Economic opportunities from onshore wind in wales

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Economic opportunities from onshore wind in wales

  1. 1. Economic Opportunities forWales from Future Onshore Wind DevelopmentA Final Report by Regeneris Consulting and the Welsh Economy Research Unit, Cardiff Business School
  2. 2. RenewableUK CymruEconomic Opportunities for Wales from Future Onshore Wind Development January 2013 Regeneris Consulting Ltd Faulkner House Faulkner Street Manchester M1 4DY 0161 234 9910 www.regeneris.co.uk
  3. 3. ● Economic Opportunities for Wales from Future Onshore Wind Development ●ContentsExecutive Summary 11. Introduction 102. Overview of Assessment Approach 123. The Onshore Wind Sector in Wales 204. Economic Opportunities for Wales 355. Local Economic Benefits 506. Conclusions and Recommendations 66Appendix A Economic Impact Methodology 1Appendix B Survey Questionnaire 1Appendix C Consultees 1Appendix D Case Studies 1
  4. 4. ● Economic Opportunities for Wales from Future Onshore Wind Development ● About the AuthorsRegeneris Consulting is an independent economic consulting firm specialising in economicdevelopment. We are a leading firm in socio-economic impact assessment, having undertakenmany studies across a range of sectors, including energy, housing, broadband, tourism andleisure, land and property, pharmaceuticals, automotive, aerospace, and others. We specialisein using robust analytical techniques to draw out the range of socio-economic impacts ofsectors, companies, investment projects and economic shocks.The Welsh Economy Research Unit (WERU) is based within Cardiff Business School at CardiffUniversity and has a long record of providing research and consultancy services fororganisations in both public and private sectors. An important theme of recent WERU researchhas been economic assessments and reports on industry sectors (media, heritage and culture,tourism, steel and coal, other energy). WERU has developed Input-Output tables for Wales.These tables set out the most comprehensive and robust picture available of the Welsheconomy, plotting the flow of goods and services between industries, consumers andgovernment, highlighting the intricate inter-relationships between industries in thecontemporary Welsh economy. About the ReportThis report is funded with contributions from:AmegniPennant WaltersRenewableUK CymruRESRWE npower renewablesScottishPower RenewablesSSE RenewablesTegni Cymru CyfVattenfallWelsh GovernmentWest Coast Energy
  5. 5. ● Economic Opportunities for Wales from Future Onshore Wind Development ● Executive Summary Purpose and Scope of the Reporti. Regeneris Consulting was appointed by Renewable UK Cymru, the Welsh Government and a group of wind farm developers to undertake an assessment of the economic opportunities from onshore wind development for Wales. The study has been carried out in collaboration with the Welsh Economy Research Unit at Cardiff Business School, with advice from PMSS Ltd., a renewables advisory firm.ii. The assessment covers total levels of investment by Welsh and other companies from the following sources:  Direct expenditure in Wales through manufacture of wind turbine components; planning and development work; construction of site and wind farm; operations and maintenance; and decommissioning/repowering  Indirect expenditure via supply chain components sourced within Wales and investment in grid infrastructure  Induced expenditure by employees supported through direct and indirect effects  Community benefit payments.iii. The spatial focus is on Wales as a whole, with an indication of the potential geographical location of impacts at each stage in the wind farm lifecycle.iv. The focus of the study is on the core economic opportunities that would be created by the future development of the sector. It does not provide an assessment of the wider environmental or social impacts.v. The study has been carried out using:  A review of the literature  Analysis of the RenewableUK wind farm Database  A survey of developers and operators of wind farms in Wales  Consultations with the industry, Welsh Government, local authorities and other stakeholders  Input-Output modelling  Case studies. 1
  6. 6. ● Economic Opportunities for Wales from Future Onshore Wind Development ● Overview of the Onshore Wind Sector in Wales Policy Contextvi. Welsh policy towards the onshore wind sector has evolved in recent years. TAN 8 planning guidance, published in 2005, sets out guidance on the location of wind farms in Strategic Search Areas (SSAs). These locations are expected to host the majority of wind farm capacity in coming years.vii. The latest planning guidance sets out an aspiration to deliver a total of 2,000 MW of installed onshore wind capacity by 2025, with much of this expected to be delivered up to 2020. It should be noted that projects with a capacity greater than 50 MW are determined by the UK Planning Inspectorate.viii. The Welsh Government recognises the potential socio-economic benefits from developing the sector, and its headline aims are to maximise these long term economic benefits and to ensure that local communities benefit from energy infrastructure developments. Development of the Sector: Experience to Date and Prospectsix. The publication of TAN 8 was seen as providing an impetus to the development of the sector, although this proved to be short lived. Only around a quarter of the TAN 8 target for 2010 has been met.x. According to the RenewableUK database of wind farms, there is enough capacity in the pipeline to meet the 2,000 MW aspiration by 2025: in addition to the 420 MW in operation there is approximately 1,800 MW consented or in the planning system. However, clearly not all of these projects will be approved and some are, indeed, mutually exclusive.xi. We have looked at three development scenarios for the future (see Appendix A for more detail)  2,000 MW: meeting this aspiration by 2025 would require around 120 MW of additional capacity to come forward each year up to then.  Historic Trends: a continuation of trends in the period 2001-11, implying 27 MW of additional capacity per annum, and 800 MW total capacity by 2025  Recent Trends: a continuation of more recent consenting trends, implying 86 MW per annum of additional capacity, and 1,560 MW in total by 2025.xii. We model the economic impact of these scenarios in Section 4. Industry Viewsxiii. Developers are generally positive about presence of Welsh based suppliers in the areas of civil engineering, environmental services and consultancy, and most are aware of the presence of towers manufacturing in Wales (i.e. Mabey Bridge).xiv. The vast majority of respondents saw at least some potential to increase their use of firms in the development and construction phase over the next three years, with a third reporting a lot of potential. A smaller proportion – but nonetheless, a significant majority - believed 2
  7. 7. ● Economic Opportunities for Wales from Future Onshore Wind Development ● there to be scope to increase the use of firms in operations and maintenance. Almost half saw a lot of potential.xv. Developers cited a range of policy and economic barriers to growing the Welsh supply chain, including significant risks and uncertainty over securing planning consent and a perception of a lack of buy in locally to national aspirations. Infrastructure constraints (road and grid related) were also commonly cited barriers.xvi. Overall, 40% of developers surveyed feel that Wales is either a reasonably or very favourable place in which to invest. Only a small minority of respondents view Wales as very favourable (7%). Around a third of developers stated that Wales was either fairly or very unfavourable.xvii. Looking beneath these statements, the majority of respondents did not see the skills base as a constraint and most were positive or neutral on planning policy at the Wales level (i.e. TAN 8). There was clear agreement that local planning policies and practice and grid and road infrastructure were negative factors in the consideration of Wales as an investment location for onshore wind projects. Economic Impacts for Wales Development and Constructionxviii. We estimate that total average construction costs per MW of installed capacity are £1.13m, and total development costs are £0.12m, in 2012 prices.xix. Our estimates suggest that 35% of all expenditure in the construction phase is on average expected to be retained within Wales, along with 71% of planning and development spend. On average, developers expect to source around three quarters of the requirement for turbine towers from Wales, with Mabey Bridge and potentially other suppliers with the capability to supply steel towers. Whilst Mabey Bridge has capacity to supply this requirement, for prudence and to reflect downside risks on this expectation, we have reduced this sourcing assumption to 50% for modelling purposes. Civil engineering also has a strong presence of potential Welsh suppliers, along with forestry and environment services.xx. Given the lack of a turbine manufacturer in Wales, all expenditure on wind turbines leaks fully out of Wales. We do not expect it to be possible to attract a turbine manufacturer to Wales, given existing capacity in Europe and the economies of scale that would be needed to drive such an investment.xxi. We estimate that in 2005-11 the planning and construction of onshore wind projects in Wales contributed an annual average of £7.8m in GVA and 335 FTE jobs. The economic impacts under our future scenarios are as follows: 3
