economic opportunities from onshore wind in wales

Economic Opportunities for Wales from Future Onshore

Wind Development

A Final Report by Regeneris Consulting and the Welsh Economy Research Unit, Cardiff Business School

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

● 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


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


1

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.


2

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


3

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:


4

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.


5

Economic Impacts For Wales of Development, Construction and Operations and Maintenance (average per annum)


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.


6

Economic Impacts from Increased Sourcing in Wales

% currently sourced from

Wales

10 percentage points Increase in Local Sourcing

Per MW Additional Annual Impact in 2,000 MW

Scenario; 2012-24

GVA FTEs GVA FTEs

Planning, Professional Services & Project Management

71% £10,100 0.3 1.6 50

Construction, Groundworks and Electrical Engineering

61% £23,300 0.9 3.7 140

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 all inputs

£46,100 1.5 7.3 250

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.


7

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.


8

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


9

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.


10

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


11

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.


12

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


13

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.


14

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


15

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


16

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

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

• Review of Welsh targets

• RenewableUKdatabase

• Regional economic analysis including sectoral mix

• Review of impact evidence

• Survey of

developers & operators

• Input-output tables

• Testing & refinement

Development and Construction Phase

Community Benefit Funds

Decommissioning / repowering

Operations and Maintenance

Core Economic Benefits

• Direct • Indirect• Induced

Economic Development / Regeneration Benefits

Impact Areas

• Wales• Welsh regions

Economic • FTE Jobs• GVA

Wider • Income to landowners• Local Infrastructure improvements• Skills• Employment• Community vitality

Driver of Benefit Types of Benefit Measures

Wider socio-economic benefits

Impact AreasUnderpinning Assumptions


17

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

development

RenewableUK database provides details on all wind farms in the UK that 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

Life Cycle stage

Survey of all developers and operators of all wind farms in Wales that are operational, in construction, consented, and in the planning system.

Existing socio-economic impact studies of onshore wind farms.2

Investment in Wales

by sector

Survey of developers and operators

Existing socio-economic impact studies of onshore wind farms.

Multiplier effects for

Wales and its regions

Drawing on investment data above, use of Input-Output tables for Wales to estimate indirect and induced impacts.

Impacts on local

communities

Four case studies on existing and planned onshore wind farms,

Informed by consultations with developers, operators and local authorities and document review, and the team’s experience.

Constraints and

opportunities

Survey of wind farm developers

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.


18

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


19

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.


20

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.


21

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.


22

“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.


23

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.


24

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.


25

Figure 3-1: Cumulative Installed Operational Capacity in Wales, 2000-12

Source: RenewableUK Database

3.18 There is currently 423 MW of installed onshore wind capacity across Wales. The map below

illustrates their location.

0

100

200

300

400

500

600

700

800

900

1,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Inst

alle

d O

per

atio

nal

Cap

acit

y (M

W)

Target for 2010

Tir Mostyn

Fynnon Oer

Cefn Croes Carno

Alltwalis


26

Figure 3-2: Operational Wind Farms in Wales, as at December 2012


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.


27

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



28

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)


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.

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

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

Op

era

tio

nal

Cap

acit

y

Actual installed capacity

Projection

2,000 MW by 2025

60% shortfall

27 MW p.a. additional capacity on average


29

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)


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.

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

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

Op

era

tio

nal

Cap

acit

y

Actual installed capacity

Projection

2,000 MW by 2025

22% shortfall

86 MW p.a. based on recent consenting


30

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

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

0%

10%

20%

30%

40%

50%

60%

70%

80%

% o

f D

eve

lop

ers

Development & Construction

Good selection of suppliers in Wales Some suppliers in Wales

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

% o

f D

eve

lop

ers

Operations and Maintenance


31

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

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?

33%

47%

60%

33%

0%

10%

20%

30%

40%

50%

60%

70%

Firms Used in Development &Construction

Firms Used in Operation &Maintenance

% o

f D

eve

lop

ers

A lot

A little


32

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


33

track record) and on price (due to organisational learning and economies of scale). The point

was also made that since many suppliers in Wales are relatively small in scale, they lack the

Quality Assurance systems required to compete for large projects.

3.40 Finally, other issues commonly cited included infrastructure constraints, principally, the lack

of suitable grid access and infrastructure and the lack of highway infrastructure required to

facilitate the construction process and avoid an additional cost burden for developers. This is

a particular issue in Mid Wales, where grid infrastructure upgrades are required in order to

connect the anticipated renewable energy infrastructure. Road infrastructure is also seen by

some as an issue for Mid Wales, since many ‘A’ roads are narrow and become congested

with holiday and business-related traffic at some times of the year. The view was expressed

that regulators and Councillors are not engaging proactively with transport issues, to

alleviate the concerns of investors.

“Availability of infrastructure and a suitable road network is lacking, hence the onus is on the

developer to invest time and money to sort out transport issues, and to invest in

strengthening the grid network”

Wales as an investment location

3.41 We asked developers how favourable they viewed Wales to be as an investment location for

onshore wind projects. The response was very mixed. Overall, 40% of respondents 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. The remainder were neutral.

Figure 3-8: Views on Wales as an Investment Location for Onshore Wind Projects

Source: Survey of Developers and Operators (September-November 2012)

3.42 In order to drill down into the specific factors that sit behind these overall perceptions, we

7%

33%

20% 20%

13%

0%

5%

10%

15%

20%

25%

30%

35%

Very Favourable ReasonablyFavourable

Neutral FairlyUnfavourable

VeryUnfavourable

% o

f re

spo

nse

s


34

asked developers to rate various factors as either positive, neutral or negative in terms of

their contribution to Wales as an investment location. Whilst the response was mixed, a

number of points stand out:

The responses suggest that the skills base is not a constraint in Wales: 86% of

responses were positive or neutral towards the availability of skilled workers.

Planning policy at the Wales level (i.e. TAN 8) is generally viewed either positively or

neutrally. Respondents were split on their views on the clarity on preferred

development locations. However, there is clear agreement that local planning

policies and practice are a negative factor in the perception of Wales as an onshore

wind investment location. The local consent rate in Wales tends to be lower than in

England and Scotland; this impacts on investor confidence. Delays, non-

determination, and rejection all lead to increased business costs.

“Welsh planning policy is supportive, but there is no buy in politically at the local level”

Infrastructure – both grid and other infrastructure such as the road network – are

also seen as negative factors.

Respondents were also divided on community and economic development support.

A small minority saw these factors as positive, whilst around a third saw them as

negative.

Table 3-2: Contribution of Factors to Wales as an Investment location for Onshore Wind

Factor Positive Neutral Negative

Availability of Skilled Workers 43% 43% 7%

Welsh Planning Policy 33% 47% 20%

Clarity about Preferred Development Locations 33% 33% 33%

Community Support 13% 40% 33%

Economic Development Support for the Sector 13% 33% 27%

Availability of Other Infrastructure (eg roads) 0% 20% 73%

Availability of Grid Infrastructure 0% 13% 80%

Local Planning Policies and Practice 0% 20% 80%

Source: Survey of Developers and Operators (September-November 2012)


35

4. Economic Opportunities for Wales


We estimate that average construction costs per MW of installed capacity are

£1.13m, and planning and development costs are £0.12m, in 2012 prices. An

estimated 35% of all expenditure in the construction phase is expected to be

retained within Wales, along with 71% of planning and development spend.

Operations and maintenance (O&M) expenditure is £40k per MW per annum, with a

greater expected retention of expenditure in Wales than for construction (76%).

For construction, around 76% of expenditure on turbine towers is expected to

remain in Wales, with Mabey Bridge and potentially other suppliers with the

capability to supply steel towers. Civil engineering also has a strong presence of

potential Welsh suppliers, along with forestry and environment services. For

modelling purposes we have reduced this to 50%, for prudence and to reflect the

downside risks on this expectation.

For O&M, the largest items include land rentals and access payments paid to the

Forestry Commission/ Welsh Government and local land owners. Direct employment

costs total £9,800 per installed MW. Much of this is retained in the Welsh economy.

Community Benefit payments are an important element of operational expenditure

for local communities and the spending is largely local.

The economic impacts across all phases of the wind farm lifecycle are set out in

Table 4-6. Over the full assessment period 2012-2050, Wales could secure a total of

£2.3bn in GVA, with over 2,300 FTE jobs per annum between 2012 and 2024 and

2,100 FTEs between 2025 and 2050. This would amount to:

£1.4bn additional GVA than if historic trends continued

£0.9bn additional GVA than if more recent consenting rates continued.

Construction and manufacturing stand to see the most benefit, but impacts would

be spread across the whole of the Welsh economy – see Table 4-7.

It is important to recognise that this illustrates the potential economic benefit to

Wales, should the sector develop as in the scenarios and should the supply side in

Wales be able to absorb this demand as expected. In section 6 we look at ways of

ensuring the opportunities are maximised.

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 Table 4-10. This

table also illustrates the potential impacts that would be lost should sourcing rates

be lower than expected.


36

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.

Introduction

4.1 This section provides estimates of the economic impacts for Wales of future onshore wind

development. It is divided as follows:

Firstly, we provide an assessment of the economic impacts supported by the

planning, development and construction phases of onshore wind farm development

in Wales.

Secondly, we estimate the economic impacts during the operational phase.

Finally, we look at where there is the capacity and opportunity to extend local

sourcing of goods and services, given the nature of the supply side in Wales, and the

potential additional economic benefits that might be secured.

4.2 Throughout this we test the three development scenarios for the sector set out in Section 3

and Appendix A. We build in sensitivities showing how changes in the proportion of goods

and services purchased in Wales might influence the magnitude of the economic outcomes

going forward.

4.3 A detailed description of the methodology used, and the underlying issues to be overcome

in the modelling of economic outcomes from onshore wind development, is set out in

Appendix A.

Development and Construction Phase

Activities

4.4 In onshore wind energy projects much of the cost commitment is up front. Prior to on site

construction significant sums are expended in the physical planning of the proposed site,

seeking planning permission, and associated development of various impact assessments to

inform planning the process. For selected developers this includes costs of developing

tenders on Forestry Commission sites in Wales (TAN 8). Most of this expenditure is at the

developers’ own risk. The higher the risk of an unfavourable outcome, the greater the

likelihood that developers will seek alternative investment locations.

4.5 A typical larger scale project requires extensive civil engineering works for site access and

preparation. Many of the largest wind farm sites (extant and planned) are in more rural

locations and therefore require careful development of road access to hill side locations. The

main capital components are the wind turbine itself and the tower. The size of the

components makes transport and installation a specialist process akin to construction

engineering. Once in place a series of further electrical engineering and grid connection

works are required prior to operation. The initial development phase may also include works


37

to restore habitat, or develop habitat management plans.

Expenditure and Sourcing

4.6 The construction and development phase expenditure benchmarks used in this study are

shown in Table 4-1. These are informed by our survey of developers, benchmarked against

other published sources and tested with industry representatives. 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.7 Total construction and development phase expenditures

therefore sum to £1.25m per installed MW of onshore capacity.

4.7 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. As the table shows, there is considerable variance around these headline figures

between the categories of expenditure. This is related to the presence of suitable suppliers

in Wales and competition from suppliers based in overseas markets where onshore wind is a

more mature sector:

Wind turbine nacelle, rotor and blades is by far the largest single item, accounting

for 47% of construction spend per MW of installed capacity. However, most

suppliers are located overseas, for example, in Demark (e.g. Vestas), the US (e.g. GE

Energy) and Germany (e.g. Enercon). There are at present no wind turbine

manufacturers located in Wales or elsewhere in the UK. All of the first round

expenditure therefore leaks out of the Welsh economy. The scenarios are developed

on the assumption that this specialist capacity is unlikely to be developed in Wales.

Development and planning – representing around 10% of all development and

construction expenditure - has a high Welsh content (estimated at 71%). This

includes surveys, design, grid and resource studies, legal and professional services.

Turbine towers also represent around 10% of total spend and 76% of the

requirement is expected to be purchased in Wales in future. Wales has one major

supplier of Towers: Mabey Bridge, located in Chepstow. However, there are

potentially other manufacturing and construction engineering firms in Wales with

the capability to produce steel towers, for example, selected engineering and

process skills in the Welsh supply chain serving the major oil refineries. The larger

developers (e.g. RWE, Vattenfall) have a preference to source locally and, if possible,

to source towers from Mabey Bridge and have been working closely with the

supplier (RWE has a framework agreement with them). Whilst there is capacity to

supply this expected requirement in Wales8, for modelling purposes we have

reduced the sourcing assumption from 76% to 50%, for prudence and to reflect the

downside risks on this expectation. Local sourcing levels for towers described in the

survey are higher than historic levels, and stem from a specific commercial

7 Note that all values are expressed in 2012 prices. This allows us to express values in a common currency, adjusted for

inflation.

8 Note that the annual demand for towers implied within our 2,000 MW scenario and using a 76% sourcing assumption

represents around 15% of current capacity at Mabey Bridge.


38

relationship between the single tower producer in Wales, and a number of large

developers. The historic estimates of economic impact (2005-11 below) therefore

have been amended to represent actual previous sales from Mabey Bridge to Welsh

developments.

Civil engineering also has a strong presence of potential Welsh suppliers, and

accounts for 12% of all expenditure. This includes suppliers for the building of access

roads and spurs, foundations and hard-standings, fencing etc. In the case of grid

connections this would involve engineering services, construction and components.

Forestry and environment services such as tree felling, landscaping and other

environmental works are typically a relatively low proportion of all expenditure,

although the vast majority of these services are typically delivered by Welsh firms

and Forest Enterprise.

4.8 Further, in all modelling and supply chain analysis from here on we have reduced the local

sourcing assumption to 50% to reflect the risks associated with this concentration of supply

once wind farms reach the end of their operational life, they are either decommissioned or

repowered. Capital expenditure is needed to deliver both of these.

Table 4-1: Average Expenditure per MW of installed Capacity for Development and

Construction Phase and Expected Sourcing Rate from Wales

£ per MW (total)

% sourced from Wales

£ per MW (Wales)

Development and planning 120,000 71% 85,000

Construction

Project Management of Construction 58,000 82% 47,000

Wind Turbine Nacelle, Rotor and Blades 528,000 0% -

Wind Turbine Tower 140,000 76%* 106,000

Wind Turbine Transport, Assembly & Installation 67,000 61% 41,000

Civil Engineering Works 147,000 76% 112,000

Electrical Engineering Works 85,000 28% 24,000

Grid Connection and Related Works 90,000 55% 49,000

Forestry & Environment Services (inc habitat management)

18,000 92% 17,000

Total Construction (not inc. planning) 1,133,000 35% 396,000

Source: Survey of Developers and Operators Note: Figures may not sum due to rounding * Note that whilst this represents developers’ intentions, in the modelling we have reduced this to 50%, in order to be conservative.

Economic Impacts for Wales

4.9 Table 4-2 shows the economic impact of installed capacity arising from development and

construction phases over the period 2005-11. We estimate that once direct, indirect and

induced economic effects in Wales are accounted for, £0.3m of GVA and around 12 FTE jobs

are supported per MW of installed capacity. Allowing for the annual average of capacity


39

installed over this period, we estimate £7.8m GVA and 335 FTE jobs per annum were

provided in Wales (a total of £54.6m GVA for Wales over the period).9

Table 4-2: Economic Impacts of Development and Construction of Onshore Wind Farms in Wales,

2005-11

Annual average Total over period

GVA (£m) FTE Jobs GVA (£m) FTE Person Years

Planning, development

and Construction 7.8 335 £54.6 2,345


Note: All GVA figures expressed in 2012 prices.

4.10 Table 4-3 uses the baseline described above to project forward economic impacts for our

three scenarios.

4.11 The economic impact results for the 2,000 MW scenario are as follows:

Between 2012 and 2024 we estimate that the average annual effects of new

development would be £38m of GVA and 1,610 FTE jobs. Given what we know

about the pipeline, it is likely that more of this impact would be felt up to 2020,

since many of the projects in the planning system are likely to come forward in this

period.

