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Why we need a new approach to predicting renewables job creation

The current method for calculating how many jobs a project will bring is inaccurate. There is another way, writes Alun Roberts

Major infrastructure projects of all kinds are highly political because large sums of money are involved, and money means jobs. For a contentious area such as energy investment, this means that all announcements are accompanied by claims of significant job creation. These claims typically have two things in common: the numbers are extravagantly high and it is not clear how they were calculated. As a result, there is a significant danger that people are highly sceptical unless they strengthen a case they advocate.

Developers and public bodies often want to understand the business opportunities from renewable energy projects, particularly in offshore wind. A natural question to ask is how many jobs those opportunities create. The difficulty is that it is hard to associate the figures from published studies with jobs on the ground. Because wind is a relatively new sector, little of the industry data collected by governments, such as by the UK’s Office of National Statistics, can be easily mapped onto the wind industry supply chain. To take an example, jobs from wind tower manufacture would need to use generalised data on “manufacture of basic iron and steel” and “manufacture of fabricated metal products”. This would tell you that wind tower manufacture in the UK would create several hundred jobs, despite the fact that the steel plate for towers has not typically been produced in the UK.

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A few years ago, I was asked by the UK’s Offshore Wind Programme Board to develop a methodology for measuring British content in offshore wind farms. It quickly became apparent that once you have developed a structured process for measuring where the value was generated, it could be readily extended to calculate how many people it took to generate that value. To do this, we started working with the economist Steve Westbrook of the University of the Highlands and Islands.

Economists typically talk in terms of direct, indirect and induced jobs, in which “direct” relates to work undertaken by a contractor’s own staff, “indirect” relates to employment generated by the purchase of supplies and services by the contractor in the impact area, and “induced” is generated by the spending in the impact area by direct and indirect employees. By analysing how much is spent on a project, therefore, we are considering the direct and indirect value-added. All we need to do to calculate impact, then, is to understand how much profit is being made in the supply chain, how much people get paid in each part of the supply chain and what it costs a company to employ each person. Once you understand where the work is being done and research these inputs, the number of created jobs can be calculated.

The beauty of this approach is that is transparent. The inputs are all numbers that someone in the industry can understand and validate, and the jobs can be traced to specific activities or companies. There are no mysterious multipliers generated from generalised government data. The outcome can be job figures that have credibility or can be quickly challenged.

The work relies on a deep understanding by specialist industry experts, and professional economists still have a valuable role in implementing the methodology. By working together, we believe that this approach applied within and between sectors can restore faith in job forecasts and create robust evidence for political decisions.​

Alun Roberts is associate director at consultants BVG Associates

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