  8. 8. ● Economic Opportunities for Wales from Future Onshore Wind Development ● Economic Impacts for Wales of Planning, Development and Construction Phase (average per annum) 2,000 MW Scenario Historic Trends Scenario Recent Trends Scenario 2012-24 2025-50 2012-24 2025-50 2012-24 2025-50 GVA (£m) 38 20 12 6 23 11 Employment (FTEs) 1,610 820 500 240 810 410 Source: WERU calculations, informed by developer survey and RenewableUK Database of wind farms. Note: All GVA figures expressed in 2012 prices. Estimates include impacts from decommissioning/ repowering. Operations and maintenance (O&M)xxii. 76% of all first round expenditure is expected to be retained in Wales, with this expenditure amounting to £38,600 per MW per annum.xxiii. The largest items of expenditure include land rentals and access payments, which are paid to the Forestry Commission/ Welsh Government and local land owners. Direct employment costs borne by developers total £9,800 per installed MW, and much of this is retained in the Welsh economy. Community Benefit payments are an important element of operational expenditure for local communities around wind farms and the spending is largely local.xxiv. We estimate that between 2005 and 2011 O&M activity supported an annual average of £6m of GVA and 210 FTE jobs per annum. The economic impacts under our future scenarios are as follows: Economic Impacts for Wales of Operations and Maintenance Phase (average per annum) Scenario 2,000 MW Historic Trends Scenario Recent Trends Scenario 2012-2024 2025-2050 2012-2024 2025-2050 2012-2024 2025-2050 GVA (£m) 22 37 11 15 14 23 Employment (FTEs) 720 1,260 370 500 470 770 Source: WERU calculations, informed by developer survey and RenewableUK Database of wind farms. Note: All GVA figures expressed in 2012 prices. Forecast Economic Impactsxxv. Over the full assessment period 2012-2050, Wales could secure a total of £2.3bn in GVA, should installed capacity increase to 2,000 MW by 2025. This would amount to:  £1.4bn more in GVA than if historic trends continued  £0.9bn more in GVA than if more recent consenting rates continued. 4
  9. 9. ● Economic Opportunities for Wales from Future Onshore Wind Development ● Economic Impacts For Wales of Development, Construction and Operations and Maintenance (average per annum) Scenario 2,000 MW Historic Trends Scenario Recent Trends Scenario 2012-2024 2025-2050 2012-2024 2025-2050 2012-2024 2025-2050 GVA (£m) 60 57 23 21 36 34 Employment (FTEs) 2,330 2,080 870 740 1,280 1,180 Source: WERU calculations, informed by developer survey and RenewableUK Database of wind farms. Note: All GVA figures expressed in 2012 prices. Estimates include impacts from decommissioning/ repowering.xxvi. Most of this impact in the 2,000 MW scenario would be felt in construction activities, with manufacturing (particularly steel) also benefitting. Employment in private services is estimated to increase by almost 300 FTE jobs annually to 2025 and almost 400 thereafter, whereas professional and financial services (focussed here on planning and engineering activities) accrue around 300 jobs annually to 2050.xxvii. Grid Infrastructure investment required to support the placement of wind turbines in Mid Wales would also bring economic benefits. Depending on the eventual solution (overhead vs. underground), we estimate that this investment would support between £11m and £57m in GVA and 360-1,950 person years of employment in Wales. Scope to Maximise Benefits for Walesxxviii. Based on an assessment of current capacity in the supply side and the marginal economic benefits of changes in sourcing, increasing expenditure retention in Wales for a range of sectors could lead to an additional £7.3m of GVA and 250 FTE jobs per annum in the 2,000 MW scenario between 2012 and 2024 – see the table below. Conversely, the table also shows the impact that would result should rates of Welsh sourcing be below expectations.xxix. The largest ‘wins’ would potentially be gained from increasing sourcing from Wales of construction management, civils, electricals and grid connections. A 10 percentage point increase in purchasing in Wales in this aggregated sector would lever an estimated £3.7m of additional GVA and 140 FTE jobs per annum in the period 2012-24 in the 2,000 MW scenario.xxx. A similar increase in Welsh purchasing in planning, professional services and project management would yield £1.6m in GVA and 50 FTEs per annum. 5
  10. 10. ● Economic Opportunities for Wales from Future Onshore Wind Development ● Economic Impacts from Increased Sourcing in Wales % currently 10 percentage points Increase in Local sourced from Sourcing Wales Per MW Additional Annual Impact in 2,000 MW Scenario; 2012-24 GVA FTEs GVA FTEs Planning, Professional Services & Project 71% £10,100 0.3 1.6 50 Management Construction, Groundworks and Electrical 61% £23,300 0.9 3.7 140 Engineering Manufacturing 50% £7,000 0.2 1.1 30 Transport, forestry & Other 67% £5,700 0.2 0.9 30 10% point increase in local sourcing across £46,100 1.5 7.3 250 all inputs Source: WERU Analysis Local Economic Benefitsxxxi. The economic opportunities outlined in Section 4 would not be spread evenly throughout Wales and some of the benefits would take place outside the immediate proximity of wind farm developments. Nonetheless, there are opportunities for local areas hosting wind farms to benefit from the developments, including:  contracts won by local firms during planning, development, construction and operations  employment of local residents supported in these phases, either directly or through supply chains  local expenditure in the retail and hospitality sectors as workers involved in these phases spend their income in the local economy  the wider economic benefits for local communities, including investment in local physical, economic and community infrastructure and financial benefit for particular groups such as land owners.xxxii. Using case studies this section looks at these benefits and what drives them. Development and Constructionxxxiii. Local economies with a strong presence of construction and manufacturing firms have a greater chance of being able to participate in the supply chain and retain personal expenditure of non-home based construction workers. Wind farms in close proximity to urban centres are likely to capture more of the direct and supply chain benefit. For example:  At Cefn Croes, local sourcing of inputs was limited due to its rural location and lack of suitable contractors for the types of construction inputs required.  By contrast, an estimated 13% of the overall construction value for the Ffynnon Oer wind farm, located in NPT, was sourced from within a 30 mile radius, including aggregates and related civils. 6
  11. 11. ● Economic Opportunities for Wales from Future Onshore Wind Development ●xxxiv. However, rural areas will often be very well placed to supply some types of goods and services, due to a combination of the economies associated with sourcing these inputs benefiting local suppliers and the presence of a good supply base locally. Examples include aggregates, non-specialist civils, forestry and landscaping.xxxv. Larger construction contracts and more specialist activities often require tenderers to meet certain quality standards, favouring larger firms that have the necessary experience, management, and economies of scale. Many of the main contracts and large first tier sub- contracts therefore are let to companies outside of Wales. The majority of value secured by Welsh firms tends to be in lower tiers of the supply chain (second tier and below).xxxvi. Service based rural local economies do benefit in the construction phase by providing services to the contractors that are temporarily located there, such as hospitality and retail. For example, at Cefn Croes, many construction workers including Jones Brothers were located on site for the best part of a year.xxxvii. The ability of local economies to benefit from this induced personal expenditure depends on the remoteness of the construction site, the availability of accommodation and related hospitality and retail, the duration of the construction period and the country of origin of the main component suppliers.xxxviii. Developers state that many of the skills required in the construction of wind farms (site investigators, civil engineers, plant operators, manufacturers of metal fittings and fixings) are available in locations in Wales. Nonetheless the availability of these skills and the labour market varies from location to location within Wales.xxxix. Where skills are currently in short supply, this can be countered through appropriate efforts to upskill workers, given sufficient time to plan. For example, Vattenfall, has partnered with a local engineering business (ISO Feb Ltd) to deliver a three year apprenticeship scheme to train wind turbine technicians for Pen y Cymoedd.xl. Given the current economic climate there is generally a lot more spare capacity within the labour market than in more buoyant times to absorb any increases in demand, meaning that displacement will typically be very low.xli. The developer can influence the main contractor to maximise use of local suppliers in their supply chain. For example, Meet the Buyer events for Pen y Cymoedd contracts have been held with potential main contractors and potential local sub-contractors both in attendance, meaning that they are able to have a dialogue to understand each other’s’ requirements. Vattenfall also made use of local suppliers as a criterion within the procurement of main contractors, along with monthly monitoring of the use of local firms by these contractors.xlii. Neath Port Talbot County Borough Council subsequently developed a supply chain support package, funded by themselves and by Welsh Government. The funding was used to support local businesses to further develop the skills and capacity needed to work in the renewables sector, from training and workshops to direct one-to-one support that will enable local businesses to prepare for the project.xliii. In recent years such approaches are likely to have become increasingly common practice. 7
