Fred. Olsen Renewables Economic Analysis

Fred. Olsen Renewables Ltd Economic Footprint – 2023 Update

On behalf of Fred. Olsen Renewables Ltd

Project Ref: 332010893 | Rev: 4 | Date: August 2023 Registered Office: Buckingham Court Kingsmead Business Park, London Road, High Wycombe, Buckinghamshire, HP11 1JU Office Address: 5th Floor, Lomond House, 9 George Square, Glasgow G2 1DY T: +44 (0)141 352 2360 E: info.Glasgow@stantec.com

Economic Footprint – 2023 Update Fred. Olsen Renewables

Document Control Sheet Project Name: Fred. Olsen Renewables Ltd Project Ref:

332010893

Report Title:

Economic Footprint

Doc Ref:

Final Report

Date:

August 2023

Prepared by: Reviewed by: Approved by:

Name Steven Ramsay Steven Findlay Steven Findlay

Position Economist Associate Economist Associate Economist

Signature SR SF SF

Date July 2023 July 2023 July 2023

Stephen Cox

Director, Economics & Regeneration

SC

August 2023

For and on behalf of Stantec UK Limited

Revision

Date

Description

Prepared

Reviewed

1

30/03/2023

First Draft

SR

SF

2

31/05/2023

Second Draft

SR

SF

3

13/06/2023

Third Draft

SR

SF

4

22/08/2023

Final Draft

SF

SC

This report has been prepared by Stantec UK Limited (‘Stantec’) on behalf of its client to whom this report is addressed (‘Client’) in connection with the project described in this report and takes into account the Client's particular instructions and requirements. This report was prepared in accordance with the professional services appointment under which Stantec was appointed by its Client. This report is not intended for and should not be relied on by any third party (i.e. parties other than the Client). Stantec accepts no duty or responsibility (including in negligence) to any party other than the Client and disclaims all liability of any nature whatsoever to any such party in respect of this report.

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Economic Footprint – 2023 Update Fred. Olsen Renewables

Contents 1

2

3

Introduction ............................................................................................................................... 1 1.1

Purpose ......................................................................................................................... 1

1.2

Approach ....................................................................................................................... 1

1.3

Structure ........................................................................................................................ 1

Context ...................................................................................................................................... 2 2.1

Sector Overview ............................................................................................................ 2

2.2

Economic Value of the UK Onshore Wind Sector ......................................................... 3

2.3

Overview of the Sector Supply Chain ............................................................................ 4

2.4

Community Benefit Funds ............................................................................................. 6

2.5

Fred. Olsen Renewables Sites ...................................................................................... 7

Supply Chain Engagement .................................................................................................... 11 3.1

4

5

Site Managers ............................................................................................................. 11

Economic Impact Assessment ............................................................................................. 13 4.1

Introduction .................................................................................................................. 13

4.2

Assumptions ................................................................................................................ 13

4.3

Construction & Development Phase Impacts .............................................................. 14

4.4

Operations & Maintenance Phase Impacts ................................................................. 16

4.5

Community Benefit Fund Impacts ............................................................................... 17

Conclusion .............................................................................................................................. 21

Tables Table 2.1 Distribution of Project Spend ................................................................................................... 4 Table 2.2 Spend by Phase ...................................................................................................................... 5 Table 2.3 Detailed Construction Phase Spend ....................................................................................... 5 Table 2.4 Operation & Maintenance Phase Spend ................................................................................. 5 Table 2.5 Impact per megawatt ............................................................................................................... 6 Table 4.1 Total Gross Construction Spend by Site, £m, 2022 prices ................................................... 14 Table 4.2 Total Gross Development and Construction PYE Employment by Site ................................ 15 Table 4.3 Total Gross Development and Construction GVA by Site .................................................... 15 Table 4.4 Total Net Development and Construction Impacts................................................................ 16 Table 4.5 Total Gross Operation and Maintenance Impacts ................................................................. 16 Table 4.6: Total Net Operation and Maintenance Impacts .................................................................... 16 Table 4.7 Crystal Rig Community Development Payments by Site ...................................................... 17 Table 4.8 Crystal Rig Community Development Payments by Beneficiary .......................................... 17 Table 4.9 Rothes Community Development Payments by Site ............................................................ 18 Table 4.10 Rothes Community Development Payments by Beneficiary ............................................... 18 Table 4.11 Paul’s Hill Community Development Payments Values ...................................................... 18 Table 4.12 Paul’s Hill Community Development Payments by Beneficiary .......................................... 18 Table 4.13 Mid Hill Community Development Payments by Site .......................................................... 19 Table 4.14 Mid Hill Community Development Payments by Beneficiary .............................................. 19 Table 4.16 Brockloch Rig Community Development Payments by Beneficiary .................................... 19 Table 4.17 FORL Community Benefit Payments in Scotland ............................................................... 20 Table 5.1 Total Net Development and Construction Impacts ................................................................ 21 Table 5.2: Total Net Operation and Maintenance Impacts .................................................................... 21 Table 5.3: Total Value of FORL Community Benefit Fund Payments in Scotland ................................ 22

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Economic Footprint – 2023 Update Fred. Olsen Renewables

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Economic Footprint – 2023 Update Fred. Olsen Renewables

1

Introduction

1.1

Purpose

1.1.1

In December 2021, Stantec UK produced an economic impact assessment of Fred. Olsen Renewables Ltd (FORL) business operations to understand the economic footprint of the business in Scotland. The purpose of this report is to provide an update to that report to reflect the additional investments that have taken place since then.

1.1.2

The economic footprint is the magnitude and reach of the economic impacts of the company’s windfarm developments, including the direct impacts on employment and gross value added (GVA) from the construction, operation, and maintenance of the turbines, as well as the indirect and induced impacts which propagate through the supply chain.

1.1.3

The analysis will provide evidence of FORL’s contribution to Scotland’s renewable energy sector, demonstrating the scale and reach of the company’s economic activities in the country, including the value of its investments in community development projects.

1.2

Approach

1.2.1

The researchers analysed procurement/supply chain data to create a profile of the range of goods and services sourced across different parts of the Scottish economy; and drew evidence from consultations with key staff to explain the local and regional procurement strategies used at each windfarm development, as well as information related to workforce development and corporate social responsibility activity. They then used this information to quantify and demonstrate FORL’s economic activity in Scotland including its role in creating opportunities for employment, adding value to Scotland’s economy, and supporting community activities.

