The economic potential of onshore renewables
Author: Monika Paplaczyk, Senior Investment Manager, Thrive Renewables
The Prime Minister has frequently extolled us to ‘build back better’ as we seek to rebuild the economy after the appalling global tragedy of Covid-19.
Developing and building onshore renewable energy projects should be a key part of the UK’s economic revival. They are fast to deploy, cost-efficient, and deliver much needed zero carbon electricity. A much-needed boost as we seek to make a speedy recovery and deliver positive long-term change.
“Developing and building onshore renewable energy projects should be a key part of the UK’s economic revival”
Our analysis shows the astonishing economic potential of onshore renewables:
- £66.5 billion potential investment opportunity for the UK between now and 2035 – £4.75 billion per year (£2.75 billion onshore wind)1
- Unlocking this potential could deliver:
- 45,000 new jobs2 and;
- £28.9bn pumped into the UK economy by 20351
- And save UK consumers up to £1.5bn a year.4
- The UK’s legal obligation to achieve net zero carbon emissions is providing a significant investment opportunity – 5GW of onshore renewables must be rolled out every year between now and 2035 to be on track. This is more than triple the amount approved over the last year.1,3, 5
As everyone in our sector knows, an unfavourable policy environment over several years has prevented new projects being developed and built. Our analysis recommends two simple and cost neutral actions that the UK Government should implement urgently to drive new investment and speed up recovery:
UK energy policy is like crazy paving, with market fundamentals skewed by a complicated cocktail of legacy interventions. New onshore renewables are the only generation technologies entirely reliant on selling electricity on the open market. Any technology outside the Contract for Difference (CfD), capacity market and other support mechanism has to rely solely on the wholesale electricity market, which because of the ad hoc interventions is becoming an increasingly distant relative of the marginal cost of capacity. This means long-term capital intensive decisions are very challenging to make, hence the suppressed speed of deployment.
“The Government must show clear support by delivering long-term, simple energy policies that allow investment decisions to be based on fundamentals”
The Government must show clear support by delivering long-term, simple energy policies that allow investment decisions to be based on fundamentals. Certainty over mechanisms, such as CfD auctions, and distribution network connection planning and cost structures, would support the business case and encourage investment.
Remove planning blockers
Unlike any other form of development, new onshore wind applications in England must show to planners that the project is sited within an area designated for wind development by the local authority, within the local plan. However, the lifecycle of local plans can be 30 years, and many have therefore not been updated since that requirement came into place in 2015.
“Two-thirds of local authorities have declared a climate emergency but may not yet have been able to revise their local plan”
Two-thirds of local authorities have declared a climate emergency but may not yet have been able to revise their local plan, so they cannot grant planning consent to well-sited, appropriately sized wind farms. By removing this one piece of red tape from the National Planning Policy Framework, the UK Government could unleash investment and contribute to its own net zero targets.
Renewables will power the all-important green, sustainable economic recovery. A more forward looking policy environment could enable that to happen almost immediately, benefitting jobseekers, the climate and the economy.
 Trade bodies (RUK, STA and BHA), are suggesting 77MW of the required growth to hit net zero can be delivered by onshore renewables by 2035. This will require building 5.5GW of onshore renewable capacity annually between now and 2035. This creates an annual investment opportunity of £4.75bn. Of this £2.75bn is required to deliver onshore wind, £1.4bn Solar and £0.6bn Hydro (CAPEX estimates based on current market procurement). It is estimated that over 40% of the development and capital expenditure is UK content. The proportion of UK content renewable projects grows in the operational phase, estimated to be 66% for onshore wind. https://bvgassociates.com/economic-benefits-onshore-wind-farms/. The UK content of the development and construction of ground mounted solar PV is estimated to be 46%, growing to 68% in the operational phase (https://www.solar-trade.org.uk/sta-calls-for-government-to-commit-to-2030-solar-target-to-drive-green-recovery/ ). The BHA estimate that 70% of CAPEX and OPEX of small hydro is UK content (http://www.british-hydro.org/hydro-facts/)
 Job creation calculations based on estimates from industry associations. Wind 18,800, Solar 22,800, Hydro 3,250
 The Committee on Climate Change has consistently called for onshore wind and solar to be included in the Government’s renewable energy strategy. Total UK electricity supply will need to double by 2050, and electricity from low-carbon sources will need to quadruple, in order to deliver the UK’s commitment to become a Net Zero emissions economy by that year. https://www.theccc.org.uk/2020/03/03/ccc-welcomes-government-re-commitment-to-onshore-wind-and-solar/
Saving calculated using Arup (2018) Cost of Capital Benefits or Revenue Stabilisation via a Contract for Difference: https://www.arup.com/perspectives/publications/research/section/onshore-wind-financing, Multiplied by the anticipated growth of onshore renewable projects from RUK, STA and BHA, and the number of UK households https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/families/adhocs/005374totalnumb.