Onshore Wind Direct & Wider Economic Impacts May 2012 RenewableUK is the trade and professional body for the UK wind and marine renewables industries. Formed in 1978, and with 595 corporate members, RenewableUK is the leading renewable energy trade association in the UK. Wind has been the world’s fastest growing renewable energy source for the last seven years, and this trend is expected to continue with falling costs of wind energy and the urgent international need to tackle CO2 emissions to prevent climate change. In 2004, RenewableUK expanded its mission to champion wave and tidal energy and use the Association’s experience to guide these technologies along the same path to commercialisation. Our primary purpose is to promote the use of wind, wave and tidal power in and around the UK. We act as a central point for information for our membership and as a lobbying group to promote wind energy and marine renewables to government, industry, the media and the public. We research and find solutions to current issues and generally act as the forum for the UK wind, wave and tidal industry, and have an annual turnover in excess of four million pounds. This report has been produced by BiGGAR Economics for DECC and RenewableUK. Contents 1. Introduction 1 2. Summary of Report 3 3. Economic Linkages 10 4. Direct and Supply Chain Economic Impact of UK Onshore Wind in 2011 23 5. Potential Direct and Supply Chain Impacts to 2020 30 6. Wider Impacts 40 7. Exchequer Impacts 46 8. Summary of Employment Impacts 49 9. Appendix A – Methodology 51 10. Appendix B – Literature Review 60 11. Appendix C – Consultees 66 12. Appendix D – Case Study Data Collected 68 13. Appendix E – Consultation Issues 75 14. Appendix F - Case Studies 77 1 Introduction This report presents research undertaken by BiGGAR Economics on behalf of RenewableUK and the Department of Energy and Climate Change (DECC) to assess the direct and indirect economic impacts of the commercial onshore wind sector in the UK in the decade to 2020. 1.1 Background The onshore wind sector in the UK has grown significantly over the last decade and in particular over the last five years. Further increases are expected in onshore wind energy deployment over the course of the decade in order to meet the UK’s 2020 renewable energy commitments and longer-term energy security and low carbon goals. While renewable energy has been identified as a key sector for the future prosperity of the UK economy by the UK Government1, the focus has often been on offshore renewables and on the next generation of technologies (such as wave and tidal devices). The assumption that has often been made is that a significant proportion of the economic impact associated with onshore wind will occur overseas, for example, in countries with well-developed onshore wind turbine manufacturing sectors such as Denmark and Germany. The experience of many local economies over the last few years however, demonstrates that the economic impact of onshore wind deployment can be significant in terms of direct, supply chain and wider economic effects. This report considers the scale of these effects in the UK to date and the potential contribution of the onshore wind sector to future economic growth in the period to 2020. The focus of the study is on the economic impacts of the commercial onshore wind sector i.e. gross value added (GVA) and jobs2. 1.2 Study Objectives The overall objective of the research was to: Provide stakeholders with an evidence base detailing the scale and range of impacts that flow from onshore wind developments at the local, regional and national level and the influencing factors on this impact up to 2020. In order to achieve this, the aims of the research were to: • identify the range of direct and indirect economic impacts that flow from onshore wind developments at the local, regional and national level for each stage of onshore wind farm development; • identify the factors that influence the magnitude of economic impacts at the local, regional and national levels; • project the potential impacts to 2020; • identify factors that influence investment decisions; • provide an overview of key companies in the UK supply chain; and 1 See, for example, Department of Energy and Climate Change, UK Renewable Energy Roadmap, 2011 2 The study does not consider either environmental impacts or the impacts associated with domestic micro generation. Onshore Wind: Direct & Wider Economic Impacts 1 • inform discussions around onshore wind specifically and energy policy more generally. 