Between 2025 and 2050 we estimate that there would then be an average of £20m

of GVA and 820 FTE jobs per annum, coming from the planning and construction

work required to repower wind farms as they come to the end of their operational

life.

4.12 This implies that between 2012 and 2024 around £500m of GVA would be supported in

Wales, and a further £500m of GVA in the period 2025-50.

4.13 In interpreting these figures it is important to note that the jobs supported are mix of

different positions, many of which are temporary in the construction phase, whilst others

are longer term positions (e.g. tower manufacturing jobs supported on an ongoing basis by

the development pipeline). Therefore, these jobs can be expressed in terms of “person

years” of employment. In the period 2012-24 this would equate to over 20,000 person years

of employment.

4.14 Turning to the other scenarios:

9 It should be noted that these are estimates and small changes in the value of contracts won by Welsh firms could shift the

employment impacts. Also, only a proportion of this employment and GVA impact will be in the immediate vicinity of developed wind farms. However, this activity still represents welcome impacts on the local economy, particularly where development has occurred in more rural parts of Wales where access to economic opportunity is more limited. We look in more detail at local economic impacts in section 5.


40

Should historic trends continue, between 2012 and 2024 there would be an average

of £12m of GVA per annum, supporting 500 FTE jobs per annum. Over the period

2025-50 there would be an average of £6m of GVA and 240 FTE jobs per annum,

since under this scenario much less capacity is developed and hence less repowering

is required. Once again even this slower growth scenario would see a total of nearly

£155m of GVA supported in the period 2012-24, and a further £148m in the period

2025-50.

In the Recent Trends Scenario, between 2012 and 2024 an average of £23m of GVA

would be supported per annum and 810 FTE jobs per annum. Over the period 2025-

50 an average per annum of £11m of GVA and 410 FTE jobs would be supported.

This would translate into a total of £290m of GVA supported in the period 2012-24,

and around £290m in the period 2025-50.

Table 4-3: Economic Impacts for Wales of Planning, Development and Construction Phase

(average per annum)

2,000MW 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


Note: All GVA figures expressed in 2012 prices. Estimates assume 50% sourcing for towers and

include impacts from decommissioning/ repowering.

4.15 Even the historic trends scenario would deliver around 6,000 person years of employment,

during difficult economic times at present. It should be noted that the estimates presented

take no account of displacement of other activity over the period. However, it is reasonable

to assume that much of this economic impact will be net additional to Wales, given the

considerable spare capacity in the construction sector under current economic conditions.

4.16 The analysis also highlights the economic consequences of not achieving the 2,000 MW

scenario:

Between 2012 and 2024 the 2,000 MW would deliver an additional £26m of annual

GVA and 1,100 FTE jobs per annum compared to the Historic Trends scenario. Over

this period, this would amount to a difference of over £340 million in GVA for Wales

and 14,400 person years of employment.

Over the period between 2025 and 2050, this would amount to a difference of

£360m and 15,100 person years of employment.

4.17 The main effects under the 2,000 MW scenario would come through development and

planning, tower construction and civil engineering works. For each of these the use of Welsh

suppliers is expected to be relatively high, and there is scope to increase this further,

particularly development & planning and civil engineering. Selected Welsh suppliers of civil

engineering services have already developed the expertise and capacity to service contracts

in other parts of the UK. There would also be strong economic effects connected to spending

of wages and salaries in Wales, benefiting consumer-facing sectors.


41

Operational Phase

Expenditure and Sourcing

4.18 Patterns of expenditure during O&M differ significantly from those in construction, namely

far higher local levels of purchase for O&M than for development and construction, with the

exception of equipment and spares (Table 4-4). We estimate that 76% of all first round

expenditure is expected to be retained in Wales.

4.19 We estimate that on average operational costs per MW of installed capacity (excluding

community benefit provisions) are £38,600 per annum. This is much less than in the

development and construction phases: on average, for every £1 levered per MW during

operations some £33 is levered through development and construction.

Table 4-4: Average Expenditure per MW of installed Capacity for Operations and Maintenance Phase, and % Sourced from Wales

£ per MW (total)

% in Wales

Wales £ per MW

Employment Costs:

- Wind Farm Operations and Management 3,600 79% 2,800

- Turbine Maintenance 5,700 89% 5,000

- Other Activities 500 75% 400

External Costs/Bought In

Equipment and Spares 8,400 22% 1,800

Forestry and Environment (including habitat management) 600 97% 500

Insurances 1,500 28% 400

Land Rentals/Access Payments 12,000 100% 12,000

Business Rates 6,400 100% 6,400

Total Operational Expenditure 38,600 76% 29,400

Source: Survey of Developers and Operators Note: Figures may not sum due to rounding

4.20 The largest item of expenditure is land rentals and access payments, which are paid to the

Forestry Commission (and ultimately to Welsh Government) or to private landowners,

depending on where the scheme is located. Clearly, the full economic impact of this

spending varies according to how the income is ultimately used by these beneficiaries.10 The

same applies to rates paid to local authorities. In both cases all of this expenditure is

expected to remain in Wales (although the beneficiaries such as private landowners may not

spend all of this money in Wales).

4.21 Direct employment costs borne by developers total £9,800 per installed MW, and much of

this is retained in the Welsh economy. This varies in practice according to the extent to

which activities are sub-contracted or delivered in house. Direct employment creation

10

The receipts to Welsh Government go into the central Treasury and are then used to finance a very wide range of activities. It is therefore not possible to be specific as to how this money is eventually spent.


42

during operational phases of onshore wind is understandably less than during the

construction phase. However, where employment supported is in complex maintenance

roles with higher earnings levels, the skilled opportunities provided would be in line with the

socio-economic needs of rural areas in particular, which host some of the largest wind farms.

4.22 Community Benefit payments are an important element of operational expenditure for local

communities around wind farms. The common features of community benefits schemes

include:

flows of financial benefits to local communities e.g. community fund to meet

community objectives and needs; subsidised energy etc.

contributions in kind to local assets and facilities i.e. environmental enhancement

measures, in the context of wind farm externalities; development of visitor facilities,

education programmes.

4.23 For these payments, expenditure is often calculated as a fixed sum per MW of installed

capacity. Importantly, the spending linked to community benefit schemes is largely local

because they are often managed by community institutions, often with involvement of

community councils and developer personnel. Previous research has shown that in Welsh

schemes funds varied and has been increasing in recent years (Cowell et al., 2011). Funds of

£5,000 per MW are now not unusual. Our central assumption for the economic modelling is

an average of £3,000 per installed MW. It is recognised that further work is likely to be

necessary in coming years to quantify the full impact of community benefit payments, given

the scale of funding and geographical focus.

Economic Impacts

4.24 We estimate that over this period this activity supported an annual average of £6m of GVA

and 210 FTE jobs per annum. Table 4-5 summarises the findings from the economic impact

assessment for the operations and maintenance phase. The key points to note are as

follows:

In the 2,000 MW Scenario we estimate that an annual average of £22m of GVA is

supported between 2012 and 2024, and 720 FTE jobs per annum. Given the increase

in capacity, this rises to an annual average of £37m of GVA in the period 2025-50,

with an associated 1,260 FTE jobs per annum. In very broad terms, between 2012

and 2024 under the 2,000 MW scenario, development and construction activity

would support almost twice the amount of GVA per annum compared to operational

activity.

In the Historic Trends scenario, between 2012 and 2024 there would be £11m of

GVA per annum, and 370 FTE jobs per annum. Operational activity would support

£15m of GVA and 500 FTE jobs per annum between 2025 and 2050 (i.e. less than

half of that which would be secured in the 2,000 MW scenario).

The Recent Trends scenario would deliver £13m of GVA and 470 FTE jobs per annum

in the period 2012-24, and £23m of GVA and 770 FTE jobs per annum between

2025-2050.


43

4.25 Comparing the 2,000 MW and Historic Trends scenarios shows a difference of around £11m

of GVA per annum in the period 2012-24 and some 350 FTE jobs per annum. Over this

period, this would amount to a difference of over £130 million in GVA for Wales.

4.26 Given the current profile of operational spending much of the economic impact in the

operational phase comes from the spending of wages and salaries of those involved in

routine operations, and then the uses to which rental and rate payments are put.

Table 4-5: Economic Impacts for Wales of Operations and Maintenance Phase (average per

annum)


2012-2024 2025-2050 2012-2024 2025-2050 2012-2024 2025-2050

GVA (£m) 22 37 11 15 14 23

Employment (FTE) 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

4.27 Table 4-6 shows the overall economic impacts for Wales across all phases of the wind farm

lifecycle under our scenarios, for 2005-2050.11 The range of average GVA impacts per annum

2012-24 is from £60m under the 2,000 MW scenario to £23m under the historic trends

scenario. Over this same period total employment effects would vary between 870 FTE jobs

to 2,330 FTE jobs per annum.

4.28 This implies that over the full assessment period 2012-2050, Wales could secure a total of

£2.3bn in GVA should installed capacity increase to 2,000MW by 2025. This would amount

to:

£1.4bn additional GVA than if historic trends continued

£0.9bn additional GVA than if more recent consenting rates continued.

Table 4-6: Overall Economic Impacts For Wales of Development, Construction and Operations and Maintenance


2012-2024 2025-2050 2012-2024 2025-2050 2012-2024 2025-2050

GVA (£m) 60 57 23 21 36 34

Employment (FTE) 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 assume 50% sourcing for towers.

11

It is important to recognise that our estimates throughout this chapter take no account of discounting of future jobs and GVA back to 'present' 2012 values. Then we recognise that a £m of GVA generated in 2025 is worth less than a £m of GVA generated in 2012.


44

4.29 Our modelling provides an indication of how these economic impacts are spread across

sectors. Table 4-7 presents the sectoral impact of employment for the 2,000 MW scenario:

Construction activities comprise the largest FTE impacts, with well over half (58%) of

all employment in the Construction and Development phase. This totals almost

1,000 FTE jobs in construction annually to 2024. Construction is also the biggest

portion of operations and maintenance phase employment, albeit only at around

40% of all jobs. In total, the construction industry could supply 1,220 FTE employees

annually in the period to 2025 and 960 FTE employees annually thereafter in support

of wind farm development and operations.

Manufacturing also benefits, particularly the metals industries. Given the far higher

capital intensity, the investment supports fewer jobs –around 250 in total to 2025

and around 150 thereafter.

Impacts are spread across the entire Welsh economy. Private services are estimated

to increase employment 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.

Table 4-7: Annual FTE Job Impacts by Industry Sector: 2,000 MW Scenario

2012 – 2024 2025-2050


Operations & Maintenance


Operations & Maintenance

Primary & minerals 190 20 100 40

Manufacturing & Energy

230 20 120 40

Construction 930 290 460 500

Private Services & transport

110 180 60 320

Professional & Fin Services

130 70 70 120

Other 20 140 10 240

Total 1,610 720 820 1,260


Spatial Distribution

4.30 The above analysis has focused on economic effects at an all Wales level. It is more difficult

to gauge where economic effects will fall within Wales. Under the 2,000 MW development

scenario the expectation is that areas of Mid-Wales (Powys and Ceredigion) and South West

Wales will host some 80% of the installed capacity, and with much of the different

categories of spending tied with expected developments in these same areas.

4.31 However, the economic impacts are unlikely to follow the spatial pattern of the

development with construction teams mobile and the supply side in Mid-Wales in particular

very limited in terms of the development and construction categories of spend. For example,

the five counties of Carmarthenshire, Powys, Ceredigion, Swansea and Pembrokeshire

together made up about 22% of the Welsh economy in terms of contribution to GVA in


45

2010. Indeed Munday et al (2011) argued that the limited supply side immediately

surrounding the largest wind farm developments in Mid-Wales up to 2007 provided key

context for the evolution of community benefit provisions by developers.

4.32 Our conclusion is that the spatial distribution of the direct, indirect and induced economic

impacts from onshore wind is likely to follow the existing distribution of economic activity in

Wales i.e. with around 60% of the direct, indirect and induced effects falling in South East

Wales, and around one fifth of the effects falling in Mid and South West Wales. The

remainder would accrue to North Wales.

Grid Infrastructure

4.33 The placement of wind turbine developments currently approved and in planning requires

the upgrade of grid connections (by National Grid) from Mid-Wales East through Shropshire

to population centres. This significant investment will itself bring economic impacts, for

Wales and Shropshire as well as further afield.

4.34 There is limited information available on the economic nature of this development, although

the decision on the preferred route(s) has been comprehensively covered in the National

Grid documentation12. This report does provide overall capital and lifetime costings for a

number of mutually exclusive routes from proposed substations at either Cefn Coch or

Abermule. In each case these are provided for wholly overhead and underground

connections.

4.35 National Grid were unable to provide any information on the geographic or commodity

breakdown of expected spending. We have nevertheless sought to estimate (albeit in

indicative terms only) the likely scale of economic impact in Wales following these works.

The prior modelling assumptions are listed in Appendix A.

4.36 Table 4-8 shows the estimated economic impact on Wales of the Mid-Wales grid

improvements. Of the £130m spend associated with the overhead option, we estimate

Wales captures around £22m, and with this relating to over £10m in Welsh GVA. This

additional economic activity is associated with around 360 person years of employment.

4.37 Clearly the underground option is more expensive and hence greater economic impact. Of

the almost £0.5 billion in expenditure, Wales is estimated to capture £83.2m and with this

then leading to £56.5m in additional GVA. This scenario posits an additional 1,950 person-

years of employment in Wales over the lifetime of the infrastructure.

12

http://www.nationalgrid.com/NR/rdonlyres/DC97DCAA-A978-4292-B7E7-61827F57AB4D/55369/MidWalesStatementofPreferenceDraftJuly2012.pdf




46

Table 4-8: Estimated Economic Impact of Mid Wales Grid Infrastructure Development

Overhead Underground

Gross Expenditure (Lifetime costs) (£m) 130 495

Estimated expenditure in Wales (£m) 21.7 83.2

Economic Impact (Wales):

GVA (£m) 10.6 56.5

FTEs / Person years 360 1,950

Source: WERU calculations using published National Grid data Note: the construction period is unknown, so employment impacts are expressed as person-years.

Scope to Maximise Benefits for Wales

Implications of Expected Sourcing Patterns

4.38 It is important to note that our analysis indicates the potential scale of economic impacts,

should development proceed in line with the scenarios and should the Welsh supply chain

be able to respond to the resultant demand for goods and services.

4.39 A critical driver of the level of economic impacts for Wales is the degree to which it is

possible to source from Wales the various goods and services required at each of the wind

farm lifecycle stages. Clearly there are limits on what a small economy such as Wales can

provide in terms of goods and services to meet the needs of wind farm developers.

4.40 For example, the scale economies required in the production of turbine, rotors and blades

means that just a small number of plants across Europe would be viable. Given the

geographical pattern of wind farm development to date, turbine manufacturers have

developed in various locations on continental Europe. There is currently only one such

manufacturer that is likely to be located in the UK (Siemens’ factory in Hull). At the same

time our survey of developers revealed that in some cases Welsh purchasing of selected

goods and services was already at high levels.

4.41 It is also worth noting that the increases in activity described under the 2,000 MW scenario

could result in a fundamental change in the supply side of the economy. For example, a

change in the demands from developers might serve to reduce costs per installed MW as

scale increases. Moreover, the strong growth in demand under this scenario could bring

forward significant new capacity in the supply side for this sector which could also have

subtle effects on prices.

4.42 Table 4-9 revisits the survey information for selected expenditure categories both during

operational and development phases. The third column sets out the expectations on

purchasing in Wales, while the fifth column shows an estimate of the total expenditure that

is lost to Wales per MW of installed capacity due to these sourcing patterns. For example:

71% of spending in development and planning is within Wales, the balance

(equivalent to £3,500 per MW), sourced from outside of Wales

76% of civil engineering works is purchased from Wales; again around £35,000 is lost

per installed MW through imports


47

Imports rise to nearly £62,000 per MW for electrical engineering works and over

£0.5m per MW for turbine nacelle, rotor and blades.

