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Will the hoped-for green jobs materialise?

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By Andrew Taylor, Employment Correspondent

Published: December 4 2008 02:00 | Last updated: December 4 2008 02:00

Amid the questionable forecasts contained in last week’s pre-Budget report was the chancellor’s claim that a low carbon economy could produce “an extra 1m green jobs” over the next 20 years.

Across the Atlantic, US president-elect Barack Obama, has advanced a multibillion dollar investment programme in solar and wind power and other renewable fuels, to help create millions more jobs in green or environment-related industries.

Climate change programmes, it seems, are increasingly being promoted as job opportunities schemes, as governments’ seek to boost flagging economies and restrain rising unemployment. But how realistic are the chancellor’s projections?

The experience of the British wind power industry over the past decade is that progress has been slow – painfully so, when it comes to getting planning permission. British aspirations to become a world leader in manufacturing products for the renewable power industry also have failed to materialise.

The prevailing winds blowing against the UK renewables industry turn into a positive gale when it comes to considering what effect the economic downturn will have on green energy plans. Offshore wind developments – easier to obtain planning permission but at least twice as costly as onshore developments – lie at the heart of British plans.

Environmentalists fear that, without financial help, the spiralling cost of building offshore wind farms could derail EU plans to source 16 per cent of energy from renewables. This would require the current wind farm capacity of about 3.5 gigawatts to be increased 10-fold over the next 12 years, the majority to be built offshore.

BP and Royal Dutch Shell, in the face of rising costs, recently pulled out of two large UK offshore developments to concentrate on their renewables businesses in the US. Centrica, the country’s bigggest gas and electricity supplier, is also reviewing the economics of its £4bn offshore wind power investment programme.

Government may find it difficult to step into the breach if private sector investors get cold feet. The billions of pounds being spent on bailing out banks may not leave much to bolster marginal offshore schemes. Politicians attending the United Nations climate change negotiations in Poznan, Poland, this week and next, may be more concerned about safeguarding jobs in existing industries than imposing extra costs by charging businesses for the CO 2 they produce.

So where does that leave the prospect for green jobs trumpeted by the chancellor and the prime minister, who have promised more than 160,000 new jobs in renewable energy alone by 2020? Ed Miliband, energy secretary estimated that the offshore wind sector alone had “the potential to provide up to 70,000 new, green jobs” in the next decade.

Michael Liebreich, chief executive of New Energy Finance, a consultancy specialising in renewables, however told a Financial Times study last month: “We fear that expectations are being set unrealistically high by politicians who are making promises inconsistent with economic fundamentals.”

Much will depend upon where the new generation of turbines and components for offshore developments are manufactured.

Britain’s slow response in developing onshore wind farms meant it lost out to North American and European rivals, such as GE of the US, Siemens of Germany and Vestas of Denmark, in this part of the market, says the British Wind Energy Association.

The next battle, for the offshore market, will be concentrated in continental Europe and the UK in particular it says. Onshore wind farms by comparison are likely to continue to dominate in North America and China, where there is enough land to accommodate developments without protracted planning problems.

Ideally, manufacturing, and certainly assembly, would take place as close as possible to offshore developments clustered along the British coast, says the BWEA. Clipper Windpower, a US turbine maker recently established a test facility in Blyth in north-east England, where it plans to make offshore components. Vestas has also taken over the NEG Micon turbine blade testing facility on the Isle of Wight.

There will be stiff competition, however, from manufacturers in continental Europe, where Germany, Denmark and Spain have more highly developed wind-power industries.

The BWEA says government should act as catalyst to ensure there is sufficient infrastructure at British ports to accommodate the needs of offshore assembly operations. Ministers should also encourage and support the development of a domestic supply chain to produce local components. “Opportunities will once again have been lost if we end up with a world-beating offshore industry but built by jobs abroad instead of in the UK,” it says.

A study by consultants Bain & Company for the BWEA, published in October, estimated that if a third of the wind turbines needed to meet the government’s renewable energy targets were made in the UK, it would create 36,000 jobs.

The BWEA is less pessimistic than some of the government’s critics about whether renewable energy targets will be met, even if the manufacturing jobs do not come here.

Wind farms, mostly onshore, account for about 5 per cent of the UK ‘s 75 gigawatts of electricity capacity. Another 6.8 gigawatts of wind farms have planning approval, half of them offshore; and another 8.8 gigawatts is seeking planning permission. About 40 per cent of onshore developments are approved, the BWEA says.

By 2010, it expects more than 6 gigawatts to be up and running. This would take the industry close to achieving the government’s target, from earlier this decade, of renewable energy contributing 10 per cent of electricity capacity by 2010.

Progress will depend on the speed with which offshore developments come onstream. Fast-track planning laws, approved last week, should help, says the BWEA.

Although BP and Shell have pulled out of the UK offshore market, others such as Masdar, the Abu Dhabi government’s investment vehicle for sustainable energy, moved to fill the gap. Masdar acquired a 20 per cent stake in in the £2bn London Array offshore wind project after Shell walked away.

German power group RWE last month paid £308m ($486m) for 50 per cent of Scottish and Southern Energy’s Greater Gabbard wind farm off Suffolk, which will have a capacity of 500MW when completed in 2010.

This still leaves a big gap to close if the industry is to achieve its target of more than 30 gigawatts capacity by 2020. How many jobs will be created, even if this target is met, remains to be seen.

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