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Marine Scotland: Economic Assessment of Short Term Options for Offshore Wind Energy in Scottish Territorial Waters: Costs and Benefits to Other Marine Users and Interests

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Summary

Introduction

In 2009, The Crown Estate identified 10 areas where it was prepared to grant commercial leases for offshore wind energy developments. Collectively, these areas could provide a generation capacity of around 6.4 GW. Subsequent to this, one of the sites (Bell Rock) proved technically unsuitable for development and the developer has withdrawn from the scheme.

The Scottish Government's draft Offshore Wind Energy Plan provides a strategic overview of where offshore wind development could be progressed including The Crown Estate's 9 short-term options, together with a number of medium and longer-term options. A number of studies have been commissioned by Marine Scotland to support the evaluation of the Plan prior to its adoption. These studies have included a Strategic Environmental Assessment ( SEA) (Marine Scotland, 2010a) and a Habitats Regulations Appraisal ( ABPmer, 2011) of the short and medium term options in the Draft Plan. In addition, Marine Scotland also commissioned an economic assessment of the short term offshore wind options within the Draft Plan to further inform the finalisation of the OWE Plan and the Post-Adoption Statement. The study has focused on the short term options identified as there is greater certainty about these developments at this point in time.

The project has sought to assess the impact of development in the following broad areas of Scotland specified within the Draft OWE Plan:

  • North East: focusing on Beatrice;
  • East: Inch Cape, Neart na Gaoithe, Forth Array;
  • South West: Solway Firth, Wigtown Bay; and
  • West: Argyll Array, Islay, Kintyre.

As no sites in the North or North West areas have been identified among the short term options, no development options from these areas have been considered within the analysis. Information on regional-scale impacts has also been combined to provide an indication of impacts at a national level.

The study has been undertaken by ABPmer in association with economic consultants SQW and Risk & Policy Analysts ( RPA) between December 2010 and February 2011. The project has been managed jointly by the Marine Analytical Unit ( MAU) and the Marine Renewables and Offshore Wind policy team within Marine Scotland supported by a wider Project Advisory Group involving key stakeholders. The study involved a significant level of consultation with stakeholders to understand potential impacts and develop key assumptions.

The study approach has assessed and compared the costs incurred by, and benefits arising from, different policy options and considered them against a 'do nothing' option (where there is no intervention). The assessment has been prepared in line with the principles with Better Regulation Executive guidance on impact assessment and the Green Book methodology ( HM Treasury, 2003) for economic assessment.

The key requirements of the study have been to:

  • Provide a comparison of the economic and social benefits associated with the development of the short term options for offshore wind in Scottish Territorial Waters against any potential economic and social costs associated with it;
  • Assess the distribution of costs and benefits amongst the public sector, different industries (e.g. fishing, tourism, shipping) and wider society, in order to establish who may bear the benefits and costs associated with the short term options;
  • Consider the impact (in terms of Gross Value Added ( GVA) and employment) that the short term options may have on the regional economies affected, and on the wider Scottish economy. In particular, it has estimated the net impact resulting from the manufacture, installation, operation and decommissioning of offshore wind sites, from any associated infrastructure development works that are required, and from any impacts on other marine activities; and
  • Finally, the impact assessment has involved specific tests to determine the potential impact of policies on small firms and on competition.

This report presents the findings of the assessment of costs and benefits to other marine users and interests.

Methodology

The study has sought to estimate the costs and benefits to different marine users and interests associated with implementation of the OWE Plan. Two options have been assessed as follows:

  • Do nothing (the baseline, which incorporates anticipated changes in the absence of intervention in the form of the Draft Plan); and
  • The intervention option (implement the plan for the nine short term options based on the capacities identified in the Draft Plan).

Three separate scenarios have been applied to the intervention option to take account of some of the key uncertainties that will influence the scale of costs and benefits arising from implementation of the Draft Plan. These have been termed 'low impact', 'medium impact' and 'high impact' scenarios.

The evaluation of costs and benefits for other marine users and interests under the three implementation scenarios has been undertaken in a number of steps as follows:

  • Identification of sectors potentially affected - this was based on a review of SEA Environmental Report consultation responses, wider information on the effects of offshore wind farm development on other marine users and a spatial analysis in GIS to identify potential interactions between the short term options and other marine users;
  • Evaluation of interactions - the nature of the interactions between the short term options and other marine users were evaluated to determine whether specific interactions were likely to have a significant effect on the other marine user. This evaluation took account of stakeholder views and the existing evidence base; and
  • Valuation (monetisation) of costs and benefits - where significant interactions were likely to occur, the costs and benefits to other marine users were estimated where possible based on specific scenarios identified in Section 4.

Costs and benefits to other marine users and interests have been presented as both 'long-run' annual costs and discounted costs over a 50 year period 2011-2060. This timescale is comparable to the estimated lifespan of offshore wind developments. An indication of associated job impacts has also been provided using multipliers based on the 2007 Type I multipliers for Scotland.

Assessment of Costs and Benefits

A number of marine users and interests have been identified as potentially incurring additional costs associated with implementation of the Plan scenarios (Table S1). Specific costs may accrue to the commercial fishing, shipping, recreational boating, recreational angling and tourism sectors.

