Green Jobs: Prospects for creating jobs from offshore wind in the UK

8/14/2019 Green Jobs: Prospects for creating jobs from offshore wind in the UK

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GreenJobs:Prospectsforcreatingjobsfrom

offshorewindintheUK

byJennyBird

April2009

ippr2009

InstituteforPublicPolicyResearchChallengingideas Changingpolicy

WWW.IPPR.ORG


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ippr|GreenJobs:ProspectsforcreatingjobsfromoffshorewindintheUK2

Acknowledgements ............................................................................................................... 3

Abbreviations......................................................................................................................... 4

Foreword................................................................................................................................ 5

Executivesummary................................................................................................................ 7

Introduction......................................................................................................................... 11

1.Offshorewindandemployment ..................................................................................... 12

Whyoffshorewind? ........................................................................................................ 12

Theopportunity:jobcreationfromexpandingUKoffshorecapacity............................ 14

OpportunitiesforandbarrierstoUK-basedjobsinoffshorewind ................................ 16

2.Creatingjobslessonsfromtheonshorewindindustry................................................ 22

Denmark.......................................................................................................................... 22Germany.......................................................................................................................... 23

Spain .............................................................................................................................. 23

LessonsfordevelopinganoffshorewindindustryintheUK ........................................ 24

3.Securingthedomesticmarket ........................................................................................ 26

Economicsupportmechanism........................................................................................ 26

Removingbarrierstodeliveringoffshorecapacity ......................................................... 28

Maximisingmarketsize................................................................................................... 31

4.Industrialactivism............................................................................................................ 33

Whatisindustrialactivism?........................................................................................... 33

Measurestosupportoffshorewind................................................................................ 34AnoffshorewindinwardinvestmentprogrammefortheUK ........................................ 38

5.Skills................................................................................................................................. 40

Closingtheskillsgap ...................................................................................................... 41

Training .......................................................................................................................... 42

Attractingtheworkforce................................................................................................. 43

6.Conclusionsandpolicyrecommendations ...................................................................... 44

Overcominguncertaintytodeliveroffshorewindcapacity ............................................ 44

Assistingsupply-chaindevelopment .............................................................................. 45

Maximisingthepotentialforjobcreation....................................................................... 46

Summaryofrecommendations ....................................................................................... 49

References ........................................................................................................................... 51

AnnexI:Listofinterviewees ............................................................................................... 56

AnnexII:IPC,NPSandRoundThreetimetables ................................................................ 57

AnnexIII:ExistingfundingsupportintheUK .................................................................... 58

Contents


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TheInstituteforPublicPolicyResearch(ippr)istheUKsleadingprogressivethinktank,

producingcutting-edgeresearchandinnovativepolicyideasforajust,democraticand

sustainableworld.

Since1988,wehavebeenattheforefrontofprogressivedebateandpolicymakinginthe

UK.Throughourindependentresearchandanalysiswedefinenewagendasforchangeand

providepracticalsolutionstochallengesacrossthefullrangeofpublicpolicyissues.

WithofficesinbothLondonandNewcastle,weensureouroutlookisasbroad-basedas

possible,whileourinternationalandmigrationteamsandclimatechangeprogrammeextend

ourpartnershipsandinfluencebeyondtheUK,givingusatrulyworld-classreputationfor

highqualityresearch.

ippr,30-32SouthamptonStreet,LondonWC2E7RA.Tel:+44(0)2074706100E:

[email protected]

ThispaperwasfirstpublishedinApril2009.ippr2009

Aboutippr

Acknowledgements

TheInstituteforPublicPolicyResearch(ippr)wouldliketothanktheGreenpeace

EnvironmentTrustandtheEnvironmentAgencyforfundingthisproject,withoutwhose

support,thisprojectcouldnothavehappened.

Thefindingsofthisresearchare,however,theresponsibilityoftheauthoraloneanddonot

necessarilyrepresenttheviewsofourfundingpartnersoranyotherindividualororganisationinvolvedintheproject.

Theauthorwouldliketothankalloftheindividualswhowillinglygaveuptheirtimetotake

partininterviewsforthisproject.Shewouldalsoliketothankthefollowingpeoplefor

providingguidance,comments,adviceandsupportthroughouttheproject:DougParr,Rob

Sauven,GordonEdge,PhilipWolfe,DaveElliott,CatherineMitchell,andcolleaguesfrom

ippr:MatthewLockwood,SimonRetallack,AndrewPendleton,KayteLawton,TonyDolphin,

SarahMulleyandCareyOppenheim.ThanksalsotoGeorginaKyriacouforsteeringthereport

throughthepublicationprocess.

Anyomissionsorerrorsremaintheauthorsown.


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BERR DepartmentforBusiness,EnterpriseandRegulatoryReform

BWEA BritishWindEnergyAssociation

CO2 Carbondioxide

DECC DepartmentofEnergyandClimateChange

DIUS DepartmentforInnovation,UniversitiesandSkills

EU EuropeanUnion

EWEA EuropeanWindEnergyAssociation

GW Gigawatt

IPC InfrastructurePlanningCommission

kWh Kilowatthour

MW Megawatt

NaREC NewandRenewableEnergyCentre

NPS NationalPolicyStatement

O&M Operationandmaintenance

R&D Researchanddevelopment

RD&D Research,designanddevelopment

RDA RegionalDevelopmentAgency

RO RenewablesObligation

ROC RenewablesObligationCertificate

STEM Science,Technology,EngineeringandMathematics

UKTI UKTradeandInvestment

WTO WorldTradeOrganisation

Abbreviations


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governmentrefinancing1.Thisisthesortofprioritisationthatcangiveconfidenceto

potentialinvestorsfromtheprivatesectorthattheGovernmentmeansbusiness.

BothPrimeMinisterGordonBrownandSecretaryofStateforEnergyandClimateChange

EdMiliband,havemadeitclearthatgreenjobsarepartoftherecoveryplanfortheUK.

ButiftheUKistobenefitfromthejobsthat30GWofoffshorewindwouldgeneratethenweneedurgentactionnow.LookingtowhatGermanyhasachievedoffersgreat

encouragementtherearealready250,000jobsinitsrenewableenergysectorandthe

Germangovernmentexpectsthatnumbertotripleby2020andhit900,000by2030 2.

Weneedrenewableenergytoplayapivotalroleincreatingasustainableeconomyfor

theUK.Wehaveambitioustargetsbut,asthisreportoutlines,therearesignificant

policyandpracticalissuestobedealtwithbeforedeliverycanbeassured.Theeffortsto

startarecoveryfromthecurrenteconomicdownturnprovideanopportunityfortheUK

togetitsshareofthebenefitsofthisrenewablerevolution,butandthisisespecially

keyforoffshorewindsuccessdemandsthatfinancialsupportandanewpolicy

frameworkmustbefocusedonmakingsurewedeliveronourrenewabletargets.

JohnSauven,ExecutiveDirector,Greenpeace

1.NewEnergyFinancenewsletter,24February2009

2.GermanySaysGreenJobsWillShortenRecession,Reuters,25February2009


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AsunemploymentintheUKcontinuestoincreasewiththeglobalrecession,itisonlynatural

tolookforopportunitiestocreatenewjobs.Atthesametime,theimperativetotackle

climatechangeanddrasticallyreduceemissionsofgreenhousegasesmeansthatweneedtohavearadicalrethinkofhowtheUKeconomywillbestructuredinthefuture.

ThisreportcompilesevidencefromindustryplayersabroadandintheUKofthekindof

interventionsneededtodeliverasuccessfuloffshorewindindustryinBritain.

TheimportanceofoffshorewindtotheUK

Offshorewindisastrategicallyimportantsectorforfourreasons:

Itislikelytoprovidealargeportionoftherenewableenergyneededtomeetour2020renewableenergytargetsandcarbonbudgets

Itprovideslong-termjobopportunities

ItisasectorinwhichthereisscopefortheUKtodevelopastrategicadvantagewiththepotentialforexportopportunities

Ithasthepotentialtoprovidegoodqualityjobsintherightgeographicallocations.

Withoutarapidexpansioninoffshorewindcapacity,theUKwillstruggletomeetitstarget

toachieve15percentofenergyfromrenewablesourcesby2020andtomeetthecarbon

budgetssetoutbytheCommitteeonClimateChange.Thescaleoftheexpansionisstill

uncertainwithestimatesoflikelycapacityin2020varyingquitesignificantly.The

GovernmenthasstatedveryambitiouslythatRoundThreeoftheoffshorewindprogramme

coulddeliver33gigawatts(GW)ofcapacityby2020,buttheforecastsintheRenewable

EnergyStrategypresentamuchmoreconservativeestimateof14GW.Estimatesofthenumbersofjobsthatcouldbecreatedbyincreasingoffshorewindcapacity

rangewidely,from23,000to70,000.Thesefiguresdependinpartonthesizeofoffshore

windcapacitythattheUKisabletosecure,butalsoontheextenttheGovernmentis

preparedtofollowanactiveindustrialstrategyinthisarea.Further,thereisnoguarantee

thatallofthejobswouldbelocatedintheUK.Forexample,theoffshorewindturbines

currentlyoperatinginUKwatersaremanufacturedoverseas.

TherearesomeareaswheretheUKismorelikelytobenefitfromincreasedjobcapacity.

Theseincludetechnicalconsultancy(forthedevelopmentofnewwindfarms),installationof

turbines,operationandmaintenanceofthewindfarmsandassociatedlegalandfinancial

services.Intermsofgainingnewmanufacturingjobs,thereappearstobegreatestopportunityinmanufacturingsomespecificcomponentsthatdrawontheUKsexistingskills

andknowledgebaseintheoffshoreoilandgassectorforexample,manufacturing

foundationsandtowers.

Learningfromsuccessfulwindindustriesoverseas

Denmark,GermanyandSpainhaveallbeensuccessfulindevelopingalocalonshorewind

industry.Allthreecountriesrecognisedthepotentialforeconomicandemployment

advantagesinadditiontotheenvironmentalbenefitsandusedeffectivestrategiesto

developonshorewind.

TheUKcanbenefitfromthreekeylessonsthatemergefromtheapproachestakenbythese

countries:

Astableandsizeabledomesticmarket wasneededandwasachievedthroughacombinationofstrongpoliticalcommitmentandtheuseoffeed-intariffsasaneconomicsupportmechanism.

Executivesummary


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Industrialactivism wasimportant,intheformoftaxincentives,favourablecustomsduties,qualitycertification,R&DsupportandinthecaseofSpainlocalcontentrequirements.

Anavailableskillsbase wascrucial:turbinemanufacturerswereabletodrawonanexistingmanufacturingskillsbaseineachcountryandinmanyinstances,existinglocalcompaniesdiversifiedintothewindsupplychain.

Securingthedomesticmarket

InvestorsneedtohaveconfidencethattheambitionssetoutfordevelopingtheUKs

offshorewindcapacitywillbedelivered.Thetargetssetfor2020havehelpedtobuild

confidencethattheGovernmentisseriousaboutdevelopingrenewableenergybutthereare

stillanumberoffactorsthatarecreatinguncertaintythatwillneedtobeovercomeifthe

sectoristodevelopasplanned.

ThefirstoftheseistheeconomicsupportmechanismtheRenewablesObligation(RO).

TheROhascomeunderalotofcriticismbecauseithasnotbeenabletodeliverthedeploymentofrenewablestotheextentthattheuseoffeed-intariffshasinothercountries.

