SOCIO ECONOMIC CASE STUDY VIKING WIND FARM SHETLAND

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1 SOCIO ECONOMIC CASE STUDY VIKING WIND FARM SHETLAND

2 OVERVIEW The Viking Energy Wind Farm is a 50:50 joint venture between the community owned Viking Energy Shetland and SSE plc, representing one of the largest community shared ownership opportunities in the UK. The project was first consented in April The project is expected to deliver a number of economic benefits on a local, regional and national scale; including connecting Shetland to the UK electricity grid for the first time. VIKING IN NUMBERS 570m project 103 turbines up to 412MW in size Third largest wind farm in the UK could power up to 335,000 homes 1 largest energy community ownership opportunity in the UK 10m/s wind speeds DRIVING ECONOMIC INVESTMENT Viking wind farm has the potential to generate renewable electricity comparable, or in some cases higher than other offshore wind sites in the UK due to the strength of the natural wind resource on Scotland s islands. The project will provide generation of clean renewable energy for all GB consumers at a competitive rate along with sustained and meaningful benefits to the UK supply chain, contributing to wider industrial strategy. The development and operation of Viking wind farm will also be more closely aligned with the development of offshore wind farms due to the distance of these projects from the mainland, weather conditions and strategic investment in new grid infrastructure. While the factors above can deem the delivery of island projects as challenging, these very factors help to underpin the significant economic and social value that wind farms like Viking can bring to the UK, including: Supply chain opportunities for UK companies at least 320m worth of contracts for UK GDP. Job creation and skills training opportunities - Especially for those within the North East Oil and Gas industry who have key transferable skills and invaluable expertise. Strategic grid benefits for the UK including security of supply, diversification of the UK s electricity generation mix and the possibility of encouraging further inward/ cross-border investment in trans-european interconnector projects and new marine technologies (floating offshore wind, deep water offshore wind and wave and tidal). Creating a new industry in Shetland and encouraging economic diversification on this remote island. Decarbonisation benefits to help meet UK climate change targets in the power sector. 1 Based on 3.6MW turbines

3 OPPORTUNITIES FOR UK SUPPLY CHAIN Viking wind farm will deliver supply chain benefits, jobs and economic growth right across the UK. Supply chain contracts that can be delivered by UK companies will be maximised, and further opportunities for UK supply chain investment actively sought, to help achieve ambitions outlined in the UK Government s industrial strategy. The combined value of contracts to the domestic UK supply chain is anticipated to be ca 320m or over 55% of the CAPEX investment value. SNAPSHOT OF UK BENEFITS THROUGH ISLAND WIND PROJECTS If the UK Government chooses to allow remote island wind projects to compete for Government support alongside offshore wind, this would mean the generation of renewable energy for GB-wide energy consumers at a competitive rate along with sustained and meaningful benefits to the UK economy. Yield conditions and load factors are comparable with, and in some cases higher than, existing offshore wind sites. There is also substantial UK supply chain investment potential on a large scale, serving as an important bridge between onshore and offshore industry evolution. The map below gives a snapshot of the potential island wind offers: SSE OPEN4BUSINESS ONLINE PROCUREMENT PORTAL Supply chain opportunities will also be available through our Tier 1 and Tier 2 suppliers, which are obligated to list available contracts through SSE s Open4Business online procurement portal for transparency and ease or access for tenderers. Since the launch of the portal in 2012, over 100m worth of contracts have been awarded to local businesses throughout SSE s wider project portfolio. The portal has also been backed by a number of government enterprise agencies, local authorities and our tier one contractors which contributes greatly to the portal s success Major Highland and UK supply chain benefits through civil works, operations and maintenance. 2. Island wind could mean wind farms would create up to 2000 UK jobs in the peak development phases plus hundreds of skilled permanent jobs. 3. Renewable energy yields comparable with offshore wind to benefit all GB energy consumers CS wind factory in rural Argyll could be boosted by a 60million contract for Viking wind farm alone Over 100 million already awarded to UK businesses by this sector-leading procurement portal in the Highlands and TransPennine. 6. At least 320million worth of contracts for UK GDP from Viking wind farm alone. 7. Improving UK security of energy supply. 8. Siemens Hull would potentially supply turbine blades for island wind projects. 9. Up to 383 jobs created in the remote Western Isles economy source Baringa 10. Multiple training opportunities for apprentices and renewables workforce utilising UK colleges ONSHORE WIND FARM CONSTRUCTION 11. Up to 725million for island economies as a result of construction and operation of renewables generation.

4 DELIVERING LOCAL AND REGIONAL BENEFITS The wider economic benefits to the islands in terms of gross value added, community income, local supply chain opportunities, carbon reduction, security of supply and the alleviation of existing grid constraints (which act as a barrier to economic growth) are expected to deliver over 248m of investment to Shetland alone. 2 JOB CREATION AND SKILLS TRAINING The project will create opportunities for hundreds of skilled workers during construction and it is expected that around 35 long term, permanent jobs could be created during the operation of the project. New opportunities for the highly skilled existing oil and gas workforce to retrain and redeploy could be created, ensuring that this key expertise is not lost, having been built up over decades in the North East. EMPLOYMENT DURING PEAK CONSTRUCTION EMPLOYMENT DURING OPERATION George Smith - Director of Tulloch Developments, Shetland Tulloch Developments are the biggest civil engineering and marine contractor in Shetland with a skilled workforce and a track record of successful large-scale projects for the oil industry. We have envisaged a move into contracting for renewables for some years since the islands have such a powerful natural resource to share with the nation. We are now seeing a rapid decline in oil and gas-related work and the lack of alternative economic prospects for the community makes it critical that a renewables industry is established. 150 working in civils 80 working on turbines 60 working on site electrical / grid infrastructure 35 operations and maintenance opportunities LARGEST COMMUNITY OWNERSHIP OPPORTUNITY IN THE UK Of the 50% of the project owned by the Shetland community, 90% is owned by the Shetland Charitable Trust (with the remaining 10% owned by local private investors). Shetland Charitable Trust is a charity set up to benefit the inhabitants of Shetland. Its aims are to provide public benefit to, and improve the quality of life for, the people of Shetland. Given the scale of the wind energy resource in Shetland, the project and the related grid connection to the mainland would provide significant financial returns for the community while providing substantial intergenerational economic and social benefits. This community ownership opportunity is the largest of its kind in the UK, and will be delivered in addition to the project s community benefit package. Steven Laurenson - Director of L&M Engineering (UK) Limited, Shetland Building wind farms in remote island parts of the UK would enable small businesses like ours to innovate and expand at a time of dwindling opportunities from the oil and gas sector. This has already been demonstrated successfully on a micro scale following the creation of Shetland s first small wind farm at Burradale. Its distance from established maintenance bases on the mainland was an incentive for the operator to reduce costs by encouraging local suppliers to fill the gap. L&M Engineering took the chance to diversify from its traditional role in marine engineering to meet the specialised requirements of servicing and repairing wind turbines and blades. If the Government paves the way for a large-scale island wind farm, and a grid link for Shetland, it would allow a renewable energy hub to grow and flourish in the islands. 2 Baringa - Economic Opportunities of Renewable Energy for Scottish Island Communities - March 2016

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