RENEWABLE SUPPLY CHAIN
GAP ANALYSIS


Summary Report

IN ASSOCIATION WITH
The DTI drives our ambition of
‘prosperity for all’ by working to
create the best environment for
business success in the ...
Foreword
We are delighted to present the conclusions of a wide-ranging study into the
current status of the renewables ind...
Renewable Energy Industry Gap Analysis:
Summary Report

1   Overview                                                 page ...
1 Overview


1.1 Aims
Mott MacDonald, in association with the Bourton Group, has been appointed by DTI’s
Renewables UK, Sc...
1.2 Results
(i) Monetary Value and Current Employment

The total monetary value, adjusted for imports, is of the order of ...
(iii) Key Opportunities and Threats

The main opportunities that arise from the analysis are summarised as follows:

• The...
1.3 Recommendations

Outline recommendations are summarised below.


 General

 UK Support Agencies should analyse further...
Biomass

    DTI’s Renewables UK and the Scottish Economic Development Agencies to maintain
    dialogue with project deve...
PV

DTI’s Renewables UK and the Scottish Economic Development Agencies to hold discussions
with UK and overseas existing a...
2 Main Building Blocks
The study has analysed each renewable energy technology separately, following a common
approach wit...
Figure 2-1: UK Renewables Timetable


   2000                       2005                       2010                     20...
Figure 2-2: Example of Supply Chain Pyramid - Wind

                                         Examples:

                  ...
2.2 Industry Consultation
Engagement with industry has formed an important part of the study. In addition to general
excha...
Analysis
Figure 2-4 shows how the different elements, including information gathered from industry
consultations, have bee...
3 Current size of the Renewable Energy
Industry
This section presents the approach followed to calculate the industry’s cu...
The jobs calculated are Full Time Equivalent (FTE). This process is summarised in Figure 3-1
and each step explained below...
The key elements of the approach are explained below.

The analysis includes renewables generation projects and the associ...
Jobs per MW

To estimate the total jobs per MW for any technology, jobs associated with each tier in the
supply chain must...
Figure 3-2 Method to Estimate Labour Content in the Supply Chain


                                                       ...
Figure 3-3: Method to Estimate Jobs per MW

                                     Material (M)     Very low

              ...
Import content has been estimated for each component at each level of the supply chains. The
individual items have been ag...
Emerging Technology Jobs

The core analysis is built from commercial project activity. The employment relating to
emerging...
3.2 Results
This section presents the monetary value and employment currently sustained by the industry
in the following w...
The estimates for monetary value and FTE jobs currently sustained (Q4, 2003) by the industry
are summarised as follows:

•...
Figure 3-6: Estimate of Current Monetary Value of the Industry

                    300


                                ...
3.2.3 Employment


(i) Jobs per MW by Project Phase
The level of employment sustained by the industry varies significantly...
Figure 3-8: Jobs per MW for the Development Phase and Technology

                   2.5



                   2.0
       ...
(ii) Jobs per MW by Supply Chain Tier
Figure 3-10 and Figure 3-11 give a breakdown of the employment per MW at each level ...
(iii) Total Jobs


     Figure 3-12 and Figure 3-13 show the total jobs sustained by the renewable industry in
     Scotla...
Figure 3-13: Total Jobs in the Rest of the UK in 2003 (a) by phase and (b) by technology


       3000
                   ...
4 Future Industry Size
This section presents our analysis of the industry’s future monetary value and associated
employmen...
UK Capacity (MW)

The size of domestic demand through the period has been based on the projections in the Energy
White Pap...
Investment per MW

Jobs per MW

The future shape of the industry depends to a degree on how the technologies evolve and ho...
Figure 4-4: Cost reductions by Technology to 2020


                             4500


                             4000
...
Import Adjusted per MW

We would expect import content of future capacity additions to reduce in line with the size of
pot...
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report
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RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report

