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2 For further information please visit Deloitte provides audit, tax and legal advisory, consulting and corporate transaction services to companies operating in a wide range of industries. The firm contributes its experience and outstanding professionalism in helping clients to achieve their business goals anywhere in the world. To achieve this it has the support of a worldwide network of member firms present in more than 140 countries and with more than 168,000 professionals committed to being a model of excellence. Deloitte s professionals share a common culture of cooperation based on mutual commitment, integrity, and the contribution of value to the market and the firm s clients, based on the richness intrinsic to this cultural diversity and the ongoing learning process generated by new experiences and challenges, which in turn contribute to the development of their professional career. Deloitte s professionals help to comply with the firm s responsibilities, inspiring market confidence and making a positive impact on its stakeholders. Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, and its network of member firms, each of which is a legally separate and independent entity. Please see for a detailed description of the legal structure of Deloitte Touche Tohmatsu and its member firms. This document has been drawn up from spread information, available to the general public and methodologies generally accepted. Deloitte accepts no responsibility or liability towards the Vindmolleindustrien or any third party that would have access to the present document and consequently could take harmful decisions or actions without Deloitte s knowledge Deloitte S.L. Member of Deloitte Touche Tohmatsu.

3 The robustness of the present study is based on the following aspects: 1. The Wind Energy Sector contribution to Danish Gross Domestic Product (GDP) is calculated through three equivalent approaches, recognised by the European System of National and Regional Accounts (ESNRA): Expenditure approach, Added value approach and Income approach (see 2. Assessment Approach for information about these three equivalent methodologies). Eurostat and EU national statistical bodies apply these approaches to calculate GDP (and its components). 2. Applying the above mentioned methods, the contribution to GDP of the Wind Energy Sector has been calculated with the information companies disclose in their financial statements, complemented with other additional information, such as cost structures, exports and imports or R&D expenditure, which was gathered by surveying wind industry players. The combination of these two data sets made possible to calculate the total direct impact on GDP. 306 companies (and/or business groups) in Wind Energy Sector were identified: of which 279 complete financial statements have been obtained for the period between 2007 and Thus, a 91.2% of the companies have been analysed, representing a significant sample of more than 99% of the activity in the Sector. 3. The different sub-sectors of the wind energy industry purchase from and provide services to other sectors of the economy. These interrelations produce an additional economic value and contribute to GDP (indirectly). To quantify this additional contribution, it is necessary to calculate income multipliers based on input-output model. This framework is a quantitative economic technique that captures the correlations between different branches of an economy or among branches of different and even competing economies. In order to evaluate this economic impact, the last Danish input-output tables (2008) published by Danmarks Statistik have been used; however, these tables do not take the wind energy sector (or its sub-sectors) into account as a separated industry. It is, therefore, necessary to add the information of this sector to the evaluation scheme. So the information was completed with the sectorial data collected directly from relevant industry players. These input-output tables are used to calculate income multipliers that contain the information of the wind energy sector s impact on the rest of the economy.

4 Table of content 0. Executive summary 6 Impact on GDP 6 Impact on employment 9 Wind Energy Sector competitiveness and global presence Objective and scope of the study Current situation of wind energy and forecast for Macroeconomic impact of the Wind Energy Sector in Denmark 18 Direct Contribution to GDP 19 Direct contribution of the different sub-sectors to GDP 23 Wind energy producers 27 Wind turbine manufacturers 29 Component manufacturers 31 Services 33 Wind Energy Sector Exports and Imports 34 Tax balance 37 Indirect and total contribution to GDP 39 Economic effort in R&D activities Impact on employment 46 Direct employment 47 Indirect and total employment Ratios Forecast to

5 7. Relevance of the wind energy sector in terms of first-mover advantage 55 Activity of Danish Energy Players in third countries 55 Danish Wind Energy Sector Competitive position 55 Relevance of Danish Energy players and professionals Conclusions 57 Relevance of Wind Energy business in Denmark 57 Leadership of the Danish Wind Energy industry 58 The future of Wind Energy Sector in Denmark 59 Table of figures 60 List of tables 63 Annexe I. Assessment approach 64 Direct contribution to GDP 64 Indirect contribution to GDP 67 Annexe II. Methodology to calculate the indirect contribution of the Wind Energy Sector to the GDP 68 Annexe III. Activity of Danish Energy Players in third countries 72

