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GreenJobs:Prospectsforcreatingjobsfrom
offshorewindintheUK
byJennyBird
April2009
ippr2009
InstituteforPublicPolicyResearchChallengingideas Changingpolicy
WWW.IPPR.ORG
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Acknowledgements ............................................................................................................... 3
Abbreviations......................................................................................................................... 4
Foreword................................................................................................................................ 5
Executivesummary................................................................................................................ 7
Introduction......................................................................................................................... 11
1.Offshorewindandemployment ..................................................................................... 12
Whyoffshorewind? ........................................................................................................ 12
Theopportunity:jobcreationfromexpandingUKoffshorecapacity............................ 14
OpportunitiesforandbarrierstoUK-basedjobsinoffshorewind ................................ 16
2.Creatingjobslessonsfromtheonshorewindindustry................................................ 22
Denmark.......................................................................................................................... 22Germany.......................................................................................................................... 23
Spain .............................................................................................................................. 23
LessonsfordevelopinganoffshorewindindustryintheUK ........................................ 24
3.Securingthedomesticmarket ........................................................................................ 26
Economicsupportmechanism........................................................................................ 26
Removingbarrierstodeliveringoffshorecapacity ......................................................... 28
Maximisingmarketsize................................................................................................... 31
4.Industrialactivism............................................................................................................ 33
Whatisindustrialactivism?........................................................................................... 33
Measurestosupportoffshorewind................................................................................ 34AnoffshorewindinwardinvestmentprogrammefortheUK ........................................ 38
5.Skills................................................................................................................................. 40
Closingtheskillsgap ...................................................................................................... 41
Training .......................................................................................................................... 42
Attractingtheworkforce................................................................................................. 43
6.Conclusionsandpolicyrecommendations ...................................................................... 44
Overcominguncertaintytodeliveroffshorewindcapacity ............................................ 44
Assistingsupply-chaindevelopment .............................................................................. 45
Maximisingthepotentialforjobcreation....................................................................... 46
Summaryofrecommendations ....................................................................................... 49
References ........................................................................................................................... 51
AnnexI:Listofinterviewees ............................................................................................... 56
AnnexII:IPC,NPSandRoundThreetimetables ................................................................ 57
AnnexIII:ExistingfundingsupportintheUK .................................................................... 58
Contents
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TheInstituteforPublicPolicyResearch(ippr)istheUKsleadingprogressivethinktank,
producingcutting-edgeresearchandinnovativepolicyideasforajust,democraticand
sustainableworld.
Since1988,wehavebeenattheforefrontofprogressivedebateandpolicymakinginthe
UK.Throughourindependentresearchandanalysiswedefinenewagendasforchangeand
providepracticalsolutionstochallengesacrossthefullrangeofpublicpolicyissues.
WithofficesinbothLondonandNewcastle,weensureouroutlookisasbroad-basedas
possible,whileourinternationalandmigrationteamsandclimatechangeprogrammeextend
ourpartnershipsandinfluencebeyondtheUK,givingusatrulyworld-classreputationfor
highqualityresearch.
ippr,30-32SouthamptonStreet,LondonWC2E7RA.Tel:+44(0)2074706100E:
ThispaperwasfirstpublishedinApril2009.ippr2009
Aboutippr
Acknowledgements
TheInstituteforPublicPolicyResearch(ippr)wouldliketothanktheGreenpeace
EnvironmentTrustandtheEnvironmentAgencyforfundingthisproject,withoutwhose
support,thisprojectcouldnothavehappened.
Thefindingsofthisresearchare,however,theresponsibilityoftheauthoraloneanddonot
necessarilyrepresenttheviewsofourfundingpartnersoranyotherindividualororganisationinvolvedintheproject.
Theauthorwouldliketothankalloftheindividualswhowillinglygaveuptheirtimetotake
partininterviewsforthisproject.Shewouldalsoliketothankthefollowingpeoplefor
providingguidance,comments,adviceandsupportthroughouttheproject:DougParr,Rob
Sauven,GordonEdge,PhilipWolfe,DaveElliott,CatherineMitchell,andcolleaguesfrom
ippr:MatthewLockwood,SimonRetallack,AndrewPendleton,KayteLawton,TonyDolphin,
SarahMulleyandCareyOppenheim.ThanksalsotoGeorginaKyriacouforsteeringthereport
throughthepublicationprocess.
Anyomissionsorerrorsremaintheauthorsown.
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BERR DepartmentforBusiness,EnterpriseandRegulatoryReform
BWEA BritishWindEnergyAssociation
CO2 Carbondioxide
DECC DepartmentofEnergyandClimateChange
DIUS DepartmentforInnovation,UniversitiesandSkills
EU EuropeanUnion
EWEA EuropeanWindEnergyAssociation
GW Gigawatt
IPC InfrastructurePlanningCommission
kWh Kilowatthour
MW Megawatt
NaREC NewandRenewableEnergyCentre
NPS NationalPolicyStatement
O&M Operationandmaintenance
R&D Researchanddevelopment
RD&D Research,designanddevelopment
RDA RegionalDevelopmentAgency
RO RenewablesObligation
ROC RenewablesObligationCertificate
STEM Science,Technology,EngineeringandMathematics
UKTI UKTradeandInvestment
WTO WorldTradeOrganisation
Abbreviations
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governmentrefinancing1.Thisisthesortofprioritisationthatcangiveconfidenceto
potentialinvestorsfromtheprivatesectorthattheGovernmentmeansbusiness.
BothPrimeMinisterGordonBrownandSecretaryofStateforEnergyandClimateChange
EdMiliband,havemadeitclearthatgreenjobsarepartoftherecoveryplanfortheUK.
ButiftheUKistobenefitfromthejobsthat30GWofoffshorewindwouldgeneratethenweneedurgentactionnow.LookingtowhatGermanyhasachievedoffersgreat
encouragementtherearealready250,000jobsinitsrenewableenergysectorandthe
Germangovernmentexpectsthatnumbertotripleby2020andhit900,000by2030 2.
Weneedrenewableenergytoplayapivotalroleincreatingasustainableeconomyfor
theUK.Wehaveambitioustargetsbut,asthisreportoutlines,therearesignificant
policyandpracticalissuestobedealtwithbeforedeliverycanbeassured.Theeffortsto
startarecoveryfromthecurrenteconomicdownturnprovideanopportunityfortheUK
togetitsshareofthebenefitsofthisrenewablerevolution,butandthisisespecially
keyforoffshorewindsuccessdemandsthatfinancialsupportandanewpolicy
frameworkmustbefocusedonmakingsurewedeliveronourrenewabletargets.
JohnSauven,ExecutiveDirector,Greenpeace
1.NewEnergyFinancenewsletter,24February2009
2.GermanySaysGreenJobsWillShortenRecession,Reuters,25February2009
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AsunemploymentintheUKcontinuestoincreasewiththeglobalrecession,itisonlynatural
tolookforopportunitiestocreatenewjobs.Atthesametime,theimperativetotackle
climatechangeanddrasticallyreduceemissionsofgreenhousegasesmeansthatweneedtohavearadicalrethinkofhowtheUKeconomywillbestructuredinthefuture.
ThisreportcompilesevidencefromindustryplayersabroadandintheUKofthekindof
interventionsneededtodeliverasuccessfuloffshorewindindustryinBritain.
TheimportanceofoffshorewindtotheUK
Offshorewindisastrategicallyimportantsectorforfourreasons:
Itislikelytoprovidealargeportionoftherenewableenergyneededtomeetour2020renewableenergytargetsandcarbonbudgets
Itprovideslong-termjobopportunities
ItisasectorinwhichthereisscopefortheUKtodevelopastrategicadvantagewiththepotentialforexportopportunities
Ithasthepotentialtoprovidegoodqualityjobsintherightgeographicallocations.
Withoutarapidexpansioninoffshorewindcapacity,theUKwillstruggletomeetitstarget
toachieve15percentofenergyfromrenewablesourcesby2020andtomeetthecarbon
budgetssetoutbytheCommitteeonClimateChange.Thescaleoftheexpansionisstill
uncertainwithestimatesoflikelycapacityin2020varyingquitesignificantly.The
GovernmenthasstatedveryambitiouslythatRoundThreeoftheoffshorewindprogramme
coulddeliver33gigawatts(GW)ofcapacityby2020,buttheforecastsintheRenewable
EnergyStrategypresentamuchmoreconservativeestimateof14GW.Estimatesofthenumbersofjobsthatcouldbecreatedbyincreasingoffshorewindcapacity
rangewidely,from23,000to70,000.Thesefiguresdependinpartonthesizeofoffshore
windcapacitythattheUKisabletosecure,butalsoontheextenttheGovernmentis
preparedtofollowanactiveindustrialstrategyinthisarea.Further,thereisnoguarantee
thatallofthejobswouldbelocatedintheUK.Forexample,theoffshorewindturbines
currentlyoperatinginUKwatersaremanufacturedoverseas.
TherearesomeareaswheretheUKismorelikelytobenefitfromincreasedjobcapacity.
Theseincludetechnicalconsultancy(forthedevelopmentofnewwindfarms),installationof
turbines,operationandmaintenanceofthewindfarmsandassociatedlegalandfinancial
services.Intermsofgainingnewmanufacturingjobs,thereappearstobegreatestopportunityinmanufacturingsomespecificcomponentsthatdrawontheUKsexistingskills
andknowledgebaseintheoffshoreoilandgassectorforexample,manufacturing
foundationsandtowers.
Learningfromsuccessfulwindindustriesoverseas
Denmark,GermanyandSpainhaveallbeensuccessfulindevelopingalocalonshorewind
industry.Allthreecountriesrecognisedthepotentialforeconomicandemployment
advantagesinadditiontotheenvironmentalbenefitsandusedeffectivestrategiesto
developonshorewind.
TheUKcanbenefitfromthreekeylessonsthatemergefromtheapproachestakenbythese
countries:
Astableandsizeabledomesticmarket wasneededandwasachievedthroughacombinationofstrongpoliticalcommitmentandtheuseoffeed-intariffsasaneconomicsupportmechanism.
Executivesummary
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Industrialactivism wasimportant,intheformoftaxincentives,favourablecustomsduties,qualitycertification,R&DsupportandinthecaseofSpainlocalcontentrequirements.
Anavailableskillsbase wascrucial:turbinemanufacturerswereabletodrawonanexistingmanufacturingskillsbaseineachcountryandinmanyinstances,existinglocalcompaniesdiversifiedintothewindsupplychain.
Securingthedomesticmarket
InvestorsneedtohaveconfidencethattheambitionssetoutfordevelopingtheUKs
offshorewindcapacitywillbedelivered.Thetargetssetfor2020havehelpedtobuild
confidencethattheGovernmentisseriousaboutdevelopingrenewableenergybutthereare
stillanumberoffactorsthatarecreatinguncertaintythatwillneedtobeovercomeifthe
sectoristodevelopasplanned.
ThefirstoftheseistheeconomicsupportmechanismtheRenewablesObligation(RO).
TheROhascomeunderalotofcriticismbecauseithasnotbeenabletodeliverthedeploymentofrenewablestotheextentthattheuseoffeed-intariffshasinothercountries.
TheGovernmenthasrespondedbymakingsomechangestotheROandbyintroducinga
feed-intariffforsmall-scaleinstallations.Thekeyquestioniswhetherthesechangeswhich
willresultinincreasedsupportforemergingtechnologieslikeoffshorewindgofarenough
tomaketheindustryeconomicallyviable.Governmentshouldbepreparedtoreadjustthe
supportmechanismifitisfoundnottobeworking.