  1. 1. RENEWABLE SUPPLY CHAIN GAP ANALYSIS Summary Report IN ASSOCIATION WITH
  2. 2. The DTI drives our ambition of ‘prosperity for all’ by working to create the best environment for business success in the UK. We help people and companies become more productive by promoting enterprise, innovation and creativity. We champion UK business at home and abroad. We invest heavily in world-class science and technology. We protect the rights of working people and consumers. And we stand up for fair and open markets in the UK, Europe and the world.
  3. 3. Foreword We are delighted to present the conclusions of a wide-ranging study into the current status of the renewables industry in the UK and an assessment of its future potential. The study was commissioned by the Renewables Advisory Board (RAB) and was led by a steering group comprising RAB, DTI’s Renewables UK, the Scottish Executive, Scottish Enterprise and Highlands and Islands Enterprise. The joined up nature of this work has also seen the co-operation and participation of UK Regional Development Agencies, Renewables Champions and Trade Associations. The development of renewable energy is an We believe that the report will provide us important part of our efforts to tackle climate all - industry and the public sector alike - with change. But it also offers a huge opportunity to the information to identify what steps must be enhance our manufacturing capacity and taken for the UK to become a major player in provide new employment, not least in the renewable energy technology manufacture and remote areas. If, however, we are to achieve supply. As the report makes clear, there are a the economic benefit from renewables that we number of challenges that need to be faced all believe is possible, then it is important that and obstacles that need to be overcome. But we firstly determine where exactly the as it also makes clear, the potential rewards of opportunities lie and what exactly are the doing so are great. constraints. It is the objective of this report to do just that. We therefore commend this report to all who have a role to play in developing this important industry. Stephen Timms Lewis Macdonald Minister for Energy Deputy Minister for Enterprise and Department for Trade and Industry Lifelong Learning, Scottish Executive January 2004 1
  4. 4. Renewable Energy Industry Gap Analysis: Summary Report 1 Overview page 3 2 Main Building Blocks page 9 3 Size of the Renewable Energy Industry at Present page 14 4 Future Industry Size page 30 5 Gaps, Strengths and Opportunities: Technologies page 42 6 Gaps, Strengths and Opportunities: R&D and Skills page 65 Appendix A Summary of Projects Appendix B Simplified Example: Estimation of Value and Jobs per MW Appendix C Glossary and Abbreviations 2
  5. 5. 1 Overview 1.1 Aims Mott MacDonald, in association with the Bourton Group, has been appointed by DTI’s Renewables UK, Scottish Enterprise, Highlands and Islands Enterprise and the Scottish Executive (the partners) to undertake a study of the current status of the UK renewable industry and to assess future potential. The aim of the study is to assist agencies in determining the most effective means of targeting their effort and resources. This document is a summary of a fuller report that has been provided to the partners to help in identifying potential future support. The UK has been split into two study areas: Scotland and the Rest of the UK. The study: • identifies the participants in the renewable industry in the UK and maps them along the supply chains of the technologies under review; • determines the size of the current market and the potential size and structure of future markets within the context of the Energy White Paper aspirational goals; • assesses the gaps in existing supply chains; and • determines opportunities for the UK and identifies the main constraints. A glossary of terms is included in Appendix C. 3
  6. 6. 1.2 Results (i) Monetary Value and Current Employment The total monetary value, adjusted for imports, is of the order of £290M, of which about £80M is attributed to Scotland on the assumption of no net cross border flows. (Monetary value includes the supply chain for renewable generators but excludes activity associated with grid development and items such as project financing costs, as further discussed in Section 3.1.) There are currently approximately 8,000 jobs sustained by the industry: Current jobs sustained by UK demand, adjusted for imports, are in the order of 5,500, with about 1,300 in Scotland and 4,200 in the Rest of the UK. Further employment to support export activity is in the order of 630 jobs; 200 in Scotland and 430 in the Rest of the UK. Emerging technology companies also contribute around 240 jobs of which about 40 are in Scotland and 200 in the Rest of the UK. On this basis, induced1 jobs are in the order of 1,600 jobs with 400 in Scotland and 1,200 in the Rest of the UK. For the current portfolio of MW under development, under construction and in operation, there are on average 10 jobs per MW2. (ii) Monetary value and Future Employment By 2020: Approximately £15 billion to £19 billion capital expenditure required, depending on the technology mix3 to meet 2020 aspiration. With the conservative assumption that total activity through the period is constant, this suggests that 17,000 to 35,000 jobs could be sustained by the industry. In practice the total activity would vary from year to year and therefore the peaks in jobs could be significantly above these levels. 1 See Glossary in Appendix C. Direct jobs are those in projects, indirect jobs are those in the supply chain and induced jobs arise from economic activity stimulated by the industry – for example extra retail employment. 2 This employment reflects the current levels of activity in development, construction and operations on average across all technologies and not the life cycle employment per MW. 3 Investment requirements increase pro rata if either (i) the cost structure of the technologies or (ii) the total level of demand does not reduce as expected (the Energy White Paper aspirational goal is based on 20% of total generation). Assumptions on cost reductions and demand reductions are shown in Figure 4-4 and Figure 4-6. 4
  7. 7. (iii) Key Opportunities and Threats The main opportunities that arise from the analysis are summarised as follows: • There is a huge wind resource in the UK. The expected wind capacity gap represents manufacturing investment opportunities for the UK, especially for wind turbines and components difficult to transport. • Wave and tidal energy represents a very significant opportunity nationally and globally. Developing competitive wave and tidal designs in the UK would bring significant opportunity at home and abroad for the UK’s related manufacturing and service industry. • The UK has an established hydro capability, which currently generates exports especially through services. Exports are expected to be sustained particularly as the world market for hydro revives. • Development of the UK fuel supply chain for biomass represents opportunities for the agricultural and forestry industries and can result in significant long term employment. • The industry in the UK has experience and knowledge of PV technology and its use that can be leveraged to create a strong, competitive and relatively job-rich industry, with much secondary manufacturing based in the UK. The main threats to the UK are: • The growing UK wind market being served by non-UK wind turbine suppliers that locate sales offices only in the UK, utilising their own manufacturing facilities overseas. • Low confidence in biomass project performance continues, leading to no development of fuel supply, especially energy crops, because the risk to individual producers is too high. Shortage in finance due to low confidence amongst investors. • Commercial wave technology being developed elsewhere in the world due to more supportive policies for demonstration projects and the UK losing its leading position. • Production cost reductions for PV do not materialise. • Strong competition from other countries such as Germany and Spain in the manufacture of PV equipment, potentially exacerbated if demand in manufacturers’ home markets declines so exports are sought to fill order books. 2 This employment reflects the current levels of activity in development, construction and operations on average across all technologies an not the life cycle employment per MW. 3 Investment requirements increase pro rata if either (i) the cost structure of the technologies or (ii) the total level of demand does not reduce as expected (the Energy White Paper aspirational goal is based on 20% of total generation). Assumptions on cost reductions and demand reductions are shown in Figure 4-4 and Figure 4-6. 5
