The Socio Economic Impact of Renewable Energy Technologies

Early rural electrification programmes, relying upon grid connected power, were once hailed as the catalytic drivers of rural development. However experience has shown that their impact upon indigenous rural growth has been minimal and the associated benefits have not been forthcoming. Alternatively, the advent of commercially available renewable energy technologies has injected renewed optimism into the RE camp. Because they are able to devolve many of the income and employment opportunities associated with energy generation to the local community, it means that pre-electrification programmes using decentralised renewable energy systems, have the potential to succeed where conventional energies have failed. The aim of this study is therefore to assess their propensity to effect socio-economic reform via the positive benefits they procure on local employment and income distributions. To this end, the effect of a capital investment in renewable energy generation is evaluated under a Keynesian Income Multiplier methodology. The model formulation attempts to capture the full income and employment effects derived from the installation, whilst also accounting for capital import leakages, induced investment opportunities, labour markets extensions and in-migration. The model is applied to the installation of a 3MW windfarm on the Isle of Islay. To establish the economic base, Islay’s existing socio-economic structure is detailed in terms of economic activity and industrial distribution, as is the windfarm’s expenditure. Although the windfarm does not generate substantial long term employment effects or any significant induced investment, its local expenditure in respect of land rental is found to fulfil its role as a driver of indigenous growth. Supplementary comment is thereafter given in respect of the model’s application in less developed countries, where it is noted that many of the limitations found in the Islay case study, do not present the same negative ramifications in less developed countries. The study concludes that if renewable energy technologies are to stimulate rural indigenous growth, then it is not simply enough to reconcile a region’s natural resource base with the local energy requirements, but rather, they should attempt to maximise local participation in terms of labour and/or products in both the long and short term.