6 0. Executive summary The Wind Energy Sector plays a significant role in the Danish economy, representing more than 1% of the Total GDP of Denmark in 2010, as estimated in this study. Its importance relies not only in the economic contribution of the Wind Energy Sector on the Danish economy but also in the significant benefits that it presents in other socio-economic and environmental aspects: generation of high qualification jobs, intense development of R&D activities, CO2 mitigation and reduction of energy dependency, international competitiveness and global presence, etc. Nowadays, Denmark remains the European country with the highest penetration of wind power in electricity consumption (around 24% in 2010). Thanks to the strong commitment made during the last decades from the Government and the business sector, the Wind Energy Sector in Denmark has developed powerfully, gaining a leading position at international level. This development has translated in big benefits for the Danish society, in economic and employment terms: this industry has been a driver of competitiveness and technological progress. This study has focused on the quantification of the impact that the Danish Wind Energy Sector has on the GDP and on the generation of employment, additionally quantifying other economic contributions of the sector as the taxes paid by the wind energy players and their effort in R&D activities. Impact on GDP The direct contribution of the Wind Energy Sector to GDP was of DKK 17.68bn in The evolution from 2007 has been positive, increasing more than a 17% during this period (in constant terms, base 2010). Additionally, the industry generated indirectly in other economic sectors an impact of DKK 7.64bn in The indirect impact measures the contribution that the companies related to the Wind Energy Sector have indirectly in the GDP of Denmark, as they interrelate with other sectors to purchase the components and services needed to develop its activities. April

7 DKK billion (constant prices-base 2010) Study of the macroeconomic impact of Wind The total impact (direct and indirect impact) of the Wind Energy Sector on the Danish economy was thus of DKK 25.33bn in In 2007, total impact was of DKK 21.92bn (constant prices, base 2010) which means a 15.5% growth during all the analysed period Indirect impact Direct impact DKK billion constant prices (2010) Direct impact Indirect impact Total impact Figure 0.1. Direct, indirect and total impact of the Wind Energy Sector in Denmark in constant prices (base 2010). April

8 The drop of the Wind Energy Sector contribution to GDP in 2009 in relation to 2008 corresponds mainly to a decrease in the levels of growth capacity at the European level in 2010 (12% of increase in new capacity in 2010, meanwhile during the five previous years the growth rate was between 15% and 19%): production of 2009 was installed in Danish Wind Energy Sector is focused on export, delays in new capacity/reductions in growth rates have relevant impact in Danish industry. Figure 0.2. Wind energy power capacity in Europe. Source: EWEA April

9 Impact on employment According to this economic relevance, the Wind Energy Sector has also an important contribution to the creation of jobs in Denmark. In 2010, it is estimated that 25,358 professionals were employed by companies directly related to the Wind Energy Sector. Additionally, the Sector generated 12,085 jobs indirectly, related to the indirect economic impact that it has on the Danish economy. Taking into account direct and indirect employment, the Wind Energy Sector generated a total of 37,442 jobs in The decrease in the number of jobs from 2008 to 2009 is due to the lower contribution of the Wind Energy Sector GDP during that year, which had the corresponding impact on the employment. employment Direct 23,681 28,371 24,773 25,358 Indirect 11,279 14,281 12,448 12,085 Total 34,960 42,652 37,221 37,442 Figure 0.3. Direct, indirect and total employment on the Wind Energy Sector The characteristics of the Wind Energy Sector require mainly high qualified employees and specialized workers, and a big proportion or R&D jobs. April

10 Wind Energy Sector competitiveness and global presence Danish Wind Energy Sector has a worldwide leadership position, leading the industry with high technological capabilities and important competitive advantages. Some of the most important wind energy producers, and wind turbine manufacturers are Danish, with a prominent position at international level. The Danish wind energy competitive advantage and capabilities translate in a higher proportion of exports in relation to imports. For instance, in 2010 the Danish economy accounted for a positive Wind Energy Sector balance trade of DKK 31.88bn: the exports represented DKK 46.20bn, while the imports were only of DKK 14.32bn. During the period , net exports increased by 22.2%. Danish players export mainly value-added equipment and services; mainly wind energy equipment and services. In the last years, Danish wind energy industry have reached an enviable strategic position characterized by: Leadership of the Danish players at international level in all stages of the value chain, with a strong presence in major markets, especially in the market of wind energy turbine manufacturers. Due to Danish leadership, Wind Energy Players export more than 82% of total production 1. Access to a highly qualified workforce: Danish professionals are highly demand abroad. Existence of specialized and competitive auxiliary industries, which have facilitated rapid access to critical components and services This industrial framework has encouraged innovation processes and collaborative R&D and innovation activities. 1 Wind Energy Sector direct total income: DKK56.32 billion, Direct exports: DKK46.20 billion, April

