Policy Report

A Just Transition to a Renewable Energy Economy in the Hunter Region,
Australia
Anthea Bill, William Mitchell and Riccardo Welters (Centre of Full Employment andEquity) in collaboration with Jay Rutovitz and Geoff Evans 1

June 2008

This Report was commissioned by Greenpeace Australia PacificCentre of Full Employment and Equity
The University of Newcastle, Callaghan NSW 2308, Australia
Home Page: http://e1.newcastle.edu.au/coffee
Email: coffee@newcastle.edu.au

1

Table of Contents
Table of Contents............................................................................................................ 2
Terms of Reference......................................................................................................... 4
Executive Summary ........................................................................................................ 5

1.

1.

Two scenarios for a renewable energy future for the Hunter ............................. 5

2.

Local impacts of phasing out coal-fired power generation................................. 7

3.

Revitalising manufacturing industry through green jobs.................................... 7

4.

Community response: a just transition to green job creation............................ 10

5.

Green industrial restructuring ........................................................................... 10

6.

A just transition for coal communities.............................................................. 11

7.

Investment in clean energy ............................................................................... 11

8.

Green-labour alliances ...................................................................................... 12

9.

Policy framework to enhance the Hunter as a renewable energy hub .............. 12
Introduction........................................................................................................... 14

1.1
2.

Defining the region ....................................................................................... 17

A Just Transition to a renewable energy economy ............................................... 20
2.1

Overview....................................................................................................... 20

2.2

Community response: a just transition to green job creation........................ 20

2.3

Green industrial restructuring ....................................................................... 21

2.4

A just transition for coal communities.......................................................... 22

2.5

Green-labour alliances .................................................................................. 23

3. Challenges of downsizing the Hunter / Wyong coal-fired power generationindustry ......................................................................................................................... 24
3.1

Overview....................................................................................................... 24

3.2

Existing theory on large scale industry downsizing ..................................... 24

3.3

Summary of literature on industry closure.................................................... 28

3.4
Predicted effects of downsizing the Hunter / Wyong coal-fired power
generation industry.................................................................................................... 29
3.5

Other labour market consequences of downsizing the industry ................... 31

3.6 Summary of employment loss impacts of the ‘shut down industry’ scenario .... 35
4. Opportunities for the Hunter / Wyong region in switching away from coal-fired
generation...................................................................................................................... 36
4.1

How much can energy efficiency reduce NSW electricity consumption?.... 36

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5.

4.2

Renewable energy supply ............................................................................. 39

4.3

Capital Investment ........................................................................................ 44

4.4

The employment effects of renewable energy .............................................. 44

4.5

Employment factors for renewable energy and co-generation ..................... 46

4.6

Direct employment in renewable energy and co-generation – results.......... 53

4.7

The employment effects of energy efficiency measures............................... 55

4.8

Energy efficiency – direct and indirect jobs ................................................. 56

4.9

Total employment in energy efficiency, renewable energy and co-generation
59

Policy framework to enhance the Hunter as a renewable energy hub .................. 62
5.1

Overview....................................................................................................... 62

5.2

Some key policy initiatives for the Hunter ................................................... 63

6. Conclusion: When challenges and opportunities meet: a just transition .................. 71
References..................................................................................................................... 72
Endnotes........................................................................................................................ 783

Terms of ReferenceThis Report is the collaboration between researchers at the Centre of Full Employment
and Equity, The University of Newcastle (Bill, Mitchell and Welters) and independent
consultants Geoff Evans and Jay Rutovitz.
The project was commissioned by Greenpeace Australia Pacific and the Terms ofReference were designed by Greenpeace Australia Pacific.
The researchers at the Centre of Full Employment and Equity take responsibility for
Sections 3 and 5 and the input-output modelling in Section 4 (indirect employment
numbers in Table 24 and discussion). Geoff Evans is fully responsible for Section 2, andJay Rutovitz is responsible for Section 4. Joint contributions have been made in Section 1
and the conclusion, Section 6.
The specific Terms of Reference provided to the researchers at the Centre of Full
Employment and Equity were

Use input-output analysis to model the employment losses resulting from a closure of
the coal-fired powered industry in the Hunter / Wyong region.

Use data estimates of the direct jobs generated by renewable energy production (theseestimates were provided by an independent consultant, Jay Rutovitz) in input-output
analysis to estimate the total jobs generated by a switch to renewable energy
electricity production. In undertaking this exercise the researchers were cognisant of
the fact that the initial data estimates were based on occupational classifications
broadly mapped into the ANZSIC structure. The resulting input-output analysis used
the industries identified. A more complete study would clearly treat the renewablesector as a new entrant without existing linkages and gather new data on the exact
nature and magnitude of these linkages through the input-output system.



Develop some policy parameters to assist the Hunter region in the industrial
restructuring from coal-fired power to renewable energy.

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Executive Summary
This Report demonstrates that there can be major benefits to the Hunter and adjacent
Wyong region if there is a shift from coal-fired power generation to a renewable energy
economy. These benefits include the creation of thousands of new secure, well-paid jobs
in the research, design, manufacture, installation, maintenance and export of energy
efficiency and renewable energy technologies.
This Report estimates that a shift to a renewable energy economy in the Hunter / Wyong
region would create between 7,500 and 14,300 new jobs - a net gain in jobs of between
3,900 and 10,700 jobs.
The lower estimate is extremely conservative, as it assumes no Australian manufacturing
in wind or solar energy. If manufacturing is established in the Hunter to service the NSW
renewable industries, the lower estimate is 9,400 jobs, a net gain of 7,100 jobs.
The Hunter / Wyong region could become a renewable energy hub, and in doing so
revitalise the region’s manufacturing industry.
There are costs in making a shift to a renewable energy economy and that is why there
needs to be a just transition to such an economy.
This Report estimates there will be 1,300 direct job losses in the phasing out of coal-fired
electricity generation in the Hunter / Wyong region and 2,300 indirect job losses (a totalof 3,600 jobs).
A just transition policy recognises that people and ecology are both important. It
recognises that ‘business-as-usual’ and high risk technological fixes to unsustainableeconomic activity are not credible options for confronting climate change.
A just transition ensures that the costs of economic restructuring and the shift tosustainability do not fall on workers in targeted industries and their communities.
A just transition in the Hunter / Wyong region requires government intervention andcommunity partnerships to create the regulatory framework, infrastructure and market
incentives for the creation of well-paid, secure, healthy, satisfying environmentallyfriendly jobs with particular attention to appropriately meeting the needs of affected
workers and their communities.
The Report reflects the findings of other researchers, such as Diesendorf, Saddler, Teskeand others, who have documented Australian energy scenarios, and identified that energy
needs (including base-load power) can be met by extensive deployment of currentlyexisting energy efficiency, renewable energy technologies, and some supplementary gasfired electricity generation.
The Report outlines two renewable energy scenarios for the Hunter which it uses togenerate employment estimates: one that sees the Hunter as a self sufficient regionalenergy centre, and one that continues the Hunter’s role as a net energy exporter to the restof NSW. The scenarios are summarised in Table 1.
1. Two scenarios for a renewable energy future for the Hunter
Scenario 1 Hunter as a self-sufficient regional energy centre

5This would involve 23 per cent of NSW electricity being generated within the region.
This is equivalent to all local energy being supplied from local renewable energy(wind, solar, geothermal, and bioenergy) or gas co-generation. It includes electricity
for the two large aluminium smelters located at Tomago and Kurri Kurri. This
scenario estimates 4,700 jobs will be directly created, and the same number indirectly– a total of 9,400 jobs. Establishing the Hunter as a Self-Sufficient Regional Energy
Centre would create a net gain of 5,800 jobs.

Scenario 2. Hunter as a NSW energy exporting centreThis would involve 40 per cent of the NSW electricity being generated in the Hunter,again from a mix of renewable (wind, solar, geothermal and bioenergy) and gas cogeneration. This scenario retains the Hunter and Wyong region’s historic role as amajor energy exporter to the rest of NSW, although on a somewhat smaller scale than
this currently occurs. Under this scenario, it is estimated new industries would create
7,350 jobs directly, and 6,950 jobs indirectly, a total of 14,300 jobs. Establishing the
Hunter as a NSW Energy Exporting Centre would create a net gain of 10,700 jobs.

Energy efficiency
Energy efficiency is maximised in both scenarios, keeping NSW electricity consumption
stable at current levels. This compares to the business as usual (BAU) growth inelectricity use of 16 per cent by 2020, which has electricity growth of 1.6 per cent per
annum.
Table 1 Net employment gains from a switch to clean energy in the Hunter / Wyong
regionRenewableenergyEnergy
Total
Total
Total
efficiency Direct jobs Indirect jobs Jobs

Employment gains
Scenario 1: Hunter as a selfsufficient regional energy centre

3,680

1,020

4,700

4,700

9,400

Scenario 2: Hunter as a NSW
energy export centre

6,320

1,020

7,340

6,950

14,290

1,300

2,340

3,640

Scenario 1: Hunter as a selfsufficient regional energy centre

3,400

2,360

5,760

Scenario 2: Hunter as a NSW
energy export centre

6,040

4,610

10,650

Employment losses
Phase out of coal fired generation
Net effectNotes:
1. Employment gains are an average of low and high energy efficiency estimates for Scenario 1 andScenario 2, and assume renewable manufacturing for all of NSW occurs within the Hunter.
2. Energy efficiency uses the average values for job creation.
3. Jobs losses in the phase out of coal-fired power generation are based on input/output analysis of ABS
data, as are indirect jobs created under employment gains for the renewable energy sector.

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2. Local impacts of phasing out coal-fired power generation
 An overnight closure of the coal-fired power stations would lead to 1,300 direct job
losses in power stations, and an estimated additional 2,377 indirect job losses, a totalof 3,637 jobs.
Many of the jobs lost would be relatively high wage jobs so the closure of theindustry would lead to some loss of consumer spending, which may spark further
losses in the region.

The phasing out of coal-fired electricity is likely to have its highest impact in the
Wyong and Lake Macquarie Local Government Areas (LGAs) where Munmorah,
Vales Point and Eraring power stations are located, and in Muswellbrook andSingleton LGAs where Bayswater, Liddell and Redbank are located, and where mines
supplying these power stations are located.

Some mines operate solely to provide coal for nearby power stations and therefore
may be phased out as the power stations are phased out. These mines make up only arelatively small proportion of total employment in the Hunter’s coal mining industry.
It is likely that, in the event of a phase-out of demand from local coal-fired power
generators these mines would focus production on export markets.

It is noted that Greenpeace has called for a phasing out of coal-fired power by 2030,
not an “overnight” closure of industry. The purpose of modelling the “overnight”
shut-down of industry is two-fold:a) It provides a snapshot of the total employment ‘footprint’ of a specific industry via
its interconnections with other industries;b) It identifies the scale of the transition that is required and informs the policy
design. It allows governments to scale the transition to minimise the costs to thecommunities affected.

3. Revitalising manufacturing industry through green jobs
 Green jobs are secure, well-paid, environmentally-friendly jobs.
Green jobs in renewable energy and energy efficiency are in manufacturing,
installation, maintenance and servicing, operations, transport and delivery of goods,
sales, research and design. A significant growth in these jobs would revitalise
manufacturing industry in the Hunter / Wyong region.



Skills development and training are a critical part of creating green jobs. Investment
in new training programs and apprenticeships in energy efficiency and renewableenergy technologies is essential to attract these industries.



The full range of new jobs that could be created in the Hunter / Wyong region would
vary according to a range of local manufacturing scenarios (see Table 2). The
scenarios range from:- no renewable sector manufacturing in the region- renewable sector manufacturing for the Hunter / Wyong region only
- renewable sector manufacturing for all of NSW.

7

A local renewable energy and energy efficiency industry has potential as a new exportindustry, supplying technology and expertise to other regions in NSW, Australia andto global markets. The potential export industry has not been included in the analysis.



Renewable energy and energy efficiency technologies are by their very nature
decentralised, which means that jobs in these industries can be created in the many
localities where appropriate natural resources (wind, geothermal, sun) are available.
This report estimates that many thousands of additional renewable energy and energy
efficiency jobs could be created around NSW if 100 per cent of the state’s electricity
is from renewable energy or gas co-generation (see Table 2).

8

Table 2 Total direct and indirect jobs created in renewable energy, energy efficiency andco-generation in the Hunter and NSW in a 2020 renewable energy scenario
Hunter region

RE direct
jobs

EE direct jobs

Indirect jobs

Total Jobs

Scenario 1: Hunter as a self-sufficient regional energy centre
Assume region generates 100 per cent of electricity for local use (23 per cent of NSW electricity)
No Australianmanufacturing in RE

2,760

690-1,340

3,500-4,000

6,950-8,100

Assumes renewablesector manufacturing for
Hunter region only

2,940

690-1,340

3,700-4,200

7,300-8,500

Assumes renewablesector manufacturing for
all of NSW

3,680

690-1,340

4,400-5,000

8,800-10,000

Scenario 2: Hunter as a NSW energy export centre
Assumes region generates 40 per cent of NSW electricity
No Australianmanufacturing in RE

5,400

690-1,340

5,700-6,300

11,800-13,000

Assumes renewablesector manufacturing for
Hunter region only

5,780

690-1,340

6,100-6,700

12,600-13,800

Assumes renewablesector manufacturing for
all of NSW

6,320

690-1,340

6,700-7,200

13,700-14,900

Total NSW Employment In RE and EE
Assumes 100 per cent of electricity from renewable energy or co-generation
No Australian renewableenergy manufacturing

17,1006,150-11,920

38,000-42,900

61,400-72,000

NSW manufacture of 36
per cent of wind energy
equipment, 20 per centof Photovoltaics (PV),and 100 per cent of solar
thermal18,1006,150-11,920

39,000-43,800

63,200-73,800

Notes:
1) Manufacturing: when onshore manufacturing is included, 100 per cent of solar thermal, 36 per cent ofwind, and 20 per cent of PV manufacturing assumed to occur in Australia.
2) Solar thermal (Hunter region): 70 per cent of construction work and all of the O&M is assumed tooccur outside the Hunter. Jobs are included in ‘rest of NSW’.
3) Co-generation: all fuel collection and distribution employment are assumed to occur outside the Hunter.
These jobs are included in ‘all of NSW’.

94. Community response: a just transition to green job creation
 Coal communities, like the Hunter have for too long been taken for granted bycorporations and governments as out-of-sight, out-of mind ‘cash cows’. Their local
environments have been degraded by mines and dirty power stations, and local
communities have been chronically disadvantaged. The incidence of linked
ecosystem and human health distress is being well-documented.
Furthermore, critics of the further expansion of the Hunter coal industry, including
the region’s horse breeding, wine, crop growing and tourism industries, have argued
that the cumulative local impacts of the region’s coal-fired electricity generation andlarge-scale coal mining, particularly open cut mining, on air quality, water quality andquantity, light pollution, noise, traffic, biodiversity and other impacts is jeopardisinglocal ecosystem and human health, and undermines the viability of their businesses.

Awareness of the region’s contribution to climate change, the impacts of local coalmining, and concern about the impacts of climate change are high and are powerfuldrivers of calls for a change in the region’s economy, and a just transition to new
green jobs in a clean, renewable energy economy.

5. Green industrial restructuring
 Successful policies for regional-scale transitions to Green industry in European
countries – with their potential application in coal communities would involve:- Clear environmental targets – greenhouse gas emission cuts of at least 40 per
cent by 2020;- A clear decision to end investment in the affected area or industry – astatement indicating an end to investment in coal-fired power stations and newcoal mines;- Availability of satisfactory technological alternatives to the technology being
phased out – appropriate mix of renewable energy and energy efficiency
technologies, and gas-fired co-generation;- Innovation and political leadership that promotes the diffusion of alternativetechnologies – a commitment to research, develop and invest in energy
efficiency and renewable energy technologies, and local jobs manufacturing
and installing them;- A market that encourages research and development investment –carbon taxes
and carbon cap and emissions trading;- A high degree of political integration among different government sectors –between environment, energy, regional development, industry ministries andbetween local, state and national levels of government;- Compensation and income support to minimise social and regional disruption
caused by change – targeting displaced workers and communities, and lowincome families;- Establishment of Regional Development Funds to facilitate research andinvestment incentives for the establishment of areas.
106. A just transition for coal communities
 Governments have a critical role in fostering a just transition that protects local
communities and environments during change. Government support must include:- Assistance for both displaced workers and for contractors;- Adequate notice of workplace change and closures;- Consultation and full engagement of relevant unions;- Support for innovation and partnerships for new local industries;- Investment in research and development and infrastructure;- Training for alternative employment tailored to local and individual needs andopportunities;- Special targeted support for older, disabled and less educated workers;- Relocation assistance for displaced workers;- Income maintenance, redundancy entitlements and retraining allowances;- Cheap loans and subsidies for new industries and employers;- Compensation and equipment buy-outs for contractors;- Assistance programs extended to workers employed by contractors;- A just transition requires investment in training programs and apprenticeships
to create a highly trained ‘green’ workforce;- The introduction of a Job Guarantee.
7. Investment in clean energy The renewable energy scenario discussed in this report assumes that energy efficiency
measures sufficient to achieve a saving of 16 per cent compared to business as usual
are put into place. Renewable energy supply sufficient to meet the reduced
consumption, and energy efficiency measures sufficient to achieve it, are assessed todetermine the effects on employment.


