Unlocking Economic Benefits of Onshore Wind in the UK

1. Quantifying the economic benefits of onshore wind to the UK Prepared for RenewableUK June 2019

2. Quantifying the economic benefits of onshore wind to the UK Executive summary: the deployment of additional onshore wind offers sizeable employment, consumer and productivity benefits throughout the UK • Deployment: CCC ‘net-zero’ report to government recommends up to 35 GW of onshore wind by 2035. • This would require the deployment of 1.4 GW of onshore wind annually, a significant increase from the modest 0.6 GW deployed in 2018. • However, continued expansion is challenged by multiple barriers, including lack of access to contract-for-difference auctions and strict planning permissions. • The benefits of overcoming these barriers include: • Consumer: reduce electricity costs by up to 7% compared to natural gas (with carbon cost) in 2035, saving the average household £50 per year • Employment: triple current employment, supporting 31,000 jobs by 2035 with 14,000 directly employed • Productivity: lift productivity throughout the UK, particularly in Scotland, Wales and Northern Ireland • Exports: increase exports to £360m per year by 2035, capitalising on a global market expected to increase 4-fold from today* • * Increase measured in GW of capacity, where the IEA ETP (2017) 2-degree scenario expects global capacity to increase from 540 GW today to nearly 2,150 GW in 2035

3. Quantifying the economic benefits of onshore wind to the UK Contents • Introduction: • The future of onshore wind • Onshore wind deployment scenario • Consumer savings • Onshore wind-led electricity mix compared to a gas-led counterfactual • Reduction in electricity prices • Employment and productivity benefits • Employment by activity • Local employment benefits • Local productivity benefits • Technical appendix

4. Quantifying the economic benefits of onshore wind to the UK Onshore wind is a growing source of decarbonised electricity generation Existing onshore wind farms by local authority The sector today Onshore wind is predominately located in Scotland today Source: capacity: BEIS (2018) DUKES; statistics table: ONS (2019) LCRE; location: BEIS (2019) REPD

5. Quantifying the economic benefits of onshore wind to the UK The sector faces multiple barriers In response, new onshore wind applications have significantly declined Barriers enacted in 2015 span contract-for-difference access and planning permissions • Exclusion from contract-for-difference auctions restricts the primary route to market for onshore wind • Planning policy and guidance does not always support the most up-to-date and efficient turbine designs with higher tip heights, used as standard internationally, which would deliver even better value for consumers in suitable high-wind UK sites • Lack of progress in aviation radar mitigation and grid infrastructure development further restricts the quantity of viable onshore wind sites • These restrictions stifle deployment, reducing investment in the UK based supply chain and increasing consumer bills Policy change What if these barriers did not exist? Note: Project applications in the REPD without a planning application submission date are excluded Source: Applications from BEIS (2019) REPD

6. Quantifying the economic benefits of onshore wind to the UK Only without these barriers, could the UK achieve the CCC’s net zero recommendation of 35 GW of onshore wind by 2035 +22 GW Policies in place today will depress deployment in the near future • Source: 2018 deployment of 0.6 GW from Wind Europe (2019). This low level of deployment is repeated from 2019 to 2021, until impacts from policy change are felt • Note: Maintaining existing capacity to 2035 requires repowering 4.5 GW. Repowering

7. Quantifying the economic benefits of onshore wind to the UK Deploying 22 GW of onshore wind to 2035 generates additional economic benefits Three types of economic benefits are considered: employment, consumer and productivity • Consumer: household savings from deploying onshore wind compared to gas generation (with carbon costs) in 2035 • Employment: direct and indirect jobs supported by the domestic and export markets • Assessed from 2020 to 2035 by activity and likely location of jobs throughout the UK • Productivity: productivity uplift from onshore wind supported jobs • Assessed at the local authority level in 2035 Linking slide that sets out benefits from deployment and definition of deployment

8. Quantifying the economic benefits of onshore wind to the UK The CCC expects onshore wind to be a key decarbonised generation technology in the future UK electricity system UK electricity system capacity and generation profile in 2035 Meeting the generation gap with gas could be more costly Onshore-led avoids 23 Mt of CO2 emissions per year • Source: Vivid Economics and Imperial College London (2019): Accelerated Electrification and the GB Electricity System; Vivid Economics • Note: The 27 GW of new capacity includes 4.5 GW of repowering. The onshore-led mix avoids 23 Mt of CO2 emissions per year in 2035. Gas-led includes carbon costs.

