed at post-educational careers in energy-related fields. The emphasis
is still heavily on the social sciences, law, and medicine.
At the university level, there are still too few Blacks pursuing degrees in
geology, physics, earth sciences, chemistry, and engineering. The Colorado School
of Mines, for example, one of the major energy related schools in the country,
currently has six Blacks enrolled in its undergraduate school and one Blade
working on a masters thesis.
ABE intends to provide the impetus to move considerably more students in
this direction.
2. One of the most effective means to accomplish this is through offering scholar
ships and recognition awards and information seminars for school administrators
and teachers.
3. In the entire United States, there are less than ten Black-owner energy re
lated businesses. For purposes of definition, an energy-related business is one en
gaged in the exploration, development, production, transportation, refining, or
marketing of primary energy sources (other than at the retail level such as a
filling station) ; chemical, engineering, geological, and communications consult
ing firms serving the energy industry or government energy-related agencies as
an exclusive or near exclusive endeavor; or research firms engaged in develop
ing alternate energy resources such as shale oil, liquefaction, or gasification
of coal, geothermal steam, solar, nuclear technology, wind, ocean thermal energy
conversion, and waste conversion (methane).
ABE would foster Black entrepreneurship in these areas.
4. Presently, Blacks have practically no voice at all in the formulation of en
ergy policy at the local, regional, state, multistate, or federal level. For example,
a recent energy conference held in Washington at the Rayburn House Office
Building, and sponsored by a Black political organization, had only two Black
speakers out of seven on the agenda. This dearth of Black input is even more
pronounced at lower levels of government such as land use commissions, air
and water quality control commissions, and powerful private organizations such
as the Sierra Club and Friends of the Earth.
Accordingly, emphasis has been on problem solving for suburban and high
income rural and mountain communities while energy and environmental prob
lems of core cities have not received similar prioritization.
ABE would actively pursue much greater participation of Blacks at all these
levels.
5. Many Black organizations would like to have dialogue on energy from a
Black perspective. This currently is not being provided,
ABE would provide resource persons to organizations with these needs.
6. Black-owned business could appreciably benefit from programs on conserva
tion and other forms of energy-management. Black consumers could benefit
from learning techniques to reduce home consumption and automobile fuel
consumption.
ABE would 'provide information and resources in this area.
7. In order to advance the state of the art, we must know its current status’. A
good deal of research is presently underway and much of the activity here could
consist of collecting data gathered elsewhere, verifying data where necessary,
and developing data where it does not exist.
This activity is one that ABE would be uniquely suited to perform.
8. The private energy sector should be provided on a continuing basis, and not
just at crisis times, with knowledgeable Black perspectives on energy.
ABE would establish and monitor this process.
9. The private sector is in need of assistance in identifying problems, goals,
and opportunities for Blacks in energy-related fields. Internal advancement op
portunities need further articulation, and external goals need better definition.
ABE would assist the private sector in understanding policies and establishing
goals.
10. Recently, the White House approached a civil rights organization for input
on energy policy. Energy is an economic and technological/environmental issue

214
with socio-political overtones. Thus, although Blacks were obstensibly provided
socio-political input, we were not involved in the fundamental processes of the
development of a national energy policy.
ABE would insure Black input on a more comprehensive and meaningful
basis.
PROPOSED STRUCTURE

ABE would be a “not for profit” national organization operating within the
framework of a board of directors and officers. All officers would be required to
be either owners of energy-related businesses as described in item three of the
background section or employees of energy-related industries or agencies of
government.
Membership would be restricted to owners (as previously described) and pro
fessional and technical employees of energy companies, utilities, and government
agencies.
Limited honorary memberships would be granted upon approval of the Execu
tive Committee of the ABE Board of Directors.
At least two executive officers of the ABE Board of Directors must either work
in or reside in the Washington, D.C. area.
The executive officers shall consist of a chairperson, vice-chairperson, treasurer,
vice-treasurer, and a parliamentarian.
For at least the first two years of the organization’s existence, the principal
headquarters shall be in Denver, Colorado, with a field address in Washington,
D.C. The rationale for this location emerges from the recognition in both the
public and private sectors that coal is going to play a significant role in meeting
the country’s future energy needs. Most recent predictions pinpoint Colorado
and neighboring states as containing “40 per cent of the nation’s coal deposits.”
The state and the nation are approaching an intersection in fossil resources
dependency with oil and natural gas on the downside angle and coal use rising
dramatically. According to the Colorado State Governor’s Office, extracted coal
tonnage could increase 2y2 times byl 1985.
At the same time, according to ERDA, U.S.G.S. and industry sources “the area
contains 90 percent of the nation’s oil shale deposits.” These deposits contain
an estimated recovery under existing technology, principally modified in situ,
of a potential 1y2 trillion barrels of oil.
Additionally, exactly one year ago, the United States Interior Department’s
Bureau of Mines in 10 Circular 8719 noted that: “As of May, 1976, a total of
515 fuels-related projects are planned, proposed, or under construction at loca
tions in the 22 states west of the Mississippi River in the conterminous United
States. These projects include future coal mines and expansions to existing mines,
electric powerplants and expansions, coal conversion plants, waste-to-fuel conver
sion plants, oil shale projects, tar sands projects, potential geothermal facilities,
coal slurry pipelines, future railroads related to fuels development, uranium
mines, uranium mills and enrichment facilities, oil refineries, and natural gas
processing plants.” Eighty-two of these projects are planned for Colorado, 67 for
Wyoming, 57 for Utah, and 54 for Texas. The balance is distributed among the
other 18 states.
Taken in the aggregate, these planned or current activities support earlier
predictions by government and private sources that 80 percent of the nation’s
remaining energy supply lies west of the Mississippi. (This, of course, does not
include perpetual energy sources such as solar and wind, which are not geographi
cally specific.) Therefore, as Denver emerges as the new hub for energy activity,
it would seem crucial that ABE have a major presence there as well.
Two honorary co-chairpersons, who are Black members of Congress, shall be
enlisted.
There will be an executive committee consisting of the organization’s officers,
the two members of Congress, and ten other members including the top-ranking
Black person in the new U.S. Department of Energy.

215

2X6

EMPLOYMENT IMPACT STATEMENT
JOBS CREATED

ALTERNATIVES
. What are the employment impacts of alternative means
of providing the same services?
(These alternatives can be different production processessuch as employing bank tellers instead of computers to
process checks-or different institutional arrangements.
Small, locallyowned shops keep business profits within
a community, where they provide indirect and induced
jobs, while large, outside-owned franchises remove profits-and inducedjobs-from the community and frequent
ly purchase supplies from outside suppliers they own,
reducing indirect jobs in a community.)

Ho« many new local jobs will be directly associated
with the proposed new facility (program, project, etc.)?
. How many new local jobs will be created indirectly by
local purchases of supplies and services by the new
(This can be roughly calculated by: (a) obtaining estimates
of the newfacility's annual local purchases of supplies;
<b) figuring the proportion that will go to pay the wages
of new workers that local suppliers will haw to hi« to
handle the increased business; (c) and then dividing by
local aveiage wage, to convert the dollar figure to •jobs
equivalent. Consistent and reasonable "guestimates'' are

What are the employment impacts of alternative uses
i>t the same investment resources? (particularly if
public funds)
Almost any expenditure of money creates jobs, but using
that money for different purposes may have very differ
ent results while providing the same amount of jobs. Build
ing new power plants providesjobs and insulating homes
provides jobs, but only the latter eliminates need for
unnecessary future expenditures of work, dollars and
energy. Expenditure of ax money provides jobs but raises
our taxes, giving us each less to spend, which would have
provided jobs anyhow. And expenditures for different
purposes provides very different numbers of jobs and
use of resources. Hospital services provide three times as
many jobs per dollar spent as highway construction. Expen
diture of funds for waste treatment construction, social
security benefits or national health insurance instead of
present Army Corps of Engineers projects would provide
30 to almost 6 increases in employment.

!. How many induced local jobs will the new facility
generate?
(This can be roughly calculated by: (a) estimating the
percentage of new direct and indirect payrolls that will
ultimately become local personal expenditures by work
ers; (b) figuring the proportion that will go for wages of
new workers that local retailers will have to hire to
handle the increased business; (c) and dividing by the
average local wage to convert the dollars to job estimates.)
Total number of jobs created;
(direct t indirect + induced = total)
. How many jobs will the new facility eliminatedirectly or indirectly-in other local businesses?
6. NET number of jobs created:
(number of jobs created minus number of jobs
eliminated)

COMMUNITY IMPACTS

What special conditions will be required to sustain the
activity being planned? (Do the product produced and
’ the proposed rate of resource use indicate sustainable
operation? Are special markets, government subsidies,
local resources, abnormally low local wages necessary?)
Are the activity and the job”: it creates seasonal or
cyclical over a longer period of time?

5. What will happen to workers in temporary jobs when
their work ends?

10. How many of the new jobs are likely to be filled by
local residents? How many by newcomers?

6. What will be the distribution of new jobs among types
and wage levels?

! 1 Ho» mam of the new jobs arc likely to bo filled by
men? women? minorities?

Type of job

Wage

Number

Percent of Total

12. Will the new facility make it harder for people without
special education or training to get jobs in the com-

. Will the income distribution of the jobs prowded in
crease inequality ol wealth in the community?
8 How many of the new jobs are likely to Ik- filled by
local unemployed people?

I 3. Will the new facility make local employment more
dependeni on outside decisions that don't incorporate
the needs of the community?

9. How many of the new jobs are likely to be filled by
workers whose employment has been terminated, di
rectly or indirectly, Itccause of the new facility?

14 Will the financial base of the new project make it
comparatively harder for small local industry to
compete fairly for loans'

. How many of the new jobs created will be permanent?
How many of the new jobs will be temporars ’ (e.g..
associated only with construction or initial operation)

Prepaid! t.> RAIN Magazine from an earlier version by Avrom Bendavid Val. Center (or Crowth Alternait'

217
St a t e m e n t

R obert A. G eobgine , P r esident , B u il d in g & C o n stru ctio n
T rades D e p a r t m e n t , AFL-CIO

Mr. Chairman and members of the subcommittee, my name is Robert A.
Georgine and I am President of the Building and Construction Trades Depart
ment, AFL-OIO, its 17 affiliated International Unions and their 4 million
members.
I welcome this opportunity to testify on the subject of the relationship between
energy supply, jobs and economic growth.
The nation faces challenges in the coming decades. These same challenges will
hang on for our children and grandchildren to face unless those of us occupying
this planet now in the 1970’s take the necessary actions to meet them.
The challenges I speak of have to do with an adequate national energy supply.
Without it, life in the United States will become difficult and painful.
Energy, economic growth and unemployment are foremost on the minds of the
American people. Indeed, the President has indicated on many occasions that
these issues are among his highest domestic priorities.
The President has addressed the people of this country on two occasions indi
cating that energy was one of the nation’s most severe problems, and that con
tinued economic health was greatly dependent on resolving our rapidly worsening
energy situation.
I couldn’t agree more with the President. Each passing month, the energy situ
ation becomes more critical—the percent of our oil imports has surpassed the 50
percent level and is steadily on the rise; last year payments for this imported
oil (approximately 45 billion dollars) were the major cause of the largest trade
deficit in our nation’s history—nearly 27 billion dollars; the reliability of this
source of supply continues to be reflected in the volatile political situation that
exists in the area of our principal suppliers; efforts to curtail the outflow of
funds and the drop in the overseas value of the dollar, principally caused by our
oil deficits, lias resulted in higher interest rates which act as a brake on the
economy.
Substantial growth in energy supply is needed to just keep the unemployment
level at slightly less than seven percent (7 percent)— much less reduce it Bal
anced energy growth for our economy for the past thirty years has averaged
nearly four percent (4 percent) when unemployment was lower. Many economists
suggest that greater growth will be needed during the next five years to make up
for the severe recession in the mid-1970’s and the present high level of unemploy
ment. Nevertheless, let’s assume a four percent (4 percent) or even slightly lower
growth rate.
The Construction Industry is in a depression with unemployment over 18 per
cent of our total work force. This nation’s largest industry, which is so crucial
to the entire economy, will not be revived until the construction of energy supply
facilities resumes its progress.
Much research has been done on the relationship between economic growth
and energy growth. Past history has shown an almost symbiotic relationship.
Putting it another way, growth in employment and GNP is directly accompanied
by growth in energy use. While some would suggest that this lockstep relation
ship will be broken in the future, the truth is there is no factual base on which
to count on this. Since the oil embargo, energy and economic growth have traced
the same paths—declining in 1974-75 and rising with the increased economic
activity thereafter.
Last year, electricity demand increased by a substantial six percent (6 per
cent) margin. While it is possible that some of these relationships might be
broken by vigorous conservation measures, which must be undertaken, I believe
the Administration’s plan for halving these ratios is extremely optimistic.
If the Administration’s conservation assumptions are not realized, and if
increased energy production is not in place when needed, the result will be lower
economic activity. Few knowledgeable individuals would dispute the relation
ship between economic expansion and unemployment. Without sufficient eco
nomic and thus energy growth, higher unemployment is inevitable. For example,
according to a National Power Survey Study, 4.4 million jobs would be lost for
only a 12 percent shortfall in electrical energy. Over one and a half million
layoffs and a three-day work week resulted in a few weeks of coal shortage in
Great Britain in 1972. Here in the U.S., about 2 million became unemployed as
a direct result of natural gas shortages during the winter of 1977.
The economy today is operating far below its full potential. Much of our
industrial capacity and manpower resources are lying idle. This country’s eco
nomic well-being depends on a plentiful supply of energy at a reasonable cost.
31-502 O •• 78 ■ 15

218
However, cancellation after cancellation, postponement after postponement of
many fossil and nuclear plants by utilities because of intervenor actions, envi
ronmental restraints, and high interest rates during the past several years are
laying the groundwork for future energy shortages. For example, there is no
need for it to take 10 to 12 years to construct a nuclear power plant. Hopefully,
the Administration’s forthcoming licensing reform legislation is going to alle
viate some of these delays with respect to nuclear plants. The construction of
much needed nuclear and fossil plants alone would provide employment for
many years for many thousands of workers, to say nothing of the jobs that
would be available to the economy once the plants are operational. And this is
an extremely important point—these facilities are needed to supply energy to
other sectors of the economy where other jobs depend on adequate energy
supply.
Regarding the increased labor and capital requirements for constructing these
electric generating power plants, I have included for the record a recent Depart
ment of Labor/Department of Energy Report.
Let me now turn to a subject that must be addressed, that of the no-growth
economy. I have tried to detail the direct correlation between energy consump
tion, employment, and economic growth. The effects of a no-growth, low-energy,
spartan life-style will surely result in the fact that there simply won’t be enough
resources to support our present society—a society that was founded on the
principle of freedom of choice. That concept could well find itself in jeopardy.
The AFL-CIO Platform Proposals presented to the Democratic and Repub
lican National Conventions in 1976 included the following statement:
“Organized labor has not wavered in its active and continuous support of
legislation and programs to protect and restore the nation‘s environment. But
at the same time we reiterate our conviction that America can have a clean
environment and jobs, too. Environmental requirements can and must be recon
ciled with employment and energy requirements essential to maintaining a
strong national economy, without sacrificing either the environment or a healthy
economy.
“We, therefore, strongly oppose policies, or programs that would move America
into a disastrous no-growth posture.”
In short, if the no-growth advocates succeed, energy sources would not be
available in sufficient quantities for industries to expand and meet the needs
of our growing population. That means that jobs would not be available. There
would be countless job layoffs. Moreover, products would rise in price as short
ages of energy become apparent.
A shortage of energy supply would not only cut the number of jobs but would
reduce workers’ earning and living standards. Choices would have to be made
between adequate housing, food, and health care. Unemployment also produces
significant losses of tax income to state and local governments. It represents
wasted human resources, and erodes the skill of the individual and j<eopardizes
his, or her self-respect.
As a final point, a serious look must be taken at those who will suffer the
most by insufficient energy supplies. The unemployed won’t necessarily be the
wealthy with secure jobs, nor the elitists of society, but rather the “guy on the
bottom rung of the ladder”— blacks, women, teenagers, et al who represent the
bulk of the unemployed ranks.
The availability of jobs and opportunity for our citizens to enjoy the health
and welfare benefits of technological development depends on the economic
vitality of the nation. Prosperity and an expanding economy cannot be provided
unless an ample supply of reasonably priced energy is assured.
Economic and social losses for the worker, and freezing the poor and low
income members of our society into their current status is a situation wTe must
avoid.
S t a te m e n t of B ar r y C om m o n e r , D irector , C enter for t h e B iology
N at u r a l S y s t e m s , W a sh in g t o n U n iv e r sity , S t . L o u is , M o .

Energy and Labor— Job Implications of Energy Development or Shortage *

The theme of this conference—dobs and the environment— is a timely and
crucial one. Both are urgent and unsolved problems. Canadian unemployment
has jumped from a “normal” rate of 4 or 5 percent to 8.4 percent, the highest
♦Presented at the Conference on Jobs and the Environment, sponsored by the Canadian
Labour Congress, Ottawa, Canada, Feb. 20, 1978.

219
since World War II. In the United States, despite a 0.4 percent figure in De
cember, unemployment averaged 7 percent last year. About 15 percent of young
workers are unemployed and nearly 40 percent of young, 'black workers are
unemployed. At the same time, in spite of major legislation and a huge effort
to clean up the environment, we are still plagued by pollution. Some environ
mental problems, like toxic chemicals, have become even worse. Their most
serious effects, such as sterility and cancer, have been imposed on labor—the
workers who produce and use these chemicals.
Now the persistent problems of unemployment and environmental decay have
been joined by a third one—the energy crisis. Although there is much confusion
about what the energy crisis is, who is to blame for it and even whether it is
real, this much is celar: Whatever is done about energy or even if nothing is
done, it will have enormous effects on both jobs and the environment, and indeed
on all the other issues with which labor is concerned—prices, working condi
tions and the strength of the economy.
We therefore confront three serious, simultaneous problems: Unemployment,
environment and energy. The worst feature of this troublesome triumvirate is
that it seems impossible to solve any one problem without making the others
worse. When more than 20,000 U.S. steelworkers were laid off in the last six
months and steel plants closed, the industry blamed the cost of pollution con
trols for its inability to compete with steel imports. Here in Canada you are told
that to meet the nation’s energy needs, much of Alberta’s land and water must
be diverted to mining tar sands, and that the resulting environmental damage
must be borne as a kind of patriotic duty.
People seem ready to accept the notion that there are built-in, insoluble con
flicts among the three goals of employment, energy sufficiency and environmen
tal quality. Compromise seems to be the only way out, trading off jobs for en
vironmental quality and energy for agricultural land and clean waters. “There
is no free lunch,” we are told; we cannot meet all these goals at once, some
thing has to give. Anyone proposing to solve one of the problems is expected to
question the importance of solving the others. The oil companies call for strong
incentives for oil and natural gas production, but want environmental controls
to be “reexamined5* and made “more reasonable.” Those of us who are seen as
“environmentalists” are expected to argue strongly for environmental quality
and energy conservation, making only some sympathetic sounds about the plight
of the unemployed.
And inevitably, labor is caught in the middle. Utility executives and business
leaders pressure labor to join battle against environmentalists, claiming that
their opposition to nuclear power plants will throw people out of work. Auto
executives pressure the unions to join in condemning gasoline conservation for
fear that it will worsen the economic situation in the auto industry.
Before I examine this situation, let me make my own position unambiguosly
clear:
If there were in fact a conflict between jobs and environmental quality, or
between maintaining the supply of energy and ecological balance, I would per
sonally favor actions that cut unemployment and maintain the flow of energy,
and suffer the environmental consequences. I say this because my own interest
in the environment and in a sensible energy policy is ¡based on a much more
fundamental aim—the improvement of human welfare. And I know of no way
to accomplish that aim if people are out of work, if inflation is rampant and
the economic system is in a decline.
I’d like to carry this argument even further, and assert that of these three
issues, the one which most urgently needs to be solved is unemployment, and
the attendant problems of runaway inflation and economic decline. Unless we
can solve the unemployment problem, the rest won’t matter very much. How
long can we tolerate the rejection of one in every five young workers—or two
in five if they are black—trying to find their very first job; trying, as every
young person must, to discover if they can find a place in society? It is hard
to conceive of a nation finding the will to tackle the enormously complex en
ergy crisis or coping wtih thousands of chemical pollutants when the new gen
eration which is supposed to reap the benefits of these improvements is con
demned to such despair. Or to put it in more practical terms, an economic sys
tem incapable of finding work for such a large proportion of its new generation
of workers could hardly be expected to muster the huge financial resources
needed to clean up the environment and to weather the energy crisis. On these
grounds I am convinced that if we were forced to choose among them, the task

2 20
of reducing employment and of rebuilding the faltering economy would have to
take precedence over the energy and environmental crisis.
But are we in fact forced to make this desperate choice? Must we sacrifice
environmental quality—which is, after all, also essential to human welfare—
on the altar of high employment and economic stability? My answers is no.
I am aware that this is a strong claim which seems to fly in the face of com
mon wisdom about our trio of crises. And I would agree, if you are convinced
that people are unemployed because they don’t want to work, that the Arabs are
to blame for the energy crisis and that pollution is due to our sloppy habits, it
is indeed hard to see any connections among the three issues. Looked at this
way, there does not seem to be a way to harmonize the three goals rather than
compromise them; to solve all the crises rather than trying to improve one
situation by worsening the others.
But if we look for more fundamental reasons why, like ancient Egypt, we
have been afflicted with this series of unexpected plagues, we will discover that
they are connected. More than that, we will discover that the only way to meet
the fundamental needs of labor—to reduce unemployment and inflation and re
verse the present economic decline— is to adopt a policy that would at the same
time make sense out of the energy crisis and reduce pollution. The reverse is
also true: the only sound energy and environmental policy—a policy that can
best give the nation a stable energy supply and a clean environment— is one
that serves these needs of labor. This is the main point of my remark«, in which
I hope to demonstrate why I have reached these conclusions.
To begin with, we must recognize that the place where labor works, where
energy is produced and used, and where most environmental problems are
created, is the same: the productive enterprise— the mine, the factory, the
farm. This means that the relation between the availability of jobs, the produc
tion and use of energy and impact on the environment depends on how these
productive enterprises are designed and operated—more generally, on the tech
nology of production. In turn, the design and operation of a mine, a factory or
farm involves economic factors: the wages paid to labor, the price of energy
and other necessary inputs, the amount of capital needed to buy or build the
productive machinery, the value of the goods that are produced and the expected
rate of profit.
The welfare of labor—the availability of jobs, for example— depends on how
this complex system operates, and that, in turn, depends on how all of its dif
ferent technological and economic elements are connected. What labor requires
from this system, simply stated, is that it should operate at its highest possible
capacity; that it should provide, for all who can work, decent jobs at decent pay,
in conditions that protect safety and health; that the goods which it produces
should be sold at prices that labor can afford; that inflation, which erodes the
standard of living, should be controlled; that labor should be free to organize
and to take part in the decisions which affect its welfare.
Our task here is to learn how the production and use of energy and the
quality of the environment affect these requirements which labor—and indeed
society as a whole—must place on the production and economic system. Spe
cifically, we need to ask what energy policy will encourage strong economic
activity, ample job opportunities, control inflation and enable labor to play its
proper role.
The first, most obvious feature of such a policy is that energy must be avail
able. It is a simple, but often overlooked fact that every form of production—
in factories, farms, transportation, offices—requires energy and cannot operate
without it. This is the inescapable result of the physical laws which govern the
production and use of energy. These laws tell us that work must be done if we
wish anything to happen that won’t happen by itself (for example, producing
an auto) and that work can be done only if there is a flow of energy. Any block in
the flow of energy means that production stops—and people lose their jobs. And
a small interruption in the flow of energy can have a much larger effect on the
economy. For example, when the Midwest ran out of natural gas last winter—
because Texas producers preferred to make an extra profit of $1 per thousand
cubic feet by selling gas within the state rather than shipping it north at a
lower, regulated price—the resulting economic dislocation involved losses, in
wages alone, many times greater than the cost of the missing fuel. No matter
what else is done about energy, it must continue to flow if goods are to be pro
duced and people are to remain at work.

