WIND FARM INVESTMENT, EMPLOYMENT AND CARBON ABATEMENT IN AUSTRALIA

Transcription

1 WIND FARM INVESTMENT, EMPLOYMENT AND CARBON ABATEMENT IN AUSTRALIA Published July 2012 visit cleanenergycouncil.org.au

2 CONTENTS 1 DEFINITION 1 2 EXECUTIVE SUMMARY Study Approach Investment Employment Abatement 5 3 INTRODUCTION Scope of Project Methodology Scope of the report 6 4 THE WIND ENERGY INDUSTRY National Picture Industry by State Industry by State 11 5 INVESTMENT IN WIND ENERGY National Picture Investment by State Investment Impact Location of expenditure Investment Impact Contribution to GSP Indcative Estimates of Contribution of GRP Local direct expenditure 29 6 WIND ENERGY EMPLOYMENT National Employment by State Employment Impact 29 7 PROJECTED WIND ABATEMENT 32 8 REFERENCES 35 APPENDIX A : METHODOLOGY 36 A.1 Multiplier Interpretation 37 A.2 Assumed Industry Sectors 38 APPENDIX B : WIND FARMS (CEC POWER PLANT REPORT) 40

3 1. DEFINITION CONSTRUCTION includes all activities required to design, procure and construct the project. DEVELOPMENT includes all activities required to progress the project to the point where a business case is presented for Board approval. Typically, development activities would include attaining all required permits and authorisations, implementing a wind monitoring programme, procuring a design and construct contractor and negotiating a Transmission Connection Agreement. DIRECT EMPLOYMENT includes the employees who are directly employed in developing, constructing and/or operating the wind farms and those directly employed in manufacturing wind farm plant and equipment and supporting these activities. GROSS DOMESTIC PRODUCT (GDP) is the total market value of goods and services produced in Australia after deducting the costs of goods used up in the process of production (intermediate Consumption) but before deducting consumption of fixed capital (depreciation). GROSS STATE PRODUCT (GSP) is the total market value of goods and services produced in a State after deducting the costs of goods used up in the process of production (intermediate Consumption) but before deducting consumption of fixed capital (depreciation). GROSS REGIONAL PRODUCT (GRP) is the total market value of goods and services produced in a region after deducting the costs of goods used up in the process of production (intermediate Consumption) but before deducting consumption of fixed capital (depreciation). GROSS VALUE ADDED (GVA) is defined as total factor income plus taxes and less subsidies on production. Total factor income is made up of compensation of employees, gross operating surplus and gross mixed income. GDP, GSP and GRP are all measures of Gross Value Added. INDIRECT EMPLOYMENT is generated from the expenditure on flow on activities from developing, constructing and operating wind farms including expenditure by suppliers of components for wind farm manufacture needed to replace materials used up in the manufacturing process such as steel, reinforcing bars, paint etc. (production induced) and the expenditure of the wages and salaries of direct employees (consumption induced). OPERATION PHASE commences on issue of the Practical Completion certificate for the project. The Operational phase for a wind farm is typically 20 to 25 years. REGION means an agreed area around a wind farm which may include one or a number of local government areas, may be a regional area designated by state and/or the Commonwealth government or be a regional area defined by Australian Bureau of Statistics or other body for statistical purpose. TOTAL EXPENDITURE is the total amount spent on the direct development, construction and operations of the wind farms. PRESENT VALUE takes into account the time value of money and discounts future cash flows to give a present value of the total cash flow. The process is based on a dollar today being worth more than a dollar in a year s time. This is because a dollar today could be invested and therefore be worth a dollar plus interest or that a dollar to spend today is perceived to be more valuable than the promise of a dollar to spend in a year s time. The rate to discount future ash flows will relate to the cost of capital or simply an effective interest rate for funds invested or borrowed. In practice the discount rate will usually be some weighted cost of capital that takes into account the sources of funding or the available investment opportunities and the relative risks. 1

4 2. EXECUTIVE SUMMARY The Clean Energy Council (CEC) commissioned SKM to undertake an independent study that presents an updated national and state-based snapshot on wind farm investment, jobs and carbon abatement including: Total investment nationally and by state Division of investment (in terms of total dollars as well as percentages) into various business categories including: Construction businesses e.g. concrete, roads etc Manufacturing businesses e.g. towers, substations etc Local service businesses e.g. hotels and shops Other significant categories Project construction jobs Ongoing direct and indirect jobs Carbon abatement STUDY APPROACH The methodology collated information from the CEC s industry wind farm database, wind farm assessment reports, other information sources and consultation with selected wind farm developers to provide a current snapshot of the wind energy sector including estimates of the proportion of construction spend by location, activity and industry sector. The study aimed to use financial and other data from this range of sources to determine a reasonable indicative set of figures (%) or a small number of specific sets of figures for identified types of wind farms. The defined set(s) of figures are then applied to high level investment numbers to provide agreed proportions of costs and employment estimates. The estimates and proportions of expenditure by location and wind farm components used in the study were reviewed by the industry informants for reasonableness. These estimates were then analysed using an Input Output (IO) model to provide estimates of direct, indirect and total output and employment for the construction and operations phase of wind farms. The development stage was not modelled on the advice of the industry participants. The estimates are provided on a per MW basis to allow extrapolation for different sizes of wind farms and for an example 50 MW wind farm. 2

5 2. EXECUTIVE SUMMARY 2.2. INVESTMENT The findings from the assessment are set out in the report and the highlights are summarised below: Construction of a 50 MW wind farm would provide a gross value added of some $50 million to a state and contribute between 0.012% and 0.21% to gross state product (GSP) depending on the size of the state economy. Based on four indicative regions, construction of a 50 MW wind farm could contribute between some 0.1% to 2.6% to regional gross regional product depending on the size of the regional economy. Construction could lead to potential local personal expenditure of $25,000 per person per annum. If, for example, a wind farm had an average construction workforce of some 35 over a two year construction period then the expenditure in the region would be some $875,000 in total per annum on accommodation, food and other services. The same wind farm could employ between 5 and 6 FTE staff for operations and maintenance with a potential ongoing expenditure of $125, ,000 per annum. In addition, a 50 MW wind farm project is likely to provide up to $250,000 in payments to farmers and an ongoing community contribution that could be some $80,000 per annum for the life of the project. This expenditure is likely to be a minimum as wind farm developers policies of sourcing suppliers and services locally as far as possible also mean that transport, plant hire and materials such as crushed rock, cement, sand and gravel are likely to be provided from local sources. 3

6 2. EXECUTIVE SUMMARY 2.3. EMPLOYMENT Estimated direct, flow-on and total employment from regional spending, from state and to Australia as a whole from construction of a 50 MW of installed capacity wind farm is shown in the following table: TABLE 1 CONSTRUCTION PER 50MW LOCAL / REGIONAL STATE AUSTRALIA DIRECT EMPLOYMENT PRODUCTION CONSUMPTION TOTAL EMPLOYMENT INCLUDING INDIRECT JOBS This provides a direct to indirect job multiplier of some 3.3 at the national level. On-going annual operational employment is shown in the following table: TABLE 2 OPERATIONS PER 50MW (ANNUAL) LOCAL / REGIONAL STATE AUSTRALIA DIRECT EMPLOYMENT PRODUCTION CONSUMPTION TOTAL EMPLOYMENT INCLUDING INDIRECT JOBS

7 2. EXECUTIVE SUMMARY 2.4. ABATEMENT The national average of emissions abatement achieved across Australia is 246,200 tons per annum which is equivalent to 57,300 cars removed from the road. In the National Electricity Market (NEM), the abatement intensity achieved varies quite a lot from state to state. This is illustrated in the graph below, which shows that abatement in the NEM is highest in Victoria, and lowest in Tasmania. The method used in the modelling was to run a base case to 2020, which would represent the most efficient market outcome to that point. A 100 MW wind farm was then inserted in each state of Australia, and the emissions savings attributable to the wind farm were then calculated with reference to the base case. TABLE 3 AVERAGE ABATEMENT ACHIEVED BY 100MW WIND FARM AT 35% CAPACITY FACTOR ACROSS AUSTRALIA REGION ABATEMENT INTENSITY (t CO2e/MWh) EMISSIONS ABATED (t CO2e p.a.) EQUIVALENT CARS REMOVED FROM ROAD NATIONAL ELECTRICITY MARKET (SA, VIC, TAS, NSW, QLD) ,700 62,000 SOUTH WEST INTERCONNECTED SYSTEM (WA) ,000 54,200 DARWIN KATHERINE INTERCONNECTED SYSTEM (NT) ,400 36,400 NATIONAL 0.80 QLD 0.89 NSW 0.89 VIC 1.10 SA 1.02 TAS , , , , , ,200 57,300 63,500 63,700 78,400 73,100 31,900 5

