We are testing a new beta website for gov.scot go to new site

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

Listen

2. Methodology

2.1 Introduction

This report seeks to estimate the costs and benefits to other marine users and interests as a result of implementation of the OWE Plan.

There are a number of key assumptions and uncertainties that need to be addressed in projecting costs and benefits, for example: the scale of offshore wind development under the OWE Plan; the compatibility of the offshore wind developments with other marine users (following incorporation of appropriate mitigation measures); and the potential costs of any displacement of existing activities. These uncertainties have been used to define the particular options and scenarios that have been assessed.

2.2 Options Assessed

For this study, two options were 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).

2.3 Approach to Scenarios

Three different scenarios have been applied to the intervention option to take account of uncertainties in the potential significance and impact of interactions between the short term options and other marine users. These factors can potentially influence the costs and benefits to marine users and interests. The scenarios have been termed 'low', 'medium' and 'high' impact reflecting combinations of different scales of impact on other marine users. .

As a result of the relative lack of direct precedent for offshore wind development on such a scale, there are inherent uncertainties about the extent of sectoral incompatibility and consequential impacts. Although assumptions underpinning the scenarios vary according to marine sector, in general terms, the 'high', 'medium' and 'low' impact scenarios have sought to reflect these uncertainties as follows

  • The high impact scenario generally assumes that sectors' activities are incompatible with the short term options in the areas where they interact and, therefore, do not take place;
  • The medium impact scenario generally assumes that aspects of the sectors' activities are compatible with the short term options, or that appropriate mitigation measures are put in places, which would allow some aspects of the sectors' activities to continue; and
  • The low impact scenario generally assumes that the short term options would have a limited significant impact on other marine sectors' activities. This may be as a result of activities being naturally compatible, through use of mitigation measures, or through reduced scale of development of short term options.

The bases for estimating the cost and benefit consequences for each sector and for each scenario are described in detail in Section 4.

2.4 Information Sources

A wide range of information has been accessed to inform this study. This has included published and unpublished data and reports (see Appendix D), spatial data layers ( Appendix E) and other specific information provided through stakeholder engagement. Sector specific sources of information are identified in Sections 3 and 4.

2.5 Stakeholder Engagement

Notwithstanding the short time scales within which the study has been progressed, a high level of engagement has been sought with relevant stakeholder organisations. An initial list of stakeholders was contacted at the start of the study to inform them of the purpose and nature of the work (see letter in Appendix F), to identify how they wished to be engaged and to seek to identify additional relevant evidence that they might be able to contribute to the study. A complete list of stakeholders contacted through this study is presented in Appendix C.

The study has been overseen by a Project Advisory Group ( PAG) comprising the most relevant stakeholder groups at national and regional levels and chaired by Marine Scotland. The PAG met twice, in December 2010 and January 2011, where the members reviewed and commented on the methodology and draft findings of the study. In addition, a brief presentation of the study objectives was made at five regional stakeholder events organised by Marine Scotland in January 2011 (Campbeltown, Tiree, Islay, Dumfries and Wigtown). These stakeholder events were primarily to inform stakeholders about progress with the draft OWE Plan and to discuss comments received in relation to the consultation on the draft SEA Environmental Report. However, the events provided a useful opportunity to engage directly with stakeholders and to discuss potential socio-economic concerns.

2.6 Establishing a Baseline

The definition of the baseline is an important step in any impact assessment as it provides the initial starting point against which to assess the implementation scenarios, and the changes that will arise in any case under the do nothing option, going forward. The baseline has been focused on those topic areas where changes in costs and benefits can reasonably be expected to be impacted by the proposed intervention (with reasons provided where other topic areas are excluded).

As with all socio-economic assessments, the establishment of a baseline involves a degree of extrapolation and projection of data from recent years into future years. In doing so, it also recognises that changes will occur over time in the absence of the OWE Plan. This information is important in informing the cost and benefits of the 'do nothing' option. The baseline therefore sought to identify how sectors may change over the 50 year time period of this assessment in the absence of the policy intervention, describing these changes, as far as possible, in quantitative terms in Section 3. Given the uncertainties in future trends in activity levels for other marine users and consequent changes in values, the baseline used in the assessment of impacts to other marine users has therefore assumed that volumes and values of activity, remain the same as now in each region over the appraisal period.

