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Memorandum submitted by
1. The British Wind Energy Association (BWEA) is the leading UK trade association in the field of renewable energy, with over 470 corporate members representing the large majority of the wind energy business in this country, both large and small-scale. Wind energy is the fastest-growing renewable technology in the UK, and it will make an increasingly significant contribution to our electricity supplies over the next decade and beyond. BWEA also represents the interests of the emerging wave and tidal stream energy sector, building on its experience in the development of offshore wind. We therefore welcome the opportunity to submit evidence to the Committee on the subject of Green jobs and skills. 2. Most of the subjects being addressed in this inquiry are discussed in BWEA's report Powering a Green Economy[1], a response to Government's Low Carbon Industry Strategy: A Vision document. We answer some of the specific questions asked by the Committee below, but in general Members are directed to BWEA's report. 3. The degree to which the Government's long-term policy framework, including environmental regulations, tax changes or new market instruments, will encourage low-carbon investment and increase employment in environmental industries and their associated supply chains. 4. It cannot be stressed highly enough that the most important factor in making a country a major site for investment in low carbon industry is for there to be a strong, stable domestic market for the goods and services required. This has been the lesson from the wind industry in Denmark, Germany and Spain, where world-leading manufacturing bases have been established on the back of comprehensive policy support for the building of wind power generation. If the market does not exist domestically in the UK, or is considered unstable and risky, then this country will not benefit from the investment that is inevitable if climate change is to be tackled. 5. The UK has had a strong instrument to support renewable electricity production in place since 2002, in the form of the Renewables Obligation (RO). This has been highly successful in encouraging developers of wind projects to bring forward schemes: onshore, 15-20,000MW of projects have been submitted to the planning system in that time. It is not the fault of the RO that more has not been built, and the industry supports its retention in the new, banded form as the key vehicle for delivering our commitments under the 2020 renewable energy targets. In fact, some of the most pressing issues for the renewable energy sector are non-economic barriers such as planning and grid availability. In this context, the Renewable Energy Strategy due for publication in June will be more important than recent stimulus packages, and BWEA awaits its conclusions with some anticipation. 6. The UK is well placed to take the lead in a number of renewable electricity generating technologies, given that this country is well endowed with resources of wind and marine renewable energy. The UK also has advanced capabilities in research and development in these areas, and a long history of activity - for instance, BWEA was established over 30 years ago. This country has a distinguished tradition of heavy electrical engineering and capabilities in manufacturing areas such as aerospace and motor vehicles which could be transferred. The expertise in offshore structures and operations developed in the course of extracting oil and gas from the North Sea is also very relevant. 7. While the technology and businesses associated with large-scale onshore wind are and will most likely remain primarily non-UK-owned, wind at the small and micro scales and offshore offer major opportunities to British business. Given our status as an island nation, the new marine renewable technologies of wave and tidal stream power should also be motors for long-term economic growth. In each of these areas markets are at an early stage of development, with much of the investment to build industries yet to happen. Strong early action therefore holds the promise of taking leadership positions in all of these technologies, repeating the experience of Denmark in the area of onshore wind. 8. The UK is already and will remain for the foreseeable future the largest single market for offshore wind in the world. Once the Round 3 zones have been awarded, there will be nearly 40,000MW of projects in varying stages of development in UK waters, including 565MW of operating capacity, 1,240MW under construction and 3,600MW with consents but not yet being built. BWEA believes that at least 20,000MW is deliverable by 2020, which will be vital if the UK is to meet its targets for both renewable energy and carbon emissions. It is important to note that one of the most important ways to maximise the amount that can be delivered by 2020 is to set out a longer-term vision, to 2030 or beyond, which shows continuing build over a period of 20 years. 9. At 20,000MW in 2020, the UK would constitute half of the total European market for offshore wind, set to be 40,000MW according to the European Wind Energy Association[2]. This amount of UK capacity would represent an investment of about £50bn. With a strong home market, UK companies would be well placed to exploit export opportunities to other EU member states, as well as countries such as the US and China, which have indicated that offshore wind is an opportunity they intend to pursue[3]. 