Thesecondfactorisremovingbarrierstodelivery.Thebarriercausingmostconcernisthe
gridinfrastructure:majorupgradestocapacityandnewoffshoreconnectionswillbeneeded
inordertoaccommodatesuchalargeamountofnewoffshorewind.Therearecurrently
severalprocessesunderwaytoaddressthisproblembutthecreditcrunchmayaddanother
dimension.Governmentshouldconsiderunderwritinginvestmentinthegridifalackof
availablefinancethreatenstopreventthenecessarygridupgradesfromoccurring.
Theplanningsystemandsupplychainalsoposethreatstothedeliveryofoffshorewind.An
InfrastructurePlanningCommission(IPC)iscurrentlybeingestablishedanditishopedthat
thiswillhelptospeeduptheconsentprocess.Thismustbemonitoredasanyslippagein
timetablecouldjeopardisedeliveryofnewcapacityby2020.
Governmentshouldalsoconsidertargetingsupportmeasuresatcompaniesthatcouldhelp
overcomebottlenecksinthesupplychain.Thisincludesmanufacturersoffoundations,
offshoresubstations,cables,installationvesselsandturbines.
Industrialactivism
Improvingtheeconomicsupportmechanismandremovingbarrierstodeliverywillhelpto
buildconfidenceintheUKmarket.However,theUKmarketisnotlikelytobebigenoughto
guaranteethatnewjobswillbecreateddomestically.TheextenttowhichtheUKeconomy
andworkforcewillbeabletobenefitfromnewopportunitiesinoffshorewindwilldependon
howwillingtheGovernmentistoemployindustrialactivismandbestrategicinthechoices
itmakes.
SomeotherEuropeancountriesalreadyhaveastrongonshorewindindustriessotheUK
Governmentwillneedtotakeadvantageofthegame-changingnatureoftheoffshorewind
marketcomparedtocurrentonshorearrangementinordertoreapsignificantUK
employmentrewards.WithoutaproactivestrategythereisasignificantchancethattheUKoffshorewindmarketwillcontinuetorelyonimportsfromcontinentalEurope.Fromthe
pointofviewoftheclimatethismattersonlyalittle.Fromthepointofviewofenhancing
UKmanufacturingindustryitwouldclearlybeamissedopportunity.
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Combiningtheevidencefrominterviewsconductedbyipprwithindustryplayerswithother
evidencesuggeststhattheGovernmentshoulddevelopanoffshorewindinvestment
programmefortheUKthatwouldberunbytheDepartmentofEnergyandClimateChange
(DECC)andadministeredthroughRegionalDevelopmentAgencies(RDAs)andUKTradeand
Investment(UKTI).Theprogrammewouldconsistofthefollowingelements:Financialandtaxincentives. CurrentGovernmentgrantprogrammesandsupportfor
R&Darespreadtoothinly.Theymustbedrawntogetherintoamuchmoreclearlydefinedandfocusedpackagethatwillbeeasiertomarkettopotentialinvestors.
Facilitiesandinfrastructuredevelopment.ThiswillhelpmaketheUKamoreattractiveplacetoinvest.Itshouldincludeidentifyingasiteforanearshoretestfacilityanduseofpublicandprivateinvestmenttoupgradeportfacilities.Thesemeasuresshouldbetargetedataspecificgeographicalareainordertopromoteagrowthcluster.
Short-termguarantees.Therecessioncouldmakeraisingfinancedifficultintheshort
termsoGovernmentshouldoffertounderwriteborrowingforthissectorand/orencouragebankstolendtothissector.
Considerrequirementsforusinglocallyproducedcontent (componentsandsoon).ThisapproachhasbeeneffectiveinothercountriesbutmayrunintodifficultieswithWorldTradeOrganisationandEuropeanUniontraderules.GovernmentshouldconsiderwhetheritmightbepossibletoimplementsuchanapproachindeterminingsuccessfulbiddersinRoundThreeoftheoffshorewindprogramme.
Skills
Aswellasmaximisingthenumberofjobsavailable,governmentalsoneedstothinkmore
strategicallyaboutensuringthattheworkforcehastherightskillstotakeadvantageofthese
jobopportunities.ThereisashortageofengineeringandmanufacturingskillsintheUKandthiscouldposeproblemsforthedeliveryofoffshorewindcapacity,andmakestheUKless
attractivetoinvestors.
Ananalysisofthelikelysizeoftheskillsgapisneeded,followedbyastrategicplanforhow
thegapwillbeclosed,toinclude:
Training.Asafirststep,amoreeffectiveapproachtoencouragingyoungpeopletostudyScience,Technology,EngineeringandMathematics(STEM)subjectsneedstobefound.
Attractingtheworkforce. Acomprehensivestrategyforattractingmorepeopleintothesectorwillrequireinputfromindustryrepresentatives,universitiesandsectorskills
councils(amongothers).Itcouldinclude:engagingwithcareersadviceservicestoensuretheyhavethemostup-to-dateinformationonopportunities,highlightingeffortstoforgelinksbetweenuniversitiesandindustry,andprovidingincentivesforpeopletotakeuplow-carbon-sectorjobs.
Conclusions
TheUKcurrentlyhastheworldslargestinstalledoffshorewindcapacityaswellasambitious
plansforexpansionanditsgrowthoffersarealopportunityforjobcreationandtoremove
bottlenecksinthewindsupplychain.However,asinternationalexperienceshows,withouta
moreinterventionistapproachfromgovernment,theUKwillstruggletocaptureasignificant
shareofthesejobsgiventhatnearbycountriesalreadyhavingthrivingindustriesonwhichto
developthenewcapacitiesrequiredforoffshorewind.
Byremovingthebarrierstoinvestment,providingadditionalfocusedsupporttotheindustry
andbycreatingastrategytobuildupthenecessaryskillsbase,theUKwillbewellplacedto
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reaptheemploymentbenefitsoftheshifttoalow-carbonenergysystem.Conversely,failure
toacttogainjobsinthissectorwillbeasignificantmissedopportunityastheUKmoves
towardsalow-carboneconomy.
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TheUKisfacingtoughtargetstoreduceitsemissionsofgreenhousegasesandtoincrease
itsuseofrenewableenergyby2020.Atthesametime,astheglobaleconomicslowdown
hitstheUKandunemploymentfiguresbegintorise,manyhavelookedtotheenvironmentalsectorasapotentialnewgrowthareathatcouldhelptocreatenewjobsandboostthe
economy.Theideathattacklingourenvironmentalproblemscouldsimultaneouslyprovide
goodqualityemploymentopportunitieshasledtonumerouscallsforaGreenNewDeal,
fromorganisationsrangingfromtheUnitedNations,totheEnvironmentAgencytotheNew
EconomicFoundationsGreennewdealgroup(UNEP2008,nef2008,EnvironmentAgency
2008).
TheoffshorewindsectorhaspotentialtobepartofaGreenNewDeal.Thereareambitious
planstoscaleuptheUKsoffshorewindcapacityoverthenextdecadeunderRoundThree
oftheCrownEstatessiteallocationprocessandachievingthisgoalwillrequirealarge
workforcetoplan,manufacture,installandrunthewindfarms.YetmanyconsiderablebarriersremaintodeployingoffshorewindpowerintheUKand,evenifRoundThree
ambitionswererealised,thereisnoguaranteethatthejobscreatedwouldgototheUK.
ThispaperinvestigatesthebarrierstodeployingmoreoffshorewindturbinesintheUK,the
potentialforcreatingUK-basedjobsinthissector,andwhethertherearelessonsthatcanbe
learntfromtheexperienceofothercountriesindevelopingindigenousonshorewind
industries.
Thereportisbasedonaliteraturereviewandinterviewswithkeystakeholdersinthewind
industryacrossEurope,includingindustryassociations,developers,turbineandcomponent
manufacturersandprovidersofkeyservices(afulllistofintervieweesisincludedinAnnex
1).TheinterviewswereconductedinJanuaryandFebruary2009.
Section1examinestheopportunitiesforjobcreationinoffshorewindintheUKaswellasthekeybarrierstodeliveringthesejobs.
Section2goesontolookatthesuccessesofbuildingonshorewindindustriesinDenmark,GermanyandSpainandidentifieskeylessonsfromtheseexperiences.
ThefollowingthreesectionsthenapplytheselessonstotheUKcontext,focusingonoffshorewind.Thefirstlessonregardswhatneedstobedonetoprovideastableandpredictabledomesticmarket;thesecond,whatformsofindustrialactivismarenecessary;andthethird,whatkindsofskillsactivismwillbeneeded.
Thefinalsectionprovidesaconclusionandsummaryofkeypolicyrecommendations.
Introduction
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Asthefall-outfromthecreditcrunchcontinuestospreadacrosstheUKeconomy,the
prospectofcreatinggreen-collarjobsasarouteoutofrecessionhasgainedmoreandmore
currency.AtthelaunchoftheLowCarbonIndustrialStrategy,thePrimeMinistersaid:
Iwanttoconstructaglobalgreennewdealthatwillpavetheway
foralowcarbonrecoveryandhelpusbuildtomorrowsgreeneconomy
today.(Number10,2009)
JimMurphy,MinisterforEurope,hasalsohighlightedGovernmentsupportfordeveloping
green-collarjobs:
Countriesthattakeearlyactionindevelopinggreentechnologywill
haveacompetitiveadvantageasthisboomindustrygrowsinthefuture.
TheGovernmentiscommittedtomakingsuretheUKisaheadofthe
packinthefuturewewantaneconomyofferingamixofgoodbluecollarjobs,goodwhitecollarjobsandgoodgreencollarjobs.Outaimis
tohaveoveramillionUKworkersinenvironmentalindustrieswithinthe
nexttwodecades.(ForeignandCommonwealthOffice2008)
Whilethetermgreen-collarjobsappliestomanydifferentindustries(includingrenewable
energygeneration,installationofenergyefficiencymeasures,providinglow-carbontransport
andmore)thefocusofthisreportisonjobcreationintheoffshorewindsupplychain.
Thissectionbeginsbydescribingwhyoffshorewindcouldbeagoodsourceofgreen-collar
jobsandwhytheGovernmentshouldpayparticularattentiontothissectorwhendeveloping
strategiestotackletherecessionandstimulateemployment.Wethengoontoconsiderhowmanyjobscouldbecreatedinoffshorewind,beforelookingateachstepofthesupplychain
inmoredetailtoidentifysomeofthebarriersandopportunitiesforjobcreation.
Whyoffshorewind?
Theglobaleconomicslowdownhasunderstandablyfocusedmindsonwherenewjobsmight
becreatedtobuildapathoutofrecession.Atthesametime,theimperativeoftackling
climatechangeisforcingGovernmentandbusinessesaliketoradicallyrethinkthefutureof
theUKeconomyinalow-carbonworld.
TheGovernmentiscommittedtodevelopingaLowCarbonIndustrialStrategy(HM
Government2009)thatseekstoensurethattheUKisbestplacedtobenefitfromthe
opportunitiespresentedbymovingtoalow-carboneconomy.Thisincludesinstallingthe
newlow-carboninfrastructurethatwillbenecessarytoachieveouremissionsreduction
targets,developingandproducingnewlow-carbonvehicles,helpingbusinessestoimprove
theirenergyefficiencyandmakingtheUKanattractivelocationforlow-carbonindustries
(ibid).