  12. 12. ● Economic Opportunities for Wales from Future Onshore Wind Development ● Operations and maintenancexliv. Rural areas have more scope to benefit from opportunities in the O&M phase. Larger schemes tend to require more workers to be permanently located on the ground. For example, Wern Ddu, a 9.2 MW wind farm, only requires 2-3 weeks of maintenance per year. By contrast, Cefn Croes requires 4 operations and maintenance FTEs and Pen y Cymoedd is expected to require 12 FTEs, with 90% of these being based locally.xlv. The maintenance of wind farms is often built into the turbine manufacturing contract for a specified warranty period. Since the turbine contracts typically go to overseas firms, maintenance is often undertaken by non-UK based firms. The extent to which local firms and employees are able to benefit from this work depends on the balance between the manufacturers’ use of local teams and their use of their own workers.xlvi. Where activities are contracted out following expiry of the warranty, this is sometimes done through a single contract covering all O&M activities, which brings potential for local companies to benefit through the use of a framework agreement of local contractors which the main O&M contractor can draw on where required. This has been achieved around various wind farm sites in Wales by holding open days for local firms to highlight the potential supply chain opportunities and supporting local suppliers to become approved suppliers for the wind farm.xlvii. Where developers choose to deliver the maintenance in-house, local opportunity partly depends on the developer’s approach to managing their portfolio of wind farm schemes across Wales. Larger developers may have a portfolio of wind farms in Wales, and choose to centralise their approach to operations and maintenance of these wind farms, sharing responsibility across existing staff, especially for smaller schemes.xlviii. A relatively small proportion of equipment and spares tend to be sourced from Wales, since this generally links to where turbines and components are actually manufactured. However, there is much more scope for forestry and environment services to be sourced from local areas given the presence of these skills, especially in rural areas. There is also scope for induced benefits to be secured locally within the hospitality sector where maintenance staff need to stay locally. Wider Benefitsxlix. Community Benefit Funds offer significant potential to secure positive impacts for local communities. Indeed, CBFs are the main source of longer term local benefit for communities from the presence of the wind farms.l. The size of payments is closely linked to the scale of the wind farm. For larger schemes this gives potential for significant on-going benefits. Of the case studies, the annual level of community benefit payment varied from £10,000 for Wern Ddu (a 9.2 MW scheme) to an anticipated £1.8 million for Pen y Cymoedd (a 256 MW scheme).li. Developers typically are very keen to ensure that local communities are fully engaged in the process of designing, delivering and managing the Funds as it is important that they take ownership of the Funds. Developers generally devolve responsibility for the CBFs, although 8
  13. 13. ● Economic Opportunities for Wales from Future Onshore Wind Development ● they may offer advice on administrative issues.lii. In the case of Pen y Cymoedd, for example, the proposed CBF of £1.8m per annum is clearly very large and has potential to deliver significant socio-economic benefits locally.liii. Some larger developments also include a dedicated economic development fund alongside the CBF. For example, RWE npower renewables is proposing to do this for its proposed wind farms at Brechfa and Clocaenog. For Clocaenog, a £3,000 per MW Economic Development fund is being proposed alongside the £5,000 per MW CBF (both are index linked).liv. Wind farm developments often include investments in environmental improvements as part of the package of infrastructure works. For example, at Ffynnon Oer the developer has sponsored improvements to the Afan Mountain Bike Trails, which are an important tourism asset in the Afan Valley.lv. An important benefit for local rural economies hosting wind farms is the payments made to local landowners on which the wind farms are situated. Wind farms in Wales are either located on Forestry Commission Wales land, privately owned farmland or occasionally common land. Developers typically negotiate an annual rental payment in return for access to the land. The level of payment negotiated varies of course with the amount of land used and the value that is negotiated. Our survey suggests an average of £12,000 per MW per annum across all respondents. Conclusionslvi. Our analysis has highlighted that there is potential for a significant and steady stream of economic benefits for Wales from onshore wind development and operation. Should 2,000 MW be developed by 2025 and should Wales be able and prepared to capture its expected share of investment, there is the opportunity to secure £2.3 billion of GVA between 2012 and 2050, with over 2,000 FTE jobs per annum on average in this period. Whilst construction and manufacturing could stand to see a particular benefit from this activity, the benefits could be spread across a range of sectors, as a result of supply chain effects and the consumer expenditure of employees whose jobs are supported by the sector.lvii. There are downside risks to the achievement of these benefits.  Should development proceed at a slower rate, there would be less investment in Wales and consequently fewer jobs and less GVA created. A continuation of historic trends would see GVA of around £1.4 billion less than if 2,000 MW is developed, and only around a third of the jobs supported. A continuation of more recent trends could mean £0.9 billion less in GVA and around 1,000 fewer jobs per annum. Our research has highlighted a number of barriers to achieving development, including local planning issues and grid and road infrastructure constraints.  Moreover, should 2,000 MW of capacity be achieved, a proactive approach is nonetheless required to ensure that the potential benefits outlined above are secured. The analysis in section 4 has illustrated the consequences of investment in Wales being below expectations.lviii. Our recommendations in Section 6 explore some of the options available for maximising the benefits, focussing on the planning system, enabling infrastructure, supply chain and sector development, community benefit payments and local benefits. 9
  14. 14. ● Economic Opportunities for Wales from Future Onshore Wind Development ●1. Introduction1.1 Regeneris Consulting was appointed by Renewable UK Cymru, the Welsh Government and a group of wind farm developers to undertake an assessment of the economic opportunities from future onshore wind development for Wales. The study has been carried out in collaboration with the Welsh Economy Research Unit at Cardiff Business School, with advice from PMSS Ltd, a renewables advisory firm.1.2 The overall purpose of the report is to quantify the economic impact on the economy in Wales arising from investment in onshore wind, based on current and potential future levels of economic activity for the different stages of a wind project lifecycle.1.3 Within this overall aim, the scope of the analysis is as follows:  The analysis covers the timeframe 2005-2050, using baseline figures as supplied by industry, and scenarios for installed capacity in Wales which were agreed by industry and Welsh Government. The 2050 end point has been selected as it covers the expected operational lifetime of turbines and wind farms currently installed or in planning.  The assessment covers total levels of investment by Welsh and other companies from the following sources:  Direct expenditure in Wales through manufacture of wind turbine components; planning and development work; construction of site and wind farm; operations and maintenance; and decommissioning/repowering  Indirect expenditure via supply chain components sourced within Wales and investment in grid infrastructure  Induced expenditure by employees supported through direct and indirect effects  Community Benefit payments.  The spatial focus of the assessment is on Wales as a whole, with an indication of the potential geographical location of impacts at each stage in the wind farm lifecycle.  The key indicators of impact used are Gross Valued Added and Full Time Equivalent (FTE) Jobs.1.4 The focus of the study is on the core economic opportunities that would be created by the future development of the sector. It does not provide an assessment of the wider environmental or social impacts.1.5 The remainder of the report is structured as follows:  Section 2: sets out in detail the assessment approach, including the economic impact framework and the research methods used 10
