# 77W NET NATIONAL EMPLOYMENT RESULTS Net national employment impacts from water heater standards are defined as netjobs 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 bythe energy companies; (3) increased spending on the purchase price ofnew waterheaters; (4) increased spending on the installation ofnew water heaters; and (5) the associated indirect effects ofthose four factors throughout the national economy. Figure 1shows the estimated net national employment impacts offour 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 givenyear, the change in the number of jobs inthe economy relative to the case if there were no change ofstandard (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

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2000 2005 2010 2015 2020 2025 2030 Year Figure 1 To develop these results we used an input/output model ofthe U.S. economy to estimate the effects on different major sectors ofthe U.S. economy mostrelevant tobuildings and their net impact onjobs. The model, ImBuild, was developed for the Office ofBuilding Technology,
C:\WINDOWS\TEMP\whjobs.wpd 1 June 14, 1999State and Community Programs.' ImBuild (which stands for Impact ofBuilding Energy Efficiency Programs) was created by the PacificNorthwest National Laboratory (PNNL) as a special-purpose version ofthe IMPLAN national input-output model. It was developed to estimate the employment and income effects ofbuilding energy technologies. In comparison with simple economic multiplier approaches, ImBuild allows for more complete and automated analysis ofthe economic impacts ofenergy efficiency investments inbuilding. ImBuild is also easier touse than existing macroeconomic simulation models. ImBuild is written in Visual Basic and Excel 7.0. ImBuild takes user-supplied input and estimates employment effects atthe national level. It uses a 35-sector model ofthe national economy to model the economic impacts ofresidential and commercial buildings technologies. It has a user-friendly, menu-driven front end to facilitate user inputs. Energy efficiency technology affects the activity level ofthe U.S. economy through three primary mechanisms. First, ifthe incremental costs ofthe newtechnology per installed unit are different from those ofthe conventional technology, changes in the level ofpurchases will occur in the sectors involved in manufacturing, distribution, and installation forboth technologies, changing the overall mix ofeconomic activity. Second, depending on howthe 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 aswell), as well asthe trade and services sectors that provide maintenance, parts, and services for these sectors. On the otherhand, itincreases net disposable income ofhouseholds 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 bycollecting estimates ofthe initial investments, energy savings, and economic activity associated with spending ofthe savings (increases in final demand inpersonal consumption, business investment, and government spending), and provides overall estimates ofthe increase in national output foreach input-output sector. Then, the model applies estimates ofemployment and wage income per dollar ofeconomic output for each sector and calculates impacts on national employment and wage income. ImBuild calculates the total effect on employment, includingjob creation or deletion in the manufacturing sector. Direct employment impacts, those that would occur at waterheater manufacturing plants, are discussed in theManufacturer Impact Analysis section.2 'Pacific Northwest National Laboratory (PNNL). 1998. ImBuild:Impactof Building EnergyEfficiency Programs. Prepared for the U.S. Deparment ofEnergy under Contract DE-AC06-76RLO 1830. Pacific Northwest National Laboratory, Richland, Washington. 2The direct employment impacts will be based on direct interviews andoutput from a spreadsheet model called GRIM. C:\WINDOWS\TEMP\whjobs.wpd 2 June 14, 1999Figure 1 showsthe cumulative net increase or decrease injobs for eachyear tothe year 2030. The greatest number of jobs is created for trial standard level three; in this case there would be 15,100 morejobs in 2030 than ifthere was no efficiency standard implemented. Trial standard level four follows closely with anet gain of 13,900jobs. Jobs are created when a waterheater standard results in operating cost savings that more than offset the greater cost ofa more efficient water heater. Energy (lower operating costs) are based on the difference in energy consumption between atrial standard level case and the base case. There are two basic reasons why energy cost savings (drivingjob 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 ofwater 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 alower efficiency water heater ifahigher efficiency standard were not implemented. Figure 1can be divided into three general sections: 1) In the first few years ofanew standard the increased costsofbuying more efficient water heaters are greater than the dollar savings in energy. InFigure 1,this is reflected as anet decrease injobs for all ofthe 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 tobuy other goods in the economy, thereby increasingjobs. The netnational employment curve is steepest forthe first dozen years (the lifetime ofawater heater) during which time there isboth a growth in the total stock ofwater heaters aswell as an increase in the saturation ofwater heaters ofhigher efficiency. 3) After 2015, even though the total stock water heaters continues to increase, the growth in net employment tapers offbecause atthat point all ofthe water heaters being replaced in the standards case arereplacing water heaters that are already high efficiency (instead ofreplacing a baseline heater with ahigh efficiency heater). The impact onjobs has been disaggregated the component effects. Figures 2, 3, and 4 show the impact onjobs ofconsumer energy savings by fuel type. When more consumers save money by using efficient waterheaters, they have more money to spend on othermore labor-intensive sectors ofthe economy and this results in a netincrease injobs.

