Investigating Economic Impact of Offshore Wind in Northern Ireland
"Explore the economic implications of offshore wind investment in Northern Ireland, focusing on the policy background, literature review of macroeconomic models, and the use of CGE framework to estimate impacts. The paper aims to provide insights for policymakers on green growth and job creation in the renewable energy sector."
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X T H E P L A C E O F U S E F U L L E A R N I N G X S T R AT H C LY D E B U S I N E S S S C H O O L Investigating the Economic Impact from offshore wind in Northern Ireland Kevin Connolly, University of Strathclyde, Glasgow, Scotland.
X S T R AT H C LY D E B U S I N E S S S C H O O L Policy Background The Climate Change (Northern Ireland) Act 2022 80% of electricity by renewables by 2030 Offshore Renewable Energy s Action Plan (OREAP) Sustainability and Co-existence, Enabling Farmwork s; Electricity Network; Economic Growth; Legislation and Regulation Grow the Low Carbon Renewable Energy Economy to 2 billion by 2030. Roughly double. Large resource/potential so offshore wind seen as a key in driving economic growth
X S T R AT H C LY D E B U S I N E S S S C H O O L Literature Review of macroeocomic models for renewables Significant body of academic and policy research investigating impacts of renewables on an economy IO used throughout the literature in estimations of impacts Demand (gross) - Brelik et al. (2023); Aponte et al. (2021) Replacement (net) - Mardones (2023) ; Allan et al. (2020) Argument that due to the type and scale of investment may lead to over/under estimation using IO. Connolly (2020) Some author s choose to use CGE framework Graziano et al (2017)
X S T R AT H C LY D E B U S I N E S S S C H O O L The papers question Aim: Use CGE framework to estimate economy-wide impacts of investment in offshore wind in small regional economy (NI). Novelty: Compares the demand-side with the supply-side impacts which are often overlooked. Adds to the growing literature on economic impact of offshore wind Why: Important for the policy makers in decision making and adds to the argument around green jobs and inclusive green growth.
X S T R AT H C LY D E B U S I N E S S S C H O O L Modelling Framework Employ multisectoral computable general equilibrium model of the Northern Ireland Economy 30 Industry model of the NI economy based on 2018 Input-Output table Based on the AMOS family of models Three internal institutions (households, firms & government) & to external (RUK, ROW) Output is produced from a combination of composite intermediates and value added, where labour and capital combine in a constant elasticity of substitution (CES) function to produce value added, allowing for substitution between these factors in response to relative price changes. Used to model investment decisions and policy changes. Micro to Macro approach. Multi-year (60) period setting
X S T R AT H C LY D E B U S I N E S S S C H O O L Simulation Strategy Demand side Standard appraisal method looking at the impact of new investment in offshore wind. Seen throughout the academic and industrial literature as a way of estimating economic impacts of investment decisions. Introduce investment in offshore wind in Northern Ireland as increase in increase in industrial demand industries matched with offshore wind components. 2GW floating offshore wind Costing from ORE. Use NREL learning rate estimates to for cost reductions, floating foundations the driver in reduction. Supply chain method similar to previous FAI (2023) report Key industries: Offshore fabrication, electrical equipment, onshore construction and ports
X S T R AT H C LY D E B U S I N E S S S C H O O L Simulation Strategy Supply side Previous simulations only focus on demand side impacts but there could be supply side impacts related to prices. Increased capacity should have a positive impact on the price of electricity as the wind is replacing fossil fuel generation technologies reducing the link to volatile fuel prices. Reduced electricity price = reduced production costs which should increase consumption Hosius et al (2023) estimate the impact of offshore wind energy in Northern European wholesale prices Use Western Denmark estimate of 6.91% for first 1GW with an additional 4.92% reduction with second GW
X S T R AT H C LY D E B U S I N E S S S C H O O L Results 1 Demand only 2029 2030 2031 2032 2033 2034 2035 2036 GVA 0.34% 0.22% 0.23% 0.11% 0.09% 0.08% 0.07% 0.08% Employment 0.67% 0.32% 0.34% 0.09% 0.08% 0.08% 0.08% 0.12% Investment 0.64% 0.39% 0.39% 0.16% 0.13% 0.11% 0.10% 0.13% Gross Wage 0.64% 0.39% 0.39% 0.16% 0.13% 0.11% 0.10% 0.13% Real Wage 0.13% 0.22% 0.21% 0.21% 0.16% 0.13% 0.11% 0.09% Capital Stock 1.35% 0.73% 0.74% 0.23% 0.19% 0.16% 0.14% 0.22% Total HH Tax 0.47% 0.20% 0.20% 0.01% 0.01% 0.01% 0.01% 0.05%
X S T R AT H C LY D E B U S I N E S S S C H O O L Results 2 Timing 250 2,000 1,800 200 1,600 1,400 150 1,200 Employment (FTE) GVA ( M) 1,000 100 800 600 50 400 200 0 0 1 2 3 4 5 6 7 8 9 10111213141516171819202122232425262728293031323334353637383940414243444546474849505152535455565758596061 GVA (S) GVA (D) Investment Employment (S) Employment (S)
X S T R AT H C LY D E B U S I N E S S S C H O O L Results 3 Sectoral results 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% -0.50% Demand Only Supply
X S T R AT H C LY D E B U S I N E S S S C H O O L Discussion Over the 60-year period, we estimate that for the pathway of 2 GW capacity of floating offshore wind, Gross Value Added (GVA) could increase to 8.6 billion, with an employment of 47,750 person-years. This represents an increase of 4.7 times in GVA and 3 times in employment compared to the demand-only case in scenario one Underscore the broader impact of considering the pricing effects associated with transitioning to offshore renewables, extending beyond the traditional scope of demand-focused economic analysis prevalent in existing literature For policymakers recognizing this broader impact could potentially bolster support for renewable energy initiatives among policymakers. Also adds to the idea of sustained green growth
X S T R AT H C LY D E B U S I N E S S S C H O O L Conclusion Primary objective of the study is to assess the economy-wide impact of offshore wind, utilizing Northern Ireland as a case study using a CGE modelling framework. The novelty is in the comparison of the demand-side v supply impact as well as focus on floating offshore wind. Find accounting for supply-ide impacts increases the economic impact dramatically and will have consequences for policy makers, Policymakers may thus be overlooking the supply-side impacts associated with electricity price, which are crucial for fostering sustained green growth and positively influencing public opinion.
X T H E P L A C E O F U S E F U L L E A R N I N G X S T R AT H C LY D E B U S I N E S S S C H O O L
