A new economic impact methodology for offshore wind power

Offshore wind is a maturing industry that is becoming truly global. For continued growth and to build local and government support, it needs a robust but easy way to demonstrate the economic benefits of projects. In particular, job creation can be a powerful way to gain support for projects.

BVG Associates (BVGA) and the Economic Intelligence Unit at the University of the Highlands and Islands (UHI) have worked together to develop a new method of modelling economic impacts for offshore wind that is more robust and more transparent than existing economic analyses.

Modelling of economic impacts usually relies on Government statistics and standard industry classification (SIC) codes. But SIC level data is too general for a maturing sector such as offshore wind and does not reflect fully relevant industrial capacity and capability. Accurate measurement of the economic impact of offshore wind development requires a comprehensive understanding of the supply chain together with economic and business rigour.

“It is better to seek to understand the supply chain than to model it using misleading generalised data,” said Alun Roberts, Associate Director at BVG Associates.

BVG Associates together with the University of Highlands and Islands have developed a benchmark standard in measuring local and national value added from offshore wind developments.

The methodology builds on BVG Associates’ existing UK content methodology to derive measures for other economic indicators such as gross value added (GVA), full-time equivalent (FTE) jobs and earnings.

The method can be applied to any level of geography – global, continental, country or region. It can be used to model the impacts of a single product or service, a set of projects, or the industry as a whole over a given period. It can even be applied to different industries, provided sufficient knowledge is available.

By using a transparent set of assumptions that can be easily validated, the new methodology means Governments, enablers, developers and suppliers can have confidence in the results. “Many industrial sectors publish employment impact figures,” said Steve Westbrook, Director of Economic Intelligence Unit, UHI School of Management. “Often these are unrealistically high, and the offshore wind sector needs to have a transparent methodology if it is to avoid cynicism.”

The great advantage of the approach is it takes the mystique out of economic analyses and creates a method that can be led by industry experts with input from economists. Until now, economic analyses have been impenetrable to the layperson and excessively difficult to compare. Now, the inputs and outputs are comprehensible to the industry in question. Our economic impact methodology identifies visible, tangible jobs that can be associated with specific facilities, which is important in helping politicians understand the impacts of investments.

Overall, the result will be greater confidence in the data that is published and better evidence-based policy.