9. Quantifying the economic benefits of onshore wind to the UK Meeting the generation gap with onshore wind instead of gas could save every household around £50 per year in 2035 Onshore wind could reduce electricity costs by 7% in 2035 Total savings could reach £1.5bn per year across all households in 2035 Savings Other bill components Electric heat EV charging General household use • Note: £1.3 bn per year of savings across all households in 2030, which is £44 per household. Carbon price assumed to be £118/tCO2 in 2035, see BEIS (2019) Valuation of Energy Use and Green House Gas; Electricity costs take into account whole system costs. Additional notes • Source: BEIS (2016) Electricity Generation Costs; LCOE comparison; Onshore LCOE to 2030

10. Quantifying the economic benefits of onshore wind to the UK 35 GW by 2035 could support 14,000 jobs, which would be a three-fold increase from current levels Potential direct employment from onshore wind to 2035 Exports O&M Installation Manufacturing Development • Notes: Exports deep dive, Expenditure, Turnover, Turnover/job, * Today’s direct job estimate is for 2017, see ONS, (2019) LCRE

11. Quantifying the economic benefits of onshore wind to the UK The onshore wind industry can support up to 31,000 direct and indirect jobs by 2035 as each direct job is estimated by the ONS to support 1.24 indirect jobs Potential direct and indirect employment from onshore wind to 2035 Indirect jobs Exports O&M Installation Manufacturing Development • Note: Indirect job multiplier of 1.24 from ONS (2019) LCRE * Today’s direct job estimate is for 2017, see ONS (2019) LCRE

12. Quantifying the economic benefits of onshore wind to the UK Onshore wind employment is likely to be located in local authorities most in need of high-paying, high-productivity jobs Existing unemployment today Supported employment in 2035 Local authorities in Wales could see a sizeable increase in onshore wind employment • Note: Locating jobs • Source: unemployment rate: ONS (2019) Regional labour market

13. Quantifying the economic benefits of onshore wind to the UK Onshore wind jobs can raise productivity throughout the UK Productivity levels today GVA uplift of £285m per year in 2035 Scotland, Wales, Northern Ireland and Cornwall could see productivity increases Text Text Text • Notes: Uplift by region, GVA/worker, Some LAs, such as Aberdeenshire, see a decline in productivity due to onshore wind GVA/worker below the LA average. In Aberdeenshire, this is a result of comparing onshore wind jobs with relatively high GVA/worker oil and gas jobs • Source: GVA/worker: ONS (2017) Regional gross value added

14. Quantifying the economic benefits of onshore wind to the UK Concluding remarks: the onshore wind industry could deliver the following benefits by 2035 • Consumer: onshore wind is the cheapest source of new generation and could reduce electricity costs by up to 7% compared to natural gas (with carbon costs) in 2035, saving the average household £50 per year • Employment: the sector could nearly triple employment, supporting 31,000 jobs by 2035 with 14,000 directly employed in the industry • Productivity: onshore wind jobs are projected throughout the UK, lifting productivity (GVA per worker) in local authorities that need it most, particularly in Scotland, Wales and Northern Ireland • Exports: the UK supply chain could capture £360m of the global onshore wind market by 2035, a rapidly growing market which is expected to increase by 4-fold from today

15. Quantifying the economic benefits of onshore wind to the UK Technical appendix • Repowering • LCOE of onshore wind and natural gas • Onshore wind LCOE cost decline to 2035 • Costs and content (expenditure and shares) • UK captured turnover • Exports market and market shares • Turnover/job and GVA/worker estimates • Locating O&M jobs • Locating development, manufacturing and installation jobs • Regional employment and productivity statistics

16. Quantifying the economic benefits of onshore wind to the UK The UK needs to deploy an additional 21.5 GW and repower 4.5 GW of onshore wind to achieve 35 GW of capacity by 2035 +4.5 GW +21.5 GW 9 GW • Source: 2018 deployment of 0.6 GW from Wind Europe (2019). This low level of deployment is repeated from 2019 to 2021, until impacts from policy change are felt • Note: Deployment Repowering assumption from BEIS (2016) Electricity Generation Costs

17. Quantifying the economic benefits of onshore wind to the UK Repowering schedule Repowering is determined by past deployment In-line with BEIS (2016), onshore wind capacity is assumed to be repowered after 24 years of operation. Accordingly, repowering in 2032 is determined by the quantity of wind deployed in 2008 • Source: historical deployment: BEIS (2018) DUKES; repowering assumption: BEIS (2016) Electricity Generation Costs • Note: Deployment

18. Quantifying the economic benefits of onshore wind to the UK Onshore wind and natural gas LCOE comparison in 2018, 2030 and 2035 LCOE comparison in 2018 £ LCOE comparison in 2012 £ • Note: Electricity cost represents all generator, storage and interconnection costs. Electricity cost accounts for wholesale price, carbon price, low-carbon support costs, and capacity market payments and reflects system integration costs of onshore wind and other renewables. No repowering is assumed in gas-led scenario. 1.5 GW of existing wind is assumed to retire by 2030, and 4.6 GW by 2035; Gas price assumed to be 63p/therm in 2030 and 2035 in line with BEIS (2019); Consumer savings