221

The second basic point is that the availability of energy depends on its price.
People have frozen to death because they couldn’t afford to pay their utility bill.
In turn, the price of energy has a heavy influence on general inflation and worsens
its damaging effects: reduced purchasing power, lowered demand for goods,
depressed production and unemployment. Because energy is used in producing
all goods and services, when the price of energy rises it inevitably drives up the
cost of everything else. When the price of energy, which was essentially constant
for 25 years, suddenly began escalating in 1973, wholesale commodity prices
followed suit. Before 1973 commodity prices had been inflating at a modest
rate of about 2 percent a year. After 1973 they took off, going into double-digit
figures in 1974, and since then running at more than 10 percent a year.
The prices of goods that are particularly dependent on energy are hardest hit
by inflation. Unfortunately, these energy-intensive goods include housing (which
depends on the cost of fuel and electricity), clothing (most of which is now made
from petroleum-based synthetic fabrics) and food (which now heavily depends on
fertilizers and pesticides, chemicals made out of petroleum and natural gas). This
puts a particularly heavy burden on the poor. In the United States, the poorest
fifth of all families use about 25 percent of their budget to buy such energy-in
tensive items; the wealthiest fifth of the families use only 5 percent of their
budget for this purpose. When the price of energy rises the poor suffer most.
The rising price of energy also damages the economy and increases unemploy
ment because of its influence on economic predictability. This is an important
factor in a new industrial investment because an entrepreneur needs a reliable
prediction of the long-term cost of the energy needed to operate it. This is how
the rate of return on the investment is computed— the famous “bottom line”
which determines whether or not an investment will be made. The price of
energy is now rising at a rate unprecedented in the history of the United States.
In the ten years before 1973 the energy price index increased at about 3.7 percent
per year; in 1973-76 it increased at the rate of 25 percent per year. The problem
for the businessman is not so much the actual price of energy, since in most cases
he can pass the cost—and usually a little more— along to the consumer. What
the businessman cannot cope with is the rate of increase, because when the rate
is very high it is also uncertain, making future energy costs highly unpredictable.
Several business commentators have pointed to such uncertainies as a major
cause of the present slow rate of investment—which means that plants are not
built, and job opportunities are lost.
Unfortunately, nearly all of our energy now comes from sources that must,
inevitably, rapidly increase in price. Nearly all of our energy comes from oil,
natural gas, coal and uranium. These are nonrenewable resources. They are lim
ited in amount. We are “running out” of them. At this point some people tend to
visualize oil and gas supplies slowing down to a trickle as the underground
pools run dry. But that is not the way it works. What happens as oil, for example,
is taken out of the ground is that the easiest oil to produce is produced first.
As a resul, the cost of producing oil inevitably escalates as more oil is produced.
The law of diminishing returns is at work. As production of oil, natural gas
and. more recently, uranium, increases it became necessary to drill deeper, to
tap smaller deposits and to use more expensive recovery methods. Inescapably,
whenever the limited supply of a nonrenewable fuel is sufficiently depleted,
its price begins to rise exponentially— that is, the higher the price, the faster
the price increases. (In the case of oil this is sometimes blamed on OPEC
and the Arab states’ embargo. But in fact two years before the embargo, the
OPEC oil ministers got their cue from a massive and detailed report published
by the U.S. National Petroleum Council. The NPC— which should know, since
it is composed of the officers of the U.S. oil companies—predicted that the price
of domestic U.S. oil, which had been essentially constant for the previous 25-30
years, would, beginning in 1972-73, need to rise exponentially if the oil com
panies were to maintain their rate of return on investment. The OPEC oil
ministers believed their American colleagues and took steps to see that they
were not left behind.)
In sum, the situation is this: As long as we continue to use nonrenewable
energy sources, the price of energy will continue to escalate, causing a series
of disastrous economic effects—rapid inflation, an erosion on the standard of
living of poor families and uncertainties about investments in new production—
all of which depresses the economy and worsens unemployment Continued de
pendence on nonrenewable energy sources inevitably hurts the country, and labor
in particular.

222

A third basic link between energy and the economy is provided by capital.
We now hear frequent complaints in the financial columns that the present
weakness of the economy is in good part due to the lag in new capital investment.
This is an ominous sign, for a slow rate in investment in new productive enter
prises today means much lower productive capacity—and job opportunities—
tomorrow. The availability of capital, and the willingness of investors to risk
it in new productive enterprises, is a crucial feature of the economy’s health.
There is a close connection between the flow of energy and a capital. It is
widely recognized that the availability of capital strongly influences energy
production. Utilities have been forced to abandon new construction projects
(especially nuclear power plants) and investors have been forced to abandon
synthetic oil and shale oil projects for lack of the necessary capital. What is less
well-known is that the opposite connection is alse important: The ways in
which we now produce and use energy strongly influence the availability
of capital, and therefore the rate of new investment which depends on it.
Various methods of producing energy differ considerably in their capital pro
ductivity— that is, in the amount of energy (for example, BTU’s) produced annu
ally per dollar of capital invested. One dollar invested in oil production (in 1974)
produced about 17 million BTU’s of energy per year. But that same dollar in
vested in producing strip-mined coal yielded only 2 million BTU per year; in
shale oil about 400,000 BTU per year; and nuclear power brings up the rear with
the equivalent of 20,000 BTU per year. Thus, any energy policy which emphasizes
the production of electricity (particularly from nuclear power plants), rather
than direct burning of fuel; which favors the use of coal over oil and natural gas;
or which emphasizes the production of synthetic or shale oil, would worsen the
energy industry’s already serious drain on the availability of capital.
Bach of the different ways of producing energy also has its own particular de
mand for labor. For example, in 1973 for every unit of energy yielded (trillion
BTU’s), oil and natural gas extraction created six jobs; strip mining, six jobs;
deep coal mining, 18 jobs. As a result of these differences, and differences in capi
tal productivity, the same amount of capital invested in different ways of pro
ducing energy can have very different effects on unemployment. For example, one
calculation shows that a given amount of capital would produce two to four times
as many jobs if invested in solar energy rather than electricity generation. A re
port to the New York State Legislative Commission on Energy Systems calcu
lated that investment in energy conservation would produce about three times as
many jobs as the same capital invested in nuclear power.
Finally, the impact of different forms of energy production on working condi
tions and on the general environment also vary a great deal. The physical dangers
of work in coal mines and the risk of diseases such as black lung are well known.
In the nuclear power industry, uranium miners are exposed to particularly high
risks of radiation-induced cancer. The risks of radiation to other workers in the
industry are still poorly understood, but some recent studies suggest that they
may be higher than most earlier estimates. Shale oil production and conversion
of coal to synthetic fuels produce highly carcinogenic substances; workers in a
pilot coal conversion plant operated in West Virginia in the 1960’s suffered 16-37
times the incidence of skin cancer as comparable workers in different jobs. There
may be similar problems in tar sands operations.
The environmental impact of different energy sources closely parallels their
impact on the workers’ health. Coal mining, shale oil and tar sands oil produc
tion devastate the land and use large amounts of scarce water. Coal conversion
operations are heavy polluters of the air. Coal-burning power plants pollute the
air with nitrogen oxides, sulfur dioxide and carcinogens. The nuclear power in
dustry has yet to solve its serious environmental problems, such as safe disposal
of radioactive wastes. Recent reports show that radiation leaking from reactors
has contaminated milk from nearby dairies with unsafe levels of strontium 90.
When energy is conserved all of these difficulties are, to that extent, reduced. And
if solar energy were used instead of these conventional sources, environmental im
pact would be very sharply reduced.
From these considerations it is apparent that the effect of energy production
on major factors which govern the welfare of the nation, and of labor in partic
ular—inflation, employment, the availability of capital, working conditions and
environmental quality—varies greatly depending on the form of energy which is
produced. While a continuous flow of energy in some form is essential to keep the
production system going and the economy strong, the way the flow is sustained

223
can haye the opposite effect. For example, if we were to choose to sustain the nec
essary flow of energy by relying heavily on very capital-intensive sources of
energy (such as nuclear power, shale oil production and the production of syn
thetic fuels from coal) the enormous drain on capital would hinder investments
in the productive enterprises that use the energy and seriously disrupt economic
development. It is true that continued production of energy is essential to the
economy. But it is also true that we could literally bankrupt the economy by in
vesting heavily in the wrong kinds of energy production.
Perhaps the most striking example of this danger is nuclear power, as Saunders
Miller, a prominent utilities investment counselor, has pointed out:
“Based upon thorough in-depth analysis, the conclusion that must be reached
is that, from an economic standpoint alone, to rely upon nuclear fission as the
primary source of our stationary energy supplies will constitute economic lunacy
on a scale unparallelled in recorded history, and may lead to the economic Water
loo of the United States.” 1
If we turn now from the ways in which we produce energy to a consideration
of the ways in which we use it, we see once more that there are profound differ
ences which seriously affect both labor and the national welfare. Here we need
to consider how efficiently energy, capital and labor are used in production proc
esses. A convenient way to measure these efficiencies is in terms of the productiv
ity of an enterprise, such as a particular manufacturing operation. This measures
how much economic gain—usually expressed as value added—is produced per
unit of energy, capital or labor used. Thus, three basic productivities need to be
considered:
Energy productivity, or how efficiently the enterprise converts the energy that
it uses into value added. This is measured a s: dollars of value added per BTU
used in production.
Capital productivity, or how efficiently the enterprise converts the capital in
vested in it into value added. This is measured a s: dollars of value added per
dollar of capital invested.
Labor productivity, or how efficiently labor is converted into value added. This
is measured as: dollars of value added per man-hour.
Let us compare the productivities of two industries which produce competing
materials: leather products and the chemical industry which produces the plastics
that have so heavily replaced leather and other natural materials. Of the two
industries, leather production is about 4.5 times more efficient in converting capi
tal into value added, and nearly 13 times fore efficient in its use of energy. This
relationship between capital and energy productivity is quite general among dif
ferent industries. Five industries, petroleum products, chemicals, stone, clay and
glass products, primary metals and paper, account for about 59 percent of elec
tricity and 77 percent of the total energy used in manufacturing. They also have
the lowest captial and energy productivities of all major sectors of manufactur
ing. There is a good correlation between energy productivity and capital produc
tivity because energy is used to run the machines purchased by capital; the more
capital (machinery) involved in an industry, the more energy it uses. And in
many cases, this means fewer jobs, since the energy is often used to rcplace hu
man labor. For example, for the same economic output the chemical industry uses
less than one-fourth the amount of labor than the leather industry.
Another important feature of the relation between energy and the economic
system is that?—strange as it may seem in the light of supposed economic princi
ples—capital and energy tend to flow toward those enterprises that use them least
efficiently. Capital used in industrial production flows heavily toward those sectors
which are low in both energy productivity and capital productivity. For example,
the five industries cited earlier that use energy and capital least efficiently use
nearly one-half of the capital invested in all manufacturing industries. In con
trast, the seven most energy-efficient industries (such as leather production) use
only 7 percent of the capital invested in manufacturing.
As pointed out earlier, various methods of producing energy also differ signifi
cantly in their capital productivity (i.e., how efficiently capital is used to produce
energy). Here too capital tends to flow toward those enterprises which use it least
efficiently. For example, although electric power represents only 21 percent of the
total amount of energy which we use, it consumes 56 percent of the capital in
1 The Economies of Nuclear and Coal Power, Miller, S .; New Y ork : Praeger Publishers,
1976; p. 109.

224
vested in energy production. At the same time, due to thermodynamic limitations,
no more than one-third of the fuel used to drive a power plant is converted into
electricity. Electric power is therefore by far the most expensive form of energy
in terms of capital expenditure. When electricity is used to produce space heat,
more than 97 percent of the thermodynamic value of the original energy is wasted.
Yet about a fifth of U.S. electric power is used in this way— an enormous waste,
not only of energy, but also of the capital needed to produce job-generating fac
tories and homes.
In recent years industries with high energy and capital productivity (such as
leather) have given way to industries with low capital and energy productivities
(such as plastics). This is particularly true of the displacement of natural prod
ucts (leather, cotton, wool, wood, paper and soap) by synthetic ones (plastics,
synthetic fibers and synthetic detergents). For the reasons cited earlier, this dis
placement not only drains supplies of energy and capital, but also worsens un
employment. In the U.S. about half of the unemployment is “technological”—that
is, job opportunities lost when such new production technologies are introduced
and cut the overall demand for labor—and usually disproportionally increase the
demand for energy and capital.
Now we can see the basic links among energy, the economic system and the en
vironment : The same shifts in production technology that reduced the productiv
ity of capital and energy and have cut the number of jobs usually increased the
impact of production on the environment. As synthetic products replaced natural
materials more i>etroleum and natural gas were used both as raw materials and
for fuel, polluting the environment with combustion products and toxic chemicals.
The petrochemical industry demonstrates the close links among the wasteful use
of energy and capital, the assault on the environment and unemployment.
Thus, we find that unemployment is part of the same economic trends that
generated the energy crisis and the environmental crisis: Energy has been pro
duced increasingly in forms (especially electric power, and nuclear power in par
ticular) which use a great deal of capital relative to the amount of energy that
they yield. As a result, energy production has claimed an increasing proportion of
the capital available for business investment, making it less available for invest
ment in new job-creating enterprises. (In 1960, energy production claimed 26
percent of the capital invested in industry; by 1980 it is expected to claim more
than a third). At the same time, industries which use energy inefficiently also
use capital inefficiently; they also pollute the environment most heavily and are
often least effective in creating jobs. In sum, the same economic tendencies—the
displacement of labor by energy-driven machines—that have worsened employ
ment carry a good deal of the responsibility for the energy crisis and the environ
mental crisis. The crises in employment, energy, and the environment are, in this
sense, the same crisis.
Against this background what can be said about Carter’s National Energy Plan,
which is the United States’ first effort to establish a comprehensive energy policy ?
Judged by the standards developed above, most of the plan must be given rather
bad marks, especially for its effect on labor. The plan is based on the strategy of
raising energy prices as a means of encouraging energy conservation. Leaving
aside that the plan would in fact accomplish very little conservation (only 16 per
cent of the increased demand for energy between now and 1985 would be met by
conservation) this approach will only worsen inflation, and with it unemploy
ment and all the economic ills which trouble labor. The plan mandates a sharp in
crease in the present rate of nuclear power plant construction and in the use of
coal—with a resulting doubling in the contribution of electricity to the energy to
be acquired between now and 1985. This means heavy reliance on the ways of pro
ducing energy that are most wasteful of capital, a step that is certain to add to
our present economic difficulties. At the same time, by increasing the availability
of electricity (relative to direct use of fuel) the plan would encourage those in
dustries that are power-intensive—and which are thereby likely to use little labor.
Finally, the plan would create enormous new environmental difficulties, because
it relies so heavily on the two methods of producing energy that most severely
threaten the environment— the use of coal and nuclear energy.
In sum, the National Energy Plan is likely to aggravate the energy crisis
rather than solve it, for it would worsen the main effects of the energy crisis: in
flation, unemployment and economic uncertainty. This means, I fear, that if the
plan is enacted in anything remotely resembling its present form, we would be
confronted even more by the divisive antagonisms among those concerned with

225
unemployment, energy and the environment that only contribute confusion to a
national debate that cries out for clarity.
Is there no way out? There is. There are alternatives to the nuclear power
plants, the strip mines, the coal gasification projects, to the continued use of oil
and natural gas which will rise in price forever. The alternative is, of course,
solar energy.
Now at this point many people will react with a faraway look in their eyes,
and perhaps with some impatience and frustration, expecting to hear another
one of those pie-in-the-sky schemes about a beautiful solar future. But that is
not what I am talking about. I am not going to tell you that all will be well
if we do more research on solar energy, set up a few more demonstration houses
or learn how to build a solar power plant in space. What I am going to tell you—
and not on my own authority, but on the authority of U.S. government agencies—
is that for most methods of using solar energy the technology is already in
hand, and can be introduced at once in most parts of the country, for a wide
variety of uses, at economically competitive costs. To many people, and apparently
to some government officials, this is news. But it is good news, for the most
important thing about solar energy is that unlike conventional energy sources it
will stabilize the price of energy, slow inflation and improve investment planning;
it will create rather than destroy jobs; it can turn the country’s faltering
economy around. It can give us a real energy plan that solves the energy crisis
rather than making it worse—the kind of energy plan that meets the needs of
labor.
Here are a few reminders about what solar energy is all about.
First, unlike oil, natural gas, coal or uranium, solar energy is renewable; it
will never run out (or at least not in the next few billion years). Because solar
energy is renewable it is not subject to diminishing returns—which means that
its price, instead of escalating like the price of present energy sources, will be
stable and even fall as the cost of devices continues to decline. By stabilizing
the price of energy, solar energy reduces the threat of inflation and eases the
task of planning investments in new productive enterprises, thus relieving two
of today’s worst economic problems.
Second, the use of solar energy does not depend on any single technique. There
are different sources of solar energy, some forms more available in one place
and other forms in other places. Everywhere that the sun shines solar energy
can be trapped in collectors and used for space heat and hot water. Of course,
the amount of sunshine varies from place to place, but not as much as mast
people think. The sunniest place in the United States, the Southwest, gets only
twice as much sunshine as the least sunny place, the Northwest. In some places
the most available form of solar energy may be wind (the wind blows because the
sun heats the air on the earth’s surface unevenly). In agricultural areas solar
energy will be available in the form of organic matter (which is produced by
plants, through photosynthesis, from sunshine) : manure, plant residues, or
crops grown to be converted into methane (the fuel of natural gas) or alcohol.
In forested areas, waste wood, or even wood grown for the purpose, can be con
verted into heat, either directly, or by being made into gas. And wherever the
sun shines, photovoltaic cells can be used to convert solar energy directly into
electricity.
Third, for each of these solar processes the scientific basis is well understood
and the technological devices have been built and are in actual use. Solar col
lectors are used all over the world, and were once (about 30 years ago) common
in Florida and California; small windmills used to dot the farm landscape;
methane plants are in operation in hundreds of thousands of Indian and Chinese
villages; alcohol produced from grain was used extensively, mixed with gasoline,
to run cars and trucks during World War I I ; photovoltaic cells now power
satellites and remote weather stations. Of course solar energy needs to be
stored during the night or over cloudy periods. This can be done in batteries,
in tanks of alcohol or methane, in silos full of grain, as standing timber, or for
that matter in piles of manure. All these items exist.
The main questions are, once again, economic: Granted that most solar tech
nology exists, does it pay to introduce it? More precisely the question is not
whether it will pay, but when. The cost of conventional nonrenewable fuel is
now rising exponentially and will do so indefinitely. Since it is renewable, the
cost of solar energy is fixed only by the cost of the equipment, which will fall
in price as experience is gained. Place these two curves on the same time scale
and inevitably they will sooner or later cross. Solar energy, which a few years

226
ago was more expensive than the conventional alternatives, will inevitably equal
them in price and then each year become cheaper relative to conventional energy.
Estimates of when and how solar energy systems become economically advan
tageous have now been made by the Solar Energy Task Force of the Federal
Energy Administration (now part of the new Department of Energy). Here are
the main features of the task forces “National Solar Energy Plan” :
Solar heating: In most of the central part of the United States, if the govern
ment would provide low-cost loans, it would today pay a householder who uses
electricity or oil for space heat and hot water to replace about half of it with a
solar collector system. Even borrowing all the necessary funds at eight percent
interest, with a 15-year amortization period, would cut the average annual
heating bill by 19-20 percent.
Photovoltaic electricity: Here is the biggest surprise. For a long time even
those of us most optimistic about solar energy were convinced that this technol
ogy— a wonderfully simple way to produce electricity from sunshine—was
unfortunately so expensive as to remain uncompetitive for some time to come.
Now the FEA report shows that the production of electricity from photovoltaic
cell systems can compete with conventional power sources and exactly how that
can be accomplished. The report shows that, beginning immediately for the
more expensive installations such as gasoline-driven field generators, within two
years for road and parking lot lighting, and within five years for residential
electricity in the Southwest, photovoltaic units can compete, economically, with
conventional power. All that is required to achieve this remarkable accomplish
ment is to invest about $0.5 billion in the purchase of photovoltaic cells by the
federal government. This would allow the government to order about 150 million
watts capacity of photovoltaic cells. This order would allow the industry to
expand its operations sufficiently to reduce the price of the cells from the current
price of $15/watt (peak) to $2-3/watt in the first year; to $l/watt in the second
year and to $0.50/watt in the fifth year, achieving the competitive positions noted
above and succesfully invading the huge market for conventional electricity. A
similar federal (or state) purchase plan could bring large-scale power-generating
windmills down to a competitive price, according to the FEA report.
Methane and alcohol production from organic matter: While methods of com
mercializing these sources of solar energy have not yet been worked out by the
FEA task force, current research already begins to show how that can be done.
Public work funds can be used effectively to rebuild urban garbage and sewagesludge disposal systems so that they generate methane, which can help meet a
city’s energy demand. In certain farm operations—such as a dairy with 200 or
more cows or a farm raising 5,000 or more chickens—it is already economical to
replace current manure-disposal systems with methane generation, using it, for
example, to produce electricity to drive farm machinery and heat to warm the
barns. In Texas, one company has already begun to sell methane produced from
feed-lot manure to the natural gas pipelines. Several Midwestern states are
actively developing alcohol production from grain, as a partial substitute for
gasoline in cars, trucks and tractors.
The most important aspect of solar energy, I believe, would be its effect on em
ployment and economic recovery, but solar energy has another unique feature—
it has no economy of scale. In all conventional energy production, there is a very
large economy of scale—the cost of energy falls sharply with the size of the unit.
Solar energy is very different. When a farmer wants to produce more corn he
does not producer bigger com plants, but plants more of them over a larger
area. And each corn plant operates at the same efficiency, so that one acre of
corp traps solar energy as efficiently as 1,000 acres of com. The same is true of
all solar techniques, such as photovoltaic cells. You can run a flashlight or a whole
house on photovoltaic cells, at the same energetic efficiency.
In conventional energy production the large economy of scale means that
only very large corporations can compete (that explains why the energy corpora
tions are such big ones). In solar energy production a small or middle-sized com
pany (or a household) can do as well as a corporate giant. As a result, huge,
centralized solar installations are unneeded. The power can be produced on a
scale that matches its use, where it is used, thus eliminating the need for heavy
transmission systems (although light ones will be useful to balance our produc
tion and demand). It is easy to see that the introduction of solar energy would
mean a rebuilding of not only our system of energy production, but also many of
the ways in which energy is used in manufacturing, agriculture and transpor
tation ; it would create new jobs, and in doing so begin to control inflation.