Scope to Increase Sourcing from Wales

4.43 This therefore hints at the areas where improvements in purchasing from Wales would have

the greatest direct spending effects. Based on the potential spending lost to Wales per MW

of installed capacity, and on whether a supply side already exists in the Welsh economy in

the category, the fifth column colour codes the potential to lever increases in spending in

Wales.

4.44 The judgements on the sectors where there is greatest scope for improvements in local

sourcing are partly based on levels of existing employment in Welsh sectors that link to the

spending categories. For example:

In 2011 Welsh employment in manufacture of tubes, pipes, metal structures, and

other fabricated metal projects was over 6,800.13 Whilst little of this employment is

currently connected to construction of wind turbine towers we believe that this level

of employment is an indicator of the skills and processes available to produce

relevant large metal structures. Furthermore, we believe that elements of the supply

side in Wales that serve the oil refineries (Valero and Murco in Milford Haven),

existing power stations, and firms such as Tata Steel at Port Talbot could potentially

serve the onshore wind industry in the event of a strong increase in demand. This is

without the potential for new inward investment to serve this demand.

The construction sector in Wales is diverse but construction of roads or civil

engineering projects employed close to 10,200 people in Wales in 2011.14 A similar

number were employed in electrical installation. Furthermore, we expect that the

propensity of developers to import service requirements during the development

and planning stage link to existing firm ties, rather than lack of capacity in Wales to

provide the relevant services. For example, Welsh employment in architectural,

engineering and other technical consultancies alone was over 10,000 in 2011.15

4.45 Whilst this focusses on the potential to improve the proportion of purchasing from Wales in

the categories, it also hints at what would happen were developers to reduce local spending

in some of the categories. This could happen were local suppliers to become uncompetitive

or were simply unable to respond to the increases in demand that are expected over the

next decade.

13

Source: ONS, Business Register and Employment Survey (BRES), SIC 2420, 2511, 2599

14 Source: ONS, (BRES.

15 Source: ONS, BRES


48

Table 4-9: Propensity to Source Goods and Services from Wales and Scope to Increase

£ per MW (total)

% Sourced from Wales

£ per MW Wales

£ per MW Lost to Wales

Scope

Development and planning 119,700 71% 85,078 34,700 High

Construction

Project Management of Construction 58,000 82% 47,000 10,400 High

Wind Turbine Nacelle, Rotor and Blades 528,000 0% - 528,400 Low

Wind Turbine Tower 140,000 50%* 106,000 70,000 High

Wind Turbine Transport, Assembly & Installation

67,000 61% 41,000 26,000 High

Civil Engineering Works 147,000 76% 112,000 35,000 High

Electrical Engineering Works 85,000 28% 24,000 61,600 High

Grid Connection and Related Works 90,000 55% 49,000 40,800 High

Forestry & Environment Services 18,000 92% 17,000 1,500 High

Operations

Employment Costs: Ops 9,800 85% 8,300 1,500 Low

Equipment and Spares 8,400 22% 1,800 6,600 Low

Insurances 1,500 28% 430 1,000 Low

Source: WERU calculations, informed by developer survey and RenewableUK Database of wind farms. *Note that we have reduced the sourcing assumption for towers from 76% and 50% for prudence and to reflect the downside risks.

4.46 The overall implication of this analysis is that a number of sectors in Wales could be

developed in order to increase the amount of onshore wind expenditure retained. Given the

scale of potential impact that could be secured these all relate to the planning, development

and construction phase.

Economic impacts from Changes in Sourcing

4.47 Using Table 4-9 as a starting point we take the analysis further by considering what would

occur given a 10 percentage point sourcing increase in:

Planning, professional services and project management

Construction elements including construction management, civils, electricals and

grid connections etc.

Turbine towers

Turbine transport, assembly, installation, forestry and environmental services.

4.48 Table 4-10 shows the approximate spend per MW in each of these categories,16 and the

average spending in the four categories in the Welsh economy as a percentage of the total.

16

Note that two of these categories are aggregated from sectors noted earlier


49

4.49 The fourth and fifth columns show the economic impact of a 10 percentage point increase in

purchasing from Wales. For example, a 10 percentage point increase in Planning,

professional services etc. would take the percentage spent in Wales from 71% to 81%. This

would result in an additional estimated £10,100 in GVA per MW and an additional 0.3 FTE

jobs per MW (including indirect and induced effects).

4.50 In the final columns of the table these per MW changes are translated into estimated

additional annual impact 2012-24 for the 2,000 MW scenario. This shows that increasing

each of the categories by 10 percentage points leads to an additional £7.3m of GVA and 250

FTE jobs per annum on the 2,000 MW scenario between 2012 and 2024. The largest ‘wins’

would potentially be gained from increasing sourcing from Wales of construction

management, civils, electricals and grid connections etc. Indeed, our analysis earlier showed

that in grid connections and electrical engineering the percentage of inputs purchased in

Wales was estimated to be just 55% and 28% respectively. As Table 4-9 shows:

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.

A similar increase in Welsh purchasing in planning, professional services and project

management would yield £1.6m in GVA and 50 FTEs per annum.

4.51 Clearly this analysis also provides insights into what might occur if local sourcing propensities

in these spend categories were to fall by 10 percentage points. It is conceivable that the

level of new capacity highlighted in the 2,000 MW scenario could attract more firms from

further afield to tender for activity (e.g. civil engineering works). However, prior analyses of

Welsh construction engineering have revealed that on strategic projects, even where

projects are regularly won by managing contractors from outside of Wales (or the UK),

significant activity is still supported within Wales as work is subcontracted back

(Construction Excellence in Wales, 2012).

Table 4-10: Economic Impact of Increased Local Sourcing – Development and Construction Phase

£ per MW

% in Wales

10 percentage points Increase in Local Sourcing

Per MW Additional Annual Impact in 2,000 MW Scenario;

2012-24

GVA FTEs GVA FTEs

Planning, Professional Services & Project Management

120,000 71% £10,100 0.3 1.6 50

Construction, Groundworks and Electrical Engineering

380,000 61% £23,300 0.9 3.7 140

Manufacturing 140,000 50% £7,000 0.2 1.1 30

Transport, forestry & Other 85,000 67% £5,700 0.2 0.9 30

10%age point increase in local sourcing across all inputs

£46,100 1.5 7.3 250

Source: WERU analysis


50

5. Local Economic Benefits


The economic opportunities outlined in Section 4 will not be spread evenly

throughout the nation, with a concentration of the benefits outside the immediate

area around wind farm developments due to the greater presence of relevant

sectors and the density of suitable businesses.

Nonetheless, there are important economic opportunities for local areas hosting

wind farms to benefit from the developments in a variety of ways.

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, and forestry and environmental

services.

Service based rural local economies also often benefit in the construction phase by

providing services to the contractors that are temporarily located there, such as

hospitality and retail.

Evidence from our case studies shows that there are examples of good work being

done to engage with the supply chain in local areas, to link up prime contractors

with local suppliers, as well as to support potential suppliers to tender for

opportunities.

Rural localities are also often well placed to benefit from opportunities in operations

and maintenance activity. This is especially the case for larger schemes with a need

for locally based maintenance support.

All local communities hosting wind farms will see long term benefit from Community

Benefit Payments. In some cases these payments can be very substantial and offer

potential for significant positive economic and community benefit. For example, the

community benefit fund (CBF) for Pen y Cymoedd will be worth around £1.8 million

per annum. Some larger developments also include a dedicated economic

development fund alongside the CBF. For example, RWE npower renewables is

proposing a £3,000 per MW economic development fund alongside the £5,000 per

MW CBF (both are index linked) for Clocaenog wind farm.

Wind farm developments often include investments in environmental improvements

as part of the package of infrastructure works, including the restoration of important

habitats.

Another valuable benefit for rural economies is the income generated for local

landowners who receive capital and/or rental payments in return for the siting of

wind farms on their land. Depending on the landowner, this either goes to local

farmers, other landowners or to the Forestry Commission/Welsh Government. This

income provides a benefit in terms of additional investment in rural businesses.


51

Introduction

5.1 This chapter considers the extent to which the economic impacts outlined in Section 4 can

generate economic benefits for the local communities in which the developments are

located. It draws on evidence concerning the approaches which developers and operators

adopt to promote these benefits, as well as a number of case studies of a mix of existing and

proposed wind farms. The section also considers the potential to secure greater economic

benefit locally as the extent of onshore wind capacity within Wales expands up to 2025.

5.2 The assessment is restricted to the economic benefits which arise from the expenditure

associated with the construction and on-going operation of the wind farms. It does not

consider other economic impacts which may arise locally due to the presence of these

developments currently or in the future.

Sources of Local Impact

5.3 For the purposes of the assessment, we have defined ‘local’ as the economy within which

the wind farms, existing or proposed, are located. Clearly the nature of these local

economies, in terms of their urban-rural character, size and mix of sectors, and skills and

travel to work areas, will vary widely between wind farms. As outlined below, these

differences in economic character and geography are important factors explaining the way

in which the local areas can benefit from the developments.

5.4 The development and operation of an onshore wind farm can benefit the local economy in

which it is located in a number of ways – the main ways are through:

The contracts won by local firms as part of the planning, development, construction

and operational phases – that is the supply chain

The employment of local residents supported in these phases, either directly or

through the supply chains

The 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.

5.5 Whilst the nature and scale of these core economic benefits varies from one wind farm to

another, there are a number of common factors that will influence their nature and scale

locally. These include:

The scale of the wind farm

The duration of the construction programme, the extent to which construction work

takes place on-site or off-site, and origin of the workers who work in site

The approach to procurement adopted by the developer/operator


52

The nature and capacity of the local business and skills base

The degree to which proactive action is taken by the developer and local agencies to

engage with the local supply chain and local workforce.

5.6 In practice these factors are complex and inter-related. To understand how these effects

manifest themselves in practice we have drawn upon four case studies of onshore wind

farms across Wales, as well as the wider consultations we have undertaken. The purpose

was to obtain the views of the developers, operators and local stakeholders on the nature

and scale of these impacts, and what is driving them. The rationale for selecting these was to

obtain a diverse selection of schemes in terms of location, size, developer and age. The case

studies undertaken were:

Ffynnon Oer, a 32 MW scheme located in Neath Port Talbot operational since 2006

Cefn Croes, a 59 MW scheme located in Ceredigion, operational since 2005

Wern Ddu, a 9.2 MW scheme located in Denbighshire, approved on appeal in June

2007 and operational in March 2010

Pen y Cymoedd, a 256MW scheme located in Neath Port Talbot and Rhondda Cynon

Taf, approved in May 2012 and expected to be operational 2016.

5.7 In interpreting the evidence in this section it is important to note that the case study

evidence obtained was of variable quality and coverage. Developers in some cases did not

retain records that would allow us to drill down into the nature and scale of local economic

benefits. This was especially true where a significant amount of time had elapsed since wind

farms had been constructed. However, sufficient evidence was obtained across all of the

research strands of the study to help us to draw out the key factors that typically drive local

economic impacts.

Local Context for Current and Proposed Wind Farms

5.8 Figure 5-1 shows the locations of current and proposed wind farms in Wales, with a 10km

isochrome around each, and an urban context underlay. This serves to illustrate the rural

context for many of the wind farms especially in Mid- and South East Wales. Those wind

farms located in South East Wales are closer to urban centres.


53

Figure 5-1: Operational, Consented and Proposed Wind Farms in Wales

Source: RenewableUK database

Approaches to Local Economic Benefit

5.9 The survey of developers and operators explored the extent to which they pursued various

actions to help secure local economic and community benefits as a consequence of their

onshore wind farms in Wales. Figure 5-2 summaries the results, whilst the most notable

points are:

All developers/operators that responded to the survey state that they provide a

community benefit payment and the vast majority report that they work with local

communities to help them maximise the benefits from these payments.

Around two thirds of the respondents report that they work with local schools and

colleges on topics covering renewable energy and energy efficiency.

A little less than a half of respondents (around 46%) currently run any supplier

events or training initiatives. However, closer inspection reveals that the larger

developers – who are delivering or due to deliver a lot of the operational and

pipeline capacity – are typically more active in this regard.


54

The respondents were evenly split in terms of the prevalence of actions to invest in

improvements to local visitor and recreational facilities. The drivers of these types of

actions tend to be very scheme-specific and depend on the local needs and

opportunities of the development.

Around 40% of respondents encourage contractors to adopt local training initiatives.

5.10 In interpreting these results some care is required in that the extent to which the developers

in our sample are active in these areas will partly depend on the stage that their

developments are at.

Figure 5-2: The Extent to which Developers Pursue Actions Secure Economic and Community Benefits in Wales

Survey of Developers and Operators (September-November 2012); n = 15

To what extent do you pursue the following actions in order to secure social and economic benefits of

onshore wind in Wales?

Findings from the Case Studies

Development and Construction Impacts

5.11 There are several factors that explain the extent to which local economies benefit from the

development and construction of wind farms. We look at these below.

Scheme Size and Duration on Site

5.12 Clearly, the scale of the potential local economic benefit brought by a wind farm is closely

related to the size of the scheme. Larger schemes (in terms of number of turbines and level

of installed capacity) will have a greater capital cost and typically require more labour input

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Running supplierevents or similarinitiatives to helpcompanies basedin Wales to access

supply chainopportunities

Running your ownlocal traininginitiatives (eg

providingtraining/work

placements to localresidents)

Encouragingcontractors to

adopt local traininginitiatives

The provision ofcommunity benefit

payments

Working with localcommunities toproactively help

them maximise thebenefits of usingthese communitybenefit payments

Investing inimprovements tolocal visitor and

recreationalfacilities

Working with localschools and

colleges on topicscovering

renewable energyand energyefficiency

% o

f al

l re

spo

nd

en

ts

Large Extent

Some Extent

Do Not

Don't Know


55

on or close to the construction site. For these schemes, the size and duration of the total

expenditure injection and therefore potential economic impact will be greater. For example,

it is expected that the 256 MW Pen y Cymoedd scheme will take almost three years to

construct, whilst Wern Ddu, a 9 MW scheme, took just 5 months.

5.13 Where local firms are not of sufficient scale to compete for or win the main or larger sub-

contracts, the local economy still has the potential to secure significant benefits from larger

schemes with a more lengthy construction period given the greater/longer presence of

construction workers over a period in the local area. This presence supports the local

economy through the expenditure of these workers on local retail goods and on

accommodation and so on.

Economic Geography

5.14 Of all the factors that influence the extent to which local economies can benefit from

onshore wind farms, location and local economic considerations are amongst the most

important. There are several dimensions to this, which are interlinked to some extent.

Nature and Scale of Business Base

5.15 The ability of a local area to benefit from the contracts on offer in the construction phase

depends on the capacity of the supply side. Local economies with a sufficient presence of

suitable firms in construction and manufacturing have a greater chance of being able to

participate in the supply chain and retain personal expenditure of non-home based

construction workers.

5.16 The upshot of this is that wind farms located in close proximity to urban centres, with a

greater density of firms and workers to draw on as part of the supply chain, are likely to

capture more of the benefit. The potential to secure local benefit will be markedly less

where wind farms are being constructed in the more peripheral parts of Wales, with low

economic and labour market density.

5.17 For example, whilst Cefn Croes is a relatively large scheme (59MW), the sourcing of inputs

from the local area during the construction programme was limited due to its rural location

(see Figure 5-3) and lack of suitable contractors for the types of construction inputs which

might feasibly be sourced within Wales. However, suitable prime contractors were available

in other parts of Wales, demonstrated by the fact that Jones Brothers of Ruthin,

Denbighshire17, secured the £6.3 million Balance of Plant contract (c.13% of total

construction value).

