Dr Alun Roberts, Associate Director, BVG Associates
Steve Westbrook, Director of the Economic Intelligence Unit, University of the Highlands and Islands
From a white paper of January 2017
BVG Associates has developed a local-content methodology for UK offshore wind, working closely with industry and government. Together with the University of the Highlands and Islands, it has extended it to create a new tool for modelling the full range of economic impacts. The tool can be adapted for use in other industries and geographies.
Why demonstrate economic impacts? There are many justifications for offshore wind projects, including:
- The moral (to meet climate objectives)
- The practical (to increase security of supply)
- The financial (to reduce the cost of renewable energy), and
- The economic (to stimulate job creation). In the political context, however, job creation can be the most visible effect.
Many industrial sectors publish employment impact figures. Often these are unrealistically high and lead to cynicism. If the offshore wind sector is to cultivate political support and play a responsible role in the wider energy debate, it needs to have a transparent and straightforward methodology that produces credible figures.
BVG Associates and the Economic Intelligence Unit at the University of the Highlands and Islands (UHI) have worked together to develop a method of modelling economic impacts for offshore wind that is more robust and more transparent to the industry lay-reader than existing economic analyses. “Many industrial sectors publish employment impact figures. Often these are unrealistically high, and the offshore wind sector needs to have a transparent methodology if it is to avoid cynicism.”
A new model based on detailed industry knowledge Conventional modelling of economic impacts for most industrial sectors relies on Government statistics. In the UK, for example, the Office of National Statistics categories certain industries using standard industry classification (SIC) codes to produce ‘input-output’ tables and other production and employment ratios.
- The industry needs a reliable and comprehensible way to demonstrate the economic benefits of renewable energy projects locally and nationally if it is to retain local and government support.
- Many “conventional” impact methods rely on information and data that are not suitable for new industries, such as offshore wind.
- By understanding the offshore wind supply chain in detail and applying economic and business rigor to that understanding, we have developed a benchmark standard in measuring local and national value added from offshore wind developments.
- It builds on BVG Associates’ existing UK content method to derive measures for other economic indicators such as gross value added, full time equivalent jobs and earnings.
- Our method can be applied to any level of geography – global, continental, country or region. It can be used to model the impacts of a single product or service, a set of projects, or the industry as a whole over a given period. It can also be applied to different industries, provided sufficient knowledge is available.
- The method uses a transparent set of assumptions that can be easily validated, building confidence in the data.
SIC (Standard Industrial Classification) code data can be appropriate for traditional industries at a national level. The development of new SIC codes for a maturing sector, however, takes time. This means that conventional economic analyses of offshore wind need to map existing SIC data onto offshore wind activities.
Analyses using SIC codes also have to rely on generalized data. For example, generalized ‘input-output’ data tables show that the demand for steel in the UK has a substantial impact on UK economic activity in steel production. This is not the case in offshore wind, as the generalized data fails to reflect that the UK has little capacity to produce the type of steel used for offshore wind turbine towers and monopile foundations.
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Filed Under: Offshore wind