TODAY’S STUDY: WHAT OFFSHORE WIND CAN DO

South Carolina Wind Energy Supply Chain Survey and Offshore Wind Economic Impact Study

Elizabeth Colbert-Busch, Robert T. Carey, Ellen Weeks Saltzman, July 2012 (Clemson University Restoration Institute and Strom Thurmond Institute)

Key Findings

The purpose of this project is to assess the economic impact of the wind energy industry on the state of South Carolina. To do so, we needed to complete two main tasks. The South Carolina Wind Energy Census identified South Carolina firms in the wind energy supply chain.

The second task estimated the current and potential economic impact of the wind energy industry on South Carolina. The economic impact analysis has two components: the estimated economic impact of installation and operation of a 1000 MW wind farm off the coast of South Carolina, and the estimated economic impact of the state’s existing wind energy supply chain, as identified in the South Carolina Wind Industry Census. Key findings are presented below.

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South Carolina Wind Energy Census

The 2012 South Carolina Wind Industry Census is a survey of manufacturers and service providers in the wind energy supply chain in South Carolina. This survey was designed to obtain information about the composition and characteristics of the wind energy supply chain in South Carolina, and to measure the number of jobs involved.

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Employees and Jobs

• Thirty-three firms1 responding to the South Carolina Wind Industry Census reported 1,134 of their employees spend part or all of their time on wind energy related production or service activities. These wind energy employees represent close to 14% of total employment in these 33 firms.

• Employment in wind energy related production or service activities ranged from a single employee at seven firms to 400 employees at one firm. Most firms reported 10 or fewer wind energy employees. The median firm had five employees in wind energy activities.

• South Carolina wind energy employees in management, professional, scientific, and technical jobs made slightly above the state’s average annual salaries for these types of jobs. Average earnings reported by survey respondents were $78,308 a year for employees in these jobs. Statewide, salaries range from $62,406 a year for management, scientific, and technical consulting services to $73,005 for architectural and engineering services.

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Firm Characteristics

• Engineering Procurement & Construction (19 firms) and Component or Material Supplier (13 firms) were the top two primary firm functions selected by 26 firms. Six respondents identified consulting (including environmental, energy, permitting, and site selection) as their firm’s primary function.

• Less than 10% of respondents selected Wind Turbine Original Equipment Manufacturer (one firm), Developer (four firms), or Operations & Management (2 firms) as their firm’s primary function.

• Professional, Scientific, and Technical Services (13 firms) and Manufacturing (11 firms, including durable goods wholesalers) and are the two industry sectors most frequently represented by firms in the South Carolina wind energy supply chain.

• Engineering services (6 firms) and other consulting services (6 firms) were the most frequently occurring wind energy specific activity in South Carolina. Eight firms manufactured products used in the wind energy supply chain, such as power cables, seals, bearings, and lubricants, among others.

• All 38 firms reported a market for their products and services in the United States.

• Canada (22 firms), Western Europe (20 firms) and Mexico (19 firms) were the dominant international markets identified by respondent firms.

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Business Climate

• About 84% of respondents expected their firms to either increase capital investment above current levels (16 firms) over the next one to five years, or keep it about the same (16 firms).

• Twenty-five of 38 respondents expected their firms to increase employment over current levels in South Carolina, and an additional 11 respondents expected employment levels to remain the same. No respondents expected their firm to decrease employment in the next one to five years.

• Nearly all respondents expected their firms to either add new products or services over the next one to five years (28 firms) or to stay at about the same level (8 firms).

• South Carolina’s quality of life (18 firms) and existing firm location(s) in the state (17 firms) were the most frequently selected factors affecting firm location decisions.

• Over one-third of respondents (14 firms) selected a competitive and skilled workforce as an important factor in their firm’s decision to locate in South Carolina, followed by supportive state regulations (11 firms).

• Economic development incentives (5 firms) and access to finance (3 firms) were the least frequently identified factors affecting firm location decisions.

• Industry volatility was selected by 27 respondents as a risk facing their company at this time.

• Domestic tax policies and domestic industry competition were the next four most common risks facing respondents, headed up by the risk posed to firms by inconsistent renewable energy targets among states (16 firms).

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The Economic Impact of Wind Energy on the State of South Carolina

South Carolina’s Wind Energy Supply Chain

• The South Carolina Wind Industry Census identified 1,134 direct jobs involved in wind energy related production or service activities in 2012. These direct jobs in the wind energy supply chain are estimated to generate an additional 1,797 jobs statewide through indirect and induced effects for a total employment impact of 2,931 jobs in 2012. South Carolina’s existing wind energy supply chain has an estimated jobs multiplier of 2.6.