Developers and operators of offshore wind farms may also incur some additional costs to mitigate some potential impacts on other marine users. It has been assumed that these are included within the costs of offshore wind farm construction and operation and are not, therefore, included here. The scale of such costs relative to the overall investment in offshore wind is estimated to be very small.

While some potential benefits have also been identified, these are likely to be small in terms of value and not significant in the context of the Plan as a whole. The extent to which such benefits might be realised remains very uncertain and it has not been possible to quantify them.

Table S1. Summary of affected sectors and impacts

Sector

Significant
Cost Impact
to Sector?

Main Economic Impact

Commercial Fisheries

v

Loss of revenues from displacement of fishing activity

Aquaculture

X

Shipping and Ports

v

Increased costs from additional steaming distances

Aviation

X

Wave and Tidal Energy Development

X

Cables and Pipelines

X

Recreational Boating

v

Increased costs from additional steaming distances

Recreational Angling

v

Loss of expenditure on related activities from displacement or cessation of activity

Surfing, Windsurfing and Kayaking

X

Tourism

v

Loss of expenditure from displacement or cessation of activity

Social Impacts

v

Not quantified. Negative impacts as a result of impacts to existing economic activities; positive impacts as a result of offshore wind farm supply chain development

The total discounted costs to other marine users range from £1.4m in the low impact scenario up to £168.7m in the high impact scenario (Table S2). This range reflects the current available evidence base, the uncertainties involved in making assumptions around trends in future marine activities and current uncertainties about the extent of impacts, particularly in advance of detailed project-level assessments.

Under the high impact scenario, the largest costs are estimated to relate to reductions in tourism expenditure, although costs are also borne by the commercial fisheries, shipping and ports, recreational angling and recreational boating sectors. Approximately 61% of the costs are estimated to fall in West Region with relatively low costs associated with the single short-term development option in North-East Region.

While the costs to other marine users may be relatively small at the national and regional levels, they may still be significant at a local level or to individual sectors and stakeholders.

Table S2. Estimated range of total costs to other marine users, between low and high impact scenarios (£m, discounted over 50 years)

North East

East

South West

West

Total

Commercial Fisheries

£0.3m-£2.6m

£0.7m-£15.4m

£0.1m-£1.1m

£0.3m-£14.4m

£1.4m-£33.5m

Aquaculture

-

-

-

-

-

Shipping and Ports

-

£0m-£31.4m

£0m-£0.2m

£0m-£0.6m

£0m-£32.2m

Aviation

-

-

-

-

-

Wave and Tidal Energy Development

-

-

-

-

-

Cables and Pipelines

-

-

-

-

-

Recreational Boating

£0m-£0.1m

£0m-£0.3m

£0m-£0.2m

£0m-£0.2m

£0m-£0.8m

Recreational Angling

-

-

£0m-£7.9m

£0m-£16.6m

£0m-£24.5m

Surfing, Windsurfing and Kayaking

-

-

-

-

-

Tourism

-

-

£0m-£6.9m

£0m-£70.8m

£0m-£77.7m

Social Impacts

Not quantified

Not quantified

Not quantified

Not quantified

-

Total Quantified Costs

£0.3m-£2.7m

£0.7m-£47.1m

£0.1m -£16.3m

£0.3m-£102.6m

£1.4m-£168.7m

These costs may also result in some employment opportunities being lost in the affected marine sectors. When the costs are isolated and applied to simple economic multipliers, it is estimated that between 4-140 jobs per annum in the fisheries, recreational angling and tourism sectors may no longer be supported compared to what would have happened in the absence of development (Table S3). In the high impact scenario, approximately 70% of the affected jobs are in tourism, and 14% are in commercial fisheries. Around 80% of employment impacts per annum are estimated to occur in West Region. These impacts are substantially lower in the medium and low impact scenarios. The reduction in the number of jobs supported is predicted to reach maximum levels in around year 6 and to remain at this level over the operating life of the wind farms.

Table S3. Estimated national employment impacts on commercial fisheries, recreational angling and tourism sectors

Scenario

Maximum Gross No. Jobs Lost/Not Supported

Number

Year

High Impact

140

6

Medium Impact

26

8

Low Impact

4

6

This reduction in employment opportunity can be compared with data on the total number of employees in these sectors, from Section 3 of this report. This indicates a total of around 5,000 people employed in fishing in Scotland, just over 3,000 in sea angling and over 200,000 in tourism as a whole, with around 4,400 of these in marine and coastal wildlife tourism. The numbers of jobs indicated in Table S3 are a small proportion of these totals, but could still be significant locally.

There may be scope within the design of individual projects to avoid or mitigate impacts to many of the other marine interests. Such measures effectively transfer the cost impacts to the developer. Where costs of mitigation measures may fall to developers, these have been assumed to be included within the capital cost of offshore wind farm construction.

Social Costs and Benefits

Implementation of the short-term options also has the potential to give rise to a range of social impacts. Positive impacts would be associated with job creation in the offshore wind farm supply chain. Other social impacts may arise as a result of impacts to visual amenity. There are also stakeholder concerns that the scale of development overall would undermine some of the essential qualities of these Regions, including their wild and isolated character. Other specific concerns identified through the consultation on the SEA Environmental Report relate to possible impacts associated with shadow flicker, impacts on TV reception, infrastructure provision, health impacts and the effects on property prices and housing availability. These potential impacts have not been quantified or monetised within the analysis.