1.3

Structure

1.3.1

The report is structured as follows: 

Section 2: Provides an overview of the importance of the onshore wind sector to the Scottish and UK economies and provides contextual details on the size and location of Fred. Olsen Renewables windfarm sites.



Section 3: Presents the findings of the economic impact assessment.



Section 4: Summarises and presents conclusions from the research and analysis.

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Economic Footprint – 2023 Update Fred. Olsen Renewables

2

Context

2.1

Sector Overview

2.1.1

The UK power grid is struggling to meet peak electricity demand due to population growth and electric vehicle adoption. 35GW of onshore wind power may be necessary by 2035 to accommodate these trends.1

2.1.2

This is compounded by the closure of coal-fired power stations and ageing thermal power stations. The UK’s remaining coal-fired power stations (2) have a combined capacity of 5.8GW2 and are due to close by 2025.3 The UK also has 9 nuclear power stations which contribute 15% of the nation’s electricity, however nearly half of these facilities are due to be retired by 2025 with Scotland’s last nuclear power station, Torness, scheduled for closure in 2028.4

2.1.3

Onshore wind energy plays a significant role in meeting Scotland's energy demands, particularly in achieving the country's 2030 renewable energy targets, as outlined in its Energy Strategy (2023)5. The goal is to have renewable sources provide 50% of Scotland's energy for heat, transportation, and electricity consumption. The Strategy recognizes onshore wind energy as one of the most cost-effective means of generating power while also being a vital component of Scotland's renewable industry.

2.1.4

The Low Carbon Economic Strategy for Scotland (2011) states that onshore wind is the technology which can make the most immediate positive impact on Scotland’s low carbon economy.

2.1.5

Onshore wind can provide new generation capacity, but barriers to development have slowed its annual growth to just 0.6GW in 20186. Delivering 35GW of onshore wind in Scotland by 2035 could create 1,600 jobs.7

2.1.6

The Scottish Government published the Onshore Wind Policy Statement in 2017 which clearly stated that Scotland will continue to need more onshore wind development and capacity in locations across the country where it can be accommodated, including further investment into existing windfarms as well as the development of new sites.

2.1.7

Scotland’s National Strategy for Economic Transformation (2022) aims to increase sustainable economic growth and provide opportunities for everyone in the country. Priorities include innovation and inclusive growth. The strategy emphasizes investments in infrastructure to unlock the potential of remote communities and islands. FORL windfarms have created employment opportunities and advanced renewables technologies, aligning with government targets.

2.1.8

The Office for National Statistics (ONS) released the UK Environmental Accounts: Low Carbon and Renewable Energy Economy Survey in January 2020. The figures from the survey indicate that more than half (57%) of the UK’s turnover from onshore wind activities was generated in

1 Vivid Economics and Imperial College London (2019). Accelerated electrification and the GB electricity system 2 http://www.powerstations.uk/coal-countdown/ 3

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/672137/Govern ment_Response_to_unabated_coal_consultation_and_statement_of_policy.pdf 4 https://www.world-nuclear.org/information-library/country-profiles/countries-t-z/united-kingdom.aspx 5 Draft Energy Strategy and Just Transition Plan, The Scottish Government. Available: https://www.gov.scot/publications/draft-energy-strategy-transition-plan/ 6 Wind Europe. Available: https://windeurope.org/wpcontent/uploads/files/about-wind/statistics/WindEuropeAnnual-Statistics-2018.pdf 7 Vivid Economics, 2019. Available: https://www.vivideconomics.com/wpcontent/uploads/2019/08/Quantifying_the_Benefits_of-report-.pdf

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Economic Footprint – 2023 Update Fred. Olsen Renewables Scotland. The survey also found that of the estimated 4,000 wind businesses within the UK, 50% of them are in Scotland. These findings align with the fact that the majority of the UK’s large-scale wind farms are in Scotland.

2.2

Economic Value of the UK Onshore Wind Sector

2.2.1

The UK's onshore wind industry has emerged as an essential part of the country's energy framework. Both national and regional policies endorse onshore wind technology as a means to meet carbon reduction and climate goals.

2.2.2

Onshore wind has a proven track record of success, and the UK is now the world’s sixth largest wind market. Wind energy accounted for 24% of total electricity generation (with offshore wind accounting for 13% and onshore wind accounting for 11%).8

2.2.3

Between 2021 and 2022 onshore wind generation increased by 5TWh meaning that a record in onshore wind generation was achieved in 2022 of 21.8 TWh.

2.2.4

The annual turnover of the onshore wind industry was £1.98b in 20219 employing 3,300 people in Scotland. This is equivalent to an annual GVA contribution of £393m.10

2.2.5

As of January 2023, the Department for Business, Energy, & Industrial Strategy’s Renewable Energy Planning Database noted that there were 735 operational onshore wind sites in the UK (including sites with just a single turbine). The database also recorded 58 large installations (defined as having 50MW capacity or greater), of which 45 (~78%) are in Scotland.

2.2.6

The Renewable Energy Planning Database shows 112 windfarm sites of 10MW capacity or greater either having been granted planning permission or already under construction, with 88 of these sites (78.5%) located in Scotland.

2.2.7

The UK onshore wind sector generated £3.4 billion in turnover in 2021, about the same as the turnover generated in 2018 after declining in 2019 and 2020 11. 57% of the UK’s total onshore wind sector turnover is generated in Scotland.

2.2.8

In 2021, onshore wind had the highest share of capacity of renewable sources (29.2%) and accounted for 38% of total renewable energy generation12.

2.2.9

Onshore wind farms create economic value throughout the project lifecycle, including at the development & conceptualisation stage, the construction phase and the operation & maintenance (O&M) phase.

2.2.10 Much of this expenditure is retained locally, for example, research suggests that 13:

8 Wind energy in the UK, ONS, June 2021. Available:

https://www.ons.gov.uk/economy/environmentalaccounts/articles/windenergyintheuk/june2021 9 Low carbon and renewable energy economy estimates, ONS, 2023 Available: https://www.ons.gov.uk/economy/environmentalaccounts/datasets/lowcarbonandrenewableenergyeconomyfirstes timatesdataset 10 Stantec calculation based on ONS and Scottish Annual Business Statistics data.