The assumed energy efficiency potential for the Hunter / Wyong region is in keepingwith targets adopted elsewhere. For example, the state of Maryland in the USA has
just adopted policies to reduce electricity consumption by 29 per cent compared tobusiness as usual by 2025 and the European Union also has policies to reduce energy
use by 20 per cent by 2020 (American Council for an Energy – Efficient Economy
2008, European Commission 2007).



There are a growing number of regions where new renewable energy industry
development has occurred, including in coal mining regions of Germany.

Approximately $12 billion would need to be invested in renewable energy, cogeneration and energy efficiency measures for Scenario 1 between now and 2020.
This may be an over estimate, as it makes no allowance for technology cost decline
over the period.

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8. Green-labour alliances Labour unions and environmentalists are critical participants in a just transition
process. Many are recognising that the massive challenge of making a just transition
process in response to global warming offers scope for transforming the traditional
agenda of labour unions and environmental organisations, bringing them together incampaigns targeting government development priorities.
Green-labour alliances can inspire the broad-based community awareness and actions
needed to make a just transition to renewable energy and new green jobs - collective
social action on issues of ecological sustainability and related social development.

9. Policy framework to enhance the Hunter as a renewable energy hub
General considerationsIn general, the policy mix must attempt to address several basic issues, which include
ensuring that:- There is on-going research and development to reduce the economic costdisadvantage associated with renewable energy;- Barriers which prevent investment in and take-up of renewable energy are
reduced;- Market failures which hinder the development of renewable energies are
reduced;- Human capital development keeps pace with the investment in renewableenergy capital to reduce the chance of skilled labour bottlenecks inhibiting
innovation and implementation; and- An appropriate safety net is in place to smooth the labour market transitions
from fossil fuel based industries to renewable energy industries.

Research and development


The CSIRO Energy Centre in Newcastle is a major regional resource, whose funding
for renewable energy and energy efficiency research needs to be sustained as acatalyst for local industry development. The same applies for the University of
Newcastle.



A major funding boost for renewable energy and energy efficiency research anddevelopment in the Hunter region would boost the region’s international reputation inthese technologies and facilitate local industry development, potentially setting theregion up as Australia’s Renewable Energy ‘Silicon Valley’.

Skill development
Targeted initiatives in the area of renewable energy skills are desirable and would
require improved Government/industry collaboration. The Hunter TAFE system isideally placed to offer new training courses in renewable energy, with linkages into
schools and potential employers. A significant boost in funding is needed to support
quality teaching, to attract students and engage employers.

12Overcoming scale disadvantage through export promotion

Scale disadvantages can be overcome, in part, by adopting an export strategy.
Provision of first class public infrastructure including transport systems, port capacity
and communication systems is crucial in this regard.

Further, social infrastructure in the form of community development and adequate
housing and recreation is required.



Industry clusters and skilled labour will be attracted to the Hunter if the State andFederal governments work together to ensure this infrastructure is the best available.

Safety socio-economic net
The introduction of a Job Guarantee is essential to ensure that everyone who wants towork and is currently unable to find employment is provided with productive work by
the public sector at the minimum wage.

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1.

Introduction

The recently released reports by the Intergovernmental Panel on Climate Change (IPCC)
have provided tangible evidence of the effects of climate change in Australia, implicatedhuman activity in such effects and highlighted the potential future environmental impacts
that would be incurred in the absence of intervention (IPCC, 2007a, 2007b, 2007c).
One of the recommendations of the IPCC aimed at reducing carbon dioxide (CO2)emissions – which account for more than 75 per cent of greenhouse gases implicated inclimate change – is to decouple economic growth from the use of CO2 emitting resources.
Electricity generating sector emissions make up 25 per cent of the global total CO2
emissions. There is an urgent need to find alternatives to carbon-intensive energy
production. The science tells us that the time to act is now.
As part of the global community, Australia needs to take responsibility for the impacts of
our industrial activity on the environment, despite a seeming reluctance by successive
federal governments to resist the well-documented and significant influence of the
carbon-intensive industries lobby, the self-styled ‘greenhouse mafia’ (Hamilton, 2007;
Pearse, 2007).
People living in the Hunter and Wyong region communities are aware of the link between
climate change and coal as well as the impacts that the coal industry is having on thelocal environment. The communities are divided on the benefits of the region’s coalmining industry. Growing numbers of residents indicate willingness to buy ‘Green’
power. Younger people in the 25-34 years age group were significantly more likely tobelieve that the costs of coal outweighed the benefits and that climate change will have a
direct impact on their lives in the next 20 years than other age groups. (HVRF, 2007;
HVRF 2008, CCRF, 2008). These shifting attitudes are driving local calls for a shift froma fossil fuel to renewable energy economy.
The coal-fired power stations of New South Wales have been described as among theworld’s most polluting and inefficient by Carbon Monitoring for Action (CARMA 2007),a database containing information on the carbon emissions of over 50,000 power plants
and 4,000 power companies worldwide. This database provides detailed information on
carbon emissions resulting from the production of electricity. CARMA is a product of the
Confronting Climate Change Initiative at the Center for Global Development, an
independent and non-partisan think tank located in Washington, DC.
CARMA (2007) research indicates that Australia’s power industry is the highest polluting
in the world on a per capita basis, producing more than 10 tonnes of carbon dioxide in
generating power for each person per year, compared with 9 tonnes for Americans and 2
tonnes for the Chinese.
The two biggest producers of carbon dioxide in Australia are the Bayswater and Eraring
power stations in the Hunter, which each produce 18.325 million tonnes of carbon
dioxide a year. These rank equal 44th in terms of their carbon dioxide emissions globally,
but their carbon dioxide intensity — that is carbon dioxide to power output — iscomparable to many of the power stations in China, which are often criticised for being‘dirty’ plants (CARMA, 2007; Davies and Morton, 2007).

14

In terms of assessing the Australian position, a major issue is the economic dependence
on coal as an energy source. There are two dimensions to this dependence: (a) its use as a
productive input within Australian industry; and (b) its major contribution to our export
performance.
The emissions from New South Wales’ coal-fired power stations are shown in Table 3.
Together they emit 78 million tonnes annually.
Table 3 CO2 Equivalent emissions from NSW coal-fired power stations
Name

Total
capacityMWYear
commissioned

CO2 E
MT peryear

Source for emissions data

Eraring

2640

1982/8418.32

http://carma.org/plant/detail/12587

Bayswater

2760

1982/418.32

http://carma.org/plant/detail/3667

Liddell

2030

1971/7313.15

http://carma.org/plant/detail/25185

Redbank

148

2001

1.01

http://carma.org/plant/detail/36909

Wallerawang

1000

1976/80

6.35

http://carma.org/plant/detail/48810

Vales Point

1320

1978

8.46

http://carma.org/plant/detail/47612

Mount Piper

1320

1992/93

8.46

http://carma.org/plant/detail/29573

Munmorah

600

1969

3.72

http://carma.org/plant/detail/29872

Total CO2 E

77.79

Source: Carbon Monitoring for Action (CARMA) (2007) – Carbon Monitoring for Action,
http://carma.org/plant.

Some government and industry groups with a strong vested interest argue that Australia
can both maintain coal dependency and contribute to ecological and economic
sustainability through the development and deployment of a suite of technological fixes
known as ‘clean coal’ and carbon capture and storage technologies (CCS) (ACA, 2004;
NSW Government, 2006; NSW Minerals Council, 2007; Williams, 2007).
These propositions have been refuted by others, who argue that ‘clean coal’ and carbon
capture and storage technologies are high risk options, as they are of insufficient impact,and (particularly in the case of CCS) immature, expensive and unlikely to becommercialised on a scale sufficient to tackle climate change within the necessary
timeframes (Diesendorf, 2006; Saddler, Riedy, and Passey 2004; Wilkenfeld et al., 2007;
Rochon et al., 2008).
Furthermore critics of the further expansion of the Hunter coal industry, including theregion’s horse breeding, wine, crop growing and tourism industries, have argued that the
cumulative local impacts of the region’s coal-fired electricity generation and large-scalecoal mining, particularly open cut mining, on air quality, water quality and quantity, light
pollution, noise, traffic, biodiversity and other impacts is jeopardising local ecosystem

15

and human health, and undermines the potential for ecological, economic and social
sustainability in the longer term (Connor et al., 2004 Albrecht, 2000; Evans, 2005).
Despite what many would consider coal’s central position in the economic wealthgeneration process in this country, a transition away from coal dependency to cleaner
energy sources would represent a major step forward in terms of reducing Australia’s
climate change impact.
This Report is written from the perspective of reducing the Hunter region’s direct carbon
footprint by phasing out dependency on coal-fired electricity generation, and avoiding
risks inherent in unproven technologies such as carbon capture and storage. It isconsistent with the findings of researchers, such as Diesendorf, Saddler, Teske and others
who have documented Australian energy scenarios to 2040. These researchers haveidentified how Australia’s energy needs (including base-load power) can be met byextensive use of energy efficiency, currently-existing renewable energy technologies, andsome supplementary gas-fired electricity generation (Diesendorf 2007; Saddler,
Diesendorf and Denniss 2004, Teske et al., 2008).
However, structural changes in any economy are not without costs and transition phases
can be particularly painful. In terms of an economy that is so heavily reliant on coal-fired
electricity these adverse economic effects are likely to be highly significant and cannot beignored. Specifically, without any adjustment policies, localised pockets of massunemployment in regions in which the coal industry is a substantial source of
employment will occur. Not only will direct employment loss occur, but indirect job
losses in associated industries within these areas are likely to occur, with potentiallysevere impacts on social cohesion within the affected areas.
This Report focuses on the Hunter and adjacent Wyong region in New South Wales(NSW) Australia, which is a region in which the coal-fired electricity generation and coalmining industry is a significant source of employment.
Section 2 discusses the concept of a ‘just transition’ to a renewable energy economy, anapproach to structural change advocated by both labour unions and environmentalorganisations. The role of governments in facilitating the process is discussed. Section 3
examines the likely challenges of downsizing coal-fired electricity generation in theregion, in terms of forecasted job losses. This discussion is informed by empiricalevidence from previous large downsizing activities experienced in other countries.
Section 4 focuses on the likely opportunities that downsizing the coal-fired electricity
generation industry in the Hunter / Wyong region will present with respect to new
employment creation in renewable energy and energy efficiency. We analyse theopportunities the creation of an industry hub of renewable energy in the region would
provide, calculating direct and indirect employment flowing from such an initiative.
Section 5 proposes a general policy framework for encouraging the development of arenewable energy industry in the Hunter / Wyong region, and Section 6 concludes.

16

1.1
Defining the region
The Hunter Valley is located in New South Wales, Australia. It is situated 150 kilometres
north of Sydney and extends 200 kilometres inland from the coast. The region can be
defined in many ways, perhaps most often as the catchment of the Hunter River.
However, we must stress that the Hunter Valley and its surroundings is not a statisticallydefined region within the Australian Standard Geographic Classification (ASGC) used by
the Australian Bureau of Statistics (ABS) to disseminate their data. This means that wecannot conduct statistical analysis for a region called “Hunter Valley and its
surroundings”. Instead we use the ABS defined statistical region, the Hunter Region as
the basis of our statistical analysis presented (see Figure 1 below), and extend thisstandard definition to include also Wyong Local Government Area (LGA).
Figure 1 LGAs in the Hunter Statistical Region and Wyong, 2006

Source: ABS, 2006 Census of Population and Housing.

There are 8 coal-fired power stations in NSW, with six located in what we refer to as theHunter / Wyong region. In the 2004/2005 financial year production in the Hunter coalmining industry yielded 95 million tons of saleable coal, worth 5.5 billion dollars. About
70 per cent of saleable coal is exported, predominantly to Asia. The remaining 30 per
cent is used in domestic consumption by the electricity industry (NSWDPI, 2006). Coalfor the Hunter power stations is provided from 18 coal mines in the Hunter andNewcastle coalfields.

17

The coal-fired power stations in New South Wales are responsible for the major part ofdomestic coal consumption and subsequently the emission of greenhouse gases in thestate. Table 4 summarises the employment and production data for the eight coal-fired
power stations located in NSW. Six of those are located in the coalfields of the Hunterregion. Together these six power stations directly employ 1,300 people in the Hunterregion, with the two other power stations at Wallerawang and Mt Piper making a total
workforce in coal-fired power stations of 1,625 in the NSW. These jobs would be lost in
the ‘shut-down of industry’ scenario we describe in Section 3.3 of this Report (in addition
many jobs associated with these jobs will be lost indirectly).
While the ABS 2006 Census of Population and Housing indicates 2,785 workers are
employed in the ‘electricity supply’ industry, according to 1993 ANZSIC classification –many of these workers will be employed in administrative or clerical functions outside of
the coal-fired power stations themselves, and are not included in our analysis of direct job
losses (or the subsequent indirect employment losses). We assume that any job loss
which would result in these administrative fields from the closure of the coal-fired
generation plants would be met by an equal quantum of jobs generated in the renewableenergy sector.
It is important to point out that loss of coal-fired electricity generation is different fromloss of coal mining. Coal-fired electricity generation will inevitably be replaced by a mixof renewable and gas generation. If renewable energy, then employment numbers will behigher, and it will be local, so this transition is likely to result in net job gain.
A phasing out of the Hunter’s coal-fired electricity generation industry will have some
impact on the 18 mines supplying coal to local power stations. In the case that the mines
did not redirect their supply to the export market, then job losses would be mostsignificant in the coal mines whose sole purpose is supplying coal-fired power stations.
The reality is that many mines currently providing coal for local power stations(particularly those in the Hunter coalfield) primarily produce for export markets. In theevent of coal-fired power generation industry shut-down the production of those mines(and also the mines providing for domestic market) are likely to shift totally to the export
market. We make this assumption in the analysis.

18

Table 4 Coal-fired electricity generators in NSW, 2006
Geographical breakdown

Employees

Production(GWH)

Bayswater

320

18.5

Eraring360

18.5

Liddell230

14.0

Redbank40

1.1

Munmorah50

4.2

Vales Point

300

9.3

1,300

65.6

Mount Piper

150

9.3

Wallerawang

175

7.0

Rest of NSW

325

16.3

Total NSW

1,625

102.4

Hunter and Wyong region:

Total Hunter region
Elsewhere in NSW:

Source: GWh derived from ESAA (2006). ABS, 2006 Census of Population and Housing and ABS, Labour
Force Survey, August 2006. Note: Employment figures derived from websites. Industry spokespeople
confirm that it is difficult to give precise numbers of employees, as numbers vary depending on contractors
or other employee arrangements on particular sites.

19

2.