8 3. INTRODUCTION 3.1. SCOPE OF PROJECT The Clean Energy Council (CEC) commissioned SKM to undertake a study that presents an updated national and state-based snapshot on wind farm investment, jobs and carbon abatement including: Total investment nationally and by state Division of investment (in terms of total dollars as well as percentages) into various business categories including: Construction businesses e.g. concrete, roads etc Manufacturing businesses e.g. towers, substations etc Local service businesses e.g. hotels and shops Other significant categories Project construction jobs Ongoing direct and indirect jobs Carbon abatement METHODOLOGY The methodology collated information from the CEC, the SKM Hallett Wind Farm assessment, published and other information and consultation with selected wind farm developers to provide a current snap shot of the wind energy sector including estimates of the proportion of construction costs by activity/sector. The consultation aimed to use financial and other data from this range of sources to determine a reasonable indicative set of figures (%) or a small number of specific sets of figures for identified types of wind farms. The defined set(s) of figures are then be applied to high level investment numbers to provide agreed proportions of costs and employment estimates. The CEC provided relevant information from the CEC database including wind farms and wind turbines. It also provided contact details and introductions to the wind energy companies as required. A detailed discussion on the study methodology is provided at Appendix A SCOPE OF THE REPORT The report provides an industry snapshot including: Total wind farm investment nationally and by state and by estimated activity/industry sector Estimated annual investment, value added and contribution to Gross Domestic Product (GDP) from construction. This information is provided by each state and nationally Estimated annual expenditure, value added and contribution to Gross Domestic Product (GDP) from selected regions as an indication of potential benefits as a result of specific regions Direct and flow on jobs created during wind farm construction Direct and flow on jobs created during operation Estimates of the potential carbon abatement nationally by market. 6

9 4. THE WIND INDUSTRY This chapter provides a brief description of the wind energy sector as a proportion of the national total renewable and total electricity generation NATIONAL PICTURE INDUSTRY BY STATE Figure 1 indicates the growth of the wind sector over the five years to in Terawatt-Hours (TWh). Over the five year period the generation of electricity from wind has grown just under 40% per annum albeit from a small base. Given the changes in government policy over the past two years it is unlikely that this rate has continued. Figure 1 TWh of Wind Energy Source: Bureau of Resources and Energy Economics, Energy in Australia 2012, Table 8 Australia s electricity generation by energy source 6 5 WIND TWh TWh TWh TWh TWh TWh 7

10 4. THE WIND INDUSTRY 4.1. NATIONAL PICTURE INDUSTRY BY STATE As a proportion of electricity generation from all renewable sources, wind has grown from some 5% to 25% at an average growth rate of some 1.7% per annum. The rate of growth slowed over the latest two years (Figure 2). Figure 2 Proportion of Wind as a Percentage of Total Renewables Source: Bureau of Resources and Energy Economics, Energy in Australia 2012, Table 8 Australia s electricity generation by energy source 30.00% 25.00% 20.00% 15.00% WIND/TOTAL RENEWABLES 10.00% 5.00% 0.00% Figure 3 compares the same data with the total electricity generation over the same period. This figure indicates that despite the significant growth in electricity generated by wind resources, the total electricity generation task is largely covered by non renewable resources (around 92% of total generation) with the proportion of renewable resources largely static between 7% and 8% of the total and wind providing less than 2% of the total. Figure 3 Total Electricity Generation compared with Generation by Wind and Total Renewables (TWh) Source: Bureau of Resources and Energy Economics, Energy in Australia 2012, Table 8 Australia s electricity generation by energy source WIND TOTAL RENEWABLES TOTAL ENERGY

11 4. THE WIND INDUSTRY 4.1. NATIONAL PICTURE INDUSTRY BY STATE Figure 4 and Figure 5 include the number of wind farms established and turbines installed in Australia since Wind farm development was slow until the late 90 s when it moved forward to a peak in Since then the number of wind farms per annum has reduced although they appear to have become larger in terms of MW capacity (Figure 6). Figure 4 Annual Establishment of Wind Farms in Australia Source: CEC Industry database which draws on independent information from AEMO, BREE, Bloomberg New Energy Finance, wind company reports, company websites, and state planning departments WIND FARMS Figure 5 Annual Establishment of Turbines in Australia Source: CEC Industry database which draws on independent information from AEMO, BREE, Bloomberg New Energy Finance, wind company reports, company websites, and state planning departments 250 TURBINES

12 4. THE WIND INDUSTRY 4.1. NATIONAL PICTURE INDUSTRY BY STATE Figure 6 indicates the installed capacity in MW suggesting again the capacity of individual wind farms has increased. Figure 6 Total Installed Capacity (MW) Source: CEC Industry database which draws on independent information from AEMO, BREE, Bloomberg New Energy Finance, wind company reports, company websites, and state planning departments 600 TOTAL INSTALLED CAPACITY Figure 7 reinforces the continuing increase in the installed capacity of the newer wind farms. Figure 7 Comparison of Turbines and Installed Capacity (MW) Source: CEC Industry database which draws on independent information from AEMO, BREE, Bloomberg New Energy Finance, wind company reports, company websites, and state planning departments 500 TOTAL INSTALLED CAPACITY

13 4. THE WIND INDUSTRY 4.1. NATIONAL PICTURE INDUSTRY BY STATE Figure 8 illustrates this growth clearly with the average capacity per turbine increasing from some KW in the early 90 s to nearly 2MW by Figure 8 Average Capacity per Turbine MW Source: CEC Industry database which draws on independent information from AEMO, BREE, Bloomberg New Energy Finance, wind company reports, company websites, and state planning departments 2.00 AVERAGE CAPACITY/TURBINE INDUSTRY BY STATE Figure 9 indicates the same information by state. These data show that Tasmania and South Australia have moved to 2MW turbines since the early 2000s while the other states have moved towards 1.5MW. Victoria started development a little later than some states but moved immediately to 1.5MW turbines on average. Queensland has been omitted from this figure as it has only two small wind farms with 22 turbines and an installed capacity of 12.5MW. The two existing wind farms were developed in 1998 and Figure 9 Average Capacity per Turbine by State Source: CEC Industry database which draws on independent information from AEMO, BREE, Bloomberg New Energy Finance, wind company reports, company websites, and state planning departments NSW AVERAGE CAPACITY/TURBINE SA AVERAGE CAPACITY/TURBINE VIC AVERAGE CAPACITY/TURBINE WA AVERAGE CAPACITY/TURBINE TAS AVERAGE CAPACITY/TURBINE 11

14 4. THE WIND INDUSTRY 4.2. INDUSTRY BY STATE Figure 10 indicates the current total number of turbines and installed capacity in the states. These data indicate that South Australia has the most turbines and installed capacity followed by Victoria and Western Australia. Figure 10 Comparison of Turbines and Installed Capacity by State 2012 Source: CEC Industry database which draws on independent information from AEMO, BREE, Bloomberg New Energy Finance, wind company reports, company websites, and state planning departments TURBINES INSTALLED CAPACITY NSW SA Vic WA Qld Tas The bulk of this development started from the mid 2000s followed by the development of significant wind resources in NSW and Tasmania in the late 2000s. 12

15 5. INVESTMENT IN WIND ENERGY This chapter sets out the current investment in wind farms in Australia the States and the impact of this investment in terms of the contribution to national, state and regional economic activity and employment NATIONAL PICTURE The total cumulative capital investment in wind farms in Australia to date is estimated at just over $7 billion. Of this some $4.25 billion is estimated to be spent in Australia. The Australian investment includes the manufacture of the towers that support the wind turbine generators (WTGs) and blades, the civil, electrical and other site works including most of the installation and supporting labour local transport and employee support services such as accommodation and food. The major imported items include most of the plant and equipment related to the WTGs and the blades. The data represent the investment in all operating wind farms and a proportion of those under construction. There are currently some 90 proposed wind farms. Development of these is estimated to provide a further $29.6 billion investment, of which an estimated $17.8 billion could be spent in Australia INVESTMENT BY STATE Figure 11 indicates the break-down of the national investment by state including total investment and the estimated proportion of investment in each state. Figure 11 Investment in Wind Farms by State Source: CEC Industry database which draws on independent information from AEMO, BREE, Bloomberg New Energy Finance, wind company reports, company websites, and state planning departments TOTAL CAPITAL INVESTMENT ($m) *INVESTMENT IN AUSTRALIA ($m) NSW Qld SA Tas Vic WA 13