  8. 8. 1.3 Recommendations Outline recommendations are summarised below. General UK Support Agencies should analyse further the import and export activities of the renewable industry. UK Governments to maintain consistent support policy post 2010 that provides business confidence into the long term. Wind DTI’s Renewables UK and the Scottish Economic Development Agencies to continue to work closely with the manufacturers that currently assemble wind turbines in the UK to increase UK content. DTI’s Renewables UK and UK Support Agencies to continue to work closely with the overseas turbine manufacturers to maximise UK content. DTI’s Renewables UK and the Scottish Economic Development Agencies to continue working with wind turbine manufacturers towards establishing manufacturing facilities in the UK and maximising UK component supply. DTI’s Renewables UK to organise ‘meet the buyer’ sessions linking to the study’s database, to introduce potential suppliers to manufacturers. These sessions would examine either potential partnerships and collaborative arrangements or means to increase the visibility of the supplier qualification criteria. DTI’s Renewables UK and the Scottish Economic Development Agencies to continue to work with main turbine manufacturers to facilitate pre-qualification of UK suppliers to join suppliers lists for the main turbine manufacturers. Development Agencies and the Scottish Economic Development Agencies to examine ways to assist potential suppliers in meeting pre-qualification criteria. DTI’s Renewables UK and the Scottish Economic Development Agencies to continue working with key developers to establish their planned routes for procurement DTI’s Renewables UK and the Scottish Economic Development Agencies to support regional agencies in a co-ordinated UK effort to identify the best manufacturing sites for wind turbines and related items. 6
  9. 9. Biomass DTI’s Renewables UK and the Scottish Economic Development Agencies to maintain dialogue with project developers to ensure that they are aware of existing UK capability. Development Agencies and Scottish Economic Development Agencies to provide underlying guarantees against project failure risk to farmers as an incentive for energy crops. UK Support Agencies to review the support for the growth of energy crops to provide the raw material for biofuel production. UK Support Agencies to encourage alliances between UK Operations and Maintenance (O&M) contractors and non-UK main equipment suppliers to capture maintenance jobs. Wave and Tidal UK Support Agencies to develop support mechanisms for devices, post demonstration, in order to maintain the UK’s lead and to compete with other European Support schemes Governments, Development Agencies and Scottish Economic Development Agencies to raise international awareness of European Marine Energy Centre. Hydro Through existing trade support routes such as UK Trade & Investment (previously Trade Partners UK), to continue to support UK consultancies and service companies in the international market. DTI’s Renewables UK, UK Trade & Investment and the British Hydro Power Association to explore further export potential for small hydro equipment and hold discussions with equipment manufacturers. Energy from Waste and Landfill Gas DTI’s Renewables UK and the Scottish Economic Development Agencies to maintain dialogue with EfW project developers to ensure that they are aware of existing UK capability. UK Support Agencies to encourage alliances between UK O&M contractors and non-UK main equipment suppliers to capture maintenance jobs. 6 7
  10. 10. PV DTI’s Renewables UK and the Scottish Economic Development Agencies to hold discussions with UK and overseas existing and potential manufacturers to identify options to expand. Governments to consider the expansion and extension of programmes to encourage the installation of PV units Governments to further encourage new buildings to be fitted with PV units through the planning system and building regulations. Biofuels UK Support Agencies to review the support for the growth of energy crops to provide the raw material for biofuel production. Solar Thermal DTI’s Renewables UK to work with UK solar manufacturers to consider domestic expansion and with international manufacturers to discuss locating manufacturing facility in the UK. Governments to consider extending incentive programmes to increase UK uptake of solar thermal technology. Skills and R&D Trade Associations to liaise with education bodies and training providers to tailor renewables-specific courses to industry needs. Trade Associations to discuss with key players university sponsorship in order to develop innovative technologies 8
  11. 11. 2 Main Building Blocks The study has analysed each renewable energy technology separately, following a common approach with each. This has been based on: • Mapping the supply chain • Extensive industry consultation • Analysis combining qualitative evidence and quantitative assessment The technologies are classified as mature or emerging based on the stage in their technological development and commercial viability (see Table 2-1). Wind, both onshore and offshore, is treated separately because of its significance at present and in the future. Existing large hydro in the UK has not been included. Table 2-1: Mature and Emerging Technologies Mature Technologies Wind Emerging Technologies Biomass Wind onshore Wave Energy from Waste (EfW) Wind offshore Tidal Landfill Advanced biomass Photovoltaics (PV) Advanced EfW Solar thermal (active and passive) Hydrogen production Hydro Fuel cells Production of biofuels (transport) Concentrated solar Conventional energy storage Geothermal (dry rocks) Aquifer based geothermal Energy storage Note: Biomass: extracting energy from energy crop fuels and biomass waste streams including forestry residues EfW is the combustion of domestic and commercial waste The future UK market size has been estimated based on the Energy White Paper4 and the Scottish Executive’s aspirational goals5 to 2020. The level of demand in 2020, the technology mix and the appearance of any emerging technologies in the market follow the Energy White Paper’s timeline, reproduced in Figure 2-1. 4 Energy White Paper: Our Energy Future – Creating a Low Carbon Economy, Department of Trade and Industry, 2003 5 Securing a Renewable Future; Scotland’s Renewable Energy ;Scottish Executive, 25 March 2003 9