A Just Transition to a renewable energy economy

2.1
Overview
The Intergovernmental Panel on Climate Change (IPCC), has predicted that average
global temperatures could rise over the next 100 years to as high as 5.8˚C above preindustrial average. Scenarios of the impact of an average temperature rise of even 2˚Cshow serious impacts on weather patterns, biodiversity, human health, economies (IPCC,
2007 a, b, c). The climate change impacts from the burning of fossil fuels, including
Hunter coal, are beginning to “boomerang” back on the health of the region’s social–ecological system through higher average temperatures, lower rainfall, and increased
frequency and severity of bushfires and storm events (Jones and Hennessy 2000, Pittock
2003, Hennessy et al. 2005, CSIRO, 2007a, b). Government policy should be guided byscience, rather than by political and economic expediency, no matter how challenging thetransition to a clean energy economy might be.
As local and global concern about climate change grows, there are demands for the
Hunter Valley to move from its non-sustainable ‘Carbon Valley’ present to a sustainable‘Post-Carbon Society’ future. A ‘Post-Carbon Society’ would have reduced per capita
resource usage in wealthy countries, renewable energy sources, emphasis on strong local
economies rather on a global free-market, and dramatically improved environmental
conditions and social equity (Heinberg, 2004).
Yet as the global warming threat grows, many Australian political leaders remain under
the spell of the coal industry and the lobby groups that work on its behalf. Indeed, despite
the warnings from scientists to the contrary, there is still a strong lobby that is advocating
new coal-fired power stations and a massive increase in coal exports.
Tackling climate change means our dependency on coal as an export earner and as adomestic fuel must be phased out over the next decades. This will mean a huge change in
the national economy, and for coal-affected regions such as the Hunter and Latrobe
Valleys. The challenges associated with this change are significant, but notinsurmountable. Indeed, a transition to renewable energy promises to revitalise Australianmanufacturing and create thousands of new jobs in many rural, regional and urban
communities, including coal communities.
The United Nations Environment Programme (UNEP), the World Health Organisation(WHO) and the International Labour Organisation (ILO) emphasise that workers affectedby change have to be consulted and fully engaged in environmental, employment andeconomic policy development and restructuring from unsustainable to sustainableindustries so their needs and experiences are fully taken into account, and theircooperation is secured (United Nations Environment Program et. al. 2007).
2.2
Community response: a just transition to green job creation
Coal communities, like the Hunter and Latrobe Valley, have for too long been sacrificed
and taken for granted by corporations and governments as considered narrowly in termsof their ability to generate export revenue. Their local environments have been degradedby mines and dirty power stations, and local communities have been chronicallydisadvantaged as a result. The incidence of linked ecosystem and human health distress iswell-documented (Connor et al. 2004).
20

Environmental organisations and labour unions refer to the process of economic
restructuring from non-sustainable to a sustainable industry economy as a ‘justtransition’.
The Canadian Labour Congress (CLC) was a pioneer in the theory and organising aroundthe just transition concept and noted that a:
Just transition will ensure that the costs of environmental change will be sharedfairly. Failure to create a just transition means that the cost of moves tosustainability will devolve wholly onto workers in targeted industries and theircommunities (CLC, 2000: 4).
A just transition links ecological sustainability with issues of work, equity and social
justice. A just transition process recognises the needs of both current and future
generations for safe, secure and satisfying jobs.
A just transition policy recognises that people and ecology are both important. It
recognises that ‘business-as-usual’ and high risk technological fixes to unsustainableeconomic activity are not credible. A just transition is needed to ensure that the costs ofchange do not fall on vulnerable workers and communities, or that failure to change falls
on the world most vulnerable communities (such as those living on islands of the Pacificsuch as Kiribati or in other low-lying regions of the world) or on future generations.
The CLC noted that Green Job creation – well-paid, secure, healthy and satisfying jobs
that protect rather than harm the environment – is the flip side of a just transition (CLC,
2000).
The Australian Council of Trade Unions (ACTU, 2007) has also noted that a justtransition is needed to deal with the challenges of climate change, and this requires new
partnerships of the labour movement and other sectors, including government, industry,
local communities and training providers to retrain and re-skill workers into jobs in the
renewable energy industry.
The ACTU policy recognises the tremendous potential of renewable energy to create
additional jobs in development, installation and operation phases:
Increasing the share of renewable energy in the total energy mix is possible
without damaging existing industry and with continuing growth in high quality
jobs, as the EU experience demonstrates (ACTU, 2007: 6).
2.3
Green industrial restructuring
A just transition to a renewable energy economy in coal communities, like the Hunter andLatrobe Valley, is possible. Research shows that currently-available energy efficiency
and renewable energy technologies (solar, wind, geothermal, and biomass) with gas as atransitional fuel can meet energy needs in Australia, and in the developing countries ofour region (Teske et al., 2007, 2008; Mallon et al., 2007).
A shift to renewable energy systems would create more resilient and empowered local
communities. Big centralised energy infrastructure, like coal-fired power stations, requiremassive investment in a single piece of infrastructure. Renewables, on the other hand, aredecentralised technologies located at multiple sites where solar, wind and geothermal

21resources are available – often in regions where investment and economic revitalisation isurgently needed and where local needs rather than global profit-seeking can rule.
Furthermore, investment in renewable energy and energy efficiency creates many more
new jobs than in current fossil fuel industries per dollar invested, and they can be in manyrural and regional communities, as this report will show.
Successful policies for regional-scale transitions to Green industry in European countries– with their potential application in coal communities would involve:

Clear environmental targets – the greenhouse gas emission cuts of at least 40 per centby 2020;



A clear decision to end investment in the affected area or industry – a statement
indicating an end to investment in coal-fired power stations and new coal mines;Availability of satisfactory technological alternatives to the technology being phased
out – an appropriate mix of renewable energy and energy efficiency technologies;

Innovation and political leadership that promotes the diffusion of alternativetechnologies – a commitment to research, develop and invest in energy efficiency andrenewable energy technologies and local jobs manufacturing and installing them;

A market that encourages research and development investment – carbon taxes andcarbon cap and emissions trading;A high degree of political integration among different government sectors – between
environment, energy, regional development, industry ministries and between local,
state, national and international levels of government;

Funding for compensation to minimise social and regional disruption caused bychange – compensation and income support to displaced workers and communities,
and low-income families;

Establishment of Regional Development Funds to facilitate research and investment
incentives for the establishment of areas (Binder et. al. 2001).



Introduction of employment guarantees to ensure that all those who want to work andare currently unable to find work can be productively employed by the public sector
adding value to their local communities and achieving independence from the welfare
system.

The closure of the BHP steelworks in Newcastle in 1999 exemplified other features of ajust transition process, including early notice and active government, industry, union andcommunity partnerships. Workers were given years of prior notice of the proposedchanges and packages were put in place to ensure that workers received benefits during
the transition from steel making. Workers and management worked together to ensurethat the two groups worked towards the same objectives and established a BHP
workforce transition committee.
2.4
A just transition for coal communities
Workers in transition between jobs need redundancy entitlements, income maintenanceand opportunities for retraining tailored to individual skills, needs and local opportunities.

22

Research shows that workers with less formal education, older or disabled workers needspecial targeted support (Robinson and Wilkinson 1998).
Governments have a critical role fostering a just transition that protects local
communities and environments during change in many industries – fishing, mining,
manufacturing, forestry, etc. The 1999 Forestry Restructuring Program of the Victorian
Government provided assistance for both displaced workers and for contractors withelements fundamental to most just transition processes, including support for innovationand partnerships for new local industries, research and development and infrastructure
investments. Training and alternative employment tailored to local and individual needs
and opportunities was provided. Relocation assistance and support for displaced workers,
including income maintenance, redundancy entitlements and retraining allowances wasprovided. Compensation and equipment buy-outs for contractors were offered andassistance programs were extended to workers employed by contractors (Victorian
Department of Natural Resources and the Environment, 2002).
As indicated in Section 2.3, the public sector has a responsibility to introduce a buffer
stock of jobs which we call a Job Guarantee. The introduction of employment guarantees
would ensure that all those who want to work and are currently unable to find work canbe productively employed by the public sector adding value to their local communities
and achieving independence from the welfare system.
2.5
Green-labour alliances
Labour unions and environmentalists are critical participants in a just transition process.
Many are recognising the massive challenge of building a sustainable society. They seek
to build collaborations rather than conflict or ‘business-as-usual’, and in particular, toavoid a false ‘jobs versus the environment’ conflict.
A just transition process targeting global warming offers scope for transforming the
traditional agenda of labour unions, bringing them into collaborations with environmentalorganisations, governments and other civil society organisations campaigns that link
workplaces and communities into collective social action on issues of ecologicalsustainability and related social development (United Nations Environment Program et.
al. 2007). Australian building unions’ Green Bans of the 1970s pioneeredtransformational union-environmental activism and social movement unionism.
Many Australian labour unions have embraced the concept of social movement unionismthat links the labour movement into broader political coalitions on issues of publicconcern. Social movement unionism engages unions in issues beyond the workplace,organising union members to work with other civil society organisations to support eachother in what are seen as mutually beneficial goals (Brofenbrenner and Juravich, 1998;
Reiss, 2005; Tattersall, 2005).
Australian unions have been involved in leading the highly successful Your Rights at
Work, Defend Public Education and Medicare campaigns. Union – community
collaborations for a just transition and Green Job Creation in response to climate change
are beginning to emerge around Greening the Workplace campaigns.
Green-labour alliances can inspire the broad-based community campaigns needed tomake a just transition to renewable energy and new Green jobs.
23

3.
Challenges of downsizing the Hunter / Wyong coal-fired power
generation industry
3.1
Overview
In this Section we outline the challenges and opportunities that are presented by aproposal to transform the Hunter / Wyong region into one which provides
environmentally sustainable employment in renewable energy, rather than being coaldependent. The aim is to provide an evidence base for an informed and balanced
discussion on the merits of this proposal.
In some parts of this Report we adopt what is known as the ‘loss of the industry’ or ‘shutdown of industry’ approach to estimate the job losses and the resulting labour market
impact by assuming that all coal-fired electricity generation is closed down overnight.
This is a technical construct within the context of Input-Output (IO) modelling to enable
the researcher to trace the linkages between industries and produce a total employment
loss (or gain) estimate.
It needs to be emphasised however that none of the environmental, farmer or residentgroups that have been involved in advocacy around the Hunter’s coal industry haveproposed an overnight shut down of the coal-fired power generation industry.
Instead there are calls for a phasing out of the coal-fired power generations over time. For
example Greenpeace, in its recently-published Australia’s Energy [R]evolution (Teske et.
al. 2008) calls for the phase-out of coal-fired power generation by 2030, with phase-out
beginning with the most polluting power stations, and with appropriate support toaffected workers and communities.
This approach is referred to as a ‘just transition’ (Evans, 2008).
The purpose of modelling the ‘shut-down of industry’ is two-fold:

It provides a snapshot of the total employment ‘footprint’ of a specific industry via its
interconnections with other industries;

It identifies the scale of the transition that is required and informs the policy design. It
allows governments to scale the transition to minimise the costs to the communities
affected.

3.2
Existing theory on large scale industry downsizing
It is clear that downsizing the coal-fired power generation industry will have employment
consequences in these industries directly, and will also affect jobs in other industries
linked to these industries. This subsection considers empirical studies of major industry
downsizing activities throughout the world to make an assessment of the extent of the‘contagion’ that is likely to occur under the ‘shut down of industry’ scenario.
We consider the important facets of downsizing that bear on an assessment of theemployment losses likely in downsizing the coal-fired electricity generation industry in
the Hunter, an industry within the larger coal industry. Aspects that will be discussed inthis section are employment spill-overs, wage spill-overs, spatial spill-overs (that is,
migration effects), worker heterogeneity and the concept of opportunity costs.

24

Employment spill-overs
Black et al. (2005) explore the effects of the boom and bust in the coal industry in the
1970s and 1980s in the United States (US). The oil price hike in the early 1970s madecoal an attractive alternative to oil as an energy resource (that is, the boom), but thesubsequent decrease in oil prices, reduced the competitiveness of the coal industry
relative to the oil industry (that is, the bust). This study focuses on the consequences ofthis process for three states in the US. The study compares ‘coal rich’ to ‘coal poor’counties within these states both during the boom and after the bust of the coal industry.
The research formed a benchmark control group upon which comparative analysis was
based by including ‘coal poor’ counties. The study sought to estimate the employment
spill-overs, that is, the extent to which the ‘coal bust’ impacts on employment in non-coalindustries in counties where employment in the coal industry falls dramatically.
The study finds that over the period 1983 to 1989, average annual employment in the coalmining industry declined by around 8 per cent. This represents a serious downsizing ofthat industry. 2 The study finds evidence of employment spill-over effects such that theregional employment consequences of downsizing the coal mining industry extend
beyond that sector. For example, employment in the construction and the retail trade
sectors falls by 2 to 4 per cent more in ‘coal rich’ counties than in ‘coal poor’ counties.
Consequently, downsizing a dominant employment sector will lead to employment losses
that extend beyond the direct jobs lost in the dominant industry. However, theseassociated employment losses are limited to sectors which are closely related to thedominant sector (the construction and ‘retail trade’ sector).
The spill-over effects arise in two ways: (a) loss of business; and (b) loss of consumer
spending. The construction industry is a contractor into the coal mining industry anddirectly loses business following the bust. The retail trade industry, in turn, suffers fromreduced sales because the regional income base shrinks.
Wage spill-overs
Carrington (1996) investigates the labour market consequences of the Trans-Alaska
Pipeline, which was built between 1974 and 1977. The discovery of significant oil
reserves in Alaska in the late 1960s, spurred the US government to construct a pipeline totransport the oil. The construction of that pipeline initially led to a boom in theconstruction industry in Alaska, but then, once construction was completed, gave way to“bust conditions” in that industry. Employment in the Alaskan construction industry
surged by 270 per cent during the boom, but slumped to its original level afterwards.
The Alaskan labour force was too small to accommodate these changes. Consequently,
the majority of labourers that worked on constructing the pipeline came from outside
Alaska and left Alaska once the construction was finished. Therefore, studying the local
employment effects in the Alaskan construction industry is not very informative, but the
study is useful for examining the wage spill-overs into other industries. To attract
construction workers, the Alaskan construction company had to pay high wages, both tocompensate for the arctic conditions and the time pressure under which the pipeline had
to be constructed. Though it was clear from the outset that the Alaskan labour force was
not deep enough to supply sufficient labourers to complete the project, the construction
company had agreed to employ all Alaskans who were willing and qualified to work on
25

the project. Consequently, the pipeline construction interfered in the Alaskan wage
structure, potentially driving up wages in other sectors to retain workers. These effects
are those that we term wage spill-overs.
Carrington divides the non-construction sectors into two groups: sectors that weredirectly affected (in terms of increased business) by the construction boom – such as
mining, the various services sectors (retail trade, finance and insurance), and sectors thatwere not – such as manufacturing and the public sector. The sectors that were directly
affected may simultaneously experience labour demand increases (increased business)and labour supply decreases (workers moving into construction). Both effects will put
upward pressure on wages. The sectors that were not directly affected however can only
experience wage increases through labour supply decreases.
Carrington finds that the directly affected industries, and to a lesser extent, the nonaffected sectors experienced wage increases during the boom caused by the increase inearnings in the construction sector. He therefore concludes that significant wage spillovers occur as a consequence of the major up scaling or downsizing of industries andextend beyond the sectors that instigate the dynamic.
Spatial spill-overs
Beatty and Fothergill (1995) study the massive coal mining industry downsizing in theeighties and early nineties in the UK. Employment in the coal mining industry fell from
218,800 in 1981 to 10,800 in 1994. They study the spatial decision making process of
those that lost their job over a ten year period in areas in which at least 25 per cent ofmale employment was located in the coal mining industry in 1981.
Their research was triggered by the finding that unemployment rates in areas with at least
25 per cent job loss went up by a meagre 1.7 per cent on average, suggesting leakages in
the official regional unemployment statistic. About a third of the newly unemployedmigrated out of the region and therefore did not count in the regional unemployment
statistics for the region they vacated. Another 20 per cent continue to reside in theaffected area, but find employment outside of the region. About 30 per cent of the job
losers find employment in the original region. In some cases this is partially shelteredemployment provided by the government to help the affected areas. Finally there is agroup of about 22 per cent who leave the labour force because there are too few job
opportunities available to them (that is, they join the hidden unemployed).
The leakages caused by out-migration and commuting critically depend on the size of theinvestigated region. The above figures relate to so-called pit villages and are hence fairly
small. Expanding the size of what constitutes the study regions by definition leads toprogressively lower shares of migration and commuting. However, the size of the regionis unrelated to the share of discouraged workers. Governments that employ job creation
schemes to neutralise the 1.7 per cent unemployment gap, may underestimate theseriousness of the problem. If new employment is created in these areas, discouraged
workers will re-enter the local labour market potentially followed by commuters and evenrecent migrants. Given the size of these groups, Beatty and Fothergill conclude that the
unemployment rate gaps governments are facing are much higher than the official 1.7 per
cent.

26

Worker heterogeneity
Hinde (1994) explores the labour market consequences of the Sunderland shipyard plantclosure in the UK in 1989, which put an end to the shipbuilding industry in Sunderland.
In total 2,092 workers were made redundant in the space of a few months and had to start
searching for employment in an already depressed labour market. Many unemployedworkers who lost their jobs in previous downsizing activities and who possessed similarskills to the ones who were made redundant in 1989 were still searching for jobs.
Hinde explores the age and educational break down of those made redundant during theclosure of the shipyard in Sunderland in an attempt to determine which workers weremore successful in finding new employment. Hinde exploits data which allows tracking
the unemployed for a two year period following the redundancy.
Figure 2 presents some of the findings. Hinde finds that about 35 per cent of all redundant
workers found employment soon after the closure of the shipyard. This share increases toabout 60 per cent a year after the closure, but then levels off. The author hints at the 1990
recession as a reason why the job find rate stagnates. However, the differences within the
population are stark. As expected, older and/or unskilled workers find it far more difficult
to find employment than their younger and/or more skilled colleagues, clearly indicatingthat the economic and social burden of the shipyard closure is shared unequally.