1.3 Structure This report is structured as follows: • chapter 2 provides a summary of the report findings; • chapter 3 discusses the economic linkages associated with the UK onshore wind sector; • chapter 4 describes the baseline direct and supply chain economic impact of the UK onshore wind sector; • chapter 5 presents a scenario analysis, which considers the potential direct and supply chain economic impact of the onshore wind sector in the UK to 2020; • chapter 6 discusses, and where possible quantifies, wider impacts of the onshore wind sector on the UK economy and on local and regional economies; • chapter 7 summarises the current and potential future contribution of the sector in local and national taxation; • chapter 8 summarises the quantifiable direct, supply chain and wider economic impacts in employment terms; • Appendix A provides a methodology, including a description of the research undertaken and the analysis of data gathered from the research programme; • Appendix B summarises a review of existing relevant literature on the economic contribution of the onshore wind sector; • Appendix C lists the organisations consulted during this research; • Appendix D contains details of the information requests made to developers and operators included in the case studies; • Appendix E contains details of the topics discussed during the consultation programme; • Appendix F contains details of the project case studies used in this study. Onshore Wind: Direct & Wider Economic Impacts 2 2 Summary of Report 2.1 Background The onshore wind sector in the UK has grown significantly over the last decade and further significant increases are expected over the course of the coming decade in order to meet the UK’s 2020 renewable energy commitments and longer-term energy security and low carbon goals. While renewable energy has been identified as a priority by the UK Government3, it is often assumed that a significant proportion of the economic impact associated with onshore wind will occur in countries with well-developed onshore wind turbine manufacturing sectors such as Denmark and Germany. This assumption does not however reflect the experience of many local economies throughout the UK over the last few years, which have experienced significant direct, supply chain and wider economic benefits from onshore deployment. Although a variety of research has been undertaken into the actual and potential economic impact of the renewable energy sector, to date there has been no comprehensive study that quantifies the impacts of onshore wind deployment in the UK. In early 2012, RenewableUK and the Department for Energy and Climate Change (DECC) appointed BiGGAR Economics to address this knowledge gap. 2.2 Methodology The key research tools used to inform the study were: • a review of existing published literature about the economic impact of the onshore wind sector; • a review of available information about current and planned deployment of onshore wind capacity; • case studies of 18 existing wind farm projects across the UK; • a programme of consultations with key companies involved in the UK onshore supply chain; and • the development of an economic model to estimate the economic impacts of the onshore wind sector in the UK as well as regionally and nationally between 2011 and 2020. The development of the study methods was also informed by BiGGAR Economics’ experience of undertaking economic impact studies of a wide range of sectors, investments and public sector interventions including particular experience of undertaking socio-economic impact assessments of onshore wind energy projects for both developers and public sector agencies. This experience includes providing expert witness to several onshore wind farm public inquiries and hearings and to parliamentary inquiries. 2.2.1 Literature Review The first step in this study was to review existing published research about the economic contribution of the wind energy sector in the UK in order to identify any relevant evidence and information. While many reports on the sector have been 3 See, for example, Department of Energy and Climate Change, UK Renewable Energy Roadmap, 2011 Onshore Wind: Direct & Wider Economic Impacts 3 published in the UK and elsewhere, there are few with robust assessments of economic impacts. However, some reports were identified that were relevant to this study. These studies informed the development of the model used to estimate the economic impact of onshore deployment in the UK and of the scenarios for future deployment. In particular, the deployment scenarios considered in this study were taken from the UK Renewable Energy Roadmap 2011 and the 2010 National Renewable Energy Action Plan. Job creation estimates were calculated in the economic impact model and cross-referenced against RenewableUK’s Working for a Green Britain report. The analysis of the wider economic impacts also considered available evidence on the impact of onshore wind on the tourism sector. 2.2.2 Current Deployment of Wind Energy in the UK In order to estimate the economic impact of onshore wind deployment, it was first necessary to understand how much installed capacity there currently is across the UK and how much is under construction or being planned. This was achieved through an analysis of a the wind energy database maintained by RenewableUK, which showed that, in January 2012, onshore wind farms contributed 4.5GW of operational installed capacity in the UK4.