  15. 15. ● Economic Opportunities for Wales from Future Onshore Wind Development ● Section 3: provides an overview of the onshore wind sector in Wales, including the policy context, the development of the sector to date, and industry perceptions of Wales as a location for onshore wind development Section 4: presents the results of the economic impact modelling Section 5: provides a discussion of the potential local economic impacts of onshore wind farms in Wales Section 6: sets out our conclusions and recommendations. Appendix A provides details of the methodology used Appendix B contains the survey questionnaire that was sent to developers and operators of onshore wind farms in Wales Appendix C summarises the organisations that were consulted as part of the study. Appendix D contains four case study wind farms in Wales. 11
  16. 16. ● Economic Opportunities for Wales from Future Onshore Wind Development ●2. Overview of Assessment Approach2.1 In this section we set out in detail the approach that has been followed in quantifying the economic opportunities from onshore wind development. We cover the economic impact framework and the research strands used. Economic Impact Framework2.2 At the heart of the assessment is an economic model that serves to capture the likely economic impacts of onshore wind development for Wales, informed by scenarios for rates of development and the retention of the associated expenditure in Wales. Sources of Impact2.3 The development and operation of an onshore wind farm is a complex and often lengthy process that involves several distinct phases. Each of these phases generates economic activity through capital investment and operational expenditure: 1) The construction and assembly of the wind farm and related supply chain activity. The investment made in planning and development, site preparation, manufacture and assembly, and commissioning of the wind turbines delivers benefits directly to the businesses delivering this activity and also to their suppliers as the additional economic activity feeds through the supply chain. The assessment considers the potential scale of benefits during the construction phase in light of the expected size and geographic location of the development’s supply chain, the potential for local companies (or companies with local operations) to win the main contracts or to enter the supply chain of those that do. 2) The ongoing maintenance and operations. Staff required for the operation and maintenance of the wind farm (including those in administrative and support functions) and the expenditure required to cover other overheads (e.g. the cost of spare components, grid connection and other support services and commitments) provides an additional, and longer term, source of economic impact. Again, the potential benefit is linked to the scale of investment, geographic sourcing of goods and services, the location of any new jobs which are created and the scope to recruit local staff. The assessment of the impact of operations and maintenance does not include the economic impact associated with the onward transmission and sale of the electricity generated by the scheme. 3) The impact of community benefit payments. Developers can opt to make voluntary annual contributions to local communities over the course of the operational life of a wind farm. These funds can be used in a range of ways by local communities so the type and scale of benefits generated can differ substantially. The assessment considers the potential impacts of these payments. 4) The impact of decommissioning or repowering. The cost of either decommissioning or replacing components to repower the wind farm at the end of its operational period generates further economic impacts in similar ways to the initial construction 12
  17. 17. ● Economic Opportunities for Wales from Future Onshore Wind Development ● investment, by providing revenue to supply chain companies and supporting employment.2.4 Every onshore wind farm that is developed in Wales brings with it these sources of economic impact and thus an injection of economic activity into the Welsh economy. Moreover, in order to bring forward the scale of onshore wind development and other renewable energy infrastructure that is envisaged for Wales, significant investment will be required in grid infrastructure in Mid Wales. This infrastructure development would bring with it a range of economic impacts for Wales as a result of the planning, development, construction and maintenance required to make it happen. This is treated as a separate source of economic impact, cutting across all scenarios.2.5 It is worth noting that Welsh industry also has the potential to win business in wider onshore wind markets stemming from the development of the industry in the rest of the UK and indeed overseas. These potential effects are outside the scope of this study. This is primarily due to the difficulties in estimating robustly the scale of these markets over time and the market share that Welsh companies may be able to secure. Moreover, the greatest stimulus to the development of the Welsh supply chain comes from the development of the sector in the home market. Types of Impact2.6 The assessment considers both the core economic benefits associated with increased economic activity in the area as well as wider socio economic benefits that the wind farm development might deliver. The core economic benefits have been assessed quantitatively through an economic impact model which estimates:  Direct Impacts. This measure captures the economic activity that is supported directly through the construction, operation and maintenance of the wind farm. This covers direct staff employed on the development and all first tier supply chain expenditure relating to the construction of the wind farm.  Indirect Impacts. This measures the supply chain impact of the additional output generated by companies in the supply chain supporting the tier one suppliers.1 The additional economic activity in these companies is passed down through their supply chains and generates additional, indirect benefits for many other companies.  Induced. This captures the knock on benefits that additional employment supported directly and indirectly has in the economy as salaries, earned by those employed in additional jobs are spent on goods and service elsewhere in the economy.2.7 There are wider economic benefits associated with the development of the industry in Wales, including:  Income to landowners. Onshore wind farms in Wales tend to be located on Forestry Commission land or on privately owned farmland. These landowners receive capital1 Tier One suppliers are at the top of the supply chain, supplying directly to the Prime Contractor. 13
  18. 18. ● Economic Opportunities for Wales from Future Onshore Wind Development ● payments and/or rental payments from developers/operators of wind farms in return for access to this land.  Business Rates. Wind farm developers and operators pay business rates, which are then paid into the Welsh Government’s Non Domestic Rates Pool and are then redistributed amongst local authorities (pro-rata to the adult population) as part of the local government revenue settlement each year.2.8 We consider these benefits alongside the core economic impacts.2.9 Beyond these quantifiable economic benefits, onshore wind development has the potential to deliver a range of wider socio economic benefits, including:  A boost to local and national renewables sectors. The increased opportunity associated with a pipeline of onshore wind projects in Wales in the medium term could deliver lasting benefits by stimulating increased capacity in the sector (e.g. as companies start up or diversify into other renewables activities to take advantage of new opportunities), and positioning local firms to access future opportunities in the sector.  The scope for labour market impacts related to the new employment opportunities. There may be potential for skills development activity, for example, as a result of the scheme so that local people can be trained to help them take advantage of opportunities arising as a result of the development. The additional capacity developed in local training providers as a result of this would underpin further skills development activity.2.10 Impacts for local economies are considered separately in Section 5 of the report. Measures of Impact2.11 The assessment uses two key measures to quantify the nature and scale of economic impacts from onshore wind development:  Gross Value Added (GVA). GVA is the commonly accepted measure of wealth creation for an economy. It is what is left of gross output once bought in goods and services have been paid for. This residual output is then available for distribution as profits, wages and salaries and capital investment costs.  Employment. This is the number of jobs that are created within Wales. We express these both as Full Time Equivalents, a measure that converts full- and part-time jobs into a common currency (where 1 PT job is equivalent to half a FT job), and, for temporary construction impacts, as person years of employment. Time Period2.12 The assessment covers the period 2005-2050. There is a clear rationale for selecting this time period: it covers the operational life of the majority of schemes that are either currently operational or in the pipeline (in construction, consented and submitted to the relevant planning authority). Most of the wind farms in the planning pipeline will, if 14