Share employed

Figure 2 Reemployment of redundant shipyard workers over time
90
80
70
60
50
40
30
20
10
0
1989 Q1

Q2

Q3
all

Q4
skilled1990 Q1
unskilled

Q2

Q3
under 25

Q4

1991 Q1

over 50

Source: Hinde (1994).

This unequal burden also impacts on the duration of employment gained after
redundancy. Hinde calculates the number of weeks of employment gained by the workers
who were made redundant in 1989 and who were unemployed in the first quarter of 1991.
Young and skilled unemployed workers had on average worked for about 40 weeks outof a potential 103 weeks whereas the old and unskilled unemployed workers only worked
for an average 5 weeks.

27

Opportunity costs
Hooker and Knetter (2001) look at the closure of military bases in the period 1971-1994
in the US. They exploit data covering 57 closures, ranging from 0.05 per cent to 30 per
cent job loss in the region, with a median of 2.25 per cent. Consequently, the job losses
are small compared to the previous studies, but their approach deserves inclusion in thissection. Hooker and Knetter determine multipliers involved in the closure which are theratio of regional job losses to the initial job losses arising from the downsizing.
A multiplier larger than one suggests that negative spill-overs are present. Surprisingly,
the authors find multiplier effects equal to unity at best, not larger than unity. Thissuggests that the regions examined which were hit by mild adverse shocks demonstrated
a strong resilience to recover. The authors give several explanations for their findings.
First, they find higher multipliers or spill-overs if the base is an Air Force base. Air Force
employment is highly skilled and hence high wage employment. The loss of that type of
employment will erode the regional income base more than low wage job loss.
Second, the authors demonstrate that the multiplier is close to one if job loss concerns
military personnel, but the multiplier is close to zero if job loss concerns civilian
personnel. As opposed to civilian personnel, military personnel do not demonstrate aclose attachment to a region and are transferred to another base once a base is closed
down. Civilian personnel are typically rooted in the region and thus seek new
employment in that region after the shut-down.
The extent of the damage is clearly linked to the type of employment generating activity
that is undertaken at the location of the closure. In some cases, it is possible to conceiveof new alternatives that are richer in employment opportunities than the existing usage
but which would not have been introduced if the original industry was not closed.
3.3
Summary of literature on industry closure
Drawing the findings together, the literature suggests that when analysing theemployment consequences of downsizing, employment spill-overs increase if:


The downsizing sector constitutes a large part of the income base of a region, which
could either be because the sector is large, or it pays high wages.

Wage spill-overs could occur if the downsizing sector dominates regional wage
setting. Downsizing a high wage sector, may erode wages in other sectors in theregion as well.

The existence of spatial spill-overs may soften the employment consequences ofdownsizing. The entrenchment of redundant workers in the region and the availabilityof work outside the region determine the likelihood of spatial spill-overs to function
as a cushion.



Skill levels and age impact on the length of the transition towards new employment
after being made redundant.

The opportunity costs of the downsizing activity should be taken into account in any
policy regime aimed at downsizing a significant industry.

28

These findings are useful when estimating the employment consequences of downsizing
the coal-fired power generation industry in the Hunter.
3.4
Predicted effects of downsizing the Hunter / Wyong coal-fired power
generation industry
Data collated from the coal-fired power industry in the broad Hunter and Wyong region(that is, including the coal-fired power stations in the Newcastle coalfields in Wyong
LGA) indicates that 1,300 workers will lose their jobs if the coal fired power industry
were shut down.
We have drawn on 2001 requirement coefficients for the ‘Electricity Supply’ sector
generated by ABS Input-Output tables (in doing so we make an assumption that the
majority of electricity supply in the Hunter is through coal-fired power generation), to
examine the flow on employment effects of the shut-down of the coal-fired power
generation industry. The estimates are therefore not exact but a reasonably accurate
approximation.
Table 5 shows the production loss in terms of dollars for a 100 dollar reduction in theelectricity industry. The strongest impacts will occur in mining, manufacturing and inproperty and business services.
Table 5 Impact on production of a $100 reduction in Electricity industry output, 2001
Industry

Output loss (in dollars)

Agriculture

0.28

Mining

14.57

Manufacturing

11.73

Electricity, Gas, and Water Supply

115.57

Construction

7.95

Wholesale Trade

3.78

Retail Trade

1.94

Accommodation, Cafes and Restaurants

0.69

Transport and Storage

4.55

Communication Services

1.99

Finance and Insurance

7.43

Property and Business Services

10.29

Government Administration and Defence

0.26

Education

0.66

Health and Community Service

0.02

Cultural and Recreational Services

0.42

Personal and Other Services

0.12

Source: ABS, Input-Output Tables 2001-02.

29

We calculate using the Input-Output analysis indirect employment effects in Table 6, thistime for closing the coal-fired power industry in the Hunter rather than the coal mining
industry. Again, including indirect effects means that the overall job losses are higher
than the original 1, 300 - increasing to 3,637 (of which 2,337 jobs are lost indirectly).
Table 6 Direct and indirect job loss following downsizing in electricity sector, 2006
Industry

Employment loss
No’s

Employment loss
Per cent shares

Agriculture

13

0.2

Mining104

1.0

Manufacturing

490

1.7

Electricity, Gas and Water Supply

1,502

37.3

1,498

48.1

Construction

503

2.0

Wholesale Trade

38

0.3

Retail Trade

81

0.2

Accommodation, Cafes and Restaurants

69

0.5

Transport and Storage

160

1.5

Communication Services

58

1.7

Finance and Insurance

163

2.2

Property and Business Services

356

1.3

Government Administration and Defence

15

0.1

Education

43

0.2

Health and Community Services

1

0.0

Cultural and Recreational Services

30

0.6

Personal and Other Services

11

0.1

Total

3,637

1.3

Of which electricity

Source: ABS, 2006 Census of Population and Housing; ABS, Labour Force Survey, August 2006; ABS,
Input-Output Tables 2001-02.

The phasing out of coal-fired electricity is likely to have its highest impact in the Wyong
and Lake Macquarie LGAs where Munmorah, Vales Point and Eraring power stations arelocated, and in Muswellbrook and Singleton LGAs where Bayswater, Liddell and
Redbank are located, and where mines supplying these power stations are located.
Some mines operate solely to provide coal for nearby power stations and therefore may
be phased out as the power stations are phased out. These mines make up only arelatively small proportion of total employment in the Hunter’s coal mining industry.
30

3.5
Other labour market consequences of downsizing the industry
The lessons drawn from the international literature discussed in Section 3.2 suggest that
there may be several reasons why adding the employment loss to the existing
unemployment rate to derive a new ‘after the shut down’ unemployment rate is incorrect.
We learned that loss of business and loss of consumer spending cause employment spillovers. The IO analysis only considers the first of these effects - loss of business. The lossof consumer demand depends on the loss of income involved in the downsizing, which isa function of the size of employment loss and the wages earned in that industry.
Table 7 Industry sector weekly wages in the Hunter Statistical Region, 2006
Industry

Over $2,000
Per cent
sharesOver $1,600
Per cent
sharesOver $1,300
Per cent
sharesAgriculture

3

5

8

Mining28

55

71

Manufacturing

4

9

19

Electricity, Gas and Water Supply

11

22

38

Construction

3

7

13

Wholesale Trade

4

8

15

Retail Trade

1

2

4

Accommodation, Cafes and Restaurants

1

1

2

Transport and Storage

5

11

20

Communication Services

3

8

17

Finance and Insurance

7

11

18

Property and Business Services

7

11

18

Government Administration and Defence

3

8

21

Education

2

7

28

Health and Community Services

5

8

14

Cultural and Recreational Services

2

3

5

Personal and Other Services

1

3

8

Total

4

9

17

Source: ABS, 2006 Census of Population and Housing.

Table 7 shows relevant estimates of industry wages in the Hunter. We present thepercentage shares of employees that earn more than $2,000; $1,600; and $1,300 a week,
respectively. The results clearly demonstrate that the mining industry is by far the highest
income earning sector in the Hunter. The Electricity, Gas and Water supply industry (of31which Electricity Supply is a sub-section) also has an above average share of workers
employed in high income jobs, although the share is significantly lower than the mining
sector. As a consequence of the higher income the Electricity Gas and Water Supply
sector generates through above-average wages, we would estimate that the employment
spill-overs arising from the loss of consumer demand would be significant if the coalfired power generation industry were shut down.
From Section 3.2 we also know that a significant proportion of those that face job loss inthe process of large scale downsizing will leave the labour force because they assess theirchances of becoming re-employed as weak (the so-called hidden unemployed or
discouraged job seekers). The most likely category of discouraged job seekers are those
aged over 55. Table 8 gives the current age break down to sector in the Hunter.
The age break down in the Hunter electricity, gas and water industry is roughly in linewith the overall age structure. Hence, a coal-fired power generation industry closure will
not put a disproportionately high number of older workers who might subsequently find it
hard to find re-employment onto the labour market.
Table 8 Industry sector age structure in the Hunter Statistical Region, 2006
Industry

Over 35 years
Per cent sharesOver 45 years
Per cent sharesOver 55 years
Per cent shares

Agriculture

75

54

33

Mining71

43

12

Manufacturing

63

37

13

Electricity, Gas and Water Supply

71

44

14

Construction

60

34

13

Wholesale Trade

64

38

13

Retail Trade

46

28

10

Accommodation, Cafes and Restaurants

40

24

9

Transport and Storage

78

52

23

Communication Services

61

36

12

Finance and Insurance

60

33

11

Property and Business Services

62

39

16

Government Administration and Defence

68

37

11

Education

76

53

17

Health and Community Services

74

47

16

Cultural and Recreational Services

56

35

15

Personal and Other Services

57

34

14

Total

62

38

14

Source: ABS, 2006 Census of Population and Housing.

32Younger workers are more likely to search for new employment elsewhere. That
elsewhere may be outside the Hunter / Wyong region meaning that these workers will
either migrate to new regions or increase their commuting to take on new opportunities.
Table 9 provides an indication of the labour market impacts for the Hunter region of aclosure of the coal-fired power industry. As in Table 9 it estimates the age-related
unemployment rates that would result. The unemployment rate (in 2006) would increaseby 1.4 per cent, assuming that none of the laid off workers or currently unemployedworkers leave the labour force. Once again this also assumes the lay-off is uniformly
distributed over the various age cohorts, which may be an unlikely assumption.
Table 9 Estimated Hunter unemployment rates pre- and post-downsizing, 2006, per centLabour Market Indicator

35-44
years

45-54
years

> 55
years

Total

per cent

per cent

per cent

per cent

Unemployment rate, 2006

5.5

4.3

5.1

6.9

Estimated unemployment rate, after closure

7.0

5.8

6.7

8.3

Source: ABS, 2006 Census of Population and Housing.

Table 10 provides an occupational breakdown of job losses for the Hunter following thecoal-power generation sectors downsizing, focusing on the commuting and migration
area represented by the Sydney metropolitan region. The first two columns show thatcoal-fired power industry closures in the Hunter would lead to very moderate job losses
concentrated in three occupational groups: Technicians and Trade Workers andMachinery Operators and Drivers. The last two columns show the occupational
employment distribution post downsizing for the Hunter and Sydney. While the share of
employment provided in Sydney for ‘Clerical and administrative workers’ is favourable,
it is less favourable for ‘Technicians and Trade Workers’ and ‘Machinery Operators andDrivers’ than in the Hunter, which is bad news for Hunter workers in these two
occupations who may lose their jobs.

33

Table 10 Occupational structure in the Hunter, 2006
Occupation

Job loss(No’s)

Job loss
Per cent
sharesPost-downsizing per
cent shares
HunterSydneyManagers

339

1.1

11.3

13.5

Professionals

503

1.1

17.0

24.4

Technicians and trades workers

1,063

2.2

17.1

12.9

Community and personal service workers

65

0.3

8.6

8.2

Clerical and administrative workers

659

1.8

13.6

17.1

Sales workers

176

0.5

12.8

9.8

Machinery operators and drivers

414

1.8

8.3

6.1

Labourers

417

1.3

11.4

8.1

Source: ABS, 2006 Census of Population and Housing. The Hunter shares do not include effects ofdeveloping new industries in the Hunter.

34

3.6 Summary of employment loss impacts of the ‘shut down industry’ scenario
Drawing the findings of this subsection together, the following conclusions can be made:An overnight closure of the coal-fired power stations would lead to 1,300 direct job
losses in power stations, and an estimated additional 2,337 indirect job losses, a totalof 3,637 jobs.

Many of the jobs lost would be relatively high wage jobs so the closure of theindustry would lead to some loss of consumer spending, which may spark further
losses in the region.

35

4.
Opportunities for the Hunter / Wyong region in switching away fromcoal-fired generation
In this Section we estimate the size of possible alternate energy industries and theircontribution to the Hunter’s labour demand.
The Hunter region currently generates nearly 80 per cent of NSW electricity in 6 coalfired power stations. The region accounts for 20 per cent of NSW electricity
consumption, with the two aluminium smelters at Kurri Kurri and Tomago consuming 15
per cent of the State’s electricity. Under business as usual, NSW electricity consumption
is projected to increase by 27 per cent by 2020. 3
In order to determine the scale of renewable or low emission generation needed to enablea phase out of coal-fired electricity stations, one must first answer the question: what
future electricity consumption do we need to provide for?
A renewable energy scenario such as discussed in this report is driven by the need forgreenhouse emissions cuts in the region of greater than 40 per cent below 1990 levels by
2020 and 90 per cent by 2050.
A 40 per cent reduction in greenhouse emissions corresponds to a reduction of 335
million tonnes compared to business as usual 4 . A recent study of the potential to reduce
Australian greenhouse emissions estimated that energy efficiency in buildings andindustry could save 85 million tonnes greenhouse emissions by 2020, one quarter of therequired emission reduction, as well as saving $6.5 billion dollars (McKinsey, 2008a).
A similar picture is found internationally. Global energy use is expected to increase by 40
per cent by 2020 with current policy settings. A recent study estimated that investing inenergy efficiency could reduce global energy growth by more than half, even byundertaking only energy efficiency with a commercially attractive rate of return(McKinsey, 2008b). The United Nations Development Program estimated thatindustrialized countries can become 25-35 per cent more energy efficient in the next 20
years at no net cost (Goldemberg and Johannson, 2004).
Thus a realistic scenario for replacement of coal-fired electricity generation assumes asignificant deviation from business as usual growth in electricity consumption.
4.1
How much can energy efficiency reduce NSW electricity consumption?
The potential for reduction in the projected growth of NSW electricity consumption has
been explored using NFFE (2003), Energetix (2004), McNichol (2004), EMET (2004)
and GWA (2004).
The National Framework on Energy Efficiency commissioned research in 2003 (NFFE
2003) to estimate the potential for energy efficiency in Australia. The limit is generally
economic rather than technical, as studies tend to examine options that repay capital
investment within a certain time period.
In the NFFE work the lower estimate includes efficiency measures that pay forthemselves within 4 years, while the higher range includes measures where the combined
payback is 6 years. Most other carbon abatement has a net cost rather than saving money,36

so setting the boundary at 6 years may not be appropriate when comparing emissions
reduction options.
After the initial NFFE work more detailed studies were carried out to identify energy
efficiency potential with paybacks up to 4 years in the industrial and residential sectors,
and paybacks of up to 6 years in the commercial sector.
Figure 3 shows current energy use in industry and buildings, and 2020 energy use withand without energy efficiency. Implementing efficiency measures with a combined
payback of 4 years would reduce business as usual energy by 13 per cent. Implementing
measures with a combined payback of 6-9 years could reduce business as usual energy
use by 19 per cent. This work did not include the effects of a carbon price, which would
increase the economically attractive potential for energy efficiency.
Figure 3 Estimated potential to reduce energy use in Australia

Energy (Petajoules)

3500

Business
as Usual

Efficiency w ith 4
year payback

Efficiency w ith 6-9
year payback

2020

2020

2020

3000
2500
2000
1500
1000
500
0
Current

Energy Use

Residential savings

Commercial savings

Industrial savings

Note: Derived from NFFE (2003), Energetix (2004) McNichol (2004), EMET (2004) GWA (2004) 5

The potential for industrial energy efficiency was derived by projecting the Energetix
work, which gives a detailed breakdown of savings against payback times. The trendline
is shown in Figure 4 and has an R value of 0.99. The formula has been applied to obtain aprojected saving for years 5 to 10.