TheSecretaryofStateforBusiness,LordMandelson,hassuggestedthatanapproachof
industrialactivismthatwouldwidenanddiversifythespecialistbasesoftheUKeconomy
andfocusonhowwefurthercommercialiseandinternationalisethesebases(Mandelson
2008)wouldleavetheUKbetterplacedtodealwiththeconsequencesoftheslowdownand
tobuildanewlow-carboneconomy.TheGovernmentalsohasa158millionfundto
supportandprovidetrainingopportunitiesfortheunemployed(DepartmentforWorkandPensions2009).Thequestion,ofcourse,iswhereshouldthisattentionbefocused?
1.Offshorewindandemployment
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Werecognisethattherearemanydifferentsectorsthathavethepotentialtodrivethenew
low-carboneconomy.WhiletheLowCarbonIndustrialStrategymustencompassallofthese
sectors,suchabroadanalysiswasbeyondthescopeofthisresearch.Althoughthefocusfor
thisreportisoffshorewind,thisdoesnotmeanthatwebelieveoffshorewindshouldreceive
attentionattheexpenseofotherrenewableenergytechnologies.Ratherweseektoprovideanexampleofthekindsofmeasuresthatarelikelytobeneededtobringforwardjobsand
economicbenefitsfromnewgreenindustries.
Wehavechosentofocusonoffshorewindforfourmainreasons:
1.OffshorewindisasectorwithgrowingimportancefortheUK
TheUKcurrentlyhasthelargestinstalledoffshorewindcapacityintheworldandhas
ambitiousplanstopromotearapidandlarge-scalegrowthinoffshorewindfarms.Offshore
windisexpectedtomakealargecontributiontomeetingrenewableenergytargetsand
carbonreductionbudgetsfor2020,unlikemanyotherrenewableandlow-carbonenergy
technologies,whichwillnotbeabletobedeployedonsuchashorttimescale(thisis
exploredinmoredetailbelow).ItisclearthatiftheUKexpandsitsoffshorewindcapacityas
planned,thenalargeworkforcewillbeneededtoplan,manufacture,installandoperatethe
newwindfarms.
2.Offshorewindprovidesgoodlong-termprospects
Whileitisunderstandabletowanttofocusonshort-termjobcreationopportunitiesthatwill
helptacklethecurrentrecession,itisimportanttoconsiderthelong-termprospectsfor
thesejobswilltheystillexistindecadestocome?
Offshorewindmaynotprovideinstantnewjobs,butitdoesoffergoodmedium-term
prospects.Inaddition,jobsinoffshorewindarelikelytobesustainableoverthelongerterm
becauseunlikejobsincarbon-intensiveindustriesoffshorewindislikelytobeaprominentfeatureofthenewlow-carboneconomythatisnecessarytomeetourclimate
changeobligations.
3.Offshorewindhaspotentialforcompetitiveadvantageandexportopportunities
ThisisclearlyasectorwheretheUKhasthepotentialtodevelopacompetitiveadvantage.
Germanyisalsodevelopingitsoffshorewindmarketanditispossiblethatothercountries,
includingtheUSA(theCapeWindProjectAmericasfirstoffshorewindfarmiscurrently
goingthroughthepermittingsystem[CapeWind2009]),ChinaandotherEuropean
countrieswillfollowsuit.Developinganexperiencedoffshorewindworkforcecouldtherefore
provideopportunitiesinthefuturetoexporttheseskillsasothermarketsmature.Similarly,if
weareabletoattractmanufacturingfacilitiestoopenintheUK,thereisscopeforfutureexportofcomponentsandturbines.Thereisalsothepotentialthatoncecompaniesare
established,theymayinnovateandcreatenewmarketsanopportunitythatwouldbe
missedifcompanieslocateoverseas.
4.Offshorewindhasthepotentialtoprovidegoodqualityjobsintherightplaces
Itisimportanttogiveconsiderationtothequalityofthejobsthatwillbecreatedthrougha
LowCarbonIndustrialStrategywilltheyprovidegoodcareerdevelopmentopportunities?
Willmoreeconomicallydeprivedareasofthecountrybeabletobenefitfromthenewjobs?
Andwillpeoplewhoarecurrentlyunemployedorworkinginindustriesthatarelikelyto
declineinthefuturebeabletobenefitfromthenewjobopportunities?
Althoughtherehavenotbeenmanystudiesinthisarea,thereissomeevidencetosuggestthatoffshorewinddoeshavethepotentialtooffergoodquality,career-trackjobs.For
example,studiesoftheSpanishandGermanrenewablesindustrieshaveshownthatthey
offergoodjobprospects,careerpathsandjobsecurity(UN2008).
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ItisalsolikelythataUKoffshorewindindustryislikelytobelocatedinsomeofthemore
economicallydeprivedregionsoftheUK.Offshorewindcouldofferanalternativecareer
optionforthosecurrentlyemployedintheoffshoreoilandgasindustry,whichislikelyto
declineoverthenextdecadeasreservesintheNorthSeadeplete.Manyoftheskillsfrom
thissectorcanbetransferredtooffshorewindandthejobsarelikelytobelocatedinroughlythesamegeographicalareas.Therearealsoopportunitiesforpeopleworkinginthe
automotiveandaerospaceindustriestomoveintooffshorewind.
Takentogether,thesefourreasonssuggestthatoffshorewindisanareaofstrategic
importancefortheUKandassuchwouldbeagoodsubjectforindustrialactivism.
Theopportunity:jobcreationfromexpandingUKoffshorecapacity
Thecaseforpursuingastrategytosupportthecreationofjobsinoffshorewindhasbeen
made.Wenowturntothequestionofhowmanyjobsarelikelytobecreatedinthissector.
However,beforewecanlookatnumbersofjobs,itisfirstnecessarytounderstandthelevel
ofambitionforincreasingoffshorewindintheUK.
Targetsandforecasts
TheUKhastwoimportanttargetsfor2020towhichoffshorewindisexpectedtomakea
significantcontribution:
ThefirstisaEuropeantarget,toachieve15percentofenergyfromrenewables,setoutinthenewEuropeanDirectiveonRenewableEnergies,whichwasadoptedinDecember2008(EurActiv2009).
Thesecondisadomestictarget,setoutintheClimateChangeAct,toreduceemissionsofgreenhousegasesbyatleast26percentfrom1990levels.However,theCommitteeonClimateChangehasrecommendedbudgetsthatimplyareductionof29
percentuntilaglobalagreementisreachedand40percentonceanagreementisreached(CommitteeonClimateChange2008).
TheGovernmentsRenewableEnergyStrategyconsultationdocumentsuggeststhatinorder
tomeettherenewablestarget,aroundathirdormoreofourelectricitywillneedtocome
fromrenewablesourcesandoffshoreandonshorewindareexpectedtoprovidealarge
proportionofthis(theGovernmentsillustrativescenarioshowsoffshorewindcontributing
40percentofrenewableelectricityneedsandonshore28percentby2020)(HM
Government2008a).Othertechnologies,suchasmarinepower,areunlikelytobe
sufficientlydevelopedtomakemuchofacontributiontothe2020target,butmaybecome
moresignificantinlateryears.
The2020targetsareambitious.Lessthan5percentoftheUKselectricitycomesformrenewablesourcestoday(HMGovernment2008a),soalargeexpansioninrenewable
generatingcapacitywillbeneededtomeetbothtargets.Offshorewindisexpectedto
providethelionsshareofrenewableelectricityby2020yetthereisstillagreatdealof
uncertaintyaboutwhethertherewillbeenoughwindfarmsupandrunningtomeetthis
requirement.
Anumberofstudieshavemadeestimatesofthecapacitylikelytobeavailablein2020(see
Table1.1below).Foroffshorewind,estimatesrangefrom10.7GW(DouglasWestwood
2008)to18GW(RenewablesAdvisoryBoard2008).However,theCarbonTrustcalculates
that29GWwillbenecessarytomeetthe2020renewablestarget(CarbonTrust2008)and
thetimetableforRoundThreeoftheoffshoresiteallocationprocesscontainsatargetforanadditional25GWtobebuiltby2020(whichwouldgiveatotaloffshorewindcapacityof
33GWwhencombinedwiththeexisting8GWinoperation,constructionorplanning)(The
CrownEstate2008).TheGovernmentiscurrentlyconsultingonitsStrategicEnvironmental
Assessmentoftheseplans(DECC2009).
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Jobforecasts
TheUKwindindustry(onshoreandoffshorecombined)currentlyemploysaround4,000to
5,000people(EWEA2009,Boettcheretal2008)andthisfigurewillincreasesignificantlyif
therapidexpansionofoffshorewindcapacitygoesaheadasplanned.Forecastsofjob
numbersin2020varyquiteconsiderablyfromjust23,000jobsinthewindsectorto133,000
jobsincentralisedrenewableenergy(Table1.2).
Table1.1.Estimatesofoffshoreandonshorewindcapacityin2020
Study Onshoreandoffshorewindcapacityin2020
GovernmentsRenewableEnergyStrategy Upto33GWofoffshorewindmaybepossibleby2020,butmodelling
(HMGovernment2008a) showsthatdeploymentmaybecloserto14GW
14GWonshorewind
DouglasWestwoodsupplychainstudyfor 10.7GWoffshorewind
BERR(DouglasWestwood2008) 14GWonshorewind
Bain&CompanystudyforBWEA Containsthreescenarios:
(Boettcheretal2008) Staticscenario:22GWonshore+offshorewind
Solidprogress:27GWonshore+offshorewind
Dynamicscenario:34GWonshore+offshorewind
RenewablesAdvisoryBoard(RAB2008) 18GWoffshorewind
13GWonshorewind
CarbonTrust(2008) 29GWofoffshorewindwillbenecessarytomeet2020renewablestarget
Table1.2.Forecastsofjobscreatedrenewableenergy,windandoffshorewindin2020
Source Jobforecast(2020) Sector Assumptions
GovernmentsRenewableEnergy 133,000 Centralisedrenewable Thesejobsmaynotnecessarily
Strategy(HMGovernment energygeneration allaccruetotheUK
2008a) 14GWoffshorewind
14GWonshorewind
CarbonTrust(2008)Offshore 40,00070,000 Offshorewind Basedon29GWcapacity
windpower:bigchallenge, installedby2020
bigopportunity
Boettcheretal (forBWEA) Dependingonscenario: Onshore+offshore Scenarios:(totalwindcapacity
(2008)Acloserlookatthe 23,000 wind in2020)
developmentofwind,wave 36,000 22GW
andtidalenergyintheUK 57,000 27GW
34GW
DouglasWestwood(2008) Dependingonscenario: Windpower Scenarios(basedonnumberof
Supply-chainconstraintson 5,000 turbinemanufacturerslocatinginUK):
thedeploymentofrenewable 14,000 locatinginUK):
electricitytechnologies 34,000 Low(onemanufacturer)
Mid(twomanufacturers)
High(threemanufacturers)
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Table1.3givesamoredetailedbreakdownofjobcreationacrosstheoffshorewindsupply
chain.
Thereisclearlyhugepotentialforjobcreationasaresultofexpandingoffshorewind
capacity,butwhatislessclearishowmanyofthesejobswilloccurintheUKandto
whatextentlocalpeoplewillbenefit.(Ontheotherhand,theseestimatesdonotinclude
opportunitiesforjobcreationintheUKasaresultofothercountriesdevelopingoffshore
windcapacity).Wenowconsiderwherethesedifferentjobsarelikelytobelocated.
