Vanino, E.

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This is a repository copy of Could the renewable energy transition promote the long-term and sustainable economic development of lagging-behind regions?.White Rose Research Online URL for this paper:https://eprints.whiterose.ac.uk/id/eprint/227247/Version: Published VersionArticle:Vanino, E. orcid.org/0000-0002-4740-1501 (2024) Could the renewable energy transition promote the long-term and sustainable economic development of lagging-behind regions? Regions (19). ISSN 1367-3882https://doi.org/10.1080/13673882.2024.12466423eprints@whiterose.ac.ukhttps://eprints.whiterose.ac.uk/Reuse This article is distributed under the terms of the Creative Commons Attribution (CC BY) licence. This licence allows you to distribute, remix, tweak, and build upon the work, even commercially, as long as you credit the authors for the original work. More information and the full terms of the licence here: https://creativecommons.org/licenses/ Takedown If you consider content in White Rose Research Online to be in breach of UK law, please notify us by emailing eprints@whiterose.ac.uk including the URL of the record and the reason for the withdrawal request. Could  the  renewable  energytransition promote the long-termand  sustainable  economicdevelopment  of  lagging-behindregions?By Enrico Vanino, Associate Professor in Economics, School of Economics,University of Sheffield, UK (e.vanino@sheffield.ac.uk)Renewable energy sources are becoming increasingly important in the energy mixof advanced economies, accounting for about 40% of the electricity produced bothin the US and in the EU in 2022, led by wind and solar generating almost aquarter of total electricity produced (EIA, 2023; Eurostat, 2023). Investing in therenewable energy transition would not only help developed countries to achievenet zero goals, but could also drive economic growth, both nationwide and at thelocal level, potentially addressing regional disparities in economic activity withincountries (Grillitsch and Hansen, 2019; Coenen et al., 2021).In fact, the generation of renewable energy relies on smaller scale, decentralised,and spatially dispersed plants,  which need to be located where the exploitednatural  resources  are  located.  This  is  in  contrast  to  the  traditional  energyproduction  system characterised  by  few  large  plants  located  near  to  wheredemand is, and by the transportation of fuel from where it is located to where it isneeded.  This  creates  a  location  advantage for  places  where  abundant  greenenergy natural  resources  are  located,  which are mostly  rural  and peripheralareas,  as  the natural  conditions favourable for  renewable energy are usuallyconstraints for urban development (e.g. solar in arid areas, wind and tidal inremote coastal locations, hydro in mountainous regions, etc.) (Jenniches, 2018).As  a  consequence,  the  renewable  energy  sector  is  increasingly  viewed as  apotential  source  of  economic  development  for  peripheral,  rural  and  lagging-behind  places  which  are  often  relying  on  mature  and  declining  industries(Munday  et  al.,  2011;  Mauritzen,  2020;  Shoeib  et  al.,  2021;  Brunner  andSchwegman, 2022). Renewable energy investment could affect the local economythrough  several  channels:  paying  rents  and  royalties  (Munday  et  al.,  2011;Castleberry  and  Greene,  2017),  generating  tax  income  for  local  authorities(Brunner and Schwegman, 2022), creating new jobs directly involved with theconstruction and management of renewable energy plants (Leknes and Modalsli,2020; Costa and Veiga, 2021}, and indirectly by generating local demand formanufacturing production of renewable energy components (Gilbert et al., 2023;IPPR, 2024) and other localised services (Shoeib et al., 2021).In  a  research project  funded by  the  RSA we investigate  the  local  economicdevelopment impact of renewable energy investment, considering the effect ofinvestment in offshore wind farms capacity on the economic development of localonshore coastal communities in the UK. We focus on the case of offshore windenergy in the UK for several reasons. First, because offshore wind is the firstsource of renewable energy in the UK, making it one of the global leaders in theworld  in  this  technology.  Offshore  wind  generates  around  36% of  the  totalelectricity produced in the UK, starting from the first small farms installed in theearly 2000s, and booming to 1.3 gigawatts (GW) by 2010, 15 GW in 2022, with aprojection of producing half of the UK’s electricity by 2030 (ONS, 2021). This is aworldwide trend, with China surpassing the UK as the world leader in 2022 with30 GW of installed capacity, and the US planning to reach 30 GW of offshore windenergy capacity by 2030 (Global Wind Energy Council, 2023). Secondly, the UK ischaracterised  by  large,  persistent  and  widening  spatial  economic  disparitiesacross places, driven by London’s outstanding role as a highly productive globalcity, while a large number of regions are lagging behind with low productivity andhigh unemployment levels,  making the UK one of  the most spatially  unequalcountries in the OECD (Martin et al., 2016; McCann, 2020; Overman and Xu,2022). Offshore wind farms are currently mostly located off the shore of some ofthe  most  deprived  areas  in  the  country,  with  significant  potential  economicbenefits for some of these places (Curran et al., 2022). Despite being owned andbuilt by foreign-owned companies, these farms could still create large economicdevelopment opportunities for workers and independent small businesses in theseareas, in particular during the 20-25 