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NET NATIONAL EMPLOYMENT RESULTS

Net national employment impacts from water heater standards are defined as net jobs created or

eliminated in the general economy as a consequence of: (1) reduced spending by end users on

energy (electricity, gas, oil and lpg); (2) reduced spending on new equipment by the energy

companies; (3) increased spending on the purchase price of new water heaters; (4) increased

spending on the installation of new water heaters; and (5) the associated indirect effects of those

four factors throughout the national economy. Figure 1 shows the estimated net national

employment impacts of four different trial standard levels. These trial standards are discussed in

greater detail in the Life-Cycle Cost and National Energy Savings Results sections. Figure 1

shows, for any given year, the change in the number of jobs in the economy relative to the case if

there were no change of standard (And hence no resulting change in spending and cash flow

patterns throughout the economy).

Net National Employment Impacts

40 - * -- -

._ Tnal Standard 1

s Trial Standard 2

30 -aTrial Standard 3

Trial Standard 4

o o -

-20

-10______________-___________

2000 2005 2010 2015 2020 2025 2030

Year

Figure 1

To develop these results we used an input/output model of the U.S. economy to estimate the

effects on different major sectors of the U.S. economy most relevant to buildings and their net

impact on jobs. The model, ImBuild, was developed for the Office of Building Technology,

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State and Community Programs.' ImBuild (which stands for Impact of Building Energy

Efficiency Programs) was created by the Pacific Northwest National Laboratory (PNNL) as a

special-purpose version of the IMPLAN national input-output model. It was developed to

estimate the employment and income effects of building energy technologies. In comparison

with simple economic multiplier approaches, ImBuild allows for more complete and automated

analysis of the economic impacts of energy efficiency investments in building. ImBuild is also

easier to use than existing macroeconomic simulation models.

ImBuild is written in Visual Basic and Excel 7.0. ImBuild takes user-supplied input and

estimates employment effects at the national level. It uses a 35-sector model of the national

economy to model the economic impacts of residential and commercial buildings technologies.

It has a user-friendly, menu-driven front end to facilitate user inputs.

Energy efficiency technology affects the activity level of the U.S. economy through three primary

mechanisms. First, if the incremental costs of the new technology per installed unit are different

from those of the conventional technology, changes in the level of purchases will occur in the

sectors involved in manufacturing, distribution, and installation for both technologies, changing

the overall mix of economic activity. Second, depending on how the efficiency investment is

financed, it may "crowd out" other domestic savings, investments, and consumer spending,

somewhat reducing overall economic activity. Third, energy expenditures are reduced. On one

hand, this reduction lowers final demand in the electric and gas utility sectors (and the fuel oil

production and distribution sector as well), as well as the trade and services sectors that provide

maintenance, parts, and services for these sectors. On the other hand, it increases net disposable

income of households and increases general consumer spending in all sectors (including some

increases in expenditures for electric and gas utility services and retail trade and services).

ImBuild addresses these mechanisms by collecting estimates of the initial investments, energy

savings, and economic activity associated with spending of the savings (increases in final

demand in personal consumption, business investment, and government spending), and provides

overall estimates of the increase in national output for each input-output sector. Then, the model

applies estimates of employment and wage income per dollar of economic output for each sector

and calculates impacts on national employment and wage income.

ImBuild calculates the total effect on employment, including job creation or deletion in the

manufacturing sector. Direct employment impacts, those that would occur at water heater

manufacturing plants, are discussed in the Manufacturer Impact Analysis section. 2

'Pacific Northwest National Laboratory (PNNL). 1998. ImBuild: Impact of Building Energy Efficiency

Programs. Prepared for the U.S. Deparment of Energy under Contract DE-AC06-76RLO 1830. Pacific Northwest

National Laboratory, Richland, Washington.

2The direct employment impacts will be based on direct interviews and output from a spreadsheet model

called GRIM.

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Figure 1 shows the cumulative net increase or decrease in jobs for each year to the year 2030.

The greatest number of jobs is created for trial standard level three; in this case there would be

15,100 more jobs in 2030 than if there was no efficiency standard implemented. Trial standard

level four follows closely with a net gain of 13,900 jobs.

Jobs are created when a water heater standard results in operating cost savings that more than

offset the greater cost of a more efficient water heater. Energy (lower operating costs) are based

on the difference in energy consumption between a trial standard level case and the base case.

There are two basic reasons why energy cost savings (driving job creation) increase after a

standard is implemented: (1) households buy higher efficiency water heaters as compared to the

base case scenario and (2) the total number of water heaters in the country increase over time

generating a greater potential for energy savings. These water heaters are bought by buyers, who

would have bought a lower efficiency water heater if a higher efficiency standard were not

implemented.

Figure 1 can be divided into three general sections:

1) In the first few years of a new standard the increased costs of buying more efficient water

heaters are greater than the dollar savings in energy. In Figure 1, this is reflected as a net

decrease in jobs for all of the trial standard levels, except trial standard level one.

