A paper released by LSE economist Dr Tony Hockley argues that UK policy intended to create jobs in offshore wind energy may have the opposite effect. Government demands that bidders for wind farm development must have approved “supply chain plans”, showing their local jobs and local content, will undermine the sector’s viability once current subsidies come to an end.
Dr Hockley draws on his experience in tackling state aid and state protectionism in the airline industry to highlight the risks for such “techno-nationalism” in industrial policy. He argued that: “Offshore wind energy is an attractive option for the UK, but it must make dramatic cost reductions if it is to play a significant part in the long-term energy mix, once the current subsidies are removed. Current government policies send mixed messages that discourage the investments required to innovate and reduce costs.”
The paper highlights potential arguments for a Government commitment to offshore wind energy beyond 2020, as a spur to private investment, and a new emphasis on a competitive supply chain, instead of a local supply chain.
In a foreword to the paper, Frank Vibert warns against policies that may create barriers to entry. He argues that competition needs to be a clear objective, pursued at all stages in the “chain of intermediation”, as it is in the financial services sector.
Commenting on the report, Dr Hockley said: “In the end the subsidised and protected flag carriers airlines had to shed jobs or close. But competition enabled cost reductions that increased the capacity for air travel. Employment growth came about because of competition. I would expect a similar result from a stable, transparent and open market in offshore wind energy. It is a young industry, with considerable potential for innovation free from well-intentioned but harmful techno-nationalism.”