TheGovernmenthasrespondedbymakingsomechangestotheROandbyintroducinga

feed-intariffforsmall-scaleinstallations.Thekeyquestioniswhetherthesechangeswhich

willresultinincreasedsupportforemergingtechnologieslikeoffshorewindgofarenough

tomaketheindustryeconomicallyviable.Governmentshouldbepreparedtoreadjustthe

supportmechanismifitisfoundnottobeworking.

Thesecondfactorisremovingbarrierstodelivery.Thebarriercausingmostconcernisthe

gridinfrastructure:majorupgradestocapacityandnewoffshoreconnectionswillbeneeded

inordertoaccommodatesuchalargeamountofnewoffshorewind.Therearecurrently

severalprocessesunderwaytoaddressthisproblembutthecreditcrunchmayaddanother

dimension.Governmentshouldconsiderunderwritinginvestmentinthegridifalackof

availablefinancethreatenstopreventthenecessarygridupgradesfromoccurring.

Theplanningsystemandsupplychainalsoposethreatstothedeliveryofoffshorewind.An

InfrastructurePlanningCommission(IPC)iscurrentlybeingestablishedanditishopedthat

thiswillhelptospeeduptheconsentprocess.Thismustbemonitoredasanyslippagein

timetablecouldjeopardisedeliveryofnewcapacityby2020.

Governmentshouldalsoconsidertargetingsupportmeasuresatcompaniesthatcouldhelp

overcomebottlenecksinthesupplychain.Thisincludesmanufacturersoffoundations,

offshoresubstations,cables,installationvesselsandturbines.

Industrialactivism

Improvingtheeconomicsupportmechanismandremovingbarrierstodeliverywillhelpto

buildconfidenceintheUKmarket.However,theUKmarketisnotlikelytobebigenoughto

guaranteethatnewjobswillbecreateddomestically.TheextenttowhichtheUKeconomy

andworkforcewillbeabletobenefitfromnewopportunitiesinoffshorewindwilldependon

howwillingtheGovernmentistoemployindustrialactivismandbestrategicinthechoices

itmakes.

SomeotherEuropeancountriesalreadyhaveastrongonshorewindindustriessotheUK

Governmentwillneedtotakeadvantageofthegame-changingnatureoftheoffshorewind

marketcomparedtocurrentonshorearrangementinordertoreapsignificantUK

employmentrewards.WithoutaproactivestrategythereisasignificantchancethattheUKoffshorewindmarketwillcontinuetorelyonimportsfromcontinentalEurope.Fromthe

pointofviewoftheclimatethismattersonlyalittle.Fromthepointofviewofenhancing

UKmanufacturingindustryitwouldclearlybeamissedopportunity.


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Combiningtheevidencefrominterviewsconductedbyipprwithindustryplayerswithother

evidencesuggeststhattheGovernmentshoulddevelopanoffshorewindinvestment

programmefortheUKthatwouldberunbytheDepartmentofEnergyandClimateChange

(DECC)andadministeredthroughRegionalDevelopmentAgencies(RDAs)andUKTradeand

Investment(UKTI).Theprogrammewouldconsistofthefollowingelements:Financialandtaxincentives. CurrentGovernmentgrantprogrammesandsupportfor

R&Darespreadtoothinly.Theymustbedrawntogetherintoamuchmoreclearlydefinedandfocusedpackagethatwillbeeasiertomarkettopotentialinvestors.

Facilitiesandinfrastructuredevelopment.ThiswillhelpmaketheUKamoreattractiveplacetoinvest.Itshouldincludeidentifyingasiteforanearshoretestfacilityanduseofpublicandprivateinvestmenttoupgradeportfacilities.Thesemeasuresshouldbetargetedataspecificgeographicalareainordertopromoteagrowthcluster.

Short-termguarantees.Therecessioncouldmakeraisingfinancedifficultintheshort

termsoGovernmentshouldoffertounderwriteborrowingforthissectorand/orencouragebankstolendtothissector.

Considerrequirementsforusinglocallyproducedcontent (componentsandsoon).ThisapproachhasbeeneffectiveinothercountriesbutmayrunintodifficultieswithWorldTradeOrganisationandEuropeanUniontraderules.GovernmentshouldconsiderwhetheritmightbepossibletoimplementsuchanapproachindeterminingsuccessfulbiddersinRoundThreeoftheoffshorewindprogramme.

Skills

Aswellasmaximisingthenumberofjobsavailable,governmentalsoneedstothinkmore

strategicallyaboutensuringthattheworkforcehastherightskillstotakeadvantageofthese

jobopportunities.ThereisashortageofengineeringandmanufacturingskillsintheUKandthiscouldposeproblemsforthedeliveryofoffshorewindcapacity,andmakestheUKless

attractivetoinvestors.

Ananalysisofthelikelysizeoftheskillsgapisneeded,followedbyastrategicplanforhow

thegapwillbeclosed,toinclude:

Training.Asafirststep,amoreeffectiveapproachtoencouragingyoungpeopletostudyScience,Technology,EngineeringandMathematics(STEM)subjectsneedstobefound.

Attractingtheworkforce. Acomprehensivestrategyforattractingmorepeopleintothesectorwillrequireinputfromindustryrepresentatives,universitiesandsectorskills

councils(amongothers).Itcouldinclude:engagingwithcareersadviceservicestoensuretheyhavethemostup-to-dateinformationonopportunities,highlightingeffortstoforgelinksbetweenuniversitiesandindustry,andprovidingincentivesforpeopletotakeuplow-carbon-sectorjobs.

Conclusions

TheUKcurrentlyhastheworldslargestinstalledoffshorewindcapacityaswellasambitious

plansforexpansionanditsgrowthoffersarealopportunityforjobcreationandtoremove

bottlenecksinthewindsupplychain.However,asinternationalexperienceshows,withouta

moreinterventionistapproachfromgovernment,theUKwillstruggletocaptureasignificant

shareofthesejobsgiventhatnearbycountriesalreadyhavingthrivingindustriesonwhichto

developthenewcapacitiesrequiredforoffshorewind.

Byremovingthebarrierstoinvestment,providingadditionalfocusedsupporttotheindustry

andbycreatingastrategytobuildupthenecessaryskillsbase,theUKwillbewellplacedto


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reaptheemploymentbenefitsoftheshifttoalow-carbonenergysystem.Conversely,failure

toacttogainjobsinthissectorwillbeasignificantmissedopportunityastheUKmoves

towardsalow-carboneconomy.


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TheUKisfacingtoughtargetstoreduceitsemissionsofgreenhousegasesandtoincrease

itsuseofrenewableenergyby2020.Atthesametime,astheglobaleconomicslowdown

hitstheUKandunemploymentfiguresbegintorise,manyhavelookedtotheenvironmentalsectorasapotentialnewgrowthareathatcouldhelptocreatenewjobsandboostthe

economy.Theideathattacklingourenvironmentalproblemscouldsimultaneouslyprovide

goodqualityemploymentopportunitieshasledtonumerouscallsforaGreenNewDeal,

fromorganisationsrangingfromtheUnitedNations,totheEnvironmentAgencytotheNew

EconomicFoundationsGreennewdealgroup(UNEP2008,nef2008,EnvironmentAgency

2008).

TheoffshorewindsectorhaspotentialtobepartofaGreenNewDeal.Thereareambitious

planstoscaleuptheUKsoffshorewindcapacityoverthenextdecadeunderRoundThree

oftheCrownEstatessiteallocationprocessandachievingthisgoalwillrequirealarge

workforcetoplan,manufacture,installandrunthewindfarms.YetmanyconsiderablebarriersremaintodeployingoffshorewindpowerintheUKand,evenifRoundThree

ambitionswererealised,thereisnoguaranteethatthejobscreatedwouldgototheUK.

ThispaperinvestigatesthebarrierstodeployingmoreoffshorewindturbinesintheUK,the

potentialforcreatingUK-basedjobsinthissector,andwhethertherearelessonsthatcanbe

learntfromtheexperienceofothercountriesindevelopingindigenousonshorewind

industries.

Thereportisbasedonaliteraturereviewandinterviewswithkeystakeholdersinthewind

industryacrossEurope,includingindustryassociations,developers,turbineandcomponent

manufacturersandprovidersofkeyservices(afulllistofintervieweesisincludedinAnnex

1).TheinterviewswereconductedinJanuaryandFebruary2009.

Section1examinestheopportunitiesforjobcreationinoffshorewindintheUKaswellasthekeybarrierstodeliveringthesejobs.

Section2goesontolookatthesuccessesofbuildingonshorewindindustriesinDenmark,GermanyandSpainandidentifieskeylessonsfromtheseexperiences.

ThefollowingthreesectionsthenapplytheselessonstotheUKcontext,focusingonoffshorewind.Thefirstlessonregardswhatneedstobedonetoprovideastableandpredictabledomesticmarket;thesecond,whatformsofindustrialactivismarenecessary;andthethird,whatkindsofskillsactivismwillbeneeded.

Thefinalsectionprovidesaconclusionandsummaryofkeypolicyrecommendations.

Introduction


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Asthefall-outfromthecreditcrunchcontinuestospreadacrosstheUKeconomy,the

prospectofcreatinggreen-collarjobsasarouteoutofrecessionhasgainedmoreandmore

currency.AtthelaunchoftheLowCarbonIndustrialStrategy,thePrimeMinistersaid:

Iwanttoconstructaglobalgreennewdealthatwillpavetheway

foralowcarbonrecoveryandhelpusbuildtomorrowsgreeneconomy

today.(Number10,2009)

JimMurphy,MinisterforEurope,hasalsohighlightedGovernmentsupportfordeveloping

green-collarjobs:

Countriesthattakeearlyactionindevelopinggreentechnologywill

haveacompetitiveadvantageasthisboomindustrygrowsinthefuture.

TheGovernmentiscommittedtomakingsuretheUKisaheadofthe

packinthefuturewewantaneconomyofferingamixofgoodbluecollarjobs,goodwhitecollarjobsandgoodgreencollarjobs.Outaimis

tohaveoveramillionUKworkersinenvironmentalindustrieswithinthe

nexttwodecades.(ForeignandCommonwealthOffice2008)

Whilethetermgreen-collarjobsappliestomanydifferentindustries(includingrenewable

energygeneration,installationofenergyefficiencymeasures,providinglow-carbontransport

andmore)thefocusofthisreportisonjobcreationintheoffshorewindsupplychain.

Thissectionbeginsbydescribingwhyoffshorewindcouldbeagoodsourceofgreen-collar

jobsandwhytheGovernmentshouldpayparticularattentiontothissectorwhendeveloping

strategiestotackletherecessionandstimulateemployment.Wethengoontoconsiderhowmanyjobscouldbecreatedinoffshorewind,beforelookingateachstepofthesupplychain

inmoredetailtoidentifysomeofthebarriersandopportunitiesforjobcreation.

Whyoffshorewind?

Theglobaleconomicslowdownhasunderstandablyfocusedmindsonwherenewjobsmight

becreatedtobuildapathoutofrecession.Atthesametime,theimperativeoftackling

climatechangeisforcingGovernmentandbusinessesaliketoradicallyrethinkthefutureof

theUKeconomyinalow-carbonworld.

