The Shetland community’s stake in Viking Energy’s huge windfarm project could lead to the creation of three times more jobs than would be the case if it only received community benefit payments from a standalone developer, according to a study by economists at the University of Strathclyde.
The ownership model under which Shetland Charitable Trust (SCT) holds a 45 per cent stake in Viking Energy Ltd – a joint venture with Scottish and Southern Energy (SSE) – could lead to a mushrooming of public sector jobs in the isles, particularly in education and social care, the independent study suggests.
Research for the report, entitled “The Importance of Revenue Sharing for Local Economic Impacts of a Renewable Energy Project: A Social Accounting Matrix approach”, was funded by the Engineering and Physical Sciences Research Council (ESPRC). It is to be published in the international Regional Studies journal.
Professors Grant Allan, Peter McGregor and Kim Swales outline the differing economic impacts between the local ownership model and an alternative scenario where there would be no direct local stake but where community benefit payments would be made.
Based on the current model, the study estimates that the charitable trust stands to gain £15.3 million a year in profits after it repays debt interest on the borrowings of more than £200 million it will require to get the project up and running.
The projected profits and a raft of other figures and statistics related to the 150-turbine project are to be overhauled when Viking Energy publishes the long-awaited addendum to its environmental impact assessment. The document is expected to be published sometime in the next few weeks.
The Strathclyde academics’ findings do contain one strong caveat: the project remains a “high-risk” one because of the “high degree of regulatory uncertainty” surrounding the decision to construct the necessary £300 million grid connection cable from Shetland to mainland Scotland, without which the project would have no future.
The report notes: “Where the proposed project on Shetland may be required to finance any element of the cost of supporting a link to the UK mainland, the revenues retained locally would be likely to be diminished, possibly very significantly, with a knock-on effect upon local economic activity.”
In the scenario where income from a windfarm is restricted to rent, taxes and community benefit payments, the academics estimate that Shetland Islands Council would receive £1.3 million a year, with a further £200,000 a year going to local households and £1.72 million going into the charitable trust’s coffers in benefit payments. That would leave the community £3.3 million a year better off and would create an additional 270 full-time equivalent jobs.
By contrast, they calculate that income to the charitable trust of £31 million (excluding £3.44 million which would go to the directors of Shetland Aerogenerators, who hold a five per cent stake in Viking Energy Ltd) would leave a profit of £15.3 million after annual debt repayment charges estimated at £15.7 million are factored in.
Rental payments to the council and householders would remain the same under the charitable trust ownership model, meaning that a total of £16.86 million would remain within the Shetland economy. The report estimates that, on top of direct employment of 54 full-time equivalent posts, an additional 831 jobs could be created, equivalent to nine per cent of the isles’ total 9,109 workforce based on 2003 figures.
Professor McGregor said: “The results are illustrative of what would happen if the revenues were all spent in the same proportions as existing local authority expenditure. Presumably this is very unlikely to happen in practice: there is likely to be some accumulation of revenues; expenditures are likely to be much more targeted than we assume. Nonetheless the results serve to illustrate the potentially very substantial impacts that such a development could have.”
He said local ownership, or part ownership, of major wind energy projects like Viking Energy can provide “substantial” income flows to local economies: “Traditionally onshore wind energy projects tend not to have strong backward linkages into the local economy since turbines are mainly imported, although local contractors will be involved during the construction phase and other jobs created thereafter.
“However, the social and economic benefits of local ownership combined with community benefit should not be underestimated and can bring very significant benefits to rural communities like Shetland.”
Commenting on the findings, Viking Energy project manager Aaron Priest said: “In 2003, Shetland Islands Council made it clear that no large-scale renewables development should take place in Shetland without the community having the opportunity to obtain a stake.
“This study validates what we inherently understood those many years ago. The unique structure of the Viking Energy project gives Shetland control over how the project might come forward and will keep the greatest benefits locally.”