C:\WINDOWS\TEMP\whjobs.wpd 3 June 14, 1999Employment Impacts ofConsumer Savings for Electricity ,0 Trial Standard 1

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2000 2005 2010 2015 2020 2025 2030
Year Figure 2 The employment impacts ofconsumer savings on electricity are largest for trial standard level negative employment impacts from consumer spending.
gas by 2030 leads to aprojected cumulative increase of33,000jobs. This is shown in figure 3. 1.1% ofthe amount spent on gasand 0.5% ofthe amount spent on electricity. Savings for all trial standard levels are correspondingly smaller aswell, so theimpacts on employment are much smaller. The largest cumulativejobincrease by 2030 is 600jobs under trialstandard level four.

C:\WINDOWS\TEMP\whjobs.wpd 4 June 14, 1999Employment Impacts ofConsumer Savings for Gas 40

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2000 2005 2010 2015 2020 2025 2030 Year Figure 3 Employment Impacts ofConsumer Savings for Oil 40 -,+Tal Standard 1

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-20 _ ___ 2000 2005 2010 2015 2020 2025 2030 Year Figure 4 C:\WINDOWS\TEMP\whjobs.wpd 5 June 14, 1999Figure 5below, shows the employment impacts due to the increased first cost ofmore efficient waterheaters. This higherfirst cost is reflected in the decrease injobs 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
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2000 2005 2010 2015 2020 2025 2030 Year Figure 5

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There is a significant increase in installation costs. It approaches one third ofthe 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 ofthe incremental water heater costs under trial standard level three and almost 40% ofthe incremental water heater costs for trial standard level four. However the impact onjobs is surprisingly small. Cumulative job increase because ofinstallation costs in 2030 is projected to be 230jobs fortrial standard level three and 670jobs fortrial 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 ofthis impact.

C:\WINDOWS\TEMP\whjobs.wpd 6 June 14, 1999Employment Impacts of Increase in Installation Cost 40 . ..... ............ ............... . . ........... .......................... ....... .......................................................... ....

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2000 2005 2010 2015 2020 2025 2030 Year Figure 6 Figures 7 and 8below show the decrease in employment due to energy savings. When consumers use less energy, the electricity and gas utilities (and fuel oilproduction and delivery companies) have arelative reduction in revenue. Revenue loss by energy companies, results in lower employment inthese 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 arelatively 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 ofthe fuel sources are shown in theNational Energy Savings results.

C:\WINDOWS\TEMP\whjobs.wpd 7 June 14, 1999Employment Impacts of Electricity Savings on Utilities 40
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2000 2005 2010 2015 2020 2025 2030 Year Figure 7 Employment Impacts of Gas Savings on Utilities 40 - __ S
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2000 2005 2010 2015 2020 2025 2030 Year Figure 8 C:\WrNDOWS\TEMP\whjobs.wpd 8 June 14, 1999