  19. 19. ● Economic Opportunities for Wales from Future Onshore Wind Development ● approved, be operational by 2025, and the typical operational life of a wind farm is up to 25 years.2.13 Within this period we focus in particular on the potential development of the industry up to 2025 as a policy period. This corresponds with the timescales for Welsh Government’s aspiration to grow onshore wind capacity, as well as wider EU level targets. We consider the following time periods:  2005-11;  2012-24; and  2025-50 Spatial Focus2.14 The focus of the study is on the impacts for Wales as a whole. The study also provides analysis on the impacts for the regions within Wales (North, Mid, South East and South West).2.15 We also consider the scope for the local areas in which these developments have occurred, likely to occur, focussing in particular on supply chain opportunities and access to jobs. Supporting Assumptions2.16 The model uses assumptions on:  Costs: the typical costs of developing and operating a wind farm are a key driver of the nature and scale of the associated economic impact. These have been estimated through a survey of all developers and operators of onshore wind farms in Wales (see Research Strands and Tools below), consultation with the industry and a review of other assessments. The likely costs of grid infrastructure have been estimated in consultation with the National Grid.  Sourcing: the extent to which Wales benefits from this expenditure is determined by the amount of expenditure that is retained within Wales through Welsh firms supplying goods and services as part of the supply chain. Likely levels of expenditure retention for each part of the supply chain are estimated using evidence from our survey of developers and are subjected to sensitivity testing. Subsequent multiplier effects in Tier 2 of the supply chain and below are estimated using Welsh Input- Output tables (see Appendix A for more detail). Use of Scenarios2.17 It is helpful to make use of scenarios as a means of testing how economic impacts may change in response to changes in certain key variables. Our modelling tests scenarios in two regards:  Development of installed capacity. Our model uses projections for installed onshore wind capacity up to 2025. Whilst we have a comprehensive picture of the capacity in 15
  20. 20. ● Economic Opportunities for Wales from Future Onshore Wind Development ● the pipeline, much of this is in the planning system at present and it is therefore uncertain which schemes may come forward and at what rate. We therefore use three scenarios for the build up of installed capacity:  2,000 MW: achievement of the aspiration for 2,000 MW total installed capacity by 2025  Historic Trends: a continuation of trends seen over the past decade  Recent Trends: A continuation of more recent consenting trends The basis for these scenarios is set out in more detail in Section 3 and Appendix A.  Sourcing of suppliers. The most up to date view of developers in Wales is used to inform estimates on the retention of expenditure in Wales in our model. There is potential for the proportion of this expenditure retained in Wales to be both greater and lower than this baseline, in certain parts of the supply chain. We test this in the impact assessment.2.18 A summary of the economic impact framework is set out in the diagram below. Figure 2-1: Economic Impact Framework Underpinning Assumptions Driver of Benefit Types of Benefit Measures Impact Areas Core Economic Economic Impact Areas • Review of Development and Benefits • FTE Jobs Welsh targets Construction Phase • GVA • Wales • RenewableUK • Direct • Welsh regions database • Indirect Wider • Regional • Induced • Income to economic landowners analysis Operations and Economic • Local including Maintenance Development / Infrastructure sectoral mix Regeneration improvements • Review of Benefits • Skills impact • Employment evidence • Community Decommissioning / vitality • Survey of repowering developers & operators • Input-output tables • Testing & Community Benefit Wider socio- refinement Funds economic benefits Research Strands and Tools2.19 The research has been designed so as to provide an independent and robust assessment of the economic impacts of onshore wind up to 2050. As such, a number of research strands have been undertaken in order to build up a comprehensive and accurate picture of:  Potential scenarios for the future development of installed capacity in the sector, based on recent experience and the Welsh Government’s stated aspirations.  Likely levels of total investment associated with these development scenarios at 16
  21. 21. ● Economic Opportunities for Wales from Future Onshore Wind Development ● each stage of the project life cycle (planning and development, construction, operations and maintenance and repowering/decommissioning), including associated grid infrastructure, based on actual experience to date.  Realistic levels of expenditure that are likely to be retained in Wales, and areas where there is potential for more expenditure to be retained, based on actual experience to date and assessment of the capacity of the Welsh economy.  Multiplier effects for Wales, arising from subsequent rounds of supply chain expenditure (indirect effects) and consumer expenditure by employees (induced effects).  Likely impacts on local communities, based on experience to date, and drawing out the key factors that constrain and encourage local economic benefit.  Constraints to, and opportunities for, maximising the sector’s economic impact for Wales, based on views of industry and government and an analysis of the Welsh economy.2.20 The principle has been to triangulate the findings by making use of available data sources, and gathering primary data and views from industry, Welsh Government and local stakeholders. The table below summarises the research tools that have been used to inform each of the study elements. We then discuss the research tools in more detail below. Summary of Study Elements and Research Study Element Research Approach/ sources used Scenarios for future  RenewableUK database provides details on all wind farms in the UK that development are operational, in construction, consented, and in the planning system, including dates, installed capacity and location.  Consultation with wind farm developers and Welsh Government. Investment by project  Survey of all developers and operators of all wind farms in Wales that Life Cycle stage are operational, in construction, consented, and in the planning system.  Existing socio-economic impact studies of onshore wind farms. 2 Investment in Wales  Survey of developers and operators by sector  Existing socio-economic impact studies of onshore wind farms. Multiplier effects for  Drawing on investment data above, use of Input-Output tables for Wales and its regions Wales to estimate indirect and induced impacts. Impacts on local  Four case studies on existing and planned onshore wind farms, communities  Informed by consultations with developers, operators and local authorities and document review, and the team’s experience. Constraints and  Survey of wind farm developers opportunities  Consultation with developers, Welsh Government, local government representatives. Literature Review2.21 We reviewed the literature on the economic aspects of onshore wind, including relevant2 For example, Onshore Wind Direct and Wider Economic Impacts, BiGGAR Economics for RenewableUK and Department of Energy and Climate Change (DECC), May 2012. 17