11 Adaptation to a very demanding domestic demand, from a double perspective: It has been necessary to adapt the industry to the demands of the largest worldwide wind energy facilities operators: one of the wind energy leaders is Danish. It has been necessary to adapt the industry to very demanding requirements established by EU and Denmark electricity system operators. Strong international demand: from previous experiences in the domestic market, Danish manufacturers acquired strong capabilities with high levels of efficiency and performance. Nowadays, based on this experience, they have reached a competitive advantage to access new markets. Their leadership at international level has allowed Danish players to achieve greater economies of scale. Intensive innovation activities and technology leadership: strong effort has been dedicated to R&D activities during the last years. Nowadays Danish players are leading new wind energy technologies as for example offshore wind energy. Strong governmental support: in the last few decades, Danish governments have shown a great commitment with the development of the Wind Energy industry in Denmark. Political support and the establishment of a stable regulatory framework have promoted and facilitated the development of a relevant an internationally recognized Wind Energy industry in Denmark. April

12 1. Objective and scope of the study It is not easy to identify a business activity in the European economy that has progressed as much as the wind industry in Denmark during the last fifteen years. In addition to the effective contribution of this industry in the reduction of the energy dependency and the mitigation of greenhouse gases and other polluting gases emissions, the wind industry has reached a highly prominent position in economic terms, contributing to the creation of value, GDP growth and job creation; having at the same time a relevant positive effect in the development of other economic sectors. Nowadays, wind energy plays an essential role within the electricity industry in Denmark. In the past ten years, the Danish installed capacity for the electricity generated from wind energy sources has grown constantly, having increased a 79.48% 2 between 2000 and 2010, with 3,787 MW of installed capacity at the end of The years with the biggest increase in power capacity were the year 2002, with 22.22% increase in relation to 2001, and the years 2009 and 2010, that presented more than a 10% increase in power capacity in relation to the previous years. This capacity allowed in 2010 the generation of 7.8 TWh of energy, 20.13% 3 of the Danish gross electricity generation and 24.35% 4 of its final electricity consumption. 2 Wind energy installed capacity in 2000: 2,110 MW; Wind energy installed capacity in 2010: 3,787 MW. Source: Vindmolleindustrien 3 Source: Eurostat 4 Source: Eurostat April

13 The aim of this study is to evaluate the impact of the wind energy industry in the Danish economy for the period between 2007 and 2010 and to forecast its impact for This study has been elaborated in collaboration with Vindmolleindustrien, under a framework established with EWEA, and has taken into consideration all the phases of the wind energy industry value chain and the effects that its activities generate on the rest of the economic sectors. The project is based on relevant surveys of a wide range of companies (306 Danish wind energy players 5 ) and its scope is as follows: Evaluation of the impact of the wind energy sector in the Danish economy. Direct contribution of the sector and the different sub-sectors to the GDP: wind energy producers, wind turbine manufacturers, manufacturers of specific equipment and components and providers of specific services. Specification of the main components related to the wind industry that form the GDP: internal demand, external demand, total revenues, expenses, compensation to employees, business cash flow, etc. Contribution to job creation in the different sub-sectors: wind energy producers, wind turbine manufacturers, specific equipment and components manufacturers and providers of specific services. Indirect contribution to other GDP sectors: metallurgical, electronic equipment providers, financial services, professional services, etc. Indirect contribution to job creation in other economic sectors. Tax balance assessment: corporate tax, local and regional taxes. Impact on trade balance: exports and imports figures. Additionally, a list of Danish companies that develop business in third countries is included, identifying the agent and the country where they operate. Comparative analysis of the wind energy sector contribution to GDP (and its components) in relation to other economic sectors in absolute and relative terms. 5 Assessment scope: 306 Danish wind Energy players have been analysed, of which financial statements assessment has been developed for 279 companies, according to the information requirements. April

14 Forecasted assessment of the impact of the wind energy sector in the Danish economy for Direct and indirect contribution to GDP of the sector and the different subsectors. Direct and indirect contribution to job creation. Relevance of the wind energy sector study in terms of first-mover advantage Number of Danish companies among the worldwide leaders. Volume of exports. It is important to highlight that this project has required the collaboration of Vindmolleindustrien in order to ensure the best possible outcome. The objectives of this collaboration are the following: To confirm that all relevant wind energy players have been included in the study. To assist on the collection of information and facilitate the players access to. To ensure that the information gathered and the analysis performed are aligned with the players analyses. Several interviews with relevant Danish wind energy players like wind energy promoters or equipment manufacturers, provided by Vindmolleindustrien, have been conducted by Deloitte s team. April

15 2. Current situation of wind energy and forecast for 2020 In 2010 the wind energy installed capacity in Denmark reached 3,787 MW. This meant an increase of 364 MW in relation to 2009, a 10.63% increase. Figure 2.1. Wind energy power capacity. Source: Vindmolleindustrien. In 2010, the generation of wind energy in Denmark was of 7.8 TWh, which represented 20.13% of total electricity generation. The evolution of wind energy generation has been quite relevant from 2009 to 2010: The quantity of energy generated increased from 6.8 TWh in 2009 to 7.9 TWh in The share of wind energy in relation to total electricity generation in Denmark was of 18.47% in 2009 and of 20.13% in The estimated installed capacity for 2020 in Denmark is of 5,468 MW. April