19. Quantifying the economic benefits of onshore wind to the UK Onshore wind LCOE to 2035 In the modelling, onshore wind LCOE is held constant from 2030 to 2035 0 • Note: Consumer savings; LCOE is held constant from 2030 to 2035 as a conservative assumption. Cost reductions are likely to continue from 2030 onwards. • Source: Baringa (2017), BVG (2018), Vivid Economics based on Baringa (2017) and BEIS (2016) Electricity Generation Costs

20. Quantifying the economic benefits of onshore wind to the UK Onshore wind costs and content today and in 2030 • Note: Direct jobs

21. Quantifying the economic benefits of onshore wind to the UK UK captured turnover from the domestic and export markets Turnover from onshore wind by activity to 2035 Exports OPEX CAPEX DEVEX • Notes: Direct jobs, CAPEX includes manufacturing and installation and repowering of existing onshore wind farms is included (24 year lifetime assumed)

22. Quantifying the economic benefits of onshore wind to the UK Onshore wind job and GVA multipliers • Notes: Direct jobs; Productivity map Turnover/worker estimates based on 2016 data from ONS (2019), GVA/worker estimates follow Genecon and Parsons Brinckerhoff (2014) methodology with updated ONS (2018) ABS estimates

23. Quantifying the economic benefits of onshore wind to the UK Exports of manufactured goods and installation services are a massive opportunity for the UK supply chain The IEA estimates more than 2,000 GW of onshore wind in a 2 scenario by 2035 A modest share of the global market brings substantial economic benefits to the UK • In 2017, the UK exported £52m worth of onshore wind goods and services (ONS, 2019), capturing around 0.2% of the global market • An assessment of UK trade in similar goods suggests that a 1.6% share of the EU27 market and 0.4% share of the RoW is feasible • If the UK onshore wind supply chain can achieve these modest market shares, turnover from exports could support 3,700 jobs in 2035 • Note: decline in export jobs is driven by a decline in the rate of annual onshore wind additions in the EU27 between 2030 and 2035 compared to the prior 5 year period • Source: IEA (2017) ETP; Direct jobs

24. Quantifying the economic benefits of onshore wind to the UK The location of O&M jobs in 2035 depends on the location of existing wind farms today, projects in the onshore wind pipeline* and wind quality The REPD locates 12.8 GW of operational onshore wind The remaining 15.5 GW are located according to wind quality and technical constraints The REPD locates 6.7 GW of projects in the pipeline Existing onshore wind farms by local authority Onshore wind projects in the REPD permitting pipeline UK wind quality at 100m (WPD) Dark areas indicate highest quality wind + + • Note: Jobs map; For a list of technical constraints see: Vivid Economics and Imperial College London (2019): Accelerated Electrification and the GB Electricity System • *Pipeline projects are from the REPD (Renewable Energy Planning Database). Pipeline projects include wind farms categorised as under construction, planning permission granted and planning application submitted.

25. Quantifying the economic benefits of onshore wind to the UK The location of development, manufacturing and installation jobs depends on the location of the existing supply chain today RenewableUK supply-chain map Development, manufacturing and installation jobs are attributed to local authorities with existing supply chain facilities Note: Jobs map

26. Quantifying the economic benefits of onshore wind to the UK Onshore wind employment is likely to be located in local authorities most in need of high-paying, high-productivity jobs Employment in 2030 Employment in 2035 Local authorities in Wales could see a sizeable increase in onshore wind employment • Note: Locating jobs

27. Quantifying the economic benefits of onshore wind to the UK Onshore wind jobs can raise productivity throughout the UK Onshore wind can lift GVA by £244m per year in 2030 Onshore wind can lift GVA by £285m per year in 2035 Scotland, Wales, Northern Ireland and Cornwall could see productivity increases Text Text Text • Notes: Uplift by region, GVA/worker, Some LAs, such as Aberdeenshire, see a decline in productivity due to onshore wind GVA/worker below the LA average. In Aberdeenshire, this is a result of comparing onshore wind jobs with relatively high GVA/worker oil and gas jobs

28. Quantifying the economic benefits of onshore wind to the UK Productivity uplift by region in 2030 and 2035 • Note: Productivity map

29. Quantifying the economic benefits of onshore wind to the UK Indicative distribution of economic benefits in Scotland Employment uplift in 2035 Productivity uplift in 2035 • Note: Jobs by region, Locating jobs