227
The point of the foregoing analysis of the economic consequences of different
ways of producing and using energy is not so much to support this particular
theory about the role of energy in the production and economic system. What I
wish to emphasize is the basic point that all energy sources and ways of using
energy in production, are not alike in their effects on jobs, inflation and economic
stability—and therefore on the interests of labor. Yes, some form of energy must
be available if production and the economy is to continue—if goods are to be pro
duced and if people are to have jobs and afford to buy what they need. But it
makes a big difference which form of energy is chosen to support production, and
how it is used. Choose the wrong form of energy and the effort to support the
economy and create jobs will have the reverse effect. The economy will suffer
and jobs will be lost.
Consider, for example, the often repeated claim that nuclear power plant con
struction is a good way to produce energy, support the economy and create jobs.
This claim simply does not stand up before the facts. When compared with al
ternative ways of producing the needed energy it becomes clear that nuclear
power is not the best way to sustain the economy and to provide jobs. Here is a
concrete example: The Fiat Company, in Italy, has announced the availability
of a cogeneration unit (“TOTEM” ) which uses natural gas, or methane produced
from a solar source, to drive a converted gasoline engine, producing electricity
and recapturing the normally wasted heat as a source of space heat. About
67,000 TOTEM units would produce a total of about 1,000 megawatts of power—
the capacity of a typical U.S. nuclear power plant. However, whereas the nuclear
plant would cost about $1 billion, the TOTEM units would cost only $191 million,
and they would produce electricity at about one-fourth of the cost of electricity
from the nuclear plant
The economic efficiency of such cogeneration units, as compared with nuclear
power means not only lower electricity prices, but also a more effective use of
capital, therefore more opportunities for productive investment of capital— and
more jobs. Because they can run on methane—a renewable solar fuel—such units
can help bridge the gap between our present dependence on nonrenewable fuels
and a solar economy. As should be evident from Fiat’s accomplishment, such units
could readily be manufactured in U.S. and Canadian auto plants, where they
could take up the slack created by the disruptive effects of the energy crisis.
It is also informative to compare nuclear power with photovoltaic cells. If the
proposed U.S. federal purchase plan were carried out, in five years or so the
photovoltaic industry would expand enough to begin to allow local installations
to compete economically with nuclear power in many parts of the United States.
Again, many more jobs would be created by the solar technology than the nuclear
one. The widespread availability of competitive photovoltaic cells would also
create many opportunities for new types of industrial production. For example,
it would encourage the development of battery operated hand-tools, since bat
teries could readily be recharged by a photovoltaic unit mounted on the factory
roof.
These are only two examples of the choices that are now open to us, and I
mention them only to emphasize that there are choices. There is only one way in
which the familiar arguments that pit jobs against the environment, that put
labor leaders on the side of nuclear utility executives, makes sense. And that is
if we accept the assumption that the alternative to a nuclear power plant is no
new electricity and that the alternative to massive strip mining is no new sources
of heat. In other words, this argument holds only if we give up the right to choose,
among the different ways of producing energy, those which best serve the nation’s
—and labor’s—needs. Then, of course, the bitter choice between jobs and the en
vironment must be made, for if the flow of energy is disrupted we will surely
suffer massive unemployment and economic disaster.
I
am aware that labor groups have often decided to support nuclear power,
shale oil production, coal conversion and similar energy sources which, on the
basis of the foregoing analysis, seem to be not in labor’s interests. But I know
of no instance in which such support has been based on an actual comparison
with alternative sources of energy. In every case, it is not a matter of making
the wrong choice, but of avoiding a choice—in the belief that energy is essen
tial for production and jobs (which is correct) and that all forms of energy
will yield the same beneficial effects (which is not correct). Resolutions have
been passed by labor groups which in one place strongly urge a fight for jobs
and against inflation, and elsewhere urge the development of all forms of
energy, listing sources such as nuclear power and coal conversion—which are

228
bound to do employment and inflation more harm than good—alongside solar
energy, which is labor’s most powerful weapon against energy-driven inflation
and unemployment.
If labor is to win its fight for jobs, for reasonable prices, for decent working
conditions and for a strong economy, it must accept the responsibility of decid
ing, for itself, which forms of energy and which ways of using it will best sus
tain these aims. Up to now these decisions have not been made by labor, but
by management. And now that management's choices—for nonrenewable sources
such as oil and capital-intensive sources such as nuclear power, rather than
the solar alternative— have precipitated the energy crisis, the decisions are
being made by government executives and legislators. But, again, labor is on
the sidelines.
Unless labor enters into the debate— 011 its own terms, making its own deci
sions about what energy policy best serves the needs of society, and labor in
particular— we will make the same disastrous mistakes once more. Nor is it
enough for labor to rely 011 “environmentalists” and other people of good will
to suggest the right way to produce and use energy. There is no guarantee, for
example, that an energy policy will be free of serious economic and social dis
advantages just because it is based on solar energy. Devotion to solar energy
is not, after all, proof against indifference to social welfare, greed or simple
foolishness.
Consider for example two different ways to achieve a transition to solar
energy. One option is to deliberately increase the price of conventional energy,
so that solar technologies will become more quickly competitive. The other is
to hold down the price of conventional energy as much as possible and use
public funds to cut the cost of solar alternatives and make them competitive.
For the reasons already given, the first approach would place an intolerable
economic burden on the people, especially the poor and the minorities, who suffer
most from unemployment. At the same time, wealthier people would benefit
from the transition. This strategy would increase both the general cost of
energy and the price the consumer needs to pay to shift to a solar source. Poor
people, unable to afford the high price of the new solar technology, would be
forced to pay higher fuel prices, while wealthy people, who could afford the
solar investment, could avoid buying the high-priced fuel. The strategy of rising
fuel prices in order to encourage solar energy would tax the poor and favor the
rich, justifying the suspicion already being voiced that public movements for
energy conservation and solar energy are likely to be more in the interest of
the wealthy than of the poor and the unemployed.
Perhaps the most serious clangers of this approach arise from a feature which
in some quarters would be regarded as a virtue—the strategy relies on the “free
marketplace” to govern the introduction of solar technologies. Bluntly stated,
this means that the introduction of each solar technology would be governed by
a single criterion—that it generate a profit for its producer greater than one he
might obtain from an alternative investment. Such a strategy would please the
companies now entrenched in the energy field. The oil companies would, of course,
benefit from higher oil and natural gas prices. Even if the price increase were
generated by taxes, it would make the oil companies’ holdings in coal and
uranium more valuable, and help support the price of oil in the world market—
in which most of the U.S. companies are also involved. Private utilities could
also benefit, by using their position in the consumer market and their access
to capital to sell or lease to their customers whatever solar technologies are
most profitable and least damaging to their centralized operations.
The last to gain from such a solar transition would be the poor. They would
need to wait for benefits until, in the course of time, the massive substitution of
solar energy for conventional sources stabilized the rising price of energy, and
reduced the rate of general inflation. Finally, when the cost of the solar technolo
gies fell far enough, the poor could afford them too. Such a profit-oriented transi
tion would mean that the benefits of solar energy would be allowed, as usual, only
to trickle down to the mass of people.
Clearly, it would not serve labor’s interests— or for that matter, the nation’s—
to rely on such an approach to an environmental!y-sound system of solar energy.
Rather, labor and the nation need an approach which permits rational plan
ning of the development, testing and introduction of solar technologies in keep
ing with their efficacy in the overall process of transition rather than on the
basis of the narrow criterion of profitability. This approach would, of course,

229
challenge the widely fostered notion that private profit is the sole acceptable
basis for new productive investments. But this has happened before, in connec
tion with the development of energy resources—notably in the development of
hydroelectric projects, in particular the Tennessee Valley Authority, rural elec
trification and most recently nuclear power. In each case the creation of the
system required public initiative and at least the initial investment of public
funds. The issue is not necessarily one of public ownership, since in the case of
nuclear power, the decision to develop it and the design of the technology was de
termined socially, while the ownership and operation of most of the industry has
been in private hands. The example of nuclear power should also remind us that
social governance of such decisions is by no means a guarantee that they will
be in the best interest of society. Social governance is a necessary but not suf
ficient condition for maximizing social welfare.
An independent labor position on energy could provide a powerful remedy for
some of the serious economic difficulties in U.S. and Canadian industry. Many
industries—auto, steel, textiles, shoes and electronics—are being forced to cut
back because they cannot compete with imports. These industries face the
enormously difficult job of overcoming the economic advantages of foreign pro
ducers, achieved by their more modern productive facilities, in order to regain
their share of the market. Meanwhile, plants close and people are thrown out of
work. From what has been said earlier it should be evident that to cope with
the energy crisis all industrial countries will need to develop new renewable
sources of energy and new energy— and capital—efficient production technologies.
Promising examples are photovoltaic cells and cogeneration units such as Fiat’s
TOTEM. Consider this very sobering thought—that U.S. and Canadian industry,
still locked in the old pattern of producing and fusing energy—will not move
quickly enough to develop photovoltaic cells and cogeneration units, failing to
meet the inevitable demand for them. If that happens we will soon see Japanese
photovoltaic cells and Italian cogeneration units capturing not just a ¡part of the
North American market, but all of it. We will have been frozen out of a good
chunk of the enormous world-wide industrial transformation that is certain to
take place under the impetus of the energy crisis.
I believe that labor can protect us from this fate, strengthen economic develop
ment and create jobs by taking its rightful place in the decision-making process
that will determine our response to the energy crisis. Labor has the most to lose
from the wrong decisions, and the most to gain from the right ones. Labor has
the experience to understand how old production facilities can be converted
to new uses and how to train workers in the new skills. Labor has the experience
to defeat the notion, already being heard in some quarters ,that union labor
would drive prices up and make the solar transition that much harder, and
show that non-union labor would mean shoddy workmanship that could only
hold back the new technologies. Finally, only labor has the political strength to
break the corporate stranglehold on energy and to help society apply the power of
public governance to the creation of a new energy system that can truly serve
human welfare.

230

JOBS & ENERGY
energy and the economy/the substitution
of energy for labor/productivity and jobs/
energy growth and prosperity: the myth/
energy inefficiency and waste/capital
investment/energy efficiency/energy ef
ficiency and jobs/solar energy/solar ener
gy and jobs/the politics of solar energy/

E nvironmentalists F or F ull E mployment

231

GUIDE TO JOBS AND ENERGY
Researched and written by Richard Grossman
and Gail Daneker.
published by
Environmentalists For Full Employment
Room 305,1101 Vermont Avenue, N.W.
Washington, D.C. 200051(202) 347-5590
Co-Directors:
Peter Harnik, Hazel Henderson,
Byron Kennard, Richard Grossman
EFFE appreciates the assistance of those who conscientiously
read and critiqued successive drafts of this paper.

232

Jobs and Energy
Introduction
Corporate energy interests, along with most industrialists
and some agencies o f the government, are vigorously urging
the rapid expansion o f energy production. The energy systems
they a re promoting are large in scale, technologically complex,
costly, wasteful, environmentally destructive and dangerous
to energy industry employees and the public.
An increasing number o f Am ericans are becoming con
vinced that these systems— such as nuclear fission and fusion,
conversion o f coal and shale to gas and oil, expanded coalfueled electric generation— are too destructive to the public's
health— as well as to workplace and natural environments— to
be acceptable. These citizens propose instead a large decrease
in the nation's w aste o f energy, plus immediate commercial
ization o f proven solar energy technologies and development
o f solar technologies almost ready to be commercialized.
Most proponents o f the large-scale, com plex energy sys
tems con ced e the systems they are promoting expose the
public to a variety o f dangers. But, they contend, there is ab
solutely no other possible w ay to meet the nation’s energy
needs, to provide for a strong economy, and to create sufficient
numbers o f jobs.
Environmentalists For Full Employment disagrees; there
is another way.
The increased energy efficien cy plus solar energy choice
cun provide sufficient energy for a prosperous economy. In
fact, such a solution to the nation’s energy problem actually
leads to a m ore stable econom y and to m ore jobs than does the
large-scale system s cenario. It does so with less pollution, less
disease, less social disruption, and less interference with
community, labor union and individual rights?'
Decisions on the nation’s econom ic, energy and employ
ment futures are being made now. W rong decisions today will
be irreversible: if the nation decides to pin its hopes on in
efficient, large-scale energy systems, such a vast quantity of
resources and money will be consumed and so much havoc will
be generated through all levels o f society that energy and job
options fo r the future will be choked off.
In sum, a future based on the visions o f Am erica’s giant
energy corporations and some o f the federal agencies charged
with planning energy strategies will be neither prosperous nor
safe. A m ericans need to know this; and they need to know
there is an alternative approach which w ill provide the nation
with safe energy, with prosperity and with jobs.
For these reasons, EFFE has prepared this “ Guide to Jobs
and Energy.”

and jobs. It seemed enough to note that as energy production
expanded over the years, so did econom ic growth and total
employment. Many in government and industry— in the Energy
Research and Development Administration (ERDA), in the
Federal Energy Administration (FEA), in Congress, at the
Edison Electric Institute, the Atomic Industrial Forum, the
oil companies—-are therefore advising that unemployment can
be ended only by stepping-up energy development to the great
est degree possible, and with the largest systems possible.
Yet, current high unemployment, along with a succession
o f economic crises, have been taking place while nationai
energy use has been at an all-time high, and increasing.
The widening gap between accepted theory and reality
has prompted calls for re-evaluation o f the relationships be
tween energy expansion, econom ic health and jobs. Cass Al
vin, Director o f Public Relations and Education for the United
Steelworkers o f America, reflected this new outlook recently
when he told a Los Angeles Federation o f Labor (AFL-CIO)
meeting which had been listening to threats o f job loss de
livered by California utility executives:
I think w e’ve got to deal with the nature of energy and
jobs very carefully, or w e ’ll find ourselves looking to
the wrong allies when confronting energy issues.
.3
And an economist in the research and education department
of the International W oodworkers o f Am erica (AFL-CIO/CLC)
has warned in a similar vein:
Unions risk disaster and perform a disservice to their
members if they do not attempt to define [energy and
job relationships.]4
It sometimes appears deceptively easy to determine which
event causes another, especially when there are some ap
parent connections. For example, some w ags have pointed out
that over the years there has been a direct correlation be
tween the salaries o f a certain denomination o f ministers in
Massachusetts and the p rice o f rum in Cuba.5 Yet, no one
seems to be suggesting that a real connection exists between
these two occurrences. Similarly, along with energy growth
during this century there has been an increase in mental ill
ness. But it is not likely that advocates of energy expansion
would say that such tragedy is connected to or necessary for
continued energy growth.
To probe the nature o f energy-employment relationships,
it is instructive to begin with a look into the manner in which
energy has been used.
D.

Energy and the Economy

The latest recession is the 6th since W orld W ar II. It is
the most s evere.’ Total real unemployment is between 8 % and
1 0% . W om en, minorities and young people are out of work in
even higher percentages. In the last year, incomes of three
million additional Am ericans fell below the “ poverty line.’ ’
Rural poverty has increased. The nation’s largest cities have
been experiencing severe financial crises, and have cut back a
broad range o f vital human services.2 Industry has been oper
ating at less than full capacity, and inflation has cut deeply
into most w age increases o f the past decade.
Am ericans have long been told that ever-increasing ener
gy production w as the key to national econom ic well-being

The Substitution of Energy For Labor

Historically, industry has sought to substitute energy for
human labor. The amount each working p erson could produce
has therefore increased steadily. But after substitution o f
energy for labor in each process, the total number o f workers
needed decreased. The only w ay the total number o f workers
could increase would be if there w ere also a rise in the demand
for products. In other w ords, more jobs would have to be
created by the increased demand than w ere eliminated by the
energy substitution.
For instance, assume the Lutkus Felt Company discovered
it would increase profits by replacing most o f its employees
with machinery (which involves investment o f energy, re
sources and dollars). Once the m achinery is installed, Lutkus

233
CQn lay o ff its employees. Rival felt companies need to stay
competitive with Lutkus: they also automate and lay o ff em
ployees.
So after Lutkus and its competitors have finished install
ing their n ew machines, the result is:
1. energy consumption in the felt industry is up;
2. employment in the felt industry is down.
Such has been the pattern o f Am erican industrial devel
opment. (See A rt Buchwald’s satirical analysis, page 3.)
W hat has kept the *‘more energy leads to more jobs” myth
alive has been that accompanying a growing population has
been a very large increase in the use o f goods and services
per person. There has also been a significant increase in ener
gy use. It has thus appeared as if energy expansion had been
causing econom ic expansion and increases in jobs. But con
stantly expanding demand has led to constantly expanding
production and employment. As Louisiana State University’s
P rofessor Herman Daly has concluded:
Clearly, what is responsible for increasing total em
ployment is the increase in total [goods a n d services],
not the increase in inanimate pow er production,
which by itself must decrease employment.'
III. Productivity and Jobs
From industry's point o f view, energy and investment
dollars have been preferred to human labor. Automated equip
ment does not complain about unsafe working conditions, seek
w age hikes, question the nature o f jobs or products, or strike.
And energy has been cheap, subsidized by the government and
by the Am erican people.
Goods-producing industries have therefore sought to use
few er workers (or at least make their employees work faster).
Their goal has been to increase output per worker, or “ produc
tivity." This has caused total employment in the manufacturing
sector to decline over the last 40 years. Organized labor has
supported this emphasis on "p roductivity," and has allowed
the w age scales o f skilled labor to be linked to the "p rodu c
tivity index.” T o management, this index is an important indi
cator o f how well an industry is performing.
But as Hazel Henderson has pointed out, the "productivity
index” is really an "automation index” — a guide to tell man
agement how well it is doing in its drive to get rid o f employees.
Thus, as more and more energy is substituted for labor, auto
mation increases and jobs decrease (unless there is an accom
panying sw itchover to shorter work days, and a basic re
distribution o f wealth with increased consumer access to
goods and services). The “ productivity index” goes up, and
management knows it is being successful.
Labor's accep tance o f “ productivity” — that is, auto
mation— as a criterion for wage increases has resulted in a
widening o f the earnings gap between those employed in high
energy industries (who are members o f well-organized, p ow er
ful unions) and those working in areas where energy (and
skill) requirements are low (and whose unions are less pow er
ful).7
It has also resulted in the need for more and m ore energy,
and in a d ecrease in the total number o f industrial jobs. In
1971, the five largest manufacturing industries (primary
metals; stone, clay and glass; food; chemicals; and paper)
provided only 7.3% o f the nation's jobs. From 1950-1970, there
had been no employment growth in these industries; yet their
gross energy consumption during these years increased
greatly.“
In the steel industry from 1949— 1969, the number of
production jobs decreased by 20% , while steel output
increased by 4 5 % .9

3 1 -5 0 2 O - 78 - 16

The aluminum industries in the Pacific Northwest provide
a particularly glaring example o f high-energy, low job ratios.
A ccording to the Bonneville Power Administration, this in
dustry consumes 25% o f the region's electricity, and provides
but one-half o f one p ercen t o f the total jobs in that region.10
In the agricultural sector, the use o f energy— for fer
tilizers, chemicals and automated equipment— increased the
output per worker. But this increase in “ productivity” led to a
steep decline in the number o f people employed. In 1970, agri
cultural employment was less than h alf o f what it had been in
1920. That yeár, about 27 billion person-hours o f labor w ere
needed, com pared with only about 2 billion person-hours 50
years later. Energy input increased more than 4 times over
that period ."
Between 1950 and 1971, total national employment in
creased 4 1 % , while jobs in the energy-producing industries
increased only 5.5% .12 And this small increase over twenty
years w as due primarily to expanded gasoline station employ
ment. (Today, most o f these jobs are vanishing, being replaced
by customers and self-service gas pumps.)
From 1961-1973, electric utilities increased their kilowatt
output about 130% , their revenues about 260% , their con
struction costs about 340% . But employment in electric
utilities increased only 2 1 % .'3
Bruce Hannon, at the University o f Illinois' Center for Ad
vanced Computation, has calculated the relative amounts o f
energy and the units o f labor reflected in consumer purchases
for 1971. The following table shows that for each consumer
dollar spent on electricity, 502,473 British Thermal Units
(BTUs) o f coal, gas or oil w ere required. But only 44/1000 of
a job unit was necessary. Gas and oil purchases reflect similar
ly large energy requirem ents p er dollars spent by the con
sumer, and relatively small units of labor.
These figures contrast sharply with those relating to ex
penditures for other categories listed— such as wom en's and
children’s clothing, or furniture. These purchases needed far
less energy than did production o f electricity, gas or oil, and
utilized more units o f labor per dollar spent:
TABLE I
ENERGY AND LABOR INTENSITIES OF
PERSONAL CONSUMPTION A C n v m E S , 1974 *

personal consumption expenditure

energy intensity
(BTUs p er dollar)

Jabor intensity
(labor units
p er dollar)

electricity
gasoline and oil
kitchen and household appliances
new and used cars
food purchases
furniture
wom en's and children’s clothing
religious and welfare activity
telephone and telegraph

502,473
480,672
58,724
55,603
41,000
36,664
33,065
27,791
19,043

.044
.073
.073
.078
.085
.092
.100
.086
.055

In all, the major energy-producing and energy-using in
dustries consume V» o f the nation’s energy. Yet they directly
provide only about 10% o f the nation’s jobs.” Energy com
panies claim that indirect employment created by energy is
substantial. But as Professor Daly points out, any investment—
even in w elfare and unemployment compensation— leads to
indirect job creation. And as noted above, energy, once avail
able, generally ends up replacing jobs.
W here have the new jobs com e from? Since W orld W ar II,
new jobs have been created overwhelmingly in the m erchan
dising and service sectors o f the economy. Between 1947 and
1970, employment in these areas increased 9 5 % ." These jobs
have required relatively low amounts o f energy, capital and

234

Moving the American Economy
by Art Buchwald
. . . Rootin' Motors is visited by a sales
man from Glutton Machinery. The
salesman explains to Rootin' that Glut
ton can now provide machinery that will
do the jobs of 1,000 men at a saving of
$5 million a year. The president of Root
in' is impressed and decides to install
the machinery. A year later the pink
slips go out and 1,000 men, including
Laidlaw, get one.
The president of Rootin' makes a
speech to the departing men and wo
men telling them he is sorry about the
layoffs but there was no way Rootin'
could stay in business if it did not install
the new equipment.
While the new machinery helps Root
in' make 200 more Dolphins a day, sales
are way off. The president calls in his
dealers. "Why aren't the Dolphins mov
ing?"
"Because Laidlaw is still looking for a
job," one of the dealers says.
"Who is Laidlaw?" the president
asks.
"He's one of the men you fired when
you installed new machinery so you
could be in a competitive position in the
economy."
"All right," says the president. "Let's
forget Laidlaw. Aren't there other cus
tomers out there for our Dolphins?"

"Streeter was, but he bugged out.'
"Who is Streeter?"
"He's a bricklayer who was laid off
when Laidlaw decided not to build a
new house because he didn't have a
job. When Streeter was laid off after
Laidlaw was fired, Feldman canceled his
Dolphin."
"Feldman?"
"The furniture man who was going to
sell Mrs. Laidlaw a new dining room and
living room set. Not only did Feldman
cancel his Dolphin, but he told his
brother-in-law not to buy one either, be
cause they were laying off men at the
Rootin' plant which was a sure sign of a
recession."
"Just when we can make Dolphins at
a price people can afford," the presi
dent of Rootin' moans, "no one can af
ford them anymore."
"Wait a minute. What about all the
people at Glutton Machinery?" a dealer
says. "They're all working."
"Of course," the president replies.
"Why didn't we think of them?"
The president of Rootin' calls the
president at Glutton and says, "How
many people do you have making the
machinery you sold us so we could lay
off 1,000 men?"
"We had 5,000," the Glutton presi

resources. They also have caused less pollution and environ
mental disruption than industrial jobs.
The drive for increased substitution o f energy for labor
continues. The chief economist o f the U.S. Department o f Com
merce recently testified before Congress that "productivity''
will grow faster during 1976-1986 than in the past d ecade.17
Indeed, “ productivity” is becoming a factor in the service and
merchandising sectors— the very areas which have provided
new jobs in the past 30 years. Machinery is replacing super
market clerks, bank tellers, teachers and telephone operators,
in order to increase output per remaining employee and avoid
dependence upon human labor. The Bell System, for example,
is planning to r eplace 33,000 operators by installing computer
ized switching and billing systems, at a net annual savings
(to them) o f $390 million.1'
IV: Energy Growth and Prosperity: the Myth
It is for good reason that the public has been led to believe
that energy expansion has been the springboard to econom ic
growth, the “ good life,” and jobs.
Industry has been able to replace human labor econom ic
ally with energy purchased at very low rates from an everexpanding energy industry which has been accumulating everincreasing profits. The small consumer has been picking up the
tab: industries traditionally have paid less than individual con

dent says. "But then the Robot Tool
Company installed a new plant for us
and now we have four. Why do you
ask?"
"We're trying to get someone to buy
our Dolphins."
"I wouldn't call Robot. They recent
ly developed a new assembly line which
requires the services of just one man,
and they're waiting for him to retire in
six months so they can replace him with
a computer."
The president turns to his dealers.
"Okay, we have the best factory in the
United States but no customers for our
cars. What do we do?"
"Why don't you hire back Laidlaw?"
someone suggested.
"We can't afford him,” the presi
dent shouts.
"Maybe instead of hiring Laidlaw
back we can give him a tax cut. Then
he'll want to buy a car again."
"Laidlaw doesn't pay taxes,' the
president says. "He's on unemploy
ment. We've got to find a job for Laid
law."
"How?" a dealer asks.
The president says, "That's Carter's
problem, not ours."
Source: Washington Post, Dec. 21,
1976, reprinted by permission.

sumers for each unit o f energy used. In addition, by bearing
most o f the environmental and disease costs associated with
energy, and by permitting substantial government assistance
to energy companies, the public has actually been subsidizing
industrial use of cheap energy to replace human labor.
It is thus clearly in the interests o f both energy p roducers
and major energy users to continue keeping the public in the
dark about energy supplies, production, expansion and use.
From their standpoint, it makes sense to dig up the old scare
tactic about job loss and econom ic depression: a line used with
much success in the past: against the presidential bid o f
Populist William Jennings Bryan in 1896, against child labor
laws, unemployment insurance, workman's compensation,
labor union organizing and pollution control legislation, to cite
but a few examples.
Critics o f energy policy have been slow to consider the
industry-promoted mythology about energy expansion leading
to economic prosperity and jobs. But increasingly, reputable
organizations and analysts have been examining energy and
its relationships to the rest o f the economy:
•
A number o f studies have shown that Am ericans use as
much as two times the energy per p erson as do W est Germans,
Swedes and the Swiss. Yet the standards o f living in W est
Germany, Sweden and Switzerland are com parable to or
higher than this country's. And unemployment in those Europe
an nations is much low er than in the United States. As a recent