TheGovernmentiscommittedtodevelopingaLowCarbonIndustrialStrategy(HM

Government2009)thatseekstoensurethattheUKisbestplacedtobenefitfromthe

opportunitiespresentedbymovingtoalow-carboneconomy.Thisincludesinstallingthe

newlow-carboninfrastructurethatwillbenecessarytoachieveouremissionsreduction

targets,developingandproducingnewlow-carbonvehicles,helpingbusinessestoimprove

theirenergyefficiencyandmakingtheUKanattractivelocationforlow-carbonindustries

(ibid).

TheSecretaryofStateforBusiness,LordMandelson,hassuggestedthatanapproachof

industrialactivismthatwouldwidenanddiversifythespecialistbasesoftheUKeconomy

andfocusonhowwefurthercommercialiseandinternationalisethesebases(Mandelson

2008)wouldleavetheUKbetterplacedtodealwiththeconsequencesoftheslowdownand

tobuildanewlow-carboneconomy.TheGovernmentalsohasa158millionfundto

supportandprovidetrainingopportunitiesfortheunemployed(DepartmentforWorkandPensions2009).Thequestion,ofcourse,iswhereshouldthisattentionbefocused?

1.Offshorewindandemployment


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Werecognisethattherearemanydifferentsectorsthathavethepotentialtodrivethenew

low-carboneconomy.WhiletheLowCarbonIndustrialStrategymustencompassallofthese

sectors,suchabroadanalysiswasbeyondthescopeofthisresearch.Althoughthefocusfor

thisreportisoffshorewind,thisdoesnotmeanthatwebelieveoffshorewindshouldreceive

attentionattheexpenseofotherrenewableenergytechnologies.Ratherweseektoprovideanexampleofthekindsofmeasuresthatarelikelytobeneededtobringforwardjobsand

economicbenefitsfromnewgreenindustries.

Wehavechosentofocusonoffshorewindforfourmainreasons:

1.OffshorewindisasectorwithgrowingimportancefortheUK

TheUKcurrentlyhasthelargestinstalledoffshorewindcapacityintheworldandhas

ambitiousplanstopromotearapidandlarge-scalegrowthinoffshorewindfarms.Offshore

windisexpectedtomakealargecontributiontomeetingrenewableenergytargetsand

carbonreductionbudgetsfor2020,unlikemanyotherrenewableandlow-carbonenergy

technologies,whichwillnotbeabletobedeployedonsuchashorttimescale(thisis

exploredinmoredetailbelow).ItisclearthatiftheUKexpandsitsoffshorewindcapacityas

planned,thenalargeworkforcewillbeneededtoplan,manufacture,installandoperatethe

newwindfarms.

2.Offshorewindprovidesgoodlong-termprospects

Whileitisunderstandabletowanttofocusonshort-termjobcreationopportunitiesthatwill

helptacklethecurrentrecession,itisimportanttoconsiderthelong-termprospectsfor

thesejobswilltheystillexistindecadestocome?

Offshorewindmaynotprovideinstantnewjobs,butitdoesoffergoodmedium-term

prospects.Inaddition,jobsinoffshorewindarelikelytobesustainableoverthelongerterm

becauseunlikejobsincarbon-intensiveindustriesoffshorewindislikelytobeaprominentfeatureofthenewlow-carboneconomythatisnecessarytomeetourclimate

changeobligations.

3.Offshorewindhaspotentialforcompetitiveadvantageandexportopportunities

ThisisclearlyasectorwheretheUKhasthepotentialtodevelopacompetitiveadvantage.

Germanyisalsodevelopingitsoffshorewindmarketanditispossiblethatothercountries,

includingtheUSA(theCapeWindProjectAmericasfirstoffshorewindfarmiscurrently

goingthroughthepermittingsystem[CapeWind2009]),ChinaandotherEuropean

countrieswillfollowsuit.Developinganexperiencedoffshorewindworkforcecouldtherefore

provideopportunitiesinthefuturetoexporttheseskillsasothermarketsmature.Similarly,if

weareabletoattractmanufacturingfacilitiestoopenintheUK,thereisscopeforfutureexportofcomponentsandturbines.Thereisalsothepotentialthatoncecompaniesare

established,theymayinnovateandcreatenewmarketsanopportunitythatwouldbe

missedifcompanieslocateoverseas.

4.Offshorewindhasthepotentialtoprovidegoodqualityjobsintherightplaces

Itisimportanttogiveconsiderationtothequalityofthejobsthatwillbecreatedthrougha

LowCarbonIndustrialStrategywilltheyprovidegoodcareerdevelopmentopportunities?

Willmoreeconomicallydeprivedareasofthecountrybeabletobenefitfromthenewjobs?

Andwillpeoplewhoarecurrentlyunemployedorworkinginindustriesthatarelikelyto

declineinthefuturebeabletobenefitfromthenewjobopportunities?

Althoughtherehavenotbeenmanystudiesinthisarea,thereissomeevidencetosuggestthatoffshorewinddoeshavethepotentialtooffergoodquality,career-trackjobs.For

example,studiesoftheSpanishandGermanrenewablesindustrieshaveshownthatthey

offergoodjobprospects,careerpathsandjobsecurity(UN2008).


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ItisalsolikelythataUKoffshorewindindustryislikelytobelocatedinsomeofthemore

economicallydeprivedregionsoftheUK.Offshorewindcouldofferanalternativecareer

optionforthosecurrentlyemployedintheoffshoreoilandgasindustry,whichislikelyto

declineoverthenextdecadeasreservesintheNorthSeadeplete.Manyoftheskillsfrom

thissectorcanbetransferredtooffshorewindandthejobsarelikelytobelocatedinroughlythesamegeographicalareas.Therearealsoopportunitiesforpeopleworkinginthe

automotiveandaerospaceindustriestomoveintooffshorewind.

Takentogether,thesefourreasonssuggestthatoffshorewindisanareaofstrategic

importancefortheUKandassuchwouldbeagoodsubjectforindustrialactivism.

Theopportunity:jobcreationfromexpandingUKoffshorecapacity

Thecaseforpursuingastrategytosupportthecreationofjobsinoffshorewindhasbeen

made.Wenowturntothequestionofhowmanyjobsarelikelytobecreatedinthissector.

However,beforewecanlookatnumbersofjobs,itisfirstnecessarytounderstandthelevel

ofambitionforincreasingoffshorewindintheUK.

Targetsandforecasts

TheUKhastwoimportanttargetsfor2020towhichoffshorewindisexpectedtomakea

significantcontribution:

ThefirstisaEuropeantarget,toachieve15percentofenergyfromrenewables,setoutinthenewEuropeanDirectiveonRenewableEnergies,whichwasadoptedinDecember2008(EurActiv2009).

Thesecondisadomestictarget,setoutintheClimateChangeAct,toreduceemissionsofgreenhousegasesbyatleast26percentfrom1990levels.However,theCommitteeonClimateChangehasrecommendedbudgetsthatimplyareductionof29

percentuntilaglobalagreementisreachedand40percentonceanagreementisreached(CommitteeonClimateChange2008).

TheGovernmentsRenewableEnergyStrategyconsultationdocumentsuggeststhatinorder

tomeettherenewablestarget,aroundathirdormoreofourelectricitywillneedtocome

fromrenewablesourcesandoffshoreandonshorewindareexpectedtoprovidealarge

proportionofthis(theGovernmentsillustrativescenarioshowsoffshorewindcontributing

40percentofrenewableelectricityneedsandonshore28percentby2020)(HM

Government2008a).Othertechnologies,suchasmarinepower,areunlikelytobe

sufficientlydevelopedtomakemuchofacontributiontothe2020target,butmaybecome

moresignificantinlateryears.

The2020targetsareambitious.Lessthan5percentoftheUKselectricitycomesformrenewablesourcestoday(HMGovernment2008a),soalargeexpansioninrenewable

generatingcapacitywillbeneededtomeetbothtargets.Offshorewindisexpectedto

providethelionsshareofrenewableelectricityby2020yetthereisstillagreatdealof

uncertaintyaboutwhethertherewillbeenoughwindfarmsupandrunningtomeetthis

requirement.

Anumberofstudieshavemadeestimatesofthecapacitylikelytobeavailablein2020(see

Table1.1below).Foroffshorewind,estimatesrangefrom10.7GW(DouglasWestwood

2008)to18GW(RenewablesAdvisoryBoard2008).However,theCarbonTrustcalculates

that29GWwillbenecessarytomeetthe2020renewablestarget(CarbonTrust2008)and

thetimetableforRoundThreeoftheoffshoresiteallocationprocesscontainsatargetforanadditional25GWtobebuiltby2020(whichwouldgiveatotaloffshorewindcapacityof

33GWwhencombinedwiththeexisting8GWinoperation,constructionorplanning)(The

CrownEstate2008).TheGovernmentiscurrentlyconsultingonitsStrategicEnvironmental

Assessmentoftheseplans(DECC2009).


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Jobforecasts

TheUKwindindustry(onshoreandoffshorecombined)currentlyemploysaround4,000to

5,000people(EWEA2009,Boettcheretal2008)andthisfigurewillincreasesignificantlyif

therapidexpansionofoffshorewindcapacitygoesaheadasplanned.Forecastsofjob

numbersin2020varyquiteconsiderablyfromjust23,000jobsinthewindsectorto133,000

jobsincentralisedrenewableenergy(Table1.2).

Table1.1.Estimatesofoffshoreandonshorewindcapacityin2020

Study Onshoreandoffshorewindcapacityin2020

GovernmentsRenewableEnergyStrategy Upto33GWofoffshorewindmaybepossibleby2020,butmodelling

(HMGovernment2008a) showsthatdeploymentmaybecloserto14GW

14GWonshorewind

DouglasWestwoodsupplychainstudyfor 10.7GWoffshorewind

BERR(DouglasWestwood2008) 14GWonshorewind

Bain&CompanystudyforBWEA Containsthreescenarios:

(Boettcheretal2008) Staticscenario:22GWonshore+offshorewind

Solidprogress:27GWonshore+offshorewind

Dynamicscenario:34GWonshore+offshorewind

RenewablesAdvisoryBoard(RAB2008) 18GWoffshorewind

13GWonshorewind

CarbonTrust(2008) 29GWofoffshorewindwillbenecessarytomeet2020renewablestarget

Table1.2.Forecastsofjobscreatedrenewableenergy,windandoffshorewindin2020

Source Jobforecast(2020) Sector Assumptions

GovernmentsRenewableEnergy 133,000 Centralisedrenewable Thesejobsmaynotnecessarily

Strategy(HMGovernment energygeneration allaccruetotheUK

2008a) 14GWoffshorewind

14GWonshorewind

CarbonTrust(2008)Offshore 40,00070,000 Offshorewind Basedon29GWcapacity

windpower:bigchallenge, installedby2020

bigopportunity

Boettcheretal (forBWEA) Dependingonscenario: Onshore+offshore Scenarios:(totalwindcapacity

(2008)Acloserlookatthe 23,000 wind in2020)

developmentofwind,wave 36,000 22GW

andtidalenergyintheUK 57,000 27GW

34GW

DouglasWestwood(2008) Dependingonscenario: Windpower Scenarios(basedonnumberof

Supply-chainconstraintson 5,000 turbinemanufacturerslocatinginUK):

thedeploymentofrenewable 14,000 locatinginUK):

electricitytechnologies 34,000 Low(onemanufacturer)

Mid(twomanufacturers)

High(threemanufacturers)


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Table1.3givesamoredetailedbreakdownofjobcreationacrosstheoffshorewindsupply

chain.

