The need to stimulate the economy and grow a Green Collar Workforce is undeniable.  In fact, one of the topics discussed in this week's State of Green Business Forum was the current condition of the green job market.  The press has spent many thousands of words writing about the stimulus package up for vote now and the previous administration's bail out package.  What hasn't been detailed is exactly how some of this spending creates actual green jobs.  There are many pieces to this puzzle some of which are a qualified workforce, the opportunity, funding and the technology required to solve these problems.  I'm sure there are many examples that can be detailed in this manner, but I hope this specific case helps the public understand how the money flows from this spending down to our local economy.

The Workforce

It's no secret that the real estate slump has caused hardship in the construction and contracting industry.  At Electrical Marketplace, the sponsor of the Relight with T5 initiative, we have been in a position to witness the impact this downturn has had on many of our electrical contractor customers.  We've seen first hand how large organizations have been forced to cut jobs and are surviving on a fraction of the projects they once had.  These are motivated workers that have the necessary skills to become part of the green collar workforce.  The next piece to the puzzle is the funding.

The Funding

In 2005, the federal government initiated the Energy Policy Act which provided tax incentives for companies that reduced their energy demand in existing buildings or built energy efficiency into new buildings.  These incentives were set to expire at the end of 2008, but one of the many items in the last administration's bail out package extended the incentive until the end of 2013. These incentives allow for companies to write off the total cost of energy efficient projects up to a maximum of $1.80 per square foot and the deduction would not be subject to recapture when these assets were sold.  Since our sample workforce is made of of electrical contractors, I'll focus on the $0.60 per square foot that is available for lighting upgrades.  This provides the funding albeit as a deduction on taxable income.  Despite the fact that these incentives have been in place for years, very few companies have taken advantage of them.  The consensus is that building owners were either not aware these benefits existed or were not sure of how to apply for the tax deductions. Next I'll detail the size of the opportunity for a specific industry.

The Opportunity

Armstrong & Associates, a supply chain market research and consulting firm, estimates there are approximately 5 billion square feet of warehouse space in the US.  A conservative estimate of the percentage of these facilities that have implemented lighting retrofit projects and taken advantage of these tax benefits is only 25%.  The actual numbers are likely closer to 5%, but for the sake of this illustration, we'll go with the higher number.  This means that 3.75 billion square feet are still burning away their profits with old lighting technology.  The chart below breaks down how this figure translates into actual man-months of labor to replace the inefficient lighting with newer T5HO lighting fixtures.

The Money Flow

So now that we know that there is work to be done, how does the money flow?   Well, in this example, it's quite simple. A building owner or tennant recognizes the need for a retrofit and either consults with an energy services company or calls in a contractor.  The project is designed and materials purchased.  The material cost alone for the warehouse example is $1.1 billion which is paid to distributors (local) and eventually manufacturers (national) of the products.  Installation begins which brings in the workforce we identified earlier.  The cost of installation is approximately $360 million, which is paid to contractors and eventually trickle down to equipment leasing companies and other support personnel in local communities.  Industry now has paid out a total of $1.46 billion to retrofit all of these buildings.  If properly designed, these retrofit projects are eligible for up to $2.25 billion in tax deductions for the cost of these projects. This shows that even if the numbers are off, there is still ample room to be able to take the full tax deduction for these projects if the numbers are higher.  This also does not consider the many rebates and incentives put in place by local utilities and state governments to spur energy efficiency in our buildings.

This example only includes warehouse space, which only accounts for 7% of commercial and industrial space in the country.  The total opportunity is much larger than what is outlined above.  We also don't discuss the work it would take to retrofit the HVAC and building envelope systems of these buildings which are eligible for another $1.20 per square foot deduction.  It's clear that our new green workforce can continue to apply its trade for years to come.

Since our new green workforce is working to make these buildings up to 50% more energy efficient, this has a direct impact on the cost of operating these buildings.  In our warehouse example, these projects can reduce operating costs by $550 billion dollars per year.  That is $211 million per hour of operation!  This half trillion dollars would be free to be spent on other projects or could pay for new jobs or expansion.

Green Benefits

What makes this a truly green workforce is the impact they have on the environment. Since the numbers for the entire segment get so huge, I've summarized the benefits to the environment below in terms of the reduction of emissions per hour of operation. Keep in mind that the average warehouse operates at least 2,600 hours per year. This data comes from the Texas State Energy Conservation Office's online Electric Power Pollution Calculator.

The total return on investment for just this portion of the stimulus and bailout packages is astronomical.  I would love to hear your comments on this analysis or other examples of how all of this government spending is helping to grow our economy.