235
Federal Energy Administration report noted:
This large disparity in energy use between [W est
Germany and the United States] suggests that con
tinued econom ic growth and improvement o f the
standard o f living in the United States should be pos
sible without a proportional increase in energy con
sumption.1'
• From his studies, Professor Herman Daly has concluded:
Undeniably, energy is a necessary input to the sup
plies o f nearly all sectors. But it does not necessarily
follow that increasing the production o f energy will
increase the numbers o f jobs in those sectors . . . Nor
does it alw ays follow that other sectors cannot ex
pand employment without an in crease in energy input
. . . In general, increasing input o f energy to the sup
ply side is neither a necessary nor a sufficient condi
tion for increasing employment.20
• A W ashington DC-based research group, Resources for
the Future, has found that data
do not support the widely-held belief that energy and
Gross National Product (GNP) have grown at essen
tially the same rates in advanced cou n tries. . . It
seems to be questionable to assert a rigid linkage be
tween [the two].21
In the latter part o f the 19th Century, says this organization,
energy use in the United States grew faster than did the GNP.
This was becau se heavy industry was the main factor in na
tional econom ic growth. But after W orld W a r I, when lighter
m anufacturing plus increasing services began to predominate,
energy use increased at a slow er rate than did GNP.
• The Institute o f Ecology, at the University o f California
at Davis, has concluded that comparison studies of different
countries also
do not support the hypothesis that constantly-increas
ing energy consumption per capita is a prerequisite
to increasing econom ic growth.

oped by the Institute represent
a significant break with the proportionality between
GNP and energy use which has held approximately
even for several d ecades.2*
• John Myer, in the C onference Board Record, a journal
which reports to management on business affairs, w rote that
industry can use energy more and more efficiently. To Myers,
the connection between energy growth and econom ic growth
seems to me more elastic than commonly assumed...
T o the extent that w e can cut down on energy use more
cheaply than w e can expand domestic supplies, the
goal of lessened vulnerability to supply interruptions
or sudden drastic p rice hikes can be more economical
ly achieved. This course would also carry the added
benefits of less ecological damage and expense of
environmental protection.27
• Testifying before the Joint Economic Committee o f Con
gress, Lee Schipper and Thomas V. Long stated:
There does not seem to be an immutable direct pro
portionality between econom ic growth and energy
use.
Schipper and Long also pointed out that increased capital in
vestment has been substituted for both energy and labor,
hence
energy use has been the tail o f the dog, wagged by the
interaction o f the larger factor costs.2'
• Even Paul M cCracken, a former chairman o f the Presi
dent’s Council of Economic Advisors, has confided to Wall
S treet Journal readers his doubts about what the public has
been led to believe regarding energy and econom ic growth:
the striking thing about the relationship between the
rate o f growth in output and the rate o f increasing
energy consumed is not that it obviously exists, but
that it is so variable.2*

The Institute discovered that energy and employment ratios
varied in different industrialized countries, “ reflecting funda
mental differences between structures o f econom ies.” In
addition,
. . . beyond an optimal level of energy consumption
per person, further increases in energy use leads to
a variety o f deleterious effects which ultimately lower
growth rates.22
• The Ford Foundation’s massive Energy Policy Project
determined that a less than historical rate o f in crease in ener
gy expansion, accom panied by more efficient use o f this ener
gy, would expand the total number of jobs, and improve public
health and environmental quality as well. By the year 2000,
according to the report, improved energy efficiencies could
actually permit a zero energy growth rate. In fact, the nation
w ould be using almost half as much energy as is currently
being projected for that date, and would be experiencing an
Increase in total employment.“
• An investigation by the Oak Ridge Institute for Energy
Analysis has revealed that energy production could grow at
the very low rate o f 1.5% through the year 2010 without ad
versely affecting the economy. The Institute found that there
would still be a real GNP growth o f between 2 .5 % -3 % .24 A c
cording to Science magazine, this study provides “ evidence
that low-energy growth forecasts are well on their w ay to at
taining the status o f conventional w isdom ."25 And a recent
study commissioned by ERDA commented that the data devel

Further examination o f the myths surrounding energy
requires discussions of energy waste, and o f capital invest
ment and job creation.

236
V.

Energy Inefficiency and W aste

Individuals w aste energy, and there is much each person
can do to conserve. But there has been a campaign on the part
of the energy industry to mislead the public into believing that
the bulk o f energy w aste is caused by the average citizen who
is too lazy to walk, or too pam pered to live and work with the
thermostat at a low setting.
In fact, energy in this country has been wasted primarily
because public and private policies have long promoted energy
extravagance in the mistaken belief that this w as the best way
to achieve a prosperous economy. The “ lazy citizen” theory ig
nores the reality that accu rate information on energy matters
and alternative methods o f energy supply have not been avail
able to the consumer. It also does not take into account that
wasteful energy consumption has been encouraged to increase
the profits o f energy-producing companies.
Jimmy Carter has stated:

out the entire structure.
Energy is wasted at industrial sites when steam, which
could be reused to generate on-site electricity or put to a vari
ety of successively lower-grade uses (“ cascading” ) is simply
released to the atmosphere. Energy is wasted when inaccurate
long-range projections lock utilities into building huge, centralstation electrical generating plants which are not needed
when completed seven to ten years after the decisions to build
them w ere made.

Our energy waste in transportation is 8 5 % ; in gen
erating electricity, 6 5 % . Overall, 50 % o f our energy
is w asted.10
According to Denis Hayes o f W orldw atch Institute, Amer
icans wasted more fuel in 1975 than was used by two-thirds
o f the w orld's population.
Energy can be w asted during generation, during trans
mission and at end use. The process o f transforming coal, gas
or oil to electricity results in the w aste o f about two-thirds o f
the energy in the fuel. Conversion o f uranium to electricity is
even more wasteful. Using coal to make synthetic fuels involves
the waste o f about one-third of the coal's energy content.
Energy is w asted when it is sent out over long transmis
sion lines, especially over pow er lines from nuclear pow er
plants which for danger reasons the government has decided
must be located far from large concentrations o f people. Ener
gy is w asted when appliances and machines are not built to
perform at the best p ossible efficiency levels. Energy is wasted
when heavy automobiles with "high perform ance” engines
guzzle fuel to propel the vehicles a few miles per gallon. And
energy is wasted when it simply is allowed to leak— through
ceilings, walls, pipes, hot water heaters and industrial pro
cesses, due to inadequate insulation and design.
Energy is also w asted when it is not matched in "quality"
to the intended task. This occurs, for example, when electricity
is used for heating buildings and water, and for cooking. Elec
tricity is a very “ high quality” and expensive form o f energy,
most suited to and most econom ic for special tasks such as rail
transportation and some exacting industrial processes. W hen
water is heated by electricity, for exam ple, it is after water
at a pow er plant has already been boiled by the fuel. This fuel,
whether fossil, nuclear o r solar, has had to boil w ater to make
steam to turn turbines to generate electricity— and in each
step there is considerable loss o f energy. It is quite apparent
that there is a w asteful “ mismatch” when nuclear fuel is used
to achieve a tem perature o f several thousand degrees in an
expensive and com plex reactor in order to boil water to create
steam— something which occu rs at 212 degrees F. And it
makes even less sense to go through all this trouble to heat or
cool buildings to 70 degrees when other sources of less trouble
some and less expensive heating and cooling are available
which utilize air w hose temperature is closer to the levels de
sired. For instance, it has been demonstrated that modern
high-rise o ffice buildings could be well-served by heat pumps
which move cold air to the warm side o f the building exposed
to the sun’s rays, and return w arm air back to the cold side.
These heat pumps w ould replace the waste created by heaters
and air conditioning units operating simultaneously through

According to Amory Lovins, increased electrical expan
sion to the 150 quadrillion BTUs by the year 2000 which many
in the energy industry and government yearn for, would result
in energy waste approximately equal to the nation's total en
ergy consumption in 1971.3'
And as energy is wasted and thrown away, so are jobs.
Bruce Hannon has computed that for each quadrillion BTUs
of fuel changed into electricity, 75,000 jobs are lost over the
entire economy.”
Lastly, all the money invested in wasteful and unneces
sary energy production at the expense o f other national needs
must be considered wasted as well. This is especially serious
because money will be in short supply: Lovins doubts whether
the nation will even be able to afford to build— or consumers
able to buy— all the products w hich are supposed to be using
this wasteful investment in energy.
VI. Capital Investment
The major energy-producing and energy-using industries
consume the lion's share o f national capital investment.
A recent ERDA report concluded:
It is probable that the nation’s single greatest invest
ment in energy in the future will be in the area o f elec
tricity generation, transmission and distribution.”
Amory Lovins has calculated that investments in largescale, centralized energy systems as proposed by people in
ERDA, FEA and assorted energy monopolies, would consume
three-fourths o f all private investment capital in the United
States.14 Estimates o f the total amount o f money needed
through 1985 range from $900 billion to one trillion dollars.”
The Edison Electric Institute, the public relations arm o f the
nation’s privately-owned utilities, has estimated that these
utilities would require $570 billion for construction purposes
alone to provide electric pow er they believe will be necessary
over the next fifteen years.1* The President o f Exxon Nuclear
Corporation stated last year that at least half a trillion dollars

237
would be needed to build the 500 nuclear power plants he
w ould like to see completed by the year 2000. Another $100
billion, he added, would be required to construct the necessary
nuclear fuel cycle facilities.3' The development o f a commercially-usable nuclear breeder reactor, by the latest estimate,
w ill cost $10 billion plus. Storage o f radioactive wastes will
mnaumfl presently-uncalculable billions o f dollars over hun
dreds and hundreds o f years («incalculable because the meth
ods for long-term storage have not yet been devised). The cost
o f each coal-conversion facility is currently thought to be
around $1 billion. Rocky Mountain shale conversion plants will
run at least $1 billion each. And the price tag for nuclear
fusion electric systems, assuming they can be made commer
cially available, will be in the billions of dollars.
These large capital investments result in small numbers o f
very expensive jobs. A 1977 report by The C on/erence Board
found that investment to create each job in energy-producing
and major energy-using industries w as much higher than in
vestm ent to create a job in areas which use smaller amounts
o f energy. See Table II:

petroleum
public utilities
chem icals
primary metals
stone, clay, glass
all manufacturing (average)
food & kindred products
textile mill production
wholesale and retail trade
services
apparel and other fabricated textiles

Capital investment
p er em ployee
$108,000
105,500
41,000
31,000
24,000
19,500
18,000
11,000
11,000
9,500
5,000

It is clear from these figures that it takes about 21 times
the amount o f investment to create a job in the petroleum in
dustry than it does to create one job in the apparel and textile
industry. Jobs created by investment in public utilities are the
second-most expensive: about $105,500 each. The investment
needed to create a manufacturing job on the average is about
$19,500, w hich is about one-half of the amount required for a
job in the chem ical industry, and about one-third o f what is
required p er job by the primary metal industry. Investment in
“ all m anufacturing” is about double that needed to create a
job in wholesale and retail trade, or in the service sectors of
the economy.
But despite the huge capital investments required, and the
small numbers o f jobs created; despite the inefficiencies and
the w aste o f non-renewable fuels; and despite threats to
human health and local autonomy, industry promotion of their
large-scale, com plex energy systems continues. (In the past
year, for exam ple, over one-half of all new homes constructed
had all-electric heating, cooling and cooking systems.) In at
tempting to fulfill their own propaganda that prosperity and
jobs depend on more and more energy— especially electrical
energy— these companies will seek to divert more money and
more resources their way to create more waste and more
pollution.
There will be continuation of the trend toward fewer
manufacturing jobs, greater gaps in wage scales through the
entire society, increased environmental destruction and citi
zen protest. Less money will be available for investments in
other areas which serve people's needs, provide more jobs

Technologies shape social institutions. The use of largescale, complex, dangerous energy systems such as nuclear
fission and coal conversion affects more than just energy
matters. Such installations lead to concentrations of political
and econom ic power, as well as to curtailment of individual
freedoms and the democratic process.
A recent Rockefeller Brothers Fund report listed the
following “ unavoidable consequences" of these kinds of
energy technologies:
• compulsory governmental diversion of scarce re
sources (capital, skills, labor, special sites, water,
etc.,) from other priorities into the energy sector;
• a need for a central authority (often federal) to im
pose big energy facilities and their perceived risks on
people who want neither;

TABLE II
CAPITAL INVESTMENT PER JOB*
industry

SOCIETAL EFFECTS OF
LARGE-SCALE TECHNOLOGIES

• conflicts between central authority (often federal)
and local autonomy in all energy matters;
• concentration o f political power, enabling urban peo
ple to obtain the benefits of the energy while inequit
ably allocating the associated social costs to political
ly weaker rural minorities, as has already happened in
Wyoming, Appalachia, the Brooks Range in Alaska,
and Navajo country;
• a tendency to make patterns of energy end-use con
form to the needs of the source of supply rather than
to people's needs;
• encouragement
polies;

horizontally-integrated

mono

• isolation and alienation of energy users from the un
accountable elite w ho supply, price, and regulate the
energy;
• commitment by the political authority to support the
continued uses of the energy system regardless of
any inherent faults, and hence to suppress dissentor use social engineering to bypass dissent—even in
the case of major accidents or technical failures;
• development of strong central bureaucracies and
technical establishments that favor the technologies
they develop and com e to dominate decisions about
their use.
Members of the New York State Labor Action Coalition,
a group o f labor union locals working for municipal takeover
of investor owned utilities, have pointed out that increasing
the size and concentration of energy systems diminishes the
chances o f communities ever obtaining control of their own
energy production and distribution. In addition, centraliza
tion and automation of energy systems lead to the closing of
existing smaller facilities, and enable industry management
to keep their plants running with the use of a handful of
supervisory personnel. The consequence will be smaller,
and weaker, labor unions.
Source: The Unfinished Agenda, a Task Force Report Spon
sored by the Rockefeller Brothers Fund, Crowell
Company: N.Y., 1977.

238
per dollar, consume less energy, and create less environmental
and public health havoc. Consumers will b e paying increasing
prices for unneeded, inefficient and unreliable energy systems
which will be unable to provide a return on the money invested
in them. Consumers will also b e paying higher taxes to protect
their health and bail out failed energy systems. (This is hap
pening now: N uclear Fuel Services’ fuel reprocessing plant
and a Con Ed n uclear reactor in N ew York State have already
been dumped into the laps o f the people o f New York.) Higher
interest rates will also result because o f the money shortage
caused by the diversion o f so much capital to the energy arena.
(Some projections show this shortage may total $915 billion
through 1985.")
Surely, there is a better path to prosperity and jobs.

“ simply by improving the efficiency o f existing use.” 43
•
The Am erican Institute o f Architects (AIA) has calcu
lated that by 1990, 12.5 million barrels o f petroleum p er day
(equal to one-third the current national energy use) could be
saved just by employing energy-efficient systems in old and
new buildings. The following chart prepared by the AIA shows
that conservation alone in buildings offers an energy supply
which by 1990 would be larger than the contribution o f any
one o f the following: domestic oil, conversion o f shale to oil,
Alaskan North Slope oil, domestic and im ported natural gas,
and an overly-optimistic prediction o f nuclear energy output.

CHART I44

VII. Energy Efficiency
Energy production is not a goal in and o f itself. Energy
should be utilized to serve people, to provide the freedom
for all people to have richer, easier, healthier lives. That a
nation uses vast amounts o f energy does not reveal to what
extent the energy is actually being put to wise, effective use by
its people.
The best approach to energy sufficiency, econom ic pros
perity and jobs is that which com bines increasing energy ef
ficiencies with a variety o f diverse and safe energy-supplying
technologies. Each energy-producing technology should be
used to do what it does best, and should be m atched in scale
and energy quality to the w ay in which its energy will be used.
And the m ore the fuels for these new energy systems are re
newable, the better.
This approach is not “ anti-technology,” as sometimes is
alleged by the large energy interests. In fact, technological
innovation will be a key to achieving success with this ap
proach . . . but the technologies involved need to be ones which
can be controlled by the Am erican people, not ones so elabor
ate and complex that people have to be kept far aw ay from
them or from decisions concerning them.
And this is not a “ no grow th” approach, or one which ad
vocates a return to drudge labor. To the energy industry,
“ growth” has always meant growth in energy production in
order to satisfy its own needs, no matter the consequences for
the rest o f society. But to others, “ grow th” means a national
policy o f full employment, im proved standards o f living, im
proved job safety and public health, expanded opportunities
for leisure activities and the development o f rewarding rela
tionships with other people.
How can increasing energy efficiencies (that is, conserva
tion of energy) make a significant contribution to such goals?
Here is a brief list o f just some of the benefits which result
from energy efficiencies:
• To the University of California’s John Holdren, the es
sence o f conservation is “ extracting more well-being from
each gallon o f fuel and each kilowatt o f electricity.” 40
• A unit o f energy saved is cheaper— in dollar, energy,
public illness and environmental costs— than a unit of energy
produced. The Bonneville Power Administration has con
cluded that saving energy by conservation costs one-sixth of
what it costs to deliver an equivalent amount o f energy from
new thermal p ow er plants.41
• “ Saving energy,” said former Federal Energy Admin
istration Director Frank Zarb, “ is synonymous with saving
dollars and can, in fact, be one of the least expensive energy
supplies this nation h as.” 42
• Denis Hayes has calculated that for the next quarter
century, the United States could meet all its new energy needs

AIA ESTIMATES OF THE RATE OF ENERGY SAVINGS
IN BUILDINGS COMPARED WITH THE CAPACITY
OF PRODUCTION FROM VARIOUS OPTIONS
AS FORECASTED BY THE U.S. GOVERNMENT

Millions Bbls.
per Day Oil Equivalent

Î8

Energy
Conserv
in Buildi

In order to supply the energy equivalent of 12.5 million
barrels of oil per day in 1990 by traditional centralized energy
systems, a capital investment o f $415 billion would be re
quired. The customer would pay between $892 billion and
$1.4 trillion for this unneeded energy. But investing money in
energy efficient buildings, says the AIA, would produce both
energy and dollar savings.
•
The Bonneville Power Administration has summarized
a number o f energy-savings estimates calculated by its con
sultants and a variety o f other analysts:

239
TABLE HI*1
COMPARISON OF ESTIMATED CONSERVATION SAVINGS

FOR GOODNESS'

Residential
Sector
14-48%

24.8%
38-49%
30-40%
11.3-42.7%

Commercial
Sector
22-44%

Industrial
Sector
5-10%

Energy 1990 (City of Seattle, 1976)
U. o f Calif. (Goldstein, 1975)
Oak Ridge National Lab. (1973)
Arthur D. Little, Inc. (1976)

Energy 1990 (City o f Seattle, 1976)
American Institute of Architects (Stein,
1974)
U.S. General Services Administration
(1973)
Arthur D. Little, Inc. (1976)

Energy 1990 (City o f Seattle, 1976)
W est German Industries (Stanford
Research Institute, 1975)
National Bureau o f Standards (1974)
Federal Energy Administration (1974)

• General Electric’s Evandale, Ohio, jet engine plant has
cut its energy use by 45.1% over the last five years, “ with
nothing m ore sophisticated than a chicken coop timer.’ ’ G.E.’s
program has saved the company $8.6 million, at an investment
o f $400,000.«
• 1976 cars already average 27% better mileage than
1974 cars. 1977 cars will average 6 % better mileage than the
1976 models.47
• A n energy study commissioned by the City o f Seattle
influenced that city not to buy into Oregon’s nuclear power
plants. The study convinced city officials and Seattle citizens
that with appropriate energy efficiency measures, no new
electricity generating capacity would be required for Seattle
through 1990. And, the cost per kilowatt hour o f electricity
would be 1.3<P ch ea per without building new energy facilities.4*
• A Dow-Midland study indicated that by using waste
industrial steam to generate electricity— as is done in Sweden
and W est Germany— energy savings equivalent to 680,000
barrels a day o f oil could be saved by 1980. By 1985, this " c o
generation,” as it is called, could replace the equivalent of 50
large nuclear reactors.4* The California Energy Commission
has determined that the potential for co-generation in that
state alone could be as much as 140 billion kilowatt hours per
year, the equivalent of the total amount o f electricity con
sumed in California in 1975.50
• Energy conservation retrofits have led to a 60% de
crease in steam use, and a 30% decrease in electrical con
sumption, at the Hermann Building o f the M assachusetts In
stitute o f Technology.51
• The D irector of the M assachusetts Energy Policy O ffice
has concluded:
Energy conservation is not synonymous with depriva
tion. In fact, just the opposite is true. Saving energy
means saving money. For a household, this means
more cash for other activities; for a business, this
savings means higher profit. For the state in general,
this means m ore jobs, and more income for our
citizens.52

If expansion of large, complex energy systems is so
wasteful, causes pollution and disease, gobbles up invest
ment dollars, threatens the democratic process, displaces
existing jobs and chokes out large numbers of new jobs,
why have utilities and energy industries been so determined
to expand, expand, expand?
For regulated utilities, there is a clear, direct relationship
between energy growth and profits—their profits. A utility's
rate of return on investment is set by law at a fixed per
centage. The more they invest, the more profits they reap.
To attract more investors who will put up the money for
more facilities which will return more profits in order to at
tract more investors, utilities seek to invest in more facilities
which will attract more investors and return more profits.
If consumers use decreasing amounts of energy, utilities
have a hard time justifying investment in more energyproducing facilities. Less utility money is available for re
investment, and utilities begin to experience difficulty at
tracting money from the financial community. Because
energy use has decreased (or in some places has increased
at a lower rate) since the Arab oil embargo, many utilities
have lost large amounts of revenues, and have ended up
with unneeded facilities which were planned a decade ago.
They have had to seek huge rate increases to pay construc
tion and operation costs of their expensive overbuilding.
Thus do consumers rightly complain that it does not make
much difference whether or not they turn their thermostats
down: they may use less energy, but their bills keep going
up anyway.
It is just not in the interests of the utilities to promote
energy efficiency very seriously.
Utilities pay some lip service to conservation—especially
when there are shortages of fuel or they are having par
ticular problems delivering the energy they are required to
deliver. But they do not want to encourage too much con
servation. A recent Mobil advertisement, for example, had
some nice words about conservation, but it strongly stressed
the need not to "trade-off" conservation for jobs or GNP
growth, and the need to preserve consumers' “freedom of
choice'' to use energy as they see fit.
Thus, in order to raise their rates to expand and increase
profits to expand and raise rates, it has been in the interest
of the utilities to have people believe that energy growth

•
States are beginning to respond to the Energy Policy and
Conservation A ct (1975) which provides FEA money to a state
which can cut back at least 5 % o f its energy use projections,
beginning in 1980. Colorado plans to save 52.8 trillion BTUs in
1980. Governor Lamm, in his state's energy conservation plan,
sums up the rationale:
Conservation is the only way in the next few years
w e can bring some manner o f economic relief to the
millions o f our citizens who cannot afford the vastly
increased cost of energy. Conservation is the least
expensive and most cost-effective way tor expand our
energy “ supply” . . . A conservation program will
reduce the im pact [of energy production] on the en
vironment .

240
. . . energy conservation and econom ic well-being are
compatible . . . Even the most superficial and immedi
ate measures to cut w aste would revive our environ
ment.55

SAKESWHY?
leads to employment growth and economic prosperity; to
persuade large industries to use energy extravagantly by
charging the lowest rates to the largest users; to threaten
that without nuclear and other exotic energy systems Amer
icans would soon freeze and starve in the dark; and to
oppose environmental and public health measures, which
interfere with their visions of unlimited expansion without
regulation. In addition, utilities have recently become inter
ested in the plight of the poor and disadvantaged: utilities
take great advertising pride in having brought them to the
threshold of the good life, and are now declaring it is for the
sake of these people that more and more giant, dangerous
energy facilities should be built.
Some of the nation's largest manufacturers build the
equipment used by the utilities. They also build and sell the
appliances that people buy, and the machines that industries
buy, all of which consume large amounts of energy. Many
of the corporations which control energy resources (coal,
oil, gas, uranium) are also in the business of finding, ob
taining, transforming and delivering these resources in
usable form. The profits of these companies increase as the
utilities expand their ability to supply energy. Clearly, then,
it is in the interest of the energy-production companies and
the energy-equipment manufacturers to throw in their lot
with the utilities.
The utility industry, with the full support of energy in
dustries and the government (which has provided research,
development and demonstration money, along with favor
able subsidies and tax incentives), has been very success
ful at expanding without much caring about the undesirable
societal, economic and human consequences of their ef
forts. This confirms what John Maynard Keynes noted
earlier in the century.