Thereisclearlyhugepotentialforjobcreationasaresultofexpandingoffshorewind

capacity,butwhatislessclearishowmanyofthesejobswilloccurintheUKandto

whatextentlocalpeoplewillbenefit.(Ontheotherhand,theseestimatesdonotinclude

opportunitiesforjobcreationintheUKasaresultofothercountriesdevelopingoffshore

windcapacity).Wenowconsiderwherethesedifferentjobsarelikelytobelocated.

OpportunitiesforandbarrierstoUK-basedjobsinoffshorewind

Sincecreatingnewjobsisimportantfortacklingtherecession,Governmentwillwantto

ensurethatasmanyofthejobscreatedbyoffshorewindarelocatedintheUKas

possible.SomejobsinoffshorewindaremorelikelytoaccruetotheUKthanothersfor

example,jobsinoperationandmaintenance,whichrequireregularvisitstothewind

farmsinquestion,aremuchmorelikelytoberecruitedlocally(UN2008).However,other

jobs,suchasthoseininstallationandmanufacturing,willnotnecessarilybeasclosely

tiedtotheUK.

Forexample,companiesinvolvedwithUKoffshorewindprojectscurrentlybringoverhigh-levelstafffromthecountriesinwhichtheyarebasedtooverseeprojectsandalso

hiremigrantlabourwherethereareskillsshortagesintheUK(forexample,in

construction).AstudyoftheScrobySandswindfarmdevelopmentinNorfolkshowed

thatUKlabouraccountedfor73percentofthetotalman-hoursindevelopment,70per

centinconstructionand82percentinoperation(DouglasWestwood2005).Thereis

clearlyariskherethatunrealisticexpectationscouldberaisedamongmembersofthe

publicabouthowmanynewjobswillbecreatedwiththeexpansionofoffshorewind,

andthiscouldposepoliticaldifficulties.However,itshouldalsoberememberedthatthe

developmentofoffshorewindinothercountriescouldresultinemploymentbenefitsfor

theUK,whicharenotgenerallyaccountedforinthejobprojections.

Inthissectionwelookatthedifferenttypesofjobacrosstheoffshorewindsupplychain

andexaminewhattheopportunitiesandbarriersaretolocatingthesejobsintheUK.

Table1.3.Breakdownofjobsacrossthesupplychainby2020,accordingtotwosources

a)SQWEnergy(2008) Max.no.jobs Min.no.jobs

Planninganddevelopment 5,965 2,060

Designandmanufacturing 14,095 4,865

Constructionandinstallation 15,720 5,420

Operationsandmaintenance 13,550 4,680

Technical,financialandlegalservices 4,880 1,685

Totaladditionaljobs 54,210 18,710

Totaljobs(windonly) 56,900 23,100

b)CarbonTrust(2008) Max.no.jobs Min.no.jobs

RD&D,engineeringanddesign 4,000 3,000Turbineandcomponentmanufacturing 15,000 7,000

Services 22,000 22,000

InstallationandOperationsandmaintenance 29,000 8,000

Total 70,000 40,000


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Technicalconsultancy

Someofthefirstjobstobecreatedintheoffshorewindsectorwillbegeneratedbythe

needtoputtogetherplanningapplicationsandcarryoutenvironmentalimpactassessments.

SuccessfulbiddersintheRoundThreeoffshoreallocationprocesswillbeawardedexclusive

rightstodevelopwindfarmsinanumberofspecificallydefinedzonesaroundthecoastofEnglandandWales.Producingplansforthesedevelopmentswillbelikelytoincrease

demandfortechnicalconsultancies.

ThisisanareainwhichtheUKalreadyhasabaseofexpertiseandmuchofthistypeof

workforRoundOneandRoundTwohasbeendonebyBritishfirms.Itistherefore

consideredtohavegoodpotentialforfuturegrowth.

Quitealotofthesupply-chainactivitytodatehasbeenfocussedon

themanufacturingofturbinesandcomponentsandnotenoughonthe

widervaluechainincludingtechnicalconsultancy,logisticsand

OperationsandMaintenancewheretheUKhassomestrong

capabilities.RegionalDevelopmentAgency,interviewwithippr

Research,designanddevelopment(RD&D),engineeringanddesign

TheCarbonTrustnotesthatalthoughmanyRD&D,engineeringanddesignjobsarelikelyto

occurinothercountries(becausemanufacturinghubsarealreadyestablishedforboth

turbinemanufacturersandcomponentsuppliersseebelow),thereisstillscopetogenerate

somejobsinthissectorwithintheUK.TheCarbonTrustestimatesthatitispossibleto

attract20to30percentofglobaloffshorewindRD&DtotheUK(CarbonTrust2008).

Turbineandcomponentmanufacture

Jobsinturbineandcomponentmanufacturearehighlysoughtaftersincetheyaccountfora

largeproportionofthejobsandvaluecreatedbyexpandingtheuseofwindpower.TheEuropeanWindEnergyAssociationestimatesthatatotalof59percentoftheworkforce

directlyemployedintheEuropeanwindsectoreitherworkforcomponentmanufacturersor

turbinemanufacturers(EWEA2009a).Establishingaturbineand/orcomponent

manufacturingbasecanhaveknock-onbenefitsasjobsarealsolikelytobecreatedamong

second-tiersupplycompanies.

Itisimportanttodistinguishbetweenthethreedifferenttypesofmanufacturingmodelthat

countriescanhave:

Full,local,turbinemanufacturing

Localmanufacturingofselectedcomponents

Assemblyofturbinesfromimportedcomponentsbylocalemployees.(LewisandWiser2005)

Belowweconsidereachofthese,whilealsoreflectingonthequestionofwhetherlocal

manufacturingcompaniescoulddiversifyintothewindsector,orwhetherexistingforeign

companiescouldbeencouragedtosetupfactoriesintheUK.

Fullturbinemanufacturing

Clearly,theidealfromaUKeconomicpointofviewwouldbetoestablishafullturbine

manufacturingbasebecausethiswouldcreatethemaximumnumberofjobs,maximisetax

revenuesandalsopotentiallyleadtoexportopportunities.Mostcommentatorsagreethattheroutetoestablishingfullturbinemanufacturingistofirst

attractaturbinemanufacturertolocateintheUK,whichwillinturndrawincomponent

manufacturerstosetupnearby(CarbonTrust2008,DouglasWestwood2008).


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Buthowlikelyisthisto

happen?Althoughthe

Governmentisworkingto

attractamajorturbine

manufacturertosetupintheUK,anddespitethesuccess

storyofClipperWind

establishingacentreto

developanewoffshore

turbineinBlyth(seeBox

1.1),manystakeholdersare

stillscepticalaboutthe

chancesofachievingfull

turbinemanufacturingin

theUK.

Therearetwoprimary

reasonsforthis.First,theUK

willhavetocompetewith

countrieslikeDenmark,

GermanyandSpain,which

alreadyhaveestablished

windindustriesandskills

bases(andpotentiallyChina

andIndiainthefutureif

productioncostsarelower

thantransportationcosts).Second,thesizeofthe

offshorewindmarketintheUKmaynotbesufficienttomakeitworthwhileinvestingin

afactory,particularlywhencomponentscanbeshippedfromnearbyEuropeancountries.

Formanufacturerswhohaveexistingcomponentorturbinefactoriesinmainland

Germany,expandingexistingcapacitytosupplytheoffshorewindmarketlooksmore

appealingthanstartinganewfactoryfromscratchintheUKbecausetheskillsand

knowledgeofproductionprocessesarealreadythere.Aslongasthefactorieshavegood

accesstothesea,itwillnotbetoodifficultforthemtosupplytheUKmarket.

TherearethemajorplayersandtheyvebeenbasedinDenmark,

Germanyandtheyrequitehappystilltobebasedtheretosupplytheirmarketsowhyshouldtheymove?Turbinemanufacturer,

interviewwithippr

Anadditionalbarriertoattractinginvestmentfromforeigncompaniesistheuncertainty

causedbytheexchangerate.Asageneralrule,manufacturersliketooperateinthesame

currencyasthemarkettheyaresellingintobecauseexchangeratefluctuationsintroduce

uncertaintyintothebusinessmodel.AtfirstglancethismayappeartoputtheUKina

strongerpositionsinceintheshorttermatleastthemarketforoffshorewindisgoingto

bemainlyintheUK.Butthisisnotnecessarilythecase,fortworeasons.First,theUK

marketmaynotbelargeenoughtowarrantdedicatedfactories,thereforetheywillbe

supplyingothermarketsaswellastheUKandhencedealinginothercurrencies.Second,sincealloftheexistingmajorturbinemanufacturersareforeigncompanies,settingup

factoriesintheUKwouldincreaseriskintermsoflabourcosts,whichwouldbepaidin

Sterling.

Box1.1:ClipperWindPowerinvestmentintheUK

AmericanwindcompanyClipperWindPowerhasrecently

establishedanoffshorewindturbinedevelopment

operationinBlyth,NorthEastEngland.Thecompanyis

workingtodevelopaprototypeoffshorewindturbine

andtheprojectwillmakeuseofthebladetestingand

manufacturingfacilitiesattheCentreofExcellencefor

NewandRenewableEnergy(NaREC),whichwas

establishedbythelocalRegionalDevelopmentAgency,

OneNorthEast(NaREC2009,UKTradeandInvestment

2009).OneNorthEastisalsoinvestinga5mpackageof

supportintotheproject.

Thedevelopmentoftheturbineisexpectedtocreate25

skilledengineeringjobsinthefirstinstance,butthereare

alsohopesthatoncethetechnologyhasbeensuccessfullydeveloped,manufacturingwillalsobecarried

outintheUK(NaREC2009).

ClipperWindhasannouncedthatitwillbuildanoffshore

windturbinefactoryinNorthernEnglandthatwillbeable

tomanufactureturbinesby2015(Nakanishi2008,One

NorthEast2008).

Theinitialinvestmentcameaboutthroughacollaborated

effortbetweenBERR,OneNorthEastandUKTradeand

Investment(DouglasWestwood2008).


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Whileitmightbedifficulttoattractmanufacturerswhoalreadyhaveestablishedbases

elsewhereinEurope,theremaybescopefordrawinginotherturbinemanufacturers,who

haveyettoestablishabaseinEurope,ornewentrantstothemarket.

Therefore,effortsaimedatattractingforeigncompaniestoinvestintheUKshouldbe

focusedonthosewhodonotalreadyhaveanestablishedEuropeanbase.

Componentmanufacturing

Manyofthestakeholdersinterviewedforthisprojectfeltthatitmightbemorefruitfulto

focuseffortsondevelopingmanufacturingcapacityonafewareasofthesupplychainin

whichtheUKcouldhaveacomparativeadvantage.TheUKcurrentlyhasonlyonefactory

manufacturingturbinecomponentsaVestasbladefactoryontheIsleofWight.Further

componentsthatwereidentifiedbyintervieweesasonesthatcouldbemanufacturedin

theUKwere:foundations,towers,cablesandelectricalcomponents.Themarketfor

manufacturingothercomponentsparticularlythenacelle(thepartoftheturbinethat

containstherotorhub,gearbox,generatoranddrivetrain)andtheinternalcomponentswasthoughttohavebeenalreadycapturedbyothercountriesinEuropewhowouldbe

reluctanttoseeothernationstakingonthiswork,giventhehighfinancialvalueofthese

components.