  12. 12. Figure 2-1: UK Renewables Timetable 2000 2005 2010 2015 2020 2001/06: Biomass may be Bio-energy capital grants and Energy Crops economically viable scheme to develop biomass generating in mid 2010’s capacity. 2002/2012: Implementation of solar PV demonstration PV may be programme, In line with our competitors, economically as set out in the “Opportunities for All” viable post - 2020 white paper. 2002/2027: Operation of the Renewables Obligation 2003: 2005: Second round Installation of offshore 2005 onwards: of allocation of wind farms from first Installation of further offshore wind farms offshore wind round of allocation of following the second and subsequent sites offshore wind sites rounds of allocating offshore wind sites 2005/06: 2010-2015+: 2003: We review the Wave and tidal OFGEM sets the renewables Obligation technologies incentive may become framework for commercially distrubuted viable generation, for 2005: implementation in Next distribution price April 2005 control implemented 2000 2005 2010 2015 2020 2003: 2010 target: 2020: Renewables supply 1.5% Renewables supply 10% Renewables supply 20% of UK electricity (excluding of UK electricity. Onshore of UK electricity. Onshore large hydro and mixed and offshore wind may and offshore wind and waste incineration). Onshore be the largest contributors biomass may be the largest wind (500MW) and Landfill to the renewables contributors to the Gas (400MW) largest generation mix in 2010 renewables generation contributors. mix in 2020 Source: Energy White Paper 2.1 Mapping the Supply Chain For each of the technologies, the supply chain can be represented as a pyramid. Tier 0 is the project developer, operator and/or Engineering, Procurement and Construction (EPC) contractor. Below Tier 0 are the suppliers of the technology’s main components. In turn, these have sub-components supplied by Tier 2 companies. Below Tier 2 the levels represent further divisions of components down to raw materials at the lowest level. In this manner, the supply architecture is constructed. 10
  13. 13. Figure 2-2: Example of Supply Chain Pyramid - Wind Examples: Tier 0 Tier 0: Developer, turnkey contractor, operator Tier 1 Tier 1: Suppliers of wind turbine, electrical systems, foundation and services etc Tier 2 Tier 2: For wind turbine: suppliers pf rotor, nacelle, tower, electronics and control systems and a sub-category of micro turbines Tier 3 Tier 3: For the rotor: turbine blades, pitch control, bearings, nub and rotor shaft Tier 4 Tier 4: For turbine blades: bolts and blades Tier 5: For blades: blade material, resin and moulds Tier 5 Each technology has been broken down into its components and sub-components to characterise the various tiers of the supply chain. These components have been used to build up the labour and materials content associated with the life cycle of planning, manufacture, installation, operation and maintenance. Supply chains for emerging technologies are currently not established. These will emerge when the technologies become commercial. The study has identified around 2,000 companies involved in renewable energy activities plus trade associations and academic/research institutions using the following sources of information: • DTI renewable energy directories • Collaboration with regional development agencies throughout the UK • James and James Database • Attendance at the BWEA, EEEGR and Wave • Fame Database Symposium conferences • Kelly’s On Line (Kellysearch) • Internet searches • Avayl Engineering Directory • Mott MacDonald internal contacts • Trade Associations membership listings and • Literature searches company directories • Other renewable directories. • Databases and contacts provided by gap analysis partners Companies offering products or services that are not renewable-specific were excluded from the analysis. Companies selected have been placed in the relevant parts of the supply chains. This has been done based on the information obtained about their activities from data searches, responses to the study’s questionnaires, interviews and industry knowledge. 11
  14. 14. 2.2 Industry Consultation Engagement with industry has formed an important part of the study. In addition to general exchange of information through business and conferences during the period of the study, the following contacts have been made: • Approximately 2,000 companies plus trade associations and universities currently active in the industry were identified and contacted with detailed supply chain questionnaires. Over 550 responses were obtained across all technologies (see Figure 2-3 below). • In addition, structured meetings were held with 20 companies. • R&D activities were investigated through the questionnaire and discussions with 25 academic institutions in the UK active in renewable energy • Ten international utility companies were surveyed about UK’s market positioning. • Discussions were held with 15 financiers on their perception of the UK market and key investment criteria for both projects and technologies. Figure 2-3: Responses to the Supply Chain Questionnaires by Technology Technology Scotland Rest of UK Total Wind 90 156 246 Biomass 6 51 57 EfW 7 34 41 Landfill gas 0 19 19 PV 5 25 30 Solar Passive 5 24 29 Hydro 8 29 37 Biofuels 0 5 5 Energy Storage 0 6 6 Geothermal 1 9 10 Wave 12 18 30 Tidal 9 14 23 Advanced Biomass 0 2 2 Fuel Cells 4 7 11 Hydrogen 2 6 8 Concentrated Solar 1 4 5 Total 150 409 559 12
  15. 15. Analysis Figure 2-4 shows how the different elements, including information gathered from industry consultations, have been used in the analysis. Estimates of current and future industry size have been built up using the method set out in Section 4. This makes use of qualitative information gathered through the surveys in the estimation of imports and exports, but is not dependent on an aggregation of the survey results. Separately, the material from surveys and interviews has been used to populate the supply chains in order to understand the nature of any gaps. Figure 2-4: Study Inputs Project Data Project Costs Market Data Supply Chain Value Added Data Size of Industry Jobs & Monetary at Present Value at Present Database of Imports & Recommendations Companies Exports Size of Indusrty Jobs & Monetary in Future Value in Future Supply Chain Questionnaire Interviews Strengths & Weeknesses Financial Survey Base Data R & D Survey Empirical Elements Analytical Elements International Survey Results 13
  16. 16. 3 Current size of the Renewable Energy Industry This section presents the approach followed to calculate the industry’s current (Q4, 2003) monetary value and associated employment and it presents the results. 3.1 Approach The study reviews the status of the current renewable industry in the UK by analysing the supply chains of a range of available technologies. Those with low activity in the UK: geothermal, biofuels for transport and energy storage projects in the UK, have not been considered in detail. Industry activity has been estimated by: • collating current project activity: MW under development, construction and in operation (excluding existing hydro projects greater than 20 MW) • estimating the value added per MW and jobs per MW for each technology at each phase (development, construction and operation) • allowing for import content and adding in export activity • adding in jobs in companies developing emerging technologies • estimating induced jobs: jobs outside the industry but sustained because of industry activity (e.g. retail) 14