16 5. INVESTMENT IN WIND ENERGY 5.2. INVESTMENT BY STATE Figure 12 shows a selection of the investment in Australia data by year based on the percentage of installed capacity in each year. This reinforces the lead role of South Australia and the variability of investment year on year. Figure 12 Estimated Investment by State Since 2000 Source: CEC Industry database which draws on independent information from AEMO, BREE, Bloomberg New Energy Finance, wind company reports, company websites, and state planning departments $2,000,000, $1,800,000, $1,600,000, $1,400,000, $1,200,000, $1,000,000, $800,000,000 $600,000, $400,000, $200,000, $0 NSW South Australia Victoria Western Australia Queensland Tasmania

17 5. INVESTMENT IN WIND ENERGY 5.3. INVESTMENT IMPACT This section looks at the development of a wind farm in terms of the total expenditure and the expenditure in the region, during construction and operation. The estimate of the local/regional expenditure is used to indicate the direct benefits of the project on the localities and regions that host wind farms. These estimates reflect actual information from a number of wind farms in Australia and overseas and on informed industry comment from interviews with representatives of four major wind farm developers and operators in Australia. The information was collated from the results of a literature review and information provided by relevant industry representatives. Local and regional expenditure estimates include the civil and electrical works involved in construction including the provision of local materials such as crushed rock, cement and sand and gravel, transport of plant and equipment and construction and operations labour and plant hire. In some regions it would also include the manufacture and supply of towers and potentially some electrical equipment. In all regions it includes support expenditure including accommodation, food and beverages and local transport. Wind farms developers indicated that they had a policy of employing local contractors and recruiting direct staff locally and sourcing local materials and support services where possible. In addition, these projects provide a range of apprenticeship and training opportunities. To support these policies developers hold information sessions and may approach some businesses directly relating to work scope and schedule, potential work opportunities for local businesses, and any requirements for tenders, accommodation requirements and potential direct recruitment jobs for locals. Usually these sessions are advertised in local papers and with posters around the town and in council offices. Advertising from support operations such as accommodation providers, restaurants, cafes, hotels and service stations is usually available at the wind farm site offices. Most regions have a range of businesses with the capability to provide services to a wind farm project and individuals with skills to meet employment requirements. These include but are not necessarily limited to: Domestic scale electricians Transport operators Competent machine operators General labourers Quarries, and Concrete businesses. Estimated project expenditure in total and occurring from each region is presented in this section. Expenditure estimates inform the assessment of the project impacts including direct and indirect impacts as a result of regional spending, through input-output (IO) modelling. Further detail on the IO approach and methodology is provided at Appendix A. 15

18 5. INVESTMENT IN WIND ENERGY 5.3. INVESTMENT IMPACT LOCATION OF EXPENDITURE Assessing the economic impacts by location requires reasonable estimates of the breakdown of actual expenditure by location. SKM Hallett, 2010 included estimates by region, state, national and overseas for the development, construction and operations phases of a major wind farm (Figure 13). These data were collated from actual data provided by the Hallett project participants, contractors, advisers and consultants. Figure 13 Estimated Location of Expenditure by Development Stages for the Hallett Wind Farms Source: SKM Economic Impact Assessment of the Hallett Wind Farm % 80% 60% 40% OVERSEAS NATIONAL STATE REGION 20% 0% Development Construction O & M This study has refined and generalised these estimated proportions of expenditure by location based on additional wind farm data and direct consultation with relevant representatives of wind farm developers and operators. It used these additional data to determine indicative estimates on wind farm expenditure by location. Discussion on the process is set out below. A recent UK study, BiGGAR Economics, 2012, provided similar detailed estimates of the expenditure by location (Figure 14). These data are based on 18 case studies of onshore wind farms chosen because they were broadly representative of the onshore wind energy industry in the UK. The study showed that 98% of development expenditure, 45% of construction expenditure and 90% of operations expenditure occurs in the UK. While the proportion of overseas construction expenditure appears larger than the estimates from Hallett the report notes that the majority of the towers installed in the UK were manufactured in Europe. As the tower could comprise up to 15-18% of the total cost, a change of manufacture from Europe to the UK could make the UK location estimates similar to the Hallett ones. It is also noted that the proximity of the UK to the wind turbine manufacturing base in Europe could mean more wind farm development, construction and operations activities may be serviced from Europe than for developments in more remote locations. 16

19 5. INVESTMENT IN WIND ENERGY 5.3. INVESTMENT IMPACT LOCATION OF EXPENDITURE Figure 14 Estimated Location of Expenditure by Development Stages UK Case Studies Source: Onshore Wind Direct and Wider Economic Benefits BiGGAR Economics, RenewableUK, % 80% 60% OVERSEAS NATIONAL REGIONAL LOCAL 40% 20% 0% Development Construction O & M Discussions with the industry representatives suggested that while they considered that the overseas component of construction could be higher in some projects, for example if the towers are sourced from overseas, the Hallett data provided a reasonable indication of the typical proportions. In general it was noted that actual expenditure was based on the commercial and industry supply chain situation at the time of procurement. For example a significant wind farm development period in Australia may mean the Australian tower suppliers are unable to meet the demand and some or all towers for a project may have to be imported. Concerns that the supply chain could become stretched could lead to some companies sourcing components from more than one supplier to mitigate any risk. Similarly economic conditions in an overseas supplier country may mean they can supply components cost competitively and change the location of expenditure proportions for a particular project or a more or less temporary period. In assessing the benefits from an individual project after completion the actual procurement location may need to be considered but based on the information collated in this study, the proportions above seem to provide an appropriate indicator of the breakdown of expenditure by location. BiGGAR Economics, 2012 based its analysis on cost per MW figures. Given that this study is looking to consider the benefits and implications of wind farm developments at regional, state and national levels, the development of economic impact estimates (output, GVA and employment) on a per MW level offers scope to assess the benefits of a range of actual and proposed wind farms at regional, state and national levels and to consider the benefits of potential new wind farm scenarios by scaling up the per MW estimates. 17

20 5. INVESTMENT IN WIND ENERGY 5.3. INVESTMENT IMPACT LOCATION OF EXPENDITURE Figure 15 provides the indicative construction proportions on a per MW basis based on the agreed proportions as discussed above. Figure 15 Estimated Indicative Expenditure per MW for Wind Farm Construction Source: SKM Estimates based on actual wind farm data and industry estimates 3,000,000 2,500,000 2,000,000 1,500,000 OVERSEAS NATIONAL STATE REGION 1,000, ,000 0 Construction Similarly Figure 16 shows the operating data on the same basis. Figure 16 Estimated Expenditure for Hallett 1 O&M (Adjusted) Source: SKM Estimates based on actual wind farm data and industry estimates 80,000 70,000 60,000 50,000 OVERSEAS NATIONAL STATE REGION 40,000 30,000 20,000 10,000 0 O & M 18

21 5. INVESTMENT IN WIND ENERGY 5.3. INVESTMENT IMPACT LOCATION OF EXPENDITURE The investment impact has been assessed based on an IO modelling approach described at Appendix A. The definitions used in this section including Gross Domestic Product (GDP), Gross State Product (GSP), Gross Regional Product (GRP) and Gross Value Added (GVA) are measures of the level of economic activity at national, State and regional levels. GDP, GSP and GRP are the total market value of goods and services produced in Australia, in a State or region respectively after deducting the costs of goods used up in the process of production (intermediate Consumption) but before deducting consumption of fixed capital (depreciation). To avoid double counting, only the value added at each stage of production is included in the GSP and GRP and not the total expenditure. Gross Value Added (GVA) is defined as total factor income plus taxes and less subsidies on production. Total factor income is made up of compensation of employees, gross operating surplus and gross mixed income. These terms are also defined in the definition section at the start of this report. The model uses the agreed indicative local/regional, state and national breakdowns discussed above. The breakdown of these expenditure proportions by location by the broad components of a wind farm is based on the proportions shown in the following Table 4. These estimates were derived from data from a number of wind farms and discussions with the representatives of the four wind farm developers consulted with. The estimates were reviewed and agreed by the industry representatives consulted. The basis of the calculations is included at Appendix A. TABLE 4 EXPENDITURES BREAK UP BY INDUSTRY CONSTRUCTION PROPORTION RELEVANT INDUSTRY PROPORTION OF PROJECT WTG 64.80% Polymer Product Manufacturing Electrical Equipment Manufacturing Metal Manufacturing 22% 43% 35% CONTRACT ADMINISTRATION AND SITE DESIGN 8.10% Heavy and Civil Engineering Construction Construction Services 50% 50% SITE CONSTRUCTION WORKS 8.10% Heavy and Civil Engineering Construction Construction Services 50% 50% SITE ELECTRICAL WORKS 9.00% LABOUR 10.00% TOTAL CONSTRUCTION 100% OPERATIONS Electrical Transmission Accommodation Food & Beverage Services Road Transport Other repairs and Maintenance Construction services Electrical Transmission 100% 33% 47% 20% 80% 15% 5% Source: SKM Estimates based on actual wind farm data and industry estimates Note (1): See notes on rationale for estimated proportions below Table A1 Appendix A. 19

