Economic benefits from onshore wind farms

A report for ScottishPower Renewables

Subtitle
September 2017
Document history
Revision Description Circulation classification Authored Checked Approved Date

3 For client Client discretion CED SGM AER 15 Sept 2017

BVG Associates

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Front cover image courtesy of ScottishPower Renewables.

2
 Economic benefits from onshore wind farms

Executive summary Total investment and impacts of ScottishPower

Renewables’ eight onshore wind farms (474MW)
ScottishPower Renewables (SPR) recognises the
importance of the economic benefits to Scotland and the  £1.6 billion investment
rest of the UK from investing in onshore wind generation.
Content in total expenditure
SPR commissioned BVG Associates (BVGA) to assess the
UK, Scotland and local (south west Scotland) economic  66% UK content
benefits created by eight onshore wind farms in south west
Scotland commissioned between 2016 and 2017. The wind  51% Scottish content, including 16% local (south west
farms have a combined capacity of 474MW. This report Scotland) content
shows the contribution onshore wind can make in the Economic impact over the lifetime of the projects
Government's future industrial and energy strategies.
 £1,276 million gross value-added in the UK
UK, Scottish and local content
 £297 million local value-added
The analysis uses the methodology BVGA has developed
for the Offshore Wind Programme Board to calculate the  31,118 UK FTE years, including 7,768 local FTE years
content in UK offshore wind projects.  £814 million UK earnings, including £194 million local
In this report, 'UK content' is the value of all supplies earnings
sourced from within England, Northern Ireland, Scotland  £59 million community benefit funding
and Wales that accrues as earnings from employment and
business profits. It is the sum of 'direct' and 'indirect'
impacts. 'Scottish content’ is the value captured in Table A Summary of content by geographic region
Scotland. ‘Local content’ refers to the south west Scotland. aggregated across the eight wind farms.
UK content in total expenditure (TOTEX) relating to the
eight onshore wind farms analysed in this study over the Category Region % content % content of
whole period covered is calculated at 66% and 51% is of TOTEX category
Scottish content (77% of the UK content figure), including
16% local content. Non-UK content accounts for 34% of DEVEX Local 0.2% 11.6%
wind farm related expenditure. The development,
commissioning and operation of the eight wind farms will Scottish 1.5% 74.4%
represent a total investment of around £1.6 billion by SPR,
which is almost £3.4 million per MW. UK 2.0% 93.6%
Source: BVG Associates
CAPEX Local 1.1% 2.3%

Scottish 9.3% 25.0%

Local,
16.5%
UK 12.5% 33.8%

OPEX Local 15.2% 25.1%

34.0%
Scottish 40.6% 67.0%

UK 51.5% 85.1%
UK,
66.0% Rest of TOTEX Local 16.5% 16.5%
Scotland,
34.9%
Scottish 51.4% 51.4%
Rest of
UK, 14.6%
UK 66.0% 66.0%

Figure A UK content aggregated across the eight wind

farms.

3
The UK content in SPR’s wind farms is higher than Across the eight onshore wind farms, the annual funds
previously reported for other projects and the main factor available for distribution by communities from 2015 total
1
appears to be relative proportions of CAPEX and OPEX. almost £2.5 million at 2016 prices. Over 25 years, this
gives total community benefit funding income of £59
Economic impact
million.
Economic impact is considered in terms of local value-
Source: BVG Associates
added (LVA), gross value-added (GVA) in the UK, full-time
2
equivalent (FTE) years employment and earnings. All data
presented is given in real prices at final investment
decision (FID), that is, not adjusted for future inflation. A Induced,
summary of economic impacts is shown in Table B. £235
million,
Table B Summary of direct. Indirect and induced 18.5%
Direct,
economic impact. £624
million,
Impact UK Local 48.9%

Value-added £1,276 million £297 million Indirect,

£416
million,
FTE years 31,118 7,768 32.6%

Earnings £814 million £194 million

Of the total £1,276 million GVA created, 49% is direct

Figure B Gross value-added by direct, indirect and
value-added (shown in Figure B). Direct value-added
induced to 2040.
relates to work undertaken by SPR and its immediate
suppliers’ own staff within the UK. GVA averages Source: BVG Associates
2
£41,000/FTE year between 2013 and 2040.
Of the total £297 million LVA created, 51% is direct value-
added (shown in Figure C). Direct value-added relates to
Induced,
work undertaken by a contractor’s own staff within south £42
west Scotland. LVA averages £38,000/FTE year between million,
2013 and 2040. 14.3%

The number of local FTE years created over the lifetime of

the projects is 7,768, with 31,118 UK FTE years created Direct,
£153
over the lifetime of the projects. A local FTE year is an FTE million,
working for a company that is operating within the local Indirect, 51.4%
(south west Scotland) area. £102
million,
Total local earnings created over the lifetime of the projects 34.3%
are £194 million. Annual local earnings average
£25,000/FTE year between 2013 and 2040. Total UK
earnings created over the lifetime of the projects is £814
million. Annual UK earnings average £26,000/FTE year
between 2013 and 2040.

Figure C Local value-added by direct, indirect and

induced to 2040.
1
For each of the eight wind farms, actual DEVEX and CAPEX
transaction data was available. OPEX data was mostly budgetary.