  17. 17. The jobs calculated are Full Time Equivalent (FTE). This process is summarised in Figure 3-1 and each step explained below. Figure 3-1: Estimation of Industry Value and Jobs Sustained Under development Size of Under Construction MW by technology domestic demand(MW) In operation Labour value in each £/MW by technology supply chain component Value per MW Jobs per MW Duration of activities: Cost per labour input in each development supply chain component construction, operation Monetary Value Import content in UK Import Adjusted projects at each level value per MW of supply chain Import Adjusted Jobs per MW Jobs Sustained Current export activities Export Value Export Jobs Key Emerging Value specific data Pre-commercial stage Technology employment Jobs Jobs specific data General data Multipliers Induced Jobs Monetary Value = (UK demand (MW) * import adjusted Value per MW) + Value of exports Jobs = (UK demand (MW) * import adjusted Jobs per MW) + (Export Jobs) + (Emerging technology Jobs) + (induced jobs) 15
  18. 18. The key elements of the approach are explained below. The analysis includes renewables generation projects and the associated supply chain. Complementary investment in the electrical grid has not been included. Size of UK demand (MW) For each of the renewable technologies under study, the size of present capacity in MW for Scotland and the Rest of the UK has been calculated by considering projects under development, projects in construction and projects in operation. 6 The totals are included in Appendix A. Project listings have been compiled by referring to Trade Associations, the UK’s Land Registration Database, other relevant publications, industry knowledge and discussions with industry experts. Templates of typical projects have been constructed for each of the technologies under review. These have been built using confidential data made available by developers, supplemented by industry knowledge and discussions with industry experts. These templates build up key information such as the typical size of projects, fixed and variable project costs and typical durations of development, construction and operation activities. These are used in the calculation of both monetary value and employment. Monetary Value per MW Monetary value is the turnover associated with a project, as detailed below. These values have been based on the template projects and assigned to each phase of a project based on data gathered as described above. • Financing costs, VAT, insurance, land and other costs such as rates and use of system charges are not included as these are more difficult to generalise consistently and with reasonable certainty (also these have a lesser influence on jobs). • Profit margins have been taken as typical of current generators at each phase (development, construction and operations), based on actual projects in operation and expectations at the development stage. These assume the generators have long term contracts for electricity offtake and sale of Renewable Obligation Certificates (ROCs) so do not include the risk and reward in trading electricity and ROCs. The template projects are based on typical project sizes. Dividing by this size in MW yields average monetary value per MW for each technology in the present industry. 6 See glossary in Appendix C for definition of terms. Development is the phase of a project until financing, consents and procurement contracts are in place. Construction includes all project implementation including manufacture and construction. 16
  19. 19. Jobs per MW To estimate the total jobs per MW for any technology, jobs associated with each tier in the supply chain must be included. The monetary value in each template project has therefore been broken down into the components identified in the technology trees, and each component further subdivided at each tier in the supply chain. To translate monetary value into labour and jobs, a number of steps have been taken based on dividing monetary value into material, overhead and profit as shown in Figure 3-2: • The level of material content has been assessed based on the Bourton Group’s knowledge of the manufacturing processes involved. • Typical profit margins have been estimated based on similar industry knowledge. Profit has been assumed to be direct extraction to shareholders, and therefore not contribute to jobs. • The remaining “payroll and overhead” includes all services and in-house labour plus miscellaneous costs such as property rent. This amount has been divided by typical employment costs to derive labour input for that component. • The employment costs include allowances for miscellaneous costs and are derived from current typical labour costs in UK companies. Companies have been identified by SIC codes, which denote the type of activity, and the sample weighted according to the importance of each activity in the relevant renewables sector. Databases such as FAME have been used as a source. This process has been followed for each component in the supply chains and at each tier. The total labour content for a typical project has been derived by aggregating the labour elements. 17
  20. 20. Figure 3-2 Method to Estimate Labour Content in the Supply Chain Tier 0 Direct Material Tier 1 Payroll and Overheads Value Added Tier 2 Profit Total value of a renewables project Total for all Tiers Tier 2 Tier1 Tier 0 Tier 0 Portion of value added assumed to Tier 2 convert directly into jobs Tier 1 Tier 2 Note: For simplicity, the Figure shows only Tier 0, Tier 1 and Tier 2. In practice the analysis extends to Tier 3 and lower where applicable. Figure 3-3 illustrates the method described above for estimating labour content and jobs for each technology, at each phase7. Phases have been computed separately: • Labour content per template project is estimated as described above • To estimate average labour per MW from the assessments of labour content, template project typical sizes in MW have been used (MW/project). • To derive jobs sustained on average at any phase in a project, labour inputs (or “job years”) have been adjusted for the duration of an activity. Durations are technology specific and have been based on the template projects. 7 Project phases are development, construction and operation. 18
  21. 21. Figure 3-3: Method to Estimate Jobs per MW Material (M) Very low Development MW/project Duration (d) Vd Overhead Labour=Vd - M - x% Vd Ld/MW Employee cost(d) Profit x % (based on industry norms) Development Jobs/MW MW/project For each component, break Aggregate Duration (c) down into lower labour element Material (M) High/Medium/Low tiers (as Figure 4-2) of each tier, Lc/MW then aggregate Value V (£) Construction tiers. Vc Overhead Labour= Vc - M - y% Vc Construction Jobs/MW Employee cost(c) Profit y % (based on industry norms) MW/project For each component, break Aggregate Duration (o) down into lower labour element Material (M) High/Medium/Low tiers (as Figure 4-2) of each tier, Lo/MW Operation then aggregate tiers. Vo Overhead Labour= Vo - M - y% Vo Operations Jobs/MW Employee cost(o) Profit z % (based on industry norms) Key £ per template project Labour per MW(job years) Jobs per MW Note: Refer to Glossary for definition of terms, other terms defined above V Total monetary value: as defined above M monetary value of material content L Labour content (in “job years”) L/MW Labour content (in “job years”) per MW d, c, o denote development, construction and operations respectively For projects under construction, where necessary the construction time has been extended to include for lead times for certain parts of equipment (e.g. gas turbines for biomass projects). This is a simplification as the production times for different items in the supply chain may vary significantly. The result therefore gives an average number of jobs sustained through the construction phase. Import Adjusted Jobs per MW An example is included in Appendix B to illustrate the approach. If the monetary value per MW and jobs per MW estimated above are combined with the size of UK demand (current portfolio of projects under development, construction and operation, see Appendix A), the total value and jobs arising globally from projects in the UK are calculated. Imported content then needs to be subtracted to reflect the level of UK activity currently supported by the projects. 19
