The Downstream Impacts of OE in Ireland Dr. Karyn Morrissey, SEMRU, NUI Galway

Economics of Ocean & Marine Energy Workshop, 21st of April, 2010, HMRC, UCC, Cork

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Presentation Overview ► The

Marine & Energy Sector in Ireland ► Ocean Energy ► Methodology ► Current Direct & Indirect Effect on the Irish Economy ► Potential Downstream Impacts ► Future Work by SEMRU in OE Economics of Ocean & Marine Energy Workshop, 21st of April, 2010, HMRC, UCC, Cork

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Marine Economy ►

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The Marine Economy was estimated at €3bn in Ireland & provided 21,824 jobs (Full-time Equivalent), representing 1.2% of total employment in 2003 Sector can be divided into 3 main groups,   

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Marine Resources – Fishing, Water Transport, Seaweed, RE Marine Manufacturing – Shipbuilding, Marine Equipment Marine Services – Marine Construction, Environmental Consultancy, Tourism

Research - significant development opportunities in the Irish Marine Sector Of Particular interest – Marine Renewables Economics of Ocean & Marine Energy Workshop, 21st of April, 2010, HMRC, UCC, Cork

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Irish Energy Economy ►

The focus on renewable energy by government and industry is directly related to a number of issues.  Security of supply & the reduction of GHGE  The global economic downturn. ► The

creation of a new economically and environmentally sustainable industry sector may be seen as a means of stimulating many stagnate economies.

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The Irish energy sector employs over 2,570 individuals. It had a turnover of over €1bn and contributed €600m to Irish GDP in 2006. Irish companies - established market share in the supply of equipment and services to the Irish and international energy sector. Economics of Ocean & Marine Energy Workshop, 21st of April, 2010, HMRC, UCC, Cork

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Ocean Energy ► ►

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Ocean energy is an emerging technology and is in early stage development. Considerable potential for economic growth & job creation in the development, manufacturing & deployment of marine renewables in Ireland & abroad. However, although the greatest gains for the sector are in the long-term, the OE Sector is currently providing economic growth within Ireland Expenditure & Employment by OE companies is generating both direct & indirect activity within the Irish Economy Important to Capture this Activity

Economics of Ocean & Marine Energy Workshop, 21st of April, 2010, HMRC, UCC, Cork

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Methodology ► ►

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Holistic Approach is required to accurately represent the Sectors Potential I-O analysis allows one to statically analyse the direct, indirect and induced effect of a sector or sub-sector & upstream and downstream linkages between sectors One can derive Multipliers to examine the impact a sector has on the economy as a whole The CSO provides multipliers for each sub-sector of the economy through their Input-Output Tables  I-O tables were last produced in 2005

Economics of Ocean & Marine Energy Workshop, 21st of April, 2010, HMRC, UCC, Cork

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Direct Expenditure ►

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The companies already active in these two areas of OE are currently contributing to the Irish economy via direct employment, investment and the purchasing of goods and services within Ireland. Survey of Ocean Energy Companies shows that in 2008 & 2009, expenditure by these companies was approximately €5m & €3.8m, respectively This represents direct expenditure within the Irish economy of approx. €8.8m over the last 2 years However, this expenditure stimulates economic activity throughout the area, either through direct purchasing or employment, or through knock-on effects that arise from the first round of spending.

Economics of Ocean & Marine Energy Workshop, 21st of April, 2010, HMRC, UCC, Cork

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Impact of the OE Sector ►

Sub-Sectors which benefitted from this direct expenditure include;   

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Engineering Consultants Materials Manufacturers R&D Companies

High Added-Value Sectors, with proven export experience It must be further noted that the recession during this period means that, as spare capacity in the economy is brought into production, the net value of these benefits has increased & represents increased economic activity that may not have been generated without OE expenditure I.E. less likely to be displacement effects Economics of Ocean & Marine Energy Workshop, 21st of April, 2010, HMRC, UCC, Cork

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Multiplier Effects ► Using

the Output Multipliers for the appropriate NACE Sectors, primarily  Engineering & Consultancy Services