2
Value-added calculations exclude that generated from SPR’s
profits.

4
 Economic benefits from onshore wind farms

Contents
1. Introduction ............................................................................................................................................................................. 7
2. Methodology ........................................................................................................................................................................... 8

2.1. UK, Scottish and local content .......................................................................................................................................... 8

2.2. Economic impact .............................................................................................................................................................. 8
3. Results .................................................................................................................................................................................. 10
3.1. UK, Scottish and local content ........................................................................................................................................ 10
3.2. Economic impact ............................................................................................................................................................ 12

4. Discussion ............................................................................................................................................................................ 15
4.1. Onshore wind UK content ............................................................................................................................................... 15
4.2. Offshore wind UK content ............................................................................................................................................... 16
4.3. Differences between ScottishPower Renewables wind farms ........................................................................................ 16
4.4. Conclusions .................................................................................................................................................................... 16
Appendix A : Economic impact assessment methodology ............................................................................................................ 17

Appendix B : Comparison with conventional economic impact methodologies ............................................................................. 18

Appendix C : Economic impact graphs ......................................................................................................................................... 19
Appendix D : Impacts from community benefit funds .................................................................................................................... 25

List of figures
Figure 1 Location of ScottishPower Renewable wind farms considered in the study. .................................................................... 7
Figure 2 Content by geographic region aggregated across the eight wind farms. ........................................................................ 10
Figure 3 Local content range between wind farms. ...................................................................................................................... 10
Figure 4 UK content range between wind farms. .......................................................................................................................... 11
Figure 5 Aggregated UK content (split by local and rest of UK) in DEVEX and CAPEX. .............................................................. 11

Figure 6 Aggregated local and UK content in OPEX. ................................................................................................................... 12

Figure 7 UK content in offshore wind farms. ................................................................................................................................. 16
Figure 8 Annual undiscounted local value-added by expenditure type to 2040. ........................................................................... 19
Figure 9 Annual undiscounted local value-added by direct, indirect and induced to 2040. ........................................................... 19
Figure 10 Annual undiscounted gross value-added by expenditure type to 2040. ........................................................................ 20
Figure 11 Annual undiscounted gross value-added by direct, indirect and induced to 2040. ....................................................... 20

Figure 12 Annual undiscounted local FTEs by expenditure type to 2040. .................................................................................... 21

Figure 13 Annual undiscounted local FTEs by direct, indirect and induced to 2040. .................................................................... 21
Figure 14 Annual undiscounted UK FTEs by expenditure type to 2040 ........................................................................................ 22
Figure 15 Annual undiscounted UK FTEs by direct, indirect and induced to 2040. ...................................................................... 22
Figure 16 Annual undiscounted local earnings by expenditure type to 2040. ............................................................................... 23

Figure 17 Annual undiscounted local earnings by direct, indirect and induced to 2040. ............................................................... 23
Figure 18 Annual undiscounted UK earnings by expenditure type to 2040. ................................................................................. 24
Figure 19 Annual undiscounted UK earnings by direct, indirect and induced to 2040. ................................................................. 24

5
List of tables
Table 1 Onshore wind farm project data. ........................................................................................................................................ 7
Table 2 Supply chain descriptions. ................................................................................................................................................. 9

Table 3 Summary of content by geographic region aggregated across the eight wind farms. ...................................................... 10
Table 4 Aggregated local, Scottish and UK content within each expenditure category. ............................................................... 11
Table 5 Aggregated local, Scottish and UK content within each expenditure category. ............................................................... 12
Table 6 Economic impacts, 2013 to 2040. .................................................................................................................................... 13
Table 7 UK content in planned wind farms on the Isle of Lewis. ................................................................................................... 15

Table 8 Community benefit spend by category of project. ............................................................................................................ 25

Table 9 Summary of FTE year impacts from community benefit funds. ........................................................................................ 26

6
 Economic benefits from onshore wind farms

1. Introduction Table 1 Onshore wind farm project data.

ScottishPower Renewables (SPR) recognises the Capacity Commission Number of

Wind farm
importance of the economic benefits to Scotland and the (MW) date turbines
rest of the UK from investing in onshore wind farms. To
measure the scale of these benefits, SPR commissioned 1. Black Law 30.06 2016 18
BVG Associates (BVGA) to assess the UK, Scotland and Extension (a)
local (south west Scotland) economic benefits created by
eight onshore wind farms commissioned in 2016 and 2017. 2. Black Law 33.37 2016 16
This report includes assessments on UK content, local Extension (b)
value-added (LVA), gross value-added (GVA), full-time
equivalent years of employment (FTE years) and earnings. 3. Dersalloch 69.0 2016 23
It also includes an assessment of the secondary benefits of
the projects on the local economy. 4. Ewe Hill 1 13.8 2016 6
The work was completed in partnership with Steve
3 5. Ewe Hill 2 36.8 2017 16
Westbrook , an economist who specialises in analysing the
economic impacts from infrastructure investments.
6. Glen App 22.0 2017 11
Figure 1 shows the locations of the eight projects in south
west Scotland. For the purposes of this analysis, south 7. Hare Hill 29.75 2017 35
west Scotland is defined as being the local authority areas Extension
in which at least one of the wind farms is situated, namely:
4
Dumfries and Galloway, East Ayrshire, North Lanarkshire 8. Kilgallioch 239.0 2017 96
and South Ayrshire.

1,2

7
3

4, 5
8
6

Figure 1 Location of ScottishPower Renewable wind

farms considered in the study. Circle size shows
relative wind farm capacity.

Table 1 lists the wind farms considered. The development,

commissioning and operation of the eight wind farms
represents a total lifetime investment of around £1.6 billion
by SPR.

3 4
https://www.uhi.ac.uk/en/media/find-an-expert/steve-westbrook Anticipated fully commissioned in September 2017.

7
2. Methodology relevant suppliers, BVGA used its detailed supply chain
knowledge supplemented with information provided by
To assess the economic benefits from onshore wind farms SPR project managers to derive local and UK content
BVGA used a two-step methodology: figures.

1. A content analysis, and For contracts less than £10 million, BVGA estimated
content figures. BVGA allocated the value as accurately as
2. An analysis of the economic benefits of gross value- possible to the location where the value was generated.
added (GVA), local value-added (LVA) and full-time
equivalent (FTE) years employment, using the content Each contract value was assigned to one or more relevant
data. elements of the supply chain outlined in Table 2 on page 9.