22 5. INVESTMENT IN WIND ENERGY 5.3. INVESTMENT IMPACT LOCATION OF EXPENDITURE The expenditure data is based on a review of the expenditure per MW from a number of wind farms that were developed recently or are under construction. While there was some variation in the per MW figure, the differences were small. The Hallett 1, Waubra and Macarthur figures were all similar and close to the average figure. The Hallett figure was slightly higher and is used as there is more detailed estimates and information available. Small changes in the base data will not alter the modelled output materially. The data is analysed on a per MW basis so that it can be extrapolated to provide estimates for any size of new or proposed wind farm or use to aggregate state or national data where appropriate. While it is expected that the per MW figure will stay relatively constant in the short to medium term, technology developments may reduce this over time. On this basis, the per MW figures for new wind farms should be monitored and the overall results of this study reviewed if a significant difference develops. The assessment below extrapolates the per MW data for the scenario of a 50 MW wind farm and then looks at the benefits in terms of additional GDP occuring from each state and occuring from each of four selected regions. The results for larger wind farms can be extrapolated. For example, the output and employment numbers for a 100MW wind farms would be double the 50MW figures in the report. The potential GDP impacts of the actual developments across the States are also discussed below. We have estimated that the value added component which excludes costs of materials is approximately 33% of the total expenditure. This figure is based on a weighted average of the industry sector value added for the industries involved in the construction and operation of wind farms (Table 1). See Appendix A for a further the explanation of the assumed sectors and the calculation of this estimate. Table 5 provides per MW expenditure data for the local/regional, state and national expenditures. The construction expenditure is based on the actual construction costs divided by the MW capacity and then apportioned over the wind farm components in the table. The operations data is shown on two bases, the: Present value (PV) 1 of the annual operating costs over an assumed 25 year life of the wind farm Annual expenditure. These expenditure estimates are input to an IO model as described to provide the direct and flow on output impacts in Table 6 below and the employment impacts in Chapter 6. 1 Present value is defined in the Definition section at the front of this report. 20

23 5. INVESTMENT IN WIND ENERGY 5.3. INVESTMENT IMPACT LOCATION OF EXPENDITURE TABLE 5 LOCAL/REGIONAL, STATE AND AUSTRALIAN CONSTRUCTION AND OPERATIONAL EXPENDITURE PER MW $m CONSTRUCTION & OPERATION WTG CONTRACT ADMINISTRATION AND SITE DESIGN SITE CONSTRUCTION WORKS SITE ELECTRICAL WORKS LABOUR LOCAL / REGIONAL STATE AUSTRALIA $0.192 $0.642 $0.954 $0.024 $0.080 $0.119 $0.024 $0.080 $0.119 $0.027 $0.089 $0.132 $0.030 $0.099 $0.147 TOTAL CONSTRUCTION LOCAL OPERATIONAL EXPENSES (ANNUAL) LOCAL OPERATIONAL EXPENSES (PV 25 YEARS) $0.297 $0.991 $1.472 $0.020 $0.031 $0.071 $0.272 $0.420 $0.963 Source: SKM Estimates based on wind farm data In Table 5 above, the total construction expenditure in the local/regional column (equal to $297,000) flows straight through to the local economy. This expenditure is then increased by the flow on impacts of increased production in other industries to support the supply of goods and services to the wind farm development and maintain their other activities and the additional expenditure of wages and salaries across the nation. This regional flow on effect provides a total multiplier of This supports the national multiplier the industry has used to date. Similarly the direct expenditure at state and national level flows directly to Australia and is then multiplied to provide a total benefit. These multipliers are again Table 6 and Table 7 indicate the construction output impacts per MW and for a 50 MW development resulting from regional, state and national spending. These numbers have been extrapolated to provide the impacts for an assumed 50MW wind farm development. The figures in Table 6 have been calculated by the IO model on the basis of the expenditures in Table 5. 21

24 5. INVESTMENT IN WIND ENERGY 5.3. INVESTMENT IMPACT LOCATION OF EXPENDITURE MULTIPLIER INTERPRETATION The total economic impact identified by use of IO multipliers includes the direct effect of the initial increase in demand, and the flow-on effects. The flow-on effects include production induced impacts which result from the linkages between industries in an economy. For example, the direct manufacture of towers requires the purchase of steel and other materials from suppliers, these suppliers would then need to restock to meet commitments to other customers creating a production induced flow on effect in the economy. Flow-on effects also include consumption induced effects, effects resulting from the recycling of cash flows in the economy, or households (consumers) spending their wages. A new employee operating a wind farm for example, may rent housing from a local owner or shop at the local grocery store and in doing so drive additional local employment and spending. TABLE 6 CONSTRUCTION OUTPUT IMPACTS PER MW EXPENDITURE ($m) LOCAL / REGIONAL STATE AUSTRALIA DIRECT IMPACT $0.30 $0.99 $1.47 TOTAL PRODUCTION CONSUMPTION TOTAL IMPACT $0.32 $1.07 $1.59 $0.29 $0.98 $1.45 $0.91 $3.04 $4.52 Source: SKM IO Modelling Table 7 takes the estimates from Table 6 and scales them up to the equivalent of a 50 MW wind farm development. These estimates suggest that a 50MW wind farm development could add over $40 million to the regional economy. In practice the increase would be less as some of the flow on effects of the direct expenditure will spread beyond the region and could even flow overseas, for example if a portion of employees wages and salaries is spent on imported items such as flat screen TVs. TABLE 7 CONSTRUCTION OUTPUT IMPACTS PER 50MW WIND FARM EXPENDITURE ($m) LOCAL / REGIONAL STATE AUSTRALIA DIRECT IMPACT $14.84 $49.56 $73.61 TOTAL PRODUCTION CONSUMPTION TOTAL IMPACT $16.08 $53.69 $79.74 $14.62 $48.82 $72.51 $45.54 $ $ Source: SKM IO Modelling 22

25 5. INVESTMENT IN WIND ENERGY 5.3. INVESTMENT IMPACT LOCATION OF EXPENDITURE Table 8 indicates the operations output impact on two bases, the annual expenditure and the cumulative expenditure over the life of the wind farm (assume to be 25 years). For a smaller locality a potential direct expenditure of up to $3million per annum for a 50MW wind farm would be a significant benefit. As noted above, in practice this would be the maximum benefit as it is likely that there will be leakages of expenditure from any region and especially a smaller local area. However, the maximum cumulative benefit (Table 9) indicates that even with leakages a wind farm development will provide significant economic benefits over the long term at across Australia. TABLE 8 LOCAL OPERATIONS OUTPUT IMPACTS PER MW EXPENDITURE ($m) LOCAL / REGIONAL YEAR 1 CUMULATIVE DIRECT IMPACT $0.02 $0.27 TOTAL PRODUCTION $0.02 $0.25 CONSUMPTION $0.02 $0.29 TOTAL IMPACT $0.06 $0.81 Source: SKM IO Modelling TABLE 9 LOCAL OPERATIONS OUTPUT IMPACTS PER 50MW WIND FARM EXPENDITURE ($m) LOCAL / REGIONAL YEAR 1 CUMULATIVE DIRECT IMPACT $1.00 $13.50 TOTAL PRODUCTION $1.00 $12.50 CONSUMPTION $1.00 $14.50 TOTAL IMPACT $3.00 $40.50 Source: SKM IO Modelling 23

26 5. INVESTMENT IN WIND ENERGY 5.3. INVESTMENT IMPACT LOCATION OF EXPENDITURE Table 10 and Table 11 show the potential operations data per MW and for a 50 MW development for a region, state and nationally. TABLE 10 OPERATIONS OUTPUT IMPACTS PER MW WIND FARM EXPENDITURE ($m) LOCAL / REGIONAL STATE AUSTRALIA DIRECT IMPACT $0.02 $0.03 $0.07 TOTAL PRODUCTION CONSUMPTION TOTAL IMPACT $0.02 $0.03 $0.07 $0.02 $0.03 $0.07 $0.06 $0.09 $0.21 Source: SKM IO Modelling TABLE 11 OPERATIONS OUTPUT IMPACTS PER 50 MW WIND FARM EXPENDITURE ($m) LOCAL / REGIONAL STATE AUSTRALIA DIRECT IMPACT $1.00 $1.50 $3.50 TOTAL PRODUCTION CONSUMPTION TOTAL IMPACT $1.00 $1.50 $3.50 $1.00 $1.50 $3.50 $3.00 $4.50 $10.50 Source: SKM IO Modelling In summary construction of a 50 MW wind farm could add over $14 million in direct expenditure to a regional economy and some $1 million per annum during operations. This expenditure would then be multiplied across Australia, although only a proportion of the total impact would occur in the region. 24