  22. 22. ● Economic Opportunities for Wales from Future Onshore Wind Development ● policy documents and existing socio-economic assessment of onshore wind developments. This was used to inform an up to date picture of the policy context and our assumptions on expenditure and sourcing for the economic modelling. Analysis of RenewableUK Database2.22 RenewableUK holds a database of all onshore wind farms in the UK that are either in operation, in construction, consented or in planning. It provides information on a number of aspects including:  The date when operations/construction commenced, when consent was given or when it entered the planning system  Location  Installed capacity, in MW  Developer and operator.2.23 This database was used to analyse trends in installed capacity in recent years and to understand the capacity in the pipeline. From this, data three scenarios for the future development of the sector were developed.2.24 These scenarios are discussed in more detail in Appendix A. Survey of Developers and Operators2.25 A key research tool for the study was a survey of all developers and operators of onshore wind farms in Wales. The developer survey ran in October and November 2012 and solicited information on:  involvement in the onshore wind sector in Wales, including details of existing or proposed wind farms and their perspectives on the strength of wind energy supply chains in Wales, and on Wales as an investment location  onshore wind schemes in development in Wales, including expected development costs and timescales, and likelihood of sourcing of goods and services from Wales  operational onshore wind schemes in Wales, including when schemes were developed, annual operational costs, proportion of goods and services sourced from Wales, employment created, community benefit funds provided and expectations regarding decommissioning or repowering at the end of the wind farms life.2.26 The achieved response covered 66% of all existing and proposed capacity in Wales. The survey questionnaire is reproduced in Appendix B. Consultations2.27 We have consulted with developers, Welsh Government, local authorities and other stakeholders in the course of the study. The purpose of the consultations has been to gather up to date views on the development of, and prospects for, the sector, to inform 18
  23. 23. ● Economic Opportunities for Wales from Future Onshore Wind Development ● assumptions on the ability of the Welsh economy to benefit from the associated investment and expenditure, and to inform our assessment of the constraints, barriers and opportunities for the sector going forward. Case Studies2.28 Whilst rigorous economic modelling provides a robust picture on the potential economic impacts for Wales, assessing the impact at a very local level can only be done through the use of case studies. We therefore undertook case studies of operational and consented wind farms of various sizes across Wales in order to understand the factors that promote or constrain how the local business base, workforce and community benefit from the economic activity that arises as a result of the development of onshore wind farms in Wales. 19
  24. 24. ● Economic Opportunities for Wales from Future Onshore Wind Development ●3. The Onshore Wind Sector in Wales Summary of Key Points  Welsh policy towards the onshore wind sector has evolved in recent years. TAN 8 planning guidance, published in 2005, sets out guidance on the location of wind farms in Strategic Search Areas (SSAs). These locations are expected to host the majority of wind farm capacity in coming years.  The latest planning guidance sets out an aspiration to deliver 2,000 MW of installed onshore wind capacity by 2025. Much of this is expected to be delivered up to 2020.  The Welsh Government recognises the potential socio-economic benefits from developing the sector. It aims to maximise these long term economic benefits and to ensure that local communities benefit from energy infrastructure developments.  The publication of TAN 8 was seen as providing an impetus to the development of the sector, although this proved to be short lived. After some additions to capacity in 2005 and 2006, the growth in capacity stalled, with no additions in 2007 and only two new wind farms in 2008. Only around a quarter of the TAN 8 target for 2010 has been met.  There is enough capacity in the pipeline to meet the 2,000 MW aspiration by 2025: there is approximately 2,200 MW in operation, consented or in the planning system.  Developers are generally positive about presence of Welsh based suppliers in the areas of civil engineering, environmental services and consultancy, and most are aware of the presence of towers manufacturing in Wales (i.e. Mabey Bridge).  The vast majority of respondents see some potential to increase their use of firms in the development and construction phase over the next three years, with a third reporting a lot of potential. A significant majority believe there to be scope to increase the use of firms in operations and maintenance.  Developers cite a range of policy and economic barriers to growing the Welsh supply chain, including significant risks and uncertainty over securing planning consent and a perception of a lack of buy in locally to national aspirations. Infrastructure constraints (road and grid related) are also commonly cited barriers.  40% of developers surveyed feel that Wales is either a reasonably or very favourable place in which to invest. Only a small minority of respondents view Wales as very favourable (7%). A third of developers state that Wales is fairly or very unfavourable.  Looking beneath these statements, the majority of respondents do not see the skills base as a constraint. Most were positive or neutral on national planning policy.  However, there was clear agreement that local planning policies and practice and grid and road infrastructure were negative factors in the consideration of Wales as an investment location for onshore wind projects. 20
  25. 25. ● Economic Opportunities for Wales from Future Onshore Wind Development ● Introduction3.1 This section provides a discussion on the onshore wind sector in Wales, including:  the policy context that has shaped the development of the sector, related sectors and the support infrastructure in Wales  the development of the sector in Wales to date and possible scenarios for future development and  perceptions of industry stakeholders of Wales as a location in which to develop onshore wind farms. Policy Context3.2 The Welsh onshore wind industry is subject to, and driven by, a wide array of policies at the EU, UK and Wales level. Here we focus on the evolution of Welsh policy to date, although it should be noted that projects with a capacity greater than 50MW are determined by the UK Planning Inspectorate (formerly this was the responsibility of the Infrastructure Planning Commission, which was abolished in April 2012).3.3 Against the backdrop of numerous regulatory and statutory drivers, at the UK level, the key policy mechanism supporting the development of onshore wind is the Renewables Obligation (RO), which is intended to accelerate the deployment of renewable energy technologies in order to enhance energy security and contribute towards the delivery of wider carbon emissions targets and obligations.3.4 Moving to low carbon energy production and maximising the economic opportunities from the low carbon transition have for several years been stated priorities for the devolved Welsh Government. Given Wales’ natural advantages in wind energy, development of onshore wind forms an important part of this response. The stated ambition within the current Programme for Government (2011-16) is to create a sustainable, low carbon economy for Wales.3.5 Welsh policy towards renewables in general, and to onshore wind in particular, has evolved in recent years. 2005 Planning Policy3.6 Back in 2005 the then Welsh Assembly Government issued a Ministerial Interim Planning Policy Statement3 that set a target for generating electricity from all renewable technologies to 4TWh by 2010, with an aspiration that this would then increase to 7TWh by 2020. Within this overall target, a technology specific target was set for an additional 800 MW of onshore wind capacity by 2010 (i.e. additional to the 233 MW that was already operational at that time). It was recognised that Wales had natural advantages in onshore wind:3 Ministerial Interim Planning Policy Statement 01/2005 Planning for Renewable Energy, July 2005. Note that the latest Planning Policy statement is contained within Welsh Assembly Government, Planning Policy Wales Edition 5, November 2012. See below for reference to this. 21