10. The marine renewables of wave and tidal stream are still primarily in the technology development and demonstration phase, but most of the leading companies are either UK owned or based, attracted by the UK's resource, our strong technical base and the investment in the research infrastructure that has already been made. The UK should not be complacent, however: there is a need to step up the commitment of resources to this sector if this leadership position is to be maintained in the face of increasing competition. The Carbon Trust reports that these technologies could provide as much as 15-20% of our electricity, and there is the potential for 2,000-4,000TWh/year of wave energy alone to be generated globally, which would require investment of at least £500bn. 11. One of the unsung UK business success stories in the renewable energy sector is small and micro wind power. Wind is the only microgeneration technology in which the UK leads, and domestic manufacturers supply 82% of all small wind turbines installed in the UK, a market worth £13.5m in 2008. The sector is already exporting heavily, with 50% of production sold abroad. In the long term, BWEA estimates that UK companies could secure 20% of a total market of 80m units over the next 20-30 years. 12. As the North Sea reserves of oil and gas are exhausted, there is an opportunity to redeploy the expertise and skills of the offshore hydrocarbon industry to the renewables sector. This is a key transition from the high- to low-carbon economy, building on experience and existing solutions to provide cost-effective renewable energy. 13. Whether the changes in public spending intended to help tackle the recession will maximise employment opportunities in environmental industries. 14. The stimulus packages in the Pre-Budget Report and the Budget itself must be judged against the criterion of whether they will ensure a secure, long-term market for renewables. The RO is already in place and successful in stimulating the market for developing renewable generation projects. The measures to award extra support to offshore wind help to unlock the value of the RO for this sector, while underlining Government commitment to a strong market for the technology, which is most welcome. Action announced in the Budget on accessing funding from the European Investment Bank for onshore wind projects similarly leverages the value of the RO. If these initiatives are successful, they should be exactly the kind of measure required. 15. For the purposes of building new industries, the Budget announced new funding of £405m, split across a number of sectors, including renewable energy. We await further detail on how this money will be spent, but there are useful indications in Government's paper Investing in a Low Carbon Britain, published the day after the Budget. In particular, BWEA welcomes the focus on establishing a manufacturing 'hub' port for offshore wind. We note, however, that the wave and tidal stream sectors need a long-term path from the Marine Renewables Deployment Fund to the Renewables Obligation at 2ROC/MWh, which currently does not exist: the new Budget funding will be aimed at filling gaps in the innovation process up to the MRDF. This is an omission that will need to be addressed sooner rather than later. 16. BWEA would also welcome some additional targeted funding to overcome some key barriers. In particular, we believe that Government needs to make resources available to bring forward technical solutions to the problems of wind turbine interference with radar signals: the industry has volunteered £3.2m in difficult economic circumstances, while Government departments have not committed funds, with the honourable exception of the Ministry of Defence. Approximately £10m of additional funding is required, which will unlock the 4.5GW of wind projects in the planning system that are currently blocked by these concerns. In addition, a small fund of £2m would be extremely useful in supporting new small wind products through certification processes. This would ensure UK companies continue to be world leaders in the field, tiding them over to the point where a market supported by the new feed-in tariff allows them to justify the expense of certification. If money from the £405m fund is directed to these two areas, it will be money well spent. 17. The economic and social benefits of planned green investments and the extent to which the changes in spending will contribute to sustainable development and environmental protection. 18. The wind generation capacity that is required by 2020 represents investment of approximately £60bn. The extent to which the UK benefits from the direct capital investment depends on how successful Government is in creating an environment in which manufacturers wish to invest in UK capacity. We are therefore looking forward to the publication of the Low Carbon Industrial Strategy this summer, which we hope will give a strong signal to the market. 