2.1. UK, Scottish and local content We weighted data by the individual wind farm capacity to
derive overall UK content in DEVEX, CAPEX, OPEX and
The analysis uses the methodology BVGA has developed TOTEX.
for the Offshore Wind Programme Board (OWPB) to
calculate the content in UK offshore wind projects.
5 2.2. Economic impact
As defined for this report, 'UK content' is the value of all To model the impacts of the wind farms’ development,
supplies sourced from within England, Northern Ireland, construction and operation, we used an innovative
Scotland and Wales that accrues as earnings from methodology which is based on a detailed understanding of
employment and business profits. It is the sum of 'direct' the wind and transmission supply chains. The methodology
plus 'indirect' impacts. Similarly, 'Scottish content’ is the is explained in Appendices A and B and uses a structured
value captured in Scotland and ‘local content’ is value local content (defined as the direct and indirect value
captured in south west Scotland. Scottish content is the added) analysis from a modelling methodology originally
sum of local content and rest of Scotland content. UK developed by BVGA. The following is analysed:
content is the sum of Scottish content and rest of UK  Direct and indirect gross value added (GVA) and local
content. 'Non-UK content' is the value captured elsewhere. value-added (LVA)
6

According to BVGA’s OWPB methodology, UK content is

 Direct and indirect earnings, and
reported as:
 Direct and indirect full-time equivalent (FTE) job years.
 UK content in development expenditure (DEVEX)
Full-time equivalent (FTE) employment is derived from an
 UK content in capital expenditure (CAPEX) understanding of:
 UK content in lifetime operational expenditure,  Typical profit margins
including decommissioning (OPEX), and
 Costs of employment, and
 UK content in total expenditure (TOTEX).
 Salary levels.
All data presented is given at real prices at final investment
decision (FID). For each of the eight wind farms, actual Where possible, this information was established through
DEVEX and CAPEX data was available for the analysis. discussions with suppliers and was supplemented with
Budgeted estimates were used for OPEX. DEVEX includes additional research.
capitalised salaries for SPR's development and
‘Direct’ impacts relate to work undertaken by a contractor’s
construction staff but excludes other indirect or corporate
own staff. ‘Indirect’ impacts relate to employment
overhead. SPR profits are not included in the data.
generated by the purchase of supplies and services by the
The OWPB methodology states that for contracts issued contractor.
for £10 million or greater, the supplier should be asked to
The induced values for these measures were calculated
provide their content assessment. BVGA approached the
using historical data from other sectors because
relevant suppliers, requested additional data and derived
expenditure patterns of workers in other sectors with
suitable figures for local (south west Scotland), UK and
comparable average earnings are unlikely to differ
non-UK content. Where it was not possible to speak to
significantly.

5
Methodology for measuring the UK content of UK offshore wind
farms, May 2015, BVG Associates for Department of Energy and
6
Climate Change, The Crown Estate and RenewableUK. Available Gross value-added is a national measure. The term local value-
online at https://bvgassociates.com/publications/. Last accessed added is used to measure the value captured in south west
September 2017 Scotland.

8
 Economic benefits from onshore wind farms
The methodology allocates value to the place of work.
Some contractors hire workers resident in south west
Scotland so we treated local workers engaged to work on
the projects as directly employed but with a place of work
the same as the place of residence.
The figures only include the impacts from building and
operating the wind farms. They do not consider the impacts
of profits made by SPR or from central UK Government
revenue generated through taxes.

OPEX is assumed to be spread over the operating life of

the wind farm.
We also provide data on local and UK gross earnings.

Table 2 Supply chain descriptions.

Expenditure Supply chain area Description

DEVEX Project development The processes up to the point of financial close or placing firm orders to proceed with
and management wind farm construction, and project management costs incurred by SPR.

CAPEX Turbine The activity by wind turbine manufacturers and their suppliers, covering nacelle
component manufacture and assembly and blade and tower manufacture. It includes
transport, installation and commissioning. It excludes the turbine service agreement.

Civil works The activity by civil contractors and their suppliers; covering roads and drainage,
crane pads, turbine foundation, meteorological mast foundations, cable trenches and
buildings for electrical switch gear, SCADA equipment and its installation, and a
maintenance and spare part facility.

Electrical works The activity by electrical contractors and their suppliers, covering cables, electrical
switch gear, protection and control system, maintenance facilities and grid
connection.

OPEX Transmission OMS Activity during the lifetime operation of the wind farm, covering grid connection and
transmission costs

Wind farm operations, Activity during the lifetime operation of the wind farm, including land rental costs,
maintenance and business rates, operations and maintenance costs relating to the wind farm,
service (OMS) community benefit funds and environmental costs

Decommissioning The costs associated with the removal of the wind farm components at the end of its
operating life

9
3. Results Source: BVG Associates

3.1. UK, Scottish and local content

Local,
Figure 2 shows the UK content across the eight wind farms
16.5%
is 66% and 51% is Scottish content (77% of the UK content
figure), including 16% local content. Non-UK content
accounts for 34% of the wind farm expenditure. The total
investment across the wind farms is £1.6 billion, equivalent
34.0%
to almost £3.4 million per MW. A summary of weighted
local and other UK content by expenditure category is
shown in Table 3.
UK,
Table 3 Summary of content by geographic region
66.0% Rest of
aggregated across the eight wind farms. Scotland,
34.9%
Category Region % content % content of Rest of
of TOTEX category UK, 14.6%

DEVEX Local 0.2% 11.6%

Figure 2 Content by geographic region aggregated

Scottish 1.5% 74.4%
across the eight wind farms.
UK 2.0% 93.6% Local content comes from three main sources:
 Local suppliers working on the wind farms
CAPEX Local 1.1% 2.3%
 Accommodation for workers working on the wind
Scottish 9.3% 25.0% farms, and
 Expenditure from community payments, rent and rates.
UK 12.5% 33.8% The variation in local content is primarily because of the
selection of significant suppliers that happen to be located
OPEX Local 15.2% 25.1% in south west Scotland. For OPEX, the main driver for
variation is a result of grid charges. TNUoS is estimated to
Scottish 40.6% 67.0% have lower UK content than distribution network charges.
The highest levels of local content (shown in Figure 3)
UK 51.5% 85.1% were 22% for TOTEX, 21% for DEVEX, 5% for CAPEX and
7
34% for OPEX.
TOTEX Local 16.5% 16.5%
100%
Source: BVG Associates
Scottish 51.4% 51.4%
75%
% local content

UK 66.0% 66.0%

50%

25%

0%
DEVEX CAPEX OPEX TOTEX

Figure 3 Local content range between wind farms.