2) Once the initial costs are recovered by energy savings, the dollars saved in expenditures on

energy are available to buy other goods in the economy, thereby increasing jobs. The net national

employment curve is steepest for the first dozen years (the lifetime of a water heater) during

which time there is both a growth in the total stock of water heaters as well as an increase in the

saturation of water heaters of higher efficiency.

3) After 2015, even though the total stock water heaters continues to increase, the growth in net

employment tapers off because at that point all of the water heaters being replaced in the

standards case are replacing water heaters that are already high efficiency (instead of replacing a

baseline heater with a high efficiency heater).

The impact on jobs has been disaggregated the component effects. Figures 2, 3, and 4 show the

impact on jobs of consumer energy savings by fuel type. When more consumers save money by

using efficient water heaters, they have more money to spend on other more labor-intensive

sectors of the economy and this results in a net increase in jobs.

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Employment Impacts of Consumer Savings for Electricity

,0 Trial Standard 1

.. Tridal Standard 2

30 __ Trial Standard 3__

..... Tral Standard 4

20 _ _

'A

2000 2005 2010 2015 2020 2025 2030

Year

Figure 2

The employment impacts of consumer savings on electricity are largest for trial standard level

negative employment impacts from consumer spending.

gas by 2030 leads to a projected cumulative increase of 33,000 jobs. This is shown in figure 3.

1.1% ofthe amount spent on gasand 0.5% ofthe amount spent electricity. on Savings for all

trial standard levels are correspondingly smaller as well, so the impacts on employment are much

smaller. The largest cumulative jobincrease by 2030 is 600 jobs under trialstandard level four.

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Employment Impacts of Consumer Savings for Gas

40

_ . Tral Standard 1

._. Tral Standard 2

30 _-_Trial Standard 3 __ _ -_-_' _ "

..2Trial Standard 4 -

e. I 20

3 C I

o __ _=-*'x-_-_'_ 

1

_--' - --

0

-10

-20 -- i

2000 2005 2010 2015 2020 2025 2030

Year

Figure 3

Employment Impacts of Consumer Savings for Oil

40

-,+Tal Standard 1

-- Trial Standard 2

30 -_BTrial Standard 3

....... Trial Standard 4

20

I C I

0 10 _____ __

0 0 I

-10

-20 ___ _ 

2000 2005 2010 2015 2020 2025 2030

Year

Figure 4

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Figure 5 below, shows the employment impacts due to the increased first cost of more efficient

water heaters. This higher first cost is reflected in the decrease in jobs shown in Figure 5.

Because manufacturing is capital intensive there is less investment capital available for other

purposes.

Employment Impacts of Increase in Water Heater Price

40 r - ---- Trial Standard 1

-Trial Standard 2

30 - -Trial Standard 3

._ Trial Standard 4

-20 - ----------------------- __._---__ ____-- -_-----_______-

20 'O

10

2000 2005 2010 2015 2020 2025 2030

Year

Figure 5

' 0

There is a significant increase in installation costs. It approaches one third of the incremental

-10 --

costs for trial standard level four. However the impact onjobs is surprisingly small. Cumulative

2000 2005 2010 2015 2020 2025 2030

Year

Figure 5

There is a significant increase in installation costs. It approaches one third of the incremental

water heater costs under trial standard level three and almost 40% of the incremental water heater

costs for trial standard level four. However the impact on jobs is surprisingly small. Cumulative

job increase because of installation costs in 2030 is projected to be 230 jobs for trial standard

level three and 670 jobs for trial standard level 4. This is shown in figure 6. The scale in figure

6 is the same as the other employment impact charts to show the relative size of this impact.

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Employment Impacts of Increase in Installation Cost

4 0 . ..... ............ ............... . . ........... ................................. .......................................................... .................. ............................................................................. ...

Tnrial Standard 1

- Trial Standard 2

30 _ --- Trial Standard 3

_ Trial Standard 4

20

Ut

-0 -

-10 --

-20 - ---- -- -------------------- J

2000 2005 2010 2015 2020 2025 2030

Year

Figure 6

Figures 7 and 8 below show the decrease in employment due to energy savings. When

consumers use less energy, the electricity and gas utilities (and fuel oil production and delivery

companies) have a relative reduction in revenue. Revenue loss by energy companies, results in

lower employment in these sectors.

The employment impacts on electric and gas utilities are very small, with trial standard level four

showing hardly any impact on electric utilities, but a relatively large impact on gas utilities due to

the switch in water heater fuel choice. The impact on utility employment due to fuel oil savings

is negligible and is not shown.

The energy savings for each of the fuel sources are shown in the National Energy Savings results.

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Employment Impacts of Electricity Savings on Utilities

40

_, Trial Standard 1

-- TriTal Standard 2

30 -_.Trial Standard 3__ ____

... Tial Standard 4

20

0o 10

I-I

.0

0

010

-20

2000 2005 2010 2015 2020 2025 2030

Year

Figure 7

Employment Impacts of Gas Savings on Utilities

40 - S __ 

,. Trial Standard 1 I

.-TriTal Standard 2

30 _._+Trial Standard 3 ___

.... Trial Standard 4

20

0 o 10

-10 _---- e -- - _- ______-___----

-20

2000 2005 2010 2015 2020 2025 2030

Year

Figure 8

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