TheUKsgoodatcertainthingsandnotatotherthingssowedont

have,forexample,thecapacityforbigcastingsbutwedohavealot

oftheotherskillswhicharerequired:ongenerators,theassemblyof

thethings,electricalcomponentstheinverters,transformersetc.

theresnoreasonwhysomeofthesteelworkcantbedonehere

makingtowersandfoundationsandobviouslythingslike

fibreglassthatweuseinblades.Turbinemanufacturer,interviewwithippr

Towersandfoundationsinparticularstandoutaslikelycandidatesforlocal

manufacturing.Thisispartlybecause,giventheirsizeandweight,thesecomponentsare

difficulttotransport,andpartlytheUKalreadyhasaknowledgeandskillsbasein

makingthesecomponents,gainedfromtheoffshoreoilandgasindustry;theothermain

playerinoffshorewindGermanydoesnothavethesamehistoryofoffshoreindustry.

Inaddition,foundationshavebeenidentifiedasabottleneckinthesupplychainthat

couldjeopardisethe2020target,sogrowinganindigenousfoundationmanufacturing

industrywouldalsomakesenseforthisreason(CarbonTrust2008).

ThereisscopeforUKcompaniestodiversifyintocomponentmanufacturing:inparticular,theautomobileandaerospaceindustrieshavebeenidentifiedashaving

potentialtomoveintooffshorewind,aswellascompaniesproducingcablesandthose

manufacturingfoundationsandplatformsforoffshoreoilandgasandthoseoperatingat

thesecondtierofthesupplychain.However,nocomprehensiveanalysishasbeen

conductedtoidentifywhichexistingcompanieshavethepotentialtodiversify.We

recommendthatGovernmentconductamappingexercisetobetterunderstandwhich

companiescouldmoveintotheoffshorewindsupplychain.

However,thesecompaniesmayneedfinancialsupport(forexample,throughcapital

grants)inenteringthesupplychainbecausecostsarehigh.Theymayalsorequire

assistanceinmarketingthequalityandreliabilityoftheirproductsasqualitycontrolisaprimaryconcernforturbinemanufacturers(DouglasWestwood2008).Andtheywillneed

tobepersuadedthatthereisagenuineandstablemarketforoffshorewindcomponents.


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Weneedtoprequalifyanysupplierthatweprocureequipmentfrom

andthatcantaketime.Dependingonthecomponentitmaytake

monthsorayear.Wewanttoknowthatoursuppliersarefinancially

stable,theycanworkwithourprocurementprocesses,thattheyhave

thedesign,quality,andreliabilitythatwedemand.Thattheyarewillingtoworkwithinoursocial,environmentalandethical

requirementsandthattheyarewillingtoworkwithustodevelopa

stronglong-termrelationship.Manypotentialsuppliersdonotrealise

howlongitmaytakeforthemtobeapproved.Turbinemanufacturer,

interviewwithippr

TheexperiencetodateintheUK,whereamarkethasbeenpromisedforyearsbuthasnot

yetmaterialised,hasnotbuiltconfidenceintheoffshorewindmarket.Intervieweestoldof

newentrantsintheUKwhohadtriedtomoveintosupplyingtheoffshoremarketbutfailed

becausetherewasnotabigenoughmarketfortheirproducts.Inordertoattractnew

entrantsanddiversification,itwillthereforebenecessarytoincreaseconfidenceinthesizeandcertaintyofthemarket.ThereisasensethatviewstowardstheUKmarketarestarting

tochange,buttherearestillmanyuncertaintiesaboutthefutureofthemarketthatare

currentlyundermininginvestorconfidence.ThisisexplainedfurtherinSection3below.

Heretoforethemarkethasntbeenstableenoughon-oroffshoreto

getthekindofvolumeandstabilitythatsnecessary.Industry

spokesperson,interviewwithippr

SincethefirstUKoffshorewindprojectatBlythNorthumberlandthere

havebeenanumberofon/offinitiativesandthemarkethasnever

reallykickedoff.Nowthecompanystrategieshavestartedtochange

andbusinessconfidenceappearstobegrowingonthebackofastrongergovernmentdriveandmomentumthroughRound3.Although

itmighttakelongertoimplementintodayseconomicclimatethan

theyexpectedsixmonthsagoitsanopportunitythatcompaniesare

investinginnow.RegionalDevelopmentAgency,interviewwithippr

Barrierstoattractingforeign-ownedcompaniestoestablishcomponentmanufacturing

factoriesintheUKaresimilartothosementionedaboveregardingfullturbinemanufacture.

Namely,thatthemarketmaynotbelargeenoughtojustifyanewfactory,itmaybeeasier

toexpandexistingfacilitiesinEuropeandexporttotheUKmarketanduncertainty

introducedbytheexchangeratemaybeunattractive(forexample,somecurrentDanish

suppliersalwaysagreetheircontractsinEurosratherthanDanishKrone,sodealingwithUK-basedsubcontractswouldaddanadditionalrisk).

[TheGovernment]reallyshouldgoforadditionaljobsproduction

phasestheyneedtoencouragethemanufacturingindustryreallyto

createalargernumberofjobsallthesethings[turbinecomponents]

areprettyexpensivetomovearoundbutneverthelessitsmuchmore

economicaltodaytoimportthesefromEuropeintotheUK.Andthey

needtochangethepictureiftheywanttocreatejobs.Component

manufacturer,interviewwithippr

AssemblyTurbineassemblylooksaviableoptionfortheUK.Themainbarriertoachievingthisis

ensuringthattherightinfrastructureisinplace.Thiswillrequireinvestmentinportfacilities


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andotherlocalinfrastructureaswellasensuringthereissufficientspaceavailabletosetup

anassemblyplant.

Afinalimportantfactorthatappliestoallmanufacturingjobsisthequestionofwhetherthe

UKmarketwillbelargeenoughtomakeitworthwhileforcompaniestosetupnew

manufacturingfacilitiesintheUK.

Installation

InstallationofwindturbinesisanotherareawheretheUKcoulddrawonitsexistingskills

basefromtheoffshoreoilandgasindustry.Thereisalsopotentialtoexportthesejobsas

theoffshorewindmarketdevelopsglobally.

Thereismassivepotentialtoexportskills[inconstructionand

operationandmaintenance].Developer,interviewwithippr

Operationandmaintenance

Mostindustryexpertswouldagreethatoperationandmaintenance(O&M)whichincludes

monitoringoftheturbines,routineservicingandmaintenanceandrepairsistheareawhere

themajorityofthejobsarelikelytoaccruetotheUK.Thisisbecausetheworkforcewillbe

requiredtoliveneartothewindfarm.Again,thereispotentialtobuildonknowledgeand

skillsfromtheUKsexistingoffshoreoilandgasworkforce.

StakeholdersalsonotethatO&Mjobsarelikelytobegoodqualityskilledjobswithlong-

termstabilityoverthelifetimeofthewindfarm.

ThebarrierstocreatingO&Mjobsforplannedoffshorecapacityexpansionarethelackof

suitableskillsandalackofsuitableinfrastructure.TheCarbonTrustidentifiesalackofport

facilitiesinparticularasabarrier(CarbonTrust2008).

Services

Agrowingoffshorewindindustrywillalsocreateopportunitiesinthefinancialandlegal

sectors(forexampleinfinancingwindfarms).Thisisalsoconsideredtobeanareawherethe

UKhasacomparativeadvantageandexistingskillsbaseandagainthereispotentialto

exportthesejobs.TheCarbonTrustestimatesthattheUKcouldprovidethesekindsof

supportservicesforover50percentoftheglobaloffshorewindindustryby2020,creating

22,000jobsintheprocess(CarbonTrust2008).

Ingeneral,intervieweestendedtoagreethattechnicalconsultancy,operationand

maintenanceandservicejobsweremorelikelytoaccruetotheUK,whilemanufacturingjobs

weremorelikelytobebasedoverseas.

Alotofjobswillbecreatedobviouslythroughtheoperationsand

maintenanceandvirtuallyallourworkwedoonenvironmentalsurveys

andconsultanciesgoestoBritsalotoftheengineeringforour

projectsisdonebyBritishconsultanciessotheworkloadandthe

opportunitiesareboominganditsintheknowledgesectorsitsquite

aboomtimeforthosesectorsbutwhenyoucomedownto

manufacturingplantstherewillbeImsuremoreBritishinputbutI

cantseeaneasywayofusmakingsubstantialinroads.Developer,

interviewwithippr


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Thereisclearlymuchpotentialforjobcreationintheoffshorewindindustrybut,aswe

haveseen,agreatdealofuncertaintyremainsaboutthenumberofjobsthatmightbe

createdandwheretheyarelikelytobelocated.Thisuncertaintystemsfrommanyfactors,includingtheeffectivenessofgovernmentpolicy,economicconditionsand

publicacceptability.

ThissectionlooksattheexamplesofDenmark,GermanyandSpainallofwhichhave

beenverysuccessfulindevelopinglocalonshore windindustriestoidentifywhich

factorswereimportantintheirsuccess.WeaskwhethertherearelessonsfortheUKin

buildingupanoffshorewindindustryandinmaximisingthejobcreationopportunities.

Denmark

Denmarkcapitalisedonitsfirstmoveradvantagetobuildupasignificantwindenergy

industry(CentreforSustainableEnergy2005,EWEA2009a).Approximately23,500

peoplearedirectlyemployedtodaybywindenergycompaniesandmanysignificant

globalturbineandcomponentmanufacturers,aswellasserviceproviders,areDanish

companies.ThisincludesVestas,theworldsleadingturbinesupplier,andanotherofthe

worldstop10manufacturers,Siemens(whosewindpoweroperationsarebasedin

DenmarkafterSiemensacquiredBonusEnergy,aDanishwindturbinemanufacturerin

2004)(BTMConsultApS2008,EWEA2009a).Denmarkalsoexportsasignificant

numberofwindturbinesandcomponentsaround40percentofcurrentglobal

capacityisproducedinDenmark(EWEA2009a).

OneofthemainfactorsbehindDenmarkssuccesshasbeenthewayinwhichthe

marketforwindwasdeveloped.InstalledcapacityinDenmarkrosesteadilyfromless

than1GWin1996tojustover3GWin2003(DanishWindIndustryAssociation2009).

Thisstableannualgrowthwasfacilitatedbyastrongpoliticalcommitmenttothe

developmentofwindandtheuseofafeed-intariffsupportmechanismwhichprovided

aconsistentfinancialsupportmechanism(LewisandWiser2005,CentreforSustainable

Energy2005,Tokeetal 2008).Thecertaintyofthismarketwasimportantingiving

companiestheconfidencetoinvestinR&DandmanufacturingfacilitiesinDenmark.

TheDanishgovernmentalsoprovidedsomedirectsupportmechanismstoaidthe

developmentofthewindindustry.Theseincluded:

GuaranteedloansforlargeprojectsusingDanish-madeturbines(theWindTurbineGuarantee)

Usingcustomsdutiestofavourtheimportofcomponentsratherthanassembledturbines

Providingtied-aidwherebygrantstodevelopingcountriesweremadeonconditionthatDanishwindturbineswouldbeimported

ProvidingawelltargetedR&Dbudget

UsingqualitycertificationtoeffectivelydemandtheuseofDanish-madewindturbinesforprojectsinDenmark(sincemanufacturersfromothercountriescouldnotmeetthesestandards).(LewisandWiser2005)

2.Creatingjobslessonsfromtheonshorewindindustry


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Germany

GermanyhasEuropeslargestwindworkforcewith38,000peopledirectlyemployedtoday

(EWEA2009a).Itisalsohometotwooftheworldstoptenturbinemanufacturers

EnerconandNordexandhasa28percentshareoftheworldmarket(BTMConsultApS

2008,GermanWindEnergyAssociation2008).

