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Economic opportunities from onshore wind in wales
1. Economic Opportunities for
Wales from Future Onshore
Wind Development
A Final Report by Regeneris
Consulting and the Welsh
Economy Research Unit,
Cardiff Business School
2. RenewableUK Cymru
Economic 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. ● Economic Opportunities for Wales from Future Onshore Wind Development ●
Contents
Executive Summary 1
1. Introduction 10
2. Overview of Assessment Approach 12
3. The Onshore Wind Sector in Wales 20
4. Economic Opportunities for Wales 35
5. Local Economic Benefits 50
6. Conclusions and Recommendations 66
Appendix A Economic Impact Methodology 1
Appendix B Survey Questionnaire 1
Appendix C Consultees 1
Appendix D Case Studies 1
4. ● Economic Opportunities for Wales from Future Onshore Wind Development ●
About the Authors
Regeneris Consulting is an independent economic consulting firm specialising in economic
development. We are a leading firm in socio-economic impact assessment, having undertaken
many studies across a range of sectors, including energy, housing, broadband, tourism and
leisure, land and property, pharmaceuticals, automotive, aerospace, and others. We specialise
in using robust analytical techniques to draw out the range of socio-economic impacts of
sectors, companies, investment projects and economic shocks.
The Welsh Economy Research Unit (WERU) is based within Cardiff Business School at Cardiff
University and has a long record of providing research and consultancy services for
organisations in both public and private sectors. An important theme of recent WERU research
has 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 Welsh
economy, plotting the flow of goods and services between industries, consumers and
government, highlighting the intricate inter-relationships between industries in the
contemporary Welsh economy.
About the Report
This report is funded with contributions from:
Amegni
Pennant Walters
RenewableUK Cymru
RES
RWE npower renewables
ScottishPower Renewables
SSE Renewables
Tegni Cymru Cyf
Vattenfall
Welsh Government
West Coast Energy
5. ● Economic Opportunities for Wales from Future Onshore Wind Development ●
Executive Summary
Purpose and Scope of the Report
i. 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.
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6. ● Economic Opportunities for Wales from Future Onshore Wind Development ●
Overview of the Onshore Wind Sector in Wales
Policy Context
vi. 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 Prospects
ix. 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 Views
xiii. 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
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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 Construction
xviii. 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:
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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 Impacts
xxv. 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.
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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 Wales
xxviii. 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.
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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 Benefits
xxxi. 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 Construction
xxxiii. 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.
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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.
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12. ● Economic Opportunities for Wales from Future Onshore Wind Development ●
Operations and maintenance
xliv. 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 Benefits
xlix. 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
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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.
Conclusions
lvi. 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.
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14. ● Economic Opportunities for Wales from Future Onshore Wind Development ●
1. Introduction
1.1 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
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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.
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16. ● Economic Opportunities for Wales from Future Onshore Wind Development ●
2. Overview of Assessment Approach
2.1 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 Framework
2.2 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 Impact
2.3 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
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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 Impact
2.6 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 capital
1
Tier One suppliers are at the top of the supply chain, supplying directly to the Prime Contractor.
13
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 Impact
2.11 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 Period
2.12 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. ● 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 Focus
2.14 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 Assumptions
2.16 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 Scenarios
2.17 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. ● 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 Tools
2.19 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. ● 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 Review
2.21 We reviewed the literature on the economic aspects of onshore wind, including relevant
2
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. ● 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 Database
2.22 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 Operators
2.25 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.
Consultations
2.27 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. ● 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 Studies
2.28 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. ● 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. ● Economic Opportunities for Wales from Future Onshore Wind Development ●
Introduction
3.1 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 Context
3.2 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 Policy
3.6 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. ● 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) 8
3.7 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 Map
3.8 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 Letter
3.9 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.6
3.10 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. ● Economic Opportunities for Wales from Future Onshore Wind Development ●
Related Economic Development Policy
3.11 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. ● 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 Date
3.15 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. ● 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 Database
3.18 There is currently 423 MW of installed onshore wind capacity across Wales. The map below
illustrates their location.
25
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 Prospects
3.19 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. ● 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 2012
3.20 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. ● Economic Opportunities for Wales from Future Onshore Wind Development ●
Development Scenarios
3.22 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 2025
Source: RenewableUK Database
3.24 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. ● 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 2025
Source: RenewableUK Database
3.27 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 rates
3.28 A full explanation of the basis for these scenarios is provided in Appendix A.
Industry Perceptions of Wales as an investment location
3.29 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.
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34. ● Economic Opportunities for Wales from Future Onshore Wind Development ●
Supply Chain
3.31 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 = 15
To what extent are you able to source the range of goods and services, at the right cost and quality, used in the
construction 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
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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
36. ● Economic Opportunities for Wales from Future Onshore Wind Development ●
Barriers to Further Development
3.35 To drill down further, the survey sought to establish the key barrier that developers
perceived to be holding them back from growing the supply of goods and services from
Wales used in the construction and operation of onshore wind schemes. A range of issues
were highlighted, from policy-related barriers to the competitiveness of the current Welsh
business base in relevant sectors. We draw out the most commonly cited ones below.
3.36 There is strong consensus that the current lack of consents in the pipeline, along with more
general uncertainty, are a barrier to further development. This uncertainty over the future
scale of opportunities is seen as holding back investment decisions of the supply chain. The
view was commonly expressed that in order for growth in the supply chain to take place
there needs to be a strong pipeline of potential work with a degree of certainty attached to
it. A strong pipeline provides the underpinning rationale for investment in capacity and skills.
The point was made that there are other locations globally that have a larger, more
predictable pipeline of work: in this context, there is less of a business case to invest in
Wales.
3.37 Some of the respondents took this further, identifying what they saw as underlying sources
behind this uncertainty, including uncertainty and delays in securing planning consent. A
number highlighted their own experiences and those of other developers of delays in
securing planning permission for wind farms as being an important barrier. Delays of 5 or
more years were mentioned.
3.38 Developers also expressed their perception of a lack of support locally for development, and
a lack of recognition of the associated benefits. Some referred to the lack of strategic
leadership and joined up approach from the Welsh Government and local authorities that is
needed to ensure delivery through the planning system.
“The lack of consented sites, and lack of timescale certainty hampers efforts to develop the
supply chain as future opportunities are uncertain.”
“If there was more certainty in gaining planning consent, and more local buy in of Welsh
renewables targets and recognition of the associated benefits, there would be further
confidence within the industry to further invest more time and money in helping develop the
supplies of goods and services in Wales and the relevant skills base required.”
“Wales is seen as a favourable place to develop due to the good wind speeds and natural
resources the country has to offer. Generally from a planning perspective and general
development risk associated with getting a project consented Wales is not seen as a
favourable place for development at all.”
3.39 A number of developers also highlighted the relative lack of capacity and competitiveness of
the supply side in Wales as being a barrier in itself to further development. The scope of
aspects of the supply chains is often global. As other locations have made more progress
already in developing renewable infrastructure, their associated supply chains have grown
their capacity and experience. Consequently they are often better placed to compete for
onshore wind business in places like Wales, both on quality (due to their experience and
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