37Figure 4 Potential reduction in industrial energy use from EE measures% reduction in energy

30%
25%
20%
15%
10%
5%
0%
1

2

3

4

5

6

7

8

9

10

Payback time in years
Note: Years 1 – 4 are from Energetix (2004), with later years projected values. The regression underlying thedata which was used to project the years 5-10 is y = 0.0987Ln(x) _ 0.0405. The R-squared was 0.9885.

The percentages shown in Figure 4 are gross savings, and include the energy savings
under BAU which Energetix anticipates as 6.3 per cent. These are not included in thecomparison with BAU (Figure 3), which uses the net saving beyond BAU of 19 per centas the potential for reducing industrial energy use by measures with a combined paybackof nine years.
The potential for reduction in electricity use from energy efficiency in the residential andcommercial sectors have been assumed to be equal to overall energy efficiency potential
in these sectors for Australia.
The potential for efficiencies in industrial electricity use are derived from Energetix(2004), which details potential savings by sector and fuel type. The values for years 1 – 4
have been projected to year 9, with an R value of 0.98 (shown in Figure 4). This gives apotential reduction of 22 per cent in addition to business as usual efficiency.
Applying these potentials to projected NSW electricity use gives an overall reduction of
24 per cent compared to business as usual, and reduces electricity consumption by 4 percent compared to 2005. This is equivalent to saving 20,700 GWh in NSW, and 4,600
GWh in the Hunter region, compared to business as usual. Current consumption, businessas usual at 2020, and business as usual with energy efficiency are shown in Figure 5 andTable 11.
The two aluminium smelters in the Hunter account for 15 per cent of NSW electricity
consumption, which is nearly 65 per cent of consumption in the Hunter region. Therefore
action taken in aluminium smelting, is extremely important in any analysis of regional
electricity supplies. The energy efficiency potential for the aluminium smelters in the
Hunter region has been taken directly from Energetix (2004), rather than using a
projected value. Thus savings of 13 per cent are expected in aluminium smelting relative38

to business as usual 6 , with an expected payback of 3.8 years. This corresponds to an 8
per cent reduction in electricity use compared to current levels (see Figure 5).
Figure 5 NSW electricity consumption 2005 and 2020 with and without EE

NSW electricity (GWh)

100000
90000
80000
70000
60000
50000
40000
30000
20000
10000
0

2005

Energy Use

Residential savings

2020 Electricity use 2020 Electricity use
BAUwith energy efficiency
Commercial savings

Industrial savings

The renewable energy scenario discussed in this report assumes that energy efficiency
measures sufficiently to achieve a saving of 24 per cent compared to business as usual are
put into place. Renewable energy supply sufficient to meet the reduced consumption, andenergy efficiency measures sufficient to achieve it, are further assessed to determine theeffects on employment.
The energy efficiency potential used is in keeping with targets adopted elsewhere. The
state of Maryland in the USA has just adopted policies to reduce electricity consumption
by 29 per cent compared to business as usual by 2025 (ACEEE, 2008), and the European
Union to reduce energy use by 13 per cent by 2020 (European Union, 2007).
4.2
Renewable energy supply
Two electricity supply scenarios are used in this study. The projected consumption show
in Table 11 is the basis for both scenarios.
Table 11 shows 2005 electricity generation and consumption in the Hunter region and
NSW, and 2020 consumption under business as usual, and with a significant
improvement in energy efficiency.

39

Table 11 Electricity consumption in NSW and the Hunter 2005 and 2020, BAU and withenergy efficiency measures
Generation

Consumption

Consumption reduction 2020
compared to

2005

2005

2020
BAU

2020
with EE

2020 BAU

2005
Consumption

GWh

GWh

GWh

GWh

%

GWh

%

GWh

67,200 85,300

64,60024-20,700

4-2,6001-3,300

5

-950

NSW
Hunter52,142

15,700 18,100

14,700

Hunter as %of NSW

78% 2

23%

23%

21%

18

Notes
1) Consumption for aluminium smelting is reduced by 8 per cent compared to current levels.
2) Hunter region coal generation as a percentage of NSW consumption.

Two electricity supply scenarios are given in Table 12 and Table 13, and are used tomodel the employment effects of a transition to renewable energy. Scenario One: Hunteras a Self-Sufficient Regional Energy (RE) Centre assumes that the Hunter region
generates sufficient for local consumption, but that its role as the major energy exporterfor the rest of NSW does not continue. This reflects the more diffuse nature of renewableenergy compared to fossil fuels, and the need to locate generation equipment nearresources. The large concentration of coal-fired power stations reflects the location ofcoal mining. It is likely that the role of the region as a major energy supplier to the whole
State would change as fuel sources change.
The second scenario: Hunter as a NSW Energy Export Centre assumes that the Hunterregion continues to generate a very significant proportion of NSW electricity supply.
In both scenarios, it is assumed that every effort is made to locate companies and jobs
associated with improvements in energy efficiency and renewable energy within the
Hunter, to compensate for the loss of coal-associated employment.
A regional resource assessment is beyond the scope of this Report. The following
scenarios are not prescriptive; they are indicative only based on reasonable assumptions
about resources within the region.
The second scenario assumes the development of concentrating solar thermal power
stations would be outside the Hunter region. It is highly unlikely that the power stations
would be located within the Hunter, as optimum conditions occur several hundred
kilometres to the west where daily sunlight hours are significantly higher. However,location will be driven by proximity to transmission lines, so power stations are likely on
both the Nyngan/ Cobar and the Narrabri/ Inverell lines.
The employment potential assumes that companies associated with manufacturing anddevelopment for these projects are locate within the region, capitalising on the presenceof the National Solar Centre in Newcastle.

40

The two scenarios show the Hunter can continue to play an important role in NSW
energy production under a transition to renewable energy, although it is very unlikely thatthe region could continue to supply as high a proportion of NSW electricity.
The scenarios use two emerging technologies, geothermal using hot dry rocks, and solar
thermal. While solar thermal power generation is in use internationally, it has not been
fully commercialised. In the event that these technologies cannot be scaled up
sufficiently, gas combined cycle technology would need to be deployed as an interim
measure. This would still bring a very substantial emission reduction compared to coal
generation.
The aluminium industry has an important role to play, as it accounts for 65 per cent of the
Hunter electricity consumption (15 per cent of NSW). As well as energy efficiency
measures equivalent to the potential identified in Energetix (2004), it is assumed thataluminium smelters will install substantial levels of co-generation. This is in keeping with
the information produced by the Aluminium Council:
Alumina production facilities are the perfect co-generation partner, with 365 day
24/7 constant heat demand. Few, if any, industries “fit” better than alumina forco-generation, particularly in an Australian climate (Australian Aluminium
Council, 2006).

41

Table 12 Scenario 1: Hunter as a Self-Sufficient Regional Energy Centre
MWGWh

Per cent ofregional
electricity

Per cent of
NSW electricity

Wind (note 1)

1,400

3,679

25

6

Bioenergy (note 2)

250

1,752

12

3

Geothermal(note 3)

200

1,489

10

2.3

PV – Residential(note 4)

250

329

2

0.5

PV - Business (note 5)

325

427

3

0.7

Gas Co-generation (note 6)

1,000

7,008

48

11

3,425

14,684

100

23

Wind

3,500

9,198

-

14

Hydro

4,200

3,800

-

6

Bioenergy

1,300

9,110

-

14

PV

3,000

3,942

-

6

Solar thermal

2,000

6,132

-

10

Co-generation

2,500

17,520-27

16,50049,702--20,700

Hunter region

Total
Elsewhere in NSW

Total
Energy efficiency (note 7)

77
-

-

Notes
1. Assumes that 3500 MW of wind is developed elsewhere in NSW.
2. 16 per cent of identified currently available NSW bioenergy resource. (Rutovitz and Passey, 2004)
3. Assumes development of the Geodynamics sites at Muswellbrook and Bulga.
4. Assumes installation of 3kW systems on 37 per cent of houses.
5. Assumes business PV installation is 30 per cent higher in total than residential.
6. Assumes installation of gas fired co-generation at industrial sites and large users within the region,
initially at aluminium smelters.
7. This is the total NSW saving compared to BAU electricity use.

42

Table 13 Scenario 2: Hunter as a NSW Energy Export Centre
MWGWh

Per cent ofregional
electricity

Per cent of
NSW electricity

Wind (note 1)

2,000

5,256

36

8

Bioenergy (note 2)

400

2,803

19

4

Geothermal(note 3)

200

1,489

10

2

PV – Residential(note 4)

467

614

4

1.0

PV - Business (note 5)

934

1,228

8

1.9

Gas Co-generation (note 6)

1,600

11,21376

17

Solar Thermal

1,000

3,066

21

5

6,601

25,669

174

40

Wind

2,900

7,621

-

12

Hydro

4,200

3,800

-

6

Bioenergy

1,200

8,410

-

13

PV

2,200

2,891

-

4

Solar thermal

1,000

3,066

-

5

Co-generation

1,900

13,315-21

13,40039,103--20,700

Hunter region

Total
Elsewhere in NSW

Total
Energy efficiency (note 7)

61
-

-

Notes
1. Assumes that 2900 MW of wind is developed elsewhere in NSW.
2. 26 per cent of identified currently available NSW bioenergy resource. (Rutovitz and Passey, 2004)
3. Assumes development of the Geodynamics sites at Muswellbrook and Bulga.
4. Assumes installation of 3kW systems on 70 per cent of houses.
5. Assumes business installs double the total capacity of residential PV.
6. Assumes installation of gas fired co-generation at industrial sites and large users within the region,
initially at the aluminium smelters.
7. Assumes major development of solar thermal, although power stations would not be located within theregion43

4.3
Capital Investment
Approximately $12 billion would need to be invested in the capital costs of the renewableenergy and co-generation and the energy efficiency measures for Scenario 1 between now
and 2020 (Table 14 shows these estimates). This does not take account of technology costdecline over the period, which is likely to lead to PV in particular being considerably lessexpensive than shown.
Table 14 Estimated capital cost of renewable energy, co-generation and energy
efficiency measures for Scenario 1 (Hunter region only)
Energy efficiency investment

GWh savings

Investment

Capital cost

$AUD million per
GWh$AUD million

Residential

590

$0.73

$429

Commercial

320

$0.39

$124

Industrial

975

$0.89

$869

MW installed$AUD million per
MW

Wind

1,400

$1.7

$2,380

Bioenergy

250

$2

$500

Geothermal

200

$4

$800

PV

575

$10

$5,750

Solar thermal

0

$3.5

$0

Co-generation

1,000

$1.2

$1,200

Renewable energy investment

Total$12,052

Note: Does not take account of technology cost decline over the period. All investment will not occur in the
Hunter, as capital costs include imported technology.

4.4
The employment effects of renewable energy
But what sort of jobs are we talking about? Jobs in energy efficiency and renewableenergy are potentially secure, well-paid, environmentally-friendly jobs – Green Jobs.
There are a wide variety of jobs available in the manufacture, installation, maintenanceand servicing, transport and delivery of goods, operation, sales, and research and designof renewable energy technologies.
A local renewable energy and energy efficiency industry has potential as a new export
centre, supplying technology and expertise to global markets. This potential exportindustry has not been included in the analysis.

44

Many of these jobs can utilise skills that are already in abundance in the Hunter, creating
new jobs for local people. Skills development and training are a critical part of creating
Green jobs through new training programs and apprenticeships.
These include a range of trades and non-trades jobs, Figures 6 and 7 below give examplesof the type of labour requirements involved in wind and solar photovoltaics, based on
research by Singh and Fehrs (2001).
Figure 6 Labour requirements in wind by activity
Transportation, 2%Servicing, 20%

Blades, 26%

Installation, 11%
Couplings, 2%

Development, 1%

Brakes, 4%
Turbine Assembly,
4%

Monitoring/Controls,
5%

Nacelles, 5%

Gearboxes, 6%
Towers, 8%

Rotor Hubs, 2%Generators, 4%

Source: Singh and Fehrs, 2001

Figure 7 Labour requirements in solar photovoltaics by activity
Plastics mfg, 0%Servicing, 7%

Glass mfg, 0%
Silicon supply, 8%
Cell Mfg, 5%Contracting, 15%

Distribution, 6%

Module assembly,
30%

System integration,
17%
Wires Mfg, 3%

Mounting, 2%
Inverter Mfg, 7%

Source: Singh and Fehrs, 2001

45

4.5
Employment factors for renewable energy and co-generation
How many jobs would be generated in the Hunter if there were a shift to renewableenergy?
Employment factors for renewable energy are presented in numerous studies, usually inthe form of jobs per MWp in operations and maintenance, and job years in installation,
construction, and manufacturing per MWp installation. Some studies present job numbers
per $ million investment. There is considerable variation in the actual numbers, and in the
allocation of jobs to different stages of work. The results from a number of studies, andthe derivation of the factors used here is presented in the following sections.
The employment factors for renewable energy and co-generation used in this report are
shown in Table 15, and the employment creation from present coal-fired electricity
generation in NSW.
The last column shows the numbers of jobs per GWh for each technology compared withthe employment creation resulting from coal generation in NSW. The renewable
technologies are considerably more employment intensive than current generation. The
ratio ranges from 1.2 times as many jobs per unit of electricity for wind compared to coal
generation, to 20 times as many jobs for PV generation. Globally wind energy creates
approximately 1.9 times as many jobs as coal generation job per unit of electricity.
However, this figure includes manufacturing, and a great deal of this will occur offshore.
The employment modelling here is presented for 36 per cent of wind manufacturing
occurring onshore, and for none of the wind manufacturing occurring onshore.
Co-generation creates less jobs in the Hunter region, although more jobs overall, as thefuel extraction does not take place within the Hunter.
These factors underestimate the potential increase in employment from a phase out ofcoal-fired electricity, as they include jobs created during construction of power stations,although this occurred some time ago.
This comparison is consistent with the general consensus that expanding a country’s
renewable energy sector (and contracting fossil-fuel based production) has a net positive
impact on employment. For example Kammen et al. (2004), Bedzek (2007), MacGill etal. (2002), find the renewable energy sector generates more jobs than the fossil-fuel basedenergy sector per unit of energy delivered across a broad range of scenarios.
The factors are only for direct employment impacts (rather than the IO analysis employedin the previous section which includes the generation of indirect in addition to direct
employment).
Renewable energy employment must be categorised according to the Australian and New
Zealand Standard Industrial Classification (ANZSIC) classification system. This required
further subdivision of ‘construction, manufacturing, and installation’. As this breakdown
is not available in most studies, it has been derived for this report. The ratio andderivation are given in Table 16. Manufacturing, construction and installation, operations
and maintenance, and fuel supply, have been allocated to ANZSIC categories for eachtechnology, with the allocation shown in Table 17.

46

Table 15 Renewable energy and co-generation employment factors used in this study

Energytechnology
PV1

Personyears per
MWp

Jobs
per
MWp

Personyears per
GWh

CM&I

O&M

Fuel

CM&I

20 (29)

1.8

0

0.6

Normalised to lifetime of facility
Jobs per GWh
O&M& fuel
1.33

Total
2.21

Ratio with
NSW coal
20 (26)

0.03

0.18

1.2 (1.9)(0.88)
Wind2

5.2 (9.4)

0.09

0

0.08
(0.14)

3

5.25

1.2

-

0.03

0.17

0.20

2.3

4

1.7

0

0.02

0.24

0.27

3.1

Solar thermal

8.3

0.7

0

0.09

0.20

0.29

3.4

Cogeneration4

5.8

0.13

N/a

0.03

0.02
(0.09)

0.12

0.5 (1.2)

NSW coal
generation5

8.3

0.14

0.03

0.04

0.06

0.09

1

Bioenergy

Geothermal

Notes
1. Figures in bold are PV indicators from REN21 (2005) adjusted for 80 per cent of manufacturing
occurring overseas
2. Figures in bold show wind indicators from EWEA 2003 adjusted for 64 per cent of manufacturing
occurring overseas.
3. Fuel collection and processing for bioenergy is included in O & M.
4. Figure in bold for gas co-generation excludes fuel extraction and processing, as it will be outside theregion..
5. NSW coal generation operation and maintenance and fuel employment calculated from current data;
construction, manufacturing and installation taken from Kammen et al 2004.
6. PV, bioenergy, geothermal and solar thermal derived from REN21 (2005) Renewables 2005 Global
Status Report . Wind from EWEA 2003. Co-generation from ACIL (2000).

47

Table 16 Assumed proportion of manufacturing in ‘Construction, installation andmanufacturing’
Percentage ofmanufacturing

ReferencePV

40 per centRatio given in BCSE 2004, page 20.

Wind

67 per cent

EWEA 2003 ratio, adjusted for 66 per cent of
manufacturing occurring outside Australia.