  22. 22. Import content has been estimated for each component at each level of the supply chains. The individual items have been aggregated in the study model to produce adjusted monetary value per MW and adjusted Jobs per MW for each technology. There is little information available from published sources about the import patterns and levels of imports currently found in the renewable industry. Some data available such as Customs and Excise Surveys, is not sufficiently specific to renewable energy. The study therefore employs a combination of the results obtained from the study surveys, comment from participating companies and industry knowledge of manufacturers and service providers to create a view on the current level of imports. The import assumptions made at each tier and for each component for the technologies under review have been aggregated and summarised in Figure 3-4 below. Figure 3-4: Aggregated Import Assumptions Import UK Content 100 90 80 70 UK – Imports Ratio 60 50 40 30 20 10 0 Onshore Offshore Biomass EFW Landfill PV Hydro Solar Wind Wind Thermal It is important to note that the level of employment associated with the renewable industry at present is sensitive to the assumptions made on the percentage of imports. Accordingly, it is recommended that this is analysed further. Export Values Export Jobs The methodology shown in Figure 3-3 is based on UK demand and does not capture the value and employment associated with exports. Export figures have therefore been added separately. Export content within the current market is difficult to evaluate analytically as the global market is by its nature diverse and the level of involvement of UK players fragmented. Estimates of export activity have therefore been made on the basis of questionnaire responses and industry knowledge of manufacturers and service providers currently active in exports. 20
  23. 23. Emerging Technology Jobs The core analysis is built from commercial project activity. The employment relating to emerging technologies has therefore been added separately. • Jobs associated with pre-commercial ventures have been added based on survey responses and knowledge of the industry. These also have marginal induced economic activity associated employment. • Funding of pre-commercial ventures has not been included in estimates of monetary value. These will have an incremental effect on the industry value, however the main effect is on jobs. Also, as technologies become commercial, their value will be reflected in future estimates of monetary value. Today’s snapshot represents turnover, and not expected future value. • Academic research is significant in advancing knowledge. The activity is mostly government funded and as such the alternative would be for government support of a different sector. These jobs and associated monetary value have therefore not been included. Summary Figures Jobs induced in the wider economy are estimated by applying a factor of 0.25 to the total jobs, on the basis of guidance from HM Treasury (The Green Book). This element is shown separately in the results. Adjustments for induced jobs8 have been incorporated, but adjustments for indirect and displaced jobs are not appropriate: • The assessment includes both direct and indirect jobs at each level of the supply chain associated with any project. Indirect jobs are included in the core methodology and adjustment is not necessary. • The study takes an industry-wide perspective so displaced jobs should be considered only at an industry level. For example, jobs in the thermal power industry might be displaced as a result of additional renewable energy activity. The current mix of renewable and thermal projects in the UK and elsewhere is taken to be the “business as usual” case and is the result of energy policy and market signals over an extended period of years. Adjustments have therefore not been made for jobs displaced. • If targeted regional support were being considered then there might be displacement of jobs between regions. However, this adjustment for this effect is not appropriate at the industry level. 8 See glossary of terms for definition of induced effect. 21
  24. 24. 3.2 Results This section presents the monetary value and employment currently sustained by the industry in the following way: summary figures factors that influence monetary value in Scotland and the Rest of the UK jobs per MW for each technology during the different phases of a project’s life (development, construction and operation) jobs per MW for each technology at different levels of the supply chain total jobs 3.2.1 Summary Figures Figure 3-5 summarises the results for the monetary value and FTE jobs sustained by the renewable industry in the UK in 2003. The ranges shown are due to the differences in technologies. Figure 3-5: Current Industry Size and Jobs Sustained Scotland Rest of the UK Size of domestic Development 5,929 MW Development 2,301 MW demand(MW) Construction 80 MW Construction 252 MW Operation 225 MW Operation 1,074 MW (Excludes solar thermal) Monetary Value Scotland £81 MW Value per MW 714,000 - 4,075,000 £/MW 714,000 - 4,075,000 £/MW Rest of UK £205 MW Jobs per MW 15.9 - 28.5 Jobs/MW 15.9 - 28.5 Jobs/MW Import Adjusted 314,000 - 1,879,000 £/MW 314,000 - 1,879,000 £/MW Value per MW Import Adjusted 6.4 - 22.3 Jobs/MW 6.4 - 22.3 Jobs/MW Jobs per MW Export Value £12,000,000 £21,000,000 Jobs sustained Export Jobs 204 Jobs 429 Jobs Scotland 1953 Rest of UK 5994 Emerging 41 Jobs 200 Jobs Technology Jobs Induced Jobs 391 Jobs 1199 Jobs Note: The job/MW figures exclude PV as this would significantly skew the ranges. PV currently sustains about 85 jobs/MW in total and 35 jobs per MW after adjustment for import activity. 22
  25. 25. The estimates for monetary value and FTE jobs currently sustained (Q4, 2003) by the industry are summarised as follows: • After adjustment for imports, the total monetary value is about £285M, of which about £80M is attributed to Scotland on the assumption of no net cross border flows. 9 • About 5,500 jobs are sustained by the domestic UK industry, adjusted for imports, with 4,200 in the Rest of the UK and 1,300 in Scotland • Further employment to support export activity is in the order of 630 jobs; with 430 in the Rest of the UK and 200 in Scotland. • Emerging technology companies also contribute around 40 jobs in Scotland and 200 jobs in the Rest of the UK. • On this basis, induced jobs are in the order of 1,600 jobs with 1,200 in the Rest of the UK and 400 in Scotland. • This gives a weighted average of 10 jobs per MW. The results are by definition based on the current projects under development10, construction and operation. These have been split according to the study areas, although the combined results give the most complete picture of the UK market as this is net of interaction across the border. 3.2.2 Monetary Value The results for monetary value are represented in Figure 3-6. The figure shows the reduction in value due to the study’s import assumptions (as explained in section 4.1). 9 There is evidence of trade in both directions between Scotland and the Rest of the UK. The size of these flows is difficult to capture with great certainty; for example there are several Scottish manufacturers due to supply projects under construction in the Rest of the UK but also known services being transferred north. 10 Value of development is derived from projects prior to the start of construction, excluding those for which there is no significant activity (see Glossary in Appendix C). 23