OpportunitiesforandbarrierstoUK-basedjobsinoffshorewind
Sincecreatingnewjobsisimportantfortacklingtherecession,Governmentwillwantto
ensurethatasmanyofthejobscreatedbyoffshorewindarelocatedintheUKas
possible.SomejobsinoffshorewindaremorelikelytoaccruetotheUKthanothersfor
example,jobsinoperationandmaintenance,whichrequireregularvisitstothewind
farmsinquestion,aremuchmorelikelytoberecruitedlocally(UN2008).However,other
jobs,suchasthoseininstallationandmanufacturing,willnotnecessarilybeasclosely
tiedtotheUK.
Forexample,companiesinvolvedwithUKoffshorewindprojectscurrentlybringoverhigh-levelstafffromthecountriesinwhichtheyarebasedtooverseeprojectsandalso
hiremigrantlabourwherethereareskillsshortagesintheUK(forexample,in
construction).AstudyoftheScrobySandswindfarmdevelopmentinNorfolkshowed
thatUKlabouraccountedfor73percentofthetotalman-hoursindevelopment,70per
centinconstructionand82percentinoperation(DouglasWestwood2005).Thereis
clearlyariskherethatunrealisticexpectationscouldberaisedamongmembersofthe
publicabouthowmanynewjobswillbecreatedwiththeexpansionofoffshorewind,
andthiscouldposepoliticaldifficulties.However,itshouldalsoberememberedthatthe
developmentofoffshorewindinothercountriescouldresultinemploymentbenefitsfor
theUK,whicharenotgenerallyaccountedforinthejobprojections.
Inthissectionwelookatthedifferenttypesofjobacrosstheoffshorewindsupplychain
andexaminewhattheopportunitiesandbarriersaretolocatingthesejobsintheUK.
Table1.3.Breakdownofjobsacrossthesupplychainby2020,accordingtotwosources
a)SQWEnergy(2008) Max.no.jobs Min.no.jobs
Planninganddevelopment 5,965 2,060
Designandmanufacturing 14,095 4,865
Constructionandinstallation 15,720 5,420
Operationsandmaintenance 13,550 4,680
Technical,financialandlegalservices 4,880 1,685
Totaladditionaljobs 54,210 18,710
Totaljobs(windonly) 56,900 23,100
b)CarbonTrust(2008) Max.no.jobs Min.no.jobs
RD&D,engineeringanddesign 4,000 3,000Turbineandcomponentmanufacturing 15,000 7,000
Services 22,000 22,000
InstallationandOperationsandmaintenance 29,000 8,000
Total 70,000 40,000
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Technicalconsultancy
Someofthefirstjobstobecreatedintheoffshorewindsectorwillbegeneratedbythe
needtoputtogetherplanningapplicationsandcarryoutenvironmentalimpactassessments.
SuccessfulbiddersintheRoundThreeoffshoreallocationprocesswillbeawardedexclusive
rightstodevelopwindfarmsinanumberofspecificallydefinedzonesaroundthecoastofEnglandandWales.Producingplansforthesedevelopmentswillbelikelytoincrease
demandfortechnicalconsultancies.
ThisisanareainwhichtheUKalreadyhasabaseofexpertiseandmuchofthistypeof
workforRoundOneandRoundTwohasbeendonebyBritishfirms.Itistherefore
consideredtohavegoodpotentialforfuturegrowth.
Quitealotofthesupply-chainactivitytodatehasbeenfocussedon
themanufacturingofturbinesandcomponentsandnotenoughonthe
widervaluechainincludingtechnicalconsultancy,logisticsand
OperationsandMaintenancewheretheUKhassomestrong
capabilities.RegionalDevelopmentAgency,interviewwithippr
Research,designanddevelopment(RD&D),engineeringanddesign
TheCarbonTrustnotesthatalthoughmanyRD&D,engineeringanddesignjobsarelikelyto
occurinothercountries(becausemanufacturinghubsarealreadyestablishedforboth
turbinemanufacturersandcomponentsuppliersseebelow),thereisstillscopetogenerate
somejobsinthissectorwithintheUK.TheCarbonTrustestimatesthatitispossibleto
attract20to30percentofglobaloffshorewindRD&DtotheUK(CarbonTrust2008).
Turbineandcomponentmanufacture
Jobsinturbineandcomponentmanufacturearehighlysoughtaftersincetheyaccountfora
largeproportionofthejobsandvaluecreatedbyexpandingtheuseofwindpower.TheEuropeanWindEnergyAssociationestimatesthatatotalof59percentoftheworkforce
directlyemployedintheEuropeanwindsectoreitherworkforcomponentmanufacturersor
turbinemanufacturers(EWEA2009a).Establishingaturbineand/orcomponent
manufacturingbasecanhaveknock-onbenefitsasjobsarealsolikelytobecreatedamong
second-tiersupplycompanies.
Itisimportanttodistinguishbetweenthethreedifferenttypesofmanufacturingmodelthat
countriescanhave:
Full,local,turbinemanufacturing
Localmanufacturingofselectedcomponents
Assemblyofturbinesfromimportedcomponentsbylocalemployees.(LewisandWiser2005)
Belowweconsidereachofthese,whilealsoreflectingonthequestionofwhetherlocal
manufacturingcompaniescoulddiversifyintothewindsector,orwhetherexistingforeign
companiescouldbeencouragedtosetupfactoriesintheUK.
Fullturbinemanufacturing
Clearly,theidealfromaUKeconomicpointofviewwouldbetoestablishafullturbine
manufacturingbasebecausethiswouldcreatethemaximumnumberofjobs,maximisetax
revenuesandalsopotentiallyleadtoexportopportunities.Mostcommentatorsagreethattheroutetoestablishingfullturbinemanufacturingistofirst
attractaturbinemanufacturertolocateintheUK,whichwillinturndrawincomponent
manufacturerstosetupnearby(CarbonTrust2008,DouglasWestwood2008).
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Buthowlikelyisthisto
happen?Althoughthe
Governmentisworkingto
attractamajorturbine
manufacturertosetupintheUK,anddespitethesuccess
storyofClipperWind
establishingacentreto
developanewoffshore
turbineinBlyth(seeBox
1.1),manystakeholdersare
stillscepticalaboutthe
chancesofachievingfull
turbinemanufacturingin
theUK.
Therearetwoprimary
reasonsforthis.First,theUK
willhavetocompetewith
countrieslikeDenmark,
GermanyandSpain,which
alreadyhaveestablished
windindustriesandskills
bases(andpotentiallyChina
andIndiainthefutureif
productioncostsarelower
thantransportationcosts).Second,thesizeofthe
offshorewindmarketintheUKmaynotbesufficienttomakeitworthwhileinvestingin
afactory,particularlywhencomponentscanbeshippedfromnearbyEuropeancountries.
Formanufacturerswhohaveexistingcomponentorturbinefactoriesinmainland
Germany,expandingexistingcapacitytosupplytheoffshorewindmarketlooksmore
appealingthanstartinganewfactoryfromscratchintheUKbecausetheskillsand
knowledgeofproductionprocessesarealreadythere.Aslongasthefactorieshavegood
accesstothesea,itwillnotbetoodifficultforthemtosupplytheUKmarket.
TherearethemajorplayersandtheyvebeenbasedinDenmark,
Germanyandtheyrequitehappystilltobebasedtheretosupplytheirmarketsowhyshouldtheymove?Turbinemanufacturer,
interviewwithippr
Anadditionalbarriertoattractinginvestmentfromforeigncompaniesistheuncertainty
causedbytheexchangerate.Asageneralrule,manufacturersliketooperateinthesame
currencyasthemarkettheyaresellingintobecauseexchangeratefluctuationsintroduce
uncertaintyintothebusinessmodel.AtfirstglancethismayappeartoputtheUKina
strongerpositionsinceintheshorttermatleastthemarketforoffshorewindisgoingto
bemainlyintheUK.Butthisisnotnecessarilythecase,fortworeasons.First,theUK
marketmaynotbelargeenoughtowarrantdedicatedfactories,thereforetheywillbe
supplyingothermarketsaswellastheUKandhencedealinginothercurrencies.Second,sincealloftheexistingmajorturbinemanufacturersareforeigncompanies,settingup
factoriesintheUKwouldincreaseriskintermsoflabourcosts,whichwouldbepaidin
Sterling.
Box1.1:ClipperWindPowerinvestmentintheUK
AmericanwindcompanyClipperWindPowerhasrecently
establishedanoffshorewindturbinedevelopment
operationinBlyth,NorthEastEngland.Thecompanyis
workingtodevelopaprototypeoffshorewindturbine
andtheprojectwillmakeuseofthebladetestingand
manufacturingfacilitiesattheCentreofExcellencefor
NewandRenewableEnergy(NaREC),whichwas
establishedbythelocalRegionalDevelopmentAgency,
OneNorthEast(NaREC2009,UKTradeandInvestment
2009).OneNorthEastisalsoinvestinga5mpackageof
supportintotheproject.
Thedevelopmentoftheturbineisexpectedtocreate25
skilledengineeringjobsinthefirstinstance,butthereare
alsohopesthatoncethetechnologyhasbeensuccessfullydeveloped,manufacturingwillalsobecarried
outintheUK(NaREC2009).
ClipperWindhasannouncedthatitwillbuildanoffshore
windturbinefactoryinNorthernEnglandthatwillbeable
tomanufactureturbinesby2015(Nakanishi2008,One
NorthEast2008).
Theinitialinvestmentcameaboutthroughacollaborated
effortbetweenBERR,OneNorthEastandUKTradeand
Investment(DouglasWestwood2008).
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Whileitmightbedifficulttoattractmanufacturerswhoalreadyhaveestablishedbases
elsewhereinEurope,theremaybescopefordrawinginotherturbinemanufacturers,who
haveyettoestablishabaseinEurope,ornewentrantstothemarket.
Therefore,effortsaimedatattractingforeigncompaniestoinvestintheUKshouldbe
focusedonthosewhodonotalreadyhaveanestablishedEuropeanbase.
Componentmanufacturing
Manyofthestakeholdersinterviewedforthisprojectfeltthatitmightbemorefruitfulto
focuseffortsondevelopingmanufacturingcapacityonafewareasofthesupplychainin
whichtheUKcouldhaveacomparativeadvantage.TheUKcurrentlyhasonlyonefactory
manufacturingturbinecomponentsaVestasbladefactoryontheIsleofWight.Further
componentsthatwereidentifiedbyintervieweesasonesthatcouldbemanufacturedin
theUKwere:foundations,towers,cablesandelectricalcomponents.Themarketfor
manufacturingothercomponentsparticularlythenacelle(thepartoftheturbinethat
containstherotorhub,gearbox,generatoranddrivetrain)andtheinternalcomponentswasthoughttohavebeenalreadycapturedbyothercountriesinEuropewhowouldbe
reluctanttoseeothernationstakingonthiswork,giventhehighfinancialvalueofthese
components.
