The economic impacts of marine energy developments: A case study from Scotland

Delivering the ambitious renewable energy targets set by the Scottish Government will require significant expenditures. Plans have been set out to develop 1.6 GW of marine (wave and tidal) energy capacity between 2010 and 2020 in the Pentland Firth and Orkney Waters area (off the north coast of Scotland) with construction costs estimated at £6 billion. This paper uses multi-sectoral economic models to explore the impact that these (temporary) expenditures could have on the Scottish economy. It is shown that the standard Input-Output (IO) modelling approach significantly overstates the employment and value added impacts compared to Computable General Equilibrium (CGE) methods-in which short-run scarcity of factors of production are explicitly modelled. CGE results (under myopic and forward-looking model specifications) produce smaller impacts during the timespan of expenditures but, unlike IO methods, identify non-trivial “legacy effects” after the expenditures cease.