Solar thermal

22 per centRatio for solar water heating used, derived from BCSE
(2006)

Bioenergy,
geothermal, andco-generation

Not available

No data available, all jobs in construction, installation, andmanufacturing are treated as being in construction andinstallation.

Note: Some technology stages have been allocated to two classifications,. For example, solar thermal
manufacturing has been identified as including 75 per cent glass manufacturing and 25 per cent machineryand equipment manufacture.

Table 17 ANZIC classification of employment created in renewable energy and cogeneration
Manufacturing

Installation

Operations andmaintenance

Fuel supply

C26 Non metallic
mineral productmanufacturing (0.5)
C27 Metal productmanufacturing (0.5)
C28 Machinery andequipment
manufacturing

E42 Construction
trade services
B15 Services tomining

D36 Electricity
and gas supply
E42 Construction
trade services
L78 Businessservices

A01
Agriculture
A03 Forestry
and logging

PV

C28

E42

E42 (0.5)
L78 (0.5)-

Wind

C26 (0.5)
C27 (0.5)

E42

D36

-

Bioenergy

C28

E42

E42 (0.5)
D36 (0.5)

A01 (0.5)
A03 (0.5)

Geothermal

C28

B15 (0.8)
E42 (0.2)

D36-

Solar thermal

C26 (0.75)
C28 (0.25)

E42

E42 (0.5)
D36 (0.5)-

Co-generation

C28

E42

E42 (0.5)
D36 (0.5)

B12
D26

ANZSIC
employment
categories

48

REN21 (2005) presents employment factors from more than 15 renewable energy studies,and estimates of global employment in the renewable industry for 2005. The mid range
estimates from this study have been used to derive the employment factors used in thisreport, with the exception of wind power and co-generation.
Kammen et al. (2004) review 13 independent reports/studies to develop estimates of thejob creation potential of selected renewable technologies, and present job factors from 4of these reports. The authors have attempted to standardise job numbers according to theactual electricity generation of each technology. To this effect they have used a newmeasure, MWa, which adjusts the nameplate capacity of generation plant according totheir likely actual generation, and have assumed the lifetime and capacity factors for eachtechnology. They have also averaged the ‘person years’ of employment in manufacturing
and construction over the lifetime of facilities to approximate ‘constant’ job creation, sothat they present just one figure of jobs per MWa. 7 Jobs may also be presented per GWh
generated over the life of the facility.
This report uses the same methodology developed by Kammen et al. (2004), adjusted forAustralian capacity factors, to derive employment factors from REN21 (2005), ACIL
(2000), and EWEA (2003). Factors are presented as jobs per GWh over the lifetime of the
facility, rather than as jobs per MWa, as GWh is a more common unit.
Table 19 summarises the reports used by Kammen et al (2004), and the additional reports
considered here.
Table 18 compares the estimated employment factors from different studies for various
renewable energy technologies. The last column shows the job creation per GWhcompared to NSW coal-fired electricity generation.
In Table 18, PV1, PV2, Wind 1, Wind 2, the high and low bioenergy estimates, and thecoal and gas factors are all from Kammen et al. with modified capacity factors. The
capacity factor for PV has been set at 15 per cent rather than 21 per cent, and for wind at
30 per cent rather than 35 per cent. The lower capacity factor for wind has been usedbecause the large expansion envisaged is likely to lead to utilisation of slightly lower
wind speed sites.
PV, bioenergy, wind and geothermal are also derived using REN21 (2005), the mostrecent global data available, and shown as PV3, wind 3, bioenergy 3, and geothermal.
Wind 4 has been derived from the EWEA (2003), which presents projected employment
for Europe broken down into manufacturing, installation and operations, and excluding
employment associated with export. This indicator has been used because the data
includes the breakdown between manufacturing and installation. It has been adjusted inTable 15 to include the likelihood that most manufacturing employment will occur
overseas.
The latest Australian data from the 2006 Clean Energy Report (BCSE 2006) is used toderive Australian factors for comparison, and shown as Wind 5 and Bioenergy 4.
The global indicators from REN21 (2005) and EWEA (2003) are used in this report asthey seem more relevant to the scale of industry development that would be needed ineither energy scenario. The higher Australian factors for wind energy probably reflect theearly stages of the industry in this country. In bioenergy the Australian factors are lower
49

than the global figures, perhaps as a result of the current low representation ofagricultural and forestry residues or crops (other than bagasse) in the Australian industry.
This is likely to change if significant development of bioenergy occurs.
Employment data for PV and geothermal technologies were presented in the 2006 Clean
Energy Report but are not presented here. Australian employment factors are several
orders of magnitude higher than the global estimates, but this is not considered to reflect
a long term employment creation potential. In the case of geothermal, there are currently
100 people employed and only 0.1 MW installed, but this is because there is significant
research and development underway. There were 1300 people employed in the PV
industry in Australia in 2004 (3.5 MW installed). However, the greater share of this
employment is in the export sector, so cannot be extrapolated to expansion of thedomestic market.
Factors for employment in coal fired power generation have been derived for NSW, using
the employment data from Table 4. The average capacity factor has been calculated fromESAA (2006), and the tonnes per MWh from the Department of Climate Change (2008)
workbook and the emissions intensity of Eraring power station given in NSW
Government Energy Direction Green Paper (NSW Government. 2004).

50

Table 18 Renewable energy and co-generation employment factors with derivation and source
Energytechnology

PV1
PV2
PV3
Wind 1Wind 2Wind 3
Wind 4Wind 5
Bioenergy
highBioenergy
lowBioenergy 3
Bioenergy 4
GeothermalSolarthermalCogeneration
Coal
Gas
NSW coal
generation

Data source

REPP (2001)
Greenpeace (2001)
REN21 (2005)
REPP (2001)
Greenpeace/EWEA(2003)
REN21 (2005)
EWEA (2003)
CEC (2006)

CF%

Lifetime
years

Employment factors

Employment factors normalised to lifetime of facility

CM&I

O&M

Fuel

Jobs per MWp

Jobs per GWh

personyears /
MWp

Jobs
per
MWp

personyears/
GWh

CM&I

O&M
& fuel

CM&I

O&M &
fuel

Total

0
0

0.25
1
1.75
0.1

0.98
0.91
0.88
0.06

0.19
0.76
1.33
0.04

1.17
1.67
2.21
0.10

Ratio
with
NSW
coal
14
20
26
1.1

15
15
15
30

25
25
25
25

32
30
29
3.8

0.25
1.0
1.8
0.1

0

1.29
1.20
1.16
0.15

30

25

22

0.1

0

0.88

0.1

0.33

0.04

0.37

4.4

30
30
30

25
25
25

5.6
9.4
3.1

0.15
0.09
0.6

0
0
0

0.7
0.38
0.13

0.5
0.09
0.56

0.09
0.14
0.05

0.06
0.03
0.21

0.14
0.18
0.26

1.5
1.9
3.0

REPP (2001)

85

25

8.5

0.44

0.22

0.34

2.08

0.05

0.28

0.32

3.8

REPP (2001)

85

25

8.5

0.04

0.04

0.34

0.34

0.05

0.05

0.09

1.1

REN21 (2005)
CEC (2006)
REN21 (2005)
REN21 (2005)
Bedzek (2007)

80
80
80

25
25
25

5.25
3.7
4

1.2
0.9
1.7

0

0.21
0.15
0.16

1.20
0.93
1.70

0.03
0.02
0.02

0.17
0.13
0.24

0.20
0.15
0.27

2.3
1.8
3.1

40

25

8.3

0.7

0

0.33

0.7

0.09

0.20

0.29

3.4

ACIL (2000)

80

25

5.8

0.13

0.07

0.23

0.62

0.03

0.09

0.12

1.4

Kammen et al. (2004)
Kammen et al. (2004)

80
85

40
40

8.5
8.5

0.18
0.1

0.06
0.07

0.21
0.21

0.60
0.62

0.03
0.03

0.09
0.08

0.12
0.11

1.3

Calculated

63

40

0.14

0.03

-

0.32

0.03

0.06

0.09

1

Note: PV3, Wind 4, and Bioenergy 3 have been used in this study, but modified to allow for a 64 per cent of wind manufacturing employment and 80 per cent of
PV manufacturing employment to occur offshore. Capacity factors and lifetimes have been added to source data in order to normalise to jobs per GWh. Solar
thermal construction employment has been derived the information about Nevada 1 solar thermal plant: average employment of 400 (Bedzek 2007) and aconstruction time of 16 months.

51

Table 19 Studies used to derive renewable energy employment factors
Studies drawn on by Kammen et al. (2004):

Used forfactors

REPP (2001) The work that goes into renewable energy: Study calculates jobs in personyrs/MW and person-yrs/$ invested. Does not take into account multiplier. Authors
collected primary employment data from companies in the solar PV, wind energy and coalsectors, and used project scenario numbers for biomass energy. Includes jobs inmanufacturing, transport, delivery, construction and installation, and operations andmaintenance.

PV 1, Wind
1

Greenpeace (2001) 2 million jobs by 2020: Based on employment information provided by
the industry, jobs for each region have been calculated for scenario of 207GWp of installed
PV by 2020. It is assumed that between 2000 and 2010, 20 jobs are created per MW during
manufacture, decreasing to 10 Jobs per MW between 2010 and 2020. About 30 jobs
generated per MW during installation, retailing and providing other local services between
2000 and 2010, going down to 26 jobs per MW between 2010 and 2020. For maintenance,
it is assumed that after accounting for economies of scale and other efficiency gains, 1 job
will be created per installed MW. Since developing world markets will play a moresignificant role beyond 2010, this is assumed to steadily increase up to 2 jobs per MW by
2020.

PV 2

Greenpeace/EWEA (2003) Wind force 12: a blueprint to achieve 12 per cent of the worlds
electricity from windpower by 2020: Numbers based on 2 prior studies/surveys - Danish
Wind Turbine Manufacturers Association and Danish Counties and Municipalities
Research Institute (Society Value of Wind Power). This study did not specify employment
from O and M, so the author’s draw on the REPP figure.

Wind 2CALPIRG (2003); BLS (2004): Analysis based on combining industry data with medianvalues of economic models produced by others.

Coal and gas
indicators
except NSW.

Additional studies considered
EWEA 2003. Wind energy: the facts. Volume 3 Industry and employment. Calculates
direct and indirect employment in the European wind energy industry, divided into
manufacturing, installation, and operations. A table is presented of employment from thedomestic market against annual and cumulative installed MW, projected to 2010. The 2008
figures have been used to derive the employment factors in 0.

Wind 3

ACIL Consulting. 2000. Employment Indicators for Australia’s Renewable Energy
Industries. Gives indicators of employment following industry survey.

Cogeneration(except fuel)REN21 Renewable Energy Policy Network. 2005. Renewables 2005 Global Status Report.
Summarises the status of the RE industry at the end of 2005. Data includes cumulative andincremental MW installed for each technology, and estimates of global employment split
into construction and manufacturing, and operations and maintenance per MWp. The mid
range figure of technology estimates have been used to derive jobs per MWp.

PV3,
Bioenergy 3,
Geothermal

Business Council for Sustainable Energy 2006. Clean energy report 2006. Data includes
cumulative and incremental MW installed in each technology, and employment pertechnology. The figures for employment in the PV Industry do not differentiate between
domestic and export, so these have not been used.

Wind 4,
Bioenergy 4

52

4.6
Direct employment in renewable energy and co-generation – results
Three different employment levels are presented for the renewable energy sector as it
could develop in the Hunter region, and are applied to both of the energy scenarios. Theenergy scenarios project different levels of renewable energy generation in the Hunter.
In Scenario 1: Hunter as a Self-Sufficient Regional Energy Centre only sufficientelectricity generation is developed to meet consumption within the region.
In Scenario 2: Hunter as a NSW Energy Export Centre, the Hunter remains a significant
energy exporter, albeit not supplying the 80 per cent it currently does.
The three employment levels are:All manufacturing occurs offshore: this assumes that all manufacturing associatedwith PV, wind or solar thermal occur overseas. While it is unlikely that all
manufacturing would be located within Australia, it would be a lost opportunity ifnone was realised onshore.

Manufacturing related to electricity generation within the Hunter (and in the case ofsolar thermal, to the west of the Hunter) occurs locally. This assumes 100 per cent of
manufacturing associated with solar thermal, 36 per cent of manufacturing associatedwith wind power, and 20 per cent of manufacturing associated with PV occurs on
shore. Local manufacture of wind turbine towers and blades would be approximately
equal to 36 per cent (EWEA 2003).



Manufacturing is established in the Hunter to supply the RE industry statewide. The
same percentages as the previous level are used (100 per cent of manufacturing forsolar thermal, 36 per cent for wind, and 20 per cent for PV), but in this casemanufacturing within the Hunter supplies all the renewable generation installed in
NSW.

In some cases adjustments have been made to job factors to allow for the physicalrealities of industry development and the Hunter region, or for the lack of more detailed
information. These are summarised below.
Solar thermal: power stations are unlikely to be located in the Hunter region as better
conditions occur some hundreds of kilometres to the west. It has been assumed all
manufacturing would be located in the Hunter, and that 30 per cent of the jobs
associated with construction and installation would benefit the Hunter. All theoperations and management and 70 per cent of the construction jobs are excluded
from the calculations for the Hunter, and are included in the totals for ‘rest of NSW’in Table 23.

Co-generation: the job factors have been adjusted to exclude all fuel supply jobs incalculations of Hunter region employment.

Table 20 shows the employment potential for renewable energy in both scenarios, fordifferent levels of manufacturing within the Hunter region. It also shows the employment
potential for the whole state.

53

Table 20 Potential jobs in the Hunter in renewable energy and co-generation
RE
manufacturing
Capacity MWp

For installationin Hunter region
only

For installationin rest of NSW

Construction

Operations andmaintenance

Fuel supplyNo
manufacturing

Manufacturingfor Hunter

Manufacturing
for NSW

Scenario 1:
Hunter as a SelfSufficient
Regional Energy
CentreTotal employment

Wind

1,400

127

317

176

124

-

301

428

745

Bioenergy

250

-

-

53

66

234

353

353

353

Geothermal

200

-

-

32

340

-

372

372

372

PV

575

53

278

399

1,006

-

1,405

1,458

1,736

Solar thermal

-

-

149

0

0

-

0

0

149

Co-generation

1,000

-

-

200

130

-

330

330

330

Total

3,425

180

744

860

1,667

234

2,761

2,941

3,685

RE
manufacturing
Scenario 2:
Hunter as a
Energy Export
Centre(generates 40
per cent of NSW
electricity)

Capacity MWp

For installation in
Hunter region
only

For installation in
rest of NSW

Construction

Operations andmaintenance

Fuel supply

No Manufacturing

Manufacturing for
HunterManufacturing for
NSW

Total employment

Wind

2,000

181

263

252

178

-

430

611

874

Bioenergy

400

-

-

84

106

374

564

564

564

Geothermal

200

-

-

32

340

-

372

372

372

PV

1,401

130

204

973

2,452

-

3,425

3,555

3,758

Solar thermal

1,000

74

74

77

-

-

77

152

226

Co-generation

1,600

-

-

320

208

-

528

528

528

Total

6,601

386

541

1,738

3,284

374

5,396

5,781

6,322

Note: Manufacturing: when manufacturing is included, it assumes 100 per cent of the manufacturingassociated with solar thermal, 36 per cent of that associated with wind, and 20 per cent of that associatedwith PV occurs onshore. Solar thermal (Hunter region): 70 per cent of construction work and all of O&M isassumed to occur outside the Hunter. Co-generation all fuel collection and distribution employment are
assumed to occur outside the Hunter.

54

4.7
The employment effects of energy efficiency measures
How much employment will be created in the energy efficiency industry in a renewableenergy scenario?
Three studies have been used to derive the factors to calculate employment potential in
the Hunter. Employment in energy efficiency tends to be spread through other sectors,
including construction, manufacturing, trade services, and retailing. Employees may be
only partially employed in energy efficiency work. It is therefore difficult to obtainaccurate data on the employment creation potential of energy efficiency. Bedzek (2007)
reviews the energy efficiency and renewable energy efficiency industries in the US, anddetails total sales, and numbers of employees. The direct employment has been used inthis report to derive employment compared to spending on energy efficiency measures.
Table 21 Direct employment factors in the energy efficiency industry
Study

Comment

Annualinvestment/
sales in EE
goods andservices A$

Number of
employees in
EE sector/
programs

Jobs per$million
investment/
sales in EE
goods andservices

Bezdek (2007)
Renewable Energy andEnergy Efficiency:
Economic Drivers forthe 21st Century

Gives total
employment and sales
in the energy
efficiency industry in
the USA for 2006.

$987,182
million3,500,000

3.5

Wade J et al. (2000)
National and local
employment impactsof energy efficiency
investment
programmes.