TheUKsgoodatcertainthingsandnotatotherthingssowedont
have,forexample,thecapacityforbigcastingsbutwedohavealot
oftheotherskillswhicharerequired:ongenerators,theassemblyof
thethings,electricalcomponentstheinverters,transformersetc.
theresnoreasonwhysomeofthesteelworkcantbedonehere
makingtowersandfoundationsandobviouslythingslike
fibreglassthatweuseinblades.Turbinemanufacturer,interviewwithippr
Towersandfoundationsinparticularstandoutaslikelycandidatesforlocal
manufacturing.Thisispartlybecause,giventheirsizeandweight,thesecomponentsare
difficulttotransport,andpartlytheUKalreadyhasaknowledgeandskillsbasein
makingthesecomponents,gainedfromtheoffshoreoilandgasindustry;theothermain
playerinoffshorewindGermanydoesnothavethesamehistoryofoffshoreindustry.
Inaddition,foundationshavebeenidentifiedasabottleneckinthesupplychainthat
couldjeopardisethe2020target,sogrowinganindigenousfoundationmanufacturing
industrywouldalsomakesenseforthisreason(CarbonTrust2008).
ThereisscopeforUKcompaniestodiversifyintocomponentmanufacturing:inparticular,theautomobileandaerospaceindustrieshavebeenidentifiedashaving
potentialtomoveintooffshorewind,aswellascompaniesproducingcablesandthose
manufacturingfoundationsandplatformsforoffshoreoilandgasandthoseoperatingat
thesecondtierofthesupplychain.However,nocomprehensiveanalysishasbeen
conductedtoidentifywhichexistingcompanieshavethepotentialtodiversify.We
recommendthatGovernmentconductamappingexercisetobetterunderstandwhich
companiescouldmoveintotheoffshorewindsupplychain.
However,thesecompaniesmayneedfinancialsupport(forexample,throughcapital
grants)inenteringthesupplychainbecausecostsarehigh.Theymayalsorequire
assistanceinmarketingthequalityandreliabilityoftheirproductsasqualitycontrolisaprimaryconcernforturbinemanufacturers(DouglasWestwood2008).Andtheywillneed
tobepersuadedthatthereisagenuineandstablemarketforoffshorewindcomponents.
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Weneedtoprequalifyanysupplierthatweprocureequipmentfrom
andthatcantaketime.Dependingonthecomponentitmaytake
monthsorayear.Wewanttoknowthatoursuppliersarefinancially
stable,theycanworkwithourprocurementprocesses,thattheyhave
thedesign,quality,andreliabilitythatwedemand.Thattheyarewillingtoworkwithinoursocial,environmentalandethical
requirementsandthattheyarewillingtoworkwithustodevelopa
stronglong-termrelationship.Manypotentialsuppliersdonotrealise
howlongitmaytakeforthemtobeapproved.Turbinemanufacturer,
interviewwithippr
TheexperiencetodateintheUK,whereamarkethasbeenpromisedforyearsbuthasnot
yetmaterialised,hasnotbuiltconfidenceintheoffshorewindmarket.Intervieweestoldof
newentrantsintheUKwhohadtriedtomoveintosupplyingtheoffshoremarketbutfailed
becausetherewasnotabigenoughmarketfortheirproducts.Inordertoattractnew
entrantsanddiversification,itwillthereforebenecessarytoincreaseconfidenceinthesizeandcertaintyofthemarket.ThereisasensethatviewstowardstheUKmarketarestarting
tochange,buttherearestillmanyuncertaintiesaboutthefutureofthemarketthatare
currentlyundermininginvestorconfidence.ThisisexplainedfurtherinSection3below.
Heretoforethemarkethasntbeenstableenoughon-oroffshoreto
getthekindofvolumeandstabilitythatsnecessary.Industry
spokesperson,interviewwithippr
SincethefirstUKoffshorewindprojectatBlythNorthumberlandthere
havebeenanumberofon/offinitiativesandthemarkethasnever
reallykickedoff.Nowthecompanystrategieshavestartedtochange
andbusinessconfidenceappearstobegrowingonthebackofastrongergovernmentdriveandmomentumthroughRound3.Although
itmighttakelongertoimplementintodayseconomicclimatethan
theyexpectedsixmonthsagoitsanopportunitythatcompaniesare
investinginnow.RegionalDevelopmentAgency,interviewwithippr
Barrierstoattractingforeign-ownedcompaniestoestablishcomponentmanufacturing
factoriesintheUKaresimilartothosementionedaboveregardingfullturbinemanufacture.
Namely,thatthemarketmaynotbelargeenoughtojustifyanewfactory,itmaybeeasier
toexpandexistingfacilitiesinEuropeandexporttotheUKmarketanduncertainty
introducedbytheexchangeratemaybeunattractive(forexample,somecurrentDanish
suppliersalwaysagreetheircontractsinEurosratherthanDanishKrone,sodealingwithUK-basedsubcontractswouldaddanadditionalrisk).
[TheGovernment]reallyshouldgoforadditionaljobsproduction
phasestheyneedtoencouragethemanufacturingindustryreallyto
createalargernumberofjobsallthesethings[turbinecomponents]
areprettyexpensivetomovearoundbutneverthelessitsmuchmore
economicaltodaytoimportthesefromEuropeintotheUK.Andthey
needtochangethepictureiftheywanttocreatejobs.Component
manufacturer,interviewwithippr
AssemblyTurbineassemblylooksaviableoptionfortheUK.Themainbarriertoachievingthisis
ensuringthattherightinfrastructureisinplace.Thiswillrequireinvestmentinportfacilities
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andotherlocalinfrastructureaswellasensuringthereissufficientspaceavailabletosetup
anassemblyplant.
Afinalimportantfactorthatappliestoallmanufacturingjobsisthequestionofwhetherthe
UKmarketwillbelargeenoughtomakeitworthwhileforcompaniestosetupnew
manufacturingfacilitiesintheUK.
Installation
InstallationofwindturbinesisanotherareawheretheUKcoulddrawonitsexistingskills
basefromtheoffshoreoilandgasindustry.Thereisalsopotentialtoexportthesejobsas
theoffshorewindmarketdevelopsglobally.
Thereismassivepotentialtoexportskills[inconstructionand
operationandmaintenance].Developer,interviewwithippr
Operationandmaintenance
Mostindustryexpertswouldagreethatoperationandmaintenance(O&M)whichincludes
monitoringoftheturbines,routineservicingandmaintenanceandrepairsistheareawhere
themajorityofthejobsarelikelytoaccruetotheUK.Thisisbecausetheworkforcewillbe
requiredtoliveneartothewindfarm.Again,thereispotentialtobuildonknowledgeand
skillsfromtheUKsexistingoffshoreoilandgasworkforce.
StakeholdersalsonotethatO&Mjobsarelikelytobegoodqualityskilledjobswithlong-
termstabilityoverthelifetimeofthewindfarm.
ThebarrierstocreatingO&Mjobsforplannedoffshorecapacityexpansionarethelackof
suitableskillsandalackofsuitableinfrastructure.TheCarbonTrustidentifiesalackofport
facilitiesinparticularasabarrier(CarbonTrust2008).
Services
Agrowingoffshorewindindustrywillalsocreateopportunitiesinthefinancialandlegal
sectors(forexampleinfinancingwindfarms).Thisisalsoconsideredtobeanareawherethe
UKhasacomparativeadvantageandexistingskillsbaseandagainthereispotentialto
exportthesejobs.TheCarbonTrustestimatesthattheUKcouldprovidethesekindsof
supportservicesforover50percentoftheglobaloffshorewindindustryby2020,creating
22,000jobsintheprocess(CarbonTrust2008).
Ingeneral,intervieweestendedtoagreethattechnicalconsultancy,operationand
maintenanceandservicejobsweremorelikelytoaccruetotheUK,whilemanufacturingjobs
weremorelikelytobebasedoverseas.
Alotofjobswillbecreatedobviouslythroughtheoperationsand
maintenanceandvirtuallyallourworkwedoonenvironmentalsurveys
andconsultanciesgoestoBritsalotoftheengineeringforour
projectsisdonebyBritishconsultanciessotheworkloadandthe
opportunitiesareboominganditsintheknowledgesectorsitsquite
aboomtimeforthosesectorsbutwhenyoucomedownto
manufacturingplantstherewillbeImsuremoreBritishinputbutI
cantseeaneasywayofusmakingsubstantialinroads.Developer,
interviewwithippr
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Thereisclearlymuchpotentialforjobcreationintheoffshorewindindustrybut,aswe
haveseen,agreatdealofuncertaintyremainsaboutthenumberofjobsthatmightbe
createdandwheretheyarelikelytobelocated.Thisuncertaintystemsfrommanyfactors,includingtheeffectivenessofgovernmentpolicy,economicconditionsand
publicacceptability.
ThissectionlooksattheexamplesofDenmark,GermanyandSpainallofwhichhave
beenverysuccessfulindevelopinglocalonshore windindustriestoidentifywhich
factorswereimportantintheirsuccess.WeaskwhethertherearelessonsfortheUKin
buildingupanoffshorewindindustryandinmaximisingthejobcreationopportunities.
Denmark
Denmarkcapitalisedonitsfirstmoveradvantagetobuildupasignificantwindenergy
industry(CentreforSustainableEnergy2005,EWEA2009a).Approximately23,500
peoplearedirectlyemployedtodaybywindenergycompaniesandmanysignificant
globalturbineandcomponentmanufacturers,aswellasserviceproviders,areDanish
companies.ThisincludesVestas,theworldsleadingturbinesupplier,andanotherofthe
worldstop10manufacturers,Siemens(whosewindpoweroperationsarebasedin
DenmarkafterSiemensacquiredBonusEnergy,aDanishwindturbinemanufacturerin
2004)(BTMConsultApS2008,EWEA2009a).Denmarkalsoexportsasignificant
numberofwindturbinesandcomponentsaround40percentofcurrentglobal
capacityisproducedinDenmark(EWEA2009a).
OneofthemainfactorsbehindDenmarkssuccesshasbeenthewayinwhichthe
marketforwindwasdeveloped.InstalledcapacityinDenmarkrosesteadilyfromless
than1GWin1996tojustover3GWin2003(DanishWindIndustryAssociation2009).
Thisstableannualgrowthwasfacilitatedbyastrongpoliticalcommitmenttothe
developmentofwindandtheuseofafeed-intariffsupportmechanismwhichprovided
aconsistentfinancialsupportmechanism(LewisandWiser2005,CentreforSustainable
Energy2005,Tokeetal 2008).Thecertaintyofthismarketwasimportantingiving
companiestheconfidencetoinvestinR&DandmanufacturingfacilitiesinDenmark.
TheDanishgovernmentalsoprovidedsomedirectsupportmechanismstoaidthe
developmentofthewindindustry.Theseincluded:
GuaranteedloansforlargeprojectsusingDanish-madeturbines(theWindTurbineGuarantee)
Usingcustomsdutiestofavourtheimportofcomponentsratherthanassembledturbines
Providingtied-aidwherebygrantstodevelopingcountriesweremadeonconditionthatDanishwindturbineswouldbeimported
ProvidingawelltargetedR&Dbudget
UsingqualitycertificationtoeffectivelydemandtheuseofDanish-madewindturbinesforprojectsinDenmark(sincemanufacturersfromothercountriescouldnotmeetthesestandards).(LewisandWiser2005)
2.Creatingjobslessonsfromtheonshorewindindustry
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Germany
GermanyhasEuropeslargestwindworkforcewith38,000peopledirectlyemployedtoday
(EWEA2009a).Itisalsohometotwooftheworldstoptenturbinemanufacturers
EnerconandNordexandhasa28percentshareoftheworldmarket(BTMConsultApS
2008,GermanWindEnergyAssociation2008).