LikeinDenmark,thegrowthofGermanyswindmanufacturingindustrywasmadepossible

byastrongpoliticalcommitmenttowindandastablefinancialsupportmechanismthe

feed-intariff.Theintroductionofthefeed-intariffwassupportedbyallmajorparties(with

onlyoneexception)anddespiterevisionsovertime,hasmaintaineditsessentialfeaturesof

guaranteedreturnstoinvestors,lowlevelsofriskandlong-termstability(Szarkaand

Blhdorn2006:6).Thisinturnhascreatedanattractiveclimateforinvestmentinwind

energyandGermanyscapacitygrewfromaround2GWin1997toover18GWin2005,with

aninstallationrateof1,500MWperyearbetween1999and2004(GermanWindEnergy

Associationn.d.,LewisandWiser2005).

Thedevelopmentofthewindmarketstimulatedgrowthinmanufacturingandjobsand,of

course,Germanyalsohadtheadvantageofalreadyhavingastrongengineeringbase(Szarka

andBlhdorn2006).Thisdidnothappenbyaccident:thepotentialeconomicbenefitsof

increasingtheuseofrenewableenergywererecognisedbytheGermangovernment.Inhis

forewordtothe2000RenewableEnergySourcesAct,FederalEnvironmentMinisterJrgen

TrittenacknowledgedthattheActopensupgreatopportunitiesnotonlytoenhanceour

futureenergy-mixbutalsointermsofskilledjobsandexports(FederalMinistryforthe

Environment,NatureConservationandNuclearSafety2000:3).

Thefeed-intariffwaskeytodevelopingGermanyswindindustry,butadditionalsupport

mechanismshelpedtostimulatethesector.Theseincluded:

Theprecursortothefeed-intariff,whichwasaperkWhsubsidyofferedunderthe100MWWindProgramme(laterexpandedto250MW).ThisprogrammehelpedtodevelopGermanwindtechnologyandtoestablishamanufacturingbase

SoftloansforcapitalinvestmentinGermanwindenergyprojectswereavailablefromthestate-ownedbanksundertheEnvironmentandEnergyConservationProgrammeandtheEnvironmentProgramme

Theuseoffavourablecustomduties(tofavourtheimportofturbinecomponentsratherthanturbines)

Theuseoftied-aidexportcreditassistance

Qualitycertification R&Dfunding

(LewisandWiser2005,SzarkaandBlhdorn2006)

Spain

AlthoughSpainswindindustrydevelopedlaterthanDenmarksandGermanys,itisstilla

majorplayerintheworldswindmarket.Approximately20,500peopleareemployeddirectly

inthewindindustryinSpainincomponentmanufacture(32percent),specialisedservice

provision(31percent),turbinemanufacture(16percent),anddevelopmentandoperation

(21percent)(EWEA2009a).TwooftheworldstoptenturbinemanufacturersareSpanish

companies(GamesaandAcciona)andthereisalargemanufacturingbaseinSpainitself,

withover70turbineandcomponentfactoriesacrossthecountry(AEE2008,BTMConsult

ApS2008).Spainalsohasahealthyexportindustry,havinginstalled8.5GWofcapacityin

25countriesaroundtheworldtodate(AEE2008).


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Spainhasperhapsbeenmoreexplicitinitsaimtogrowalocalwindindustrythanhas

DenmarkorGermany(althoughapursuitofeconomicbenefitswasundoubtedlyimportant

tobothofthesecountriestoo).Asaresult,policieshaveaimednotonlytoincreasetheuse

ofrenewableenergybutalsotoattractforeigncompaniestoestablishmanufacturingbases

inSpain(Lewis2007a,CentreforSustainableEnergy2005).Politically,therehasbeenclearsupportforincreasingwindcapacityfromallmajorparties.At

thepolicylevel,Spainhasalsoemployedafeed-intariffintroducedin1994to

encouragethegrowthofthedomesticwindmarket.Thesubsequentexpansioninthe

markethasbeenattributedtotheconsistentapplicationofthispolicyandtothehighlevel

ofincentivethatwasprovided(Spainhasthesecondhighestleveloffeed-intariffinEurope,

aftertheNetherlands)(Bolonetal2007,Lewis2007a,Tokeetal2008).Totalinstalled

capacityhasrisenfromlessthan1GWin1997toover15GWin2007,givingSpainthethird

largestinstalledcapacityintheworld(AEE2008,EWEA2009a).

AkeydifferencebetweentheapproachtakenbyGermanyandDenmarktodeveloplocal

windindustriesandthatofSpainhasbeentheuseoflocalcontentrequirements.ThesehavebeenappliedbySpanishregionalgovernmentsandessentiallyrequirelocalassemblyand

manufactureofturbinesbeforewindfarmdevelopmentconcessionsaregranted.Theresult

hasbeenthegrowthofSpanishcompanieslikeGamesaaswellasjobcreationasa

consequenceofforeigncompaniessettingupmanufacturingfacilitieslocally(Lewis2007a,

LewisandWiser2005,CentreforSustainableEnergy2005,UN2008).Inadditiontolocal

contentrequirements,Spainhasalsoaidedthedevelopmentofitslocalwindindustry

throughtheprovisionofaproductiontaxcreditthatisonlygrantedonturbinesmeeting

localcontentrequirements(LewisandWiser2005).

Spainwasabletobuildonitsexistingmanufacturingbasetodevelopitswindpower

industry.Ahistoryofautomobileandaircraftmanufactureprovidedasuitableskillsbasefortheindustry;indeed,Gamesanowoneoftheworldslargestturbinemanufacturing

companieswasoriginallyanaircraftmanufacturingcompanythatdiversifiedintowind

(Bolonetal2007).

LessonsfordevelopinganoffshorewindindustryintheUK

DrawingontheexperiencesofDenmark,GermanyandSpainindevelopingtheirwind

industries,threekeymessagesstandout:

Asizeableandstabledomesticmarkethasbeenessentialineachcasetodevelopinglocalindustry

High-levelpoliticalsupportfordevelopingdomesticwindpowerwasnotsufficientadditionalpolicyandfinancialsupportwasnecessarytodeveloptheindustry.

Anexistingskillsbaseallowednewindustrytosetup.

Domesticmarket

TheoverridingmessagefromthesuccessesofDenmark,GermanyandSpainindeveloping

theirwindindustriesisthatastableandsizeabledomesticmarketisvital.Inallthree

countries,localmanufacturersbeganbysupplyingthedomesticmarketbeforelookingfor

exportopportunities.Numerousreportsonthistopicreiteratetheimportantrolethe

domesticmarketshaveplayedinthedevelopmentofwindpowerindustries:

Astablehomemarketsignalstobothlocalmanufacturersandto

foreignfirmsthattheyhavethelong-termplanninghorizonnecessary

toallowthemtoreasonablyinvestinthemarket.Companiesfacing

unstableorsmallmarkets,ontheotherhand,willbelesswillingto


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spendmoneyonR&D,productdevelopment,andlocalmanufacturing

facilities.(LewisandWiser2005:11)

Themanufacturersurveyunderlinestheimportanceofastable

domesticmarketasthebasisforsuccessinthecontinuallygrowing

internationalmarket.(GermanWindEnergyAssociation2008)

Inallthreeofthesecountriesastrongpoliticalcommitmenttoincreasingwindcapacitywas

combinedwithconsistentapplicationofpolicymechanismsthatprovidedlong-termstability,

guaranteedreturnsandalow-riskinvestmentenvironment.Thiscombinationhasproved

successfulinattractinginvestors.

MostcommentatorsagreethattheUKhashigh-levelpoliticalsupportforincreasingthe

UKsrenewableelectricitysupply,demonstratedmostrecentlybythepassingoftheClimate

ChangeAct.SomealsopraisedtheCrownEstatescommitmentandproactiveattitude

towardsRoundThree.Thenexttaskwillbetotranslatethisambitionintoacrediblepolicy

frameworkthatwillgivebusinessestheconfidencetoinvestinoffshorewind.

Industrialactivism

Althougheachcountryhadhigh-levelpoliticalsupportforwindpower,thisinitselfwasnot

enoughtocatalysethedevelopmentofalocalwindindustry.Allthreeoftheexampleshere

enjoyedcross-partypoliticalsupportforincreasingwindcapacity(whichisimportant

becauseitgivesassurancetopotentialinvestorsthatpolicyinthisareawillnotchangeeven

ifthereisachangeofgovernment)andallthreehadhigh-leveltargetsforrenewable

electricityproduction.However,itisclearthatthepolicyframeworksthatsupportedthe

developmentofthemarketandencouragedalocalindustrywereanimportantpartofthe

successstory.Eachgovernmenttookastrategicdecisiontopursuegrowthinthewindsector

andestablishedapolicyframeworktoboostthisindustry.TheGermanGovernment,for

example,iscommittedtodevelopingecologicalindustrialpolicytotakeadvantageofthe

jobopportunitiesandenvironmentalbenefitsbroughtaboutbygreenindustriesandthis

includesaneedtostrengthenstrategicindustriesofthefutureandmakeourindustryfitfor

themarketsofthefuture(FederalMinistryfortheEnvironment,NatureConservationand

NuclearSafety2006:21).

Avarietyofpolicymechanismshavebeenusedtosupportthewindindustry,includinglocal

contentrequirements,financialandtaxincentives,favourablecustomsduties,exportcredit

assistance,qualitycertificationandR&D(LewisandWiser2005).Ofcourse,theindirect

supportfromthefeed-intariffwasimportant,too.

ThisexperienceimpliesthattheUKwillneedtodevelopasuiteofpoliciesoverandabovetheRenewablesObligationtosupportthedevelopmentoftheoffshorewindindustryifitis

tocreateUK-basedjobsinthissector.

Skills

Eachofthecountriesstudiedherehadanexistingskillsbasethatturbineandcomponent

manufacturerscoulddrawon.Germanyinparticulariswellknownforitsmanufacturing

capacity.

ThelessonfortheUKhereistoidentifywhereexistingskillsmightbetransferredtothe

windindustry.Theoffshoreoilandgasindustryisoneareathatwarrantsattentioninthis

regard.Therearealsoopportunitiesinfinancialandlegalservicesandtheremaybescopeto

useskillsfromtheautomobileandaerospacemanufacturingsectors.

Thenextthreesectionsofthisreporttakethesethreelessonsonthemarket,industrial

activismandskillsandapplythemtotheUKcontexttoconsiderhowtheoffshorewind

sectorintheUKcanbesuccessfullydeveloped.


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AstheexperiencesofGermany,DenmarkandSpainshow,thedomesticmarkethasavital

roletoplayindeliveringnewgreen-collarjobs.Itisclearthatthesizeofthedomestic

marketwilldeterminethenumberofnewjobsthatarecreated.Marketcertaintyalsohasanimportantroletoplaybecauseinwardinvestmentwillonlyoccurwhencompanieshave

confidencethattheywillbeabletoselltheproductsandservices.

Confidenceinthefuturemarketwillbedriveninthefirstinstancebyhigh-levelpolitical

commitmenttoincreasingoffshorewindcapacityandthenbytheperceivedeffectivenessof

thepolicyframeworkdrawnuptodeliverthisvision.