7
These figures do not come from the same wind farm.

10
 Economic benefits from onshore wind farms
Variations in UK content are largely due to differences in Table 4 Aggregated local, Scottish and UK content
the UK content in the CAPEX and this is mainly because of within each expenditure category.
the workforces of the civils contractors. The highest levels
of UK content (shown in Figure 4) were 74% for TOTEX, Category Region % content % content
7
95% for DEVEX, 42% for CAPEX and 90% for OPEX. in DEVEX in
+ CAPEX category
100%
Source: BVG Associates

Development Local 0.6% 11.6%

75%
% UK content

Scottish 4.0% 74.4%

50%
UK 4.9% 93.6%
25%
Turbine Local 0.3% 0.6%

0%
DEVEX CAPEX OPEX TOTEX Scottish 1.0% 1.9%

Figure 4 UK content range between wind farms. UK 1.8% 3.5%

Development and capital expenditure

Civil works Local 1.7% 5.3%
Figure 5 shows UK content in DEVEX and CAPEX to be
36.5%. Table 4 shows 28% of this is Scottish content (76%
of the UK figure), including 2.8% local content. The largest Scottish 21.0% 65.6%
contribution to UK content in DEVEX and CAPEX is
through civil works, which contributes 25.3%. Turbine is the UK 25.2% 79.1%
largest expenditure category within DEVEX and CAPEX
but it contributes a smaller amount (1.8%) to UK content Electrical Local 0.2% 1.8%
than the other expenditure categories. works
Local, 0.6% Local, 0.3% Scottish 2.0% 18.1%
Rest of UK,
Local, 0.3% Rest of UK, 4.3% Rest of UK,
4.3% 1.5% UK 4.6% 42.7%

Electrical works, Total DEVEX Local 2.8% 2.8%

11.1% and CAPEX
Development,
5.3% Scottish 28.0% 28.0%
Civil works,
32% Turbine, UK 36.5% 36.5%
Rest of UK, 51.6%
22.9%

Local, 2.3%

Source: BVG Associates

Figure 5 Aggregated UK content (split by local and rest

of UK) in DEVEX and CAPEX.

Table 4 shows the aggregated local and UK content figures

as a percentage of each expenditure category.

11
Operational expenditure Table 5 Aggregated local, Scottish and UK content
within each expenditure category.
Figure 6 shows UK content in OPEX to be 85.3%. Table 5
shows 66.8% of this is Scottish content (78% of the UK
Category Region % %
figure), including 25.0% local content. The largest
content content
contribution to UK content in OPEX is through wind farm
in OPEX in
OMS, which contributes 68% to UK content.
category
Source: BVG Associates
Local, 0.1% Transmission Local 0% 0%
Rest of UK, OMS
2.0% Rest of UK, Scottish 5.0% 22.7%
15.1%
UK 15.1% 68.1%
Decommissioning,
2.4%
Wind farm OMS Local 24.9% 19.0%
Transmission
OMS, 21.6%
Scottish 60.0% 79.0%

Wind farm OMS, UK 68.1% 89.9%

Rest of UK, 76.0%
43.2% Local,
24.9% Decommissioning Local 0.1% 4.0%

Scottish 1.8% 72.0%

UK 2.1% 84.0%
Figure 6 Aggregated local and UK content in OPEX.
Total OPEX Local 25.0% 25.0%

Scottish 66.8% 66.8%

UK 85.3% 85.3%

3.2. Economic impact

Economic impact is considered as:

 LVA

 GVA, and

 FTEs.
Earnings and community benefits are also discussed.

In Section 3.2, figures are presented to 2040, which is the

projected date for the final decommissioning of five of the
wind farms. For the purpose of this study, OPEX has been
averaged over the lifetime of the projects. The remaining
three wind farms' final decommissioning is projected for
2041. There is also likely to be a good case for either life
extension after this or repowering but the impacts of this
have not been modelled. There will also continue to be
economic impacts from the maintenance of the grid
connection and other renewable energy investments.
Table 6 summarises LVA, GVA, FTE years and earnings
by expenditure and direct, indirect and induced.
Appendix C includes graphs showing the annual impacts.

12
 Economic benefits from onshore wind farms
Table 6 Economic impacts, 2013 to 2040.

Supply chain Type Local value- Gross value- Local FTE UK FTE Local UK earnings
element added added years years earnings (£million)
(£million) (£million) (£million)