19. With relatively small effort, the majority of the value of UK projects could be retained within the UK. Of the capital cost of such generators, nearly half is in the development and infrastructure portions of the project[4]. Infrastructure includes cabling and foundations for projects: capability to produce the former is certainly available in the UK and if market certainty can be provided, that can be expanded to supply the thousands of km of cable required; the latter should be a natural extension of the UK capabilities to provide offshore structures for the oil and gas sector. Consequently the approximately £25bn to be spent on these components could be readily retained in the UK. 20. Of the remaining capital value, about half is the in the tower and blades of the turbine, and the other half in the nacelle. Due to transportation issues, it should be natural to manufacture the former components in the UK, and barriers to entering the production of these are relatively low, leading to a further £12.5bn of business which UK companies should be able to bid for competitively. So, approximately three-quarters of the investment in offshore wind projects - approximately £37.5bn - should be readily addressable by UK or UK-based firms. Securing the remaining 25% of the value for the UK will require nacelle assembly and a strong UK component supply chain. This will be more difficult to establish, but would maximise the value to the UK. 21. The manufacture of the equipment for offshore wind is not the only part of the value chain that is available to UK business. Installation and operation will employ significant numbers, approximately 10,000 by 2020, and have market value in the hundred of millions of pounds annually. These should be areas where the UK captures a large proportion of the value available. The expertise that UK firms are building up in the development and installation of offshore wind will also have an export value, though this will be quite small in comparison to the capital cost of projects. 22. The electricity produced from renewable sources displaces fossil fuels, which will increasingly be imported. Thus, in addition to benefits in the form of carbon emission reduction, there will be improvements in our balance of trade and an increase in our security of fuel supply from renewables. Due to the capital-intensive nature of most renewables, they also result in very stably-priced electricity, which is a benefit that is not often recognised. 23. The nature of the jobs that might be created in green industries as a result of the green fiscal stimulus. 24. Whilst BWEA is not in a position to comment on the 'green' sector as a whole it can provide input on the nature of the jobs that will be in demand for the renewable energy industries if targets are to be met. 25. Since renewable electricity will have to contribute a disproportionately large slice of our 15% by 2020 renewable energy target, and wind power is the renewable electricity technology ready to deliver at scale in this time, a large proportion of the renewable sector employment opportunities arising in the near future will be in the on- and offshore wind industries. The wind labour force needs to grow from 5,000 today to a minimum of 36,000 by 2020 to ensure capacity is installed on track to meet the Government's own renewable energy targets (Bain & Co, 2008, base case scenario). Under a higher-growth scenario with significant offshore manufacturing, this rises to 57,000. Businesses focusing on micro-generation technologies are also set to provide a large number of jobs in the near future. 26. The range of employment opportunities within the renewable energy sector is extremely diverse, and the scale of demand for talent is vast. Employees are needed coming from both vocational and graduate educational backgrounds. A single project provides a myriad of different jobs, when one considers the steps involved this becomes clear. 27. Employees of different backgrounds are in demand in consultation, planning and development, construction, operation and maintenance, technical, procurement, financial, legal and retail services. There is also plenty of scope for research and design work for those who aim to drive technological innovation forward for the future. 28. Construction, operation and maintenance are the areas that are anticipated to collectively provide the highest number of new jobs in the period leading up to 2020. Whilst design and manufacturing are the most labour intensive areas within the supply chain, without the right policy environment companies will not set up manufacturing bases in the UK and these national employment opportunities will be foregone. 29. As noted above, fiscal stimulus is not a solution in itself, key barriers such as grid connectivity, bottlenecks in the planning system and supply chain issues need to be addressed before the renewable energy sector can maximise its outputs and really start recruiting at full pace. In addition, whilst the vacancies will no doubt open up, the question of how the UK's skills base can be built up to feed industry's demands has not been adequately addressed thus far. 30. The Low Carbon Industrial Strategy, what it needs to deliver, how, and by when. 31. The Committee are directed to BWEA's Powering a Green Economy paper referred to above. This gives the Association's full thoughts on this subject. 32. The skills base for the UK environmental industries, and the effectiveness of Government policies to improve and enlarge it. 33. There are three key challenges in addressing the skills needs of the sector: (i) identifying what skills areas public policies should focus on; (ii) lack of clarity over who should be responsible for building the skills base; and (iii) rolling out support at speed and at a scale demanded to support the growth and demands of environmental industries. Whilst an impressive amount of work has recently been done on the first point, actions to address diagnosed skills shortages are lagging behind. For jobs in the renewable energy industries to be successfully filled, rolling out public investment in training of both students and trainers themselves is crucial. Such support is needed at all levels, from further education level through to postgraduate training, as the green industries are set to provide employment opportunities for individuals from a broad range of backgrounds. In order to support the success of the industries, both up-skilling and re-skilling pathways need to be set out. 34. A number of reports over the past six months have set out to analyse the nature of the skills needs for building a green economy, from TUC, EU Skills (Scotland), ETI, and the work done for BWEA by SQW and Bain & Co. Together they provide a strong indication for where public support on skills should be focused. They all suggest that the overall pool of people with the right skill sets is too small to sustain the rate of green industry growth that Government envisages. 