11 Office for National Statistics. Low carbon and renewable energy economy, UK: 2021. Available: https://www.ons.gov.uk/economy/environmentalaccounts/datasets/lowcarbonandrenewableenergyeconomyfirstes timatesdataset 12 Department for Business, Energy, & Industrial Strategy: Digest of UK Energy Statistics (2022). Available: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1135950/DUK ES_2022.pdf 13 Renewable UK. Onshore Wind: Economic Impacts in 2014. Available: https://cdn.ymaws.com/www.renewableuk.com/resource/resmgr/publications/reports/onshore_economic_benefits _re.pdf

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Economic Footprint – 2023 Update Fred. Olsen Renewables 

98% of development spend occurs within the UK.



48% of the construction spend is within the UK.



87% of O&M spend is within the UK.



69% of total expenditure occurs within the UK.

2.2.11 With UK developers having few options other than importing the main turbine components from abroad, the retention of nearly half of construction spend and over 2/3 of total spend demonstrates that the onshore wind industry in the UK is extracting significant value for the national economy. The primary way to increase the value from onshore wind within the UK would be to create and support the manufacturing supply chain.

2.2.12 A typical wind farm development in the UK will invest nearly £3 million per MW of capacity over all three phases of the project’s lifespan 14. This equates to approximately £2 million in spend being retained within the UK economy.

2.2.13 Research by Renewable UK estimate 48% of total spend is retained within the region or devolved nation, and 27% of overall spend occurs within the local authority area. This equates to £1.4 million in retained spend at the regional level, and £0.8 million retained within the local authority area per MW. Table 2.1 below details the proportion of total project spend retained within the different spatial areas: Table 2.1 Distribution of Project Spend Local

Regional

UK

Development

13%

59%

98%

Construction

12%

36%

47%

Operation & Maintenance

42%

58%

87%

Total

27%

48%

69%

Source: Renewable UK

2.3

Overview of the Sector Supply Chain

2.3.1

The windfarm sector in the UK supports a large and diverse supply chain. Within the supply chain there are firms which handle:

2.3.2



Technical consultancy.



Legal.



Financial and project management support.



Manufacturing.



Transport.



Logistics and assembly.



Turbine servicing and site maintenance.



Civil engineering and construction.

While onshore windfarm developments require some highly specialised activities, such as turbine assembly, which require procurement on a regional or national scale, supply chain opportunities exist at local scales which provide high-value employment opportunities.

14 Renewable UK. Onshore Wind: Economic Impacts in 2014.

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Economic Footprint – 2023 Update Fred. Olsen Renewables 2.3.3

The spend within the supply chain is best understood in context of the main areas of spend over the project lifespan. Table 2.2 below shows the estimated proportion of spend over the lifetime of the asset.

Table 2.2 Spend by Phase % of Total Project Spend Development

5.1%

Construction

44.5%

Operation & Maintenance

50.4%

new Table 2.3 Detailed Construction Phase Spend % Spend In Domain

% Total Construction Spend

Balance of Plant

100%

28.5%

Civil and Project Management

44.60%

12.7%

Roads

12.20%

3.5%

Substation Buildings

4.90%

1.4%

Turbine Foundations & Hard Standings

17.90%

5.1%

Landscaping/Forestry/Fences

1.20%

0.3%

Mechanical & Electrical Installation

17.70%

5.0%

Other Spend

1.50%

0.4%

Turbine

100%

64.4%

Tower Manufacture

10.40%

6.7%

Other Manufacture

72.30%

46.6%

Other Spend

17.30%

11.1%

100%

7.1%

Engineering Services

19.10%

1.4%

Construction

41.40%

2.9%

Electrical Components

3.20%

0.2%

Industrial Equipment & Machinery

3.20%

0.2%

Other Spend

33.10%

2.4%

Grid Connection

Source: Renewable UK

2.3.4

The next aspect of the supply chain involves the O&M functions required to keep the windfarms in safe working order throughout the operational lifetime of the development. Table 2.4 details the primary O&M tasks and the average proportion of spend allocated to these responsibilities.

Table 2.4 Operation & Maintenance Phase Spend % Total O&M Spend Turbine Maintenance

31%

Site Maintenance

6%

Operational Management

11%

Land Agreements

14%

Habitat Management

0%

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Economic Footprint – 2023 Update Fred. Olsen Renewables % Total O&M Spend Non-domestic rates

6%

Community Benefit

7%

Other spend

24%

Source: Renewable UK

2.3.5

Renewable UK estimates that for each 1MW of installed onshore wind capacity it would be reasonable to expect the impacts set out in Table 2.5 within the UK economy per annum.

Table 2.5 Impact per megawatt FTEs

GVA

Development

0.54

£40,600

Construction

2.49

£159,250

Operation & maintenance

0.43

£22,350

Total

3.46

£220,200

Source: Renewable UK

2.3.6

The development stage on average spans four years, therefore the total GVA associated with each 1MW of installed capacity equates to some £162,500.

2.3.7

The construction phase typically lasts two years, resulting in a total GVA contribution of £318,500 per MW installed.

2.3.8

The operational lifespan of a windfarm is assumed to be 25 years, which results in a cumulative GVA of £558,675 per MW installed.

2.4

Community Benefit Funds

2.4.1

Community benefit funds are voluntary initiatives led by renewable energy scheme operators to support communities and provide an opportunity to work collaboratively for the long-term benefit of the community. The aim of these initiatives is to achieve a lasting positive impact on communities by enabling them to carry out improvements to their local area in any sphere, including the environment, amenity, education, tourism, etc.

2.4.2

It is the Scottish Government’s position that all renewable energy developments are encouraged to offer community benefits, and the onshore wind sector has been an industry leader. It is important to note that the provision of community benefits is not a material consideration and has no bearing on the planning process 15.

2.4.3

Community benefit funds are supported by financial contribution that a renewable energy scheme operator gives to the communities surrounding a wind farm to invest in local initiatives for people. The funds allocated are proportionate to the size of the scheme and the amount of electricity the installation produces.