16 Figure 2.2. Electricity generation from wind and percentage of total electricity generation (Source: Eurostat) In 2010, the 22% of this power capacity was provided by offshore capacity installations: 868 MW on offshore installed capacity. In the next decade this penetration is expected to increase until 2,468 MW in Figure 2.3. Wind energy power capacity divided between onshore and offshore, time evolution. Source: Vindmolleindustrien. April

17 In 2020 wind energy will generate between 17.0 and 18.5 TWh, around 49% of the production will be generated in offshore facilities. April

18 3. Macroeconomic impact of the Wind Energy Sector in Denmark The economic impact of an economic sector such as the Wind energy industry can be measured from different perspectives: Contribution to Gross Domestic Product (GDP), direct and indirect impact. The direct contribution to GDP is the sum of the added values of all the companies performing activities specifically related to the Wind Energy Sector (i.e. wind energy producers, wind turbine manufacturers, component manufacturers and providers of specific services). The indirect impact refers to the additional effort executed by other economic sectors and has been calculated by means of an input-output model specially adapted to incorporate the Wind Energy Sector. The result of adding the direct and indirect effects represents the total impact of the Wind Energy Sector in the economy. The analysis includes a thorough evaluation of each of the components of the GDP, imitating the methodology followed by official statistics organisms: exports and imports, compensation to employees, net operating surplus, etc. The same tasks have been carried out for each of the sub-sectors. Additional economic information is provided, such as the tax balance and the effort in R&D activities, gathered through questionnaires and interviews with relevant players of the sector. A forecast of the economic impact for 2020 has been calculated according to different assumptions of wind energy penetration (capacity installed, electricity sold, prices, etc.) The main macroeconomic results of the study are presented hereinafter. April

19 Direct Contribution to GDP The direct contribution of the Wind Energy Sector in Denmark to GDP was DKK 17.68bn in The total direct contribution to GDP since 2007 accounts for DKK 68.26bn (constant terms, base 2010). Figure 3.1. Direct contribution to GDP of the Wind Energy Sector in Denmark in constant prices (2010) In real terms, the Wind Energy Sector increased its direct contribution to GDP by 5.6% compared to 2009: since 2007 the direct contribution to GDP grew by 17.3% in real terms. This increase occurred in all activities of the Wind Energy value chain due to increased capacity developed during this period and especially, exports of equipment. Due to its capacity, in 2010 Wind Energy industry net exports (difference between Danish exports and imports) were of DKK 31.88bn: exports reached DKK 46.20bn. 37% of total Wind Energy industrial inputs are imported: in 2010 Wind Energy Sector direct total expenditure was of DKK 38.63bn and direct Imports DKK 14.32bn. April

20 Direct GDP contribution (DKK billions) Constant prices (base 2010) Current prices Constant prices (base 2010) % (Δ previous year) Current prices Constant prices (base 2010) % (Δ previous year) Current prices Constant prices (base 2010) % (Δ previous year) Current prices Internal demand % % % Internal intermediate demand % % % Wind Energy Sector Net Exports % % % Exports % % % Imports % % % Expenditure approach % % % Total Income % % % Total Expenditures % % % Production or value added approach % % % Compensation of employees % % % 9.49 Gross Fixed Capital Consumption % % % 3.12 Net operating surplus and mixed income % % % 5.06 Income approach % % % Table 3.1. Direct contribution to GDP of the Wind Energy Sector in Denmark in current prices and constant prices (base 2010) April

21 Figure 3.2. Wind Energy Sector contribution to GDP growth In relative terms, regarding macroeconomic magnitudes, the direct contribution to GDP of the Wind Energy Sector represented around 1% of the total GDP of Denmark in 2010, while in 2007 it was of 0.823%. Figure 3.3. Wind Energy Sector relative weight in terms of National Danish GDP (direct) April

22 On the other hand, if the evolution of Danish GDP is compared with the contribution of Wind Energy during the period , it can be noticed that the average contribution growths are higher than GDP increases. 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% 0.5% 24.4% Denmark Wind Energy contribution to GDP Denmark GDP % -10.7% 5.6% 1.9% -20% Figure 3.4. Comparative between GDP growth and Wind Energy Contribution The Wind Energy Sector contribution to the GDP is subjected to relevant uncertainties, its volatility is bigger than the National GDP growth rate: Volatile energy price: energy price is highly volatile, being wind energy the commodity with the highest price volatility. Uncertain with reference to the evolution of the regulatory framework: a stable and predictable regulatory framework at national and European level is an essential requirement for the future development of this industry (and encouraging investments). Technological risk: Wind Energy Sector faces a high technological risk mainly related to Offshore Wind Energy subsector where the technology is still not mature and requires high investments in R&D and innovation activities. In medium term this risk will be mitigated by the maturing process of the sector. April