27 5. INVESTMENT IN WIND ENERGY 5.3. INVESTMENT IMPACT CONTRIBUTION TO GSP As noted above, these expenditure estimates are converted into GVA estimates to assess their impact on GSP and GRP. Table 12 below shows that for an indicative 50 MW wind farm, the total financial benefit for a state could be around $50 million, some $16 million of which is the direct impact. The on-going estimated annual operating GVA is some $1.5 million. TABLE 12 CONSTRUCTION VALUE ADD PER 50MW EXPENDITURE ($m) LOCAL / REGIONAL STATE AUSTRALIA DIRECT IMPACT $4.90 $16.35 $24.29 TOTAL PRODUCTION CONSUMPTION TOTAL IMPACT $5.31 $17.72 $26.31 $4.82 $16.11 $23.93 $15.03 $50.18 $74.54 Source: SKM IO Modelling Table 13 indicates the current GSP for the six states and the GDP for Australia. Based on these latest state GSP figures (Table 13) the estimated contribution to GSP from a 50 MW wind farm is shown in Table 14. While these are small percentages they reflect significant contributions to GSP. TABLE 13 GSP BY STATE JUNE 2011 ($m) SOUTH WESTERN NSW VICTORIA QUEENSLAND TASMANIA AUSTRALIA AUSTRALIA GDP AUSTRALIA Source: ABS National Accounts TABLE 14 CONTRIBUTION TO GSP FROM A 50MW WIND FARM - JUNE 2011 ($m) SOUTH WESTERN NSW VICTORIA QUEENSLAND TASMANIA AUSTRALIA AUSTRALIA GDP AUSTRALIA 0.012% 0.016% 0.020% 0.058% 0.027% 0.211% 0.004% 25

28 5. INVESTMENT IN WIND ENERGY 5.3. INVESTMENT IMPACT CONTRIBUTION TO GSP Table 15 indicates the potential contribution to GSP in each state and GDP from the construction of the wind farm developments to date and the contribution of investment in the highest investment year over the period to date. This table indicates that wind to date has provided a significant contribution to GSP in all states except Queensland. The apparent anomaly in the Queensland figure between Table 14 and Table 15 reflects the fact that Queensland has less than 50 MW installed capacity at present (actually just over 12 MW). TABLE 15 CONTRIBUTION TO GSP FROM A 50MW WIND FARM - JUNE 2011 ($m) STATE NSW VICTORIA SOUTH WESTERN QUEENSLAND TASMANIA AUSTRALIA AUSTRALIA AUSTRALIA GSP Addition to GDP/GSP of Total Australian Investment Largest Investment Year $419,895 $305,615 $251,616 $86,323 $187,117 $23,738 $1,320, % 0.102% 0.002% 0.684% 0.147% 0.394% 0.107% 0.020% 0.056% N/A 0.240% 0.076% 0.208% 0.019% INDICATIVE ESTIMATES OF CONTRIBUTION TO GRP The total GVA resulting from regional expenditure for the construction of a 50 MW wind farm is some $15 million with an estimated annual operating GVA of $1 million. Table 16 indicates the estimated GRP resulting from four regions that either have significant existing wind farm development and/or have potential for new or additional development. With the exception of Tasmania they include areas in the four mainland states with strong wind farm development potential. On this basis they are indicative of the impacts on other areas. The chosen locations are also different sizes and with different industry key industries which again allows an indication of the potential differences by different types of region. However, caution should be used in extrapolating these data or transferring the implied benefits to other regions. TABLE 16 GRP OF SELECTED REGIONS - JUNE 2011 ($m) MID NORTH SA BENDIGO FAR WEST NSW SOUTH WEST WA $ $4, $3, $16, Table 17 indicates the implied contribution of a new 50MW wind farm on each region. Clearly the regions with the smaller GRPs have a larger added benefit from the addition of $15m in GVA. TABLE 17 CONTRIBUTION TO GDP OF SELECTED REGIONS FROM A 50 MW WIND FARM MID NORTH SA BENDIGO FAR WEST NSW SOUTH WEST WA 2.59% 0.35% 0.49% 0.09% 26

29 5. INVESTMENT IN WIND ENERGY 5.3. INVESTMENT IMPACT LOCAL DIRECT EXPENDITURE This section looks at available data on the local expenditure by project employees. Information was provided on the expenditure on accommodation, food and fuel for the Clements Gap wind farm and the Hallett wind farm in South Australia. These data were compared with the findings from a survey of direct and contractors employees on the Sugarloaf Pipeline project a major construction project in Victoria (Table 18). While the individual items except for fuel differ, the total expenditure per FTE employee is very similar. The difference in accommodation and food may reflect the fact that the Sugarloaf project was situated on the fringe of Melbourne with many workers living at home and possibly living closer to the project site than in rural South Australia. While these data are partial they give an indication of the potential benefits of a significant construction project to a local area. For example, a 50MW wind farm might have an average construction workforce of some 35 over say 2 years with a potential local personal expenditure of $25,000 per annum or $875,000 in total per annum. The same wind farm could employ between 5 and 6 FTE staff for operations and maintenance with a potential on-going expenditure of $125, ,000. In practice the expenditure could vary up or down on this depending on such issues whether the workers have families, purchase or rent their houses, shop locally and are active in the community. In addition to the direct workers expenditure there will also be a regional flow on effect. These values would increase with the size of a wind farm although this may be mitigated by the trend to larger capacity turbines and a less than linear increase in the number of turbines. TABLE 18 LOCAL PROJECT EXPENDITURE DATA CONSTRUCTION ANNUAL EXPENDITURE/FTE (Est.) WIND FARM OTHER MAJOR CONSTRUCTION PROJECTS ACCOMMODATION FOOD $9,543 $3,904 $14,314 $11,701 FUEL $5,726 $5,720 FUEL 0 $3,711 TOTAL $29,582 $25,036 Source: Pacific Hydro and SKM These expenditures are likely to be made directly and transparently into the local community. As noted earlier (Section 5.3) wind farm developers look to use local suppliers and contractors as far as possible so that similar expenditures per employee are likely to apply in other areas. In addition to these employee expenditures the developers will seek to use other local suppliers including local transport operators and plant hire and as noted earlier local materials suppliers. As such, the above expenditure in the local area is likely to be a minimum. The wind farm project will also provide up to $250,000 in payments to farmers and an on-going community contribution that could be some $80,000 per annum for the life of the project. 27

30 6. WIND ENERGY EMPLOYMENT 6.1. NATIONAL Previously, the CEC have estimated that the wind industry currently employs just over 1,700 people directly and some 5,200 jobs in total based on 0.7 jobs per MW locally and a multiplier of 3 for total jobs or a flow on of a further 2 jobs for every direct job. This is an indicative estimate which is tested in this study EMPLOYMENT BY STATE Figure 17 indicates the current estimated employment by state based on the parameters above and provides a broad indication of importance of the sector to each state. Figure 17 Previous Estimated Direct and Total Employment by State Source: CEC Industry database which draws on independent information from AEMO, BREE, Bloomberg New Energy Finance, wind company reports, company websites, and state planning departments *^NO. OF TOTAL JOBS CREATED **NO. OF DIRECT JOBS CREATED NSW QLD SA TAS VIC WA 28

31 6. WIND ENERGY EMPLOYMENT 6.3. EMPLOYMENT IMPACT As with the investment data the modelling analyses the data on a per MW basis so that it can be extrapolated to provide employment estimates for any size of new or proposed wind farm or use aggregate state or national data where appropriate. The assessment below then extrapolates the per MW data for the scenario of a hypothetical 50 MW wind farm. Table 19 provides the estimates for the direct employment for the region, state and Australia and flow on and total employment for Australia for a MW of installed capacity based on the IO modelling. As noted earlier the modelling is based on the data collated during this study and as reviewed and agreed by the industry representatives. The table shows that the construction employment is approximately one FTE job per MW. This is a little higher than the previous estimates noted above. This estimate would suggest that the current direct employment in the industry could be some 2,300 FTEs and total employment of some 6,900 FTEs. TABLE 19 CONSTRUCTION EMPLOYMENT PER MW OF INSTALLED CAPACITY CONSTRUCTION (FTEs) LOCAL / REGIONAL STATE AUSTRALIA DIRECT EMPLOYMENT PRODUCTION CONSUMPTION TOTAL Source: SKM IO Modelling Table 20 provides the estimates for the direct employment for the region, state and Australia and flow on and total employment for Australia for 50 MW of installed capacity. These indicate that construction of a 50 MW wind farm could generate up to 160 FTE jobs from regional expenditure, up to a further some 5040 FTE jobs from the state expenditure and a further 290 nationally or a total of some 790 FTE jobs across Australia. TABLE 20 CONSTRUCTION EMPLOYMENT PER 50MW OF INSTALLED CAPACITY CONSTRUCTION (FTEs) LOCAL / REGIONAL STATE AUSTRALIA DIRECT EMPLOYMENT PRODUCTION CONSUMPTION TOTAL Source: SKM IO Modelling 29