17

This included construction of access roads, turbine bases, crane bases and the 33kV cabling.


56

Figure 5-3: Cefn Croes Wind Farm in Context

Source: Renewable UK

5.18 By contrast, an estimated 13% of the overall construction value for the Ffynnon Oer wind

farm, located in Neath Port Talbot and in close proximity to urban centres (see Figure 5-4),

was sourced from within a 30 mile radius (see the table below). The prime contractors were

able to source a range of sub-contracted services locally including from Neath, Swansea and

Bridgend, ranging from aggregates and related civils through to specialist environmental

services.

Table 5-1: Goods and Services Sourced from Companies Local to the Ffynnon Oer Wind Farm Site

Approximate Distance from Site

Area Total Value of Sub Contracts

Type of Goods and Services

Fewer than 10 miles

Neath £99,300 Aggregates, building materials, plant hire

Briton Ferry £18,000 Security services

10 to 20 miles Aberdare £725,700 Concrete for bases, cabling, building materials, skip hire

Swansea £63,500 Plant hire, appliance testing

20 to 30 miles Bridgend £202,300 Investigatory drilling / soil consultancy, plant hire

Source: RWE npower renewables


57

Figure 5-4: Ffynnon Oer Wind Farm in Context

Source: Renewable UK

5.19 Local economic density is also an important factor in the ability of an area around a wind

farm development to secure the subsequent supply chain multiplier effects. The larger the

local economy, the greater the chance that it is able to supply the goods and services

required from lower tiers of the supply chain, generating indirect multiplier effects.

Conversely an economy with a lower density is more likely to see this lower tier supply chain

expenditure leak out of the local area.

5.20 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.

5.21 Whilst the presence of suitable sectors in the local area is clearly a necessary condition for

winning any sub-contracts that come forward, it is of course not sufficient. In order for firms

to win these sub-contracts they need to have the capacity to deliver them. Given the scale of

the contracts commonly on offer, the size and competitiveness of the businesses in the local

economy can therefore be an important factor. Larger construction contracts and more

specialist activities in particular often require tenderers to meet certain quality standards, to

demonstrate efficiencies and to offer guarantees. This favours larger firms that have the

experience, management and operating systems, and economies of scale to meet these

requirements.

5.22 Given the demands associated with such large contracts, many of the main contracts and

large first tier sub-contracts in the construction phase are let to companies outside of Wales.

This is due to there being only a limited number of companies within Wales with the

capability to bid directly for these large contracts. The majority of value secured by Welsh

companies tends to be in lower tiers of the supply chain (second tier and below). However,


58

this can be influenced to some extent by specific local supply chain initiatives and by the

procurement process. For example, Neath Port Talbot BC in conjunction with the developer,

Vattenfall, is undertaking an initiative to help develop the local supply chain so that it is

ready to compete for contract opportunities through the Pen y Cymoedd development. This

includes efforts to create Joint Venture companies that may have the capacity to compete

for the larger tier one and two sub-contracts.

5.23 Whilst rural local economies that are predominantly service sector based will struggle to

meet many of the immediate direct needs of the construction supply chain, these local

economies can and do benefit in the construction phase by providing services to the

contractors that are temporarily located there, such as hospitality and retail. Anecdotal

evidence from several case studies points towards benefits for local hotels, B&Bs, publicans

and the retail sector in particular as hundreds of construction workers stay in the area over

the construction period. This includes Cefn Croes, for example, where many construction

workers including Jones Brothers were located on site for the best part of a year.

5.24 The case studies point to a number of factors influencing the ability of the local economies in

which the development occurs to benefit from this induced personal expenditure:

The remoteness of the construction site – the remoter the site, the greater the need

for contractors to be non-home based and hence the higher the demand for

accommodation;

The availability of accommodation – local areas that are able to provide sufficient

accommodation for workers will be best able to secure the associated benefits.

The availability of related hospitality and retail – likewise, the greater the presence

of other services that construction workers will need, the greater the ability of the

local area to benefit from this expenditure.

The duration of the construction period – the longer the construction period, the

greater will be the duration of these benefits as workers will be present in the local

area.

The country of origin of the main component suppliers and their contractors – for

suppliers that are located outside of Wales and the UK that bring their existing

workforce with them on a temporary basis, there is potential for significant demand

for accommodation and related services.

Labour Market

5.25 A further relevant factor bound up in the location of a wind farm is the extent to which

suppliers and contractors which are based on or close to a site, bring their workforces with

them or recruit locally. This is typically driven by three factors:

The duration of the construction activity on-site;

The degree of specialism in the skills required on-site and the manner in which these

vary during the construction phases;


59

The density and nature of the labour market for these skills, including the travel to

work areas.

5.26 Feedback from developers suggests that whilst turbine components and the associated

assembly are mostly sourced from other areas in Europe, 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.

5.27 Nonetheless the availability of these skills and the labour market varies from location to

location within Wales. There is a reasonably strong presence of consultancy, civil and

electrical engineering firms and their workforces located in South East Wales in particular, as

well as some other clusters in North East Wales and South West Wales (e.g. the Port Talbot

and Swansea areas).

5.28 The case studies and related research suggests that it is not uncommon for much of the on-

site employment to be filled by workers from other parts of Wales, the UK or Europe. The

origin of the contractors and the nature of the work mean that there can be limited

opportunities currently to recruit locally, even if the skills were available locally. Whilst

Wales undoubtedly has strength in some aspects of the supply chain, these firms are not

located in the areas in which the new developments are located.

5.29 For example, in Powys there is currently over 900 MW of capacity in the planning system (17

schemes) and due for determination in the next couple of years. Although not all of the

schemes may be built, the capacity which does come forward will provide major

opportunities for both local firms and workers. However, the scope for these firms and their

workforces to benefit will be constrained by a lack of suitable skills in sufficient volume.

5.30 Where skills are currently in short supply, this can be countered through appropriate efforts

to upskill workers, given sufficient time to plan. This underlines the importance of local

businesses being made aware of future opportunities and being assisted to access them.

Businesses often report a lack of awareness and sufficient lead-in time to respond

appropriately as key barriers to entering the supply chain. This can be addressed through

supply chain events and these are being increasingly integrated into procurement processes

(e.g. by RWE and Vattenfall). For example, the developer Vattenfall has partnered with a

local engineering business (ISO Fab Ltd) to deliver a three year apprenticeship scheme to

train wind turbine technicians for Pen y Cymoedd.

5.31 It is worth stressing that at the current time, given the state of the economy, there is

generally a lot more spare capacity within the labour market than in more buoyant times to

absorb any increases in demand. This means that displacement in both the factor market

(e.g. firms poaching workers from other firms) and product market (i.e. firms taking market

share away from one another) is likely to be minimal.

Procurement Approach

5.32 A strong message from the case studies is that even if many of the factors set out above are

favourable, ultimately the approach to procurement followed by the developer can be very

important in shaping the level of local economic benefit that is ultimately secured.

Moreover, the actions taken by the developer can themselves shape some of these other


60

factors.

5.33 Whilst in some cases Welsh firms lack the scale and track record necessary to compete for

the main/first tier contracts, the developer can influence the main contractor to maximise

use of local suppliers in their supply chain. The approach to procurement being followed for

Pen y Cymoedd has some good lessons in this respect. Given the scale of the scheme, the

local authority recognised that there is significant potential to secure economic benefits for

the community. Accordingly, the local authority has been working closely with the developer

from an early stage to ensure that the local supply chain of Neath Port Talbot/ Rhondda

Cynon Taf is made aware of the opportunities. A business briefing event was held in March

2011 attended by around 140 people in the South West Wales region. The purpose was to

provide the local business community with details on the project and consult on the

intended procurement process.

5.34 There was strong feedback that in order to maximise the opportunities for local firms, Meet

the Buyer events needed to be held before the main contracts had been let. Accordingly,

these events 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. Furthermore, Vattenfall incorporated use of local suppliers as a

criterion within the procurement of main contractors, and has made it a requirement for

monthly reporting on the use of local supply chain firms from its contractors.

5.35 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.

5.36 Whilst this approach is not common practice and is seen by the local authority as an

exemplar, it is likely that the use of these approaches has improved over time amongst other

developers, especially in the years following TAN 8. For example, RWE has been regularly

holding supplier events in the areas local to their developments for its proposed schemes. In

May 2012 RWE hosted a major South Wales Supply Chain Event at the Liberty Stadium in

Swansea. The event was intended to inform awareness of the types of opportunities which

could exist within the sector and RWE’s portfolio of developing projects, how procurement

works, and what kind of qualifications might be expected from the sector’s prospective

supply chain. The map below summarises the location of suppliers that attended the event.


61

Figure 5-5: Location of Attendees at a RWE Supply Chain Event (held in Swansea)

Source: RWE, 2012

Operational Impacts

5.37 As the analysis in Section 4 makes clear, operational impacts from onshore wind farms are

much lower than those associated with construction, although they last for much longer and

on average a greater proportion of the associated expenditure is retained in Wales. Several

factors influence the level of benefit that can be secured in the operations and maintenance

phase, some of which are in common with the construction phase.

Scale of Scheme

5.38 Scale is again a factor in so far as it influences the degree to which there is a need for on-site

operational staff. Whilst staff posts associated with core management functions are to some

extent fixed, other elements vary with the size of the wind farm, including the level of

maintenance work required. For smaller schemes it is often possible for the


62

developer/operator to service the maintenance requirements centrally, using staff based in

other locations within or outside Wales. 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.

Maintenance

5.39 The maintenance of wind farms is often built into the turbine manufacturing contract for a

specified warranty period. Therefore, 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.

5.40 At Ffynnon Oer the turnkey contractor, RePower, delivers this maintenance as part of the

warranty agreement. Despite this, there is some direct on-site employment generated to

deal with routine maintenance and checks of the turbines (for example dealing with routine

changes of oils and components). Two technicians are employed directly by RWE and based

on-site on a full time basis. Prior to their employment on-site, these technicians did not

have experience of wind farm maintenance so were trained via a six week intensive course

in Germany (at RePower’s headquarters) to provide the turbine skills required for their O&M

role.

5.41 The turnkey contractor at Cefn Croes – GE Energy - also delivers maintenance for Cefn Croes.

GE Energy employs four staff in wind farm O&M. While the posts were not all recruited from

the local workforce, all four are currently based within a radius of around 20km from the

wind farm.

5.42 Following the expiry of the warranty, maintenance may either continue to be contracted out

by the developer or managed in-house. Evidence from our survey and case studies suggests

both approaches are used. Where activities are contracted out this is sometimes done

through a single contract covering all O&M activities. This brings the 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.

5.43 Where developers choose to deliver the maintenance in-house, the extent of local

opportunity partly depends on the developer’s approach to managing their portfolio of wind

farm schemes across Wales (especially relevant for larger developers):

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.

It is also possible that where a developer/operator/turbine supplier has several sites

in reasonably close proximity, local bases are set up for the purpose of providing co-


63

ordinated support across the sites. This would happen where there is a sufficient

clustering effect that creates the critical mass for scale economies to be achieved.

Other Bought in Goods and Services

5.44 As set out in section 4 there are a range of other bought in goods and services in the

operations and maintenance phase, including forestry and environment (£600 per MW of

installed capacity), equipment and spares (£8,400 per MW) and insurances (£1,500 per

MW). As the analysis in section 4 showed, 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.

5.45 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. This includes

activities such as habitat management and monitoring, forestry and so on. There is also

scope for induced benefits to be secured locally within the hospitality sector where

maintenance staff need to stay locally.

Wider Impacts

Community Benefit Payments

5.46 The inclusion of Community Benefit Funds as part of wind farm developments offers

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. A recent report by the Joseph Rowntree Foundation found that CBFs bring the

potential to secure benefit through the sharing of benefits of developments with host

communities, linking local resources to local economies and securing local community

support.

5.47 A recently published study18 maps the extent and nature of CBFs across Wales at present.

This mapping study found that a number of different mechanisms were used to make the

CBF payments. Of 32 funds examined, the most commonly used mechanism was a fixed

annual payment (24), followed by payments per MW of installed capacity (6), equity share

(1) and in-kind payments (1). RenewableUK has proposed a minimum payment of £1,000 per

MW of installed capacity (index linked to RPI for schemes over 5 MW) as part of its

community benefits protocol for England. Nonetheless payments of £5,000 per MW have

become more frequent in recent years.

5.48 The size of payments is closely linked to the scale of the wind farm (especially if set on a per

MW basis). For larger schemes this gives potential for significant ongoing benefits to be

secured from CBFs if they are spent on activities that align with local need and have

potential to deliver local impact. Of the case studies we looked at, 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 256MW scheme). Using a central assumption

of £3,000 per MW, our modelling indicates that in the 2,000 MW scenario this would

18

RenewableUK, Enjoying The Benefits: The Value of Onshore Wind Farm Community Benefit Funds to Wales, 2012


64

generate annual payments of £6m (£150m over the period 2025-50).19 It is worth noting that

the size of the payment varies considerably on a per MW basis, with some developers

offering in excess of £5,000 per MW.

5.49 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

they may offer advice on administrative issues. CBFs are then delivered by Community

Trusts (e.g. Cefn Croes), Town/Community Councils (e.g. Wern Ddu), local charities and

other bodies. CBFs can be delivered either by a single organisation or multiple bodies (e.g. at

Ffynnon Oer it is delivered jointly by a charity and a limited company). This community

ownership of CBFs means that they are spent on a variety of activities that are deemed to be

a priority for individual communities – there is no single model for how funds should be

spent. Given the decentralised approach to CBFs there is little in the way of evidence on the

local impacts of CBFs. However, we have a flavour of the kinds of activities that have been

funded:

Cefn Croes: the £1,000 per MW fund (index linked) has to date paid for equipment

for community groups, minor repairs and improvements to buildings for the

community, community events, festivals and trips, training and educational courses

and so on. The list of organisations supported includes community councils, schools,

churches and chapels, village halls, community transport schemes, an art group, a

garden club, a heritage trust and a youth group, reflecting a wide cross-section of

local community groups and activities.

Ffynnon Oer: Grants have been provided to a variety of local organisations including

youth and sports clubs, groups set up to support OAPs and parents. Payments have

also been made to the South Wales Miners Museum. While the grants made are, on

the whole, relatively small in value they are often related to the purchase of

equipment and materials required to set up longer lasting services (e.g. coffee

mornings for elderly residents, equipment for sports clubs etc).

5.50 In the case of Pen y Cymoedd the proposed CBF of £1.8m per annum is clearly very large and

has potential to deliver significant socio-economic benefits locally. Accordingly, the

developer is kick starting the process of designing the fund by commissioning socio-

economic research to inform the assessment of local needs and priorities, other funds that

could potentially complement the CBF and lessons from previous interventions as to what

has worked in the past.

5.51 Some larger developments also include a dedicated economic development fund alongside

the CBF. This is driven by Forestry Commission requirements for wind farms located on their

estate. 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). While the

focus of investment of each of the funds would be determined by local communities, the

provision of two separate pots of funding means that there may be scope for each to be

19

These are expressed in 2012 prices – for many schemes the payment is index linked so would rise with inflation.


65

invested with a focus on different sorts of activities. For example, the community benefit

fund may be used to develop community facilities or services for use by local residents,

whilst the economic development fund could be invested in activities aligned towards the

needs of the local business base.

Local Infrastructure Impacts

5.52 Wind farm developments often include investments in environmental improvements as part

of the package of infrastructure works. Sometimes these are included to mitigate

construction effects from the development, or are included as part of negotiation with local

communities. Examples include:

Cefn Croes: the developer has contributed £10,000 per annum to an ongoing

environmental enhancement project around the wind farm site. This supports an

environmental management plan and is overseen by a committee of local

stakeholders including the developer, local authority, landowner, Welsh

Government and other partners.