• Conservation o f energy will supply goods and services
at low er total cost than could be supplied by new energy devel
opment. The money which might have been spent on energy
production would be available to pay for labor, designs and
materials for energy efficiency techniques. There will also be
money left over for other investments. The result will be more
goods, more services, more employment— both direct and in
direct, as the Bonneville Power Administration has pointed
out. And, as Denis Hayes has observed.
To the extent that a consumer conserves fuel and
spends the money on anything else, he will provide
more employment as w ell as use less energy
• Energy conservation offers considerable manufacturing
flexibility. Most energy conservation technologies will be im
plemented on a small scale, and on regional bases. Industry
will therefore be able to develop improved technologies
through competitive trials, then cut production costs by means
o f mass production. A “ balanced” and independent regional
economy based on improved energy efficiencies could provide
more jobs, with more job security, than an economy dependent
upon energy sent in from far away. The reason for this is that
the manufacturing base would be varied, would require less
energy, and be less sensitive to changes in economic, political
and meteorological conditions in other parts o f the country.
In addition, raising investment capital would be less of
a problem because energy efficiency programs are cheaper
than energy-production projects. Their short planning and
completion time would mean that cash flow would be speeded
up: money for energy efficiency investments could be used
several times rather than be tied up in a long-term energyproduction project.
And with regard to jobs created by energy conservation,
there are significant positive benefits as well.

There is no evidence from experience that the invest
ment policy which is socially advantageous coincides
with that which is most profitable.
Sources: Ernst & Ernst, Energy-Economy Relationships,
June, 1976; Ernst & Ernst, incentives For Electric
Utilities to Overforecast, July, 1976; Daly, Herman,
Towards A Steady State Economy; Washington
Post, March 12,1977 (the Mobil advertisement).

VIII. Energy Efficiency and Jobs
• A Bonneville Power Administration Study has found
that

An essential part of any serious program to promote
energy efficien cy must be a systematic and credible
effort to convince the public o f the enormous benefits
that are possible . . . The econom ic and energy sav
ings can be calculated, and they are attractive.’ 3
• Again. FEA’s Zarb:
Contrary to myth, conservation is vital to our efforts
to sustain our high standard o f living and rekindle
econom ic growth. M oreover, several recent analyses
have shown that reducing the inefficient use o f energy
would not result in an employment penalty.54
• And even Am ericans for Energy Independence, an
energy industry-oriented group which seeks the expansion of
large-scale, centralized energy systems, has noted that

High impact conservation programs create more jobs
than would be created by building new pow er plants
to generate an equivalent amount o f energy.57
Amory Lovins has testified to the Senate Select Committee on
Small Business that conservation programs which include
shifts o f investments from energy wasting to social programs
create from tens of thousands to nearly a million net jobs per
quadrillion BTUs o f energy saved.”
• A preliminary analysis for the FEA5* provides specific
breakdowns o f some energy conservation techniques, costs
and resulting employment. This report examined the prospects
of limited energy efficiency increases in 34,372 private homes.
The technical work called for was simply the installation o f
ceiling insulation and automatic thermostats, and the retrofit
or replacement o f furnaces.
The analysis concluded:

241
By 1985, natural gas supply would be increased be
cau se o f the saving o f 1,212 billion cubic feet. This is
the equivalent o f the gas to be obtained from the
major discovery at the Alaskan North Slope. It is also
about the equivalent o f the output o f 39 one-thousand
megawatt electric thermal pow er plants. Consumers
in these 34,372 homes would save $1.7-$2.3 billion in
heating costs.
The work would cost $7-$10 billion, compared with
$17-$20 billion for 39 large fossil fuel power plants;
487,000 jobs over 7 years would be created: 122,000
in manufacturing, 366,000 in local installation.
The report also stressed that employment associated with
energy conservation techniques is local, low- to moderatelyskilled, and concentrated in or near urbanized areas which
are experiencing the most acute unemployment problems. In
contrast, centralized, expensive energy production com plexes
usually have to bring in highly-skilled labor from outside the
construction area. (These transients create a large amount of
disruption: temporary housing and many services must be
supplied to meet the problems temporary workers create. In
many o f the energy “ boom towns” o f the W estern United
States, crime, alcoholism, family break-ups are well above
average. Serving the needs o f transient labor ends up being
a drain on the local economies the transients were supposed
to be stimulating.)
• The State of Colorado has estimated that 17 million pri
vate homes in the nation need ceiling insulation; 20 million
need clock thermostats; 20 million need caulking and weatherizing; 10 million need storm windows. In addition, millions of
multiple-unit dwellings, apartment houses, commercial and
industrial buildings are inadequately insulated and weatherized. If 487,000 jobs are generated by only three simple con
servation procedures in a small fraction of the buildings which
need work, the potential obviously exists for millions of jobs.
Employment for energy specialists, construction o f more ener
gy efficient equipment, jobs for architects and engineers will
be increased, along with jobs in the fields of insulation, heat
pumps, electronic controls and systems analyses, communica
tions and transportation.
• The Senate Commerce Committee Staff has estimated
that $1.6 billion in interest subsidies and loan guarantees for
conservation retrofits would generate 400,000 jobs.60
• The American Institute of A rchitects’ conservation pro
gram for new and existing buildings would create half a mil
lion to more than a million direct jobs per year through 1990.*'
• The conservation retrofits on MIT's relatively small—
94,000 square feet— Hermann Building, provided 800 person
hours for members of the Sheet Metal W orkers’ International
A ssociation.“
• A proposal sent to President Carter by the Senate Com
m erce Subcommittee Staff describes how a $1.65 billion invest
ment in energy conservation, using public service workers,
w ould create a total o f 100,470 jobs: 9,600 at $15,000 per year;
74,600 at $10,000; and 16,279 jobs in manufacturing. The staff
calculated that each $40,000 investment in materials would
create one job in the materials manufacturing industry. The
program would focus on the retrofitting of schools, colleges,
hospitals, federal buildings, the weatherizing and installation
o f solar w ater heaters in HUD-owned single family houses,
and the construction o f bicycle paths.”
• A study by Skip Laitner of Critical Mass computed that
manufacturing high efficiency appliances requires the employ
ment o f more people than does the manufacturing of inefficient
appliances.04 W hen buying more efficient items, a consumer is
investing in extra labor and materials, and in a more carefully-

constructed, longer-lasting product. The purchaser would save
money on reduced electricity bills, which would cover the
higher initial cost o f the appliance. Thereafter, on-going sav
ings in energy can be spent on consumer goods, which as
described above, create more jobs than spending on energy
generation.
• A ccording to Am ericans For Energy Independence,
experts have suggested that reducing oil imports by
2 million barrels a day would generate 500,000 to
800,000 new jobs in the U.S.'5
• And an annual energy savings o f 144 trillion BTUs
achieved by the nation’ s switching to refillable-container sys
tems would result in a net job increase of 117,000. Total labor
income would in crease $936 million, according to a recent FEA
study.“
In sum, increasing energy efficiencies will supply the
nation with a substantial source o f energy. The savings of
money and the reduction o f energy waste will generate a broad
range o f econom ic and environmental benefits throughout the
country, and create large numbers o f safe, socially-useful jobs.
For new energy sources, the nation needs to utilize the
unlimited energy w hich is available from the sun.

IX. Solar Energy
The solar energy reaching the United States in twelve
hours is equal to the nation’s yearly energy consumption.
Various technologies exist which can utilize this abundant
and safe source o f energy: solar plate collectors for heating
and cooling o f buildings, and for heating water; photovoltaic
cells for converting sunlight directly into electricity; wind
energy systems for producing electricity, pumping fluids or
compressing air; biomass conversion for creating fuels from
organic matter.
For all solar energy systems, the fuel is renewable. For all
except biomass conversion, the fuel is free. If energy quality
is matched to its ultimate use, each of these systems except
photovoltaic conversion has lower capital requirements per
unit o f energy delivered to the user than does nuclear fission
and production o f synthetic fuels from coal. All these solar
technologies readily lend themselves to small, decentralized
installations.
A ccording to John Quarles, former Deputy Director o f the
Environmental Protection Agency, some solar energy tech
niques can be commercialized sooner than can the nuclear
breeder reactor, shale or coal conversion systems, or nuclear
fusion reactors.'7
Senator Charles Percy (R-Ill.) recently stated at a solar
energy conference he helped organize:
Solar energy is not an exotic dream o f the future.
Rather, it is workable today."
The Grumman Corporation “ Sunstream” division has
advertised: “ An answer to OPEC comes up every morning!”
With Sunstream's domestic hot water heater,
you can now capture the sun's energy to heat hot
water for your household needs . . efficiently, quietly
and cleanly."
An ERDA report, A Preliminary Social and Environmental
A ssessm ent of the ERDA Solar Energy Program, has pointed
out that solar energy technologies are readily adaptable today
for broad scale commercial use.70
According to the Federal Energy Administration,

242
In general, the application o f solar energy techniques
does not require establishment o f scientific feasibili
ties.71

W e have the skills, shop facilities, manufacturing
capability and expertise to em brace this industry
now. New tools and processes are not required.74

George Szego, president o f Intertechnology Corporation,
has stated that savings o f five billion barrels o f oil could be
achieved within 10-15 years if a crash program o f solar energy
commercialization w ere begun n ow .72
Edward J. Carlough, General President o f the Sheet Metal
W orkers’ International Association, recently noted that almost
25% of all energy used in this country is consumed in heating,
ventilating and air-conditioning, and related systems. He went
on to say:

A report prepared in 1952 by the Paley Commission for
President Truman concluded that solar energy could play a
greater role in energy production than could nuclear fission.
The Commission p rojected that if an aggressive effort w ere
made, 13 million homes and com m ercial buildings could be
heated b y solar energy b y 1975.” And an Atom ic Energy Com
mission study concluded in 1974 that by the year 2000, solar
energy could provide 30 % o f the country’s energy needs.76
Although efforts to enable these predictions to com e true
w ere not made, there is nonetheless a significant amount o f
solar activity in this country today. The Solaron Corporation
o f Denver had a half-million dollar ord er backlog earlier this
year, and w as installing hot w ater systems in 60 buildings in
12 states.77 The Piper Hydro Company installed 1000 dwelling
hot w ater units in 1976, and “ hasn’t even scratched the sur
fa ce ” o f demand.7* The Federal Energy Administration has
announced that com m ercial production o f solar collectors in
creased 400% in 1975 over 1974. A total o f 142 firms are now
manufacturing collectors, and the industry seems to be in a
trend o f quadrupling production annually.7* Solar energy busi-

At a relatively low cost, w e could make a huge dent
in the nation’s energy consumption by modifying those
systems to use solar energy where it is feasible. The
national value o f a con certed effort in solar energy
and energy conservation would be measured in mil
lions o f barrels o f oil— resulting in more favorable
balances o f payments, less inflation, more jobs and
energy independence.73
The Sheet M etal and A ir Conditioning Contractors’ As
sociation has affirm ed in testimony before Congress:

. . . Unemployment calms the unions
and moderates their wage demands.
Business periodicals have been noting
with unconcealed gratification that last
year's contract settlements between
major unions and large corporations
were considerably less expensive for
employers than those of 1975, even
though union members were steadily
losing ground to inflation. When people
are scared about losing their jobs, they
work harder and gripe less. In more dig
nified language, absenteeism declines
and productivity ascends.
"Better still, factory and office work
ers, alert to potential layoffs and plant
shutdowns, are unlikely to nag unions
and employers to make work more in
teresting, and less menacing to health
and personal safety. It cannot be mere
coincidence that in Sweden, where job
enrichment and plant democracy have
had their greatest success, unemploy
ment is practically zero and astute man
agement of their economy protected
Swedes even from the worldwide eco
nomic crisis of 1973-1975. The new gov
ernment, elected on the fortuitous issue
of nuclear safety, has promised to ex
tend even further the social benefits for
which Sweden has become celebrated.
American employers preserve them
selves from Swedish experiments in
good part by keeping the industrial re
serve plentifully manned.
"Nor is this quite the end of the tale.
The hunger of communities and regions
for jobs and tax revenues has allowed
large corporations to extort an endless

Beware Full Employment
by Robert Lekachman
c

assortment of valuable concessions
from local and state governments,
either as blackmail to keep existing in
stallations or bribes to lure new ones.
Few major corporations pay their fair
share of property taxes. Propaganda by
oil, steel, chemical, and paper industries
has noticeably slowed the pace of regu
lation to protect the environment.
"By contrast, full employment on a
sustained and assured basis (the system
can stand a spell of full employment as
long as all parties understand that it is
temporary) presents an embarrassment
to the movers and shapers of American
plutocracy. To begin with, full employ
ment is the most efficient agency of
equitable income redistribution which is
at all feasible in the United States. Full
employment sucks into the labor force
men and women who now struggle on
welfare, food stamps, social security,
and unemployment compensation. It
pushes up the wages of low-paid people
whose position is scarcely less precar
ious than that of the unemployed. It is
an especial boon to blacks, Hispanics,
teenagers, and women — last hired and
first fired in expansion and recession
alike. A long spell of full employment
would substantially narrow existing
wide differentials between earnings of
these groups and those of white males.
In a time of layoff and business contrac
tion, affirmative action is a mockery, but
when there is full employment the cry
for justice is heard more sympathetical
ly by members of a majority whose own
security is not threatened."

243
nessman Jerry Plunket has estimated that 100,000 shops,
m anufacturers and firms are cap able now o f producing reli
able solar energy equipment.40
Solar energy studies— even those which suggest that a
significant contribution by solar technologies to the nation’s
energy needs is a long w ay o ff— constantly stress how much
energy could be obtained from the sun, and how safely. FEA’s
form er d irector Zarb:
Solar energy appears to be the safest and most en
vironmentally sound o f all energy . . It is inexhaust
ible, and it ca n ’t be em bargoed."
A study by the Oregon Energy Council found:
A transition to a solar energy econom y is desirable
and realizable. It involves neither privation nor social
deprivation. Life-style changes would be minimal. The
rew ards would b e enormous. Our children would
have a totally indigenous, permanent, safe energy sys
tem w hich could b e relied on by countless generations
for the future.“
The ERDA Social and Environmental Assessment o f solar
energy concluded:
Solar energy is the one source o f energy for which
there are no fundamental obstacles, no insurmount
able barriers, no serious environmental problems, no
organized public interest opposition.'3
The Solar Task Force o f the Project Independence Report
made clea r that:
A m ajor shift to the utilization o f solar energy by the
year 2000 and beyond will reduce the effects o f rapid
ly-growing energy consumption on our global climate
through a reduction in heat w aste rejection at the
generating site. Solar energy is the only energy source
w hich presently holds this promise.64
And even according to the Exxon Corporation, a multi
national com pany heavily invested in oil, coal and uranium,
and w hich is fond o f predicting that solar energy technologies
will not be particularly useful until the next century, the sun is

lough:
Solar heating/cooling systems using air are no longer
a novelty. This is a technology capable o f producing
energy and jobs.'7
The Technical Development Corporation (TDC) o f Provi
dence, Rhode Island, designed the solar heating system for the
swimming p ool at the United Auto W orkers’ (UAW) Family
Education Center in Northern Michigan. The installation costs
for the U AW system will be paid back in 6 Vi years. There
after, $3000 per year will be saved by the Auto W orkers in
decreased bills for conventional fuels. TDC studies have con
firmed that the use o f solar heating for swimming pools, laun
dries and industries which use large amounts of water, will
generate similar rapid returns."
The Energy, R esearch and Development Administration
has recently announced that solar residential hot water and
space heating are econom ically competitive today with electric
systems in 12 geographically-dispersed American cities.
(Among these cities are Boston, New York, Madison and W ash
ington, D.C.) These kinds of solar units, stated ERDA, could
becom e econom ically competitive with “ most fuel alterna
tives” by 1980.“
WIND ENERGY
Research and development in wind power have been vir
tually non-existent in this country for about 30 years. But since
the mid-19th Century, m ore than 6 million small windmills
have been used to pump water, compress air and generate
electricity. Over 150,000 are still in operation. But significant
use o f wind pow er w as phased out in the 1930’s when the
Rural Electrification Administration (REA) introduced central
ized electric pow er, as shown in the chart below:

CHART IP0
COMPARISON OF WIND ENERGY AND TOTAL U.S.
ENERGY CONSUMPTION

a source o f energy that doesn’t in any w ay pollute the
air or w ater, ca n ’t be used up, and is found right in
our ow n backyard.'5
H ere is a b rief look at some o f the methods solar energy
can be utilized to meet the nation’s needs:
SOLAR HEATING AND COOLING
Solar heating and cooling involves the use o f collectors on
site w hich absorb the sun’s energy. This method o f heating
buildings and w ater is not new. In fact, it has been utilized in
this and other countries for many years.
A ccordin g to former Congressman Paul Cronin, solar
heating and cooling systems
can have an immediate effect on our overall energy
b u d g e t. . . Most o f the U.S. patents on solar [heating
and cooling] w ere issued in the 1920’s. Florida re
ceived the majority o f its hot water from solar energy
until W orld W ar I I . . . If the government decided to
provide a solar hot w ater heater to everyone in the
U.S., w hich could be done in 3 years, it could save
over 1.2 million barrels o f oil p er day, and create .
jobs that w ould pay taxable in com es."
Again, Sheet M etal W ork ers’ A ssociation President Car-

According to a 1972 National Science Foundation-Nation
al Aeronautics and S pace Administration report, wind energy

244
systems could be installed in a very short period o f time— less
than two years. Companies such as Boeing, Kaman, General
Electric and Lockheed, along with a growing number o f smaller
firms, have indicated they are willing and able to provide wind
energy systems this rapidly.
Wind pow er expert Lorin Johnson has testified:

per8ed, flexible, low-capital enterprises which cr ea te many
jobs. The chairman o f the Am erican Gas Association has said:
From a social or political standpoint, it appears desir
able that gas be generated on a local basis from such
sources as urban refuse, industrial wastes, sewage
sludge and miscellaneous w astes."

Wind energy systems not only give a utility [company]
more flexibility than d o conventional thermal pow er
plants due to shorter lead times, they also allow new
technological innovations to be easily and rapidly in
corporated as they occu r . . . The failure o f one wind
energy system w ill not force the shutdown o f another
. . . The failure o f one wind energy system in a large
array is . . not a m ajor thousand megawatt catastrophe.*'
The Project Independence “ accelerated development”
scenario, which many experts consider to be quite conserva
tive, estimates that 2 3% o f the nation’s electricity could be
generated by wind p ow er by the year 1990." And a National
Science Foundation-Mitre Corporation study found that elec
tricity produced by wind p ow er would be competitive with
conventional diesel fuel electrical generating plants w hich use
oil priced at $10-$11 per barrel, a price w hich exists today.
The Technology Development Corporation has calculated
that wind generation o f electricity is currently economically
competitive with other systems on the seacoast o f the North
eastern states. As com plem entary energy systems, they are
“ immediately viable.” The wind machine this company built
for the United Auto W orkers will shortly be producing pow er
in cooperation with a Northern M ichigan utility.“
The New York State Energy, Research and Development
Authority has announced the installation o f a demonstration
wind generator on a working dairy farm in Northern New
York. Said the Authority’ s Chairman: “ Cost-effective use o f
new [wind] energy technologies is available today.’ ’*4

BIOMASS CONVERSION
Biomass conversion involves the changing o f organic mat
ter into useful fuels, such as gas or oil, or directly into heat.
The various biom ass techniques include utilizing urban
and industrial wastes, agricultural and forest residues, along
with farming on land or in the ocean.
A ccording to Senator Peter Domenici (R-New M exico),
the advantages o f obtaining energy from biomass conversion
are many: sources are forever renewable; the environmental
impacts are minimal; marginally useful lands and waters can
be put to use; a range o f assorted bioconversion products can
be developed differing in kind and quality which can be
matched to physical and econom ic needs.”
About 8 0% o f the total annual municipal waste is com
bustible. said Domenici, and could be used to generate energy
equivalent to more than half the 1970 oil imports from the
Middle East. Some Am erican cities are burning refuse to gen
erate energy, and over 100 cities are actively studying the
process and looking to rapid installation o f a variety o f sys
tems.
Harvest and bioconversion o f ocean kelp into methane
gas would generate 23 trillion cubic feet o f gas per year. (This
is equal to the current national annual gas demand.) Land
plantations could generate 8-11 trillion cubic feet o f gas per
year. Some gas com panies are presently experimenting with
ocean- and land-cultivated kelp production.
China has built one-half million methane gas digesters
since 1970. India is constructing 100,000 of them.
Bioconversion techniques are especially conducive to dis-

PHOTOVOLTAIC CONVERSION
Solar photovoltaic cells convert sunlight directly into
electricity at the p lace w here the electricity is to be used. They
are already cost-competitive with other energy systems in
remote areas. Their efficiency has been going up, and their
price going down, despite limited federal and industrial in
terest. In the early 1960’s, energy from photovoltaics cost
about $200 per peak watt. By the early 1970’s, the cost had
dropped to $100. By 1973, it w as $30; and in 1975, $17. Recent
ly, the energy from photovoltaic cells has been available for
$10 per peak watt.
Since photovoltaic cells convert solar energy to electricity
on site, there is no need for long-distance transmission lines,
and therefore no energy loss along these lines. Solar ceils, like
wind systems, can be installed in small units, and added on to
when needed. The use o f photovoltaic cells allows energy
planners to avoid having to predict years in advance what the
specific energy demand of a region will be.
A 1975 National Science Foundation report found that by
the year 2000, photovoltaic electricity could supply 9 % o f the
nation's needs— a figure which many today consider under
stated.
The evidence is overwhelming that solar energy tech
nologies are available today, and that they offer many tech
nical, environmental and financial advantages over other
energy systems.
They also provide significant employment benefits.
X.