Reviews nine
programs acrossEurope, including all
sectors. The weighted
average job creation
per $million is shown
here.

$255 million

1,712(calculated)

6.7

MEA (2003)
Australian Sustainable
Energy Survey 2002

Survey of Australian
employment 2002,
gives total jobs andsales per employee.

$570 million

5,800

6.6

Note: exchange rates of 1.6 A$ per Euro and A$1.07 per US$ have been used to convert from original
currencies.

MEA (2003) surveyed the Australian sustainable industry in 2002 and gives the numberof jobs in energy efficiency, and the average sales per employee. Wade et al. (2000)
investigated the employment creation of nine European energy efficiency programs witha total investment value of $A255, and presents employment creation and investment foreach program.

55

The indicators and the summary details of the studies reviewed are shown in Table 21.
Two estimates are presented of employment, using the low and high factors shown here.
In order to undertake input - output analysis for energy efficiency employment, theemployment potential requires allocation to standard industry classifications. This is a
speculative exercise, as the activities within each sector can vary considerably. The
classifications which have been used for this study are shown in Table 22.
Table 22 ANZIC classification of employment created in the energy efficiency sector
ANZSIC category
C26 Nonmetallic mineralproduct
manufacturing

C28 Machineryand equipment
manufacturing

E42 Construction
trade services

L78 Businessservices

Residential(existing)

0.2

-

0.7

0.1

Residential (newbuild)

0.2

0.1

0.5

0.2

Commercial

0.1

0.1

0.6

0.2

Industrial

-

0.2

0.5

0.3

Energyefficiency sector

4.8
Energy efficiency – direct and indirect jobs
The estimated direct employment creation from energy efficiency is shown in Table 23.
Between 700 and 1,300 direct jobs are created in the Hunter, with a further 6,100 –11,900 in the rest of NSW.
The annual capital investment is the input used to determine employment levels, as theemployment factors are expressed as jobs per $ million. Investment levels to achieve the20,700 GWh reduction of electricity consumption relative to business as usual have been
calculated by multiplying the Hunter (and NSW) electricity savings by the capital
investment per petajoule savings in the studies of Australian energy efficiency potential.
Investment is assumed to occur over an 8 year period in all cases.
Residential investment is calculated from the high energy efficiency savings from NFFE
(2003). Commercial capital investment is the weighted average of the commercial sectors
presented in EMET (2004). Industrial investment is from Energetix (2004), with the costs
for savings projected from 1-4 year payback measures to 9 year payback measures.
Figure 8 shows the trend line for electricity savings versus payback time, and cost versus
payback time. The trend lines have R values of 0.98 and 0.99 respectively.

56

Table 23 Direct employment in the Hunter and NSW in the energy efficiency sector in
2020, with measures achieving an overall reduction of 24 per cent (20,700 GWh) in NSW
electricity consumption compared to BAU
HunterTotal capital
investment$ million

Annualspending1$ million

Direct jobs
low estimate

Direct jobs
high estimate

Residential (existing housing)

$386

48

167

323

Residential (new build)

$43

5

19

36

Commercial

$124

16

54

104

Industrial

$869

109

375

727

Aluminium

$181

23

78

151

Total (Hunter region)$16,03

$200

693

1,342

Residential existing$4,322

540

1,868

3,620

Residential new build

$480

60

207

402

Commercial$1,394

174

602

1,167

Industrial$6,431

804

2,780

5,386

Total (rest of NSW)

$12,627$1,578

5,458

10,575

6,151

11,917

Rest of NSW

Total (All NSW)

Note 1. In all cases investment in all cases investment has been assumed to occur over 8 years.

57

Figure 8 Capital costs and potential for industrial electricity reduction from energy
efficiency measures
16000
Millions of dollars

14000
12000
10000
8000
6000
4000
2000
0
1

2

3

4

5

6

7

8

9

10

9

10

Payback in years(a) Costs of measures versus payback time

Percentage energy savings

30%
25%
20%
15%
10%
5%
0%
1

2

3

4

5

6

7

8

Payback in years(b) Energy savings as a percentage of payback time
Note: Years 1 – 4 are from Energetix (2004), with later years projected values. For Figure 8a, theunderlying regression model is y = 141.81x2. For Figure 8b, the underlying regression model is y =0.0891ln(x) + 0.396. The estimates for years 5-10 are predicted from the respective regressions.

58

4.9
Total employment in energy efficiency, renewable energy and cogeneration
Table 24 shows the total direct and indirect jobs created in renewable energy, energy
efficiency and co-generation by the energy scenarios presented.
In Scenario 1: Hunter as a Self-Sufficient Regional Energy Centre, the Hunter generates
electricity for use within the region only. The minimum is 3,500 direct jobs in the Hunter(23,300 in NSW) if no renewable energy manufacturing occurs on shore, and the lowest
estimates for energy efficiency job creation prove correct. The maximum is 5,000 jobs
created if manufacturing for the state-wide renewable energy industry is located in the
Hunter, and the higher estimate for energy efficiency jobs is correct (30,000 jobs in
NSW).
In Scenario 2: Hunter as a NSW Energy Export Centre, the Hunter region generates 40
per cent of NSW electricity. The minimum estimate is 6,100 jobs within the region, andthe maximum is 7,700 jobs within the region. These numbers do not include indirect jobs.
Between 23,300 and 30,000 direct jobs are created in the whole of NSW, including the
Hunter, in each scenario.
These figures have been used to perform input - output analysis so that the employment
creation from renewable energy and energy efficiency can be compared with the job
losses arising from phasing out coal-fired power generation in the Hunter region.

59

Table 24 Total direct and indirect jobs created in renewable energy, energy efficiency
and co-generation in the Hunter and NSW in a 2020 renewable energy scenario
Hunter region

RE direct
jobs

EE direct jobs

Indirect jobs

Total Jobs

Scenario 1: Hunter as a self-sufficient regional energy centre
Assume region generates 100 per cent of electricity for local use (23 per cent of NSW electricity)
No Australianmanufacturing in RE

2,760

690-1,340

3,500-4,000

6,950-8,100

Assumes renewablesector manufacturing for
Hunter region only

2,940

690-1,340

3,700-4,200

7,300-8,500

Assumes renewablesector manufacturing for
all of NSW

3,680

690-1,340

4,400-5,000

8,800-10,000

Scenario 2: Hunter as a NSW energy export centre
Assumes region generates 40 per cent of NSW electricity
No Australianmanufacturing in RE

5,400

690-1,340

5,700-6,300

11,800-13,000

Assumes renewablesector manufacturing for
Hunter region only

5,780

690-1,340

6,100-6,700

12,600-13,800

Assumes renewablesector manufacturing for
all of NSW

6,320

690-1,340

6,700-7,200

13,700-14,900

Total NSW Employment In RE and EE
Assumes 100 per cent of electricity from renewable energy or co-generation
No Australianmanufacturing in RE

17,1006,150-11,920

38,000-42,900

61,400-72,000

NSW manufacture of 36
per cent of wind, 20 per
cent of PV, and 100 per
cent of Solar thermal

18,1006,150-11,920

39,000-43,800

63,200-73,800

Notes:
1)When onshore manufacturing is included, it assumes 100 per cent of solar thermal, 36 per cent of wind,and 20 per cent of PV.
2) Solar thermal (Hunter region): 70 per cent of construction work and all of the O&M is assumed to occur
outside the Hunter. Jobs are included in ‘rest of NSW’.
3) Co-generation all fuel collection and distribution employment are assumed to occur outside the Hunter.
These jobs are included in ‘all of NSW’.

60

We use the same input-output methodology as in Section 3 (ABS, Input-Output Tables
2001-02), but this time to calculate indirect job creation from switching to a renewableindustry in the Hunter, see Table 24. Results show that indirect job flows from creatingjobs in the renewable industry exceed those which result from closing down the coal fired
power stations. If the whole of NSW is taken into account, job creation including indirect
effects would exceed the jobs lost from a shut down of the entire coal mining sector.
In Scenario 1, where the Hunter generates electricity for use within the region only,
indirect job creation ranges between 3,500 direct jobs in the Hunter (39,100 in NSW) if
no renewable energy manufacturing occurs on shore, and the lowest estimates for energy
efficiency job creation are valid. The maximum is 5,000 indirect jobs created if the
Hunter is the site for manufacturing the whole of the NSW renewable energy industry,
and the higher estimate for energy efficiency jobs is correct (44,900 jobs in NSW). Under
the NSW scenario it is predicted that direct employment will result in the oil and gas
sectors. These are highly productive sectors, having very large average products (ratio of
GDP to employment), thus a lot of indirect employment results from each job created inthis sector.
In Scenario 2, it is estimated at minimum 5,700 indirect jobs will be generated within theregion, and the maximum is 7,200 indirect jobs. Thus between 38,000 and 43,800 direct
jobs are created in the whole of NSW, including the Hunter, in each scenario.
The above analysis shows that developing a renewables industry in the Hunter is a viable
alternative to the closure of the coal fired generation in the Hunter. Looking at the various
scenarios the results suggests that for Scenario 1 and Scenario 2 direct employment
creation equals indirect.
The creation of the renewable energy and energy efficiency industries will result in aminimum 6,950 direct and indirect jobs (and a maximum of 10,000 jobs) for Scenario 1:
Hunter as a Self-Sufficient Regional Energy Centre where the Hunter generates 100 per
cent of electricity use within the region (23 per cent of NSW electricity).
Looking at Scenario 2: Hunter as a NSW Energy Export Centre where the Hunter
generates 40 per cent of NSW electricity total jobs range between 11,800 and 14,900.
Clearly the job creation potential of renewable energy for the Hunter (in both the ‘SelfSufficient Regional Energy Centre’ Scenario and ‘Exporting Centre’ Scenario), outweighs the losses of the coal fired power generation sector, with job losses dwarfed by
the job creation potential of the new industries.
In the Hunter Region 1,300 people are currently employed in the coal-fired electricity
industry, with a further 2,337 employed indirectly, a total of 3,637. This is well below thejob creation within the Hunter in the new industries under both Scenarios, and evenfurther below the job creation in renewable energy for the whole of NSW. For Scenario 1
in the Hunter (with no manufacturing) the job gain is approximately 2.5 fold the loss, andfor Scenario 2 the job gain is approximately 4 fold the loss. This job creation for NSW isalmost 19 times the total job loss of jobs in the coal-fired power industry, with job createdestimated to be between 66,700 (average of estimates for no Australian manufacturing)and 68,500 (average of estimates for NSW manufacturing).

61

5.

Policy framework to enhance the Hunter as a renewable energy hub

5.1
Overview
The development of an integrated policy framework to both downsize the coal-fired
power industry and simultaneously develop renewable energy capacities (production andemployment) in the Hunter region is beyond the scope of this report. A thorough analysis
is required to ensure that an appropriate policy mix and implementation strategy isdesigned such that the government responsibilities are clearly demarcated andunderstood.
In this Section, we provide a sketch of some of the policy components that would benecessary.
In general, the policy mix must attempt to address several basis issues, which include
ensuring that:On-going technological progress via research and development to reduce theeconomic cost disadvantage associated with renewable energy is put in place;Barriers which prevent investment in and take-up of renewable energy are reduced;Market failures which hinder the development of renewable energies are reduced;

Human capital development keeps pace with the investment in renewable energy
capital to reduce the chance of skilled labour bottlenecks inhibiting innovation andimplementation; andAn appropriate safety net is in place to smooth the labour market transitions fromfossil fuel based industries to renewable energy industries.

The urgency for a policy response
REN21 (2006: 10) provide a reasonable summary of the current outlook:(a) ‘Global energy demand will continue to grow … unless major conservationand efficiency programmes are undertaken’; and(b) Current energy supply is dominated by fossil based technologies.
With current price expectations and reserve projections, this domination will not
dramatically change in the next decades unless renewable energy technologies
become more cost competitive.
However, it is clear from the latest evidence available that the policy framework must
provide results in the short- to medium-term rather than wait for the cost advantages toturn definitively in favour of renewable energy which may take us into the second half of
this century. REN21 (2006: 10-11) respond to the argument that renewables will enjoy
unambiguous cost advantages after 2050 (based on current projections) by saying that the‘analysis of the carbon constraints imposed by associated climate change on the other
hand, show that major reductions in GHG emissions will be required from around 2030 toensure that the long-term stabilisation of GHG concentration levels is manageable.’62

Market failure
When the true costs and benefits are not reflected in the final price of a good or service
then under- or over-investment in various related activities can occur. Economists callthese under- or over-investments – externalities – and consider they represent the failingof the market mechanism to efficiently allocate resources.
Renewable energy development suffers from notable market failures which impose
barriers to entry and distortions to investment. In relation to renewable energy, theseexternalities impact in various ways but we can summarise their effects in two ways: (a)they unduly inflate the costs of renewable energy relative to other sources of energy byfailing to include the benefits the former and the true costs of the latter; and (b) generatebarriers to entry which make it hard for rational investors to choose renewable energy(see Beck and Martinot, 2004).
Governmental responsibility
Given that market failures are a significant constraint on the development of viable
renewable energy solutions, the role that government has to play is crucial. A reliance on
the market alone will not redress these failures. REN21 (2006: 11) recognise this andplace the responsibility for fast-tracking the solution in the governmental domain. The
response will ‘require dedicated action by governments on policies for economic
incentives, technology transfer, private sector investment, and research anddevelopment.’
There is already a broad literature available on the types of policies that might be
included in a renewable energy strategy. Some countries already deploy several of thesepolicies. Table 25 is taken from Beck and Martinot (2004: Table 1, pages 2-3) and shows
the breadth of policies that economists have propose as a multi-pronged vehicle tostimulate the increased reliance on renewable energy.
Any policy framework aimed at promoting the Hunter region as a renewable energy hub
would involve a mix of the type of initiatives shown in Table 25. In the remaining part ofthis Section we consider some of the key initiatives that might be part of an overall policy
response.
5.2
Some key policy initiatives for the Hunter
The following policy initiatives should be implemented as soon as possible as part of thejust transition from fossil fuel to renewable energy industries in the Hunter region.
Redressing financial barriers
While the traditional financial institutions are slowly realising that renewable energy
projects are worthy of inclusion in their lending portfolios, it remains the case that one of
the major constraints facing start-up industries is the lack of access to capital. This
general problem is compounded in the case of renewable energy by certain particularcharacteristics. Beck and Martinot (2004: 4) argue that:
Even though lower fuel and operating costs may make renewable energy costcompetitive on a life-cycle basis, higher initial capital costs can mean that
renewable energy provides less installed capacity per initial dollar invested thanconventional energy sources. Thus, renewable energy investments generally63require higher amounts of financing for the same capacity. Depending on thecircumstances, capital markets may demand a premium in lending rates forfinancing renewable energy projects because more capital is being risked up front
than in conventional energy projects.
If it can be shown that the net social benefits of renewable energy are significant then a
prima facie case exists for government to use its financial capacity to share in the start-up
risk of the industry. The Federal government could play a major role in redressing thefinance market distortion that results in an under-investment in renewable energy. For
more than a decade, the Federal government has been under spending in areas such as
public infrastructure, education, skills development and many other areas that generate
public benefit.
At the same time they have been riding the taxation wave associated with the commodity
prices boom. The result has been growing budget surpluses. These surpluses havehighlighted their lack of imagination and their failure to demonstrate leadership. They
should have been providing, among other things, first-class infrastructure to foster new
initiatives such as renewable energy.
In recent years, to prevent this fiscal austerity and revenue surge generating everincreasing budget surpluses the Federal government has been speculating in financial
markets using the surplus funds to purchase financial assets both in domestic andinternational markets (for example, the Futures Fund). While not supporting the initialausterity, it is clear that these funds could be better placed in a renewable energy fund andused to finance start-up companies under the usual conditions of due diligence.
Removing pricing distortions
We noted above that if the true costs and benefits are not reflected in the final price of agood or service then under- or over-investment in various related activities can occur.
The existence of externalities provides a solid foundation for government intervention
into the pricing system to ensure that the costs of an activity reflect the true social costrather than the narrow private cost that the company itself incurs. Available policy tools
include taxation and subsidies.
Beck and Martinot (2004: 5) argue that
The environmental impacts of fossil fuels often result in real costs to society, interms of human health (i.e., loss of work days, health care costs), infrastructure
decay (i.e., from acid rain), declines in forests and fisheries, and perhaps
ultimately, the costs associated with climate change. Dollar costs ofenvironmental externalities are difficult to evaluate and depend on assumptions
that can be subject to wide interpretation and discretion. Although environmental
impacts and associated dollar costs are often included in economic comparisons
between renewable and conventional energy, investors rarely include suchenvironmental costs in the bottom line used to make decisions.
In this regard, the Federal government should include in its upcoming review of thetaxation system, initiatives to ensure that damaging activities are more fully costed. The
market would then respond to the changing relative costs of competing technologies andbegin to divert investment funding into renewable energy industries.
64

Table 25 Summary of Renewable Energy Policies and Barriers
Policies

Description

Key barriers addressed

Renewable Energy Promotion Policies
Price-setting and quantity-forcing
policies

Cost reduction policies

Public investments and market
facilitation activities

Power grid access policies

Mandates prices to be paid forrenewable energy, or requires a
fixed amount or share ofgeneration to be renewable
Reduces investment costs throughsubsidies, rebates, tax relief,loans, and grants
Provides public funds for direct
investments or for guarantees,
information, training, etc. tofacilitate investments
Gives renewable energy equal orfavorable treatment for access topower grids and transmission
systems

High costs, unfavorable power
pricing rules, perceived risks

High costs, perceived risks

Transaction costs, perceived
risks, lack of access to credit,
information, and skills
Independent power producer
frameworks, transmission access,inter-connection requirements

Transport Biofuels Policies
Biofuels mandates

Biofuel tax policies

Mandates specific shares oftransport fuel consumption from
biofuels
Provides tax relief for biofuels

Lack of fuel production ordelivery infrastructure

Allocates, or sets aside, a
percentage of mandated
environmental emissions
reductions to be met byrenewable energy
Allows renewables to receive
monetary credit for local
pollutant emissions reductions
Allows renewables to receive
monetary credit for greenhousegas emissions reductions

Environmental externalities

High costs

Emissions Reduction Policies
Renewable energy set-asides

Emissions cap and trade policies

Greenhouse gas mitigation
policies

Environmental externalities

Environmental externalities

Rural Electrification Policies
Rural electrification policy andenergy service concessions

Rural electrification policy andenergy service concessions

Rural business development andmicrocredit

Rural business development andmicrocredit

Comparative line extension
analysesComparative line extension
analyses

May heighten barriers of highcosts, lack of fuel price risk
assessment, unfavorable power
pricing rules
May reduce barrier of interconnection requirements, butheighten barriers of high costs,
lack of fuel price risk assessment
May reduce barrier of subsidies,but heighten barriers of highcapital costs and perceived risks

Source: Beck and Martinot (2004).