32 6. WIND ENERGY EMPLOYMENT 6.3. EMPLOYMENT IMPACT This provides a total multiplier for direct jobs to total (direct and indirect) jobs of a little over 3 at national levels. IO analysis tends to overstate employment estimates a little so that continued use of a multiplier of 3 at a national level would be reasonable. Table 21 provides the cumulative operational employment per MW. Table 22 shows the same figures for a 50MW wind farm over a 25 year life. These data suggest a multiplier of less than 3 for wind farm operations. This suggests a further reason to use the current multiplier of 3 as an appropriate multiplier for the industry as a whole. TABLE 21 CUMULATIVE OPERATIONS EMPLOYMENT PER MW OF INSTALLED CAPACITY LOCAL / REGIONAL STATE AUSTRALIA DIRECT EMPLOYMENT PRODUCTION CONSUMPTION TOTAL Source: SKM IO Modelling TABLE 22 CUMULATIVE OPERATIONS EMPLOYMENT PER 50MW OF INSTALLED CAPACITY LOCAL / REGIONAL STATE AUSTRALIA DIRECT EMPLOYMENT PRODUCTION CONSUMPTION TOTAL Source: SKM IO Modelling 30

33 6. WIND ENERGY EMPLOYMENT 6.3. EMPLOYMENT IMPACT Table 23 and Table 24 provide the data for each year of the wind farm operation per MW and for a 50MW wind farm. These data indicate the potential on-going employment associated with a wind energy development. TABLE 23 ANNUAL OPERATIONS EMPLOYMENT PER MW OF INSTALLED CAPACITY LOCAL / REGIONAL STATE AUSTRALIA DIRECT EMPLOYMENT PRODUCTION CONSUMPTION TOTAL Source: SKM IO Modelling Table 24 indicates that operating a 50 MW wind farm could create some 13 total FTE jobs from regional spending, a further 7 in from state expenditure and a further 24 total nationally. TABLE 24 ANNUAL OPERATIONS EMPLOYMENT PER 50MW OF INSTALLED CAPACITY LOCAL / REGIONAL STATE AUSTRALIA DIRECT EMPLOYMENT PRODUCTION CONSUMPTION TOTAL Source: SKM IO Modelling Direct operational employment for a 50 MW wind farm based on 2 MW turbines and one O&M operative for every six turbines suggests some 4.2 site operations staff. With additional site management and support personnel, the calculated number of some 4.6 above may be a little low but is not unreasonable. The operational employment numbers suggest a multiplier for total operational employees across the nation to direct employees in the region of some 2.7 which, as noted, is similar to the 3 used in the earlier work. 31

34 7. PROJECTED WIND ABATEMENT Wind capacity in the Australian electricity markets 2 is growing at an increasing rate. The primary driver behind this growth is satisfying the Large-scale Renewable Energy Target (LRET), which aims to source 41,000 GWh per annum of additional renewable energy 3 by As more wind capacity penetrates the grid, the emission intensity of electricity production delivered via the grid falls because the new zero emission wind capacity, which has very low marginal cost, displaces emission producing thermal capacity, which is either coal-fired, gas-fired or distillate-fired. The type of thermal plant that is displaced by wind capacity, also known as the marginal plant, has a large impact on the resulting emission savings since the various thermal plants have very different emission intensities. For example, coal-fired plant burning brown coal produces emissions at the rate of 1.2 t CO 2 e/mwh to 1.6 t CO 2 e/ MWh, whereas the latest combined cycle gas turbine (CCGT) plant produces emissions at a rate of about 0.4 t CO 2 e/mwh. The abatement intensity of new wind capacity could therefore vary by a factor of 3 or 4, depending on which plant in the system is marginal. The intrinsic role of the plant mix on the emission abatement potential of wind farms means that the impact of the introduction of new wind capacity will be different in each state. One would therefore expect the greatest impact to occur in Victoria, whose generation fleet primarily consists of coal-fired plant burning brown coal, which is one of the most emission intensive of all fuels used for generating electricity. Next would be New South Wales and Queensland, both of which have large amounts of coal-fired plant utilising black coal, which has far less moisture content than brown coal and is consequently less emission intensive. The South Australian generation mix is primarily natural gas with some black coal and distillate, where the latter is used rarely during times of peak demand, and so one would expect a lower emission abatement impact from wind. However, South Australia also imports cheap power from Victoria, and if wind capacity displaces these cheap imports 4, then it will have a much greater emission abatement impact. Tasmania is primarily a hydro system with natural gas backup, and it therefore has very low emission intensity. However it too at times imports cheap power from Victoria, so there is some potential for Tasmanian wind capacity to have an impact on emissions. The other major electricity systems in Australia are located in the south-west corner of Western Australia (known as the SWIS), and around the Darwin area (known as the DKIS ). Both of these systems primarily use natural gas, although the SWIS also has some coal-fired capacity. The greatest emission abatement potential for wind in these systems is therefore in the SWIS. SKM ran some electricity market simulations in order to quantify what the potential abatement intensity of new wind capacity would be in all states of Australia and also in the Darwin-Katherine interconnected system (DKIS 5 ) of the Northern Territory. These market simulations represent, in SKM s view, the most probable electricity market outcome given the information available to us today. The key assumptions underlying the modelling are as follows: Medium electricity demand growth, taking into account reduced demand growth rates expected to materialise with the introduction of the carbon price; The introduction of the carbon price from July 2012, using the Federal Treasury s Government policy scenario carbon price path ($29.5/t CO2e by 2020 in mid 2011 dollars); The expanded LRET target will remain at its current value of 41,000 GWh to be generated by additional renewable energy sources by Both the National Electricity Market (NEM), which covers the eastern states, and the South West Interconnected System (SWIS), which covers the south-west corner of Western Australia. 3 That is, renewable energy that was not commissioned before the original scheme s inception in This is especially possible with the introduction of a carbon price. 5 Darwin-Katherine Interconnected System. 32

35 7. PROJECTED WIND ABATEMENT The method used in the modelling was to run a Base case to 2020, which would represent the most efficient market outcome to that point. A 100 MW wind farm was then inserted in turn in each state of Australia 6, and the emission savings attributable to the wind farm were then calculated with reference to the Base case 7. The results of this modelling are summarised in Figure 18, Figure 19 and Table 25. These figures show that the most abatement is achieved in the NEM (average of 0.87 t CO2e/MWh over the eight years), then the SWIS (at an average of 0.76 t CO2e/ MWh ) and the least abatement is achieved in the DKIS (0.51 t CO2e/MWh on average). This means that a 100 MW wind farm operating at 35% capacity factor would each year on average reduce emissions by 266,700 tons in the NEM, 233,000 tons in the SWIS, and 156,400 tons in the DKIS. This is equivalent to removing 62,000 cars off the road in the NEM, 54,200 cars off the road in the SWIS and 36,400 cars off the road in the DKIS. These results make intuitive sense, since they reflect the emission intensities of the respective systems 8. Table 25 also shows the national average. Based on the same factors described above, on average the national emissions abatement is 246,200 tons, equivalent to removing 57,300 cars off the road throughout Australia. In the NEM, the abatement intensity achieved varies quite a lot from state to state. This is illustrated in Figure 19 which shows that abatement in the NEM is highest in Victoria, and lowest in Tasmania. This again aligns with the emission intensity of the generation assets in each region. Victoria s generation fleet is primarily brown coal-fired plant with emission intensities exceeding 1.2 t CO2e/MWh, whereas Tasmania is primarily a hydro system which has zero emissions, and also has a CCGT and some smaller, less efficient open cycle gas turbines. TABLE 25 AVERAGE ABATEMENT ACHIEVED BY 100MW WIND FARM AT 35% CAPACITY FACTOR ACROSS AUSTRALIA REGION ABATEMENT INTENSITY (t CO2e/MWh) EMISSIONS ABATED (t CO2e p.a.) EQUIVALENT CARS REMOVED FROM ROAD NATIONAL ELECTRICITY MARKET (SA, VIC, TAS, NSW, QLD) ,700 62,000 SOUTH WEST INTERCONNECTED SYSTEM (WA) ,000 54,200 DARWIN KATHERINE INTERCONNECTED SYSTEM (NT) ,400 36,400 NATIONAL 0.80 QLD 0.89 NSW 0.89 VIC 1.10 SA 1.02 TAS , , , , , ,200 57,300 63,500 63,700 78,400 73,100 31,900 6 A 50 MW wind farm was inserted in the Darwin-Katherine system as it is considerably smaller than the other regions modelled here, and a larger wind farm would significantly distort the resulting market outcomes. 7 In all cases the price distortion caused by inserting the additional wind farm was minimal, and therefore the resulting market outcome was still deemed to be plausible. 8 The average emission intensities for 2009/10 were 0.97 t CO 2 e/mwh for the NEM, 0.90 t CO 2 e/mwh for the SWIS and 0.69 t CO 2 e/mwh for the DKIS, according to Energy Supply Association of Australia, Electricity, Gas Australia 2011,