Solar Energy and Jobs
Frank Z arb has said:
A strong solar industry means m ore jobs for Amer
icans, w ho will be needed to design, manufacture and
install and maintain solar equipment.*7
The Sheet Metal W orkers’ President Carlough:
. . . even figured conservatively, energy-saving modi
fication work and an expanded use o f solar energy
could put all unemployed sheet metal workers back
to work.“

245
The M assachusetts Energy Policy O ffice recently con
cluded that if by 1985 one-half o f all buildings in that state
w ere to use solar energy for hot water production. 32,000 jobs
would be created. In addition. 600 million gallons o f oil would
be saved per year, and $480 million retained for spending
within Massachusetts. The report stated:
The potential for solar energy seems virtually un
limited. With widespread adoption of solar power.
M assachusetts citizens could cut their collective fuel
bills by $120 million annually by 1985. Furthermore,
solar energy has vast potential for new job oppor
tunities, especially in the plumbing, construction and
research and development areas . . . It's safe to say
that by 1995 more jobs could be available from solar
pow er (directly and indirectly) than from offshore oil
and new nuclear construction combined.”
Frank Mills, o f the Sheet M etal and Air Conditioning Con
tractor's Association, has reported that retrofitting just 3 mil
lion private homes to 60% reliance apiece on solar energy
for heating and cooling would lead to 12.2 million hours per
year o f w ork for 10 years. And putting solar heat in 2.3 mil
lion new homes, at 60% reliance, would create another 12.2
million hours per year of work for ten years . . for sheet metal

GNP
The selection of Gross National Product (GNP) as a main
criterion for evaluating the nation's economic health has
served to mislead the public on energy and employment
issues.
GNP is the market value of all goods and services pro
duced in the economy over the course of a year. As far as
GNP is concerned, everything that costs money is con
sidered a benefit. GNP includes expenditures for desirable
items—such as for energy, housing, education, food, etc.,
but without taking into account whether they are made
available efficiently or safely. GNP also includes costs of
items not generally considered to be beneficial to the nation:
disease treatment, pollution clean-up, weapons production
and sales, wars, as well as unemployment insurance, work
man's compensation, welfare payments, etc.
Some analysts believe that the only part of the GNP
which is actually increasing these days is that part created
by the costs of pollution, environmental degradation and
human suffering caused by wasteful, inefficient and dan
gerous methods of production (especially of energy).
A recent Harris poll has indicated that a growing number
of people believe the quality of life has generally deteriorated
over the past decade. But the GNP has been increasing,
despite some temporary decreases in "growth" rates during
the '74-'75 recession. Thus, although individuals believe the
quality of life has gotten worse, according to the GNP,
the economy has gotten bigger and better.
For the United States to be striving for ever larger and
larger GNP, to be basing energy, employment and other
strategies on a deceptive criterion which conceals what is
actually taking place in terms of unemployment, energy
waste, work-related illness and public morbidity, does not
appear to be the height of wisdom.

fabricators, sheet metal installers, asbestos workers, car
penters, plumbers and pipefitters. Increasing the number o f
installations to half o f all private homes would mean about 5
times the number o f hours o f work. In addition, thousands of
jobs would be created in retrofitting and new installations of
solar systems in com m ercial buildings, apartment houses and
government buildings.100
A 1975 study for the Sheet Metal W orkers' International
Association found that heating and cooling could provide a
$2 billion market annually by 1990. Installation labor would
cost half a billion dollars, o f which $240 to $300 million per
year is expected to be paid to sheet metal workers (about
15,000 jobs at $20,000 p er year).10'
The Laborer, a journal o f the Laborer’s International
Union (AFL-CIO), found that jobs for its members in the solar
energy field "cou ld well mount into the hundreds of thou
sands.” The union has begun a course in San Diego to train
laborers in the installation and maintenance of solar and wind
systems. Union President Angelo Fosco has said:
Experts estimate the annual market for installing
solar systems and converting existing structures to
solar systems has a potential o f $77 billion alone . . . .
not including maintenance . . . . That translates into
a goodly number of jobs for construction workers in
our jurisdiction.1“
The President of the International Association o f Ma
chinists and A erospace W orkers (IAM), Floyd Smith, told dele
gates at an IAM-United Auto Workers legislative conference
in January, 1975:
If, for example, the government launched a program
tomorrow morning to equip each home in America
with a rooftop solar w ater heater, scores of factories
would be retooled and reopened. Thousands of jobs
would be created for unemployed machinists and auto
workers.1“
The IAM Grand Lodge Convention in Florida last year
passed the following resolution:
An all-out federally-sponsored program to convert
home w ater and s pace heating to solar would not only
decrease A m erica’ s dependence on foreign oil, but
create millions o f needed jobs for construction work
ers, machinists, metal workers and other industrial
w orkers.104
The IAM newspaper. The Machinist, quoted one solar ad
vocate as saying: “ Using local solar energy makes much more
sense than carting oil halfway around the w orld.” And Ma
chinist associate editor Dean Ruth wrote:
Millions o f Am ericans are jobless. Other millions face
the threat o f unemployment. Solar energy, as a new
industry, can provide a vast amount of work to help
get Am erica moving forw ard again.'“
An economist with the International W oodworkers of
America (AFL-CIO/CLC) has written:
Employment opportunities exist with the development
and construction o f alternate energy sources such as
solar, tidal, geothermal and wind . . . . sound conser
vation methods and the development o f alternate [to
nuclear] sources will not adversely affect job oppor
tunities in the economy. The job impact would, in fact,
be positive.1“
An article in W orklife, a magazine published by the U.S.
Department o f Labor,107 w as titled “ Solar Energy: Potential

246
Powerhouse For Jobs.” It listed some o f the skilled workers
needed to build and maintain solar units: carpenters, cement
masons, electricians, plum bers, sheet metal workers, air con
ditioning, heating and refrigeration technicians, glaziers,
crane operators. N ew jobs, the article says, will have to be
created and ground b roken in solar engineering, architecture,
law, real estate and appraisal, sales, zoning, assessment and
consumer protection.
The FEA Project Independence Task Force found that 3
to 4 million person-years o f direct jobs would be needed in
solar energy development and operation by 2000.101This figure
is probably an underestimation, since FEA’s 1974 “ acceler
ated” rate o f solar development is thought by analysts today
to be too conservative. Among other things, it is based on oil
selling at $11 p er barrel when it is now selling for as high as
$16— and going up; also, some o f the solar technologies w ere
considered for only certain parts o f the country, i.e., the South
west, which many believe an unnecessary limitation. Dr. Jerold
Noel, for example, a physicist at M obil-Tyco solar labs, has
stated:
The ro o f o f an average house around Philadelphia
could produ ce enough energy to supply the needs o f a
home, with enough energy left over, say, to charge
an electric ca r.14*
The jobs, according to the Federal Energy Administration,
would be for the skilled tradespeople listed in Worklife, as well
as for welders, bricklayers, concrete finishers, painters, iron
and insulation workers, electrical and mechanical engineers,
technicians, scientists and surveyors.
Fred Dubin, president o f an engineering, planning and
management firm w hich has conducted comprehensive energy
analyses for many parts o f the country, found that two billion
dollars invested in energy conservation and solar pow er pro
vides four times as many jobs as if it w ere invested in nuclear
reactors (64,000 to 15,000)."° Skip Laitner has shown that
about 2 Vi m ore jobs are required for solar-developed energy
than for the same amount o f energy produced by nuclear
fission.111
The job mix for the various technologies is different.
Nuclear energy utilizes few er tradespeople per professional
scientist or technician than does solar energy: for nuclear,
the ratio is about 2 to 1; fo r solar, it is 9 to I . " 2 In addition, a
broader array o f skills are n ecessary for building and main
taining solar systems than for building and maintaining
nuclear plants. And, as an ERDA report stated:
Solar systems provide m uch more room for small
business and geographically dispersed businesses
and workers than d o some o f the more com plex sys
tems.113
A report to the N ew York State Legislative Commission on
Energy Systems calculated that the operation and mainte
nance o f la rge wind systems require 2-4 times the labor force
on a continuous basis than d o nuclear fission or coal-fired
systems. And the building o f wind systems, said the report,
would provide employment in generator and electrical com
ponent manufacture; sheet metal and structural steel fabrica
tion; cement and w ire production. The combined continuous
labor requirements for construction and operation o f wind
systems without storage, according to the report, is 7000
person-years m ore than fo r an equivalent nuclear plant. For
wind systems with storage, 19,000 more person-years of work
are created than are created by an equivalent nuclear plant.
The report emphasized:

The National Indian Youth Council is opposing construc
tion of six commercial coal gasification plants on the Nava
jo Reservation in New Mexico. The Council points out that
each plant will cost $1 billion, and will be obsolete in 25
years: "In 25 years, when the investment is paid off and the
profits pocketed - ■ the coal and the water gone — the re.mains will be a wasteland . . . The Reservation will be forced
to accept unmanageable boom towns. . . . the plants will
give labor to a few of the Indians -- a doubtful benefit, con
sidering the inevitable losses to the whole life and posterity
of the tribe.. . . El Paso Natural Gas Company and Western
Gasification Company will make the profit, but the con
sumer and taxpayer will pay for it all. Every dollar spent on
the development of strip mines and gasification plants is
another dollar that will not be spent on permanent and non
destructive alternate energy sources."
Source: National Indian Youth Council
Albuquerque, New Mexico

The construction phase for both wind with storage
and wind without storage w ould employ thousands o f
electricians, engineers, heavy equipment operators,
laborers, steel workers and other construction per
sonnel.” 4
MIT P rofessor David R. Inglis has determined that if
w indpower had a share o f federal financial support commen
surate with its promise, and if the money w ere spent “ to en
courage the rapid growth o f a wind-turbine building industry,”
such an effort would utilize industrial facilities which already
exist: motor companies w hich make gears, aircraft companies
which make blades, electric com panies which make genera
tors.113 The FEA Project Independence Study estimated that to
generate 23% o f the nation's electricity with wind power,
140.000 person-years o f employment would be created by
1985, and 245,000 by 1990.1'*
That sam e report estimated that even a low level o f elec
trical production by photovoltaic conversion would result in
3.344.000 jobs by the year 2000.
Carlough o f the Sheet M etal W ork ers’ Association re
flected the frustrations o f many regarding the slow p ace o f
solar energy commercialization when he said:
Dollars now being spent on fossil fuels from abroad
would be better spent reducing joblessness by har
nessing less expensive, inexhaustible energies at
home. It is a national folly that, while the need for
energy conservation and solar energy is so great, our
sheet metal craftsmen, w ho can make energy-efficient
buildings a reality, sit idle.117
W hy, with the promise o f solar energy so great, has
progress been so slow ?

XI. The Politics o f Solar Energy
In 1952, the Paley Commission noted:
Efforts made to date to harness solar energy econom
ically are infinitessimal. It’s time for aggressive re
search in the w hole field o f solar energy— an effort in
w hich the U.S. could make an immense contribution
to the w elfare o f the whole w orld .11*

247
SUDDEN ENERGY CUTOFFS AND JOBS
This winter's job layoffs due to na
tural gas curtailments provide unfor
tunate but revealing examples of what
happens without sound energy planning
and local control of energy sources.
The disruptions which occurred high
light how vulnerable the American peo
ple are to interruptions in energy sys
tems which are controlled by corporate
interests from far away. Although
energy industries try hard to blame job
losses due to closed businesses on gov
ernment regulations and on environ
mentalists, it is clear that the shortages
and job layoffs have been due to the gas
industry's desire for higher profits. The
gas companies simply have learned a
lesson from the oil companies. (Or more
accurately, from themselves. The five
largest natural gas producers are Exxon,
Texaco, Phillips, Gulf and Mobil; 18 of
the nation's top gas producers are oil
companies.)
Representative Clifford Allen (DTenn.) has observed that the gas in
dustry is
essentially a monopoly, controlled
by a few rich, 19th Century-type
robber barons—a monopoly that
has no viable competition and per
mits no alternatives to which peo
ple can turn during these cold
winter months.
There is increasing evidence of ample
gas. Paul E. Reichardt, Chairman of the
Washington Gas Light Company, said
recently:

The gas industry has reserves,
proved and potential, to carry it
well into the 21st Century.
But the gas was not made available to
the public when it was needed most.
Charles Armin, Director of the Oil,
Chemical and Atomic Workers District
1, recently told Southern California
labor leaders that he is
really disturbed that industrial
people are blackmailing us, saying
that unless you pay more, we'll not
provide the energy anymore . . . A
lot of our problems of job disloca
tions are caused by the fact that we
haven't met someone's price. We
need to be careful we don't create
windfall profits for the oil and gas
companies. Look how much in
dustry can increase profits by little
price manipulations.
Indeed, gas company profits are up
considerably. They ere up because of
the increased use of gas and the higher
costs for gas over the past six months.
Gas company profits have been in
creasing almost as much as the oil com
pany profits increased following the
1974 Arab oil embargo.
Gas producers do not seem to be
reluctant to admit what is going on.
David H. Foster, executive Vice Presi
dent of the Natural Gas Supply Com
mittee, an industry lobby group, has
said:

There are 7000 natural gas pro
ducers out there waiting for a sig
nal that will provide them with the
incentive to get out the rigs and
lease the land.
The implication of this statement is that
frozen people, closed factories and a
disrupted economy are somehow not
"incentive" enough.
One of those gas producers, Antonio
Sanchez of Texas, expressed his views
on the naivete'of the public:
What amazes me is why people in
the East cannot understand the
simple economics of it. Why should
I sell my gas out of state at $1.42
[per thousand cubic feet] when
Texas buyers are waiting in line to
pay $2 for it?
The lesson for the public from all this
is that local and regional energy systems
must be developed which are respon
sive to the needs of consumers, and
which cannot be interrupted when ab
sentee corporate leaders decide to in
crease their profits, or indulge in any of
their other whims.

Sources: Washington Post, February 7,
1977; Los Angeles Federation
of Labor Energy Conference,
Jan. 1977; New York Times,
January 21, 1977; Wal/Street
Journal, February 3, 1977;
Dollars & Cents, March, 1977.

248
According to the Senate Select Committee on Small Busi
ness, the Paley Commission's enthusiastic predictions and
their recommendations w ent “ tragically unheeded." And more
than 20 years later, n ew studies for the government done by
the General Electric Corporation, by W estinghouse, and by
another large energy com pany— TRW — predicted that the
energy contributions o f solar technologies by the year 2000
would be minimal: General Electric's figure for solar heating
and cooling w as 1 .6 % : W estinghouse's w as 3.14% ; TRW ’s
w as 5.77% ."*
Senator Gaylord Nelson (D-Wis.), noting that these solar
projection studies w ere perform ed by companies heavily in
vested in nuclear pow er, coal, natural gas and oil, commented:
The suspicion is unavoidable that thesq, and other
absurdly low estimates o f the solar contribution dur
ing the next 25 years are not o f what the estimators
think the country could do if it put forw ard anything
like the money and effort that went into nuclear de
velopment or moonshots, but rather what they hope
the country will do. Not because doing so little is in
the best interests o f the great majority o f Americans
and other people o f the world, but because doing so
could possibly threaten existing investment in other
technologies.1“

TABLE IV’ 25
AIRCRAFT PRODUCTION IN THE U.S., 1938-1944

Y ear

Number of
A ircraft Produced

1938
1939
1940
1941
1942
1943
1944

3.623
5,856
12,804
26,277
47,836
85.898
96,318

The FEA concluded:
It is assumed that wind energy systems are not more
difficult and probably far less difficult to produce
than W orld W ar II aircraft.

James Piper, President o f the Piper Hydro Company, testi
fied before Senator Nelson’s Committee on Small Business:
I do not think W estinghouse can put its heart and
soul into producing a good solar system.121
Jerry Plunket, a solar businessman from Colorado, noted
the difficulties o f dealing with the federal government on solar
energy matters:
Rather than assisting us, w e have found federal em
ployees unable to understand the solar-state-of-thetechnology, unable to formulate reasonable plans for
moving solar technology ahead, and in fact engaging
in p rojects that w ere designed to keep university pro
fessors employed and o ff the street, and to use study
contracts granted to large firms to make solar energy
appear long term, remote and unlikely to respond to
our current energy crisis. Further, incredibly expen
sive solar heating experiments w ere conducted that
seemed designed to explore the upper bounds o f costs
—not to dem onstrate cost e ffectiveness.1”
The FEA Project Independence Task Force found that
among "fa cto rs which have inhibited" the growth o f solar sys
tems were: (1) a lack o f federal or private industry interest,
and (2) underpriced, taxpayer subsidized fuels.123
An excellent exam ple o f federal indifference to solar
energy development occu rred recently in Fairfax County,
Virginia. A school w as com pleted there which is 100% heated
and cooled by solar energy— the nation’s first. Fairfax was
unable to obtain government assistance for this project, so it
sought money for a long time from other sources. Finally, the
county received some funds from a university— in Saudi
A rabia.124
Government officials frequently say that modest sums
appropriated for solar energy are as much as can be prudent
ly spent, given the state o f the art. They say that a “ new ” in
dustry can progress only a little at a time. But on some oc
casions when this country needed vigorous action, even the
federal bureaucracies and private industry responded. For
example, when specialized aircraft w ere needed during W orld
W ar II, the fledgling aircraft industry was able to increase
production from 3,623 in 1938 to 96,318 in 1944. See table IV:

No federal funds went to solar research and development
prior to 1970. Since then, the solar budget has been increased
each year. See table V:
TABLE V1“
FEDERAL SOLAR BUDGET, 1970-1977

allocation

year
1970
1971
1972
1973
1974
1975
1976
1977

.2 million
1.2 million
1.7 million
4.0 million
15.0 million
43.0 million
114.6 million
290.0 million

249
Although the percentage increases of each year may seem
large, th e total dollar amounts allotted are nonetheless puny,
especially com pared to federal allocations for other energy
areas.
The follow ing chart compares allocations of federal funds
to solar and nuclear technologies:
c h a r t n r 27
FEDERAL EXPENDITURES FOR SOLAR ENERGY
AND NUCLEAR FISSION

The proposed fiscal year 1978 ERDA budget o f the Carter
Administration provides clear indication of federal priorities
in energy research and development:

TABLE VI1“
PROPOSED ERDA BUDGET FOR FISCAL YEAR 1978
program

budget outlay

conservation
fossil fuels
solar heating and cooling
solar electric and others (mostly centralized
solar thermal technologies)
nuclear fusion
nuclear fission
nuclear fuel cycle and dangerguards
liquid metal fast breeder nuclear reactor
management and support (ERDA bureaucracy)
uranium enrichment
nuclear w eaponry

$244 million
519 million
86 million
164 million
392 million
137 million
486 million
651 million
306 million
441 million

1 billion, 913 million

If one combines the various categories involving nuclear
fission and solar energy, the total ERDA energy research and
development budget looks like this:

technologies

budget outlays

conservation
fossil fuels
solar
fusion
fission

$244 million
522 million
250 million
392 million
one billion. 715 million

The Carter Administration has doubled the outlays re
quested for conservation, increased the solar request slightly,
and d ecreased the funds requested for the liquid metal fast
breeder nuclear reactor demonstration project by about onethird. com pared to the Ford Administration’s fiscal year 1977
budget. But other categories o f nuclear fission w ere increased,
and nuclear fission absorbed about 40°/o o f ERDA’s budget
increase, according to Tom Cochran of the Natural Resources

SOLAR STRATEGY AT ERDA
Some ERDA officials have expressed concern about
investing taxpayer money in solar technologies without
being sure what the returns will be. They—along with multi
national energy corporations—seem to be suggesting that
if the nation is going to put money into solar energy, at least
it should be directed toward developing huge, centralized,
expensive energy systems which only the corporate energy
industry can handle.
The Carter Administration has bestowed on the new
ERDA solar budget a mere cost-of-living increase over Ford
Administration fiscal year 1977 budget levels. The majority
of the new solar budget is directed to research and develop
ment of centralized solar electric systems (with some new
funds for biomass conversion programs). The money for
centralized solar research and bioconversion is not being
taken from the vast sums alotted to nuclear fission, fusion
or synthetic fuel development. Instead, the money is being
withheld from research and development of other solar
technologies which could be put to use more quickly, pro
vide greater quantities of energy, and could be installed and
controlled by small business, communities and individuals:

3 1 -5 0 2 O •• 78 ■ 17

heating and cooling of water and buildings, along with wind
energy and photovoltaic systems.
It is commendable that ERDA is concerned about its
responsibility for taxpayer dollars, and that it is seeking to
evaluate how its solar programs are doing. After twentyfive years and tens of billions of taxpayer dollars have
been poured into nuclear fission and fusion development,
it would be nice to see similar concerns expressed about
continuing investment in these realms as well.
But wishful thinking aside, ERDA needs to be prevented
from playing musical chairs with the solar energy budget,
alternately sacrificing one advantageous solar technology
for another, while investing in centralized solar systems and
continuing to pour vast sums into nuclear and other exotic
technologies.
Source: Robert Hirsch, former Assistant ERDA Administra
tor for Solar Energy; Tom Cochran, Natural Re
sources Defense Council, An Analysis o f the Carter
Administration's FY 1978 ERDA Budget; Washing
ton, D.C.: February 7, 1977.

250
Defense Council.
President C arter’s proposed funding o f nuclear fission
and nuclear fusion technologies thus ends up about four times
that of conservation and solar technologies com bined, despite
the significant advantages in economy, employment, safety,
and near-term feasibility o f conservation and solar energy.

Conclusion
A recent perceptive ERDA report has recognized that
among other aspects o f the nation’s energy dilemma, unwar
ranted “ fear o f unemployment is a key political fa ct.” 130 This
will be true as long as energy monopolies insist on threatening
econom ic depression and unemployment if their expansion
o f vast, complex, costly and centralized energy systems is not
permitted to continue.
To be sure, jobs will trickle down as a result o f invest
ment in w asteful and dangerous energy systems. ERDA has
estimated that the current total employment in nuclear fission
electric activities is about 80,000 people: mostly engineers,
mathematicians, physical and earth scientists, technicians,
w elders, plus “ all other employees.’ M31 Getty Oil Company’s
Nuclear Fuel Service Facility, between 1966-1971, employed
an average o f 1400 tem porary workers each year at radio
active “ hot spots." To locate, repair and insulate six 4 Vi inch
hot w ater pipes in radioactive areas o f a nuclear reactor,
Consolidated Edison Company brought in 1500 w elders, each
o f whom worked 15 minutes until he had received his maxi
mum permissible dose o f radiation. Professor Irwin C. Bupp of
MIT has calculated that proposed floating nuclear power
plants will create jobs beyond those created by land-based
nuclear plants— jobs in hull scraping and ferrying.
Promoters o f ever-expanding deployment o f nuclear and
other huge energy systems as the prim ary means o f providing
employment and prosperity (such as Am ericans fo r Energy in
dependence) try hard to portray those seeking energy efficien
cy and the com mercialization o f solar technologies as being
against “ econom ic growth . . workers, the poor, and the dis
advantaged.” '32
But it is the energy expansion scenario, which wastes
both capital and resources, provides only limited jobs and un
reliable energy sources, w hich causes disease and environ
mental destruction, which is not in the interests o f “ workers,
the poor and the disadvantaged," or in the interests o f anyone
else except the large energy corporations themselves. There
are more jobs by far— and safer jobs, and there will be greater
prosperity more evenly distributed if the nation cuts back sig
nificantly on energy w aste and moves vigorously tow ard solar
energy. There w ill also be much less social and political havoc
arising from this path to energy sufficiency.
Clearly, those w ho seek this solution d o not seek an era of
freezing and starving in the dark. They envision just the op
posite: a time o f decreasing dependence on foreign countries
and on vulnerable and speculative energy systems; a time of
abundant jobs and healthier people who live amidst cleaner
air and water; and a time when people have greater control
over their own lives and more resources with which to obtain
the goods and services which make living easier and more
enjoyable for all. A fair and equitable transition to a conserva
tion and solar economy, during which no group or class o f peo
ple will be made to bear the burdens o f changing social values
and technological innovations, would mean that the entire
society would benefit greatly.
Energy corporation supporters try to suggest that the
average Am erican has no business getting involved in energy
problems and solutions. Am ericans For Energy Independence,
for example, advises citizens to defer to “ representatives’ ’

in government, labor and industry:
But [proponents of limited energy growth] d o not hold
positions that would make them accountable for the
consequences o f limiting the country’s econom ic
g row th . . . On the other hand, those representatives
o f government, labor and industry w ho have personal
responsibility for maintaining the econom ic well-being
o f the nation and improving the quality o f life for the
workers, the poor, and the disadvantaged, are firmly
convinced that economic growth should not be limited
at all.133
As has been demonstrated in the above analysis o f energy
and employment, there are representatives o f government,
labor and industry who know the great value o f decreasing
energy waste and maximizing the use o f solar technologies,
especially for the benefit o f “ the workers, the poor, and the
disadvantaged.’ ’
But beyond this, the “ responsibility" for the econom ic
well-being o f the country cannot be the special p rovince o f the
country’s leaders, as the fiscal year 1978 ERDA budget makes
clear. On the contrary, all Am ericans share such respon
sibility. A s the ERDA assessment o f solar energy stresses:
Solar energy is part o f a broad societal choice involv
ing much more than the selection o f an energy tech
nology.,M
Indeed, these energy and jobs issues are components o f basic
struggles over political and econom ic pow er.
Many Americans are ahead o f their leaders in under
standing the causes o f the nation’s energy and unemployment
problems. They are willing to seek solutions which may not
necessarily coincide with corporate myths. They realize that
energy efficiency and solar technologies are the methods by
which the public can be assured that Enough safe energy wifi
be available; that the people will be able to control its produc
tion and use; and that there will b e sufficient numbers o f jobs
available in diverse activities throughout a prosperous nation.

251

On the Poor and Disadvantaged
Energy industries say they must ex
pand for the sake of the poor and dis
advantaged. If energy industries were
truly concerned about these people,
they would be spending money to de
velop inexpensive, energy-efficient and
long-lasting appliances. Yet, as Profes
sor Herman Daly has pointed out, the
industry spends eight times as much
money on advertising as it does on re
search and development of energyefficient consumer goods.
In addition, utilities would not be op
posing affordable 'lifeline' utility rates,
and would not be charging higher rates
to the smaller users. They would not be
opposing clean air and clean water
regulations, since foul air and polluted
water affect the poor more than those
who can afford to escape to cleaner
realms. They would not be fighting
commercialization of safer, cleaner,
cheaper solar energy systems and energy-efficiency techniques (which they
usually fight with rate-payer money).
They would not constantly be playing
down the danger aspects of complex
technologies like nuclear fission, coal
conversion, the liquifaction and trans
portation of natural gas, which threaten
the poor first and most. And they would
not be misleading about where the jobs
are.

NotM
1.The Congressional Budget Office. The Disap
pointing Recovery, Washington. D.C.: January J.
1977.
2. Hubert Humphrey, Congressional Record.
January 10.1977.
3. Cass Alvin, Energy Conference. Los Angeles
County Federation of Labor. January IS. 1977.
4. R. Denny Scott, The Energy Dilemma—What It
Means To Jobs. Woodworkers’ International Union.
August 16.1976.
5. Darrell Huff. How To Lie With Statistics. New
York: W.W. Norton * Co.. 1954.
6. Herman Daly. "Electric Power. Employment
and Economic Growth.” in Towards A Steady State
Economy. San Francisco: W.H. Freeman ft Company.
1972.
7. A.H. Raskin. The New York Times. January 26.
1977.
8. The Ford Foundation. A Time To Choose. Cam
bridge: Ballinger Publishing Company. 1974.
9. Dollars and Sense. September 1976.
10. Natural Resources Defense Council, Choosing
An Electrical Energy Future For the Pacific North
west.' An Alternative Scenario, Paio Alto. 1977.
11. Denis Hayes, Energy: The Case For Conserva
tion. Washington, D.C.: Worldwatch Institute. 1976.
12. Ford Foundation, op. cit.
13. Edison Electric Institute, 1973, cited in Schip
per, Energy Conservation: Its Nature. Hidden Bene
fits and Hidden Barriers, Berkeley: Lawrence
Berkeley Laboratory ft the University of California
at Berkeley, June 1,1975.
14. Bruce Hannon, cited in Schipper, op. cit.
15. Ford Foundation, op. cit.