  26. 26. ● Economic Opportunities for Wales from Future Onshore Wind Development ● “This is based on Wales’ abundant onshore wind resource and the fact that onshore wind power is the most viable commercial technology available that will provide a high degree of certainty of meeting the 2010 target.” Technical Advice Note (TAN) 83.7 Subsequently, WAG published planning guidance known as TAN 8. This set out a strategic approach to enable the 800MW target to be met. A key element within this was the establishment of Strategic Search Areas (SSAs) where large-scale wind farms were to be located. Each SSA was given an indicative target that totalled to 1,120 MW amongst the seven Areas; the excess was to allow flexibility in reaching the 800 MW target. A footnote also explains that capacity in these Areas could be increased to give an overall SSA maximum capacity of around 1700 MW. The Renewable Energy Route Map3.8 Welsh Government, along with the UK Government and other devolved administrations, published its Renewable Energy Road Map4 in 2008 as a consultation document. This suggested that the target for 7TWh by 2020 be increased significantly to 33 TWh by 2025. The implication for onshore wind is that the capacity potential would be up to 2500 MW, or up to 6.5 TWh of electrical energy generated. A Low Carbon Revolution (2010) and July 2011 Ministerial Letter3.9 The increasing emphasis on renewable energy targets was reinforced with the publication of the Welsh Government’s Energy Policy Statement Low Carbon Revolution in 2010.5 The overall renewable electricity target jumped to 48TWh. To put this into context, this is twice the electricity that Wales currently consumes from all energy sources. The potential from onshore wind by 2025 however was revised down from the Roadmap consultation to 2,000 MW. This has subsequently been restated in the latest Welsh Government Planning Policy Document.63.10 In the meantime, the existing targets for onshore wind were being missed, with only 146 MW being developed by 2010 against the target of 800MW – putting Wales over 80% behind target (see below for a more detailed discussion on the development of capacity to date). In a Ministerial letter in July of that year the Government clarified the position with regard to onshore wind, stating the Garran Hassan upper level figures (1700 MW) as the total capacity for SSAs. The remaining 300 MW needed to reach the 2,000 MW target would be made up of existing wind farms and planned smaller private and community projects that lie outside these areas.4 Welsh Assembly Government, Renewable Energy Route Map for Wales, Consultation on way forward to a leaner, greener and cleaner Wales, February 2008.5 Welsh Assembly Government, A Low Carbon Revolution, The Welsh Assembly Government Energy Policy Statement, March 2010.6 Welsh Assembly Government, Planning Policy Wales Edition 5, November 2012. 22
  27. 27. ● Economic Opportunities for Wales from Future Onshore Wind Development ● Related Economic Development Policy3.11 The Welsh Government and its partners recognise that there are, potentially, highly significant economic benefits to be had from the development of onshore wind and are keen to maximise the benefits for Wales. This was recognised in the Energy Policy Statement cited above and the Green Jobs Strategy (2009). More recently the Government’s commitment to securing these economic benefits has been restated in Energy Wales: A Low Carbon Transition (March 2012). The two headline aims are:  to maximise the long term economic benefits for Wales, particularly in terms of job creation, at every stage of development.  to ensure that communities benefit from energy infrastructure developments.3.12 It is recognised that whilst energy policy per se is not a devolved responsibility, Wales does have the power to pursue the opportunities and maximise the benefits from the move to renewable energy generation. The stated aim is therefore to ensure that energy efficiency and electricity generation support jobs across the supply chain over the lifetime of developments – from manufacturing to installation, construction through operation to decommissioning. The Government has committed, in particular, to:  ensure every major energy development maximises economic benefits for Wales through targeted interventions into supply-chain development, business support, skills and training, procurement, innovation, and R&D.  target the business support to help develop competitive Welsh supply chains – in energy sectors of greatest potential and, in the context of specific energy developments underway or expected in Wales – supporting and encouraging Welsh companies to engage in the procurement process.  ensure energy-related procurement exercises are designed to stimulate demand for local labour, products and services and enable Welsh businesses to compete fairly and effectively.  extract maximum long-term value to the Welsh economy by developing the future workforce to meet industry needs.3.13 In addition, the Welsh Government wishes to see local communities benefit from developments. The desire is to go further than the community benefit fund standards set in England (a minimum £1,000 payment per year over the wind farm’s lifetime, per MW of installed wind power). Of most relevance are the commitments to:  work in partnership with business to agree expectations for economic and community benefits from energy development.  work with communities and partners to ensure wealth generated by energy development in Wales benefits communities.  create a mechanism to report the level and nature of benefits associated with energy developments in Wales. 23
  28. 28. ● Economic Opportunities for Wales from Future Onshore Wind Development ●3.14 Welsh Government and partners are pursuing a number of specific initiatives to support the onshore wind sector, including:  Supporting Welsh businesses to compete for and win large public and private sector contracts  Supporting the skills development agenda by providing funding to HE/FE providers of training. A recent example is the support provided to Llandrillo College to deliver apprenticeships for RWE and Vattenfall.  Working with the National Skills Academy (Power) and EU Skills on researching, designing, and delivering a skills and qualification programme for the renewable sector as a whole. Development of the Sector: Experience to Date and Prospects Experience to Date3.15 Figure 3-1 sets out the trend in the level of installed operational capacity (MW) over the past decade. In the early 2000s installed capacity remained at a fairly modest level of around 150MW. In this period only a small number of relatively small scale wind farms were developed, the largest being Cemmaes in Powys (15 MW). Capacity began to increase more noticeably in 2005 and 2006, including:  Tir Mostyn, a 21 MW Wind Farm in Denbighshire that became operational in October 2005  Cefn Croes, a 59 MW wind farm in Ceredigion that came online in June 2005  Ffynnon Oer, a 32 MW wind farm in Neath Port Talbot that became operational in June 2006.3.16 Our consultations suggest that TAN 8 initially had a big impact in terms of new capacity being permitted and installed, as well as attracting firms to support this growth. For example, the law firm Eversheds set up an office in Cardiff on the back of the expectation of significant growth in the industry to support onshore wind projects. Given this rate of new capacity development it was reasonable to assume at the time that sufficient progress was being made towards the 800 MW target for 2010 (although this rate of capacity was somewhat behind the average monthly schedule that would be needed). However, capacity then flatlined in the following years, with no additions in 2007 and only two new wind farms in 2008, with a total of 15.6 MW of additional capacity coming onstream. It therefore became apparent that unless there was a significant shift, the target for 2010 would not be achieved.3.17 This has proven to be the case, with a small number of relatively small scale wind farms being developed in 2009 and 2010. Only around a quarter of the TAN 8 target for 2010 has been met to date. The build up of cumulative installed operational capacity – and the extent of the shortfall on the 2010 target - is set out in Figure 3-1. 24
  29. 29. ● Economic Opportunities for Wales from Future Onshore Wind Development ● Figure 3-1: Cumulative Installed Operational Capacity in Wales, 2000-12 1,000 900 Target for 2010 800 Installed Operational Capacity (MW) 700 600 500 Cefn Croes Carno 400 Tir Mostyn 300 200 Alltwalis 100 Fynnon Oer 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: RenewableUK Database3.18 There is currently 423 MW of installed onshore wind capacity across Wales. The map below illustrates their location. 25
  30. 30. ● Economic Opportunities for Wales from Future Onshore Wind Development ● Figure 3-2: Operational Wind Farms in Wales, as at December 2012 Source: RenewableUK Database Future Prospects3.19 RenewableUK holds records of all wind farms that are in construction, consented or in the planning system. The table below summarises the current operational capacity and that is in the planning and development pipeline. As this shows,  111MW of capacity is under construction at present (35 MW commencing in 2011 and 77 MW in 2012) and is therefore likely to come onstream by 2014 at the latest.  15 wind farms – totalling 449 MW of capacity - have been approved but construction has not yet commenced.  A further 37 wind farms are in the planning system. These have the potential to bring a further 1,200 MW of capacity. However, it is highly unlikely that all of these will be approved, and indeed some are mutually exclusive. 26
  31. 31. ● Economic Opportunities for Wales from Future Onshore Wind Development ● Table 3-1: Installed Capacity in Onshore Wind in Wales: Operational and Pipeline Windfarms Turbines MW Capacity Operational 38 540 423 Approved not constructed 15 145 449 Under construction 5 44 111 Awaiting determination 37 490 1,204 Current Total Potential Capacity 95 1,219 2,187 Source: RenewableUK database, as at October 20123.20 This therefore suggests that given the current pipeline it is technically feasible to bring forward the Welsh Government’s aspirational target of 2,000 MW of onshore wind capacity. In addition, it is likely that schemes that are currently at a pre-planning stage will enter the planning system in coming years.3.21 The map below illustrates the location of all wind farms in the pipeline, as well as those that are operational. As this shows, there is a clustering of both operational and pipeline projects in Mid Wales, and to a lesser extent in South West Wales. Figure 3-3: Onshore Wind Farms in Wales (Operational and in Pipeline), as at December 2012 Source: RenewableUK Database 27