The SEA Environmental Report and draft OWE Plan contain information on the key marine users that might be affected by the draft OWE Plan and this has provided a useful starting point for determining the scope of the baseline. The SEA Environmental Report consultation responses were also reviewed to identify possible additional key sectors to ensure that impacts on other marine users and wider stakeholders were taken into account. At a national level, much information on the value of uses of the marine environment was recently collated for Charting Progress 2 ( UKMMAS, 2010) and Scotland's Marine Atlas: Information for The National Marine Plan (Scottish Government, 2011). This included information on turnover, GVA and employment.

Wider information on the baseline relevant to the associated marine user sectors was drawn from a range of published data sources and reports, as documented in Section 3. In particular, there is a large degree of uncertainty over the baseline 50 years into the future.

2.7 Evaluating Costs and Benefits of Implementation Scenarios

2.7.1 Costs and Benefits to Other Marine Users and Interests

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.

The Treasury Green Book notes that 'Costs and benefits considered should normally be extended to cover the period of the useful lifetime of the assets encompassed by the options under consideration'. For the purposes of this study an asset lifetime of 40 years has been assumed. The study has therefore been conducted over a period of 50 years from 2011 to 2060 to take account of the phasing of development and decommissioning. Costs and benefits are discounted in line with the Treasury Green Book guidance at 3.5% for years 1-30 and at 3% for years 31-49.

2.7.2 Employment Impacts on Other Marine Users and Interests

In order to estimate job impacts, costs and benefits of the scenarios accruing to the Scottish economy were allocated to the most appropriate industry group (Table 2). The industry groups used based on the Standard Industrial Classification ( SIC) (2003) classes, using the UK Standard Industrial Classification of Economic Activities 2003 3 to identify which of the 126 industry groups was the best fit for each cost type.

Table 2. Allocation of expenditure types to industry groups

Cost Type

Industry Group

Justification

Fisheries

Sea fishing

Specific code available

Aquaculture

Fish farming

Specific code available

Navigation

Water transport

Includes sea and coastal water transport

Aviation

Air transport

Includes scheduled and non-scheduled air transport

Recreational Angling

Recreational services

Includes sporting activities

Recreational Boating

Recreational services

Includes sporting activities

Surfing and windsurfing

Recreational services

Includes sporting activities

Tourism

Hotels, catering & pubs etc

Includes accommodation, restaurants and bars

Wave and tidal energy

Research & development

Includes research and experimental design on engineering

Cables

Telecommunications

Specific code available (this also includes maintenance of the network)

The relationship between costs to other marine users and jobs is complex. For example, navigation costs may increase due to the need to avoid the wind farms, which could take longer, but is unlikely to lead to a loss of jobs. Losses are more likely where there is reduced access (e.g. sea fishing), reduced crop (e.g. fish farming) or people choose to go elsewhere (e.g. tourism). We have therefore adopted different assumptions for each type of cost to other marine users, as set out in Table 3.

Appropriate multipliers have been identified for each of the industry groups and applied to relevant costs to estimate job impacts. The multipliers are based on the 2007 Type I multipliers for Scotland (as these are the latest multipliers that are available). The Type I multipliers take account of the direct and indirect effects, but not the induced effects. We have assumed when using these multipliers that the recent economic crisis has not affected the multipliers and, hence, that they can be applied without the need for adjustment.

Table 3. Approach to assessing impacts on other marine users

Sector

Approach

Fisheries

Costs relate to loss of harvest and reduction in catch per effort, which will result in losses in jobs and GVA. We have assumed for the purposes of the analysis that the value of fish landed in Scotland is equivalent to the value of landings by the Scottish fleet. This is a simplification, but no data are readily available to provide a more accurate analysis.

Aquaculture

No overall effect

Navigation

Impacts are increased steaming times/distances, increased risk of collision; assumed to be no loss of jobs

Aviation

Costs of radar mitigation; assumed to be no loss of jobs

Recreational angling

Displacement of activity affecting the supply chain, including the potential loss of jobs

Recreational boating

Mainly related to additional sailing distances with evidence suggesting no overall reduction in sailing. The cost are linked to additional distances which should not affect jobs

Surfing and windsurfing

No significant costs

Tourism

Potential reduction in attractiveness of area, which could lead to reduced numbers of visitors and spend, potentially affecting jobs in the supply chain

Wave and tidal energy

Mainly linked to competition for space, which might increase development time/opportunities, but should not affect jobs

Cables

Increase in maintenance and repair costs, which should not have a negative effect on jobs