16. Herman Daly, op. cit.
17. Notes From the Joint Economic Committee.
United States Congress. Washington. D.C.: Volume 3,
No. 1, January 21.1977.
18. The New York Times. September 29,1976.
19. Federal Energy Administration. Conservation
Paper IS. Washington, D.C.: 1976.
20. Herman Daly, op. cit.
21. Resources for the Future Newsletter, Wash
ington, D.C.: Fall 1976. Number 53.
22. Kenneth Watt. et. al.. Testimony before the
Subcommittee on Energy and Power, U.S. House of
Representatives, March 25.1976.
23. Ford Foundation, op. cit.
24. Cooper and Weinberg. Institute For Energy
Analysis, cited in A Preliminary Social and Environ
mental Assessment of the ERDA Solar Energy Pro
gram 1975-2020.
25. Science Magazine, January 27,1977.
26. United States Energy Resources and Develop
ment Administration (ERDA), A Preliminary Social
and Environmental Assessment of the ERDA Solar
Energy Program, 1975-2020. Draft Final Report, July.
1976 (prepared by Stanford Research Institute).
27. The Conference Board Record, Volume 12.
No. 2, February. 1975.
28. Thomas V. Long ft Lee Schipper, Testimony
before the Congressional Joint Economic Commit
tee, November 16,1976.
29. Hayes, Denis, op. cit.
30. Critical Mass: Jobs and Conservation. Wash
ington. D.C.: January. 1977.
31. Amory Lovins, testimony before a joint hearing
of the Select Committee on Small Business and the
Committee on Interior and Insular Affairs, United
States Senate. December 9.1976.
32. Bruce Hannon, Energy and Labor in the Conserver Society. July. 1976.
33. ERDA 76-41: New Technologies For Electric
Utilities. Washington. D.C.: December. 1976; draft
final report.
34. Amory Lovins. op. cit.
35. Ibid.
36. Private communication from Edison Electric
Institute economist Sue Lemer.
37. Friends of the Earth: ECO. San Francisco:
October. 1975.
38. The Conference Board: Capital Invested. Road
Maps of Industry No. 1799, New York: January.
1977.
39. American Institute of Architects: A Nation of
Energy Efficient Buildings By 1990, New York: 1972.
40. John Holdren, The New York Times. July 23.
1975.
41. Bonneville Power Administration. Electric
Energy Conservation Study. Portland: 1976 (pre
pared by Skidmore. Owings ft Merrill).
42. Ron Lanoue, Nuclear Plants: The More They
Build. The More You Pay, Washington. D.C.: Center
tor Studyof Responsive Law. 1976.
43. Denis Hayes, op. cit.
44. American Institute of Architects, op. cit.
45. Bonneville Power Administration, op. cit.
46. Illinois Energy Issues. January. 1977.
47. Federal Energy Administration, Energy Re
porter. Washington. D.C.: February, 1976.
48. City of Seattle, Department of Lighting, Seattle
1990, February. 1976.
49. Dow Chemical Company. Industrial Energy
Study, a report to the National Science Foundation.
June. 1975.
50. Natural Resources Defense Council, California
Energy Policy Project: A Proposal, Palo Alto: Febru
ary. 1977.
51. Sheet Metal Workers' Journal. February. 1977.
52. Energy Policy Office. State of Massachusetts,
The Use of Solar Energy For Space Heating and Hot
Water Systems, Boston: April, 1976.
53. The State of Colorado. Energy Conservation
Plan. Denver: 1976.
54. Frank Zarb, testimony before the Congression
al Joint Economic Committee, February 3,1976.
55. Americans For Energy Independence. Energy
Conservation Strategies. Virginia: 1976.

56. Denis Hayes, op. cit.
57. Bonneville Power Administration, op. cit.
58. Amory Lovins, op. cit.
59. Federal Energy Administration, Conservation
Investment As a Gas Utility Supply Option, Wash
ington, D.C.: 1976.
60. Critical Mass, Jobs and Conservation, Wash
ington, D.C.: January. 1976.
61. American Institute of Architects, op. cit.
62. Sheet Metal Workers' Journal, op. cit.
63. Senate Commerce Committee Staff, An Energy
Conservation Puhlic Works Program. Washington
D.C.: December, 1976.
64. Skip Laitner/Critical Mass, The Impact of
Solar Energy and Conservation Technologies on Em
ployment, Washington, D.C.: May. 1976.
65. Americans For Energy Independence, op. cit.
66. Federal Energy Administration. Energy and
Economic Impacts of Mandatory Deposits, Research
Triangle Park: September, 1976.
67. Washington Center for Metropolitan Studies,
Conference Proceedings: Capturing the Sun Through
Bioconversion. Washington, D.C.: 1976.
68. Congressional Record. October 26,1976.
69. San FranciscoExaminer, December 15,1976.
70. ERDA, A Preliminary Social and Environ
mental Assessment of the ERDA Social Energy Pro
gram 1975-2020.
71. Federal Energy Administration, Project Inde
pendence Task Force Report. Washington, D.C.:
1974.
72. Energies, Volume 2, No. 9, Torrance, Califor
nia: September. 1976.
73. News Release. Sheet Metal Workers’ Inter
national Association, New York: March 8,1977.
74. Senate Select Committee on Small Business:
Solar Energy Hearings, part II (Ninety-fourth Con
gress).
75. Ibid.
76. Ibid.
77. Congressional Record, September 21,1976.
78. Senate Select Committee on Small Business:
Solar Energy Hearings, part II.
79. Federal Energy Administration, Solar Col
lector Manufacturing Activity, /anuary-/une 1976.
Washington, D.C.
80. Senate Select Committee on Small Business:
Solar Energy Hearings, part I.
81. Congressional Record. September 21,1976.
82. State of Oregon. Office of Energy, Research ft
Planning. Transition. Olympia: January, 1975.

252
83 ERDA. A Preliminary Socio/ and Environ
mental Assessment
84. Federal Energy Administration. Project Inde
pendence Tuik Force Report on Solar Energy, W ash
ington. D.C.: 1974.
85. 'Exxon Energy Course For W omen—Part 2"in women's magazines, passim.
86. Congressional Record. October 26.1976.
87 News Release. Sheet M etal W orkers' Inter
nationa! Association, op. cit
88. Private communication from Roy Beckman.
TDC. March 7. 1977
89. ERDA. Solar Energy Report, Washington,
D.C February 3.1977
90. National Science Foundation—RANN. Wind
Machines. Washington. D.C. 1976.
91 Congressional Record. September 21. 1976.
92. Federal Energy Administration. Project Inde
pendence Task Force on Solar Energy. Washington,
D.C : 1974.
93. Private communication from Roy Beckman,
TDC. M arch 7.1977
94. New York State Energy. Research and Devel
opment Authority, News Release. Albany: March.
1977
95. Washington Center for M etropolitan Studies,
op. cit
96. Ibid.
97. Congressional Record. October 26. 1976.
98. Edward J. Carlough, "A Note of Explanation.'
Sheet Metal W orkers' International Association
News Release. M arch 8.1977.

99. Energy Policy Office. State of Massachusetts.
op. cit
100. Frank Mills. February 15.1977.
101. Stanford Research Institute. Strategic Impli
cation of Solar Energy For Employment of Sheet
Metal Workers. Palo Alto: June, 1975.
102. The Laborer, "Solar Energy: Source of
Power. Key to Jobs," June. 1976.
103. The Machinist. "Solar Energy Can Generate
A Lot of Heat. Power. Jobs." November. 1976.
104. Ibid.
105. Ibid.
106. R. Denny Scott, op. cit.
107. U.S. Department of Labor. Worklife. August.
1976.
108. Federal Energy Administration. Project In
dependence Labor Task Force Report. Washington.
D.C.. 1974.
109. Institute for Local Self-Reliance. Self-Reliance. Washington. D.C.: September 24.1976.
110. Private communication. September 24.1976.
111. SkipLaitner/CriticalMass.op.cit.
112. Federal Energy Administration. Project Inde
pendence Solar Energy Task Force. Washington,
D.C.: 1974.
113. ERDA, A Preliminary Social and Environ
mental Assessment
114. Monroe, Jackson, et. al.. Energy and Employ
ment in New York State, A report to the New York
State Legislative Committee on Energy Systems.
Albany: May 3,1975 (draft).
115. David R. Inglis. “Wind Power Now." Bulletin
of the Atomic Scientists. October. 1975.
116. Federal Energy Administration, Project In

dependence Report.
117. Sheet Metal Workers' taternational Associ
ation. News Release, op. cit.
118. Senate Select Committee on Small Business:
Solar Energy Hearings.
119. Ibid.
120. Ibid.
121. Ibid.
122. Ibid.
123. Federal Energy Administration. Project Inde
pendence Report
124. The Washington Post. January 3,1977.
125. Federal Energy Administration. Project Inde
pendence Report.
126. Senate Select Committee on Small Business.
Solar Energy Hearings.
127. Ibid.
128. ERDA. Budget Request for Fiscal Year 1978
(Carter Administration).
129. Cochran. Tom. An Analysis of the Carter
Administration FY 1978 Budget. Natural Resources
Defense Council. Washington, D.C.: February 25,
1977.
130. ERDA. A Preliminary Social and Environ
mental Assessment. . .
131. ERDA. 76-111. Employment in Nuclear Ener
gy Activities, 1975. A Highlights Report. Washington,
D.C.: August. 1976.
132. Americans For Energy independence. Jobs
and Energy. Energy Issues 04.1976.
133. Ibid.
134. ERDA, A Preliminary Social and Environ
mental Assessment.

253
Guide to Jobs and Energy
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254
[From In These Times, Sept. 21-27,1977]
B l u e C ollar S u n

(By David Moberg)
Can the sun light a new political path for the nation’s labor unions?
Consider these minor examples. The Sheet Metal Workers union is trying to
convince the Chicago Board of Education jointly to finance the conversion of one
floor of the city’s skilled trades teaching center to solar heat. Already the union
has helped to build and finance solar heating of experimental homes and of other
schools, on Long Island and in Detroit, where sheet metal workers learn their
craft.
The United Auto Workers uses solar heat for the swimming pool at its Black
Lake, Mich, educational center, partly as a way of demonstrating the feasibility
of solar power.
The Los Angeles Federation of Labor after listening to ecologist Barry Com
moner address a special meeting, has been working with environmentalists to
research and promote solar energy possibilities for their area, despite differences
between the two groups over many other issues, including nuclear power.
Observers throughout the country sense a new, although still indecisive union
interest in solar energy as an immediate option and not just a dream technology
of the future.
AN IMPORTANT ALLIANCE

If that interest quickens, the impact on the labor movement might extend far
beyond immediate energy politics. Although environmentalist and labor unions
might still be at odds over bottle bills, redwood logging, tuna fishing, nuclear
power plants, offshore oil wells, leniency on auto emission standards and other
issues, unity behind more vigorous development of solar power might help
strengthen the potentially important political alliance of labor and the ecological
movement—an alliance that might have deep appeal for young blue-collar workers
as well as students and intellectuals.
Active pursuit of a solar course would mark a significant new independent
initiative by labor unions. They’ve tended to play follow-the-corporate-leader
on energy issues—except on immediate pricing policies that reduce working class
standards of living. A major push toward solar energy would also require labor
unions to buck present AFL-CIO policies and to take initiative in developing and
promoting legislation that the Carter administration has not offered.
By backing solar energy, however, unions might become, in the words of West
Coast director of the Oil, Chemical and Atomic Workers Charles Armin, more
“politically responsible.”
The support for solar energy reflects a growing interest in some quarters of the
labor movement in the quality as well as the quantity of economic growth.
Pro-solar unionists often not only accept the argument that solar development
will offer more jobs than coal and nuclear power but also believe that the jobs
may be more desirable. Solar energy projects, for example, may benefit a wide
range of workers and provide jobs in the immediate community rather than in
remote mining or drilling locations.
UAW and Machinist representatives even talk about bringing more stable,
socially beneficial jobs to their members by converting much of the aerospace
industry from military production to solar manufacturing.
Such possibilities for a new political thrust, which might include an indepen
dent labor movement working in coalition with environmentalists to plan more
consciously the country’s economic future, are still remote, however.
SUPPORT BUBBLING UP

At present one union stands out as the most active proponent of solar power,
the Sheet Metal Workers International Association, a 160,000-member construc
tion trades union.
Yet there is also strong support for solar power from various levels of the
UAW, the Machinists (IAM), and the Laborers International Union. (The Op
erating Engineers, Ironworkers, Carpenters and Teamsters have jointly with the
Laborers behind a common energy program.)
Elsewhere, support for solar energy comes bubbling up from officials at local
and regional levels, and occasionally is expressed at the international level in
such unions as the Plumbers and Pipefitters, the State, County and Municipal

255
Employers (AFSCME), United Electrical Workers (UE), Service Employees
(SEIU) the West Coast Longshoremen and the Oil, Chemical and Atomic
Workers.
Official AFL-CIO policy, however, lumps solar with diverse “other sources” that
“will be neither cheap nor be developed overnight,” as a February 17 Executive
Council memorandum stated.
MOBE AND

BETTER JOBS

When most labor leaders take time to think about energy policies one of the
main things on their minds is jobs. “Where exactly the energy comes from [for
these jobs] is not a big issue with trade unions.” Tom Donahue, executive assis
tant to AFL-CIO president George Meany, told a conference of unionists and
environmentalists at the UAW Black Lake retreat in May 1976.
Cracks are emerging in that hard-line attitude.
Perhaps most importantly, preliminary estimates suggest that solar energy
programs will generate far more work for a broader range of unions than nuclear
power plants will.
The Congressional Office of Technology Assessment, for example, compared the
labor requirements for building and operating a conventional coal-fired electrical
generating plant with those for solar hot water heaters and for a photovoltaic
system, directly producing electricity from sunlight. The figures in the comparison
were expressed in man-hours per megawatt-year, the labor time needed to
produce the equivalent of a million watts of electricity for one year.
The coal-fired plant would require 2,050 man-hours per megawatt-year but the
solar hot water heaters would require 4,440 to 6,040 man-hours. The photovoltaic
system would require between 6,240 and 10,040 man-hours for the same amount
of energy.
That would mean the two solar technologies would produce twice to five times
as many jobs as a coal-fired generating plant in generating the same amount of
energy. Since capital and material costs for solar energy production are less than
for coal or nuclear production, greater labor costs could be absorbed while still
offering energy at competitive costs.
The Sheet Metal Workers and their Training Fund, jointly administered with
the national contractors association, have already begun promotion of solar home
heating as an immediate answer to high unemployment among their members.
“Under the Sun,” a half-hour film, tells about the Fund’s involvement in pilot
solar projects and promotes solar home heating to workers and contractors. Be
sides encouraging and funding pilot projects, the union and Training Fund have
expanded specialized training in solar technology for sheet metal workers.
CRACKS IN NUCLEAR FRONT

The appeal of solar power to labor leaders has grown not only as it appeared
to offer more jobs than oil, coal and nuclear options but also as leaders became
more aware of the economic and safety problems of nuclear power.
Workers in the nuclear industry “know there are problems in nuclear fission,”
OCAW district director Armin says. “We realize there’s a danger of accidents
and disposal of wastes. Also we are quite aware that the people we represent also
live in those communities.”
No international union has so far come out against nuclear power. However,
the UAW opposed the breeder reactor and several unions have stopped saying or
doing anything in favor of nuclear power, although officially abiding by the pronuclear AFL-CIO position. The non-AFL-CIO United Electrical Workers (UE)
appears closest of any union to abandoning support of nuclear energy.
Even unions strongly supporting solar energy still back nuclear expansion, even
if a bit cautiosuly. “We’re very much for developing alternative sources,” says
Dean Ruth, editor of the Machinist union newspaper, which has prominently
written about solar power. “But we’re not against development of nuclear power.
We think it’s important to bridge the gap of the immediate present with that
source which is known, and we don’t see any substitute [for nuclear power] for
the immediate, short-term future.”
AN

EASIER PATH

Yet as the anti-nuclear movement grows and obstacles to new power plants
multiply, unions may be weaned from their attachment to nuclear—especially if
they realize there is a practical, desirable alternative.

256
“We can’t burn any more fossil fuel [in the Los Angeles area] because of air
quality problems,” Scott Franklin, 46, a Firefighters union local officer who is
vice-president of the Los Angeles County Federation of Labor and chairman of
the Jobs and Environment Committee, said. “We’re subjected to earthquakes.
So that rules out nuclear energy. So we’re looking at solar. Our climate is mild
enough to take advantage of it.”
Alvin Duskin, co-director of the Solar-Cal project for a California state public
solar development fund, says that “the unions in California are seeing that in
sofar as they want to deliver jobs, if they go nucelar they’ll run into ten years
of court battles, but on solar they’ll get support from environmentalists.”
RANK AND FILE INTEREST

Union leaders are also sensitive to growing popular support, among younger
union members as well as the general public, for ecologically sound policies. Solar
energy “is a good, clean, inexhaustible source of energy,” Bernard McMonigle,
associate director of research for the Sheet Metal Workers says. “Building trades
men like the environment as much as anybody.”
Half of young blue-collar workers rank environmental issues as very important
to them, according to a survey published in 1972 in Where Have All the Robots
Gone?, three times the rate of interest expressed by workers over 55 years old.
Along with this growing wave of environmental consciousness is a strong public
sentiment for solar energy despite the prevailing public image presented of an
exotic, futuristic solution of little immediate impact. Thirty-eight percent of the
public believes that the sun will be the most important energy source for the
country in 25 years, according to a survey made last May by Cambridge Reports,
the firm headed by President Carter’s political advisor, Patrick Caddell.
More exchanges between environmentalist scientists and union leaders could
alone made a great difference. A great deal of ignorance still exists about the
possibilities with solar energy. “We’re not engineers,” James R. Sheets, research
director for the Laborers International Union, says, “So we tend to generalize
on the non-conventional energy sources. We don’t quite understand how far the
technology has advanced. We’re in a position that we might be buying a pig in a
poke.”
MONEY AND IDEAS

Unions generally look to others as well to introduce new legislation, which can
then become a convenient and concrete focus of political support. “Unions are
more reactive than anything else,” Sheets says. “We support solar energy and
we’ll support proposals that develop it. We don’t have the capacities to make
such proposals other than to say, ‘Get off your butt and do something.’ ”
One major obstacle to union support of solar power, according to Gail Danker
of the Environmentalists for Full Employment is that they “don’t see the capital
formation that is necessary.” Although Carter’s program does very little to
capitalize solar energy, a proposal by Rep. Stephen L. Neal (D-N.C.) for a $5
billion, low-interest Solar Development Bank might be made a rallying point for
pro-solar unions and environmentalists.
Environmentalists and unionists would both benefit from a new alliance. John
Yolton, administrative assistant to UAW vice-president Odessa Komer, specu
lates, “Solar energy could be the vehicle to bring the people together.”

S t a te m e n t

R. D e n n y S cott ,* E con om ist , I n t e r n a t io n al W oodworkers
of A m e rica , AFL-CIO & CLC
The Energy Dilemma— What it Means to Jobs

FUTURE ENERGY NEEDS AND THE EMPLOYMENT PICTURE

Projected shortfalls of petroleum, natural gas, fossil fuels and even hydroelec
tric power and unprecedented increases in energy prices are causing a national
*R. Denny Scott is an economist in the Research and Education Department of the
International Woodworkers of America, Portland, Oregon. Assisting in the preparation of
this paper were Roy A. Ockert, Coordinator of the Department and Margaret A. Honey,
a student at Hampshire College, Amherst, Massachusetts.

257
reassessment of energy policies. The federal government is deeply involved in
energy-related legislation and regulations. Industry is rushing around trying to
guarantee future energy supplies, and heightening the drama are ballot measures
in several states related to the construction and operation of safe nuclear power
generating plants.
Sometimes lost in the swirl of debate over oil price regulation, the technicalities
of generating an extra million BTU’s of power, and the pros and cons of safe
nuclear waste disposal is the important question of how energy relates to jobs. If
future energy needs are not met, will plants be forced to cut back operations,
thereby causing layoffs and unemployment? Just what is the relationship between
non-human energy and jobs for working people?
The International Woodworkers of America expressed concern over U.S. and
Canadian energy policies in a 1973 Resolution at the convention in Vancouver,
B.C. The resolution called upon the International Union to study energy problems
and the potential effects they might have on IWA members.
Although there are many questions that should be addressed when viewing
U.S. and Canadian energy policies, this paper will concentrate on the employment
implications. The paper will review and analyze current literature which draws
the parallel between energy and jobs. What kind of future energy supplies are
needed to sustain an adequate number of job opportunities for people already
working and to create enough new jobs for people who will be entering the labor
market in the future?
Government, labor, engineers, scientists and others who have studied the energy
problem have acknowledged that nuclear fission power is, at best, a temporary
solution and nuclear fusion power, if achievable, is a long way off—that the longrun solution must be the alternative sources: sun, wind, tides, geothermal, etc.
What do the alternatives imply for jobs?
Unions risk disaster and perform a disservice to their members if they do not
attempt to define these problem areas, develop the questions and postulate the
possible answers.
GNP, GROWTH AND EMPLOYMENT

One of the underlying assumptions in the energy supply debate is that the
United States gross national product (GNP)— the total of goods and services
produced each year—must grow at least as fast as it has in the past in order to
assure “full” employment. Some argue that increases in energy must be available
in order to sustain an average annual GNP growth rate of about 3.5 per cent.
However, a major Ford Foundation study released in 1974 brings into question
the validity and wisdom of projecting future energy needs and employment trends
on the basis of past performance. While in the past there has been a defined rela
tionship between GNP growth, energy growth and employment growth, it cannot
be assumed that the same ratios will apply in the future. The study points out
that if we continue to increase U.S. energy consumption as we have during the
last 20 years we would need to add the equivalent of one Alaska pipeline each
year. At historical growth rates, energy in residential, commercial and transporta
tion uses would roughly double between now and the year 2000. It would triple for
industrial use.
In more concrete terms, the historical growth of energy consumption would
mean that every home in the United States in the year 2000 would be heated, have
central air conditioning, have enough energy for heating water and cooking, plus
a freezer, a dishwasher, and a large frost-free refrigerator. The trend towards
more suburban living would continue with the accompanying dependence on the
automobile. Historical energy growth would give us enough fuel to power 138
million automobiles with worse than mediocre fuel economy. Automobile travel
would increase by 15 per cent if historical growth rates bear out. Air travel would
increase more than five times, and air freight would be up eighteen-fold.
The Ford Foundation study explored the relationships between energy prices,
energy growth and economic prosperity. Growth in energy consumption depends
primarily on prices which tend to influence consumer demand. Despite the as
sumptions of many people, numerous studies indicate that the demand for energy
declines as the price advances. Government policies play an important role
in the energy demand situation by promoting an attitude of consumption or of
conservation.
The most plausible circumstances for a continuation of historical rates of
growth in energy consumption would be unexpected good fortune in keeping

258
energy prices down, combined with government policies that promote consump
tion. According to the estimates of the econometric model, fuel prices have to
stabilize at 1971 levels between 1985 and 2000 to be consistent with historical rates
of energy growth. In the past, energy represented a small fraction of industrial
and residential expenses. As a result, there was little economic incentive to ex
plore attractive conservation measures.
The Ford Foundation study concludes that price trends implicit in historical
growth projections are not realistic in view of current expectations about future
energy prices. On the basis of information now available, continued growth of
energy consumption at rates approaching those of the past is unlikely without a
large scale government commitment.
If it is unlikely that historical rates of energy growth can be sustained, is it
possible to obtain continued GNP growth and employment growth while consum
ing less energy?
The Ford Foundation also approached this problem by using the econometric
model to test whether or not the economy could grow and prosper with energy
growth rates lower than historical levels. The annual average energy growth
rate over the past 20 years has been 3.4 percent. This study tested a 1.9 percent
annual consumption rate and a zero growth rate in energy use.
If energy growth were cut from an average annual rate of 3.4 percent to 1.9
percent and certain known energy saving technologies, such as better insula
tion and better auto fuel economy, were introduced, the lower energy budget
would provide essentially the same level of energy services as are provided in the
historical growth model (i.e., miles of travel, quality of housing, levels of heat
ing and cooling, manufacturing output, etc.).
The calculations assume that in the future, users in the industrial sector will
be more aware of energy costs (and therefore more responsive to using energy in
an economically efficient way), and that the market imperfections that inhibit
investment to save energy in the residential, commerical and transportation sec
tors can be removed by specific government action.
Zero energy growth, as envisioned by the Ford Foundation study, represents
a modest departure from the circumstances and conditions projected for the
historical growth model. It includes all the energy saving devices of the 1.9 per
cent average annual growth rate plus extra emphasis on efficiency. The main
difference would be in a distinct redirection of economic growth away from
energy-intensive industrial toward economic activities that require less energy
and more workers. Zero energy growth would be achieved in steps to avoid seri
ous dislocation so that actual zero growth would not be a fact until about 1985.
“Generate Less Energy? Sure, and Generate Galloping Unemployment”
These are the words of a utility company advertisement designed to correlate
the need for energy with jobs.
There is much talk—and considerable anxiety—about the supposedly close
and unbreakable relationship between energy consumption and employment. Both
the econometric model and the analytical work of the Ford Foundation project
reveal that such commonly held fears are unfounded. While it is true that a sud
den and unexpected energy shortage can cause, and has caused, major unem
ployment, the study concludes that a long-term slowing of energy growth sig
nalled by clear policy commitments, slowly rising prices, and appropriate com
pensatory policies could actually increase employment.
Researchers in the Institute of Ecology at the University of California at Davis
have compiled international comparisons of economic growth and energy con
sumption and have found that a country passes through various phases of energy
efficiency in its industrial development. In the early stages of development, large
gains in economic growth are achieved with large increases in energy consump
tion. There are limits, however, to the amount of growth that can be stimulated
by adding an extra million pounds of energy to the country’s total supply. Certain
negative factors set in and the rate of economic growth actually begins to fell as
energy consumption rates climb at an accelerated pace.