36 7. PROJECTED WIND ABATEMENT Figure 18 Projected abatement intensity of wind farms in the NEM, SWIS and DKIS Source: CEC Industry database which draws on independent information from AEMO, BREE, Bloomberg New Energy Finance, wind company reports, company websites, and state planning departments 1.00 Abatement intensity (t CO2e/MWh) NEM SWIS NT Financial year ending June Figure 19 Projected abatement intensity of wind farms for each region of the NEM Source: CEC Industry database which draws on independent information from AEMO, BREE, Bloomberg New Energy Finance, wind company reports, company websites, and state planning departments 1.30 QLD Abatement intensity (t CO2e/MWh) NSW VIC TAS SA NEM average Financial year ending June 34

37 8. REFERENCES SKM Hallett, SKM Economic Impact Assessment of the Hallett Wind Farm Biggar Economics, Onshore Wind Direct and Wider Economic Benefits BiGGAR Economics for RenewableUK Bureau of Resources and Energy Economics, Energy in Australia 2012, February GL Garrad Hassan Review of the Australian Wind industry CEC Industry database which draws on independent information from AEMO, BREE, Bloomberg New Energy Finance, wind company reports, company websites, and state planning departments. Clean Energy Council Power Plant Report 1/5/2012. RenewableUK, The Economic value of Wind to Wales A survey, May Driving Investment, Generating Jobs, Wind energy as a powerhouse for rural development in Australia, Dr Robert Passey, March Renewable Energy Technology Cost Review, Melbourne Energy Institute Technical Series Papers, May Energy Supply Association of Australia, Electricity, Gas Australia 2011, Victorian Wind Turbine Action Plan, Regional Development Victoria, May Local content in Australian wind farms, Mike Bagot, Suzlon, 19/08/10. Acciona Energy: Economic Benefits of the Waubra and Gunning Wind Farms, February Additional information was sourced from interviews with, and unpublished data from, Wind Farm development organisations. 35

38 APPENDIX A. METHODOLOGY The link between industry and economy, employment and income, as well as households and spending can be analysed by examination of IO multipliers created by SKM based on the ABS IO tables. Using the 2007 data, the multipliers capture the direct, indirect and induced effects of economic stimulus in terms of output, and employment. Value added is also estimated based on output impacts. SKM has calculated the following multipliers for all industries: Output multipliers the amount of output required from all industries to produce output to satisfy the demand for an extra dollar of output from an industry this also includes the induced effects by spending of extra wages and salaries earned by households; Employment multipliers measurement of the additional employment, in number of persons employed, supported through production of additional output in the economy. The derived multipliers estimate the total impact on all industries in the Australian economy from changes in the demand for output in any one industry. Multipliers have been calculated for the Australian economy to estimate the aggregate national effect of the project. These multipliers are assumed to represent linkages between industries for the project site on average. Using an IO analysis to model the effects of an industry or stimulus to an economy requires a number of assumptions that must be made clear in order to interpret the outputs properly. In general, an IO model assumes: Constant prices the prices here are 2007 prices. While it is likely that prices have inflated since the initial IO tables were created and that additional demand may cause a shortage of commodities and labour which would cause prices to increase, the IO model assumes that regardless of the stimulus, the impact on prices is negligible; Fixed technology similar to the price assumption, assuming fixed technology means that the inputs and outputs from a particular industry remain the same and that consumption preferences do not change. While this adjustment clearly happens in the long run, changes in technology and spending preferences usually occur over a multi-year period and are considered negligible in the short term; Fixed import shares this assumes that local resources have not been exhausted, or new local production has not been established, if oil were to now to be refined locally instead of being imported for example; Unlimited supplies of all resources, including labour and capital output is not constrained and if the project needed more construction workers or con crete, it is readily available in the local market or readily available for import; A fixed relationship between income and private consumption again consumptions patterns do not change, even with increasing income. As a result of these assumptions, the results from IO modelling involve a certain degree of uncertainty. Therefore, it is important to note that economic impacts are not a specific forecast but provide a relative impact in relation to the economy as a whole. They represent the most current and readily available data at the time of this report and are valid for providing a picture of the impact of the project on the project area and Australian economy as a whole. Additional key assumptions that relate to specific impacts of the project include: Expenditure which is known to be imported is re moved from the inclusion of direct effects and a direct allocation of imports is used, allowing for the assessment of potential impacts on the domestic economy only; Use of national multipliers does not account for potential leakage of flow-on effects between regions. As such, there is potential that the regional impacts generated from the IO analysis could be overestimated. However, these impacts would be expected to be distributed to other regions, and therefore the estimation will be at least equal to the impact on the national economy. Given the size and diversity of each State economy with the possible exception of Tasmania, it is plausible that this comment would apply to the states as well as nationally. 36

39 APPENDIX A. METHODOLOGY A.1. MULTIPLIER INTERPRETATION The total economic impact identified by use of IO multipliers includes the direct effect of the initial increase in demand, and the flow-on effects. The flow-on effects include production induced impacts which result from the linkages between industries in an economy. For example, the direct manufacture of towers requires the purchase of steel and other materials from suppliers, these suppliers would then need to restock to meet commitments to other customers creating a production induced flow on effect in the economy. Flow-on effects also include consumption induced effects, effects resulting from the recycling of cash flows in the economy, or households (consumers) spending their wages. A new employee operating a wind farm for example, may rent housing from a local owner or shop at the local grocery store and in doing so drive additional local employment and spending. GROSS REGIONAL PRODUCT Gross regional product (GRP) is the total market value of goods and services produced in a region after deducting the costs of goods used up in the process of production (intermediate consumption) but before deducting consumption of fixed capital (depreciation). To avoid double counting, only the value added at each stage of production is included in GRP and not the total expenditure. GROSS VALUE ADD Gross Value Added (GVA) is defined as total factor income plus taxes and less subsidies on production. Total factor income is made up of compensation of employees, gross operating surplus and gross mixed income. We have assumed that the value added component which excludes costs of materials is approximately 33% of the total expenditure. This value is based on the weighted average of the value added for each of the industry sectors assumed for the impact assessment. 37

40 APPENDIX A. METHODOLOGY A.2. ASSUMED INDUSTRY SECTORS The IO model is based on the use of multipliers for a set of industries that are assumed to reflect the activities involved in constructing and operating wind farms. The industry representatives consulted recommended that the development stage of the wind farms not be analysed for a number of reasons including the difficulty in collecting and collating data, the lower costs and spread of costs across areas, the cost structures that the industry has with costs accrued by unsuccessful projects needing to be recouped from successful ones and that there are a number of current development proposals being updated and hence the lower likelihood of significant numbers of new proposals in the immediate future. Table A1 indicates the assumptions on industry sectors potentially involved in the different components of construction and operation of a wind farm. TABLE A1 LOCAL EXPENDITURES PER MW BY INDUSTRY ITEM EXPENDITURE RELEVANT INDUSTRY PROPORTION TOTAL INDUSTRY ($m) ALLOCATION ($m) WTG $0.187 Polymer Electrical Manufacturing Metal Manufacturing 22% 43% 35% $0.042 $0.080 $0.065 CONTRACT ADMINISTRATION AND SITE DESIGN $0.023 Heavy and Civil Engineering Construction Construction Services 50% 50% $0.012 $0.012 SITE CONSTRUCTION WORKS $0.023 Heavy and Civil Engineering Construction Construction Services 50% 50% $0.012 $0.012 SITE ELECTRICAL WORKS $0.026 Electrical Transmission 100% $0.026 LABOUR $0.029 Accommodation Food & Beverage Services Transport 54% 36% 10% $0.016 $0.010 $0.003 OPERATION AND MAINTENANCE LABOUR PER ANNUM $0.020 Other repairs and Maintenance Construction Services Electrical Transmission, Distribution, On Selling and Electricity Market Operation 80% 15% 5% $0.008 $0.008 $0.004 TOTAL CONSTRUCTION $

