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Wind turbine bonanza expected in Hull

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Politicians both local and national are overjoyed at an announcement by wind-turbine maker Siemens that it may build an assembly plant in Hull. A jobs bonanza for the region is predicted.

Siemens issued a brief statement earlier today in which the firm announced the selection of Associated British Ports, with its Hull harbourside operations, as preferred bidder for a wind turbine factory that Siemens plans to build in the UK. The statement says:

The parties have agreed to work together to develop plans for the construction of a new Siemens offshore wind turbine manufacturing and export facility at the Port with the aim of executing definitive agreements in 2011.

Siemens indicated that it would establish a wind-equipment plant in the UK in October, promising an £80m investment in a facility which would require around 700 employees. The new factory is expected to assemble and ship out large new turbine towers intended for use in the proposed "Round 3" offshore windfarms in the North Sea.

Licences to develop the Round 3 farms were awarded in January 2010 by the Crown Estate, the arm of the British government which owns rights to the seabed around the UK (among many other things). Nine farms are envisaged with a total installed capacity of 32 gigawatts, which - given normal windfarm load factors - would generate just over 84,000 gigawatt-hours annually.

This production would equate to approximately one-quarter of present day UK electricity demand, or about two per cent of the UK's total energy use.

Last October's £80m commitment from Siemens followed an announcement by the government that it would supply £60m in funding for port improvements associated with windfarm manufacturing.

The earlier news that licences for the Round 3 windfarms had been applied for and granted followed the previous government's announcement that any UK offshore windfarm project agreed by 2015 would benefit from the issue of 2 Renewable Obligation Certificates (ROCs) per megawatt-hour generated, rather than the usual 1.5 (or 1 for an onshore farm). The effect of the government's steadily escalating Renewables Obligation requirement is to drive up electricity prices and channel the extra revenue to windfarm operators* - in essence to place a tax on electricity and use this to subsidise windfarms.

The government, through the Crown Estate, is also paying 50 per cent of the Round 3 windfarm developers' costs through the planning and consent phases. Taxpayers are also likely to have to pay for improvements to the National Grid required by the projects.

Prime Minister David Cameron welcomed the Siemens commitment to develop plans alongside ABP warmly. He told the East Riding Mail:

"Hull is now poised to capitalise on the jobs and investment this will bring.

"These new jobs won't come from Government – they will come from cutting edge businesses, like Siemens."

Local and national media are speculating that thousands more jobs may be created in the North-East of England on top of the 700 in the turbine plant, at suppliers and other businesses. The BBC has chosen a figure of 10,000.

Councillor Carl Minns, leader of Hull city council, told the Hull Daily Mail: "This is huge. It is 10,000 jobs for our area and that is before you look at the knock on effect."

Firm commitments to proceed with the Round 3 windfarms are mostly expected in late 2014, just before the extra-ROCs deadline set by the government expires. The Siemens factory could proceed regardless, as even if Round 3 doesn't appear Siemens will be able to export turbines profitably due to the government's and ABP's investment in the port.

A firm commitment from Siemens to the Hull scheme is expected this year. ®

Bootnote

*A company supplying electricity to end users in the UK must present ROCs equal to 10.4 per cent of the total supplied this year or pay a "buy-out" fine. This will rise step by step to 15.4 per cent in 2014.

Thus an electricity supplier must either generate the necessary ROCs in its own wind farms or other renewable generation facilities, or buy them from renewables owners. From a revenue point of view, a windfarm is primarily a machine for printing valuable ROCs.

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