65

Table 25 Summary of renewable energy policies and barriers (continued)
Policies

Description

Key barriers addressed

Power Sector Restructuring Policies
Competitive wholesale power
markets

Self-generation by end-users

Privatization and/orcommercialization of utilities
Unbundling of generation,transmission and distribution

Competitive retail power markets

Allows competition in supplying
wholesale generation to the utility
network and eliminates wholesalepricing restrictions
Allows end-users to generate
their own electricity and either
sell surplus power back to thegrid or partly offset purchased
power
Changes government-owned andoperated utilities into private orcommercial entities
Eliminates monopolies so that
separate entities provide
generation, transmission, anddistribution
Provides competition at the retaillevel for power sales, including“green power” sales

May heighten barriers of highcosts, lack of fuel price risk
assessment, unfavorable power
pricing rules
May reduce barrier of interconnection requirements, butheighten barriers of high costs,
lack of fuel price risk assessment
May reduce barrier of subsidies,but heighten barriers of highcapital costs and perceived risks
May provide greater incentives toself-generate, including withrenewable energy
May reduce barriers of high costs,
lack of information, transaction
costs

Distributed Generation Policies
Net metering

Real-time pricing

Capacity credit

Interconnection regulations

Values renewable energy
production at the point of end-use
and allow utility networks toprovide “energy storage” forsmall users
Values renewable energy
production at the actual cost of
avoided fossil fuel generation at
any given time of the day
Provides credit for the value ofstanding renewable energy
capacity, not just energy
production
Creates consistent and transparent
rules, norms, and standards forinterconnection

Unfavorable power pricing rules

Unfavorable power pricing rules

Unfavorable power pricing rules

Interconnection requirements,
transaction costs

Source: Beck and Martinot (2004).

Research and development
A major policy goal must be to reduce technology costs associated with renewable energy
so that market mechanisms will push investment towards these activities. It is clear that
renewable energy technologies (for example, wind-power and photovoltaic cells) havebecome significantly cheaper in recent years as investment in research and development
has generated new production techniques and better materials. As the market begins toprice these developments correctly (in part because regulation and taxation initiatives
work to better “cost” fuel fossil technologies) larger multinational companies are likely to66become involved in this renewable technologies which will further drive cost advantages
in its favour.
Government can assist in this process by increasing the scale of research funding touniversities and related institutions to conduct research and development. REN21 (2006:
3) argue that both R&D and educational initiatives are required to lower the costs ofrenewable energy technology.
The CSIRO Energy Centre in Newcastle is a major regional resource, whose funding forrenewable energy and energy efficiency research needs to be sustained as a catalyst for
local industry development. This would also apply for the University of Newcastle. The
University has a long and distinguished record of conducting world-best research into
coal technology which has reduced the costs of that industry significantly. A major
funding boost for research and development in renewable energy and energy efficiency
would boost its international reputation in these technologies and facilitate local industry
development.
Skill development
Any growth strategy has to involve the development of human capital in addition toproviding a suitable investment climate. The current parlous state of human capitaldevelopment in Australia reflects the abandonment of an integrated skills development
framework by the previous federal regime and the run-down of our principle educational
and training institutions by federal and state governments. Australia suffers further fromthe lack of widespread private sector involvement in the skills development process.
The challenge is to revitalise our education and training institutions by increasing ourinvestment in the training and skills of our population. Targeted initiatives in the area of
renewable energy skills are desirable and would require improved Government/industry
collaboration.
The destructive way in which the Technical and Further Education (TAFE) system isbeing forced into a competitive vocational education market while at the same time
having its funding in real terms squeezed has to end. The Hunter TAFE system is ideallyplaced to offer new training courses in renewable energy, with linkages into schools andpotential employers. A significant boost in funding is needed to support quality teaching,
to attract students and engage employers.
Employment guarantees
There will be transitional pain involved in the winding down of fossil fuel industries andthe promotion of the emerging renewable energy sector. While the regional stimulus to
the education and training systems and the provision of enhanced public infrastructure on
a local basis will provide expanding employment prospects, there will be a rise in
unemployment if no further policy initiatives are introduced.
We advocate the introduction of a Job Guarantee to ease this transitional pain. Under the
Job Guarantee policy, the government would continuously absorb workers displaced fromprivate sector employment. The Job Guarantee employees would be paid the federal
minimum wage and be entitled to the normal statutory entitlements of leave etc.

67

The costs of unemployment extend beyond the narrow concerns usually considered byorthodox economists. The rise and sustenance of mass unemployment acts as a form ofsocial exclusion perpetrated against particular sections of the community, in general the
young, the old, the poor and those lacking skills and education. The burden of
unemployment is typically not shared evenly across the community.
An empirically based, experiential notion of human rights suggests that governments are
violating the right to work by refusing to eliminate unemployment via appropriate
policies. Unemployment is not compatible with fundamental human rights in thatunemployment denies those affected access to income and hence participation in markets,
it reduces the opportunity for advancement and stigmatises those affected, and violates
basic concepts of membership and citizenship. Without the right to work, afflictedindividuals are denied citizenship rights as surely as they were denied the right of freespeech or the right to vote. As long as employment is not considered to be a human right,
a portion of the community will be excluded from the effective economic participation in
the community
The Job Guarantee underpins the following propositions:

There should be a right to workThis right should be a statutory right

The State should bear the responsibility for implementing this right

Access to work should not be conditional

The right to work and a full employment policy are inexorably linked

A full employment program, encompassing the right to work, can be implemented
which also guarantees price stability.

What do we mean by the right to work? Those who wish to do so should be able to obtain
paid full-time (or fractional) employment. This guarantee should be made by the Stateand it should be legally enforceable in much the same way as other rights. Should it be
any work as designated by the State? No, those exercising their right to work should begiven options as to the type of employment they wish to take up. What wage rates should
they be paid? They should be paid minimum adult rates of pay and be accorded to samerights and conditions associated with full-time market employment (or pro rata) - holiday
and sickness benefits, a safe workplace, protection against unfair dismissal. For how longshould they be employed? Employees would remain as long as they wish while satisfying
the standard conditions of employment. Those exercising this right could regard
guaranteed jobs as a temporary step towards higher paid employment in the market
sector.
The implications of a full employment policy are considerable. First, it would mean
greater use of labour and capital resources, as mentioned the single most significant
efficiency reform that could be implemented in Australia is the elimination ofunemployment. The direct financial benefits to the economy would be enormous; as
indicated, of the order of 10 per cent additional GDP every year. Second, it would mean
fewer fluctuations in aggregate economic activity. By legislation the government would
be forced to generate jobs for those who are made redundant by the private sector. Such a68situation would offer greater certainty for investors in the private sector since investment
decisions would be undertaken in an ongoing full employment economy. Third, theextent of exclusion, poverty and costs associated with unemployment will be significantly
reduced. It would be a policy that facilitated social inclusion rather than social exclusion.
Fourth, governments would have to approach other economic goals from a full
employment context, not, as currently, assume a given rate of unemployment and attempt
to stabilise prices or reduce the current account deficit at this unemployment rate. Full
employment would be the default setting for policy. Fifth, employers would be forced tocontemplate how to better utilise labour and how to raise labour productivity throughinvestment in machinery, technology and training. There would no longer be theemphasis upon cost cutting, lower wages and static efficiency gains associated withsurplus labour conditions.
The Job Guarantee is the synthesis between the right to work and a full employment
policy.
Industry studies
The Productivity Commission describes itself on its WWW Home Page as
the Australian Government’s independent research and advisory body on a rangeof economic, social and environmental issues affecting the welfare of Australians.
Its role, expressed simply, is to help governments make better policies in the longterm interest of the Australian community (Productivity Commission 2008).
It is recognised that in its present guise the Productivity Commission is an orthodox
economic rationalist body which has demonstrated hostility to the renewable energy
industry (for example, its attitude to the MRET system). However, if there is anappropriate political commitment to renewable energy substitution then the bureaucraticmachinery that supports the policy process has to be configured so that it delivers
appropriate evidence-based analysis.
The global reality that massive industry restructuring is required to seriously address theclimate change challenges thus requires a strategic approach in terms of industry policy.
In this case, the Productivity Commission should be used to spearhead the task ofunderstanding which industry initiatives will best serve the goals of the nationalinnovation system within the overall environmental challenges.
Changes to the tariff structure and related industry support schemes have to be designed
to encourage new investment in renewable technology which meets the environmental
goals.
The decision has to be made as to whether we will be a producer or an importer ofrenewable energy production technologies. The policy framework needs to be informedby research to ensure investments are made which best suit our mix of human and othercapital resources but still result in significant employment gains to the renewable energy
sector in the Hunter.
Tripartite understandings
For a transition to be effective the policy framework must include tri-partite
understandings between government (all levels), business and trade unions. The
69

environment urgency has to be shared and an investment strategy designed which provide
benefits to all.
Scale considerations
The initial scale of the renewable energy sector in the Hunter will be small. This makes it
hard to achieve the same cost efficiencies that are available to larger scale producers. This
problem has long been used to justify “infant industry” protection of industry.
A way of maximising the opportunities for local industry to grow in scale is to ensure
there is a long-term commitment to the products being products. Government must ensurethat the policy framework provides that long-term stability in the market environment
facing the new players.
Scale disadvantages can be overcome, in part, by adopting an export strategy. Provisionof first class public infrastructure including transport systems, port capacity andcommunication systems is crucial in this regard. Further, social infrastructure in the formof community development and adequate housing and recreation is required. Industry
clusters and skilled labour will be attracted to the Hunter if the State and Federal
governments work together to ensure this infrastructure is the best available.

706. Conclusion: When challenges and opportunities meet: a just transition
Concerns about the local environmental and social sustainability impacts of coal mining
and coal-fired electricity generation, have combined with concern about climate change
to focus the attention of many farmers, environmentalists, unionists and other residents ofthe Hunter region on the challenging issue of how to transform the region’s current coalindustry dependent economy to a more sustainable and climate-friendly economy.
A shift to sustainable renewable energy will have substantial benefits for the Hunterregion and will make the region and Australia a leader in the global fight against thethreat of climate chaos.
The shift would greatly assist the Hunter in diversifying its over-reliance on coal andrevitalise the region’s manufacturing industry.
The public health and environmental benefits are also substantial - such a move would
involve a significant reduction in pollutants from coal plants within the region.
The Federal government has some policies which could be a powerful catalyst forchange, but more needs more to be done in actively creating the regulatory and market
environment for a shift to renewable energy in the urgent timeframe necessary.
Initiatives are needed that specifically target coal dependent regions such as the Hunter toassist a transition to a renewable energy economy, so the people of the region are not left
behind in a carbon-constrained world. Skills development and training, income support,
job guarantees, compensation, research, and infrastructure investment are all critical to ajust transition. This transition will cost many millions, possibly billions of dollars, but ajust transition is not an exorbitant demand: it merely addresses the need for fair treatmentof coal communities, rather than welfare subsidies to coal corporations.
The Hunter region’s coal-fired electricity generation industry could be phased out
relatively quickly if government takes the initiative and investment is shifted toalternative clean energy technologies. The precise details of the process and timing oftransforming the Hunter economy from coal dependency requires further study.
However, this report shows that the energy security can be achieved in the Hunter and
NSW by investment in energy efficiency and renewable energy, with gas as an interimfuel. A switch to clean, energy-based economy in the Hunter, models what is possible
across Australia and globally. A transition to a renewable energy economy will provide
thousands of new Green jobs while protecting local and global environments. A justtransition can ensure that the costs of change do not fall on vulnerable workers andcommunities, but can help achieve genuine sustainability grounded in ecological healthand social justice for all.

71

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77Endnotes
1

The authors of this Report are Anthea Bill, Research Fellow, Centre of Full Employment and Equity,
University of Newcastle, Dr Riccardo Welters, Lecturer in Economics, James Cook University (formerly of
the Centre of Full Employment and Equity), Professor William Mitchell, Professor of Economics andDirector, Centre of Full Employment and Equity, University of Newcastle, in collaboration with private
consultants, Geoff Evans and Jay Rutovitz. See Terms of Reference for responsibilities for sections of theReport. The Report was commissioned by Greenpeace Australia Pacific who provided the researchers with
the Terms of Reference.

2

An annual decline of 8 per cent amounts to nearly 50 per cent employment reduction in the 7 year period.

3

Business as usual is taken as the medium electricity growth scenario from the 2007 Transgrid Annual
Planning Report (Transgrid. 2007), which has electricity growth of 1.6 per cent per annum.

4

Business as usual emissions (with current policy measures) are predicted to rise by 120 per cent by 2020
from 1990 levels of 554 million tonnes (665 million tonnes). A 40 per cent reduction relative to 1990
would equal emissions of 330 million tonnes.

5

NFFE (2003) preliminary modelling looked at 3 year and 6 year payback periods. Subsequent work
(EMET 2004 and GWA 2004) looked at 4 and 6 year paybacks in the residential sector, but did not allow
combined payback, so that individual measures with longer than 6 years were disallowed. EMET (2004)
looked at combined 6 year paybacks for the commercial sector, and Energetix (2004) looked at combined 4
year paybacks in the industrial sector. The 4 year payback uses the later work, with the percentage applied
to 2020 BAU sectoral energy use. The only deviation is that the commercial sector savings include half ofthe business as usual savings in the commercial energy use anticipated in EMET, as these have notoccurred to date. The 6 to 9 year payback for residential and commercial energy uses the NFFE (2003)
assessment for high energy efficiency potential, adjusted downwards to preserve the same ratio as between
the NFFE (2003) 3 year projected savings and the later work. Industrial energy efficiency has used theEnergetix (2004) savings for 1-4 year payback projected to 9 years.

6

The business as usual growth in electricity consumption in aluminium smelting is taken as 6.1 per centbetween 2005 and 2020, from ABARE (2007).

7

MWp refers to peak megawatt capacity of a plant under consideration, which is the chief determinant of
installation employment (it will be no less labour intensive to install solar in a less sunny spot, forexample). However comparing employment according to MWp may be misleading, as actual generation
varies considerably according to technology. Actual generation is determined by the capacity factor (CF) of
the plant, where CF = (nameplate generation in MW x total hours in the year) / actual generation in MWh.
A coal power plant may have a capacity factor of 80 per cent (and be closed for maintenance the other 20
per cent of the time), a residential solar array in Australia will have on average a CF of 15 per cent, while
Australian wind farms have average CF of 35 per cent. MWa equals MWp multiplied by the capacity factor
for that technology.

78