41 APPENDIX A. METHODOLOGY A.2. ASSUMED INDUSTRY SECTORS Relevant industry proportions are taken from Table 4, Section and are based on: A broad breakdown of 70% WTG and 30% BOP adjusted for the separation of a 10% installation labour component. Blade proportion of approximately 16% of total cost adjusted for the separation of a 10% installation labour component. The sum of proportions for half the nacelle and the Gearbox and drive train, Generator systems, Brakes and hydraulics and Electronic controls adjusted for the separation of a 10% installation labour component. The tower component plus half the nacelle adjusted for the separation of a 10% installation labour component. Civil works and similar assumed to be 50:50 heavy construction and construction services. Site electrical works activity assumed to relate to cabling and electricity connection and control activity more related to transmission than generation. Employee and contractor labour expenditure on accommodation, food and beverage and transport based the proportions of actual or surveyed expenditure for wind farm construction employees and other similar construction projects (see 5.3.5). Operations and maintenance activities assumed to include engineering and machinery type R&M, general site R&M of site assets such as offices and other buildings, equipment, fencing, site access roads with some specific electricity transmission O&M activity broadly grouped under Other repairs and Maintenance, Construction services and Electrical Transmission. Expenditure per MW installed capacity is developed by location of expenditure based on the Hallett actual data. See the comments on the validity of this in Section of the report. Theses total costs by location are allocated by wind farm component in accordance with the following proportions which are approximately 70% for the WTG and 30% for BOP adjusted for a separate installation labour element which is assumed to be approximately 10% of the overall cost as set out in more detail above and in Table A2. This breakdown may understate the BOP components in the region and overstate the WTG component. However, it maintains the overall cost proportions estimated for each location which are used in the IO model. As such, the individual cost elements are indicative only. TABLE A2 ESTIMATED COST BREAKDOWN BY WIND FARM COMPONENT WTP CONTRACT ADMINISTRATION AND SITE DESIGN SITE CONSTRUCTION WORKS 64.8% 8.1% 8.1% Output and Employment multipliers from each of the industry sectors above are used to determine the direct and flow on impacts on a per MW basis. This calculated information is then extrapolated to the benefits from a scenario of an assumed 50 MW wind farm comprising 25 2MW turbines. Two MW turbines are assumed as these seem to be reasonably standard at this stage. If the size of turbines continues to increase the size of wind farm can increase appropriately. SITE ELECTRICAL WORKS 9.0% LABOUR 10.0% NON LABOUR 90.0% TOTAL 100% 39

42 APPENDIX B. WIND FARMS (CEC POWER PLANT REPORT) OWNER LOCATION STATE COMMISSION DATE UNIT CONFIGURATION INSTALLED CAPACITY Infigen Energy Capital Wind Farm NSW NOV x 2.1 MW AGL Hallet 1 SA JUN x 2.1 MW 94.5 (Brown Hill) AGL Hallet 2 SA MAY x 2.1 MW 71.4 (Brown Hill) Infigen Energy lake Bonney - Stage 2 SA JUL x 3 MW 159 RATCH Australia Corporation Mt Millar SA DEC x 2 MW 70 TrustPower Ltd Snowtown SA NOV x 2.1 MW 98.7 Stage 1 Acciona Energy Waubra VIC OCT x 1.5 MW 192 Pacific Hydro Portland Stage 2 VIC NOV x 2 MW 58 Verve Energy Kalbarri NSW x 0.8 MW 1.6 Acciona Energy Gunning NSW JULY x 1.5 MW 46.5 Origin Energy Cullerin Range NSW JULY x 2 MW 30 UBS IIT/REST Collgar WA JAN x 1.85 MW Infigen Energy Woodlawn NSW DEC x 2.1 MW 48.3 AGL Hallett 5 (Bluff Wind Farm) SA FEB x 2.1 MW 52.5 Pacific Hydro Clements Gap SA JAN x 2.1 MW 56.7 TRUenergy Waterloo SA DEC x 3 MW 111 AGL Hallett 4 (Nth Brown Hill) SA JUNE x 2.1 MW Hepburn Wind Hepburn VIC JULY x MW 4.1 (Leonards Hill) Pacific Hydro Portland Stage 3 VIC JULY x 2 MW 44 Mt Barker Power Company Mt Barker WA APR x 0.8 MW 2.4 TOTAL INSTALLED CAPACITY (MW)

43 APPENDIX B. WIND FARMS (CEC POWER PLANT REPORT) OWNER LOCATION STATE COMMISSION DATE UNIT CONFIGURATION INSTALLED CAPACITY Verve Energy Grasmere WA APR x 2.3 MW 13.8 (Albany 2) CSIRO Newcastle NSW x 0.02 MW 0.16 EnergyAustralia Kooragang Is NSW x 0.6 MW 0.6 Eraring Energy Crookwell NSW x 0.6 MW 4.8 Eraring Energy Blayney NSW x 0.66 MW 9.9 EnergyAustralia Hampton NSW x 0.6 MW 1.2 Ergon Energy Thursday Island QLD x MW 0.45 RATCH Australia Corporation Windy Hill QLD x 0.6 MW 12 AGL Wattle Point SA APR x 1.65 MW Infigen Energy Lake Bonney - Stage 1 SA x 1.75 MW 80.5 International Power Canunda Wind Farm SA x 2 MW 46 TRUenergy and Acciona Cathedral Rocks (Eyre) SA JAN x 2 MW 66 Energy SA Government Coober Pedy SA x 0.15 MW 0.15 RATCH Australia Corporation Starfish Hill SA x 1.5 MW 34.5 Hydro Tasmania Huxley Hill - King Island TAS x 0.25 MW 0.75 Hydro Tasmania Huxley Hill - King Island 2 TAS x 0.85 MW 1.7 Hydro Tasmania Woolnorth Stage TAS x 1.75 MW 10.5 Hydro Tasmania Woolnorth TAS x 1.75 MW Stage 2 Hydro Tasmania Woolnorth TAS x 3 MW 75 Stage 3 Australian Antarctic Division Mawson Territories x 0.3 MW 0.6 TOTAL INSTALLED CAPACITY (MW)

44 APPENDIX B. WIND FARMS (CEC POWER PLANT REPORT) OWNER LOCATION STATE COMMISSION DATE UNIT CONFIGURATION INSTALLED CAPACITY Elgo Estate Elgo-Longwood VIC x 15 MW 0.15 Pacific Hydro Corington VIC x 1.3 MW 18.2 Pacific Hydro Challicum Hills VIC x 1.5 MW 52.5 Pacific Hydro Yambuk - VIC MAY x 1.5 mw 30 Portland Stage 1 Regional Wind Farms Wonthaggi VIC x 2 MW 9.9 RATCH Australia Corporation Toora VIC x 1.75 MW 21 Infigen Energy Alinta Wind Farm (Walkaway) WA x 1.65 MW 89.1 Rottnest Island Authority Rottnest Island WA x 0.6 MW 0.6 Stanwell Corporation Emu Downs WA x 1.65 MW 79.2 and Griffin Verve Energy Ten Mile Lagoon, Esperance WA x MW 2.03 Verve Energy Denham WA x 0.23MW 0.23 Verve Energy Denham 2 WA x 0.23 MW 0.46 Verve Energy Albany WA x 1.8 MW 21.6 Verve Energy Nine Mile Beach, Esperance WA x 0.6MW 3.6 Verve Energy Hopetoun WA x 0.6MW 0.6 Verve Energy Bremer Bay WA x 0.6 MW 0.6 Verve Energy Denham 3 WA x 0.3 MW 0.3 Verve Energy Hopetoun 2 WA MAY x 0.6 MW 0.6 Verve Energy Coral Bay WA x MW 0.83 Infigen Energy Lake Bonney - Stage 3 SA AUG x 3 MW 39 Blowing in the Wind Sassafras TAS x MW 0.23 TOTAL INSTALLED CAPACITY (MW)

45 Shaun Blackie, worker at Codrington Wind Farm, Victoria Ben Mumford lives next door to Clements Gap Wind Farm, SA The Clean Energy Council is the peak body representing Australia s clean energy sector. It is an industry association made up of more than 600 member companies operating in the fields of renewable energy and energy efficiency. For more information please contact the Clean Energy Council on or info@cleanenergycouncil.org.au