2.4.4

In many instances, community funds are managed by an external body but delivered in partnership with local communities. This enables local people to provide input on the fund’s strategy and spend to prioritise issues that are important to the local area.

2.4.5

A breakdown of FORL’s recent community fund contributions is provided in Section 4.5.

15 Scottish Government Good Practice Principles for Community Benefits from Onshore Renewable Energy

Developments.

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Economic Footprint – 2023 Update Fred. Olsen Renewables

2.5

Fred. Olsen Renewables Sites Operational

2.5.1

Fred. Olsen Renewables operates nine windfarm sites in Scotland, with a further six either in the consent process or consented. Summary profiles of each operational site are provided below.

Brockloch Rig

2.5.2

This windfarm is located in Dumfries and Galloway, 5 miles north-west of Carsphairn. It came into Fred. Olsen Renewables’ portfolio in 2017 after being purchased from Windy Standard Ltd. This windfarm has been fully operational since 1996 and consists of 36 wind turbines of 600 kilowatts (kW) each, providing a maximum power of 21.6 MW.

2.5.3

The 21.6 MW capacity generates electricity equivalent to the consumption of over 11,500 homes on an annual average basis.

2.5.4

FORL is currently exploring opportunities to replace the existing turbines at the original site with new, larger modern turbines which incorporate the latest designs and technology. The repowering proposal would: 

Reduce the overall number of turbines.



Increase the generating capacity.



Share existing infrastructure, including tracks and grid connection.

2.5.5

The repowering project is still in the early stages of the development process. This affords an opportunity for additional and wider consultation with Community Councils, key stakeholders and local residents in proximity to the development.

2.5.6

In addition, an extension at Brockloch Rig II added 30 new turbines of 2.05 MW each, providing a maximum of 61.5 MW.

2.5.7

The 61.5 MW of electricity generation potential is equivalent to the consumption requirements of over 33,000 homes on an average annual basis.

2.5.8

The area around the windfarm is within an agricultural designation – the West Southern Uplands Environmentally Sensitive Area. Extensive consultation was undertaken with local and regional groups to ensure that the development was sympathetic the valuable natural heritage.

Crystal Rig

2.5.9

This development is located on the boundary of East Lothian and the Scottish Borders, approximately six miles south of Dunbar. The 25-turbine Crystal Rig I development became operational in 2003 and was, at that time, the largest windfarm development in Scotland. In 2010, Crystal Rig 2 added a further 60, 2.3 MW turbines creating 138 MW of further capacity with a further 6, 2.3 MW turbines added at Crystal Rig 3 in 2016, bringing the total number of turbines to 86.

Mid Hill

2.5.10 The Mid Hill windfarm lies 13 miles west of Stonehaven in Aberdeenshire and was built in 2014.

In includes 33, 2.3 MW turbines, providing a maximum capacity of 75.9 MW, enough to power 31,000 homes.

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Economic Footprint – 2023 Update Fred. Olsen Renewables Paul’s Hill 2.5.11 The Paul’s Hill windfarm lies 10 miles west of Aberlour in Moray and opened in 2006. It includes 28, 2.3 MW turbines, providing a maximum capacity of 64.4 MW, enough to power 35,000 homes.

Rothes and Rothes II 2.5.12 The Rothes wind farm, located in Moray, commenced operation in 2005. The development consists of 22 turbines, each rated at 2.3 MW giving a total capacity of 50.6 MW, enough to power 27,000 homes.

2.5.13 A community benefit fund has been established as part of FORL’s commitment to communities living in proximity to the windfarm.

2.5.14 In 2013 the Rothes II extension to this windfarm entered operation, adding a further 18 wind turbines and 41.4 MW of capacity, enough to power 22,000 homes.

Future Development 2.5.15 In addition to the operational sites, FORL has applied for consent to develop several new sites. These projects will enhance the company’s portfolio and further embed their activities within communities across Scotland.

Culachy 2.5.16 The Culachy Wind Farm is located on Culachy Estate, south of Fort Augustus and consists of 8 turbines, giving a total capacity of 57 MW. 2.5.17 If consented, it is estimated that Culachy windfarm could provide over £9.8m in community benefit over the lifespan of the project.

Lees Hill Renewable Energy Park 2.5.18 A 7-turbine development with an anticipated capacity of 42MW alongside up to 60MW of solar panels and 60MW of battery storage approximately 5km west of Duns in the Scottish Borders.

Lethen 2.5.19 A 7-turbine development is currently proposed at the Lethen Estate near Nairn, in The Highland Council area. The plans for Lethen consist of: 

Up to 19 wind turbines, with a tip height of 185m.



Energy storage facility.



Turbine foundations and hardstanding.



External transformer house.



Onsite substation and control building.



Underground electricity cables between turbines.



Access tracks, crane pads and an anemometry mast.

2.5.20 If consented, it is estimated that Lethen windfarm could provide over £18m in community benefit over the lifespan of the project.

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Economic Footprint – 2023 Update Fred. Olsen Renewables Fetteresso 2.5.21 Consent has been granted for a development within Fetteresso Forest, near Stonehaven in Aberdeenshire. The project would make use of some existing access tracks and operational infrastructure which is already present at the nearby Mid Hill windfarm development, thus extending the life of these elements.

2.5.22 At this stage, the proposed development would contain: 

Up to 10 turbines.



Turbine foundations.



External transformer house.



Access tracks, crane pads, anemometry mast.



Underground electricity cables.



Wastewater and surface water drainage.



Forest felling and replanting.

2.5.23 The windfarm could provide up to £210,000 per annum to a community benefit fund to support communities in Aberdeenshire. There is a community ownership opportunity associated with the development. Initial information has been distributed and further detail will be available as the development proposition progresses.

Paul's Hill II The proposed development is located on the hills of Carn na Dubh-chlais, approximately 7 km west of Upper Knockando in Moray. It is located to the east of the existing Paul’s Hill Wind Farm. It consists of 6 turbines and will generate 25.2 MW of power.

Rothes III 2.5.24 The proposed development within Moray Council local authority area will expand upon the Rothes I & II windfarms by adding 29 turbines. The project will make use of existing infrastructure and access tracks as far as possible.