Development Direct £1.1 £9.0 14 108 0.5 4.3

Indirect £0.7 £6.0 23 179 0.5 4.2

Induced £0.3 £3.5 5 51 0.1 1.4

Total £2.2 £18.5 43 338 1.2 9.9

Turbine Direct £1.0 £6.4 13 134 0.6 3.6

Indirect £0.7 £4.3 23 140 0.5 3.3

Induced £0.3 £2.4 5 42 0.1 1.1

Total £2.0 £13.0 42 316 1.2 7.9

Civil works Direct £6.5 £96.0 176 2,459 4.4 65.2

Indirect £4.3 £64.0 119 1,667 2.9 43.4

Induced £2.0 £38.4 44 825 0.9 17.4

Total £12.7 £198.4 339 4,951 8.2 125.9

Electrical works Direct £0.6 £18.0 15 388 0.4 12.2

Indirect £0.4 £12.0 10 283 0.3 8.2

Induced £0.2 £7.9 4 154 0.1 3.3

Total £1.3 £37.8 29 825 0.8 23.7

Transmission OMS Direct £0.0 £88.8 - 1,826 0.0 60.3

Indirect £0.0 £59.2 - 1,722 0.0 40.5

Induced £0.0 £35.8 - 646 0.0 16.1

Total £0.0 £183.8 - 4,194 0.0 116.8

Wind farm OMS Direct £142.9 £394.1 3,593 9,553 97.0 267.5

Indirect £95.3 £262.7 2,868 7,571 64.5 177.9

Induced £39.5 £143.2 818 2,839 19.9 71.3

Total £277.7 £800.0 7,278 19,963 181.5 516.7

Decommissioning Direct £0.7 £12.2 19 217 0.5 5.8

Indirect £0.5 £8.1 14 243 0.3 5.7

Induced £0.2 £4.3 4 70 0.1 1.8

Total £1.3 £24.6 37 530 0.9 13.3

Total Direct £152.8 £624.4 3,829 14,685 103.4 418.7

Indirect £101.9 £416.3 3,058 11,805 69.1 283.2

Induced £42.5 £235.5 881 4,628 21.3 112.3

Total £297.2 £1,276.2 7,768 31,118 193.8 814.2

13
Gross and local value-added
Total GVA created between 2013 and 2040 is estimated at
8
£1,276 million, of this £297 million is total LVA.

GVA averages £41,000/FTE year between 2013 and 2040.

This is typical of activity with a significant level of manual
labour. LVA is estimated to average £38,000/FTE year
between 2013 and 2040. This is lower than GVA/FTE year
because, although there are some significant suppliers in
south west Scotland, many of the jobs will be in providing
accommodation and local services to the wind farms.

Full-time equivalent years employment

UK FTE years created over the lifetime of the projects is
estimated to be 31,118. Of these, local FTE years are
created over the lifetime of the projects is 7,768.

A local FTE year is considered as somebody working for a

company that is operating within the local (south west
Scotland) area.

Earnings
The total UK earnings created over the lifetime of the
project is estimated to be £814 million, of this £194 million.
is local earnings created over the lifetime of the project.
Annual local earnings are on average £25,000/FTE year
between 2013 and 2040. Annual UK earnings are on
average £26,000/FTE year between 2013 and 2040.

Community benefit
Across the eight SPR wind farms in south west Scotland,
the annual funds available for distribution by communities
total almost £2.5 million at 2016 prices. Annual
contributions by SPR will be index linked. Over 25 years,
this gives total community benefit fund (CBF) income of
almost £59 million.

An estimated total of 9,300 FTE years is created locally

from CBFs. At an estimated average of £23,000 gross
earnings per FTE year; this would give additional local area
earnings totalling around £213 million at 2016 prices.
Economic impacts from the CBF are included in the
economic impact analysis discussed above as they are
part of wind farm OMS expenditure. Potential economic
impacts arising specifically from CBFs are discussed in
more detail in Appendix D.

8
GVA does not include SPR profits

14
 Economic benefits from onshore wind farms

4. Discussion Before the Isle of Lewis study, the most comprehensive

analysis of UK content in onshore wind was undertaken by
The weighted average UK content in TOTEX of the eight GL Garrad Hassan and published by RenewableUK in
10
wind farms analysed in this study is calculated as 66%. 2010. It reported UK content in TOTEX to be 53.9%, with
Scottish content is 51%, including 16% Local Content. 24% UK content in CAPEX and 92% in OPEX. The data
These figures can be usefully compared with data for other suggests the projects did not use UK-sourced towers
onshore wind farms and for offshore wind farms. This because the study reported a UK content figure for turbines
section will focus on the results for local and UK content of only 4%.
because they provide data that can be readily compared A second study for RenewableUK, undertaken by Biggar
with other analyses. Economics, was published in 2015 and analysed data from
11
20 wind farms built between 2011 and 2014. It reported a
4.1. Onshore wind UK content UK content in TOTEX of 69%.This analysis appears to
have assumed a UK content of 100% for major contracts,
The most recent public analysis was conducted by BVGA
which would be unlikely if the analysis had used the now
for EDF Energy Renewables (EDF) in relation to its
9 formally adopted methodology for offshore wind.
planned development of wind farms on the Isle of Lewis.
Table 7 shows that UK content in TOTEX was calculated to In conclusion, the UK content in SPR’s wind farms is higher
be 56.5% compared with 66% in SPR’s fleet of eight than previously reported for other projects and the main
onshore wind farms delivered in the period 2016-2017. UK factor appears to be the relative proportions of CAPEX and
content in the turbine was 10% in the Isle of Lewis study OPEX. There is uncertainty around content reported for
compared with 7% for SPR’s projects. The main reason for other projects where calculations are solely made using
this was the assumption of UK-sourced towers for the EDF budgetary data.
projects. Similar conclusions were reached for civil and
Comparisons in local content are difficult because the area
electrical works. The main reason for the differences in UK
defined as local is largely dependent on the needs of the
content in TOTEX is because of differences in the
organisation that commissioned the study. In both this
proportion of costs between expenditure categories, and in
analysis and the Isle of Lewis study, we used the local
particular the ratio of OPEX to CAPEX, which is higher in
authority areas for which at least one wind farm was
this study. If UK content in OPEX is high and it forms a
located. In this current study, local content in TOTEX was
higher proportion of TOTEX, it leads to a higher UK content 12
23% compared with up to 24% for the Western Isles.
in TOTEX.
Although similar, the source of the local content was
different. In the Western Isles, local content (excluding
Table 7 UK content in planned wind farms on the Isle of
9 community benefit expenditures) came from the
Lewis.
recruitment of local labour during construction and the
presence of a permanent maintenance team on the
Category % of Country % content % content
islands. In this study, the main contribution to local content
TOTEX of TOTEX of category
is the presence in the area of a few significant suppliers.
DEVEX 4.8% UK 4.3% 90.0%

Non-UK 0.5% 10.0%

CAPEX 49.2% UK 13.3% 27.1%

Non-UK 35.8% 72.9%

OPEX 46.1% UK 38.9% 84.5%

Non-UK 7.1% 15.5%

10
TOTEX 100.0% UK 56.5% 56.5% Onshore Cost / Benefits Study, November 2010, GL Garrad
Hassan for RenewableUK. No longer available online.