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OE Sector in 2008 & 2009 generated €6.5m and €4.3m to the Irish Economy. ► This represents additional indirect expenditure of €1.5m and €500k in 2008 & 2009, ► Or €2m over 2 years ► Multipliers may also be applied to employment levels Economics of Ocean & Marine Energy Workshop, 21st of April, 2010, HMRC, UCC, Cork

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Employment ► ►

Currently there are approximately 85 individuals employed within the Marine Renewable Sector (FTE) Employment Multipliers may also be derived from I-O Tables  The I-O does not contain a Renewable Category  Use Employment Multiplier for Oil & Gas

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Multiplier - 1.78, for every one person working/producing output in the OE, this generates 66 FTE employment in the wider economy Direct & Indirect Employment for the OE sector was 155 FTE in 2008 and 2009

Economics of Ocean & Marine Energy Workshop, 21st of April, 2010, HMRC, UCC, Cork

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Future Downstream Impacts ► RPS

– Outlined 8 Stages in the Lifecycle of an OE project ► Development Stage – Discrete Timeframe for investment – Multiplier Effect is discrete ► As time progresses, continuous timeframe, Lifecycle stages will overlap, Multiplier Effect increases with resource capacity ► The next figure shows the interaction of the OE sector with the wider economy at each stage of development & the potential downstream multipliers for each stage of Development Economics of Ocean & Marine Energy Workshop, 21st of April, 2010, HMRC, UCC, Cork

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Adapted form RPS Report, 2009

M - 1.513 M - 1.513, 1.234, 1.245, 1.503

M – 1.513, 1.277

Environmental Consultants Legal, Financial, Insurance, Public Admin

Environmental Consultants, Manufacturing Feasibility Study/Surveying Planning & Licensing O&M

OE LIFECYCLE

Design

Technology Developer

M -1.903 Assembly & Installation

Manufacture Testing & Certification

Contractors, divers, engineers

Manufacturing Manufacturing, Testing Facilities

M - 1.513, 1.234, 1.245

M – 1.277 M - 1.277, 1.903

Development of an Indigenous Supply Chain

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the Development of an indigenous Supply Chain for the OE sector depends on a number of key issues  Government Support ► Remove

barriers to deployment - Ease of Access to and transparency in Licensing, etc ► Provide sufficient incentives & returns to developers, these have knock-on effects to downstream companies ► Provide incentives & understanding of the sector to potential downstream companies

 Training & Education of Highly skilled Irish graduates with marine knowledge ► Large

Employment Multipliers within the Energy Sector, ensure that the effect is applied to Irish employees

Economics of Ocean & Marine Energy Workshop, 21st of April, 2010, HMRC, UCC, Cork

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Future Work – Niall Farrell ► ►

Future Projections of Output & Employment Effects of OE Spatial Analysis  SMILE – Spatial Microsimulation Model that allows one examine the effect of Policy Change/Sector Development at the National & SubNational Level  Downstream linkages of an indigenous Supply Chain: Regional Analysis  Potential Scenario Analysis: Will take into account feasible future supply chain scenarios based on industry consultation, potential policy incentives and likely areas of expansion ► This will primarily comprise of varying degrees of:  Expansion of current capacity in the manufacture of standardised components  New Plant for the domestic production of specialised components  Domestic Assembly and Installation ►

 Provides insight into distributional affect of potential future impacts

Economics of Ocean & Marine Energy Workshop, 21st of April, 2010, HMRC, UCC, Cork

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Conclusion ► ► ►

OE is continually described as an emerging industry in both technical & economic terms However, work to date has generated considerable economic benefit to the Irish Economy Activity has occurred in a period of economic recession resource capacity is currently under-utilised  Little displacement effects

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Scenario analysis will provide us with the figures for direct & indirect future activity However, this paper documents both the on-going and potential impact of OE in turns of its downstream impacts on the Irish Economy – particularly with the regards to the development of an indigenous supply chain base.

Economics of Ocean & Marine Energy Workshop, 21st of April, 2010, HMRC, UCC, Cork

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Thank you for your time…

Economics of Ocean & Marine Energy Workshop, 21st of April, 2010, HMRC, UCC, Cork

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