2.5.25 At this stage, the proposed development would contain: 

28 turbines.



Site tracks.



Underground electricity cables.



External transformer housing.



Foundations, crane pads, anemometry mast.



Two substations / control buildings.



Water crossing and drainage attenuation measures.



Forest felling and restocking.

2.5.26 The existing windfarms at Rothes have established a community benefit fund, and if consented, Rothes III will contribute to this fund.

Crystal Rig IV 2.5.27 The proposed development in the Lammermuir Hills close to the Scottish Borders/East Lothian boundary, will expand the current capacity of the Crystal Rig windfarm through the

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Economic Footprint – 2023 Update Fred. Olsen Renewables addition of 11 turbines. The project will make use of existing access routes and infrastructure where possible. The application to develop Crystal Rig IV was approved in 2021 and construction started in early 2023.

Scawd Law 2.5.28 The proposed development will be located on the Holylee Estate in the Scottish Borders and will deliver 10 turbines. The Scoping Report for the project was submitted in August 2020.

2.5.29 If consented, the windfarm will provide over £10 million in community benefit over the lifespan of the development. A community ownership package of up to 5% of shared revenue will also be offered.

Brockloch Rig III 2.5.30 Consent has been granted for a 20-turbine expansion to the Brockloch Rig windfarm in Dumfries and Galloway that will add to the Brockloch windfarms through the addition of 20 turbines. The development received approval from Scottish Ministers in March 2021.

2.5.31 In combination with Brockloch Rig I and II, these three projects will deliver enough electricity to power the equivalent of 131,000 homes annually and generate over £15m in community benefits over the lifetime of the developments.

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Economic Footprint – 2023 Update Fred. Olsen Renewables

3

Supply Chain Engagement Consultation

3.1

Site Managers

3.1.1

A series of one-to-one discussions were conducted with personnel currently or previously involved in the management of FORL windfarm sites as part of the 2022 review. These conversations were conducted via telephone in summer 2021. The purpose of these conversations was to get a more granular understanding of what goes into the operations and maintenance programmes for windfarm sites, to get information about the process by which works are procured and structured, to understand the factors involved in keeping a site operational, and to gain insight as to the current state of the market (including opportunities and challenges).

Operations and Maintenance Programmes 3.1.2

Conversations with site managers revealed that O&M is programmed in a cyclical pattern of two-year phases of works. Within this two-year period, there are various sub-cycles of works which vary depending on the components. The maintenance schedule for windfarms is prescriptive and based on the size of the site, types of turbines, and the specification of other associated kit. The typical works involved in O&M programmes include detailed and comprehensive annual checks to ensure that the whole unit is in good working order, 6-month inspections for the turbines, and monthly checks and inspections for various elements such as sensors and monitoring equipment.

3.1.3

Proper O&M regimes are critical because they provide a level of preventative care and can highlight issues to be fixed, potentially avoiding the need for prolonged periods of downtime which severely impact the performance of the windfarm operations.

3.1.4

Discussions also revealed that approximately 70% of O&M work is planned and scheduled within the standard two-year cycle, with the remaining 30% of works being reactionary to circumstances which arise. Therefore, a significant portion of the works are planned in advance and resources are secured to perform these tasks according to an agreed schedule of maintenance. The reactive/ad-hoc works includes things such as snow clearance, tree clearance, mechanical faults, electrical issues, or any other fault or issue which is unexpected.

3.1.5

It was noted that the reactive/ad-hoc work presents unique challenges in that they must be dealt with as quickly as possible to minimise the amount of downtime of the turbines. The reactive/ad-hoc works are sometimes done by companies on the preferred supplies list, however there are situations where it is imperative to rectify the situation as soon as possible and the first available company is procured to perform the service. This is managed on a case-by-case basis.

3.1.6

Site managers indicated that, as a general rule of thumb, the personnel requirement ratio for standard monitoring and maintenance is approximately one technician for ten turbines. This requirement scales linearly with the number of turbines, which enables straightforward planning and estimation of the labour required to perform tasks.

Procurement 3.1.7

The process for procuring works and services is consistent across the company. A preferred/approved suppliers list is maintained, and resources are sourced from this list as required to suit the specific job of the windfarm.

11

Economic Footprint – 2023 Update Fred. Olsen Renewables 3.1.8

Where possible, sourcing goods and services from local companies is preferred. This is just a guideline and there are no criteria which need to be met, however the use of local enterprises is emphasised. One of the most consistently challenging aspects of procurement is securing the right skills at the right time. Many technical skills, such as electricians, are constantly in high demand and therefore there can be significant competition.

3.1.9

The most required labourers for O&M tasks are electrical engineers and turbine technicians. In particular, people able to work with high voltage systems are in very high demand due to the small number of people with relevant qualifications who are able to carry out this work. It was noted that competition in summer is especially tight for labourers as there is high demand among projects.

Market Conditions 3.1.10 The wind sector has experienced significant growth in recent years, however there are still a number of challenges facing the industry. Brexit has introduced new complications for sourcing both parts and labour, which is putting additional pressures on an already tight labour market. It is now significantly more difficult to bring in specialised servicing teams from Europe, and there are not enough people in the wind sector in the UK to meet the current levels of demand. A consensus from site managers was that there is a critical need for more training programmes and pathways into employment within the wind sector. This includes developing new apprenticeship schemes, collaboration with higher/further education institutions, re-training to facilitate workers transitioning from other industries.

3.1.11 The increased presence and adoption of automation technologies is introducing a new set of opportunities and challenges for the sector. The inspection of turbine blades is typically done by a crew of personnel, with some members working at height with ropes/harnesses. This type of works comes with inherent risks and therefore requires additional safety measures and specialised skills to perform. However, increasingly this type of inspection can be done via drones. This increases the safety of conducting these tasks, speeds up the process of inspections, and reduces the overall personnel requirement to do this work.

3.1.12 The site managers expressed opinions that the continued incorporation of technological assets and processes into the O&M work is very likely to change the nature of the work conducted by people. While the blade inspection via drone example reduced the overall personnel requirement, it was not clear whether this will occur across the board. Rather, the prevailing sentiment was that technology can be used to perform more dangerous or monotonous tasks, freeing up personnel to handle more specialised and nuanced work.