years of the operations and maintenancestages (Glasson et al., 2022).Using granular  data on the location,  characteristics,  production capacity  andgeneration of  all  offshore wind farms in the UK, we develop an econometricanalysis modelling the suitability of offshore locations for wind farms based on theexogenous natural characteristics needed for the installation of turbines (such aswater depth, wind speed, distance to shorelines, etc.). We then link offshore windfarms with information on the economic performance of onshore local labourmarkets, based on the location of ports and other infrastructures servicing thesefarms, in order to estimate the causal effect of investment in offshore wind energyon local economic development.Our findings suggest a positive effect of offshore wind energy investment on thelocal  economy  of  remote  deprived  communities.  In  fact,  increasing  installedcapacity by the size of an average offshore wind farm generates a 10% growth inemployment and a 20% increase in firm entry in industries operating nearby theinfrastructure servicing these farms. This effect is mainly driven by industriesrelated to the offshore wind energy sector, and in particular by high-productivityservices, given the limited manufacturing capacity in this sector in the UK, butnot as much by local demand services. In addition, investment in offshore windenergy have beneficial impacts for deprived areas where they are usually located,but not for the most deprived areas, suggesting that a minimum level of economicdevelopment  is  needed  for  the  local  community  to  ripe  the  benefits  of  thisinvestment. Investment in renewable energy brings long-term benefits for localcommunities,  and  are  not  only  temporary  shocks  linked  to  the  constructionperiods,  as  operations  and  maintenance  activities  and  the  emergence  ofagglomeration economies in these areas promote industrial clustering and long-term economic development.The intertwining of net zero and place-based policies could promote sustainableand  long-term  positive  effects  for  the  economic  development  of  left-behindregions, in particular, if a stable, planned and long-term commitment is made byGovernments  towards  investment  in  renewable  energy  farms  projects  in  thefuture, following their pledge to increase renewable energy generation to achievenet-zero. These effects could go beyond the simple flow of investments and jobsfor the construction of the green energy infrastructure, as the development ofnew comparative advantages in these sectors would create incentives for firmsand high-skilled workers  to  permanently  relocate to  remote areas where thenatural resources are located, creating clustering of green energy firms whichcould exploit benefits from agglomerating together.ReferencesBrunner, E. J. and Schwegman, D. J. (2022). Commercial wind energy installationsand local economic development: Evidence from U.S. counties. Energy Policy,165:11299.Castleberry, B. and Greene, S. (2017). Impacts of wind power development onOklahoma’s public schools. Energy, Sustainability and Society, 7(34):1–14.Coenen,  L.,  Hansen,  T.,  Glasmeier,  A.,  and  Hassink,  R.  (2021).  Regionalfoundations of energy transitions. Cambridge Journal of Regions, Economy andSociety, 14(2):219–233.Costa, H. and Veiga, L. (2021). Local labor impact of wind energy investment: Ananalysis of Portuguese municipalities. Energy Economics, 94:105055.Curran, B., Martin, R., Muller, S., Nguyen-Tien, V., Oliveira-Cunha, J., Serin, E.,Shah, A., Valero, A., and Verhoeven, D. (2022). Growing clean: Identifying andinvesting in sustainable growth opportunities across the UK. Technical report,The Resolution Foundation.Gilbert,  B.,  Gagarin,  H.,  and  Hoen,  B.  (2023).  Distributional  equity  in  theemployment  and  wage  impacts  of  energy  transitions.  Working  Paper  31608,National Bureau of Economic Research.Glasson, J.,  Durning, B., Welch, K., & Olorundami, T. (2022). The local socio-economic  impacts  of  offshore  wind  farms.  Environmental  Impact  AssessmentReview, 95, 106783.Grillitsch, M. and Hansen, T. (2019). Green industry development in differenttypes of regions. European Planning Studies, 27(11):2163–2183.Institute  for  Public  Policy  Research  (2024).  Manufacturing  matters:  Thecorners tone  o f  a  compet i t i ve  g reen  economy .  Ava i l ab le  a t :https://www.ippr.org/articles/manufacturing-matters.Jenniches,  S.  (2018).  Assessing  the  regional  economic  impacts  of  renewableenergy sources – a literature review. Renewable and Sustainable Energy Reviews,93:35–51.Leknes, S. and Modalsli, J. (2020). Who benefited from industrialization? the localeffects of hydropower technology adoption in Norway. The Journal of EconomicHistory, 80(1):207–245.Martin, R., Pike, A., Tyler, P., and Gardiner, B. (2016). Spatially rebalancing theUK economy: Towards a new policy model? Regional Studies, 50(2):342–357.Mauritzen,  J.  (2020).  Will  the  locals  benefit?:  The  effect  of  wind  powerinvestments  on  rural  wages.  Energy  Policy,  142:111489.McCann,  P.  (2020).  Perceptions  of  regional  inequality  and  the  geography  ofdiscontent: insights from the UK. Regional Studies, 54(2):256–267.Munday, M., Bristow, G., and Cowell, R. 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Could the renewable energy transition promote the long-term and sustainable economic development of lagging-behind regions?

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Could the renewable energy transition promote the long-term and sustainable economic development of lagging-behind regions?

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