  26. 26. Figure 3-6: Estimate of Current Monetary Value of the Industry 300 Scotland 250 Rest of UK 200 Value (£ Million) 150 100 50 0 100% UK Content Import Adjusted 100% UK Content Import Adjusted 100% UK Content Import Adjusted Note: Monetary value is based on project turnover and therefore includes both capital and operating costs Development Construction Operation The monetary value of the industry in Scotland is influenced by the following: • Existing large hydro is excluded from the data which tends to understate the wider renewable related activity in Scotland, owing to its exclusion from the technologies eligible for ROCs • Scotland lacks the number of projects and diversity of technologies found in the Rest of the UK. It does not sustain the level of O&M value relating to biomass and waste technologies. • Scotland benefits indirectly from the offshore wind sector due to the activities of some project developers and manufacturers in the Rest of the UK. • The export contributions from one company dominate the construction value. Based on the MW under development, Scotland is anticipating large growth in construction activity for the domestic market. Similarly there is an element of transfer to the Rest of the UK study area that is not reflected in the base data. In the case of the Rest of the UK, the following observations can be made: • The ongoing operating and maintenance costs of the fleet of energy from waste, landfill gas and biomass projects together account for around 28 per cent of the monetary value. • Construction activity on both onshore and offshore wind farms account for 35 to 40 per cent of the total. Onshore activities are currently much more significant but this is expected to shift over the next few years. • Export contributions from key suppliers add to the base sustained by the UK industry. 24
  27. 27. 3.2.3 Employment (i) Jobs per MW by Project Phase The level of employment sustained by the industry varies significantly across the technologies. This is illustrated in Figure 3-7 for all phases of a project, Figure 3-8 for development and Figure 3-9 for operations. 11 All figures show how jobs per MW are reduced based on the study’s import assumptions. In the case of biomass, a distinction is made between waste based projects and those using energy crops. Figure 3-7: Jobs per MW by Phase of the Project Cycle and Technology 90.0 80.0 Operation Construction 70.0 Development 60.0 Jobs per MW 50.0 40.0 30.0 20.0 10.0 0.0 100% UK Content Import Adjusted 100% UK Content Import Adjusted 100% UK Content Import Adjusted 100% UK Content Import Adjusted 100% UK Content Import Adjusted 100% UK Content Import Adjusted 100% UK Content Import Adjusted 100% UK Content Import Adjusted 100% UK Content Import Adjusted Onshore Offshore Biomass Biomass EFW Landfill PV Hydro Solar Wind Wind (Waste) (Energy Thermal Crops) Note: PV is currently very capital and labour intensive. The market penetration of this technology is low 11 All the figures reflect the development, construction and operation period characteristic for each type of technology. 25
  28. 28. Figure 3-8: Jobs per MW for the Development Phase and Technology 2.5 2.0 Development Jobs per MW 1.5 1.0 0.5 0.0 100% UK Content Import Adjusted 100% UK Content Import Adjusted 100% UK Content Import Adjusted 100% UK Content Import Adjusted 100% UK Content Import Adjusted 100% UK Content Import Adjusted 100% UK Content Import Adjusted 100% UK Content Import Adjusted 100% UK Content Import Adjusted Onshore Offshore Biomass Biomass EFW Landfill PV Hydro Solar Wind Wind (Waste) (Energy Thermal Crops) Figure 3-7 emphasises the importance of construction activities in generating demand for labour. Also, to sustain employment a significant pipeline of projects is needed since construction jobs for one project are short lived. Figure 3-9 shows that biomass, EfW and landfill generate the highest number of jobs during operations. These jobs are sustained during the life of the plant. Figure 3-9: Jobs per MW for Operational Phase by Technology 8.0 7.0 Operation 6.0 Jobs per MW 5.0 4.0 3.0 2.0 1.0 0.0 100% UK Content Import Adjusted 100% UK Content Import Adjusted 100% UK Content Import Adjusted 100% UK Content Import Adjusted 100% UK Content Import Adjusted 100% UK Content Import Adjusted 100% UK Content Import Adjusted 100% UK Content Import Adjusted 100% UK Content Import Adjusted Onshore Offshore Biomass Biomass EFW Landfill PV Hydro Solar Wind Wind (Waste) (Energy Thermal Crops) 22 26
  29. 29. (ii) Jobs per MW by Supply Chain Tier Figure 3-10 and Figure 3-11 give a breakdown of the employment per MW at each level of the supply chain for construction and operation respectively.12 These figures incorporate the study’s import assumptions. Figure 3-10: Jobs per MW at each Supply Chain Tier for the Construction Phase 35.0 30.0 Tier 3 Tier 2 Tier 1 25.0 Tier 0 Jobs per MW 20.0 15.0 10.0 5.0 0.0 Onshore Offshore Biomass Biomass EFW Landfill PV Hydro Solar Wind Wind (Waste) (Energy Thermal Crops) Figure 3-11: Jobs per MW at each Supply Chain Tier for the Operations Phase 8.0 7.0 Tier 3 Tier 2 6.0 Tier 1 Tier 0 5.0 Jobs per MW 4.0 3.0 2.0 1.0 0.0 Onshore Offshore Biomass Biomass EFW Landfill PV Hydro Solar Wind Wind (Waste) (Energy Thermal Crops) 12 All figures include the development, construction and operation period characteristic for each technology. 27
  30. 30. (iii) Total Jobs Figure 3-12 and Figure 3-13 show the total jobs sustained by the renewable industry in Scotland and the Rest of the UK respectively in 2003. These figures reflect the current portfolio of projects under development, construction and in operation. Accordingly, the biomass values only relate to waste fuelled projects as there are no biomass projects based on energy crops at present. Figure 3-12: Total Jobs in Scotland in 2003 (a) by phase and (b) by technology 1000 900 Induced Jobs Direct and 800 Indirect Jobs 700 600 Jobs 500 400 300 200 100 0 Pre-commercial Development Construction Operation Development Stage 1600 1400 Induced Operational Period Construction Period 1200 Development 1000 Jobs 800 600 400 200 0 Onshore Offshore Biomass EFW Landfill PV Hydro Solar Wind Wind Thermal Technology The dominance of the wind sector can be seen in the Scottish figures. This partly arises from the exclusion of large hydro (except qualifying schemes) from the scope, from the relatively recent arrival of wind manufacturing capability and from the small Scottish capability in other renewable technologies. 24 28
  31. 31. Figure 3-13: Total Jobs in the Rest of the UK in 2003 (a) by phase and (b) by technology 3000 Induced Jobs Direct and 2500 Indirect Jobs 2000 Jobs 1500 1000 500 0 Pre-commercial Development Construction Operation Development Stage 1800 1600 Induced Operational Period 1400 Construction Period Development 1200 1000 Jobs 800 600 400 200 0 Onshore Offshore Biomass EFW Landfill PV Hydro Solar Wind Wind Thermal Technology As would be expected, the jobs sustained by the industry at present follow a similar profile to the monetary value. They are influenced by some of the same factors including: • the number of onshore wind jobs currently sustained by manufacturing for export of goods and services, for example, electrical equipment, PV systems and advisory work. • in the operating phase, the employment created by operating, maintaining and supplying spares to the existing combustion based plants (energy from waste, biomass and landfill gas). 29