At Pen y Cymoedd, a Habitat Management plan will be implemented, with a value of

£3m over 25 years. The aim will be to restore, conserve, enhance and manage local

peatland habitats.

At Ffynnon Oer, the developer has sponsored improvements to the Afan Mountain

Bike Trails, which are an important tourism asset in the Afan Valley. The improved

trail runs close to the Ffynnon Oer wind farm, through the nearby Afan Forest Park.

The improvements include upgrades to key sections of the trails as well as provision

of new signage and related information to help with navigation. The Afan Forest

Park is described as “world class” on its website and these upgrades will have made

some contribution to its offer.

Income for Landowners

5.53 An important benefit for local rural economies hosting wind farms is the capital and revenue

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 of course varies with the

amount of land used and the value that is negotiated. Our survey suggests an average of

£12,000 per MW across all respondents.

5.54 This can result in significant income for landowners, much of which will be reinvested in local

businesses in one way or another. For example, should our average for the survey be

broadly representative, this would imply payments of over £3m per annum at Pen y

Cymoedd.


66

6. Conclusions and Recommendations

Conclusions

6.1 Our analysis has highlighted the potential for a significant and steady stream of economic

benefits for Wales that could arise from the development and operation of additional

onshore wind capacity in coming years. Drawing on the latest views and intelligence from

the industry, the study has looked at the likely level of investment and expenditure that

could flow to Wales in various scenarios for the development of the industry, which sectors

stand to benefit from this, and what this could mean in terms of Gross Value Added and

employment in Wales.

6.2 This analysis has shown that, 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 for Wales between 2012 and 2050, with over 2,000 FTE jobs per

annum supported 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

throughout Wales, with the supply chain effects and the consumer expenditure of

employees.

6.3 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 supported. A continuation of

historic trends in development rates would see £1.4 billion less in GVA than if 2,000

MW were achieved, and only around a third of the jobs could be supported. A

continuation of more recent trends could mean £0.9 billion less GVA and around

1,000 fewer jobs on average per annum. Our research has highlighted a number of

barriers to achieving development, including local planning issues and to a lesser

extent, 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. In our recommendations below we explore some

of the options available for maximising the benefits.

6.4 The economic opportunities outlined in Section 4 would not be spread evenly throughout

the nation and, reflecting the economic geography of Wales, many of the supply chain

benefits would be concentrated in the larger urban areas. Nonetheless, there are

opportunities for the immediate local areas to benefit from the developments:

Those areas that are in close proximity to urban centres have the potential to

benefit from opportunities in the supply chain, given the greater presence of

relevant sectors and the density of suitable businesses.

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.


67

Examples include aggregates, non-specialist civil engineering, forestry, and other

environment/ habitat improvements works.

Service based rural local economies also benefit in the construction phase by

providing services to the contractors that are temporarily located there, such as

hospitality and retail.

Evidence from our case studies shows that there are examples of good work being

done to engage with the supply chain in local areas and to link up prime contractors

with potential local suppliers.

There is some scope for rural localities to benefit from opportunities in Operations

and Maintenance. This may be the case for larger and remoter schemes where it

makes more economic sense to locate maintenance services locally. However, where

developers have a number of wind farms across these areas, they may choose to

concentrate these activities in hubs in the main towns in Mid Wales.

Most local communities hosting wind farms will see long term benefit from

Community Benefit Payments. In some cases these payments can be very substantial

and offer potential for very significant positive economic and community benefits

for local communities.

Wind farm developments often include investments in environmental improvements

/ remediation as part of the package of infrastructure works. These can help to

address existing concerns as well to fund improvements to visitor facilities, for

example. Some of the larger schemes include major habitat restoration plans.

Landowners receive capital and/or rental payments in return for the siting of wind

farms on their land. Depending on the landowner this income either goes to local

farmers, other landowners or to the Forestry Commission/Welsh Government.

These substantial levels of income are often used to support investment in land

based and related rural businesses.

Recommendations

6.5 Maximising the opportunities from onshore wind in Wales will require proactive effort, co-

ordination and partnership in the coming years. We set out potential areas for attention

here.

Planning System

6.6 There is a clear planning framework for the development of onshore wind across Wales.

However, our research has highlighted problems in implementing this national framework at

a local level. Approval rates in Wales have been lower than the rest of the UK (and in

particular Scotland), and delays have been more common and longer. If national aspirations

for the development of the sector are to be realised, steps need to be taken to ensure that

investors and developers have confidence in the prospect of developments going ahead.

Otherwise, given the considerable upfront investment that is required, there is a danger that

planning risks will deter investment and developers will seek alternative locations in the UK

and overseas. There is also a role for developers to engage with communities as early as


68

possible in the planning process and to invest resources in communicating the benefits of

their schemes to the local community. The current review of the planning system provides

the opportunity to ensure that the system is fit for purpose and to address specific barriers.

Recommendation 1: Welsh Government and developers should work together to ensure that

concerns on planning constraints are fed into the current review of the planning system,

which will in turn inform the forthcoming Planning White Paper due to be published in 2013.

Recommendation 2: Developers to liaise closely with communities from an early stage in the

planning process and to ensure that the benefits (and disbenefits) of the scheme for the local

community are communicated clearly and effectively.

Enabling Infrastructure

6.7 It is clear from our research that a lack of grid infrastructure – particularly in mid Wales - is

widely recognised as a constraint to onshore wind development. For particular locations,

road infrastructure is also seen by some investors and developers as a constraint. Local

authorities can help to alleviate these pressures on existing roads by carefully managing the

movement of large loads and advising local people on convoy times. Local authorities could

also consider making smaller roads one way only, with suitable, clearly signposted diversions

on convoy days. This approach has been used in locations in Scotland and could be adopted

to minimise the impact of proposed schemes in Powys.

6.8 Co-ordinated action between developers, Welsh Government and local planning authorities

is required to ensure that the infrastructure necessary to enable national aspirations for

onshore wind development is delivered and ready in time to facilitate the implementation of

onshore wind capacity. Again, in the absence of this there remains a risk of delays, a loss of

investor confidence and a failure to deliver on national aspirations.

Recommendation 3: Welsh Government, working in conjunction with developers and

relevant local planning authorities, to jointly identify barriers to development of necessary

grid infrastructure, key road infrastructure constraints, and effective solutions.

Supply chain and sector development

6.9 This study has gathered headline data on the nature and scale of the Welsh supply chain for

onshore wind, but there is scope for a more comprehensive exercise to map the supply side

in detail, in order to better understand areas of strength, to identify key current and

potential suppliers, which locations have the strongest presence, current levels of awareness

of the opportunities from onshore wind, as well as key gaps in the supply side in Wales and

the potential to address these.

Recommendation 4: RenewableUK, Welsh Government and developers to consider

undertaking a mapping study of the onshore wind supply chain in Wales, with a view to:

filling gaps in developers’ awareness of the supply chain and prime contractors

understanding current levels of awareness within the supply chain of opportunities in

onshore wind. This would need to be targeted on different tiers of the supply chain

depending on the particular part of the supply chain (e.g. for tier 1 for environmental


69

services; lower tiers for manufacturing)

understanding the existence of any key gaps in the supply chain that could be

realistically targeted for inward investment promotion

understanding the extent to which existing supply chains for other industries (e.g.

metals and engineering for steel and oil exploration) may possess the skillsets and

capital equipment necessary to enter supply chains for the onshore wind sector, and

what support they need to do this

informing future action to address other identified support needs (e.g. support with

strategic business planning, tendering advice, access to finance, skills development).

6.10 Whilst there is scope to enhance knowledge of the supply chain and its support needs, there

are already examples of good practice in the work of developers to engage with the supply

chain and local authorities to raise awareness of opportunities and help local suppliers to

compete for contracts. It is important that this good practice is explicitly drawn out and used

to inform plans for future developments, where appropriate.

Recommendation 5: RenewableUK Cymru and developers to share good practice on

approaches to engaging with the supply chain, with a view to creating a knowledge bank and

evidence base on approaches and their effectiveness.

Community Benefit Payments

6.11 Community Benefit Payments linked to onshore wind farms represent a significant resource,

presenting opportunities for real and long term benefit for local communities if spent in the

right way. Efforts are being made to map out the current uses of CBFs across Wales20, and

recommendations have been made to create a CBF register of live or approved wind farms,

and to support communities to develop the best CBF for their needs. There is potential to

build on this to understand how money is being spent and what benefits are being

generated.

Recommendation 6: Continue the work being undertaken by RenewableUK Cymru, with a

view to understanding how CBFs are being used across Wales and the rest of the UK, the

benefits they are securing and good practice.

6.12 CBFs are generally handed over to local community bodies to be used as they see fit on local

community projects. Whilst this brings benefits to these local communities, given the scale

of the CBFs that are coming forward and the considerable socio-economic challenges facing

many of the host communities, there is the opportunity to use CBF more strategically in

order to address socio-economic challenges in the host areas. This could be done by pooling

together some of the forthcoming CBFs to create a fund of sufficient scale to deliver

economic development benefits, and to be matched with existing economic development

resources.

20

E.g. The value of onshore wind farm Community Benefit Funds to Wales, RenewableUK Cymru, 2012 and Cardiff University (2008) Wind Farm Development in Wales: Assessing the Community Benefits.


70

Recommendation 7: Welsh Government to investigate the feasibility of aggregating and top

slicing a portion of future CBFs, to create a fund to be used by Welsh Government and Local

Authorities to address socio-economic issues in local communities, matched with other

economic development funds (such as the European Structural Funds and Rural

Development Programme).

Local Benefits

6.13 Our case study work has revealed examples of good practice in the use of locally focussed

initiatives to maximise the local benefits of wind farm developments (for example, at Pen y

Cymoedd). We have recommended sharing and learning from this best practice. Following

on from this, these examples of good practice should be mainstreamed where possible.

Recommendation 8: For developments of sufficient scale, it should be standard practice for

developers to work with local authorities at an early stage to raise awareness amongst the

local business base of the range of opportunities potentially open to them throughout all

stages of development of the wind farm. This should be done through events and a variety of

marketing channels (online, print and broadcast media as appropriate).

Recommendation 9: Developers and Meet the Buyer events should, where possible, be held

prior to main contracts being let. These should bring together potential main contractors and

local sub-contractors so that mutual requirements can be understood at an early stage.

Recommendation 10: In ways which are practical, use of local suppliers should be

encouraged through the procurement process for main contractors (and in turn, their sub-

contracting of activities), with the monitoring of achievements built into contract

management procedures.

Recommendation 11: Where there is a sufficient pipeline of opportunities in a local area (e.g.

from clusters of developments in Powys), there would be merit in these developers exploring

the feasibility of joint training and recruitment schemes for relevant occupations targeted at

local residents.


Page A-1

Appendix A Economic Impact Methodology

1. Here we provide details on the methodology that was used to arrive at the economic impact

estimates set out in Section 4. We describe

The inputs to the model and key assumptions

The modelling process

Inputs to the Model

2. There are two key inputs into the model:

1) Development and operational profile – scenarios for the build-up of operational

capacity over time

2) Expenditure and sourcing – assumptions on the typical average levels of capital and

operational expenditure per MW of installed capacity.

1. Development and operational profile

Current pipeline

3. The table below summarises the current operational capacity and capacity in the planning

and development pipeline. As this shows, it will be possible to meet the target (assuming

that most of the pipeline comes through). With 13 years until 2025, it would be technically

possible for this to happen in the 2025 timeframe, although challenging given the

development rate over the past decade and the current delays facing schemes in Wales.

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

4. Of course, this analysis does not take into account any schemes that are at the pre-planning

stage and may be developed in this timeframe. Given the lack of information and

uncertainty on these schemes, these are outside the scope of the modelling.

Scenario 1: 2,000 MW Installed Capacity by 2025

5. The overarching purpose of the economic impact assessment is to model the potential

economic impacts that could be secured for Wales if Welsh Government’s current stated

aspirations for development of the sector are fulfilled. Recent statements by the Welsh

Government (The Low Carbon Revolution and the Statement by the Environment Minister in

Summer 2011) have clarified that the overall aspiration is to bring forward a total of


Page A-2

2,000MW of onshore wind capacity in Wales by 2025. This scenario therefore looks at how

much additional capacity is required for this to happen.

6. The headline picture for this target is complicated somewhat by the fact that some of the

currently installed operational capacity will be due to reach the end of its operational life

before 2025. Hence if some of this capacity is decommissioned in this period then

correspondingly more capacity will need to come forward if the target is to be met. Clearly,

the more of this capacity that is repowered, the less additional capacity needs to come

forward for this to happen.

7. In light of this the model needs to assume a sensible rate of repowering vs. decommissioning

of existing capacity. Having consulted with developers we assume that of the existing MW

capacity that is due to reach the end of its operational life between 2012 and 2025, 75% is

repowered and 25% is decommissioned. Further, it is assumed that the capacity of those

wind farms that do repower increases by 50%.

8. Given this assumption, a total of just over 1,500MW of additional capacity will be needed by

2025 (equivalent to an annual average of 120MW p.a).

Scenario 2: Continuation of 2001-11 rate

9. It is useful to construct a scenario that looks at how much capacity would be developed if

trends over the past decade continue. In this period a total of 270MW of onshore wind

capacity became operational (an annual average of 27MW p.a.). Should this trend continue,

there would be a total installed capacity of around 800MW in Wales by 2025 – clearly a

significant shortfall on the 2,000MW aspiration.

10. 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.

Scenario 3: Recent Consenting Rates

11. Our final scenario takes into account the more recent trend in consenting of wind farms in

Wales.

12. The RenewableUK database indicates that there is 493MW of capacity currently in

construction or consented:

111MW is in construction: 35MW commenced in 2011; 77MW commenced in 2012.

It is safe to assume that this will become operational in the next couple of years.

382MW has been approved but construction has not started yet. The database tells

us when each of these wind farms was consented and we have some survey

evidence from developers that have responded, indicating the likely start date for

operations.

13. Bringing all of this together it is likely that the majority of this capacity in the pipeline will

become operational by 2016. This equates to an annual average of 124MW p.a. of additional

capacity over the period. Assuming that this rate continues up to 2025, this would be more

than enough to meet the 2,000MW level. However, the recent approvals are heavily skewed

by the Pen y Cymoedd scheme (256MW). There are no other schemes of a comparable size


Page A-3

in the planning system at present (the largest scheme is Carnedd Wen). It is therefore not

realistic to project forward on this basis.

14. Excluding Pen y Cymoedd from the recently consented schemes indicates an annual average

of 49MW 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

124MW and 49MW per year: 86MW per annum. Projecting forward on this basis would yield

1,560MW in installed capacity by 2025.

Overview of the Scenarios

15. The profiles for installed capacity by 2025 for each of the scenarios are summarised below.

Operational Capacity, by Scenario

Building the Full Development Profile

Each of these scenarios for new capacity can then be translated into profiles for planning

and development, construction, operations and maintenance and decommissioning and

repowering from 2005 to 2025, and then on to 2050. This has been done using the following

assumptions, drawn from our survey evidence and from other published work:

Planning and development: an average of four years prior to the construction start

date

Construction: an average of two years for new capacity to be constructed before

becoming operational

Operations and maintenance: each newly constructed wind farm has an operational

life of 25 years

Decommissioning/repowering: as stated earlier, 25% of existing capacity coming to

the end of its life up to 2025 is decommissioned, and 75% is repowered. Thereafter,

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

20

24

20

25

20

26

20

27

20

28

20

29

20

30

20

31

20

32

20

33

20

34

20

35

20

36

20

37

20

38

20

39

20

40

20

41

20

42

20

43

20

44

20

45

20

46

20

47

20

48

20

49

20

50

Op

era

tio

nal

Cap

acit

y

Scenario 1: 2,000MW by 2025

Scenario 2: 2001-11 trend continues

Scenario 3: Recent consenting rates


Page A-4

the model assumes a constant profile of operational capacity, assessing the

economic impact associated with the on-going capital investment and operational

expenditure necessary to maintain this.