3.1.13 The inclusion of automation and other new technologies is expected to create new opportunities within the sector which require additional labour and specialisation. Site managers anticipated that large-scale energy storage solutions are going to create short-term disruptions in the industry but are likely to present new commercial opportunities which will have their own specialised skills and employment requirements.

12

Economic Footprint – 2023 Update Fred. Olsen Renewables

4

Economic Impact Assessment

4.1

Introduction

4.1.1

Onshore wind farms have numerous economic benefits, including job creation, reduction in energy costs, increased tax revenue, greater energy security, and a reduction in greenhouse gas emissions. The economic benefits are substantial and are essential drivers that encourage the development of wind energy projects both locally and internationally. This section presents the findings of the economic impact assessment of Fred. Olsen Renewables economic footprint in Scotland on the nation’s economy. The impacts measured in the analysis fall into three main categories: 

Employment Impacts: The number of additional jobs that the investments have helped to stimulate in Scotland’s economy.



GVA Impact: The contrition that the investments have made towards total national output.



Community Benefits: The amount of FORL funding paid out to community-based organisations.

4.1.2

The economic impacts of the windfarm developments within Fred. Olsen Renewables portfolio in Scotland were modelled using an approach consistent with HM Treasury Green Book Appraisal Guidance.

4.1.3

The economic model drew evidence from: 

Details provided by Fred. Olsen Renewables regarding project contracts and arrangements with their supply chain.



Data and workforce statistics published by the Office for National Statistics (ONS), including the Scottish Annual Business Survey (SABS), and the Scottish Government Input-Output Tables.

4.2

Assumptions

4.2.1

The economic impact model has been constructed using the following assumptions: 

Gross turnover impacts: figures for construction, pre-construction and development are based on an analysis of accounts data provided by FORL Ltd. Figures for operational expenditure are also based on data provided by FORL Ltd 16.



Gross GVA impacts: separate GVA to turnover ratios were applied to each of the sectors of the economy using ratios derived from the SABS.



Gross employment impacts: Separate GVA per head assumptions were applied to each sector using information from the SABS.



Leakage: a 33% leakage factor was applied to the development & construction spend and 13% on operation & maintenance spend in line with research from Renewable UK (as presented in Table 2.1).



Deadweight and displacement: given the specialist and remote rural nature of the economic activity under consideration, the likelihood of deadweight or displacement of activity occurring was considered limited, however a 10% adjustment was applied to construction spend and 5% adjustment was applied to O&M spend for reasons of caution.



Multiplier effects: Type II multiplier were applied to the figures based on data from the 2022 Scottish Input Output Tables.

16 In cases where no data was available, an annual spend per turbine figure was applied.

13

Economic Footprint – 2023 Update Fred. Olsen Renewables 4.2.2

As FORL’s windfarms were developed at different times and in different locations, comparing the impacts associated with each development is complicated by changes in data across time.

To address this, a simplified assessment approach has been adopted which can be applied to each development.

4.2.3

To eliminate complications arising from the comparison of projects delivered at different times, the costs to deliver each windfarm have been uprated to current 2022 values using the ONS GDP Deflator, as have the GVA per worker and turnover figures from the SABS. These uprated figures are then used to produce estimates of the construction impacts with respect to employment creation and GVA generation, reporting figures in current prices.

4.2.4

This adjustment will simplify interpretation and comparison of the figures by showing their impact in present values. For example, a project completed in 2005 yielding £10 million in GVA versus a project completed in 2012 generating £10 million in GVA cannot easily be compared, as the impact of the GVA in 2005 will be different than in 2012, and with factors like inflation and changes to worker productivity in the intervening time it is not a like for like comparison.

4.3

Construction & Development Phase Impacts Gross Expenditure

4.3.1

FORL has provided construction cost information for the existing windfarm sites. Table 4.1 below summarises the development, pre-construction and construction costs of each site, expressed in 2022 prices.

Table 4.1 Total Gross Construction Spend by Site, £m, 2022 prices Windfarm

Development Costs

Construction and Pre-Construction

Total

Brockloch Rig

2.4

139.3

141.7

Crystal Rig

11.8

287.6

299.4

Mid Hill

2

119

121

Paul's Hill

0.6

78.1

78.7

Rothes

1.6

116.4

118

Total

18.4

740.4

758.8

Source: Fred. Olsen Renewables Ltd, 2023

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Economic Footprint – 2023 Update Fred. Olsen Renewables

Gross Employment 4.3.2

Aggregated together the construction expenditure required to deliver FORL’s current operational windfarms is calculated to have supported the equivalent of 6,784 gross person year equivalent (PYE) jobs in the development, construction and pre-construction phases, approximately equivalent to 678 full time equivalent (FTE) jobs 17. This is shown below.

Table 4.2 Total Gross Development and Construction PYE Employment by Site Windfarm

Development

Construction and Pre-Construction

Total

Brockloch Rig

25

1,450

1,475

Crystal Rig

95

2,327

2,423

Mid Hill

20

1,214

1,235

Paul's Hill

6

720

725

Rothes

15

1,072

1,087

Total

161

6,784

6,945

Source: Stantec, 2023

Gross GVA 4.3.3

This employment activity has contributed £371.6 million to UK GVA to date. This is shown below.

Table 4.3 Total Gross Development and Construction GVA by Site Windfarm

Development

Construction and Pre-Construction

Total

1.2

69.2

70.4

5.0

122.7

127.8

1.3

79.3

80.7

0.3

36.8

37.1

0.8

54.9

55.6

8.6

363.0

371.6

Brockloch Rig Crystal Rig Mid Hill Paul's Hill Rothes Total Source: Stantec, 2023

Net Impacts 4.3.4

Following adjustments for leakage, displacement, deadweight and the multiplier effect, the net economic impact on the UK economy to date associated with the development, preconstruction, and construction of FORL onshore wind infrastructure in Scotland was assessed as follows: 

Net expenditure impact: £585.3 million (2022 prices).



Employment: 5,456 per year equivalent jobs (approx. 546 FTE jobs).



GVA: £308.1 million (2022 prices).