LikeinDenmark,thegrowthofGermanyswindmanufacturingindustrywasmadepossible
byastrongpoliticalcommitmenttowindandastablefinancialsupportmechanismthe
feed-intariff.Theintroductionofthefeed-intariffwassupportedbyallmajorparties(with
onlyoneexception)anddespiterevisionsovertime,hasmaintaineditsessentialfeaturesof
guaranteedreturnstoinvestors,lowlevelsofriskandlong-termstability(Szarkaand
Blhdorn2006:6).Thisinturnhascreatedanattractiveclimateforinvestmentinwind
energyandGermanyscapacitygrewfromaround2GWin1997toover18GWin2005,with
aninstallationrateof1,500MWperyearbetween1999and2004(GermanWindEnergy
Associationn.d.,LewisandWiser2005).
Thedevelopmentofthewindmarketstimulatedgrowthinmanufacturingandjobsand,of
course,Germanyalsohadtheadvantageofalreadyhavingastrongengineeringbase(Szarka
andBlhdorn2006).Thisdidnothappenbyaccident:thepotentialeconomicbenefitsof
increasingtheuseofrenewableenergywererecognisedbytheGermangovernment.Inhis
forewordtothe2000RenewableEnergySourcesAct,FederalEnvironmentMinisterJrgen
TrittenacknowledgedthattheActopensupgreatopportunitiesnotonlytoenhanceour
futureenergy-mixbutalsointermsofskilledjobsandexports(FederalMinistryforthe
Environment,NatureConservationandNuclearSafety2000:3).
Thefeed-intariffwaskeytodevelopingGermanyswindindustry,butadditionalsupport
mechanismshelpedtostimulatethesector.Theseincluded:
Theprecursortothefeed-intariff,whichwasaperkWhsubsidyofferedunderthe100MWWindProgramme(laterexpandedto250MW).ThisprogrammehelpedtodevelopGermanwindtechnologyandtoestablishamanufacturingbase
SoftloansforcapitalinvestmentinGermanwindenergyprojectswereavailablefromthestate-ownedbanksundertheEnvironmentandEnergyConservationProgrammeandtheEnvironmentProgramme
Theuseoffavourablecustomduties(tofavourtheimportofturbinecomponentsratherthanturbines)
Theuseoftied-aidexportcreditassistance
Qualitycertification R&Dfunding
(LewisandWiser2005,SzarkaandBlhdorn2006)
Spain
AlthoughSpainswindindustrydevelopedlaterthanDenmarksandGermanys,itisstilla
majorplayerintheworldswindmarket.Approximately20,500peopleareemployeddirectly
inthewindindustryinSpainincomponentmanufacture(32percent),specialisedservice
provision(31percent),turbinemanufacture(16percent),anddevelopmentandoperation
(21percent)(EWEA2009a).TwooftheworldstoptenturbinemanufacturersareSpanish
companies(GamesaandAcciona)andthereisalargemanufacturingbaseinSpainitself,
withover70turbineandcomponentfactoriesacrossthecountry(AEE2008,BTMConsult
ApS2008).Spainalsohasahealthyexportindustry,havinginstalled8.5GWofcapacityin
25countriesaroundtheworldtodate(AEE2008).
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Spainhasperhapsbeenmoreexplicitinitsaimtogrowalocalwindindustrythanhas
DenmarkorGermany(althoughapursuitofeconomicbenefitswasundoubtedlyimportant
tobothofthesecountriestoo).Asaresult,policieshaveaimednotonlytoincreasetheuse
ofrenewableenergybutalsotoattractforeigncompaniestoestablishmanufacturingbases
inSpain(Lewis2007a,CentreforSustainableEnergy2005).Politically,therehasbeenclearsupportforincreasingwindcapacityfromallmajorparties.At
thepolicylevel,Spainhasalsoemployedafeed-intariffintroducedin1994to
encouragethegrowthofthedomesticwindmarket.Thesubsequentexpansioninthe
markethasbeenattributedtotheconsistentapplicationofthispolicyandtothehighlevel
ofincentivethatwasprovided(Spainhasthesecondhighestleveloffeed-intariffinEurope,
aftertheNetherlands)(Bolonetal2007,Lewis2007a,Tokeetal2008).Totalinstalled
capacityhasrisenfromlessthan1GWin1997toover15GWin2007,givingSpainthethird
largestinstalledcapacityintheworld(AEE2008,EWEA2009a).
AkeydifferencebetweentheapproachtakenbyGermanyandDenmarktodeveloplocal
windindustriesandthatofSpainhasbeentheuseoflocalcontentrequirements.ThesehavebeenappliedbySpanishregionalgovernmentsandessentiallyrequirelocalassemblyand
manufactureofturbinesbeforewindfarmdevelopmentconcessionsaregranted.Theresult
hasbeenthegrowthofSpanishcompanieslikeGamesaaswellasjobcreationasa
consequenceofforeigncompaniessettingupmanufacturingfacilitieslocally(Lewis2007a,
LewisandWiser2005,CentreforSustainableEnergy2005,UN2008).Inadditiontolocal
contentrequirements,Spainhasalsoaidedthedevelopmentofitslocalwindindustry
throughtheprovisionofaproductiontaxcreditthatisonlygrantedonturbinesmeeting
localcontentrequirements(LewisandWiser2005).
Spainwasabletobuildonitsexistingmanufacturingbasetodevelopitswindpower
industry.Ahistoryofautomobileandaircraftmanufactureprovidedasuitableskillsbasefortheindustry;indeed,Gamesanowoneoftheworldslargestturbinemanufacturing
companieswasoriginallyanaircraftmanufacturingcompanythatdiversifiedintowind
(Bolonetal2007).
LessonsfordevelopinganoffshorewindindustryintheUK
DrawingontheexperiencesofDenmark,GermanyandSpainindevelopingtheirwind
industries,threekeymessagesstandout:
Asizeableandstabledomesticmarkethasbeenessentialineachcasetodevelopinglocalindustry
High-levelpoliticalsupportfordevelopingdomesticwindpowerwasnotsufficientadditionalpolicyandfinancialsupportwasnecessarytodeveloptheindustry.
Anexistingskillsbaseallowednewindustrytosetup.
Domesticmarket
TheoverridingmessagefromthesuccessesofDenmark,GermanyandSpainindeveloping
theirwindindustriesisthatastableandsizeabledomesticmarketisvital.Inallthree
countries,localmanufacturersbeganbysupplyingthedomesticmarketbeforelookingfor
exportopportunities.Numerousreportsonthistopicreiteratetheimportantrolethe
domesticmarketshaveplayedinthedevelopmentofwindpowerindustries:
Astablehomemarketsignalstobothlocalmanufacturersandto
foreignfirmsthattheyhavethelong-termplanninghorizonnecessary
toallowthemtoreasonablyinvestinthemarket.Companiesfacing
unstableorsmallmarkets,ontheotherhand,willbelesswillingto
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spendmoneyonR&D,productdevelopment,andlocalmanufacturing
facilities.(LewisandWiser2005:11)
Themanufacturersurveyunderlinestheimportanceofastable
domesticmarketasthebasisforsuccessinthecontinuallygrowing
internationalmarket.(GermanWindEnergyAssociation2008)
Inallthreeofthesecountriesastrongpoliticalcommitmenttoincreasingwindcapacitywas
combinedwithconsistentapplicationofpolicymechanismsthatprovidedlong-termstability,
guaranteedreturnsandalow-riskinvestmentenvironment.Thiscombinationhasproved
successfulinattractinginvestors.
MostcommentatorsagreethattheUKhashigh-levelpoliticalsupportforincreasingthe
UKsrenewableelectricitysupply,demonstratedmostrecentlybythepassingoftheClimate
ChangeAct.SomealsopraisedtheCrownEstatescommitmentandproactiveattitude
towardsRoundThree.Thenexttaskwillbetotranslatethisambitionintoacrediblepolicy
frameworkthatwillgivebusinessestheconfidencetoinvestinoffshorewind.
Industrialactivism
Althougheachcountryhadhigh-levelpoliticalsupportforwindpower,thisinitselfwasnot
enoughtocatalysethedevelopmentofalocalwindindustry.Allthreeoftheexampleshere
enjoyedcross-partypoliticalsupportforincreasingwindcapacity(whichisimportant
becauseitgivesassurancetopotentialinvestorsthatpolicyinthisareawillnotchangeeven
ifthereisachangeofgovernment)andallthreehadhigh-leveltargetsforrenewable
electricityproduction.However,itisclearthatthepolicyframeworksthatsupportedthe
developmentofthemarketandencouragedalocalindustrywereanimportantpartofthe
successstory.Eachgovernmenttookastrategicdecisiontopursuegrowthinthewindsector
andestablishedapolicyframeworktoboostthisindustry.TheGermanGovernment,for
example,iscommittedtodevelopingecologicalindustrialpolicytotakeadvantageofthe
jobopportunitiesandenvironmentalbenefitsbroughtaboutbygreenindustriesandthis
includesaneedtostrengthenstrategicindustriesofthefutureandmakeourindustryfitfor
themarketsofthefuture(FederalMinistryfortheEnvironment,NatureConservationand
NuclearSafety2006:21).
Avarietyofpolicymechanismshavebeenusedtosupportthewindindustry,includinglocal
contentrequirements,financialandtaxincentives,favourablecustomsduties,exportcredit
assistance,qualitycertificationandR&D(LewisandWiser2005).Ofcourse,theindirect
supportfromthefeed-intariffwasimportant,too.
ThisexperienceimpliesthattheUKwillneedtodevelopasuiteofpoliciesoverandabovetheRenewablesObligationtosupportthedevelopmentoftheoffshorewindindustryifitis
tocreateUK-basedjobsinthissector.
Skills
Eachofthecountriesstudiedherehadanexistingskillsbasethatturbineandcomponent
manufacturerscoulddrawon.Germanyinparticulariswellknownforitsmanufacturing
capacity.
ThelessonfortheUKhereistoidentifywhereexistingskillsmightbetransferredtothe
windindustry.Theoffshoreoilandgasindustryisoneareathatwarrantsattentioninthis
regard.Therearealsoopportunitiesinfinancialandlegalservicesandtheremaybescopeto
useskillsfromtheautomobileandaerospacemanufacturingsectors.
Thenextthreesectionsofthisreporttakethesethreelessonsonthemarket,industrial
activismandskillsandapplythemtotheUKcontexttoconsiderhowtheoffshorewind
sectorintheUKcanbesuccessfullydeveloped.
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AstheexperiencesofGermany,DenmarkandSpainshow,thedomesticmarkethasavital
roletoplayindeliveringnewgreen-collarjobs.Itisclearthatthesizeofthedomestic
marketwilldeterminethenumberofnewjobsthatarecreated.Marketcertaintyalsohasanimportantroletoplaybecauseinwardinvestmentwillonlyoccurwhencompanieshave
confidencethattheywillbeabletoselltheproductsandservices.
Confidenceinthefuturemarketwillbedriveninthefirstinstancebyhigh-levelpolitical
commitmenttoincreasingoffshorewindcapacityandthenbytheperceivedeffectivenessof
thepolicyframeworkdrawnuptodeliverthisvision.