2. Expenditure and sourcing

16. To model the economic impact of these scenarios it is necessary to translate these profiles

for planning, development, construction, operations and maintenance and decommissioning

and repowering into profiles for the investment /expenditure associated with each phase.

17. This requires informed and realistic assumptions on:

1) The total level of investment/expenditure per MW for each stage

2) The typical proportions of this total investment/expenditure that takes place in

Wales.

18. To arrive at robust figures the key research tool used to inform this has been a survey of

developers and operators of wind farms in Wales.

Purpose and Content of the Survey

19. All onshore wind farm developers with schemes in planning or operation in Wales were

invited to complete a written survey providing intelligence to assist in our economic

modelling of the impacts of the sector for Wales.

20. The survey asked developers to provide information on:

Their involvement in the onshore wind sector in Wales, including details of their

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

Their onshore wind schemes in development in Wales, including expected

development costs and timescales, and likelihood of sourcing of goods and services

from Wales

Their 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.

21. The survey questionnaire is reproduced in Appendix B.

Survey Approach and Timing

22. The survey was distributed to all developers of onshore wind farm schemes set out in the

comprehensive RenewableUK wind farm database, for whom contact details were

obtainable.

23. The survey was sent out in October 2012 and responses were received through October and

November 2012. The chart below sets out the overall response rate from the survey.


Page A-5

Summary of Sample Size and Response Rates

24. Of the 43 developers of existing and proposed onshore wind farm schemes set out in the

RenewableUK database, a total of 15 responses (35%) were received. This group however

represented the majority of larger developers, meaning that responses were received

relating to 36 of the 81 existing and proposed wind farms (44%). These wind farms comprise

66% of all capacity in operation and in the pipeline.

25. The fact that the survey responses cover 66% of all existing and proposed capacity gives us a

reasonably high level of confidence in the resulting figures on investment and sourcing.

The Modelling Process

26. In analysing the economic significance of any industrial activity (actual or proposed), it is

important to distinguish direct, indirect (and then induced) economic effects. The direct

effects are associated with the activity itself. Here direct effects might be understood in

terms of the initial expenditure injection in Wales associated with the onshore wind

development.

27. However, to provide a complete appreciation of economic effects the research required an

assessment of the economic benefits for Wales deriving from local procurement during

onshore wind development and operation. For example, the three development scenarios

we have developed, in combination with the findings from our developer survey, tell us

much about the direct spending on the range of required goods and services by developers

and operators through development, operations and maintenance and estimates of their

potential payments to labour. This is an important step in moving on to consider the wider

supply chain effects linked to this spending. For example the spending of the onshore wind

developers supports economic opportunities in local and Welsh suppliers. However, these

same suppliers also spend monies in the local economy that support further economic

output and employment. Furthermore employees of the developers and their suppliers also

spend money in the local economy that supports further economic output and jobs. These

effects through the supply chain and household sector are termed indirect and induced

effects respectively.

28. The magnitude of indirect effects is largely determined by how far wind energy developers

and their suppliers of goods and services purchase goods and services in Wales as opposed

43 36 45 2,130

36 3141 2,000

15 13

23

1,410

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Number ofDevelopers

Number ofOperational Wind

Farms

Number ofProposed Wind

Farms

Total Capacity ofOperational andProposed Wind

Farms (MW)

Total Sample Coverage Response from Sample


Page A-6

to outside of Wales. Similar arguments apply to the employees of the developers. This

analysis requires care. For example an employee of a wind farm developer may spend within

local shops and restaurants etc., however, the majority of the products could have been

made outside of the locality. In this case the retail ‘margin’ would be a local spend whereas

the spending relating to the product itself would ‘leak’ out to the rest of the UK or overseas.

Similarly, construction firms may purchase large amounts of diesel within Wales, but much

of this is a leakage outside of Wales in terms of taxes to UK government.

29. Consequently once in possession of direct spending estimates for onshore wind

development and operations, it is necessary to subtract spending which is likely to be

outside of Wales, to give the Welsh direct spending impact. These expenditures, by item, are

then an input into a modelling process which allows the indirect and induced effects

(multipliers) to be estimated. Adding the direct to these multiplier effects gives an estimate

of the total economic impact on the Welsh economy of development and operations of wind

farms both now and in the future.

30. To estimate these indirect or multiplier consequences a picture of the local economy that

specifies how the various Welsh industry sectors ‘fit together’ in terms of their trading

relationships is a key requirement. This then allows the effects of spending and employment

activity connected to on-shore wind to be traced through the entire Welsh economy.

31. A comprehensive picture of the Welsh economy in these terms is an Input-Output table,

which is essentially a spreadsheet detailing transactions between different sectors of the

Welsh economy and beyond. As well as being an important descriptive tool, the Input-

Output tables can be used for economic modelling and for impact assessment. Input-Output

Tables for Wales are the product of a continuing research project at the Welsh Economy

Research Unit to develop a comprehensive picture of the Welsh economy, and the way it is

changing over time (see Bryan et al., 2004).

32. Figure 1 outlines the economic modelling process adopted.


Page A-7

Figure 1: Methodological approach in summary

Grid Infrastructure

33. As set out in Section 4 there is limited information available on the economic nature of the

grid infrastructure investment required for Mid-Wales, although the decision on the

preferred route(s) has been comprehensively covered in the National Grid documentation21.

This report provides overall capital and lifetime costings for a number of mutually exclusive

routes from proposed substations at either Cefn Coch or Abermule. In each case these are

provided for wholly overhead and underground connections.

34. We have made the following modelling assumptions in assessing the impact of this

expenditure:

Commodities of spend major on construction, electrical engineering and (for

overhead options) structural materials (metal and wood)

Excluding the special case of towers22, local sourcing propensities for each

commodity/service follow those established from the survey of wind farm

developers for the within-Wales portion of the route (approximately half). The

English proportion is wholly spent outside Wales

We model the preferred substation and route – Cefn Coch and Red North – for

overhead and underground options

21


22 Here we assume 33% sourced within Wales rather than the survey (76%).

Total construction or operational expenditure by item expenditures

Expenditure

within Wales by

item (direct

impact)

Input-

Output

Model

for Wales

Supplier

effects

Induced

income

effects

Total

economic

impact on

Welsh

economy

Deduct spending outside Wales

Multiplier effects

Taxes and imports

(leakages)




Page A-8

Whole-lifecycle costs rather than capital costs are modelled to then include

operations and maintenance

Impacts are modelled using the 3.5% discount rate applied by National Grid and

hence on a different basis to the wind farm impact (current £)


Page B-1

Appendix B Survey Questionnaire

1. The survey questionnaire sent to developers and operators of wind farms in Wales is

reproduced below.

Developer / Operator:

Introduction

RenewableUK Cymru and the Welsh Government have commissioned Regeneris Consulting

to assess the annual economic impacts of the onshore wind energy sector in Wales up to

2050. The findings will provide important information for policy makers, sector stakeholders

and communities, demonstrating the overall economic benefits the onshore wind sector

provides for the Welsh economy.

To ensure that there is robust evidence for the study, it is important for us to gather

information from developers and operators of current and prospective onshore wind

schemes in Wales. We appreciate that you will have many calls on your time, and so we

appreciate your inputs for this important research.

When completing this survey, please bear in mind the following:

All information provided will be treated confidentially, with any financial information

you provide only presented in aggregate. The report will not disclose any

information provided for any individual wind farm.

We recognise that for some of the information requested it may be difficult to give a

precise answer. Where this is the case, please provide your best estimate.

The completion of the questionnaire may require inputs from a number of different

people within your organisation or other organisations. Please let us know if this will

cause delay in completion of the questionnaire or prevent the completion of any

aspects of the questionnaire.

The survey is broken down into the following sections:

Part A - gathering general information on your involvement in the onshore wind

sector in Wales;

Part B - seeking information on your onshore wind schemes in development in

Wales;

Part C - seeking information on your operational onshore wind schemes in Wales.


Page B-2

Part A - Involvement in the Onshore Wind Sector in Wales

The questions in this section will help us to develop a greater understanding of the way in

which the economic impacts of onshore wind farm developments can be retained in Wales,

through the approaches you and other stakeholders take to development and operation.

Your Investment and Operational Activity in Wales

3) What is the estimated capital investment that your company has made in the

development of onshore wind capacity in Wales over the last three years?

Please state the estimated investment in the box below. Provide a range if it is not

possible to precise.

£ ____(millions)

4) What is the expected capital investment your company is planning to make in

onshore wind capacity in Wales over the next three years?

Please state the estimated investment in the box below. Provide a range if it is not

possible to precise.

£ ____(millions)

5) Please indicate the scale of your current or proposed onshore wind generation

activity in Wales?

No. of Wind Farms

Installed Capacity (MW)

Onshore wind capacity in operation

Onshore wind capacity currently under construction

Onshore wind capacity consented but not yet built

Onshore wind capacity in development or planning

6) Who owns the land on which your operational and planned wind schemes in Wales

are / will be based?

Please tick the relevant owner type(s) for each listed wind farm in the table below. Please

add any schemes which your company is responsible for.

Developer-owned

Local Farmer

Forestry Commission

Other Wales-based landowner

Other landowner based outside Wales


Page B-3

Onshore Wind Supply Chains

7) 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?

Please treat goods manufactured outside of Wales but sold wholesale by Welsh

companies as being sourced from outside the country.

Please tick as appropriate

Broad Category of Good or Service: Good Selection of Suppliers In

Wales

Some Suppliers Based in

Wales

No Suppliers Currently Based in

Wales

Don’t Know/ Not

Sure

Development & Construction Category:

Planning and Environmental Consultancy Services

Legal and Financial Services

Wind Turbine Nacelle, Rotor and Blades

Wind Turbine Towers

Wind Turbine Transport, Assembly & Installation

Civil Engineering Works

Electrical Engineering Works

Grid Connection and Related Works

Forestry and Environment (inc habitat management)

Operational Category

Management of Wind Farms Operations

Turbine Maintenance

Forestry and Environment Services

Operational Equipment and Spares

Insurance

8) 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?

Scope to Increase a

Lot

Scope to Increase a

Little

No Scope to Increase

Don’t Know/ Not Sure

Goods and services used in development and construction

Goods and services used in operation and maintenance


Page B-4

9) What do you see as the main barriers to growing the supply of goods and services

used in the construction and operation of your onshore wind schemes from

suppliers based in Wales? Please write your response in the box below

Maximising Social & Economic Benefits of Onshore Wind in Wales

10) To what extent do you pursue the following actions in order to secure social and

economic benefits of onshore wind in Wales?

Potential Actions: Importance placed on these actions:

To a Large Extent

To Some

Extent

We Do

Not

Don’t Know/

Not Sure

Running supplier events or similar initiatives to help companies based in Wales to access supply chain opportunities

Running your own local training initiatives (eg providing training/work placements to local residents)

Encouraging contractors to adopt local training initiatives

The provision of community benefit payments

Working with local communities to proactively help them maximise the benefits of using these community benefit payments

Investing in improvements to local visitor and recreational facilities

Working with local schools and colleges on topics covering renewable energy and energy efficiency

Other (please write in)

11) Do you consider that any of your approaches or actions in this regard represents

good or best practice?

Tick as appropriate

Yes

No

Don’t know/not sure

If yes, please outline the nature of this good practice in the box below


Page B-5

Wales as an Investment Location

12) Overall, how would you rate Wales as a location to invest in onshore wind schemes?

Please tick the relevant box as appropriate.

Please Tick as Appropriate

A Very Favourable Location

A Reasonably Favourable Location

A Neutral Location

A Fairly Unfavourable Location

A Very Unfavourable Location

Don’t Know / Not Sure

13) Please indicate whether the following factors make a positive or a negative

contribution to Wales as an investment location for onshore wind?

Factors Positive Neutral Negative Not Sure/ Don’t Know

Welsh Planning Policy

Local Planning Policies and Practice

Clarity about Preferred Development Locations

Availability of Grid Infrastructure

Availability of Other Infrastructure (eg roads)

Economic Development Support for the Sector

Community Support

Availability of Suppliers

Availability of Skilled Workers

If you wish, please expand on any of these or related factors you see as particularly

important in the box below.


Page B-6

Part B – Onshore Wind Capacity in Development in Wales

In order to understand the economic impacts of the future development of onshore wind in

Wales, we need to understand the nature of the proposed wind schemes which are

emerging, their costs and the potential to source inputs from companies based in Wales. The

following questions will help us to build this understanding.

Please base your answers on your experience of the onshore wind schemes you have or are

currently developing in Wales, as well as your wider knowledge of the sector and supply

chain in Wales (and elsewhere as relevant).

If you are not currently proposing or developing any new onshore wind schemes in Wales,

please go on to Part C.

Development Prospects, Timescales and Costs

14) What is the current status of each of the onshore wind schemes you are developing

in Wales?

Please tick the relevant development stage for each listed wind farm in the table below.

Please add any schemes which your company is responsible for.

Pre-application Examination and Determination

Consented but not yet in Construction

Construction/ Commissioning

15) For each of your currently proposed onshore wind schemes in Wales, please provide

the following information in the table below:

(A) The expected year in which each scheme will commence construction,

commence operations, and the duration of its operational life.

(B) An estimate of the expected total capital cost of development &

construction of each wind scheme23. Please state costs in 2012 prices.

Please provide your responses in the table below, for each listed wind farm in

development. Provide a cost range if it is not possible to precise.

(A): Expected Timescales (B): Construction Costs

Year construction will/did begin

Year wind farm will become operational

Operational life for wind farm (years)

Estimated Development and Construction Costs (£m)

£

£

23

Capital Expenditure to include all development and planning costs, supply of turbine, supply of balance of plant, transportation, assembly, installation and commissioning of all parts of the wind farm.


Page B-7

16) Please provide an indication of the development and construction costs of the

onshore wind schemes by broad category of expenditure. You can provide this

information either as (i) the percentage which each category accounts for out of the

total cost or (ii) a cost per MW. In answering this question, you may wish to consider

the following:

We appreciate that construction costs will vary depending upon location, site

characteristics and scale (amongst other factors as well). With this in mind, if

you have more than one proposed development scheme, please provide an

average breakdown in costs across these schemes.

If you present the data in £s per MW, please provide it on a 2012 price basis.

If this is not possible, please indicate the alternative price basis you have

used.

We have included the standard cost categories – please add other categories if you

feel they are relevant. Provide a range if it is not possible to precise.

Expenditure Categories: % of Total Costs

Alternative format: £s per MW

Development (inc planning costs, legal and financing) % £

Project Management of Construction % £

Wind Turbine Nacelle, Rotor and Blades % £

Wind Turbine Tower % £

Wind Turbine Transport, Assembly & Installation % £

Civil Engineering Works % £

Electrical Engineering Works % £

Grid Connection and Related Works % £

Forestry & Environment Services (inc habitat management)

% £

Other (please specify) % £


Total 100% £

Construction Spend in Wales

17) In order to estimate the economic impact of the proposed onshore wind

developments, it is important to understand the scope for associated development

and construction expenditure to be captured by companies based in Wales.

Looking across all of your current proposed schemes, please provide a best estimate

of the likely average proportion of expenditure in each cost category which might be

captured by companies based in Wales. Please consider the following in responding

to this question.

We appreciate that the extent to which inputs are sourced from companies


Page B-8

based within Wales, or particular parts of Wales, will depend on various

factors and it might vary across different wind farms. With this in mind

please provide a best estimate of the average proportion you would expect to

be spent with firms based in Wales.

This estimate should be based on your existing suppliers and your knowledge

of the onshore wind farm supply chain in Wales.

The estimate should include only the main contracts and sub-contracts

placed with suppliers based in Wales - it should exclude expenditure which

might flow to lower tiers of the supply chain in Wales (typically tier two and

three firms).

Provide a range if it is not possible to precise.

