For the UK’s renewable energy industry, the big news this week was that “Manufacturing giant Siemens and the UK's Associated British Ports are to invest a total of £310m in UK wind turbine factories, creating 1,000 jobs” (£310m invested in UK wind turbines). Such a development has been on the cards for the last four years and this announcement means that the UK will finally have a purpose-built facility to manufacture turbine blades for offshore use, with production beginning in two years’ time.
For a government which both wants new jobs and remains, via the Climate Change Act, committed to further expansion of wind and solar energy, this is good news. But is this a sign that the much-heralded green economy is becoming a reality, or another false dawn?
Politicians have made much of the potential for green growth accompanying the creation of a successful new sector for employment. This, we were told, would be the future for the economy, replacing the jobs lost in manufacturing industry. According to the Foreword to the UK Renewable Energy Roadmap, published in 2011 “Renewable energy already employs more than a quarter of a million people; by 2020, it could be over half a million. The creation of jobs in the renewable energy sector, investment in new manufacturing capability, and the consequent direct and indirect benefits will support our transition to a green economy.”
Many manufacturing jobs have been exported because of the lower wages paid in China and elsewhere, but another large contributory factor has been the escalation of energy prices caused, in part, by the various policy instruments introduced to support renewable energy. If anyone doubts the importance of energy prices to an economy, they only have to look at the manufacturing jobs being brought back to the USA following the massive drop in prices due to exploitation of shale gas reserves. The International Energy Agency reported last November that “the shale gas boom will boost US manufacturing jobs until at least 2035…” (Shale gas boom to fuel US lead over Europe and Asia for decades).
By some measures, the environmental sector looks very healthy. For example, last year it was reported that UK green economy celebrates as government figures show £6bn boost. This showed the Low Carbon Environmental Goods and Services (LCEGS) market was valued at £128bn in 2011/12, employed 940,000 people and had a trade surplus of £5.2bn. However, the devil is in the detail.
This sector includes renewable energy, consulting, nuclear power, waste and pollution and noise control, with alternative fuels, building technologies and wind power being the biggest sub-sectors, accounting for £49.7bn, or nearly 40% of the total. On the face of it, this is a very significant sector of the economy, but much of it would be in place without the current renewable energy policies. Not only that, but the jobs and economic value added in the renewables sector are ultimately at the whim of government policy, since they require public subsidy (that is, our money via either utility bills or taxes) to survive.
Many of the jobs are unlikely to be sustainable in the long term. Even the energy efficiency leg of climate change policy, the principle of which makes a great deal of sense, will create relatively low-level jobs in the insulation industry, which will disappear once the current housing stock has been brought up to scratch. And most of the jobs in the wind and solar sector are for installation, which will peak at some stage and most likely drop to virtually zero when better technologies begin to be deployed. The only further job creation may come in disassembling and removing both wind turbines and solar panels.
This makes the announcement by Siemens and ABP all the more significant, because many of the jobs in question will be quite highly skilled. But the investment in the UK can only have come because of assurances that there would be a domestic market of sufficient size and longevity to justify it.
The recent history of wind turbine manufacture in the UK is not a very happy one. In 2009, the Danish company Vestas closed its blade manufacturing site on the Isle of Wight, with 425 staff being made redundant. Despite the country’s enthusiasm for renewables, the company could not justify continuing manufacture. However, a year later they did open a research facility on the island, creating 220 jobs. Manufacturing may not have been economic, but they still had a skills base to draw on (Huhne visits Vestas turbine firm on Isle of Wight).
The Siemens and Vestas operations go some way towards addressing the criticism that UK taxpayers are mainly boosting the profits of offshore manufacturers. However, there is a glaring anomaly in that Scotland, where many of the new wind farms are to be situated, still has no new skilled manufacturing jobs linked directly to this sector. Indeed, Donald Trump’s high profile withdrawal from his golf course project on the east coast because of offshore wind turbines could arguably have cost the Scottish economy as much as its southern neighbour has gained.
Certainly there are other companies which do not see renewables as a good bet, for example SSE has withdrawn from most of its planned involvement in offshore wind as part of its current restructuring (Scaling back the many-headed Hydro) and RWE has withdrawn plans for a huge development in the Bristol Channel. It would seem that Siemens’ decision was due in part to a freezing of the carbon floor price in the Budget: its manufacturing costs are kept down while it continues to benefit from feed-in tariffs and other subsidies for power generation. Other companies appear not to have such an optimistic view.
Finally, we should not forget that jobs in the subsidised renewables sector come at a price. A 2011 report (Worth the candle?) concluded that every extra job created came at the cost of 3.7 jobs foregone elsewhere in the UK economy. The Siemens investment may be good news for a lucky few, but its contribution overall is likely to be both modest and unsustainable.
Martin Livermore
The Scientific Alliance
St John’s Innovation Centre
Cowley Road
Cambridge CB4 0WS
_________________________________________