ManyofthepeopleweinterviewedforthisresearchfeltthattheGovernmenthasconveyed
astrongcommitmenttodevelopingrenewablesintheUKforexampletheambitious
natureofthetargetssetoutintheClimateChangeActwerefelttodemonstrateagood
levelofambition,aswerestatementsaboutcreatinggreenjobs.Butmanyagreedthatthere
isstillagapwhenitcomestomoredetailedpolicymeasuresonhowthetargetswillbemet.Inparticular,foroneinterviewee,muchmoredetailaboutthestrategyformeetingthe2020
targetswasneededbeforeinvestmentdecisionscouldbemade.
Thereisstillalargeamountofuncertaintyaboutwhetheritwillbepossibletodeliveronthe
Governmentsrenewableenergyaspirationsinpracticeandthisisproblematicforindustry
thereisalargedifferencebetweentheaspirationofachieving33GWby2020throughthe
RoundThreeprocessandthe14GWprojectionintheGovernmentsRenewableEnergy
Strategy.Governmentneedstoclarifyacredible,yetstretchingtargetforoffshorewind
capacity.
Beyondhigh-leveltargets,thereareanumberoffactorsthatcontributefurtherto
uncertaintyaboutdelivery:infrastructureinvestmentrequirements,theplanningsystemand
thesupplychain.Thisuncertaintyisactingasabarriertoinvestment.Theeconomicsupport
mechanismandperceptionsofitseffectivenessarealsokeytodeliveringthemarket.
ThissectionlooksatthemainfactorsthatarelikelytoaffecttheUKmarket.Webeginby
discussingsomeofthefactorsthataffectconfidenceinthemarket:theGovernments
economicsupportmechanismandbarrierstodeliverythatarecausingmarketuncertainty.
Wethenconsiderwhetherthesizeofthemarketwillbesufficienttoattractnewinvestment.
Economicsupportmechanism
ThemainpolicytoolfordeliveringrenewableelectricityintheUKistheRenewables
Obligation(RO).Thisrequireselectricitysupplierstoobtainanincreasingproportionoftheirelectricityfromrenewablesourceseachyear(6.7percentin200607).Generatorsof
renewableelectricityareawardedaRenewablesObligationCertificate(ROC)foreach
megawatthour(MWh)ofelectricitygenerated.Thesearethenpassedontoelectricity
suppliersatthepointofsale.ROCsaretradableandsuppliersmustpresentasufficient
numberofROCstotheregulator,Ofgem,tomeettheirrequirementseachyear.Ifsuppliers
arenotabletomeettheirobligation,theymustpayabuyoutprice,whichisthenreturned
toallsuppliersaccordingtothelevelofROCstheyhaveprovided.Thebuyoutpriceisset
eachyearbyOfgemandisadjustedtoreflectchangesintheRetailPricesIndex(Ofgem
2009).
TheROhascomeundercriticismbecauseithasnotbeenassuccessfulatincreasingrenewableenergyasfeed-intariffs,whichhavebeenusedinotherEuropeancountries,most
notablyDenmark,GermanyandSpain(evenwhendifferencesinplanningregimesaretaken
3.Securingthedomesticmarket
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intoconsideration).Feed-intariffsprovideaguaranteedpaymentforeachkWhofelectricity
generatedandtheirsuccesshasbeenattributedtothreefactors:
Feed-intariffsprovidelong-termcertaintyforinvestors.Forexample,inGermany,thefeed-intariffisguaranteedforthefirst20yearsofageneratingplantslifetime.The
RO,whenitwasoriginallyintroduced,wassettoendin2027.
Feed-intariffsprovidemorecertainreturnsbecausethelevelofpaymentperkWhisfixedinadvance.Bycontrast,thereturnsfromtheROareuncertainbecausetheydependonthemarketpricesofROCs,whichismoredifficulttopredict.Thisuncertaintyincreasesthecostofcapital.
Feed-intariffshavebeendifferentiatedaccordingtotypeoftechnologysothatmorematuretechnologiesweregivenlesssupportthanthoseatearlierstagesofthedevelopmentanddeploymentprocess.IntheUK,thesamenumberofROCshavebeenawardedregardlessofthetypeoftechnologyusedtogeneratetheelectricity,withtheresultthatmaturetechnologiessuchaslandfillgashavereceivedan
unnecessarilyhighlevelofsubsidy,whilethosethatarestilldevelopinghavenotreceivedsufficientsupport.(See,forexample,Sternetal2006)
TheGovernmenthasnowreformedtheROinresponsetotwoofthesecriticisms.Inhislast
Pre-BudgetReport,theChancelloroftheExchequerannouncedthattheROwouldbe
extendedto2037(Darling2008).TheGovernmentalsohopestointroduceabanding
systemfortheROinApril2009(subjecttoitmeetingEuropeanstateaidrules).Underthis
system,maturetechnologiessuchaslandfillgaswillreceivefewerROCsperMWhof
electricitygenerated,whileemergingtechnologiessuchaswaveandtidalenergywill
receivemore.Undertheproposedsystem,onshorewindwillreceive1ROC/MWhwhile
offshorewindwillreceive1.5ROCs/MWh(HMGovernment2008a).
ThecriticismabouttheuncertaintyofreturnsundertheROremainsandasaresult,there
havebeencallsfortheGovernmenttoscraptheROandreplaceitwithafeed-intariff(see
forexample,Barkeretal2008).However,thosewithintherenewableenergyindustryhave
opposedsucharadicalreformofpolicy,claimingthatthetimerequiredtodesignand
legislateforanewschemewouldseriouslyjeopardisethe2020target.Industry
representativesinterviewedforthisprojectwereclearthatthepolicyuncertainty(thatthe
ROmaybechangedforafeed-intariffatsomepointinthefuture)wasagreaterhindrance
toinvestmentthanthecurrentuncertaintyofreturnsundertheRO.Oneinterviewee
explainedthatacross-partyagreementnottochangetheeconomicsupportmechanismfor
thenextdecadeorsowouldbehelpfulinbringingforwardinvestmentdecisions.
Basically,ifpressed,wewouldsayitdoesntmatterwhatthe
regulatoryframeworkiswhetheritsfeed-intarifforROCsora
combinationaslongasitsstableandsojustdecidewhatitisandthen
getcross-partyagreement.Developer,interviewwithippr
Itappearsthataconsensusamongthemajorpoliticalpartiesisemerging.TheGovernments
responsetocallsforafeed-intariffhasbeentointroduceoneforsmall-scaleinstallations
(lessthan5MW)andtoreformtheRObyintroducingabandingsystemandextendingit
until2037(BERR2008,HMGovernment2008a,Darling2008)..Thisresponsesucceedsin
ensuringacontinuouspolicyframeworkforlarge-scaleoperators,whichisnecessaryfor
buildingconfidenceamonginvestors,whileatthesametimeprovidinganewincentivefor
smalleractors,suchashouseholdsandbusinesses.TheConservativePartyhasdemonstrated
acommitmenttocontinuingtheGovernmentspolicyinthisarea(ConservativeParty2009).
TheLiberalDemocrats,however,advocatereplacingtheROwithafeed-intariff(Liberal
DemocratParty2008).
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Perhapsamoreimportantquestioniswhether1.5ROCsforeachkWhofenergyproduced
byoffshorewindwillbesufficienttomakeinvestmentinwindfarmseconomicallyviable.
Severalindustryrepresentativesinterviewedforthisprojectsuggestedthatitwasprobably
notenough.TheBritishWindEnergyAssociation(BWEA)iscarryingoutastudyonthis
question,whichshouldbepublishedlaterin2009.Ontheeconomicside,itsnotthemechanism,itsmorethelevel
comparedtothecosts.Is1.5ROCsgoingtobeenough?Doesthe
multipleneedtoberaisedorcancostsbereducedtomakeitenough?
Industryspokesperson,interviewwithippr
AnimportantfeatureofGermanyssuccessindevelopingitswindcapacityisthatthefeed-in
tariffmechanismwasmodifiedovertimetoensureitwasdeliveringthedesiredoutcomes.
CommentatorshaverecommendedthattheUKGovernmenttakesasimilarapproachand
monitorsprogresstowardsthe2020renewablestargetannuallytoensurethattheROis
delivering(Boettcheretal2008).
ipprrecommendsthatgovernmentshouldmonitorthedeploymentofrenewableenergy
capacityonanannualbasistodeterminewhetherthelevelsofbandsundertheROhave
beensetcorrectly.Ifdeploymentisnothappeningasfastasisnecessary,Government
shouldbepreparedtoaltertheROCallocations.Similarly,Governmentshouldalsobe
preparedtomoveallocationsdownwardsastechnologiesmature.
Removingbarrierstodeliveringoffshorecapacity
DespitetheambitiousscaleofRoundThreeofoffshorelicensing,andGovernment
statementssupportingthedevelopmentofoffshorewind,thereisstillagreatdealof
uncertaintyabouthowmuchcapacitywillbedeliveredby2020.Thisisbecausetherearestill
anumberofsignificantbarrierstodeliverythatcoulddisruptoffshoredevelopmentprojectsorevenpreventthemfromhappening.Themostimportantoftheseareissuestodowiththe
grid,planningandthesupplychain.
Thegrid
Theuncertaintyaroundwhetherornotthegridwillbeupgradedintimetosupportnew
generatingcapacityisregardedasthebiggestthreattoachievingthe2020renewables
targetbymanyoftheindustryexpertsinterviewedforthisreport.
Themainbarrier[tomeetingthe2020renewablestarget]willbegrid
capacityandgridconnection.Developer,interviewwithippr
Significantworkonthegridwillbenecessarytoconnectthenewcapacitythatisexpectedtocomeonlineby2020.Thisincludesprovidingconnectionsfromoffshoresitestoonshore,
layingnewcablestoconnecttotheonshoregrid(whichismanymilesinlandinsomecases)
andexpandingthecarryingcapacityofthegridtodealwithincreasedloadsinsomeareas.
Therearealsoquestionsabouthowthegridcanbereinforcedtodealwiththeintermittency
ofwindpower,forexamplethroughinterconnectionwithotherEuropeancountries.
Numerousreportshavearguedfortheneedtofocusonimprovingthegridandproviding
connectionsasamatterofurgency(forexample,RAB2008,CarbonTrust2008).
Alackofupfrontinvestmentinoffshoreconnectionscouldmakeitlesslikelythatoffshore
windcapacitywillbedeliveredbecauseitincreasesriskandmayincreasethecostofcapital.
Thiscouldinturndiscourageinvestment.
Lackofgridcapacityisamajorissuebecauseifwecantgetagrid
connection,wecantbuildanythingnobodywillgiveusthemoneyto
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buildanoffshorewindfarmunlesswecanguaranteeweregoingto
getrevenuefromsellingelectricitysoIwouldsaythatsthemajorissue.Developer,interviewwithippr
DECCandOfgemarecurrentlyintheprocessofdevelopinganewregulatoryregimefor
offshoreelectricitytransmissionandforlicensingoffshoretransmissionconnectionsaspartoftheoffshoretransmissionproject.Afinalconsultationisscheduledforearly2009andthe
newregimeisplannedtogoliveinmid-2010(BERR2009).
Thecurrentregulatoryregimehascausedsomedifficultiestodate,particularlyaround
NationalGridstimetablingofprovidingconnections(whichhasnottakenaccountofwhat
stageintheplanningprocessprojectswereat)andbecauseofalackofcoordination
betweenOfgemandNationalGrid.In2008,OfgemandBERRjointlypublishedthe
TransmissionAccessReview,whichcontainsmeasurestoovercomesomeofthese
timetablingissues(OfgemandBERR2008).