• South Carolina’s existing wind energy supply chain generated an estimated $530 million in total output in the state in 2012, including indirect and induced effects.

• South Carolina’s wind energy supply chain generated an estimated annual net fiscal impact of $29 million for state government and $21 million for local governments around the state in 2012.

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Proposed 2,000 MW Offshore Wind Farm

Turbine Component Manufacturing. During the wind farm development period between 2016 and 2025, wind turbine components for 1,000 MW of electric power generating capacity will be manufactured for installation in the proposed offshore wind farm. This level of manufacturing activity would generate an average annual estimated economic impact on the state of South Carolina as follows:

 293 total jobs per year (direct, indirect, and induced),

 $18.3 million in wages per year,

 $54.9 million in output per year, and

 $5.7 million in combined state and local government revenue per year.

Turbine Installation. The economic impact on the state resulting from the installation of 1,000 MW of wind turbine electric generating capacity off the South Carolina coast takes place beginning in 2016, the year that the first 40 MW of turbines are installed. Over the 10 year wind farm development period, installation activities alone would generate an estimated:

 3,329 average annual total jobs per year (direct, indirect, and induced),

 $163.1 million in wages per year,

 $270.7 million in output per year, and

 $51.2 million in combined state and local government revenue per year.

Wind Farm Operations & Maintenance (O&M). The post-construction (2026-2030) average annual economic impact to the state of O&M activities for a 1,000 MW offshore wind is estimated to be:

 678 total jobs per year in South Carolina (direct, indirect, and induced),

 $41.8 million in wages per year,

 $115.2 million in output per year, and

 $13.4 million in combined state and local government revenue per year.

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Aggregate Economic Impacts. The construction and operation of a 1,000 MW wind farm off the South Carolina coast will have a large economic impact on the state, particularly during the 10 year construction phase.

 3,879 total jobs in the average year in South Carolina (direct, indirect, and induced),

 $1.96 billion in wages over the 10 year period 2016 to 2025,

 $1.93 billion in disposable income 2016 to 2025,

 $3.66 billion in output 2016 to 2025, and

 $616.2 million in combined state and local government revenue 2016 to 2025.

Employment Impacts by Industry Sector. The construction sector is predicted to see the largest impacts during the installation of the wind farm. During the ongoing O&M phase, the largest predicted impact is on professional services. Some sectors with significant employment effects are those associated with induced effects, such as food services and health care.

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Conclusion

While Europe has garnered much experience in offshore wind energy generation, it is a new endeavor in the United States. The opportunity clearly exists for South Carolina to take a leading role in offshore wind energy development, both in terms of wind farm location, supply chain, or both. In this study, we investigated the extent to which the state’s existing wind energy supply chain and a 1,000 MW offshore wind farm would impact the state’s economy and fiscal situation. These impacts are indeed significant. In 2012, South Carolina’s existing wind energy supply chain provided 1,134 jobs in wind energy manufacturing or service provision activities. These direct jobs generated 1,797 additional jobs in the state economy through indirect and induced effects. The wind energy supply chain contributed $530.2 million in the value of output to the state’s economy, and generated $50.4 million in net revenue for state and local governments.

If constructed, a 1,000 MW offshore wind farm would have a much larger economic impact on the state of South Carolina, adding an estimated 3,900 total jobs in the average year (direct, indirect and induced) during the 10 year construction period and 680 jobs in the average year after that for ongoing O&M activities. Between 2016 and 2030, construction and operation of the proposed wind farm would contribute close to $2.2 billion in wages and $4.2 billion in the value of output to the state’s economy. State and local governments would receive an estimated $683 million in total.

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In order to illustrate the upper bounds of what might be possible, we constructed one final economic impact model assuming that South Carolina had the production and service capabilities to capture 100% of the manufacture, installation, and O&M activities associated with a proposed 1,000 MW offshore wind farm in all related industry sectors.

Under this scenario, the total impact per MW installed per year would be approximately 75 jobs, $3.6 million in disposable income, and $6.6 million in output statewide. The net fiscal impact per MW installed per year would be approximately $665,000 for state government and $486,000 for local governments. For an installation schedule of 100 MW per year, say, the economic impacts associated with component manufacture, turbine installation, and O&M would add 7,500 jobs and hundreds of millions to the state’s economy in income and output. Such a state of affairs may be extremely unlikely, but demonstrates the economic potential for South Carolina that exists in offshore wind energy.

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