ManyofthepeopleweinterviewedforthisresearchfeltthattheGovernmenthasconveyed

astrongcommitmenttodevelopingrenewablesintheUKforexampletheambitious

natureofthetargetssetoutintheClimateChangeActwerefelttodemonstrateagood

levelofambition,aswerestatementsaboutcreatinggreenjobs.Butmanyagreedthatthere

isstillagapwhenitcomestomoredetailedpolicymeasuresonhowthetargetswillbemet.Inparticular,foroneinterviewee,muchmoredetailaboutthestrategyformeetingthe2020

targetswasneededbeforeinvestmentdecisionscouldbemade.

Thereisstillalargeamountofuncertaintyaboutwhetheritwillbepossibletodeliveronthe

Governmentsrenewableenergyaspirationsinpracticeandthisisproblematicforindustry

thereisalargedifferencebetweentheaspirationofachieving33GWby2020throughthe

RoundThreeprocessandthe14GWprojectionintheGovernmentsRenewableEnergy

Strategy.Governmentneedstoclarifyacredible,yetstretchingtargetforoffshorewind

capacity.

Beyondhigh-leveltargets,thereareanumberoffactorsthatcontributefurtherto

uncertaintyaboutdelivery:infrastructureinvestmentrequirements,theplanningsystemand

thesupplychain.Thisuncertaintyisactingasabarriertoinvestment.Theeconomicsupport

mechanismandperceptionsofitseffectivenessarealsokeytodeliveringthemarket.

ThissectionlooksatthemainfactorsthatarelikelytoaffecttheUKmarket.Webeginby

discussingsomeofthefactorsthataffectconfidenceinthemarket:theGovernments

economicsupportmechanismandbarrierstodeliverythatarecausingmarketuncertainty.

Wethenconsiderwhetherthesizeofthemarketwillbesufficienttoattractnewinvestment.

Economicsupportmechanism

ThemainpolicytoolfordeliveringrenewableelectricityintheUKistheRenewables

Obligation(RO).Thisrequireselectricitysupplierstoobtainanincreasingproportionoftheirelectricityfromrenewablesourceseachyear(6.7percentin200607).Generatorsof

renewableelectricityareawardedaRenewablesObligationCertificate(ROC)foreach

megawatthour(MWh)ofelectricitygenerated.Thesearethenpassedontoelectricity

suppliersatthepointofsale.ROCsaretradableandsuppliersmustpresentasufficient

numberofROCstotheregulator,Ofgem,tomeettheirrequirementseachyear.Ifsuppliers

arenotabletomeettheirobligation,theymustpayabuyoutprice,whichisthenreturned

toallsuppliersaccordingtothelevelofROCstheyhaveprovided.Thebuyoutpriceisset

eachyearbyOfgemandisadjustedtoreflectchangesintheRetailPricesIndex(Ofgem

2009).

TheROhascomeundercriticismbecauseithasnotbeenassuccessfulatincreasingrenewableenergyasfeed-intariffs,whichhavebeenusedinotherEuropeancountries,most

notablyDenmark,GermanyandSpain(evenwhendifferencesinplanningregimesaretaken

3.Securingthedomesticmarket


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intoconsideration).Feed-intariffsprovideaguaranteedpaymentforeachkWhofelectricity

generatedandtheirsuccesshasbeenattributedtothreefactors:

Feed-intariffsprovidelong-termcertaintyforinvestors.Forexample,inGermany,thefeed-intariffisguaranteedforthefirst20yearsofageneratingplantslifetime.The

RO,whenitwasoriginallyintroduced,wassettoendin2027.

Feed-intariffsprovidemorecertainreturnsbecausethelevelofpaymentperkWhisfixedinadvance.Bycontrast,thereturnsfromtheROareuncertainbecausetheydependonthemarketpricesofROCs,whichismoredifficulttopredict.Thisuncertaintyincreasesthecostofcapital.

Feed-intariffshavebeendifferentiatedaccordingtotypeoftechnologysothatmorematuretechnologiesweregivenlesssupportthanthoseatearlierstagesofthedevelopmentanddeploymentprocess.IntheUK,thesamenumberofROCshavebeenawardedregardlessofthetypeoftechnologyusedtogeneratetheelectricity,withtheresultthatmaturetechnologiessuchaslandfillgashavereceivedan

unnecessarilyhighlevelofsubsidy,whilethosethatarestilldevelopinghavenotreceivedsufficientsupport.(See,forexample,Sternetal2006)

TheGovernmenthasnowreformedtheROinresponsetotwoofthesecriticisms.Inhislast

Pre-BudgetReport,theChancelloroftheExchequerannouncedthattheROwouldbe

extendedto2037(Darling2008).TheGovernmentalsohopestointroduceabanding

systemfortheROinApril2009(subjecttoitmeetingEuropeanstateaidrules).Underthis

system,maturetechnologiessuchaslandfillgaswillreceivefewerROCsperMWhof

electricitygenerated,whileemergingtechnologiessuchaswaveandtidalenergywill

receivemore.Undertheproposedsystem,onshorewindwillreceive1ROC/MWhwhile

offshorewindwillreceive1.5ROCs/MWh(HMGovernment2008a).

ThecriticismabouttheuncertaintyofreturnsundertheROremainsandasaresult,there

havebeencallsfortheGovernmenttoscraptheROandreplaceitwithafeed-intariff(see

forexample,Barkeretal2008).However,thosewithintherenewableenergyindustryhave

opposedsucharadicalreformofpolicy,claimingthatthetimerequiredtodesignand

legislateforanewschemewouldseriouslyjeopardisethe2020target.Industry

representativesinterviewedforthisprojectwereclearthatthepolicyuncertainty(thatthe

ROmaybechangedforafeed-intariffatsomepointinthefuture)wasagreaterhindrance

toinvestmentthanthecurrentuncertaintyofreturnsundertheRO.Oneinterviewee

explainedthatacross-partyagreementnottochangetheeconomicsupportmechanismfor

thenextdecadeorsowouldbehelpfulinbringingforwardinvestmentdecisions.

Basically,ifpressed,wewouldsayitdoesntmatterwhatthe

regulatoryframeworkiswhetheritsfeed-intarifforROCsora

combinationaslongasitsstableandsojustdecidewhatitisandthen

getcross-partyagreement.Developer,interviewwithippr

Itappearsthataconsensusamongthemajorpoliticalpartiesisemerging.TheGovernments

responsetocallsforafeed-intariffhasbeentointroduceoneforsmall-scaleinstallations

(lessthan5MW)andtoreformtheRObyintroducingabandingsystemandextendingit

until2037(BERR2008,HMGovernment2008a,Darling2008)..Thisresponsesucceedsin

ensuringacontinuouspolicyframeworkforlarge-scaleoperators,whichisnecessaryfor

buildingconfidenceamonginvestors,whileatthesametimeprovidinganewincentivefor

smalleractors,suchashouseholdsandbusinesses.TheConservativePartyhasdemonstrated

acommitmenttocontinuingtheGovernmentspolicyinthisarea(ConservativeParty2009).

TheLiberalDemocrats,however,advocatereplacingtheROwithafeed-intariff(Liberal

DemocratParty2008).


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Perhapsamoreimportantquestioniswhether1.5ROCsforeachkWhofenergyproduced

byoffshorewindwillbesufficienttomakeinvestmentinwindfarmseconomicallyviable.

Severalindustryrepresentativesinterviewedforthisprojectsuggestedthatitwasprobably

notenough.TheBritishWindEnergyAssociation(BWEA)iscarryingoutastudyonthis

question,whichshouldbepublishedlaterin2009.Ontheeconomicside,itsnotthemechanism,itsmorethelevel

comparedtothecosts.Is1.5ROCsgoingtobeenough?Doesthe

multipleneedtoberaisedorcancostsbereducedtomakeitenough?

Industryspokesperson,interviewwithippr

AnimportantfeatureofGermanyssuccessindevelopingitswindcapacityisthatthefeed-in

tariffmechanismwasmodifiedovertimetoensureitwasdeliveringthedesiredoutcomes.

CommentatorshaverecommendedthattheUKGovernmenttakesasimilarapproachand

monitorsprogresstowardsthe2020renewablestargetannuallytoensurethattheROis

delivering(Boettcheretal2008).

ipprrecommendsthatgovernmentshouldmonitorthedeploymentofrenewableenergy

capacityonanannualbasistodeterminewhetherthelevelsofbandsundertheROhave

beensetcorrectly.Ifdeploymentisnothappeningasfastasisnecessary,Government

shouldbepreparedtoaltertheROCallocations.Similarly,Governmentshouldalsobe

preparedtomoveallocationsdownwardsastechnologiesmature.

Removingbarrierstodeliveringoffshorecapacity

DespitetheambitiousscaleofRoundThreeofoffshorelicensing,andGovernment

statementssupportingthedevelopmentofoffshorewind,thereisstillagreatdealof

uncertaintyabouthowmuchcapacitywillbedeliveredby2020.Thisisbecausetherearestill

anumberofsignificantbarrierstodeliverythatcoulddisruptoffshoredevelopmentprojectsorevenpreventthemfromhappening.Themostimportantoftheseareissuestodowiththe

grid,planningandthesupplychain.

Thegrid

Theuncertaintyaroundwhetherornotthegridwillbeupgradedintimetosupportnew

generatingcapacityisregardedasthebiggestthreattoachievingthe2020renewables

targetbymanyoftheindustryexpertsinterviewedforthisreport.

Themainbarrier[tomeetingthe2020renewablestarget]willbegrid

capacityandgridconnection.Developer,interviewwithippr

Significantworkonthegridwillbenecessarytoconnectthenewcapacitythatisexpectedtocomeonlineby2020.Thisincludesprovidingconnectionsfromoffshoresitestoonshore,

layingnewcablestoconnecttotheonshoregrid(whichismanymilesinlandinsomecases)

andexpandingthecarryingcapacityofthegridtodealwithincreasedloadsinsomeareas.

Therearealsoquestionsabouthowthegridcanbereinforcedtodealwiththeintermittency

ofwindpower,forexamplethroughinterconnectionwithotherEuropeancountries.

Numerousreportshavearguedfortheneedtofocusonimprovingthegridandproviding

connectionsasamatterofurgency(forexample,RAB2008,CarbonTrust2008).

Alackofupfrontinvestmentinoffshoreconnectionscouldmakeitlesslikelythatoffshore

windcapacitywillbedeliveredbecauseitincreasesriskandmayincreasethecostofcapital.

Thiscouldinturndiscourageinvestment.

Lackofgridcapacityisamajorissuebecauseifwecantgetagrid

connection,wecantbuildanythingnobodywillgiveusthemoneyto


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buildanoffshorewindfarmunlesswecanguaranteeweregoingto

getrevenuefromsellingelectricitysoIwouldsaythatsthemajorissue.Developer,interviewwithippr

DECCandOfgemarecurrentlyintheprocessofdevelopinganewregulatoryregimefor

offshoreelectricitytransmissionandforlicensingoffshoretransmissionconnectionsaspartoftheoffshoretransmissionproject.Afinalconsultationisscheduledforearly2009andthe

newregimeisplannedtogoliveinmid-2010(BERR2009).

Thecurrentregulatoryregimehascausedsomedifficultiestodate,particularlyaround

NationalGridstimetablingofprovidingconnections(whichhasnottakenaccountofwhat

stageintheplanningprocessprojectswereat)andbecauseofalackofcoordination

betweenOfgemandNationalGrid.In2008,OfgemandBERRjointlypublishedthe

TransmissionAccessReview,whichcontainsmeasurestoovercomesomeofthese

timetablingissues(OfgemandBERR2008).