Thelackofastrategicplanforthegridhasalsocausedconcern.Thegridhasevolvedover
timeinapiecemealfashionwithindividualprojectsbeingconnectedonebyone.
Commentatorshavearguedthatfutureinvestmentsshouldbemadeinamorestructured
andlogicalway(Boettcheretal2008,RAB2008).Thisissuewasalsocoveredinthe
TransmissionAccessReviewandtheElectricityNetworksStrategyGroup,whichischaired
jointlybyDECCandOfgem,iscurrentlydevelopingastrategicvisionofwherenew
transmissionslineswillberequiredtomeetthe2020targets.Thisisexpectedtobe
publishedinspring2009.
Thereisariskthattherecessionmaymakefinancingthenewoffshoreconnections
problematic.Governmentshouldmonitorprogresstowardsprovidingoffshoregrid
connectionstoensureprogressisoccurringatasufficientratetomeetthetimetablesetout
forRoundThree.Governmentcouldoffertounderwriteloansorworkwithfinancial
institutionstoencouragelendingtooffshoregridcompaniestoensuretheyareabletoraise
sufficientfinancetoallowtheworktotakeplace.
Planning
Theplanningapprovalprocesshaslongbeenapointofconcernforfuturewindproject
developers.Thelongtimetakentoreceiveplanningconsentandhighlevelsoflocal
oppositiontowindfarmshavebeenproblemsfortheonshorewindsector,andthis
experiencehasweakenedconfidenceamongpotentialinvestorsthattheUKwillbeableto
deliveronitsaspirationtohave33GWofoperationaloffshorewindinstalledby2020.
Somanyintheindustryarecynicalabouttheoffshoremarket,becauseonshorewindshouldbeeasiertodeliverthanoffshoreandyet
theUKhasstruggledtogetonshoreMWsintheground.Somany
criticsofthewindindustrysay,Ifyoucantdoitonshorewhat
confidenceareyougoingtohavethatitsgoingtobeanydifferentor
easiertodooffshore?Turbinemanufacturer,interviewwithippr
ThisproblemhasbeenacknowledgedbytheGovernmentandthePlanningActsetsout
provisiontoestablishanInfrastructurePlanningCommission(IPC)andNationalpolicy
statements.TheIPCwillbeaNon-DepartmentalPublicBodyanditsrolewillbeto
determineplanningapplicationfornationallysignificantinfrastructureprojects.Foroffshore
wind,thiswillincludeoffshorewindfarmsinEnglandandWalesthatarelargerthan100MW(HMGovernment2008b).TheIPCsdecisionswillbeguidedbyaframeworkofNational
PolicyStatements(NPSs),whichwillbedevisedbyGovernmentandwillsetouttheneedfor
certaintypesofinfrastructure,suchasenergy,ports,airportsandwatersupply.
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ThenewIPCprocessisexpectedtoreducetheplanningandconsentingprocessforoffshore
windtoaroundthreeyears.Industryexpertsinterviewedforthisreportwerehopefulthat
theprocesswouldbespeduptosomeextent.However,theIPCisstillanunknownquantity
andthetimetableforitsintroductionistight.TheIPCandNPSsarescheduledtobeinplace
bymid-2010andtheplanningandconsentingprocessforRoundThreeistimetabledtobeginimmediatelysothatconstructioncanbeginin2014(seeAnnexIIforamoredetailed
timetable).ClearlyiftherearedelaysinestablishingtheIPC,inagreeingtheNPSs(which
mustbelaidbeforeParliament)orifthenewprocessofobtainingplanningconsentisnotas
fastasanticipated,thenthedeliveryofoffshorecapacityfor2020willbecomelesslikely.
OneintervieweesuggestedthatinvestmentinstaffingandresourcingtheIPCshouldbeat
thetopofthelistwhenconsideringhowtoensurethedeliveryofoffshorewindcapacity.
Thefirstthing[thatgovernmentshouldinvestin]ismakingsurethat
theInfrastructurePlanningCommissionisproperlysetupand
resourcedandstaffedsothatisntakindofbureaucraticbottleneck.
Thatsthemostimportantthing.Developer,interviewwithipprObviouslyoneofthemostsignificantconstraintsisplanningand
consentingprocessandtheIPCandtheMMO[MarineManagement
Organisation]willpotentiallyplayareallyvitalroleinmitigating
consentingriskwhatimpactthenewconsentingregimewillhaveon
thesuccessrateandtimescaleforgainingconsentsonoffshoreprojects
Idontknowitsanunknownprocessandthisscaleofdevelopment
isnewtotheindustry.Consultantonoffshorewind,interviewwithippr
ItisclearthatGovernmentmustnowmonitortheprogressoftheintroductionoftheIPCthe
NPSsandthespeedwithwhichapplicationsareapprovedunderthenewregimeandensure
thatthetimetablefordeliveringoffshorewindcapacityfor2020iskeptontrack.ThisincludesensuringtheIPChassufficientresourcestooperateeffectively.
Supplychain
Manycommentatorsrecogniseconstraintsintheoffshorewindsupplychainasabarrierto
meetingtheUK2020targets.Recentstudiesonthistopichaveidentifiedthesupplyof
offshorewindturbines,installationvessels,cablesandoffshoresubstationsasbeingkey
areasofconstraint(CarbonTrust2008,DouglasWestwood2008,Boettcheretal2008,
BWEA2007).TheCarbonTrustidentifiesfoundationsasbeinganadditionalareaamongthe
keycomponentsthatispronetoshortages(CarbonTrust2008).
AreportbyDouglasWestwood(2008)notesthatglobally,therearecurrentlyonlythree
maincompaniessupplyingoffshorewindturbines.Otheronshorewindturbine
manufacturersareintheprocessofdevelopingoffshoreturbineswhileothersarenotyet
convincedthatthefutureglobalmarketforoffshorewindiscertainenoughtobegin
producingturbines.Increasingcertaintyinthefutureoftheoffshoremarket(asdiscussed
above)iskeytoattractingnewplayersintotheoffshorewindturbinemarketandto
reducingleadtimesforturbines.
Someintervieweesdidrecognisesupply-chaindifficultiesasanissueforoffshorewind.
However,mostwereconfidentthatsupplierswerescalinguptheiractivitiesandthatthe
shortagesthathadbeenexperiencedtodatewouldnotexistinthefuture.
Oneofthebiggestissueswevehadintheindustryiswiththecapacityforsomekeycomponentsupplierstodeliverthevolumewehave
demanded.Whentheonshorewindmarketisboomingwecantgetall
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thecomponentsweneedfastenoughfromthesupplierstobeableto
runatfullcapacityinsomeofourfactories.Wehaveinvestedalotof
timeandmoneytoimprovethisoverrecentyears.Turbine
manufacturer,interviewwithippr
Idontthinkweseethesupplychain(vessels,cables,transformers,
turbines)assuchbeingamajorcriticalissueondeliveryofRound
Threeintheschemeofthingsitmightdelayaprojectayearorso
therealshowstopperisgrid.Developer,interviewwithippr
ipprbelievesthatGovernmentshouldinitiateamappingexercisetoidentifyUK-based
companieswiththepotentialtodiversifyintotheoffshorewindsupplychainandshould
makethisinformationavailabletoturbinemanufacturerstoencouragethemtosetupinthe
UK.
Governmentshouldalsoprovidesupporttoindustriesthataremostlikelytocause
bottlenecksinthesupplychain,includingfoundations,offshoresubstations,cables,
installationvesselsandturbinemanufacturers.Section6describesinmoredetailtheform
thissupportcouldtake.
Althoughsupply-chainissuesarenotconsideredtobeasbigaproblemasfixingthegrid,
thecreditcrunchaddsanotherdimensiontotheproblem.Supplierslookingtoincreasetheir
capacityinordertomeetgreaterdemandinthefuturemayfacedifficultiesinsecuring
financetoexpand.Againuncertaintiesinthesizeofthefuturemarketcompoundthe
problem;withoutaminimumnumberoflong-termcontracts,itcanbedifficultforsome
playersinthesupplychaintoraisethefinanceneededtoincreasecapacity.
Eveniftheeconomicsofprojectscanbemadetostackup,thecurrent
crisisinthefinancialmarketsmeanssecuringtheamountsofcapitalrequiredfortheselargedevelopmentsischallenging,evenforlarge
companieswithstrongbalancesheets.Industryspokesperson,
interviewwithippr
Wherepossible,governmentshouldconsiderprovidingguaranteesforloanstosupply-chain
companieslookingtoexpandtheircapacityintheUKbutwhoarestrugglingtoraisefinance
becauseoftherecession.Governmentshouldalsoworkwithfinancialinstitutionsto
encouragelendinginthissector.
Maximisingmarketsize
AstheexamplesofDenmark,GermanyandSpainshow,thesizeofthelocalmarketisvery
importantwhenitcomestoinvestmentdecisionsfrommanufacturers.Companiesneedto
knowthatthelocalmarketfortheirproductswillbesufficientlylargeandpredictableto
outweightheset-upcosts.
WhenitcomestotheUK,althoughtheambitionsforoffshorewindareverystrong,there
wasstilldoubtamongmanyoftheintervieweesthatwespoketothattheUKmarketalone
wouldbesufficienttoattractnewmanufacturingcapacitytosetuplocally.Forexample,the
minimumsizethatsomeintervieweessaidtheywouldneedinordertowarrantsettingupa
factoryrangedfrom1GWto6GWperyearforfiveto10years.ThetotalUKmarketwould
needtobemuchgreaterthanthis(toaccountforthefactthatthetotalmarketsizeneeds
tobedividedbyeachcompanysmarketshare)andsoonthisbasistheUKmarketalone
doesnotlooklikeitwillbesufficienttoattractmanufacturing.
OneintervieweesuggestedthatincreasingtheUKsonshoremarketaswellastheoffshore
marketwouldhelptoovercomethisproblembecausethetotaldomesticwindmarketwould
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begreater(andbecauseonshorewindislesscostlythanoffshore).However,other
intervieweesdisagreedwiththisbecausethecomponentpartsforonshoreandoffshorewind
aredifferentandthereforemaynotbeabletobesuppliedbythesamefactoryandalso
becausetheydonothaveconfidenceintheUKsonshoremarketgiventheslowprogress
thathasbeenmadetodatecomparedtotheonshoremarketinothercountries.AlthoughtheUKoffshorewindmarketmaynotbebigenoughinitselftoattractnew
investment,theEuropeanmarketasawholeislikelytobebigenoughtogeneratenew
manufacturingcapacity.Forexample,Germanyalsohasplanstoincreaseitsoffshorewind
capacityinthemediumterm(EWEAreportsthatatotalof16GWisplannedintheUKand
Germanyby2015,ontopofexistingcapacityandprojectscurrentlyunderconstruction
[EWEA2009b]).Largecompanieswhoarealreadyoperatingataninternationallevelare
morelikelytomakeinvestmentdecisionsbasedonprojectionsofinternationalmarketsize
ratherthannationalmarketsandsothegrowthoftheEuropeanmarketisperhapsmore
relevantthanconsideringtheUKalone(althoughitisclearthatimprovingcertaintyinthe
UKmarketthroughthemeasuresoutlinedabovewillmakeanimportantcontributiontoperceptionsoftheEuropeanmarketforoffshorewind).
Thequestionis,the