35. Whilst BWEA is not in a position to comment on the environmental sector as a whole it can provide input on the skills gaps that affect the wind and marine energy industries. 36. The Bain & Co Report Employment opportunities and challenges in the context of rapid industry growth[5] identified that the most acute shortage today is at skills levels 4 and 5 for technical roles within renewable energy businesses. The pool of engineering technicians and professional engineers must be boosted to supply the most imminent demands of the renewable energy industries as well as the broader spectrum of employers across the UK. Bain & Co found that it was particularly difficult to recruit project managers (46% of those surveyed reported difficulties recruiting for this position), electrical engineers (40%) and turbine technicians (25%). 37. The key causes underlying the skills gap today and in the near future are a lack of qualified potential recruits, a lack of potential recruits with relevant experience, and, despite an overall rise in the intake of engineers, a fall in home student applications and candidates for essential engineering niches, for instance in 2001 the student intake for electronic engineers was 5,100, but by 2005 this had dropped to 2,900. In addition, the overall number of young people (18-20) is forecast to drop by 2020. 38. Such evidence suggests that focusing on providing support for training that combines academic groundings with practical know-how is what is needed. Funding for industry focused apprenticeships and sandwich courses at university level would be welcomed. 39. Despite efforts to streamline the complexity of the UK's skills system there is still confusion regarding the responsibilities of different players, not only experienced by industry, training providers and learners but also amongst the key bodies themselves. For example, the Sector Skills Councils must ensure they meet more regularly through their 'Cross SSC Renewables Project' so that they can clearly communicate their roles and take ownership for which areas they will cover as soon as possible. Once all stakeholders are more aware of who does what in the skills system, action to address skills gaps can take place more swiftly. Collaborative efforts such as the National Skills Academy for Power that bring a variety of stakeholders together are encouraging, and the renewable energy industry eagerly awaits what the NSAP outcomes will be for us. 40. At present around 5,000 people are working in the wind and marine energy industries. By 2020, between 22,000 and 57,000 will be employed in the large scale wind industry alone. An additional 5,000 employment opportunities are anticipated to arise within the micro-wind industry, and up to 2,100 will be joining the marine energy industries over the next 11 years. 41. Training needs to be rolled out fast especially as this growth sector is not the only one with a need for new entrants. Ensuring a wider pool of potential employees with core technical training, for all industrial sectors, should be an important goal for Government. 42. In terms of the skills needs of the renewable energy industries, there is a great deal of overlap with the power sector as a whole. RE companies are already finding it difficult to find suitably skilled recruits. On top of this, the aging employee profile within traditional energy businesses means there is will be a steeply increasing demand for a shared pool of suitably qualified new entrants. In particular, the number of professionally qualified engineers within the UK must be boosted. University departments must receive adequate funding to support their teaching and research, whilst simultaneously home-student uptake of engineering subjects must be encouraged at undergraduate and postgraduate levels. The set up of centres of excellence such as The UK Wind Energy Research Centre at the University of Strathclyde is very welcome and provides a useful model for how future expert training for the green industries can be developed. Focusing funding strategically is more valuable than spreading the same resources thinly. 43. As for vocational technical training - funding for the further education sector needs to be increased (in contrast to recent trends) and also focused in a strategic way - i.e. following the centres of excellence model.
June 2009 [1] See http://www.bwea.com/pdf/publications/Powering%20a%20Green%20Economy.pdf [2] The 40,000MW of
offshore wind that EWEA projects for 2020 is a significant part of the
230,000MW of wind power the Association expects to be installed by that date.
See http://www.ewea.org/fileadmin/ewea_documents/documents/press_releases/ [3] The US Department of the Interior estimates potential of over 1,000GW on the Atlantic coast alone. See http://www.doi.gov/ocs/slides-At.pdf [4] In the Ernst & Young report Banding of the Renewables Obligation - Costs of Electricity Production commissioned by BERR in support of the Energy White Paper, these factors are 2% and 46% respectively. See http://www.berr.gov.uk/files/file39038.pdf [5] See http://www.bwea.com/pdf/publications/Bain%20Brief_Wind%20Energy%202008_FINAL.pdf |