23 Billion DKK - current prices Study of the macroeconomic impact of Wind Direct contribution of the different sub-sectors to GDP Services providers Component manufacturers Wind turbine manufacturers Developers / Producers of energy Figure 3.5. Supply chain of the wind energy industry, division in sub-sectors The evolution of the different sub-sectors throughout the last four years has not been homogeneous as their growth depends on different variables. While the producers of energy are dependent on the amount of energy sold and the fluctuation of energy prices, wind turbine and component manufacturers are mainly sensitive to capacity installation in the short and medium term, production costs and market evolution. The services sub-sector growth, as it includes several companies supplying all of the value chain, tends to be an average of all the other three Providers of specific services for wind energy sector Component Manufacturers Wind Turbine Manufacturers Wind Energy Producers Figure 3.6. Relative weight of the different sub-sectors in terms of Direct GDP in current prices April

24 DKK billion - constant prices (2010) Wind Energy Producers Wind Turbine Manufacturers Component Manufacturers Providers of specific services for w ind energy sector Total Table 3.2. Contribution to Direct GDP of the different sub-sectors Figure 3.7. Direct contribution to GDP of the different sub-sectors in constant prices (base 2010) April

25 Figure 3.8. Growth of the direct contribution to GDP of the different sub-sectors As it can be inferred from the previous figures, all of the four sub-sectors have a significant impact: The cumulative capacity of wind energy and the electricity sold grew, the revenue of the producers sub-sector also increased, resulting in a higher direct contribution to GDP in 2010 with reference to Based on an intensive export activity, the wind turbine manufacturers activity is the most relevant subsector accounting for more than 55% of sector GDP contribution in The contribution of the developers / producers reached DKK 2.91bn. The evolution of this contribution depends on the number of MW installed in 2010 and the power price. The evolution of the component manufacturers has followed a trajectory similar to that of the wind turbine manufacturers as their growth trends are strongly correlated. Its relative weight within the Wind Energy Sector as a whole decreased from 20.7% in 2007 to 19.7% in April

26 Due to the Wind Energy Sector growth and maturity, providers of services focused on the particular characteristics of this industry have developed during the last years: its relevance reached DKK 1.53bn in 2010 in terms of GDP contribution. Relevant presence in all the value chain activities means a competitive advantage for the Danish Wind Energy Sector: Enabling access to the providers of turbines, components and services. Providing equipment, components and services adjusted to the wind energy producers and wind turbines manufacturer requirements. April

27 Wind energy producers DKK billion- constant prices (2010) 2007 % 2008 % 2009 % 2010 Total Income % % % 6.53 Total Expenditures % % % 3.62 Production or value added approach % % % 2.91 Compensation of employees % % % 0.71 Gross Fixed Capital Consumption % % % 1.21 Net operating surplus and mixed income % % % 0.99 Income approach % % % 2.91 Table 3.3. Direct contribution to GDP of the developers producers sub-sector (constant prices 2010) The contribution to GDP of the developers producers sub-sector is the direct consequence of the sale of electricity by the companies. Although the investment required for the development could be attributable to this sub-sector, the study focuses on the value added approach. As this approach subtracts operation expenses from the revenues, the funds invested by this sub-sector represent the others sub-sectors revenues, and therefore they are quantified in their contribution to GDP. Additionally, the installation of wind farms requires a significant investment that should be recovered along the life-cycle of the project. In order to guarantee a reasonable profitability of wind energy and consequently attract investments, high operational margins are required for the producers. April

28 During the period , the activity had a thorough growth: In 2010, the contribution to GDP of this sub-sector rose to DKK 2.91bn, an increase of 24.6% compared to The expenses related to compensation of employees are lower than the other concepts: this is because the size of this subsector is smaller than the manufacturers, and a significant share of the jobs related to Wind Energy is generated in the construction of the wind farm, the manufacturing of turbines and components. Nevertheless, the employees accounted on this subsector are quite significant and, as capacity installed grows, there is a progressively and increasing need of professionals capable of operating wind farms; this is why in 2010 the expenditure related to employees amounted to DKK 0.71bn. Moreover, the significant international component and global focus of Danish Wind developers and producers (that, among other activities, are focused on the development of wind energy offshore) require employing high qualified Danish professionals to work abroad developing new wind farms. For instance, the Danish company Dong Energy is the global market leader in the design, construction and operation of offshore wind farms with 22% of the offshore installed capacity of Europe in The company alone, or in consortia with other important wind energy players, has a large amount of offshore wind energy projects mainly developed in Denmark, United Kingdom and Germany that are expected to contribute until 2014 to an increase of more than 1,000 MW of installed capacity. The intense activities developed in the last years as well as the mentioned projects have required and will require the creation of a large quantity of qualified jobs. It is relevant to mention that offshore wind farms are estimated to create around 2.5 times more employment than onshore wind farms per MW installed in the investment phase 6. 6 Source: EWEA April