259
Projections of alternate energy growth rates and the effects on gross national
product, energy consumption , and employment , 1975-2000

m m m

Histor«c*i Growin.

iiiiiiiiiu iiiii

2 * o Energy Growtn

1f 6n»rgy Growth

Ill I

1975

2000

Cross national product

1975

2000

Energy consumption

I
Employment

The Ford Foundation energy study entitled A Time to Choose tested the effects
of differing energy growth rates on GNP and employment. But cutting the annual
energy growth rate from the historical figure of 3A percent to 1.9 percent, GNP in
the year 2000 would be slightly lower but employment would be slightly higher
than if historical energy growth rates were maintained. As the United States ap
proaches zero growth, employment opportunities increase— not decline.
The Davis research team concluded that an inverse relationship exists between
energy consumption and the per capita economic growth rate. In other words,
the more energy consumed on a per capita basis, the lower the economic growth
rate. The U.S. is on the downside of this curve.
To further illustrate this finding, it is useful to examine the relative position
of several countries. The 1968-72 economic growth figures for twenty nations
were correlated with 1972 per capita energy consumption rates. One of the lesser
developed countries, Portugal, showed a growth rate of 7.5 percent with only a
2,000 pound (in coal equivalents) per capita energy consumption. In contrast to
Portugal, Sweden’s energy use was 13,000 pounds, but the GNP growth rate was
only 2.7 percent. Finally, the U.S. growth rate was about the same as Sweeden’s,
but energy consumption was more than twice as high.
New job opportunities would be created in an economy using lower rates of
energy growth. The energy and manufacturing industries that are the most
energy intensive employ relatively few people. Slower growth rates in these sec
tors could be offset by more jobs in the service sector.
AUTOMATION REDUCES EMPLOYMENT

The five largest manufacturing groups are primary metals; stone, clay and
glass; food and kindred products; chemicals and allied products; and paper and
allied products. They annually consume two-thirds of the energy used by U.S.
manufacturing. In 1971, they employed 4.8 million workers—7.3 percent of the
total employment in the United States. Total U.S. employment increased 41 per
cent between 1950 and 1971, but total employment in these five industries re
mained static.

260
The Ford Foundation study concluded that adjustment to a less energy-inten
sive economy would not reduce employment but would, in fact, result in a slight
increase in the demand for labor. Other studies also support the conclusion that
we can safely uncouple energy and economic growth rates.
For example, the Conference Board and the Thermo Electron Corporation have
completed studies showing that the ratio between energy use and industrial out
put in U.S. manufacturing is expected to fail rapidly in the future. Some energyintensive industries such as steel could maintain current levels of output with
one-third less energy than is now used.
Significant savings in energy use have been realized by the manufacturing sec
tor in the past. Energy use per unit of product declined at a 1.6 percent rate from
1954 to 1967. As a result, while total manufacturing output rose 87 percent, total
energy use rose by only 53 percent. This was achieved in a period of stable or
declining energy prices.
An Oregon Task Force on Energy Report released in 1973 presented some use
ful figures showing the quantity of energy used in differing industrial sectors and
the production and employment relationship to the energy expended. Oregon
industry consumed 121.5 trillion BTU’s of energy in 1972 and it was divided as
follows: natural gas— 48 percent; electricity—34 percent; and oil—18 percent.
By far the state’s largest industrial user was the paper and allied products sector
which used 60 percent more energy than the next largest consumer—primary
metals. Lumber and wood products is the state’s third largest energy user.
When energy is viewed as an expenditure, it is apparent from the accompany
ing table that different production and employment “returns” are achieved with
a given expenditure of energy. For example, a billion BTU’s consumed by the
paper industry translates into $4,900 of product output and two-tenths of one
person employed. This is certainly an energy-intensive industry when compared
to the estimates for all manufacturing where $25,400 of output and one and onehalf jobs is achieved with each billion BTU’s. The lumber and wood products in
dustry is roughly twice as efficient in energy use as the average for all manufac
turing, obtaining 3.1 jobs per billion BTU’s and $48,000 worth of finished goods.
The high energy-use industries are also the industries requiring the largest in
vestment in capital equipment. It costs a great deal more to build a pulp mill or
aluminum smelter than it does to build a sawmill or food cannery. Cheap energy
prices in the past have provided one incentive for increased capital expenditures.
Advances in technology and automation, fed by cheap fuel, have enabled indus
try to substitute capital for more expensive labor. This has been the predominant
method of increasing labor productivity.
The trend in all manufacturing industries has been towards replacing labor
with energy-consuming capital equipment. This trend is seen most dramatically
in highly automated industries such as pulp and primary metals. As the price of
capital increases because of rising interest rates, and as the price of running the
expensive equipment spirals because of energy prices, the economic returns of
those large investments are diminishing. Economic returns in the past have been
derived from reducing labor cost per unit of output but the evidence is that these
returns are falling off. It takes a larger and larger outlay for automated ma
chines to reduce labor cost. We may even have reached the point in some sectors
where it would be wiser to reverse the historical trend and begin substituting hu
man energy for non-human energy. Revised technology would be necessary to
begin the move towards reducing the capital and BTU need per unit of output.
Past employment gains have not occurred in the industrial sectors consuming
large quantities of energy. Herman Daly, an economist from Louisiana State
University, puts it this way:
“As non-human energy has replaced human energy in agriculture
. [and in]
industry, even with large increases in total output of the [agricultural and] in
dustrial sector[sj, the new major source of employment has been the ‘new’ serv
ice sector. Of the total net increment of 14 million jobs between 1947 and 1965,
the service sector accounted for an increase of 13 million, industry and increase
of 4 million, and agriculture a decrease of 3 million. Thus, the alleged need for
large increases in energy input to provide more jobs pre-supposes that the aver
age new worker will work in a steel or aluminum plant. This is counter-factual.
The person will more likely work in [schools, hospitals, stores or banks, jobs
which are not energy-intensive].

261
ESTIMATED PRODUCTION AND EMPLOYMENT LEVELS RELATED TO ENERGY CONSUMED IN OREGON MANUFACTUR
ING INDUSTRIES, 1972

Industry
Food and kindred products..............
Lumber and wood........................
Paper and allied products...............
Chemicals..................................
Stone, clay, and glass....................
Primary metal.......................... .
Fabrication metals and machinery
Total manufacturing.............

Value added in
manufacture

Employment

Billion Btu's
of energy

Value added
per billion
Btu's

Employment
per billion
Btu’s

$386,200,000
1,234,700,000
217.500.000
64.100.000
71.400.000
151.300.000
500.400.000

23,500
78,600
9,500
2,140
3,400
7,200
28,200

4,500
25.500
44.500
5,900
5,300
27,800
2,100

$85,800
48,400
4,900
10,900
13,500
5,400
238,300

5.2
3.1
.2
.4
.6
.2
13.4

3,093,200,000

183,200

121,500

25,400

1.5

Source: Report by Gov. Tom McCall's Task Force on Energy, June 5, 1973.

The Ford Foundation study examined the energy industry itself and the
economy’s most energy-intensive industries and found that these industries have
become increasingly capital intensive, thus providing a smaller share of the
nation’s jobs. As a group they consume about one-third of total U.S. energy,
account for about 45 per cent of U.S. industrial production and provide only
about 10 percent of total employment. As a group they account for one-half of
all new capital requirements in the industrial sector. In a historical review of the
top fifteen energy-intensive industries, the study found that no new jobs have
been created by this group over the past two decades. These industries, in fact,
showed significant energy savings over the past twenty years and this was
achieved even as energy prices fell. Given much higher energy prices, fear of
future shortages, and appropriate government actions, even greater energy
savings are likely in the future.
The relationship between higher energy consumption and fewer man-hours
worked is partially demonstrated in a 1975 report issued by the Interior Depart
ment Bonneville Power Administration. Electric power consumed by manufactur
ing industries in the United States amounted to 325 billion kilowatt hours in
1957. Electricity use rose to 600 billion kilowatt hours by 1971, but man-hours
worked between 1957 and 1971 remained unchanged at 25 billion. Manufacturing
output went up by 75 percent. In 1957,13 kilowatt hours were expended for each
man-hour of labor whereas in 1971—just 14 years later—each man-hour was
accompanied by 24 kilowatt hours.
Some of this increase in electrical power usage can be explained by the subsitution of electricity for petroleum fuels, but clearly the predominant view must
be that production increases were generated by non-human energy at the expense
of human energy.
Research done at the University of California, Davis, reinforces the proposi
tion that low energy prices contribute to unemployment. High unemployment
rates in countries such as the United States and Canada are associated with low
energy prices, whereas higher energy prices in countries such as Sweden and
Japan are tied to lower unemployment rates. When confronted with cheap energy
and expensive labor, business managers will pursue a policy of substitution of
energy for labor—namely, automation.
There has, however, been a complicating factor that has obscured the relation
ship between cheap energy and unemployment. The substitution of non-human
energy for labor does not cause unemployment until the market demand for the
product being produced becomes saturated. This can happen as consumer pur
chasing power dwindles due to unemployment or because products are pro
duced at a lower cost with foreign labor. Before the market has become saturated,
increased automation reduces employment, but since the market is still expand
ing, additional plant capacity is built and more workers are hired to keep pace
with product demand. Once the market is saturated and can no longer be ex
panded, increased labor productivity brought about by automation can only
result in unemployment.
The only way to break out of the downward cycle would be to promote laborintensive activities and technology instead of energy-intensive activities and
technology.

262
CONSERVATION

Professor John P. Holdren, a specialist in energy and resources at the Univer
sity of California, comments on the opportunity for energy conservation in the
United States and its relationship to our standard of living:
The notion of a one-to-one link between energy use and well-being is the most
dangerous delusion in the energy-policy arena. Sweden, Denmark and Switzerland
all had higher gross national products per capita in 1974 than did the United
States, despite energy use per capita around half that in the United States or less.
It is time we studied how the frugal Europeans get so much prosperity from so
little energy. By carving the fat from our energy budget and wisely applying these
savings, we probably could hold United States energy growth between now and
the year 2000 to 1 per cent per year, instead of te 3 to 4 percent so widely fore
cast. If our goal is to maximize human well-being, accounting both for the bene
fits of energy use and the likely costs, we 'should not aim at more energy growth
than this, and I believe it possible we should aim at less.
More than one-half the current U.S. energy budget is waste. For the next quarter
century the United States could meet all its new energy needs simply by improving
the efficiency of existing uses. The energy saved could be used for other purposes
and relieve us of the immediate pressure to commit enormous resources to dan
gerous energy sources before we have fully explored all alternatives. Energy
derived from conservation would be safer, more reliable, and less polluting than
energy from any other source .
Moreover, a strong energy conservation pro
gram would save consumers billions of dollars each year.
In 1975, Americans wasted more fuel than was used by two-thirds of the
world’s population. We annually consume more than twice as much fuel as we
need to maintain our standard of living. We could lead lives as rich, healthy, and
fulfilling—with as much comfort, and with more employment—using less than
half of the energy now used.
A recent study looking at potential conservation strategies that would have
application in the Pacific Northwest found that a high-impact energy conserva
tion program in the residential and commercial sectors would provide more
regional employment than could be created through the construction of new
power plants—nuclear or otherwise—to generate the equivalent amount of
energy. Furthermore, the jobs created would benefit semiskilled and unskilled
workers as opposed to the technical and highly skilled jobs called for in the con
struction and operation of a nuclear plant.
According to the study, a conservation program designed to reduce 1995 energy
consumption by 27 per cent would generate employment opportunities in the
manufacture and installation of insulation and double-pane windows. There is
no reason to believe that similar measures taken in the industrial sector would
not also create new jobs.
PER CAPITA ENERGY CONSUMPTION, UNEMPLOYMENT RATES AND PER CAPITA GROSS NATIONAL PRODUCT FOR
9 INDUSTRIAL NATIONS, 1974
Energy conUnemploysumption per
ment rate
capita (in
(adjusted to
tons of oil U.S. concepts)
equivalent)
(percent)
Canada....... .
United States..
Sweden....... .
Australia.......
Germany_____
Great Britain..
France........ .
Japan......... .
Italy..........

8.56
8.09
5.45
4.39
4.25
3.82
3.39
3.05
2.47

5.4
5.6
2.0
2.2
2.1
3.0
3.1
1.4
3.1

Gross national
product per
capita (in U.S.
dollars)
$5,372
6,155
6,155
3,998
5,618
3,120
4,851
3,812
2,502

Sources: Organization for Economic Cooperation and Development, U.S. Department of Labor, Bureau of Labor Statis
tics, and Agency for International Development.

The opportunities for energy savings in U.S. industry are vast. Manufacturers,
for example, produce large quantities of steam in-house while purchasing almost
all their electricity from utilities. If the steam were first used to generate elec

263
tricity and then used as steam for its original purpose, more electricity could
be produced than the entire industrial sector now uses. This transition, obviously,
calls for the construction and manufacture o f steam-powered electricity generat
ing plants.
Aluminium refining is an exceedingly energy-intensive operation, and the
industry has therefore situated its major installations near sources o f cheap
energy. Technical advances in the traditional refining method, however, can
reduce energy requirements by almost one-third. By far the greatest opportuni
ties for energy savings lie with recycling aluminum. Refining scrap aluminum
requires only 5 per cent as much energy as the traditional process and it creates
and preserves employment as well.
Using the best available technology, the paper industry could reduce fuel
demands by 50 per cent and fossil fuels could be reduced further with greater
utilization o f wood wastes as fuel.
In a 1974 editorial, a writer for The Oregonian newspaper discussed the poten
tial for using sawmill residues and scraps as a substitute for propane and natural
gas fuels in the wood products industry. He estimated that approximately 50
lumber and plywood mills in Oregon might consider converting from gas and oil
to wood residue furnaces. These mills would save the equivalent of 75 million
gallons o f oil a year.
In recent years, large corporations in the forest products industry have been
making major investments in hog fuel furnaces to conserve traditional fossil fuels
and to utilize a cheaper energy source.
Transportation presently accounts for about 24 per cent o f our direct fuel con
sumption. Another 18 per cent o f our energy budget is used indirectly— to build
and maintain vehicles, construct roads, etc. Sixteen per cent o f our direct fuel
consumption and an additional 6 per cent o f our indirect consumption could be
saved by gradually tripling the mileage performance o f individual vehicles, sub
stantially reducing average vehicle size, transferring half o f commuter traffic to
multiple passenger modes while reducing the number o f automobiles accordingly,
and systematically shifting freight to more efficient modes. These savings could
be phased in over the next 25 years.
ALTERNATE ENERGY SOURCES

A great deal has been written lately about alternate energy sources— the
motion of waves in the ocean and the tidal action on shore, the sun, the wind, the
heat o f the earth and the steam it generates.
Unfortunately, studies have not been conducted on the relationship between
these alternate energy sources and jobs. It is safe to postulate, however, that
many jobs would be created in the process of planning, constructing, maintaining
and operating such facilities. There is no reason to believe that just as many
jobs would not be created in these endeavors as are being generated by the con
struction and operation o f nuclear plants.
Because of their interest in solar energy systems, the Sheet Metal Workers
Union commissioned a study to estimate the potential for solar heating and cool
ing over the next 15 years and the resulting effects on their membership. The
study assumed that the present low government priority given to alternate energy
sources would continue. Even with this low level estimate it was estimated that
the solar heating and cooling industry would mushroom into a $2 billion per year
operation by 1990. According to very rough estimates the study indicated modest
growth of this power source would increase dollars spent for sheet metal work
by 1.5 per cent to 3 per cent. For an eccelated solar energy program, sheet metal
work could go up from four to seven per cent. Regretfully, this study makes no
attempt to translate this increased spending on sheet metal work into numbers
o f actual job opportunities.
Facilities built to generate alternate forms of energy are likely to be dis
persed—located near the tides, in windy areas and where geothermal activity
exists. This dispersal represents a departure from the current method o f con
centrating huge generating facilities at a location and transporting the power.
Such dispersal has substantial economic and sociological advantages.
NUCLEAR POWER PLANTS AND EMPLOYMENT

The biggest thrust for adding energy supplies to our traditional forms o f
energy is in the field of nuclear generated electricity. Presently, nuclear plants

264
generate less than two per cent of the nation’s energy, but at the planned rate
of expansion this energy source will account for nearly one-quarter of U.S.
power consumption by the year 2000. The high priority given nuclear power by
the government is also seen in the budget for the Energy Research and Develop
ment Administration— an agency created in 1974 to conduct research on energy
sources and to increase efficiency in the use of energy. About 75 per cent of
ERDA’s $4.3 billion budget is concentrated on nuclear research and only ten
per cent of the budget is devoted to non-nuclear research such as fossil, solar,
geothermal, wind and others.
Surprisingly, less than two per cent of the ERDA budget is going towards con
servation programs. This is unrealistic in view of the superior energy consumption
performance achieved by other advanced countries.
The nuclear industry is presently creating a large number of construction and
manufacturing jobs. An estimate made by the Contractors Mutual Association
indicated that during 1975 from 31,000 to 32,000 construction workers were em
ployed at nuclear power plants construction sites.
A more detailed study of employment associated with nuclear plants was pre
pared by Skip Laitner, editor of Critical Mass newspaper. His study, in fact,
compares the manpower requirements of a 1,000 megawatt nuclear and coal plant
over the lifetime of the facility. The lifetime includes the construction phase as
well as operation and maintenance over a 30-year period. The nuclear plant
required 5,600 12-month jobs (called man-years) to construct and 16,300 manyears to operate and maintain over its 30-year life.
Undeniably, this represents a significant number of jobs, but the Laitner study
finds that more man-years are needed to build and operate a coal-fired plant.
While the manhour requirement for the construction of the coal-powered plant
is slightly lower than for the nuclear plant, the employment generated over the
30-year operating life is far greater in coal plants than in nuclear. The coal plant
requires 26,000 man-years to operate over its 30-year life while the nuclear
plant requires only 16,300. When the construction and operation man-years are
added together for the two plants we find that the coal plant requires 40 per cent
more man-years over its lifetime than the nuclear plant.
Every two years the U.S. Department of Labor surveys employment in the
nuclear energy industry. The most recent survey, conducted in July 1975, showed
that a total of 197,500 persons worked in the field and about one-half of the jobs
were in scientific, engineering and technical occupations. This survey did not
include people engaged in construction or uranium mining.
EMPLOYMENT IN NUCLEAR ENERGY FIELD BY OCCUPATION, JULY 1975

Mathematicians, Earth and physical scientists..................................................
Life scientists.......................................................................................
Technicians...........................................................................................
Other employees.................................................................................... .
Total............

Employment

Percent

43,200
11,800
3,300
37,100
102,000

21.9
6.0
1.7
18.8
51.6

197,500

100.0

Source: USDL News Release 76-959, June 28, 1976.

This high concentration of specialized, highly-educated people has made re
cruiting a difficult proposition for the nuclear industry. Fourteen per cent of
the establishments surveyed reported difficulty in hiring personnel. This prob
lem has even wider implications if the United States moves rapidly forward
with more nuclear-powered electricity generating plants. It will be increasingly
difficult to obtain the quantity of qualified scientific engineering and technical
personnel necessary to sustain the massive building program projected by many.
The Labor Department survey also points out that 16 percent of the people
working in nuclear energy are working on weapons systems instead of reactors
and other facilities designed to generate electric power. As might be expected, the
industry is heavily subsidized. Four out of ten scientists and engineers are sup
ported with federal funds.
The emphasis on nuclear power in the United States is based on the assump
tion that the increased energy will be necessary to meet future demands of in
dustrial, commercial and residential users. In addition to the employment im

265
plications of constructing and operating nuclear plants, we must also consider
whether or not we will have sufficient energy for power-using industries in the
future in order to sustain a growing labor force. Studies that equate future
energy needs with employment are not numerous, but it is useful to examine
one particular study carried out specifically for the Pacific Northwest—espe
cially since the study puts forth the alarming conclusion that 330,000 industrial
workers will be layed off by 1986 if the nuclear plants now planned for the region
aren’t built.
The study was released in April 1976 and is entitled Analyzing the Effects of
Anti-Nuclear Initiatives on Northwest Employment. Bonneville Power Admin
istration energy projections were used to guage the amount of industrial energy
that would be needed by 1986-87. These projections were based on historical
energy growth figures for the years 1950 to 1973. The projections estimate that
industrial power consumption (includes manufacturing and mining) will grow
by 80 per cent from 1974 to 1986—from 50 billion kilowatt hours to 90 billion
kilowatt hours. This is an astounding projection itself and assumes that energy
growth must continue just as it has in the past. The study assumes further that
the only significant addition to Northwest energy supplies between now and 1987
can come from the seven nuclear plants on the drawing boards for the region.
This fails to recognize alternate energy sources such as geothermal and solar
and it fails to allow for the large potential for conserving energy. A barrel of
oil not consumed due to effective conservation techniques is the same as a new
barrel brought in through the Alaskan pipeline. The study does say that 1986-87
energy needs can be reduced by conservation methods but suggests that the
maximum achievable savings would be only four per cent.
The amount of electricity that would have been generated by the seven nuclear
plants (which the author of the study assumes would be halted if the nuclear
safeguard ballot measures were passed) was deducted from the BPA projec
tions, producing a net energy shortage of 6,500 megawatts by the year 1986-87.
Since this indicated 59 per cent less energy than BPA estimated would be needed,
the study concluded that the number of jobs in the industrial sector would also
be 59 per cent lower than the employment projections. Logic, however, doesn’t
support the conclusion.
Stated differently the study says that industrial energy use must increase by 80
per cent from now until 1986-87 in order to support and sustain a 12 per cent
increase in employment. The entire study is based on the assumption that histori
cal growth rates in employment and energy consumption are inexorably tied to
one another and cannot be disconnected. We think this assumption is funda
mentally incorrect. Employment growth can occur with lower energy growth.
The Ford Foundation study demonstrates that government sponsored conserva
tion measures, the changing mix of energy-intensive industries versus laborintensive industries and the development of a more balanced approach to energy
supply can in fact stimulate, not depress, employment growth.
Short-sighted studies such as this shed very little light on a highly charged
subject and have the undesirable effect of setting off loud false alarms. Sound
studies are still needed.
CONCLUSIONS

In this review of the literature and the studie

Full text of Creating Jobs Through Energy Policy : Hearings Before the Subcommittee on Energy of the Joint Economic Committee, Congress of the United States, Ninety-Fifth Congress, Second Session, March 15 and 16, 1978

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