Expenditure Categories: % of Construction Expenditure Expected to be Spent with Companies Based in Wales

Development (inc planning costs, legal and financing) %

Project Management of Construction %

Wind Turbine Nacelle, Rotor and Blades %

Wind Turbine Tower %

Wind Turbine Transport, Assembly & Installation %

Civil Engineering Works %

Electrical Engineering Works %

Grid Connection and Related Works %

Forestry & Environment Services (inc habitat management) %

Other (please specify) %


Note: the percentages are the estimated proportion of expenditure for each category which might be

spent with companies based in Wales. Therefore, the categories will not necessarily sum to 100%.


Page B-9

Part C – The Operation of Onshore Wind Schemes in Wales

The questions in this section seek to draw on expenditure and supply chain information for

the wind farms which you currently operate in Wales. This will help us to build an

understanding of the economic contribution which the operational onshore wind capacity

makes to the Welsh economy.

If you do not currently operate any onshore wind schemes in Wales, please go to the end of

the questionnaire.

Background Information

18) For each of your operational onshore wind schemes in Wales, please provide the

following information in the table below:

(A) The expected year in which each scheme commenced operation and the

expected duration of its operational life.

(B) An estimate of the annual operational costs of each wind scheme24.

Please state costs in 2012 prices.

Please provide your responses in the table below for each of the wind farms listed. If

you operate other wind farms which are not included, please also include these.

Provide a cost range if it is not possible to precise.

(A): Timescales (B): Operational Costs

Year Commenced Operation

Operational life for wind farm (years)

Estimated Annual Operational Costs (£m)

£

£

£

Operational Costs

19) Please provide a best estimate of the average proportionate breakdown in

operational costs for your onshore wind schemes in Wales by the broad expenditure

categories. You can provide this information either as (i) the percentage which each

category accounts for the total annual cost or (ii) a cost per MW. In answering this

question, you may wish to consider the following:

We appreciate that operational costs will vary depending upon scale,

location and site characteristics (amongst other factors as well). With this in

mind, if you operate more than one scheme, please provide an average

breakdown in the costs across these schemes. Also please provide a range if

24

Operational Expenditure to include operator costs that are attributable to the wind farm, including direct staff employment in management and maintenance (but not including corporate overheads), equipment and spares, related environmental improvements, grid charges, business rates, insurances, land rental/access payments, and community benefit payments. Do not include financing charges.


Page B-10

it is not possible to precise.

If you present the data in £s per MW, please provide it on a 2012 price basis.

If this is not possible, please indicate the alternative price basis you have

used.

We have included standard cost categories – please add other categories if

you feel they are relevant to you.

Operational Expenditure Categories % of Operational Costs

Alternative format: £s per MW

Employment Costs:

- Wind Farm Operations and Management % £

- Turbine Maintenance % £

- Other Activities % £

Equipment and Spares % £

Forestry and Environment (including habitat management)

% £

Insurances % £

Property and Utilities % £

Land Rentals/Access Payments % £

Business Rates % £

Community Benefits Payments % £



Total Operational Expenditure 100% £

20) In order to estimate the economic impact of the operational onshore wind schemes

in Wales, it is important to understand the scope for bought in goods and services25

to be sourced from companies based in Wales.

Looking across all of your operational schemes, please provide a best estimate of the

likely average proportion of expenditure in each cost category which might be

captured by companies based in Wales.

We appreciate that the extent to which goods and services are sourced from

companies based within Wales will depend on various factors and it might vary

across different wind farms. With this in mind please provide a best estimate of the

average proportion you would expect to be spent with companies based in Wales.

Provide a range if it is not possible to precise.

25

Bought in goods and services are those goods and services which you purchase from your suppliers. This could include goods and services which you purchase from subsidiary companies at market prices.


Page B-11

Expenditure Categories: % of Operational Expenditure Spent on Bought in Goods and Services Spent with Companies Based in Wales

Maintenance Services %

Equipment and Spares %

Forestry and Environment Services (inc habitat management) %

Property Services (including rental of buildings and land) %

Utilities %

Insurances %



Note: the percentages are the estimated proportion of expenditure for each category which might be

spent with companies based in Wales. Therefore, the categories will not necessarily sum to 100%.

Jobs and Salary Costs

21) Please provide a best estimate of the number of staff and associated salary costs

arising from the on-going operation and maintenance of the onshore wind schemes

you are responsible for. Please also provide a best estimate of the extent to which

this employment is likely to be taken by workers local to the onshore wind

schemes26.

Please consider the following notes in providing this information:

This could include your own employees but also the inputs of maintenance

staff employed by the turbine manufacturers which are provided as part of a

warranty agreement.

Employment information should be provided as full time equivalents (treat

part-time employment as 0.6 of a full time job).

Consider local workers to reside within a 20km radius of the wind farm.

Total Salary Costs for Direct O&M Employees (£thousands)

Number of Full Time Equivalent O&M Direct Jobs

Best Estimate of No. of O&M Jobs Held by Local Residents (ie within 20km radius)

26

This could be workers local to the wind farm itself or a control centre


Page B-12

Community Benefits

22) We are interested to find out more about the level and nature of community benefit

packages which have been agreed with local communities. Please provide the

following information:

What is the current annual value of the community benefit package

(£thousands per MW) that you are making to local communities for each of

your onshore wind schemes in Wales?

To the best of your knowledge what types of activities are the local

communities using these payments for?

Annual Value of

the Community

Benefit Package

(£1000s per MW)

Types of Activity Being Undertaken by Communities

(please tick all that are relevant)

Community

Services

Community

Facilities

Energy

Efficiency

Energy

Generation

Education Skills &

Jobs

Enterprise Other

Decommissioning and Repowering

23) For the onshore wind schemes you are currently operating in Wales, please provide

the following information:

The expected year in which each wind farm is due to reach the end of its

operational life;

Whether you currently expect to decommission the scheme or seek to

permission to repower it? If repowering, please identify the expected total

MW capacity of the scheme once repowered.

As appropriate, the estimated costs of decommissioning or repowering the

wind farm (please provide an estimate based on £m per MW). Provide a

range if it is not possible to precise.

Expected End of Operational Life (year)

Current Plans: Decommissioning or Repowering? (write in)

Estimated Decommissioning / Repowering Costs (£m per MW)


Page C-1

Appendix C Consultees

2. The following organisations have been consulted with in detail as part of the research (in

addition to the survey of developers).

Welsh Government (BETS, Sustainable Futures, Energy Wales)

RenewableUK

RWE npower renewables

Vattenfall

West Coast Energy

Falck Renewables Wind Limited

Tegni

Neath Port Talbot Council

Denbighshire Council

Mabey Bridge


Page D-1

Appendix D Case Studies

1. Here we set out the findings of four case studies of onshore wind farms in Wales.

Wern Ddu (Craig Lelo)

2. The wind farm was developed and constructed by the Welsh wind farm developer, Tegni

Cymru. The planning and development of the wind farm was conducted by Tegni, with

development costs amounting to circa £250k. The total costs of construction were in the

region of £10million for the four turbines.

Overview of Case Study Background Information

Developer & Technical Operations Tegni

Owner Triodos Renewables

Local Authority Location Denbighshire

Number of Turbines 4 (9.2 MW installed capacity)

Date of Secured Consent June 2007

Period of Construction 6 months

Date at which the Wind Farm became Operational

March 2010

Expected Operational Life Up to 2035 (25 years)

Expectation Regarding Decommissioning / Repowering

Unknown

Impacts during the Construction Phase

3. Tegni’s approach to constructing wind farms emphasises the importance of involving local

companies in the supply chain wherever possible and where local companies are

competitive. However, the absence of Wales or UK based turbine manufacturer means that

this element of the supply chain can only presently be procured from companies based

overseas.

4. A German firm (Enercon) was contracted to supply the turbines. As a policy, Enercon

procures its own foundation works. In this instance Enercon used the services of a sub-

contractor based in South Wales. As a result of this the contract for the supply of the

turbines also included a portion of the balance of plant activity. The majority of the

construction cost was therefore contracted directly to Enercon. However some of the

investment was retained in the UK:

Tegni acted as main contractor.

Powersystems UK Ltd of Bristol were contracted to provide much of the electrical

work. Although not based locally some local labour was used during construction.

Powersystems procured the majority of the electrical equipment from UK sources.

Natural Power Consultants projects supervised the civil and electrical engineering

works on behalf of Triodos Renewables.


Page D-2

5. Enercon brought their own labour with them. During the erection of the turbines there

would have been in the region of 50 people on site. At this time, there would have been 50%

local people (the remainder being Enercon’s own staff).

6. The remainder of the construction programme (accounting for circa 10% of construction

costs) was procured directly by Tegni. The majority of this was procured locally. The main

sub-contracts included:

A local civil engineering contractor (based within 20km of the site) was used for

access road construction, base excavation, construction of crane hardstandings and

cabling works.

A local building contractor, utilising local labour and material suppliers was used to

construct the electrical switchroom

Concrete for the turbine was sourced locally.

Cranes were sourced in the UK.

7. Although the developer seeks wherever possible to source goods and services for

construction locally, the extent to which this was practical was influenced by a number of

wider factors, including:

Capacity within the local business base. The areas immediately surrounding the wind

farm are rural in nature and therefore business density is much lower. Where there

are appropriate suppliers, these do not always have sufficient capacity to deliver

within the construction timeframe.

Approach of turbine manufacturer. Enercon’s policy of maintaining control of the

turbine foundations is presumably in place to ensure that the supporting structure is

to their specifications and will not cause problems at a later stage. While this makes

sense from Enercon’s perspective, it can serve to limit local impacts. While Enercon

sub-contracted the work for the turbine foundations to UK based companies,

neither of these were locally based (although the electrical contractor did use some

local labour).

Competitiveness is the main consideration but this extends beyond just price.

Reassurance that the job will be done well is given importance within the firm and

the right quality of staff is equally important.

8. As Tegni are a smaller sized, independent developer, the organisation is able to take a more

flexible approach to procurement than larger developers might. The smaller size of Tegni

means that there are fewer structural barriers to smaller firms’ involvement in the supply

chain (e.g. procurement processes are straightforward, large guarantees are not required).

While all suppliers need to be competitive, Tegni’s view on what constitutes competitiveness

extends beyond price alone. The ability to maintain a relationship with a contractor is an

important element here. Similarly, Tegni prefers to work with small and medium sized

organisations where it is thought that their contracts would be viewed as a priority rather

than larger organisations where their work has less overall importance.


Page D-3

Impacts During the Operations and Maintenance Phase

9. Although the development is now owned and operated by Triodos Renewables, Tegni has

been contracted to provide on-going operations and maintenance support. Tegni is

responsible for day to day maintenance of the turbines. Enercon (the manufacturers of the

turbines) are contracted to provide routine maintenance and servicing for a period of 15

years.

10. As Tegni’s base is within 30 minutes of the site, they are able to provide a rapid response to

any problems which stop the turbines from generating or reduce the efficiency of their

operation. All of this activity is carried out in-house at Tegni although as the wind farm is

small and the turbines are still under warranty, the scale of activity is limited at present.

11. Tegni estimates that throughout a year, the activity would support between two and three

weeks of full time work although maintain a daily watching brief on the site.

Impacts Created by the Community Benefit Fund

12. The community benefit fund of £10,000 per year is split between three communities in the

vicinity of the site:

Gwyddelwern

Betws Gwerfil Goch

Derwen

13. The fund awards grants on the basis of fit with the aim to promote community spirit and

bring people together, enhance quality of life and promote people’s well being, foster

vibrant, sustainable communities. Grants can be awarded to individual persons, constituted

and informal groups or consortia of organisations.

14. Trustees are keen to see the funding matched with other sources to maximise the impact of

the fund and encourage it to be used more strategically. In reality, the majority of the

investments have been small scale, including upkeep and maintenance of local buildings,

new community facilities, play equipment, and support for local sports teams (e.g. to

provide new kits).

15. There are some examples of more strategic investments being made, which could deliver

wider benefits for the local community. For example a grant was provided towards

upgrading works to a caravan site in the area.

Wider Benefits of the Scheme

16. Denbighshire County Council are keen to maximise the benefits of wind farm developments

in the county although there are no specific programmes in place to enable or assist local

businesses to enter the supply chain.


Page D-4

Cefn Croes

17. At the time of commissioning, Cefn Croes was the largest wind farm in the UK. An overview

of the wind farm is shown in the table below.

Overview of Case Study – Background Information

Developer RDC

Operator Cambrian Wind Energy (subsidiary of Falck Renewables)

Landowner Forestry Commission

Local Authority Location Ceredigion

Installed Capacity 58.5MW

Number of Turbines 39

Date When Planning Consent was Secured

May 2002

Period of Construction 2004-05

Date When Wind Farm Became Operational

April 2005

Expected Operational Life

20 years

Impacts during the Construction Phase

18. The construction of Cefn Croes was a £50m contract let as a turnkey contract and won by GE

Energy, led largely from their German base.

19. Whilst the developer was keen to encourage the appointment of Welsh firms, this aspiration

was limited by the availability of firms with the appropriate capabilities to support the

construction phase (notably a lack of wind turbine suppliers based in Wales).

20. The most significant construction sub-contract awarded to a Welsh company was the £6.3m

‘balance of plant’ contract (c.13% of total construction value) to Jones Brothers of Ruthin,

Denbighshire. This included construction of access roads, turbine bases, crane bases and the

33kV cabling.

21. Over the nine month construction period, around 100 employees worked at the construction

site, a large proportion of which were from Jones Brothers. The construction workers on-

site over this construction period provided further knock-on benefits for the local area,

including additional spend in local shops as well as local food and accommodation services.

Impacts during the Operation and Maintenance Phase

22. Cefn Croes has been operational since 2005 and is expected to continue operations until

2025. At present, annual operational spend for the scheme sums to around £4m. At a local

level, this activity has:

Created four jobs in wind farm operation and maintenance, working for GE Energy

which continues to hold the maintenance contract for the wind farm. While the

posts were not all recruited from the local workforce, all four are currently based

within a radius of around 20km from the wind farm.


Page D-5

Invested an estimated £500,000 into the local economy each year, through

landowner payments (to the Forestry Commission, business rates (to the local

authority) and other goods and services (from local suppliers).

Contributed to an ongoing environmental enhancement project around the wind

farm site. This annual £10,000 funding supports an environmental management plan

and is overseen by a committee of local stakeholders including the developer, local

authority, landowner, Welsh Government and other partners.


23. Cambrian Wind Energy committed to providing £1,000 per MW of installed capacity, per

year to a local Community Benefit Fund. It also committed to raising this each year in line

with increases in the retail price index. The fund therefore began at just under £60,000 per

year, but is now worth almost £75,000 per year.

24. The fund is run by a Community Trust set up specifically for the purpose of administering the

CBF, and is also a registered charity. As well as a representative from Cambrian Wind

Energy, the trust has four locally appointed trustees, including two each from the

communities of Blaenrheidol and Pontarfynach – covering the local area around the wind

farm.

25. The trustees oversee a formal process whereby applications can be made twice a year in

April and October and are assessed and allocated funding by the trustees. Guidelines for the

fund include the following:

The fund is available for small community-led organisations and not-for-profit

groups

Priority is given to projects supporting the communities in Blaenrheidol and

Pontarfynach, and then to the wider area of the county of Ceredigion

Project activities must provide some measure of economic, environmental,

educational, social or cultural benefit for people living in the area

Any one organisation can apply for a maximum of £25,000 from the fund in one

financial year. Funds have to be spent within a year from their allocation, or

returned.

Except for smaller projects, projects are expected to provide at least 25% match

funding for their projects (i.e. only asking for 75% from the fund)

Types of activities that could be supported include:

equipment for community groups

minor repairs and improvements to buildings for the community

community events, festivals and trips

activity-based environmental schemes


Page D-6

community run newspapers

training and educational courses.