29 Wind turbine manufacturers DKK billions - constant prices (2010) 2007 % 2008 % 2009 % 2010 Total Income % % % Total Expenditures % % % Production or value added approach % % % 9.75 Compensation of employees % % % 5.19 Gross Fixed Capital Consumption % % % 1.27 Net operating surplus and mixed income % % % 3.29 Income approach % % % 9.75 Table 3.4. Direct contribution to GDP of the wind turbine manufacturers sub-sector Danish wind turbine manufacturers are among the key market players worldwide, both in terms of market share and quality. Consequently, a relevant portion of the revenues generated by this sub-sector comes from exports to third countries. The contribution to GDP of the wind turbine manufacturers climbed to DKK 9.75bn in 2010, in real terms it increased by 14.72% compared to The revenues of the sub-sector grew substantially during the period, 33.1% in real terms due mainly to the exports to third countries, but expenditures increased at a higher rate, and 41.3%. The margins have reduced due to: An increase in competition from mainly wind energy players with a lower cost structure that have set prices of wind turbines down: it involves more difficulties to sell to third countries. A slowdown in new orders affected by the financial crisis and negative perspectives on some of the EU countries. A more demanding market due to high technical requirements. April

30 The highest component of the sub-sector GDP contribution is the compensation of employees, which reached DKK 5.19bn in 2010, representing 53.2% of the value added. The relevant contribution that represents the compensation of employees in relation to the subsector GDP is due to the high intensity (and qualification) of workforce needed to develop these activities. The industrial and high technology component of the Wind Turbine Manufacturers subsector requires the employment not only of a big quantity of specialized workers to manufacture the different parts of the wind turbines but also the employment of high qualified professionals in R&D and innovation activities. In this sense, it is important to mention that Danish wind turbines manufacturers lead the worldwide market having the most advanced wind turbine technology in the world. The Danish company Vestas covers the 14.7% of global market share. Additionally, other relevant international manufacturers develop substantial activities in Denmark. During the last and the following years, the activity in this subsector has demand and will continue to demand a substantial number of employees, not only because of the development of onshore wind farms but also because of the relevant investment on offshore facilities. April

31 Component manufacturers DKK billion - constant prices (2010) 2007 % 2008 % 2009 % 2010 Total Income % % % 8.09 Total Expenditures % % % 4.60 Production or value added approach % % % 3.49 Compensation of employees % % % 2.51 Gross Fixed Capital Consumption % % % 0.47 Net operating surplus and mixed income % % % 0.50 Income approach % % % 3.49 Table 3.5. Direct contribution to GDP of the component manufacturers sub-sector The boundaries between wind turbine manufacturing and component manufacturing are sometimes blurry and not clearly defined. Many companies produce both separate components and complete wind turbines, and at the same time manufacture components for other industries. For the purpose of this study, the component manufacturers sub-sector includes companies producing goods that are specific to wind energy. Among others, the following components are defined as directly associated with wind power: Towers Brakes Rotors Elevators Blades Generators Electrical equipment Control and IT equipment Software manufacturers... Other components and raw materials for these families of products are also taken into consideration; however they are included in the indirect impact of the Wind Energy Sector. These sectors are: basic metals, fabricated metals, chemical products, etc. April

32 The component manufacturers sub-sector revenues depend on direct investments in wind farms (new installed capacity): exports and internal demand. In 2010, the main figures were the following: The contribution of this sub-sector to GDP increased by 11.6% in real terms since Its growth trend is similar to that of the wind turbine manufacturers. The highest component of the sub-sector GDP contribution is the compensation of employees, which reached DKK 2.51bn in 2010, representing more than 70% of the value added. The reasons behind the relevance of the contribution related to the compensation of employees go in the same direction than the ones mentioned for the Wind turbine manufacturers: the component manufacturers are intensive in workforce; there is the need of a large amount of high qualified employees in R&D and technical activities; and the export and global focus of the subsector contribute to the generation of jobs related to international business and management in the field of wind energy. April