17 Based on the application of a industry convention 10 job years to 1 FTE job ratio

15

Economic Footprint – 2023 Update Fred. Olsen Renewables Table 4.4 Total Net Development and Construction Impacts Expenditure (£m, 2022 Prices)

Employment (PYE Jobs)

GVA (£m, 2022 Prices)

Brockloch Rig

109

1159

58

Crystal Rig

231

1903

106

Mid Hill

93

970

67

Paul's Hill

61

570

31

Rothes

91

854

46

585.3

5,456

308.1

Windfarm

Total Source: Stantec, 2023

4.4

Operations & Maintenance Phase Impacts Gross Operation & Maintenance Impacts

4.4.1

FORL has spent an estimated £246.8 million to date on the O&M of its onshore wind infrastructure, supporting 2,092 FTE job years’ worth of employment (c. 209 FTE jobs), and contributing £108.8 million to Scotland’s GVA. Table 4.5 Total Gross Operation and Maintenance Impacts Expenditure Windfarm

(£m, 2020/21 Prices)

Employment (FTE Job years)

GVA (£m, 2020/21 Prices)

Brockloch Rig

56.4

478

22.8

Crystal Rig

68.5

580

30.6

Mid Hill

20.4

173

11.3

Paul's Hill

17.1

145

7.4

Rothes

84.4

716

36.6

Total

246.8

2,092

108.8

Source: Stantec, 2023

Net Operation & Maintenance Impacts 4.4.2

After adjusting for deadweight, displacement, leakage and multiplier effects, we estimate that the total net local expenditure impact associated with FORL’s assets in Scotland is £334.3 million, supporting 3,200 FTE job years (c. 320 FTE jobs), and contributing £159.9 million to Scottish GVA. Table 4.6: Total Net Operation and Maintenance Impacts Expenditure Windfarm

(£m, 2022 Prices)

Employment (FTE Job years)

GVA (£m, 2022 Prices)

Brockloch Rig

76.4

732

33.6

Crystal Rig

92.7

888

45.0

Mid Hill

27.6

264

16.6

Paul's Hill

23.2

222

10.9

Rothes

114.4

1095

53.9

Total

334.3

3,200

159.9

Source: Stantec, 2023

16

Economic Footprint – 2023 Update Fred. Olsen Renewables

4.5

Community Benefit Fund Impacts

4.5.1

FORL supports several communities across Scotland through Community Benefit Funds associated with the company’s wind farm developments. Each year over the lifetime of the windfarm these funds allocate an amount of money to local community groups or organisations who then administer and oversee the disbursement of money to various projects.

4.5.2

Consideration is given to all types of projects which will benefit the local community, and applications for funding can be made by community and voluntary groups, clubs, and other relevant organisations.

Crystal Rig

4.5.3

FORL has allocated £3.079 million across six community councils close to the Crystal Rig site to date and will allocate £5.525 million over the lifetime of the development. Examples of supported projects include a playpark in Oldhamstocks; a defibrillator for Innerwick; and the refurbishment of Spott Village Hall.

Table 4.7 Crystal Rig Community Development Payments by Site

Number of years of community benefit payments made to date Award per year (latest year) Amount made available to date (current prices) Total estimated lifetime value of the fund (current prices)

Crystal Rig 1

Crystal Rig 2

Crystal Rig 3

Full Development

20

14

7

20

£78,000

£74,000

£69,000

£221,000

£1,560,000

£1,036,000

£483,000

£3,079,000

£1,950,000

£1,850,000

£1,725,000

£5,525,000

Source: Fred. Olsen Renewables Ltd, 2023

Table 4.8 Crystal Rig Community Development Payments by Beneficiary Funding Share Organisation Cranshaws, Ellemford & Longformacus Community Association Abbey St Bathans, Bonkyl & Preston Community Council East Lammermuir Community Council Cockburnspath Community Council Garvald & Morham Community Council

Crystal Rig 1

Crystal Rig 2

Crystal Rig 3

Full Development

50%

67%

0%

40%

15%

20%

0%

12%

25% 10% 0%

0% 13% 0%

85% 0% 15%

35% 8% 5%

Source: Fred. Olsen Renewables Ltd, 2023

Rothes 4.5.4

FORL has allocated £1.052 million across two community councils close to the Rothes site to date and will allocate £1.921 million over the lifetime of the development. Examples of projects supported include a new solar array for Fogwatt Hall and a summer floral display and Christmas tree for Rothes town centre.

17

Economic Footprint – 2023 Update Fred. Olsen Renewables Table 4.9 Rothes Community Development Payments by Site Rothes 1

Rothes 2

Full Development

18

10

18

£35,420

£41,400

£76,820

Amount made available to date (current prices)

£637,560

£414,000

£1,051,560

Total estimated lifetime value of the fund (current prices)

£885,500

£1,035,000

£1,920,500

Number of years of community benefit payments made to date Award per year (latest year)

Source: Fred. Olsen Renewables Ltd, 2023

Table 4.10 Rothes Community Development Payments by Beneficiary Organisation Heldon Community Council Rothes Council

Rothes 1 75% 25%

Funding Share Rothes 2 60% 40%

Full Development 67% 33%

Source: Fred. Olsen Renewables Ltd, 2023

Paul’s Hill 4.5.5

FORL has allocated £766,360 across seven community councils close to the Paul’s Hill site to date and will allocate £1.127 million over the lifetime of the development. Examples of projects supported include the replacement of Cromdale Village Hall roof; a community hydroelectricity project in Knockando and sponsorship for Aberlour & District Pipe Band.

Table 4.11 Paul’s Hill Community Development Payments Values

Number of years of community benefit payments made to date Award per year (latest year) Amount made available to date (current prices) Total estimated lifetime value of the fund (current prices)

Paul's Hill 17 £45,080 £766,360 £1,127,000

Source: Fred. Olsen Renewables Ltd, 2023

Table 4.12 Paul’s Hill Community Development Payments by Beneficiary Organisation Cromdale & Advie Council Aberlour Community Association Knockando Community Association Archiestown Village Council Carron Community Hall Association Inveravon & Glenlivet Community Association Edinville Community Hall

Funding Share 15% 15% 25% 15% 10% 10% 10%

Source: Fred. Olsen Renewables Ltd, 2023

Mid Hill 4.5.6

FORL has allocated £625,600 across five community councils close to the Mid Hill site to date and will allocate £1.898 million over the lifetime of the development. Examples of projects supported include an after-school club in Drumlithie and a network of woodland trails in Banchory.