26. All supported projects are listed online to ensure full transparency. The list of organisations

supported includes community councils, schools, churches and chapels, village halls,

community transport schemes, an art group, a garden club, a heritage trust, and a youth

group, reflecting a wide cross-section of local community groups and activities.

27. In each case projects have to report back and invite the trustees to see how the money is

being spent, to ensure that this fund is being used appropriately and for the best purposes.


28. In addition to all of the impacts set out above, the scheme has had positive wider benefit on

a number of other local issues:

The creation of permanent local turbine maintenance jobs by GE Energy has also led

to upskilling of the local workforce, through ongoing development of these staff,

having an overall benefit by increasing skills levels of the local population.

The site welcomes school and college visits for educational purposes and one college

currently visits annually, bringing students studying environmental management,

enhancing their educational experience.

Ffynnon Oer Wind Farm

29. The Ffynnon Oer Wind Farm is a mid-sized (32 MW) development in Neath Port Talbot. The

wind farm site spans approximately 150 ha and is located on rough grazing upland between

Resolven and Croeserw. The land is owned by the Forestry Commission.

30. The wards which include or adjoin the Ffynnon Oer wind farm site are Resolven, Cymmer,

Glyncorrwg and Pelenna with the first three containing settlements close to the site.

Overview of Case Study Background Information

Developer RWE npower renewables

Operator

Local Authority Location Neath Port Talbot

Private or Public land Public (Forestry

Commission)

Number of Turbines 16 (32 MW installed

capacity)

Date of Secured Consent May 2003

Period of Construction 7 months

Date at which the Wind Farm became Operational

2007/8

Expected Operational Life Up to 2031

Expectation Regarding Decommissioning / Repowering

Currently unknown


Page D-7

Impacts During the Construction Phase

31. The total planning, development and construction cost for Ffynnon Oer Wind Farm was in

the region of £16 million. At the time of construction, RWE’s approach was to let a small

number of turnkey contracts rather than to procure each element of the programme

separately. As a result, the developer contracted directly with only two companies:

REpower UK. RWE contracted directly with REpower UK (UK subsidiary of Germany

based REpower Systems) for the supply, delivery, assembly and commissioning of

the turbines. REpower UK subcontracted the civil engineering elements of this work

to McNicholas Construction Services ltd (a Hertfordshire based firm).

Western Power Distribution. As the electricity distribution network operator for

South Wales and the South West of England, Western Power Distribution were

contracted directly for the grid connection elements of the construction

programme. REpower UK also sub-contracted all other aspects of the electrical

installation work to Western Power Distribution. It is not clear whether Western

Power Distribution carried out this work in-house or sub-contracted this work.

32. The cost and specification of the services offered by contractors was clearly an important

factor in procurement decisions. The use of turnkey contracts placed the need to manage

risks associated with sub-contracting at the heart of the approach. As a result, the

guarantees that contractors were able to provide in relation to their performance and ability

to meet the technical specifications of the project were key considerations.

33. The emphasis on risk management within the procurement process, in addition to the size

and value of the turnkey contracts acted as a barrier to the involvement of local companies

in the upper tiers of the supply chain. The local area around Ffynnon Oer is highly rural and

therefore does not have a strong base of businesses of sufficient scale to complete for and

win upper tier construction contracts.

34. As a result of this, the procurement strategy of REpower (RWE’s main contractor) was the

driving factor in delivering local economic impact. There is no information available about

the overall procurement approach that repower took at this time, however RWE’s

monitoring data indicates that goods and services to the value of £1.1 million were procured

from companies located within a 30 km radius of the site. This accounts for around 7% of the

total construction costs for the development.

Table 6-1: Goods and Services Sourced from Companies Local to the Ffynnon Oer Wind Farm Site

Approximate Distance from Site

Area

Total Value of

Sub Contracts

Type of Goods and Services

Fewer than 10 miles

Neath £99,300 Aggregates, building materials, plant hire

Briton Ferry £18,000 Security services

10 to 20 miles

Aberdare £725,700 Concrete for bases, cabling, building materials, skip hire,

Swansea £63,500 Plant hire, appliance testing

20 to 30 miles

Bridgend £202,300 Investigatory drilling / soil consultancy, plant hire

35. As Table 5-1 shows, the locally procured contracts tended to be relatively small in size and

confined largely to the lower tiers of the supply chain. As the goods and services that were

procured locally were a number of steps removed from RWE, it is not possible to provide any


Page D-8

detailed information on the way in which contracts were accessed by local suppliers. The

nature of the goods and services procured would suggest that, for the most part, local

suppliers will have had a locational advantage insofar as the goods and services procured

tend to be those for which transport costs are greatest. For example, stone was sourced

from the existing Bwlch Ffos Open Cast site in Cwmgwrach, less than five miles from the site.

36. While much of the expenditure associated with the construction of the wind farm was spent

with companies from outside of the local area, there is scope for impacts to be supported

locally if companies from outside of the area use local labour. Although the extent to which

local workers were recruited by supplier businesses during the construction period is not

monitored or recorded by the developer, there is anecdotal evidence that there was some,

albeit minor, local recruitment. For example, a site engineer for the construction phase was

recruited using a Cardiff based recruitment agent (although there is no information available

in relation to whether the engineer lived locally).

37. ED unit at NPT council is very active in relation to helping local companies. Although they

were not explicitly involved with the developer in developing local supply chain programmes

for the Ffynnon Oer scheme, they have since started to work alongside developers to deliver

programmes which help to ensure that businesses are aware of opportunities and supplier

ready.

Impacts During the Operations and Maintenance Phase

38. The turbines manufacturer’s warranty expired in 2011 but was extended until 2013. This

covers routine servicing of the turbines and major component replacement that might be

required. During the warranty period, there are few opportunities for significant expenditure

with local suppliers.

39. RWE may engage additional suppliers to undertake any maintenance activity that is not

included within the warranty agreement. The nature of the work required would determine

whether this was carried out directly through RWE’s O&M base (in Mid-Wales) or by other

contractors. Although there have not been any instances of this nature yet, there are local

firms which would be considered as suppliers (for example, there are electrical contractors

in Bridgend, less than 10 miles from the site which have provided services to RWE in the

past).

40. In spite of the schedule operations and maintenance activity and component replacement

being carried out by the original equipment manufacturer, there is some direct on-site

employment generated to deal with routine maintenance and checks of the turbines (for

example dealing with routine changes of oils and components etc). Two technicians are

employed directly by REpower, the OEM and based on-site on a full time basis. Prior to their

employment on-site, these technicians did not have experience of wind farm maintenance

so were trained via a six week intensive course in Germany (at REpower’s headquarters) to

provide the turbine skills required for their O&M role.

41. Once the warranty period for the turbines expires, there will be scope for more local

involvement in the O&M supply chain. It is expected that a single O&M contract covering the

main components of the turbine would be let. Alongside this, other contracts for civil

engineering, electrical work, safety inspections, cranage and security would be let. While it is

not possible to say at this stage which firms could potentially access these opportunities,

there is confidence within RWE that there is capacity within the local business base to fulfil


Page D-9

the wind farm’s O&M requirements in respect of civil engineering, electrical works and

cranes.

42. The extent to which these benefits will occur locally would depend on the approach taken by

RWE. For example, as for the construction phase, a decision might be taken to appoint a

single supplier for all O&M activities, rather than procure the elements individually. If a

single contractor option is preferred, RWE expect that there would be scope to construct a

framework agreement of local contractors which the main O&M contractor can draw on

where required. This has been achieved around other wind farm sites elsewhere 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.


43. The decision in relation to the form that the Community Benefit Payments would take was

reached in agreement with representatives from the local communities around Ffynnon Oer.

It was agreed that an annual payment would be made, but in addition the feasibility of

securing funding for the local community organisations to purchase one of the 16 turbines

was explored. It was expected that this would allow the community to earn all of the

revenue generated by the turbine (between £120 – 140k per year) but funding for the

project could not be found.

44. RWE provides community benefit payments totalling in the region of £31,000 each year.

The hills on which the wind farm is constructed act as a physical barrier between the

communities surrounding the wind farm. To reflect this, an agreement was reached for the

funding to be paid to two community based organisations:

The Community Foundation: The registered charity receives £9090 per year (index

linked to 2006) and makes investments on behalf of the residents of Resolven, Clyne

and Melincourt.

Upper Afan Forum: The limited company receives £22,000 per annum (index linked

to 2006) and makes investments on behalf of the Glyncorrwg and Cymmer areas.

45. Both organisations are wholly responsible for the management and investment of the

community funds in their area and have appointed steering groups which consist of

members of the community councils covered by the groups. RWE provides advice and

guidance to support the ongoing administration and promotion of the fund but does not

have any decision making power over how the funds are invested.

46. In both areas, the management body promotes the availability of the funds to local

organisations and invites applications for funding. Within the community benefit funding

agreement, there is a stipulation that the funds should be invested in projects related to

charitable, educational, environmental or community purposes. However, aside from this

broad remit, there is no more detailed focus or strategic plan set out for the investment of

the funds.

47. Grants have been provided to a variety of local organisations including youth and sports

clubs, groups set up to support OAPs and parents. Payments have also been made to the

South Wales Miners Museum. While the grants made are, on the whole, relatively small in

value they are often related to the purchase of equipment and materials required to set up

longer lasting services (e.g. coffee mornings for elderly residents, equipment for sports clubs


Page D-10

and equipment for afterschool play schemes). Capital grants have been used to improve

community facilities such as helping to refurbish community centres and revenue grants

have been used to develop local events including hosting the first Welsh Waterways Festival.


48. Wider benefits associated with the scheme include:

RWE have sponsored improvements to the Afan Mountain Bike Trails, which are an

important tourism asset in the Afan Valley. The improved trail runs close to the

Ffynnon Oer Wind Farm, through the nearby Afan Forest Park. The improvements

include upgrades to key sections of the trails as well as provision of new signage and

new guidance to help with navigation.

As the Ffynnon Oer construction site has local conservation importance, RWE was

asked to establish a Habitat Management Plan for the area surrounding the wind

farm as a condition of the planning consent granted by Neath Port Talbot council.

The long term vision for the site following the development and implementation of

the Habitat Management Plan is to increase the biodiversity value of the site by

habitat enhancement and habitat creation. Activities are focused around pool

creation and wall construction (to encourage nesting birds and wildlife) in addition

to blanket bog enhancement and heathland regeneration activities.

Pen y Cymoedd Wind Farm

49. Pen y Cymoedd is the largest onshore wind farm proposal in the UK at present. An overview

of the wind farm is shown in the table below.

Developer Vattenfall

Operator Pen y Cymoedd Wind Farm Limited

Landowner Welsh Government Woodland Estate

Local Authority Location Neath Port Talbot/ Rhondda Cynon Taf

Installed Capacity Approx 256MW

Number of Turbines 76

Date When Planning Consent was Secured

8th

May 2012

Period of Construction Q1 2014- 2017

Date When Wind Farm Became Operational

Expected to be from Q4 2016

Expected Operational Life 25 years

Impacts during the Planning and Construction Phase

50. Construction at Pen y Cymoedd is expected to commence in 2014. Given the scale of the

wind farm there has been an extensive process of planning and development, which

commenced in April 2008 when Vattenfall (then Nuon Renewables) was selected by Forestry

Commission Wales on behalf of Wales Government to look at developing a wind farm

project on its Estate in SSA F in the area. Based on the latest costing information from


Page D-11

Vattenfall, the total cost of planning and developing the wind farm will have amounted to

£16.8 million including option fees. It is estimated that 90% of this expenditure will have

taken place within Wales, covering expenditure on services including surveys, design, legal

and professional services as well as land option payments. Some examples of companies

that have worked on the project include Natural Power Consultants (Aberystwyth), Ecology

Matters (Talybont), Nitelite (NPT), Wardell Armstrong (Cardiff), IsoFab ltd, Treherbert.

51. Construction at Pen y Cymoedd is expected to commence in 2014. Latest estimates indicate

that the total value of the construction contracts will amount to £334 million. Vattenfall is

committed to maximising local content in the construction phase to as great an extent as

possible. It is recognised that such a large project has significant potential to benefit local

firms and, accordingly, the developer has designed the procurement approach in

consultation with the local business community. This commenced in March 2011 with a

business briefing event attending by over 140 people in the South West Wales region. The

purpose was to:

Provide the local business community with details on the project

Describe the intended procurement process and obtain views on this

Explain the requirements of the project and the contracts that would be let.

52. The feedback from the event was positive and highlighted that the key barrier to local firms

accessing contracts was the lack of early information to plan for the opportunity and the

structure of the procurement that would take place. Consequently, Vattenfall made a

number of changes to the proposed procurement process:

Detailed information was provided on the criteria/requirements to work in the

supply chain for the project

Use of the local supply chain has been made a key assessment criterion within the

contracts

Vattenfall has made it a requirement for monthly reporting on the use of local

supply chain firms from its contractors.

53. Vattenfall subsequently worked with Neath Port Talbot County Borough Council to develop a

supply chain support package. 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.

54. The main elements that Vattenfall expect to be able to be sourced from Wales during the

construction phase are the civil works and towers. Onsite materials such as stone will also be

sourced locally. Plant hire will be sourced locally or within Wales wherever possible.

55. Recently a two day Meet the Contractor event has been held to host opportunities for

potential subcontractors to engage with the companies shortlisted for the lead contracts

before the appointment of the main contractors for the various work packages. Discussions

on the day and subsequently highlighted that this gave the main contractors and

subcontractors an earlier opportunity to understand each other’s requirements and


Page D-12

procedures ahead of the selection process. Around two thirds of the local businesses in

attendance were in a position to compete for contracts.

Impacts during the Operation and Maintenance Phase

56. Pen y Cymoedd is expected to become operational in 2016 and to continue operations until

2042. The expectation is that there will be a requirement for a minimum of an additional 12

staff to be employed directly within Vattenfall on the operations and management of the

scheme. Vattenfall set up a Cardiff office in order to serve its Welsh projects that are

currently in development, including Pen Y Cymoedd, and currently employs 7 people at the

office. The developer recognises that there are business benefits from having people on the

ground and will seek to employ local people as appropriate. There will also be indirect

subcontracting opportunities.

Community Benefit Fund

57. Vattenfall has committed to provide a Community Benefit Fund which is currently worth

£1.8m per annum, equivalent to £6,000 per MW of installed capacity. The value will be index

linked so will remain the same in real terms (i.e. after inflation) over the life of the wind

farm.

58. The Fund will be designed over coming years, and Vattenfall is in the process of

commissioning socio-economic research to inform an assessment of the challenges and

opportunities for the local community and lessons from previous interventions. The next

stage will be to engage with local community stakeholders, with a commitment for this to be

an inclusive and thorough process. Given the scale of the Fund, Vattenfall is keen to

encourage a flexible approach that goes beyond traditional uses of Funds seen in other

onshore wind farms – it is felt that these are not of comparable scale so do not provide a

suitable reference point.

59. It is recognised that robust monitoring and management processes will need to be in place

to ensure that the Fund is managed effectively.


60. The scheme will bring other positive impacts for the local community, including:

Benefits to wildlife through a Habitat Management Plan, worth £3 million over 25

years. This aims to restore, conserve, enhance and manage local peatland habitats.

Improved access and enhanced public amenity through new mountain biking trails &

signage.

Engagement with schools and young people, who will be involved with the

community fund to ensure they are represented. Vattenfall is also looking at running

an “on the job” work experience scheme with local schools to give them a chance to

learn about opportunities that might be available to them in the renewables sector.

Tourism. Vattenfall has committed to work with the local community to create a

tourism concept linked to the project. This will be developed in due course.

Regeneris Consulting Ltd

Manchester Office 4th Floor Faulkner House Faulkner Street, Manchester M1 4DY Tel: 0161 234 9910 Email: [email protected]

London Office 70 Cowcross Street London, EC1M 6EJ Tel: 0207 608 7200 Email: [email protected]

www.regeneris.co.uk

economic opportunities from onshore wind in wales

Technology