11
Onshore Wind: Economic Impacts in 2014, April 2015, Biggar
Economics for RenewableUK. Available online at
http://www.renewableuk-cymru.com/wp-
content/uploads/2015/04/Benefits-of-onshore-wind-report.pdf. Last
9
Economic benefits from the development of wind farms in the accessed September 2016.
Western Isles, February 2017, BVG Associates for EDF Energy
12
Renewables. Available online at The local content was constrained by the availability of local
https://bvgassociates.com/publications/. Last accessed August labour. At peak periods of construction, more labour needed to be
2017. brought onto the island.

15
4.2. Offshore wind UK content For UK content figures the variation between wind farms
comes mainly from CAPEX and, in particular, the civils
RenewableUK published offshore wind UK content data in contract. Most of the civils contractors delivered the work
13
2017 for DEVEX, CAPEX and OPEX (see Figure 7). It from Scottish offices using a UK labour force. Local and
showed an average UK content in TOTEX of 48%. UK community impacts
content in CAPEX was 29%. This is lower than observed
Major components of OPEX are land rent, voluntary
for onshore wind because of the strong non-UK supply
community benefit payments and business rates. We have
chain for offshore foundations and the use of non-UK
assumed significant of local content in the expenditure of
vessels and contractors for installation. UK content in
these payments. They therefore dominate the local content
OPEX is also lower because of the use of non-UK vessels
figures. Cumulative local employment impacts will be
and contractors.
substantial over the lifetime of the projects.
100%
4.4. Conclusions
75% The results from this analysis show that the local and UK
% UK content

content in the eight onshore wind farms considered is

higher than previously reported for other onshore wind
50% farms and offshore wind farms. The main drivers for UK
content are:
25% 1. Differential costs for the main packages and areas of
expenditure such as turbine, civil works and
transmission OMS
0%
DEVEX CAPEX OPEX TOTEX 2. The recruitment of labour for the civils contract, and

Figure 7 UK content in offshore wind farms. The bars 3. The availability of UK-sourced towers.
show the range of results from different wind farms. For SPR’s wind farms, the first of these was largely
The Offshore Wind Developers Forum (the predecessor to favourable in increasing UK content by virtue of OPEX
the Offshore Wind Industry Council) declared in 2012 a values being relatively higher than in other studies, either
‘vision’ that the UK content in offshore wind farms would be because OPEX was high or because civils or turbine
50%. Although this is not a formal target, some wind farm contract prices are lower. For the second, SPR, contracted
owners see this as the benchmark against which their wind a civils company who typically use a proportion of labour
farms will be judged. brought over from the Republic of Ireland, which leads to a
lower proportion of UK content.
4.3. Differences between The only option for UK-sourced towers is CS Wind UK,
ScottishPower Renewables wind based in Campbeltown. It did not supply towers for any of
SPR’s wind farms. It was assumed to be the supplier for
farms the Western Isles wind farms analysis, because EDF
Energy Renewables signed a framework agreement
Figure 3 and Figure 4 in Section 3.1 show the range in 14
covering all its UK onshore wind farms.
local and UK content respectively for DEVEX, CAPEX,
OPEX and TOTEX. For local content, the variation is
primarily due to the presence of suppliers in the local area.
In these cases, the local presence is largely coincidental
and their designation as local companies is based on the
presence of the Blacklaw wind farm extensions. If the
Blacklaw wind farm extensions were excluded, the content
associated with these suppliers would have been classified
as a combination of Scottish and UK content.

13
Offshore Wind Industry Investment in the UK: 2017 Report on
Offshore Wind UK Content, September 2017, RenewableUK.
Available online at
www.renewableuk.com/resource/resmgr/publications/Offshore_Wi
14
nd_Investment_V4.pdf. Last accessed September 2017. http://www.cswinduk.com/newsfeed/2

16
 Economic benefits from onshore wind farms

Appendix A: Economic impact assessment methodology

Conventional modeling of economic impacts for most estimate typical salary levels, costs of employment and
industrial sectors relies on government statistics, for profit margins, bringing together BVGA’s specific sector
example those based on Standard Industry Classification knowledge and research into typical labor costs for the
(SIC) codes and use input-output tables and other work undertaken in each supply chain subelement.
production and employment ratios, for example those
produced by the Office of National Statistics
SIC code data can be appropriate for traditional industries
at a national level. The development of new codes for a
maturing sector, however, takes time. This means that
conventional SIC analyses of offshore wind need to map
existing NAICS data onto offshore wind activities, which is
not easy and a source of error. Analyses using SIC codes
also have to rely on generalised data.

Offshore wind is ideally suited to a more robust approach

that considers current and future capability of local supply
chains because:

 Projects tend be large and have distinct procurement

processes from one another, and

 Projects tend to use comparable technologies and

share supply chains.
It therefore enables a realistic analysis of the local, regional
and national content of projects even where there are gaps
in the data.