33 Services DKK billion - constant prices (2010) 2007 % 2008 % 2009 % 2010 Total Income % % % 5.02 Total Expenditures % % % 3.49 Production or value added approach % % % 1.53 Compensation of employees % % % 1.07 Gross Fixed Capital Consumption % % % 0.17 Net operating surplus and mixed income % % % 0.29 Income approach % % % 1.53 Table 3.6. Contribution to GDP of the services sub-sector The services accounted in the scope of this study, are the ones that provide specialized services to the other three subsectors. Among others, the following key companies are included in this category: offshore installation vessels, transport of wind energy equipment, maintenance services, providers of monitoring and controlling technology and solutions, wind energy engineering, consulting companies that carry out wind energy activities (resource assessment, location evaluation, etc.), information providers, R&D agents, training providers, specialized insurance services, sector associations. April

34 Wind Energy Sector Exports and Imports DKK billion - current prices Wind Energy Producers Wind Turbine Manufacturers Component Manufacturers Providers of specific services for w ind energy sector Total Table 3.7. Wind Energy Sector Exports: current prices. DKK billion - constant prices (2010) Wind Energy Producers Wind Turbine Manufacturers Component Manufacturers Providers of specific services for w ind energy sector Total Table 3.8. Wind Energy Sector Exports: constant prices (2010). April

35 DKK billion - current prices Wind Energy Producers Wind Turbine Manufacturers Component Manufacturers Providers of specific services for w ind energy sector Total Table 3.9. Wind Energy Sector Imports: current prices. DKK billion - constant prices (2010) Wind Energy Producers Wind Turbine Manufacturers Component Manufacturers Providers of specific services for w ind energy sector Total Table Wind Energy Sector Imports: constant prices (2010). Due to the Danish leadership position in the wind energy industry, exports are much higher than imports. In 2010, the positive balance in the balance trade was of DKK 31.88bn: during the period , net exports increased by 22.2%. The reasons behind are the following: Exports of wind turbine manufacturers are very important due to the high competence capacity of the Danish wind turbine industry and the component manufacturers. In comparison, their imports are not so relevant. April

36 Some of the main wind turbine manufacturers are Danish, with a very good strategic position involving a significant position in net exports. Due to high competence capabilities, Danish players export mainly value-added equipment and services: wind turbines, technology, engineering services, controlling software and hardware, electrical equipment, rotors, electrical equipment, multipliers and financial services. Wind energy producers and service providers are also net exporters, though less so than the industrial subsectors. April

37 Billions of DKK Study of the macroeconomic impact of Wind Tax balance Wind Energy Sector players paid DKK 1.37bn in 2010, DKK 1.18bn in concept of corporate tax and DKK 0.19bn of other taxes 7. Bilions DKK (current prices) Corporate tax Other taxes (taxes not linked to the corporate profit) Total taxes Corporate tax Other taxes Total taxes Figure 3.9. Taxes paid by the Wind Energy Players (current prices) The taxes paid by Wind Energy Sector increased by 57% during all the period, from DKK 0.88bn in 2007 to DKK 1.37bn in The payment of taxes dropped in 2009 due to the reduction of the activity in the manufacturers sectors: obviously, there is strong correlation between economic activity and tax collection. 7 Example: Regional and local taxes, taxes linked to business activity, real estate taxes, taxes linked to vehicles. April

38 Billions of DKK Study of the macroeconomic impact of Wind Bilions DKK (constant prices 2010) Corporate tax Other taxes (taxes not linked to the corporate profit) Total taxes Corporate tax Other taxes Total taxes Figure Taxes paid by the Wind Energy Players (constant prices) April

39 Indirect and total contribution to GDP Companies participating in the Wind Energy Sector interact with other activities of the economy, having an indirect impact as a result of the investment in wind farms and the production of wind electricity (see Annexe II). These interrelationships among different economic sectors can be calculated by means of an input-output model, which comprise a series of matrixes that represent these interrelationships. However, the input-output tables do not segregate the Wind Energy Sector as an individual area of activity; it is included in other sectors such as production of electricity, manufacturing of electrical equipment, metallurgy, other business services, etc HOMOGENEOUS BRANCHES Wind Energy Sector Products of agriculture, hunting and related services Products of forestry, logging and related services Fish and other fishing products; services incidental of fishing Coal and lignite; peat Input of Products Crude petroleum and natural gas; services incidental to oil and gas extraction excluding surveying Uranium and thorium ores Metal ores Other mining and quarrying products Code PRODUCTS (CPA) A No A A A Wind Energy Sector Products of agriculture, hunting Products of forestry, logging an Fish and other fishing products Figure Example of the adapted input-output tables. With the aim of achieving a more accurate result, a survey has been carried out with the objective of assessing the cost structure of the main players of the Wind Energy Sector. This information has been afterwards used to build the new matrixes including a column with the Wind Energy Sector. The results of this assessment have been the following: The indirect impact of the Wind Energy Sector in Denmark accounted for DKK 7.64bn in 2010, approximately the 30.2% of the total impact which in the same year was of DKK 25.33bn. April

