RENEWABLE ENERGY BENEFITS LEVERAGING LOCAL CAPACITY FOR OFFSHORE WIND

INTRODUCTION
Renewable energy and energy efficiency technologies, with their increasing maturity and cost-competitiveness, can help bring economic and environmental objectives into closer alignment. The
energy transition can only be considered within the framework of the broader socio-economic system
and changes in the energy sector have impacts throughout the broader economy. Achieving the
energy transition would have significant socio-economic impacts. The latest analysis by the
International Renewable Energy Agency (IRENA) shows that accelerating the deployment of renewable
energy and energy efficiency as required to move towards a more sustainable development path (the
REmap Case),1 generates a number of benefits in terms of gross domestic product (GDP), human welfare and employment relative to the Reference Case2.

TRENDS IN THE OFFSHORE WIND ENERGY SECTOR
In the last two decades, the installed capacity of offshore wind energy rose steadily increasing
67 megawatts (MW) in 2000 to almost 20 gigawatts (GW) in 2017 (IRENA, 2018d). Higher annual increases in the last three years have been driven by falling costs, targeted policies, and technological advancement. The total installed cost of offshore wind decreased by about 13 percent between 2010 and 2011 after which it climbed by almost 44 percent reaching a peak in 2013 (Figure 1.1) as projects moved farther from shore into deeper waters and more advanced technology started to be used. After
that year, projects became larger and the industry standardised the use of new wind turbines and
optimised manufacturing processes, giving developers the chance to offset some of the cost increases related to siting projects further from shore and in deeper waters. The global weighted average
installed costs decreased by 22 percent, from USD 5 452 per kilowatt (kW) in 2013 to USD 4 239 in 2016 (Figure 1.1) (IRENA, 2018c). It should be noted that the cost depends heavily on the distance to shore and the water depth.

The falling cost of technology was reflected in the price of electricity generated by offshore
wind, driven by policies such as auctions. Several policy options exist to drive the sector such as administratively set tariffs, technology-specific quotas or auctions (IRENA, 2018e). Offshore wind auctions are adopted in a growing number of countries, including China, Denmark, France, Germany, Japan, the Netherlands and the United Kingdom. In 2016 alone, the generating prices of auctioned offshore wind projects fell by 22 percent (BNEF, 2016). Prices decreased substantially in Denmark (by almost 25 percent) and in the Netherlands (by almost 30 percent). In 2017, Germany held its first auction for offshore wind where developers showed high confidence in the industry. Out of the four winning projects, three (1 380 MW out of the total 1 490 MW) offered a strike price of EUR 0/MWh meaning that they did not request any support on top of wholesale electricity prices (IRENA, 2017a). These developments were mainly driven by a supportive auction design that instilled investor confidence (Box 1.1).

Technological advancement and innovation driving the sector include bigger turbines, enhanced construction know-how, experimental technologies such as floating platform solutions, continuous improvements in foundation design and installation methods (Box 1.2). Developments in access, operation and system integration have also permitted moves into deeper waters, further from shore, to reach larger sites with better wind resources.

Considering the most recent trends and the latest developments in the sector, offshore wind energy
can be seen as a very promising technology with potential for creating local value.

POTENTIAL FOR VALUE CREATION FROM THE DEPLOYMENT OF OFFSHORE WIND

In IRENA’s REmap 2050 scenario, total wind installed capacity is expected to reach 2 906 GW by 2030 and 5 476 GW by 2050 with cumulative investments in the sector of about USD 4.34 trillion by 2030 and USD 11.96 trillion by 2050. Out of the total, the deployment of offshore wind is expected to reach 128 GW by 2030 and 521 GW by 2050 with cumulative investments in the sector of about USD 350 billion by 2030 and USD 1.47 trillion by 2050 (IRENA 2018a). These developments can present ample opportunities for local value creation in countries deploying offshore wind, with considerable benefits such as jobs and income, depending on the extent of which activities are carried out domestically.

Jobs in offshore wind
The wind sector currently supports 1.1 million jobs, and could support more than 2.2 million jobs in 2030 and up to 2 million jobs in 2050 (Figure 2.1) (IRENA, 2018a). In offshore wind, many of the newly created jobs could be filled by labour previously employed in the fossil fuel sector. Figure 2.1 presents the estimated cumulative capacity, investments and employment in wind, in 2017, 2030 and 2050 Designing policies to maximise the local benefits from the deployment of offshore wind requires an analysis of where the jobs are created along the different segments of the value chain. This section analyses jobs in offshore wind: their concentration in the value chain and the potential of the offshore wind sector to welcome labour affected by the energy transition.

The analysis of the distribution of jobs along the different segments of the value chain focuses on
its core segments: project planning, procurement, manufacturing, transport, installation and grid
connection, operation and maintenance (O&M), and decommissioning (Figure 2.2).

As illustrated in Figure 2.3, labour requirements vary across the value chain. There is a heavy
concentration in manufacturing and procurement (59 percent of the total), O&M (24 percent),5 as well
as installation and grid connection (11 percent). This shows that although the manufacturing of
equipment offers the bulk of job opportunities in the sector, countries that do not opt to manufacture
equipment locally can benefit from considerable opportunity for job creation in other segments that
are always localised, such as O&M and installation and maintenance.

An assessment of the types of jobs created in order to provide policy makers with an understanding of
the human resources and skills required to produce, install and decommission offshore wind plants is
presented in Section 3. In addition to job creation, value is created through economic activities in the sector. Those are related to the procurement of materials, the installation of turbines, O&M activities, among others.

Potential for synergies with offshore oil and gas
The global energy system must undergo a deep transformation to evolve from its present reliance on fossil fuels to a focus on renewable energy. The share of renewable energy must rise from around
18 percent of total final energy consumption (in 2015) to around two-thirds by 2050 (IRENA, 2018a).
This transformation will come about as investments shift from fossil fuels to renewables (as well as to greater energy efficiency), with wide implications for the economy, including employment. IRENA’s latest macroeconometric modelling suggests that the energy transformation required to meet the
decarbonisation and climate mitigation goals set out in the Paris Agreement would result in the loss of around 7.4 million jobs in the fossil fuel sector by 2050, compared with business as usual. But in terms of sheer numbers, this loss is more than offset by a gain of jobs in the renewable energy sector, which are projected to rise from close to 10.3 million in 2017 to 28.8 million in 2050 (IRENA, 2018a).

Planning a 500 MW offshore wind farm requires an estimated 23 828 person-days of labour. Table 3.1 presents a breakdown of the total labour force needed in project planning by activity. Project development activity accounts for about 34 percent of the total (8 012 person-days), while engineering design for about a 17 percent (4 008 person-days). Altogether, the technical assessments account for about 38 percent of the total (adding up to 9 073 person-days), the seabed analysis being the most labour-intensive one. This is followed by the environmental impact assessment which reaches a share of
11 percent of the labour force in project planning.

CONCLUSIONS
The socio-economic benefits of renewable energy have become a key consideration in building
the case for its wide deployment. Increasingly, governments understand that the expansion of
renewable energy entails important co-benefits that go beyond the need to reconcile energy systems with environmental protection. Economic analysis underlines the fact that the switch to renewables supports economic growth, creates employment opportunities and enhances human welfare. Opportunities for domestic value creation can be created by leveraging and enhancing capabilities in existing industries (like oil and gas) along the value chain or planning to develop them.


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