  32. 32. 4 Future Industry Size This section presents our analysis of the industry’s future monetary value and associated employment. 4.1 Approach The methodology described in Section 3.1 to determine current industry status has been developed further to project the value and jobs associated with the industry in 2020. Industry development through to 2020 clearly depends on the evolution of technologies and the associated support mechanisms priming the market. These will affect the level of activity and the evolution of the supply chains, including any industry consolidation. The projections are sensitive to the assumptions made in all these elements, and because they relate to the future they have a degree of uncertainty. The analysis includes renewables generation projects and the associated supply chain. Complementary investment in the electrical grid has not been included. Nevertheless, the amount of grid reinforcement required to meet the 2020 aspirational goals is likely to be significant, particularly in Scotland. This will have an impact on labour. Figure 4-1 shows the additional inputs to the methodology, which are described further below. Figure 4-1: Estimation of Future Value and Jobs Sustained KEY Size of Value specific data Energy White Paper MW by technology capacity (Investor confidence) Jobs specific data demand (MW) General data Investment per MW Cost reduction £/MW Jobs per MW Charge in labour intensity Import Adjusted Jobs per MW Evolution of global market demand Capital Investment Consolidation of industry players Procurement practices Export Activity UK UK related advantages Employment Sustained Rate of entering commercial mainstream Emerging Stake support Technology Activity Commercial support: Venture Capital/Internal Venture Empirical multipliers Induced Employment Capital Investment = (UK demand (MW) * Investment per MW) + Investment for exports Jobs = (UK demand (MW) * import adjusted Jobs per MW) + (Export Jobs) + (Emerging technology Jobs) + (induced jobs) 30
  33. 33. UK Capacity (MW) The size of domestic demand through the period has been based on the projections in the Energy White Paper and on the basis of these projections the conclusions on future industry size have been based. In order to run calculations it has been necessary to make assumptions about technology mix. This is because the costs at each tier in the supply chains, the balance of import activity and jobs sustained by the industry are all technology dependent. Two different potential technology mixes have been considered as worked examples to test the sensitivity of outcomes to technology choice: Example 1: Wind is the most substantial contributor, representing a situation where cost reductions are achieved in the offshore sector and performance is demonstrated before biomass technology overcomes some of the perceived performance hurdles. Example 2: The mix of technologies included a greater amount of capacity from biomass and wave/tidal energy devices. This reflects a situation where the planning situation, electrical grid and support mechanisms lead to a greater development of biomass and there is successful deployment of wave power technology. The examples are based on credible scenarios in terms of resource availability and sites – the outcome in practice will depend on issues such as planning, electrical connections and attractiveness to financiers. These are summarised in Figure 4-2. Figure 4-2: Installed Capacity in 2020 by Technology - Example 1 and Example 2 9000 8000 Example 1 Example 2 7000 Installed Capacity (MW) 6000 5000 4000 3000 2000 1000 0 Onshore Offshore Biomass EFW Landfill PV Hydro Biomass Wave Tidal Solar Wind Wind Advanced Thermal Note: Example 1 and Example 2 are both based on the level of predicted demand in the Energy White Paper. They both assume industry average load factors for the technologies and they represent installed capacity in MW electrical (MW thermal equivalent for solar thermal). 31
  34. 34. Investment per MW Jobs per MW The future shape of the industry depends to a degree on how the technologies evolve and how this affects their costs and the opportunities to benefit from learning or to exploit additional economies of scale. To assist this assessment, the technologies have been classified against these factors as shown Figure 4-3. Figure 4-3: Influences on Technology and Industry Evolution Stable Design Hydro Landfill Conventional High Conventional Onshore PV PV Offshore Wind Onshore Wind Solar Geothermal Wind Thermal Energy Wave Energy Offshore from from Wind Waste Biomass Waste Micro Landfill Hydro Micro Number of Units Advanced Hydro in the Period (per Conversion annum 2010/2020 Biomass Advanced Tidal Conversion Solar Thermal Hydro Wave Tidal Geothermal Evolving Low Design Bespoke Standard Bespoke Standard Product Product Product Product The cost reductions assumed to apply to the technologies over the period to 2020 have been similarly based on the work supporting the Energy White Paper. They have been assumed to decline linearly over the period to 2020 (see Figure 4-4). 32
  35. 35. Figure 4-4: Cost reductions by Technology to 2020 4500 4000 Current Future 3500 Capital Investment £000/MW 3000 2500 2000 1500 1000 500 0 Onshore Offshore Biomass EFW Landfill PV Hydro Biomass Wave Tidal Solar Wind Wind Advanced Thermal Note: There is a very significant cost reduction assumed for PV accounting for improved manufacturing processes. Advanced biomass, wave and tidal also show large cost reductions. This is because these technologies are currently at pre-commercial stage but expected to be commercial by 2020. The methodology to calculate the jobs per MW is the same as that described in Figure 3-3. Calculations have been made on the basis of real costs (i.e. not escalated to account for inflation) and have incorporated the expected downward trends in cost per MW installed arising from accumulated experience with the various technologies, and from economies of scale in manufacture. These declining costs mean that the capital investment of an additional MW reduces through the period to 2020, leading to lower investment requirements per MW and jobs per MW. This means that the total value and job creation is sensitive to the timing of MW capacity additions. 33
  36. 36. Import Adjusted per MW We would expect import content of future capacity additions to reduce in line with the size of potential opportunities for companies to increase their presence in the market. Within the mature technologies there may also be some trends within the period to 2020 to locate additional manufacturing capacity in low cost centres. The assumptions behind our two import scenarios are shown in Figure 4-5: Scenario A: No imports, this assumes 100% UK content Scenario B: Imports remain at 2003 levels to 2020 (as defined above) This graph shows that wave and tidal are assumed to have high UK content especially in comparison with wind. This will only be the case if winning designs are developed in the UK. Figure 4-5: Import Penetration per MW under Future Cases UK Jobs Replaced by Imports UK Jobs 100 90 80 70 UK/Imports Ratio (%) 60 50 40 30 20 10 0 Scenario A Scenario B Scenario A Scenario B Scenario A Scenario B Scenario A Scenario B Scenario A Scenario B Scenario A Scenario B Scenario A Scenario B Scenario A Scenario B Scenario A Scenario B Scenario A Scenario B Scenario A Scenario B Onshore Offshore Biomass EFW Landfill PV Hydro Biomass Wave Tidal Solar Wind Wind (Waste & Advanced Thermal Energy Crops) Technology The calculations for the import adjusted values for jobs per MW are the same as those explained in section 3.1 and using the methodology represented in Figure 3-1. The potential jobs sustained by the industry are sensitive to assumptions regarding import activity. We therefore recommend further examination of this area. 34

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