  32. 32. ● Economic Opportunities for Wales from Future Onshore Wind Development ● Development Scenarios3.22 It is helpful to use what we know about the rate of progress that has been made in recent years to project forward for coming years. This serves to illustrate the shift in the rate of progress that will be needed in future if aspirations are to be met.3.23 In the period 2001-11, a total of 270 MW of onshore wind capacity became operational (an annual average of 27 MW). Should this trend continue, there would be a total installed capacity of around 800 MW in Wales by 2025 – clearly, a significant (60%) shortfall on a 2,000MW aspiration.Figure 3-4: Projection Based on Historic Trend (2001-11) 2,000 MW by 2025 2,000 1,800 1,600 60% shortfall 1,400 Operational Capacity 1,200 Actual installed capacity Projection 1,000 27 MW p.a. additional 800 capacity on average 600 400 200 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025Source: RenewableUK Database3.24 Underlying this scenario is the potential for the future rate of development and new capacity becoming operational to slow beyond the current rate of consenting (see scenario three), possibly due to the widespread failure of schemes to secure consents and a shift in investment to other investment locations or technologies.3.25 In addition to this long term trend the RenewableUK database helps us to understand the more recent trend in consenting of onshore wind farms in Wales. As set out above, the database indicates that there is 493 MW of capacity currently in construction or consented prior to construction. Combining what we know about when these wind farms were consented and evidence from our survey of developers on the likely date when these will become operational, it is likely that the majority of this capacity in the pipeline will become operational by 2016. This equates to an annual average of 124 MW p.a. of additional capacity over the period. Assuming that this rate continues up to 2025, this would be more than enough to meet a 2,000MW aspiration. However, the recent approvals are heavily skewed by a very large scheme: namely, the Pen y Cymoedd scheme (256 MW). This was approved in May 2012 and is the largest proposed scheme in England and Wales at present. There are no other schemes of a comparable size in the planning system at the moment (the largest scheme is Carnedd Wen). It is therefore not realistic to project forward on this basis of a development rate including Pen y Cymoedd. 28
  33. 33. ● Economic Opportunities for Wales from Future Onshore Wind Development ●3.26 Excluding Pen y Cymoedd from the recently consented schemes indicates an annual average additional capacity of 49 MW per annum. Projecting forward on this basis would also be dubious as we know that Pen y Cymoedd is in the pipeline. We have therefore taken a mid- point between 124 MW and 49 MW per year: that is, 86 MW per annum. Projecting forward on this basis would yield 1,560MW in installed capacity by 2025 – a 22% shortfall on 2,000 MW by 2025. This is set out in Figure 3-5 below.Figure 3-5: Projection Based on Recent Consenting Rates (wind farms in construction and consented) 2,000 MW by 2025 2,000 1,800 22% shortfall 1,600 Actual installed capacity 1,400 Operational Capacity 1,200 Projection 1,000 800 600 400 200 86 MW p.a. based on recent consenting 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025Source: RenewableUK Database3.27 These forward projections are used as the basis for the development scenarios that we test in our economic modelling (see section 4). We test three scenarios:  Aspiration Scenario: 2,000MW by 2025  Historic Trends Scenario: a continuation of 2001-11 trends  Recent Trends Scenario: a continuation of more recent consenting rates3.28 A full explanation of the basis for these scenarios is provided in Appendix A. Industry Perceptions of Wales as an investment location3.29 From our consultations and our survey of developers and operators (see Appendix A for further details on the survey method and the Appendix B for the survey questionnaire) we have gathered views from the industry on Wales as a location to develop onshore wind projects.3.30 The key findings are discussed below. 29
  34. 34. ● Economic Opportunities for Wales from Future Onshore Wind Development ● Supply Chain3.31 We asked developers and operators the extent to which they feel they are able to source goods and services at the right quality and price, and how this varied by the types of good and services that are needed in the construction and operation of wind farms. The proportion of developers that believe there was either a good, or some selection, of suppliers based in Wales is set out below, split by broad element of the supply chain.Figure 3-6: Ability to source goods and services from suppliers based in Wales Development & Construction Operations and Maintenance Good selection of suppliers in Wales Some suppliers in Wales 90% 80% 80% 70% 70% % of Developers 60% 60%% of Developers 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0%Source: Survey of Developers and Operators (September-November 2012) n = 15To what extent are you able to source the range of goods and services, at the right cost and quality, used in theconstruction and operation of your onshore wind schemes from suppliers based in Wales?3.32 For development and construction, the key points to note are:  Just over half of the respondents reported that there was a good selection of civil engineering firms in Wales, with a further 33% stating that there were some suppliers in this area within Wales. This was confirmed in our more detailed interviews with developers and stakeholders, who highlighted the strong presence of firms for civils work. Examples include Jones Brothers, based in Denbighshire and Swansea, and Raymond Brown, in Bridgend. A lower proportion noted a presence of electrical engineering firms (27% saw a good selection and a further 40% saw some selection in Wales).  Both environmental services and consultancy were also highlighted as having some presence in Wales, with 93% and 87% of respondents respectively believing there to be either a good selection, or some suppliers in Wales. Our consultations highlighted that there are several consultants in Wales with a capability in Environmental Impact Assessment. However, there is sometimes a tendency for developers to appoint larger firms with a strong track record due to the increased likelihood of facing a public enquiry in Wales, compared to England and Scotland. The concern was raised that there may not be enough firms of suitable size and experience to obtain project quotes from solely Welsh based firms (many of the larger firms used are not Welsh due to UK economies of scale). Other professional services firms (legal and financial) were generally thought to be present in Wales (two thirds thought there was at least 30
  35. 35. ● Economic Opportunities for Wales from Future Onshore Wind Development ● some presence) but only 7% thought there was a strong selection of suppliers. Eversheds, based in Cardiff, is an example of such a firm.  Three quarters thought there were some turbine towers suppliers in Wales, but none of the developers thought there was a good selection. This reflects the reality that there is currently only one supplier of towers in Wales (Mabey Bridge, located in Chepstow).3.33 For operations and maintenance: the views on the presence of environmental services firms for operations and maintenance mirror those for development and construction. There was generally not thought to be a good presence of specialist insurers in Wales. “While some turbine parts do still need to come from other parts of Europe, the skills and services needed to build, operate and maintain wind farms are not specialist. They already exist locally and within Wales – from civil engineering to plant operators, site investigation research to the production of steel and aluminium fittings and fixings.”3.34 The survey asked respondents to what extent they see potential to increase the supply of goods and services from companies in Wales. The vast majority of respondents saw at least some potential to increase their use of firms in the development and construction phase over the next three years, with a third reporting a lot of potential. A smaller proportion – but nonetheless, a significant majority - believed there to be scope to increase the use of firms in operations and maintenance (80%). Almost half saw a lot of potential. Figure 3-7: Scope for the supply of goods and services sourced from companies based in Wales to increase over the next three years 70% 60% A lot 60% A little 50% % of Developers 47% 40% 30% 33% 33% 20% 10% 0% Firms Used in Development & Firms Used in Operation & Construction Maintenance Source: Survey of Developers and Operators (September-November 2012) n = 15 To what extent is there scope for the supply of goods and services sourced from companies based in Wales to increase over the next three years? 31

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