18

Economic Footprint – 2023 Update Fred. Olsen Renewables Table 4.13 Mid Hill Community Development Payments by Site Number of years of community benefit payments made to date Award per year (latest year) Amount made available to date (current prices) Total estimated lifetime value of the fund (current prices)

Mid Hill 1

Mid Hill 2

Full Development

8

9

9

£57,500

£18,400

£75,900

£460,000

£165,600

£625,600

£1,437,500

£460,000

£1,897,500

Source: Fred. Olsen Renewables Ltd, 2023

Table 4.14 Mid Hill Community Development Payments by Beneficiary Organisation Glenberview & District Community Association SCIO Auchenblae Community Association Feughdee West Community Council Inchmarlo, Brathens & Glassel Community Council Crathes, Drumoak and Durris Community Council

Funding Share 30% 30% 19% 11% 10%

Source: Fred. Olsen Renewables Ltd, 2023

Brockloch Rig 4.5.7

FORL has allocated £665,000 to communities close to the Brockloch Rig site to date, with the majority of the funding allocated towards a local renewable energy fund. It will allocate £4.094 million over the lifetime of the development.

Table 4.15 Brockloch Rig Community Development Payments by Site

Number of years of community benefit payments made to date Award per year (latest year) Amount made available to date (current prices) Total estimated lifetime value of the fund (current prices)

Brockloch 1

Brockloch 2

Full Development

5

4

5

£10,000

£153,750

£163,750

£50,000

£615,000

£665,000

£250,000

£3,843,750

£4,093,750

Source: Fred. Olsen Renewables Ltd, 2023

Table 4.16 Brockloch Rig Community Development Payments by Beneficiary Organisation New Cumnock Community Council Carsphairn Renewable Energy Fund

Funding share 30% 70%

Source: Fred. Olsen Renewables Ltd, 2023

19

Economic Footprint – 2023 Update Fred. Olsen Renewables Summary 4.5.8

The total value of FORL’s community payments across Scotland currently stands at £6.188 million and will reach £14.564 million over the course of the life of its current portfolio of assets.

Table 4.17 FORL Community Benefit Payments in Scotland

Number of years of community benefit payments made to date Award per year (latest year) Amount made available to date (current prices) Total estimated lifetime value of the fund (current prices)

Paul's Hill

Rothes

Brockloch

Mid Hill

Crystal Rig

Overall

17

18

5

9

20

20

£45,080

£76,820

£163,750

£75,900

£221,000

£582,550

£766,360

£1,051,560

£665,000

£625,600

£3,079,000

£6,187,520

£1,127,000

£1,920,500

£4,093,750

£1,897,500

£5,525,000

£14,563,750

Source: Fred. Olsen Renewables Ltd, 2023

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Economic Footprint – 2023 Update Fred. Olsen Renewables

5

Conclusion

5.1.1

Following adjustments for leakage, displacement, deadweight and the multiplier effect, the net economic impact on the UK economy to date associated with the development, preconstruction, and construction of FORL’s onshore wind infrastructure in Scotland was assessed as follows: 

Net expenditure impact: £585.3 million (2022 prices).



Employment: 5,456 person years of employment (545 full-time equivalent jobs).



GVA: £308.1 million (2022 prices).

Table 5.1 Total Net Development and Construction Impacts Windfarm

Expenditure (£m, 2022 Prices)

Employment (PYE Jobs)

GVA (£m, 2022 Prices)

109 231 93 61 91 585.3

1159 1903 970 570 854 5,456

58 106 67 31 46 308.1

Brockloch Rig Crystal Rig Mid Hill Paul's Hill Rothes Total Source: Stantec, 2023

5.1.2

Total capital expenditure remains the same as in the previous report with the expenditure adjusted to 2022 prices using the GDP deflator. Total number of job years estimated increased from 5,432 to 5,456 with GVA impact revised up slightly from £293.1m to £309.1m.18

5.1.3

After adjusting for deadweight, displacement, leakage, and multiplier effects, we estimate that the total net local expenditure impact associated with the operation and maintenance of FORL’s assets in Scotland is £334.3 million, supporting 3,200 FTE job years, and contributing £159.9 million to Scottish GVA. Table 5.2: Total Net Operation and Maintenance Impacts Windfarm Brockloch Rig Crystal Rig Mid Hill Paul's Hill Rothes Total

Expenditure (£M, 2022 Prices)

Employment (PYE Jobs)

GVA (£M, 2022 Prices)

76.4 92.7 27.6 23.2 114.4 334.3

732 888 264 222 1095 3,200

33.6 45.0 16.6 10.9 53.9 159.9

Source: Stantec, 2023

5.1.4

This is an increase over the 1,767 published in the previous report. This is driven by a significant increase in O&M spending at the Rothes windfarm with expenditure more than doubling from £44m to £114m.

5.1.5

The total value of FORL’s community payments across Scotland currently stands at £6.188 million and will reach £14.564 million over the course of the life of its current portfolio of assets.

18 Due to the significant year to year variance in the GVA and employment numbers in the Scottish Annual

Business Statistics and Type-II multipliers from the Scottish Input-Output tables used to calculate jobs and GVA, a five-year average from 2016-2020 was used.

21

Economic Footprint – 2023 Update Fred. Olsen Renewables Table 5.3: Total Value of FORL Community Benefit Fund Payments in Scotland

Number of years of community benefit payments made to date Award per year (latest year) Amount made available to date (current prices) Total estimated lifetime value of the fund (current prices)

Paul's Hill

Rothes

Brockloch

Midhill

Crystal Rig

Overall

17

18

5

9

20

20

£45,080

£76,820

£163,750

£75,900

£221,000

£582,550

£766,360

£1,051,560

£665,000

£625,600

£3,079,000

£6,187,520

£1,127,000

£1,920,500

£4,093,750

£1,897,500

£5,525,000

£14,563,750

Source: Fred. Olsen Renewables, 2023

5.1.6

In addition to these main categories, a handful of other types of projects have been supported through funding received from community benefits, including: 

Energy efficiency.



Range.



Sustainability/environment.



Tourism.

22