The methodology proposed here has been developed

jointly by BVGA and Steve Westbrook of the University of
the Highlands and Islands and has been used for a series
of major clients,.
The methodology’s first input is the cost per MW of each of
the 18 supply chain subelements at the time of wind farm
completion.
The remaining expenditure is analogous to the direct and
indirect gross value added (GVA) created. GVA is the
aggregate of labour costs and operational profits. We can
therefore model full time equivalent (FTE) employment
from GVA, provided we understand some key variables. In
our economic impact methodology, employment impacts
are calculated using the following equation:
GVA M
FT a
a W
Where:
FTEa = Annual FTE employment
GVA = Gross value added ($)
M = Total operating margin ($)
Ya = Average annual wage ($), and

W a = Non-wage average annual cost of employment

($).
To make robust assessments, therefore, we consider each
major component in the offshore wind supply chain and

17
Appendix B: Comparison with conventional economic impact
methodologies
Conventional method BVG Associates method

Total expenditure Total expenditure

Review of Review of
contracts contracts

Fraction of UK spend UK spend at tier

at tier 1 level 1 level

UK spend at
Map onto tier 2 level
SIC codes
UK spend at
lower tiers
Statistical
multipliers
Indirect GVA Split direct
and FTEs and indirect

Direct GVA Induced

and FTEs UK content = UK direct and indirect GVA
GVA
Induced GVA
and FTEs Cost of employment Profit C of e P

Wage bill W

Salaries Salaries

Inirect FTEs Induced

Direct FTEs FTEs

In a conventional analysis, multipliers are used that are based The multipliers used in conventional analysis in effect ignore
on statistics of expenditure flows in different sectors. Once the supply chain in detail, assuming that sector statistics are
the analysis has established what contracts have been valid. The BVGA method is based on the offshore wind UK
awarded to companies in the UK, the contractors are content methodology that seeks to understand the supply chain
associated with one of more sectors used in the Standard in the lower tiers and produces a figure that is equivalent to
Industry Classification. Input-output tables created, for direct and indirect GVA. Calculating a UK content figure, and
example, by the Office of National Statistics are used to having an understanding of profit margins, costs of
develop multipliers. These multipliers are used to calculate employment and salaries enables direct and indirect FTEs to
how demand in each of the SIC sectors leads to direct, be calculated. Induced impacts are calculated using
indirect and induced impacts. conventional multipliers. The same methodology is followed for
local content.

18
 Economic benefits from onshore wind farms

Appendix C: Economic impact graphs

15
Source: BVG Associates
Local value-added (£million)

10

0
'13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30 '31 '32 '33 '34 '35 '36 '37 '38 '39 '40
Development Turbine Civil works Electrical works Transmission OMS Wind farm OMS Decommissioning

Figure 8 Annual undiscounted local value-added by expenditure type to 2040.

15
Source: BVG Associates
Local value-added (£million)

10

0
'13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30 '31 '32 '33 '34 '35 '36 '37 '38 '39 '40

Direct Indirect Induced

Figure 9 Annual undiscounted local value-added by direct, indirect and induced to 2040.

19
 250
Source: BVG Associates
Grossl value-added (£million)

200

150

100

50

0
'13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30 '31 '32 '33 '34 '35 '36 '37 '38 '39 '40

Development Turbine Civil works Electrical works Transmission OMS Wind farm OMS Decommissioning

Figure 10 Annual undiscounted gross value-added by expenditure type to 2040.

250
Source: BVG Associates
Grossl value-added (£million)

200

150

100

50

0
'13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30 '31 '32 '33 '34 '35 '36 '37 '38 '39 '40

Direct Indirect Induced

Figure 11 Annual undiscounted gross value-added by direct, indirect and induced to 2040.

20
 Economic benefits from onshore wind farms

400
Source: BVG Associates

300
Full time equivalent years

200

100

0
'13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30 '31 '32 '33 '34 '35 '36 '37 '38 '39 '40

Development Turbine Civil works Electrical works Transmission OMS Wind farm OMS Decommissioning

Figure 12 Annual undiscounted local FTEs by expenditure type to 2040.

400
Source: BVG Associates
Full time equivalent years

300

200

100

0
'13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30 '31 '32 '33 '34 '35 '36 '37 '38 '39 '40

Direct Indirect Induced

Figure 13 Annual undiscounted local FTEs by direct, indirect and induced to 2040.

21
 6,000
Source: BVG Associates

5,000
Full time equivalent years

4,000

3,000

2,000

1,000

0
'13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30 '31 '32 '33 '34 '35 '36 '37 '38 '39 '40

Development Turbine Civil works Electrical works Transmission OMS Wind farm OMS Decommissioning

Figure 14 Annual undiscounted UK FTEs by expenditure type to 2040

6,000
Source: BVG Associates

5,000
Full time equivalent years

4,000

3,000

2,000

1,000

0
'13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30 '31 '32 '33 '34 '35 '36 '37

Direct Indirect Induced

Figure 15 Annual undiscounted UK FTEs by direct, indirect and induced to 2040.

22
 Economic benefits from onshore wind farms

15
Source: BVG Associates
Earnings (£million)

10

0
'13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30 '31 '32 '33 '34 '35 '36 '37 '38 '39 '40

Development Turbine Civil works Electrical works Transmission OMS Wind farm OMS Decommissioning

Figure 16 Annual undiscounted local earnings by expenditure type to 2040.

15
Source: BVG Associates
Earnings (£million)

10

0
'13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30 '31 '32 '33 '34 '35 '36 '37 '38 '39 '40

Direct Indirect Induced

Figure 17 Annual undiscounted local earnings by direct, indirect and induced to 2040.

23
 140
Source: BVG Associates

120
Earnings (£million)

100

80

60

40

20

0
'13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30 '31 '32 '33 '34 '35 '36 '37 '38 '39 '40
Development Turbine Civil works Electrical works Transmission OMS Wind farm OMS Decommissioning

Figure 18 Annual undiscounted UK earnings by expenditure type to 2040.

140
Source: BVG Associates

120

100
Earnings (£million)

80

60

40

20

0
'13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30 '31 '32 '33 '34 '35 '36 '37 '38 '39 '40

Direct Indirect Induced

Figure 19 Annual undiscounted UK earnings by direct, indirect and induced to 2040.