Thelackofastrategicplanforthegridhasalsocausedconcern.Thegridhasevolvedover

timeinapiecemealfashionwithindividualprojectsbeingconnectedonebyone.

Commentatorshavearguedthatfutureinvestmentsshouldbemadeinamorestructured

andlogicalway(Boettcheretal2008,RAB2008).Thisissuewasalsocoveredinthe

TransmissionAccessReviewandtheElectricityNetworksStrategyGroup,whichischaired

jointlybyDECCandOfgem,iscurrentlydevelopingastrategicvisionofwherenew

transmissionslineswillberequiredtomeetthe2020targets.Thisisexpectedtobe

publishedinspring2009.

Thereisariskthattherecessionmaymakefinancingthenewoffshoreconnections

problematic.Governmentshouldmonitorprogresstowardsprovidingoffshoregrid

connectionstoensureprogressisoccurringatasufficientratetomeetthetimetablesetout

forRoundThree.Governmentcouldoffertounderwriteloansorworkwithfinancial

institutionstoencouragelendingtooffshoregridcompaniestoensuretheyareabletoraise

sufficientfinancetoallowtheworktotakeplace.

Planning

Theplanningapprovalprocesshaslongbeenapointofconcernforfuturewindproject

developers.Thelongtimetakentoreceiveplanningconsentandhighlevelsoflocal

oppositiontowindfarmshavebeenproblemsfortheonshorewindsector,andthis

experiencehasweakenedconfidenceamongpotentialinvestorsthattheUKwillbeableto

deliveronitsaspirationtohave33GWofoperationaloffshorewindinstalledby2020.

Somanyintheindustryarecynicalabouttheoffshoremarket,becauseonshorewindshouldbeeasiertodeliverthanoffshoreandyet

theUKhasstruggledtogetonshoreMWsintheground.Somany

criticsofthewindindustrysay,Ifyoucantdoitonshorewhat

confidenceareyougoingtohavethatitsgoingtobeanydifferentor

easiertodooffshore?Turbinemanufacturer,interviewwithippr

ThisproblemhasbeenacknowledgedbytheGovernmentandthePlanningActsetsout

provisiontoestablishanInfrastructurePlanningCommission(IPC)andNationalpolicy

statements.TheIPCwillbeaNon-DepartmentalPublicBodyanditsrolewillbeto

determineplanningapplicationfornationallysignificantinfrastructureprojects.Foroffshore

wind,thiswillincludeoffshorewindfarmsinEnglandandWalesthatarelargerthan100MW(HMGovernment2008b).TheIPCsdecisionswillbeguidedbyaframeworkofNational

PolicyStatements(NPSs),whichwillbedevisedbyGovernmentandwillsetouttheneedfor

certaintypesofinfrastructure,suchasenergy,ports,airportsandwatersupply.


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ThenewIPCprocessisexpectedtoreducetheplanningandconsentingprocessforoffshore

windtoaroundthreeyears.Industryexpertsinterviewedforthisreportwerehopefulthat

theprocesswouldbespeduptosomeextent.However,theIPCisstillanunknownquantity

andthetimetableforitsintroductionistight.TheIPCandNPSsarescheduledtobeinplace

bymid-2010andtheplanningandconsentingprocessforRoundThreeistimetabledtobeginimmediatelysothatconstructioncanbeginin2014(seeAnnexIIforamoredetailed

timetable).ClearlyiftherearedelaysinestablishingtheIPC,inagreeingtheNPSs(which

mustbelaidbeforeParliament)orifthenewprocessofobtainingplanningconsentisnotas

fastasanticipated,thenthedeliveryofoffshorecapacityfor2020willbecomelesslikely.

OneintervieweesuggestedthatinvestmentinstaffingandresourcingtheIPCshouldbeat

thetopofthelistwhenconsideringhowtoensurethedeliveryofoffshorewindcapacity.

Thefirstthing[thatgovernmentshouldinvestin]ismakingsurethat

theInfrastructurePlanningCommissionisproperlysetupand

resourcedandstaffedsothatisntakindofbureaucraticbottleneck.

Thatsthemostimportantthing.Developer,interviewwithipprObviouslyoneofthemostsignificantconstraintsisplanningand

consentingprocessandtheIPCandtheMMO[MarineManagement

Organisation]willpotentiallyplayareallyvitalroleinmitigating

consentingriskwhatimpactthenewconsentingregimewillhaveon

thesuccessrateandtimescaleforgainingconsentsonoffshoreprojects

Idontknowitsanunknownprocessandthisscaleofdevelopment

isnewtotheindustry.Consultantonoffshorewind,interviewwithippr

ItisclearthatGovernmentmustnowmonitortheprogressoftheintroductionoftheIPCthe

NPSsandthespeedwithwhichapplicationsareapprovedunderthenewregimeandensure

thatthetimetablefordeliveringoffshorewindcapacityfor2020iskeptontrack.ThisincludesensuringtheIPChassufficientresourcestooperateeffectively.

Supplychain

Manycommentatorsrecogniseconstraintsintheoffshorewindsupplychainasabarrierto

meetingtheUK2020targets.Recentstudiesonthistopichaveidentifiedthesupplyof

offshorewindturbines,installationvessels,cablesandoffshoresubstationsasbeingkey

areasofconstraint(CarbonTrust2008,DouglasWestwood2008,Boettcheretal2008,

BWEA2007).TheCarbonTrustidentifiesfoundationsasbeinganadditionalareaamongthe

keycomponentsthatispronetoshortages(CarbonTrust2008).

AreportbyDouglasWestwood(2008)notesthatglobally,therearecurrentlyonlythree

maincompaniessupplyingoffshorewindturbines.Otheronshorewindturbine

manufacturersareintheprocessofdevelopingoffshoreturbineswhileothersarenotyet

convincedthatthefutureglobalmarketforoffshorewindiscertainenoughtobegin

producingturbines.Increasingcertaintyinthefutureoftheoffshoremarket(asdiscussed

above)iskeytoattractingnewplayersintotheoffshorewindturbinemarketandto

reducingleadtimesforturbines.

Someintervieweesdidrecognisesupply-chaindifficultiesasanissueforoffshorewind.

However,mostwereconfidentthatsupplierswerescalinguptheiractivitiesandthatthe

shortagesthathadbeenexperiencedtodatewouldnotexistinthefuture.

Oneofthebiggestissueswevehadintheindustryiswiththecapacityforsomekeycomponentsupplierstodeliverthevolumewehave

demanded.Whentheonshorewindmarketisboomingwecantgetall


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thecomponentsweneedfastenoughfromthesupplierstobeableto

runatfullcapacityinsomeofourfactories.Wehaveinvestedalotof

timeandmoneytoimprovethisoverrecentyears.Turbine

manufacturer,interviewwithippr

Idontthinkweseethesupplychain(vessels,cables,transformers,

turbines)assuchbeingamajorcriticalissueondeliveryofRound

Threeintheschemeofthingsitmightdelayaprojectayearorso

therealshowstopperisgrid.Developer,interviewwithippr

ipprbelievesthatGovernmentshouldinitiateamappingexercisetoidentifyUK-based

companieswiththepotentialtodiversifyintotheoffshorewindsupplychainandshould

makethisinformationavailabletoturbinemanufacturerstoencouragethemtosetupinthe

UK.

Governmentshouldalsoprovidesupporttoindustriesthataremostlikelytocause

bottlenecksinthesupplychain,includingfoundations,offshoresubstations,cables,

installationvesselsandturbinemanufacturers.Section6describesinmoredetailtheform

thissupportcouldtake.

Althoughsupply-chainissuesarenotconsideredtobeasbigaproblemasfixingthegrid,

thecreditcrunchaddsanotherdimensiontotheproblem.Supplierslookingtoincreasetheir

capacityinordertomeetgreaterdemandinthefuturemayfacedifficultiesinsecuring

financetoexpand.Againuncertaintiesinthesizeofthefuturemarketcompoundthe

problem;withoutaminimumnumberoflong-termcontracts,itcanbedifficultforsome

playersinthesupplychaintoraisethefinanceneededtoincreasecapacity.

Eveniftheeconomicsofprojectscanbemadetostackup,thecurrent

crisisinthefinancialmarketsmeanssecuringtheamountsofcapitalrequiredfortheselargedevelopmentsischallenging,evenforlarge

companieswithstrongbalancesheets.Industryspokesperson,

interviewwithippr

Wherepossible,governmentshouldconsiderprovidingguaranteesforloanstosupply-chain

companieslookingtoexpandtheircapacityintheUKbutwhoarestrugglingtoraisefinance

becauseoftherecession.Governmentshouldalsoworkwithfinancialinstitutionsto

encouragelendinginthissector.

Maximisingmarketsize

AstheexamplesofDenmark,GermanyandSpainshow,thesizeofthelocalmarketisvery

importantwhenitcomestoinvestmentdecisionsfrommanufacturers.Companiesneedto

knowthatthelocalmarketfortheirproductswillbesufficientlylargeandpredictableto

outweightheset-upcosts.

WhenitcomestotheUK,althoughtheambitionsforoffshorewindareverystrong,there

wasstilldoubtamongmanyoftheintervieweesthatwespoketothattheUKmarketalone

wouldbesufficienttoattractnewmanufacturingcapacitytosetuplocally.Forexample,the

minimumsizethatsomeintervieweessaidtheywouldneedinordertowarrantsettingupa

factoryrangedfrom1GWto6GWperyearforfiveto10years.ThetotalUKmarketwould

needtobemuchgreaterthanthis(toaccountforthefactthatthetotalmarketsizeneeds

tobedividedbyeachcompanysmarketshare)andsoonthisbasistheUKmarketalone

doesnotlooklikeitwillbesufficienttoattractmanufacturing.

OneintervieweesuggestedthatincreasingtheUKsonshoremarketaswellastheoffshore

marketwouldhelptoovercomethisproblembecausethetotaldomesticwindmarketwould


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begreater(andbecauseonshorewindislesscostlythanoffshore).However,other

intervieweesdisagreedwiththisbecausethecomponentpartsforonshoreandoffshorewind

aredifferentandthereforemaynotbeabletobesuppliedbythesamefactoryandalso

becausetheydonothaveconfidenceintheUKsonshoremarketgiventheslowprogress

thathasbeenmadetodatecomparedtotheonshoremarketinothercountries.AlthoughtheUKoffshorewindmarketmaynotbebigenoughinitselftoattractnew

investment,theEuropeanmarketasawholeislikelytobebigenoughtogeneratenew

manufacturingcapacity.Forexample,Germanyalsohasplanstoincreaseitsoffshorewind

capacityinthemediumterm(EWEAreportsthatatotalof16GWisplannedintheUKand

Germanyby2015,ontopofexistingcapacityandprojectscurrentlyunderconstruction

[EWEA2009b]).Largecompanieswhoarealreadyoperatingataninternationallevelare

morelikelytomakeinvestmentdecisionsbasedonprojectionsofinternationalmarketsize

ratherthannationalmarketsandsothegrowthoftheEuropeanmarketisperhapsmore

relevantthanconsideringtheUKalone(althoughitisclearthatimprovingcertaintyinthe

UKmarketthroughthemeasuresoutlinedabovewillmakeanimportantcontributiontoperceptionsoftheEuropeanmarketforoffshorewind).

Thequestionis,the

Green Jobs: Prospects for creating jobs from offshore wind in the UK

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