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Green Finance and Green Jobs, Will Blyth, Oxford Energy Associates


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By Will Blyth, Oxford Energy Associates …

By Will Blyth, Oxford Energy Associates
Presented at 'UK Energy System in Transition: Technology, Infrastructure and Investment'; an event organised by the UK Energy Research Centre, ClimateXChange and the Edinburgh Centre for Carbon Innovation, on Tuesday 1 April 2014, 14.00-17.00, in Edinburgh, United Kingdom.

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  • 1. Click to add title 1st April, 2014, UK Energy System in Transition: Technology, Infrastructure and Investment Edinburgh Centre for Carbon Innovation Green Finance and Green Jobs Will Blyth Oxford Energy Associates
  • 2. Green Finance What is the size of the ‘investment gap’? Low-cost sources of finance, and prospects for scaling these up New sources of finance Policy options Based on: “Financing the UK Power Sector: Is the Money Available?” W. Blyth, R. McCarthy, R. Gross Working Paper, UKERC Uncertainties Project.
  • 3. £m ‘Investment Gap’ Annual Build Rate MW Historical 2020 2025 2030 10000 8000 6000 4000 2000 0 2009-2012 Average: 4100 MW 3400 MW 4700 MW 5800 MW
  • 4. £m Annual UK CAPEX £m Historical 2020 2025 2030 25000 20000 15000 10000 5000 0 2009-2012 Average: £ 4600 m £ 6100m £ 8000m £ 12300m
  • 5. Low-cost finance: Two Major Investment Routes Utilities: 85%85%85%85% of the 16.5 GW of new capacity 2006-2012 in UK, has been built by the major utility companies (BNEF, 2012) Financing of renewables: Source: (UNEP, 2012) with data from BNEF Project Finance Balance Sheet (mostly utilities) Bonds / other Global renewable energy investment $bn
  • 6. UK Offshore Wind – Equity Ownership Source: (PWC, 2012)
  • 7. 0 2 4 6 8 10 12 14 2005 2007 2009 2011 2013 2015 CAPEX£billions EDF EON RWE Group Iberdrola SSE Centrica RWE Innogy (renewables) Average Average - excl EDF ‘Big 6’ CAPEX plans to 2015 Total for Europe
  • 8. Click to add title 274 345 450 540 691 812 1,111 3,984 1,899 1,155 €0 €500 €1,000 €1,500 €2,000 €2,500 €3,000 €3,500 €4,000 €4,500 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Other Renewable PE Fund Hedge Fund General PE Fund General Infra Fund Energy Infra Fund Direct Long Term Investor Dedicated Renewable Infrastructure Fund Direct Institutional Investment in low-carbon infrastructure Source: (Hg Capital) Total for Europe €m
  • 9. Green Finance Conclusions History shows that finance can flow if investment conditions are right – puts the emphasis back on policy But large volumes of money (institutional investors) only available for relatively low-risk investments Current health of the utilities and business case for investment is therefore a worry Alternative routes for institutional finance to go directly into projects are being developed Back-of-the-envelope calculations suggest up to £1bn for UK renewables via this route??
  • 10. Potential Solutions Overhaul the utility model • Allow them to make a profit • Dedicated wind utility • Re-regulate generation sector Ramp up project financing by accelerating the re-refinancing of projects Increased role of public finance institutions: • Guarantees • Public finance initiatives • GIB / EIB co-investment • Green bonds
  • 11. Green Jobs What are green jobs, and how can we measure them? Macroeconomic perspectives and concepts Comparative analysis of job estimates from the literature Conclusions Based on systematic review of literature: “Low carbon jobs: the evidence for net job creation from policy support for energy efficiency and renewable energy” Draft TPA report
  • 12. What are green jobs? Job types • Direct, indirect, induced • Short vs. long-term • Manufacturing, construction & installation, O&M • Supply chain / wider economy Net vs. gross jobs (accounting boundary) • Equipment manf inside boundary? • Displaced jobs in product markets • Impacts on labour market • Impacts on household expenditure £ MWh Equipment Labour D DI DII
  • 13. Calculating net jobs Mostly Input-Output analysis, some direct job surveys, some CGE / other approaches
  • 14. Macro-economic perspectives Is the economy in equilibrium? Is there an output (aggregate demand) gap? Role of fiscal and monetary stimulus Multipliers, interest rates and crowding out Business cycles, long-term growth and technology development
  • 15. Evidence on Gross Jobs Gross Jobs / annual GWh
  • 16. Evidence on Net Jobs Net Jobs / annual GWh
  • 17. Short-Term Jobs (M,C&I) Comparing Fossil vs. Renewables 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 75 79 F9 F9 75 79 19 42 53 65 75 79 79 79 47 79 19 79 79 19 79 Gas Lig Coal Wind Hyd Bio Geo CSP LFG CCS PV job-yearsperMWinstalled Range Average
  • 18. Green Jobs Conclusions On a simple ‘per MWh’ or ‘per £invested’ basis, renewables appear more labour intensive than fossil fuels. BUT: • The energy sector is not a major direct employer, so the effects we see are relatively small • The ability to create jobs (in any sector) depends on having spare capacity in the economy (i.e. recession). Timescales are important in determining the effects of policy. • Taking account of price effects will reduce employment benefits if higher costs lead to reduced household spending. The source of the money is important – is stimulus money really additional? Do jobs lead or follow the economy? • In the long-term (beyond the current business cycle), labour- intensity may not in itself be a good thing. Dynamic efficiency should drive decisions – i.e. will more RE/EE in the system make the economy more efficient in the long-run?