40 DKK billion (constant prices-base 2010) DKK billion (current prices) Study of the macroeconomic impact of Wind Indirect impact Direct impact DKK billion (current prices) Direct impact Indirect impact Total impact Table Direct, indirect and total impact of the Wind Energy Sector in Denmark (current prices) Indirect impact Direct impact DKK billion constant prices (2010) Direct impact Indirect impact Total impact Table Direct, indirect and total impact of the Wind Energy Sector in Denmark in constant prices (base 2010). April

41 DKK Study of the macroeconomic impact of Wind In the period comprised between 2007 and 2010, the total Wind Energy Sector contribution to GDP grew around 15.6% (in constant prices). The economic sectors that are indirectly most benefited from the activities carried out by the Wind Energy Sector are: Basic metal Transport Electric and electronic equipment Construction Fabricated metal products Financial services The Figure 3.13 shows the indirect added value generated by the Wind Energy Sector per unit of GDP generated directly in Figure Indirect added value generated by the Wind Energy Sector per unit of GDP generated directly: impact for every DKK of Wind Energy GDP Direct contribution in the rest of the sectors. April

42 Others Chemical products Research and development IT services Post and telecommunication Professional services Contribution to GDP due to Wind Energy (2010): DKK billions Rubber and plastic products Financial intermediation Fabricated metal products Construction Electric and electronic equipment Transport Basic metal Figure Indirect added value generated by the Wind Energy Sector in the rest of the sectors. The total impact of the Wind Energy Sector represented 1.44% of Danish GDP in Figure Wind Energy Sector relative weight in terms of Danish GDP (Total impact to GDP) 8 Source of GDP ( ): Danmarks Statistik April

43 Economic effort in R&D activities The wind energy sector in Denmark contributes to the investment in research and development in a much bigger proportion than the average of the rest of the sectors of the economy. The wind energy industry is involved in permanent technological evolution and still has a long way to run technologically, especially in the offshore subsector. The R&D expenditure of the wind industry represents a 7.98% of the wind industry GDP in 2010, while the expenditure in R&D of the rest of the sectors of the Danish economy in relation to the GDP is estimated to be of 3.41% 9 in As the following figure shows, the expenditure in R&D as a percentage of GDP has followed a positive trend in relation to 2007, both for the wind sector and the overall economy. Figure Comparison of R&D expenditure as a percentage of GDP in Denmark: Wind Energy Sector and overall economy. By subsector, the wind turbine manufacturers are the players of the overall sector that invest more in R&D expenditure, with more than 10% of its GDP committed to R&D activities. The reason behind this high percentage is the need of this subsector to be at the forefront of the industry at a technological level, especially in relation to the investment in research and development mainly focused on the development of wind turbines. 9 Source of Total R&D as percentage of GDP: : Danmarks Statistik / 2010: own estimates. April

44 The component manufacturers subsector follow the wind turbine manufacturers with 5.79% of their GDP committed to R&D activities. This important contribution is due to the relevance of these players in the Danish economy, and its relations to the wind turbine manufacturer s subsector, that requires constant investments in high advanced technology and equipment. The R&D expenditure of the developers and producers subsector is far behind from the effort made by the wind turbine manufacturers. Nevertheless, in 2010 this subsector invests 3.94% of its GDP in R&D activities, a percentage higher than the average expenditure made by all sectors of the Danish economy. Finally, service providers are the ones that have the smaller contribution of R&D to the GDP, with a 2.09% of R&D expenditures in relation to its GDP in Investment in R&D % of the Wind sector GDP Developers / Producers 3.74% 3.76% 3.87% 3.94% Wind Turbine manufacturers 10.70% 10.88% 10.88% 10.90% Component manufacturers 5.71% 5.78% 5.74% 5.79% Services 1.99% 2.10% 2.10% 2.09% Total 7.94% 8.00% 8.10% 7.98% Figure Evolution of the R&D expenditure as a percentage of GDP by subsector. April

45 In monetary terms, the investment in R&D in Denmark was of approximately DKK 1.41bn during The evolution experimented in the period is positive, with an increase of 21.46% from DKK 1.11bn in The wind turbine manufacturers are the largest contributor to that figure, with DKK 1.06bn in 2010, accounting for more than 75% of the total contribution. The component manufacturers contributed in DKK 0.20bn of this expenditure, and developers and services providers had a smaller impact in that figure, with DKK 0.11bn and DKK 0.03bn respectively for Investment in R&D Billions DKK Developers / Producers Wind Turbine manufacturers Component manufacturers Services Total Figure Evolution of the R&D expenditure in Billion DKK by subsector. April