24
 Economic benefits from onshore wind farms

Appendix D: Impacts from community benefit funds

In recognition that the communities surrounding its onshore music festival costs (events can bring in visitors from other
wind farms host an energy facility that is of national benefit, areas who spend locally), provision of play park equipment,
SPR voluntarily provides community benefit funds (CBF). and relief of fuel poverty measures.
By August 2017, it had voluntarily contributed more than
Expenditures on community and environmental projects will
£22 million to communities across the UK. These funds are
mainly provide benefits for residents, although in some
used for local improvement projects and often focus on
cases visitors to the area will also benefit from new and
promoting local tourism, providing bursaries for further
improved facilities and services. In relation to economic
education or improving and extending local facilities and
benefits, the focus below is on employment impacts within
services. SPR CBFs are managed locally and can be
the local (south west Scotland) area as defined for the
administered by the local communities. This allows local
purposes of this report. There will be wider UK benefits, for
people to determine what initiatives are of greatest benefit
example through construction and other development work
to their community.
undertaken within the area by companies or people from
Across the eight SPR wind farms in South West Scotland, outside the area and operational expenditures on supplies
the annual funds available for distribution by communities and services from outside the area, as well as “induced”
total almost £2.5 million at 2016 prices. Over 25 years, at impacts through the multiplier. UK or Scotland benefits,
2016 prices, this gives total community benefit fund (CBF) however, are not possible to profile meaningfully net of
income of £59 million. With some constraints set by SPR, displacement. Net impacts will be significantly lower in the
including not using the CBF to replace existing statutory UK and Scotland than in the local area due to expenditures
funding, these organisations will be able to spend their by local residents and visitors in the area rather than in
portion of the CBF across a wide range of economic, social other areas, or by Lottery and other funding that would
and environmental projects and activities. otherwise have gone to projects in other areas. A possible
breakdown of community benefit spend over 25 years
Profiling how the CBF will be spent over the 25 years and
across the wind farms is assumed in Table 8.
what impacts will be is only indicative at this stage. The
profiling takes into account early experience of spending by Table 8 Community benefit spend by category of
the distributing bodies and experience from other project.
communities in Scotland that have planned how CBF
money from wind farms and other renewables projects Category Spend per
might be spent. Early expenditures are likely to span a £million of
range of local recreational and social groups, for example revenue
to improve premises, buy new equipment and travel to
events. Funding substantial capital projects is expected to Business development projects £100,000
increase in focus over time – for example, investment in
new or expanded community halls, sports facilities, tourism Community buildings and £500,000
/ visitor facilities and units for local business development. facilities
Some community funded projects will directly create local
jobs, for example through construction contracts, operating Tourism and visitor facilities £100,000
new facilities and services, or attracting overnight stay
visitors; whilst others will make areas more attractive to live Community transport £50,000
in and create employment indirectly through increasing the
local population, stimulating business development, Energy efficiency measures £100,000
improving energy efficiency in properties, town centre
improvements, and stimulating private and third sector Miscellaneous social and £150,000
investment. environmental projects and
Impacts per pound accessed from community benefit funds activities
will be higher where money is used as match funding for
applications to the Scottish Government, the Lottery, and
other sources across a range of support programmes. In Construction
some cases funding may be spent on projects undertaken Across the above categories of spend it is assumed that
in partnership with other local organisations. Early £700,000 per £1 million of community benefit funding is
examples of spend from community benefit funds in South spent on new or improved buildings, equipment, improved
West Scotland include: purchases of minibuses, a facilities and work by trades people that would support
contribution towards the running costs of affordable local employment. Adding levered funding from external
accessible community transport, shop front improvements, sources such as the Scottish Government and Lottery
development officer employment costs, contributions to funding might increase this to £1 million. Inclusive of

25
indirect and induced impacts this might, on average, Energy efficiency measures
support 15 FTEs in South West Scotland per £1 million of
Related employment impacts, where applicable, are
spend. This would give a total impact over 25 years of 885
covered under construction and business development
FTE years.
impacts above.
Business development projects
Miscellaneous social and environmental projects and
Exclusive of construction, business development spend of activities
£100,000 might support four FTEs inclusive of indirect and
Excluding impacts already covered above, it is assumed
induced impacts, with FTEs lasting an average of 10 years.
that expenditure of £150,000 might on average support two
This allows for some support funding from external
FTE years in the years in which the expenditures are
agencies such as Scottish Enterprise. This would give a
made. This would give a total over 25 years of around 120
total impact over 25 years of 2,360 FTE years.
FTE years.
Community buildings and facilities
Table 9 summarises the FTE year impacts from CBFs. At
It is assumed that buildings and improved facilities costing an average of £23,000 gross earnings per FTE year, this
the community £500,000 (plus levered funding) might results in local area earnings totalling around £170 million
support, over twenty years from when the expenditures are at 2016 prices.
made, an average of three FTEs per year, inclusive of
indirect and induced impacts – including management, Table 9 Summary of FTE year impacts from community
administration, maintenance, and other supplies and benefit funds.
services for activities (excluding voluntary inputs). These
impacts take into account support funding that might be Breakdown FTE years
provided under category seven below. This would give a
total over 25 years of 3,540 FTE years. Construction 885

Tourism and visitor facilities

Business development projects 2,360
It is assumed that new and improved tourism / visitor
facilities might generate additional visitor spend in the area Community buildings and 3,540
through day trips and overnight stays. This could total facilities
£90,000 per year from development spend of £100,000
(plus levered funding), inclusive of entry and parking Visitor facilities and sites 1,770
charges that would support direct employment. Inclusive of
indirect and induced impacts, each £60,000 of visitor spend Community transport 590
in the area might support one FTE job year. This would
give a total over 25 years of 1,770 FTE years. Miscellaneous social and 120
environmental projects and
Community transport
activities
On average, spend of £50,000 on community transport
provision and subsidies might generate one FTE year of Total 9,265
local work for 10 years, inclusive of indirect and induced
impacts. This would principally relate to driving and vehicle
maintenance. This would give a total over 25 years of 590
FTE years.

26