The economy of an Independent Wales.

Wales wealth and how to get it,

Wales' abundance of energy. And its part in the economy.

Energy.

To recap.

An Independent Wales can raise the money to invest in its future Plan, by running a deficit.

It can sustain that deficit as a sovereign nation, with a sovereign currency.

As such, it can guarantee its financial commitments.

But not any old deficit, but managed spending to specific aims that will improve the Welsh economy and the wellbeing of its people.

Energy is the first area that government spending is to be directed.

Not just energy, but green renewable energy.

We start here for two very good reasons.

It is central to an Independent Wales economy.

The natural resources to generate such energy, exist in abundance in Wales.

This from the Engineer, a leading UK engineering publication,

The Celtic Sea and coastal water around Wales have a higher concentration of renewable energy resources, than perhaps anywhere else on the planet……..

Wales' geography, particularly tidal resources, means that every form of marine energy is abundant.

This is reinforced by initial studies by Carbon Trust, Marine Energy Wales and THe Crown Estates, which found that 14 GigaWatts of capacity was available through, Offshore Wind [ 2 GigaWatts ] Marine and tidal resources [ 8 GigaWatts ] and floating turbines [ 4 GigaWatts ], while, the Crown Estates finds, a further 20 GigaWatts potential from floating turbines by 2045.

So 14 GigaWatts  capacity were already identified before Independence. That is 50% more than Wales total energy usage, from all sources.

Wholesale energy prices fluctuate daily, the average price projection by Statsta 2024 to 2040 shows a price of £80 per MegaWatt/hr, over that period.

That would value our 14 GigaWatt capacity at £10 billion per year.

In addition to these new sources, there is the income from existing output estimated to be approximately £1.3 billion at present prices, in licence fees and taxation that now will come to Wales.

With the expansion of offshore energy generation, Onshore wind generation will need to become a less commercial source being mainly confined to domestic, community and turbines directly associated with businesses.

Solar energy, an important contribution and will continue to be expanded from its current 1 GigaWatt capacity. However, insofar as its place in the future economy,  commercial ground based solar farms take up 5 acres to produce each MegaWatt of electricity. That is 5000 acres of land per GigaWatt.

Statsta also estimates that there are over 55000 solar sites in Wales, compared to 700 wind power, however wind produces over five times as much electricity. 

Hydroelectric also contributes to Wales' energy generation mix, but it too seems a Cinderella source, suffering lack of development and investment..

Although a major source in countries such as Norway, no project larger than 2 MegaWatts has been developed in Wales.

The largest in Wales and England is a Rheidol near Aberystwyth, producing enough electricity annually to power 25000 homes.

There are smaller scale installations located at the mid Wales reservoir complex, but the Welsh government priority  with regard to hydroelectrics, seems to be concentrated on community or individual installations.

Solar, hydroelectric and onshore wind, will continue to make a valuable contribution to Wales renewable energy requirements and in many cases can be expanded, it is offshore wind and marine and tidal sources, together with perhaps green hydrogen, [ produced using renewable electricity ] that will provide the major, near and mid term energy generation,  both in terms of renewable and economic impact.

Wales coastal energy resources.

We start with some caveats.

Wales energy, as with all its natural resources, will be publicly owned.

It is the sole guarantee of maximum return,  control and energy security.

While an Independent Wales would in any case receive the tax revenues and licence fees, the maximum returns are in the profit.

Control would mean that the energy produced can be used in more innovative ways as we shall see

The second caveat is a recognition of the position we start from with regard to utilising those resources and the need for ambitious and speedy action from a new Welsh government.

In spite of the obvious scale of Wales energy potential, the ambition to release that potential has been limited.

Much of this can be attributed to the lack of influence the Welsh government has in offshore developments, as they are largely driven by UK policy and UK investment decisions.

Nevertheless, the fact is, that the total amount of renewable capacity is falling and although the total amount of capacity installed trebled in the period 2008-2012, it doubled in the period from 2012, it has only risen by 11% in the last 5 years,

It is also the case that in spite of the potential off the Welsh coast, offshore wind contributes just 28%  [ 730 mw ] of Wales renewables.

Since the Gwynt y Mor wind installation in 2015 of 576 MegaWatts, there have been no large scale projects.

Floating turbines remain very much in the development stages, while marine and tidal projects remain untapped.

An Independent Wales government would need to address these shortcomings with much more ambition.

The third caveat is that when we refer to renewable energy targets, that is with regard only to electricity.

It is only electricity that Wales produces and all that it presently controls.

We should also be aware that electricity accounts for less than 20% of Wales total energy usage, the major part being he fossil fuels of oil and gas { 43% and  36% ]

None of these caveats affect the potential wealth generation for Wales in the market for renewable electricity.

They do however affect Wales ability to fully control energy policy and also Wales ambitions to achieve energy self-sufficiency,  security and carbon free environment..

To address the first [ and second ]   energy, together with other natural resources, must be publicly owned.

 With regard to energy, a model similar to that of Norway seems a good example of best practice.

Statkraft is the Norwegian National Energy Company, wholly owned by the government of Norway.

It acts independently, with a brief to maximise the wealth from this sector for the benefit of the Norwegian nation.

It remains subject to the government's regulation and guidance on environmental issues.

Statkraft has responsibility for all things energy, from exploration to generation, research and development and the issuing of contacts and licences.

It operates as any commercial company using opportunities as they arise internationally.

Statkraft operates the biggest hydro electric installation in England and Wales at Reidol near Aberystwyth.

While it is not being suggested that Wales develops a clone of Statkraft, they are a huge, long established multinational, supported by large oil reserves. It is a real legitimate model for Wales to follow. 

Commercially independent,  maximising  energy capacity and publicly owned.

Energy, the foundation.

So we start with energy. 

During the transition to Independence, the Wales National Energy Company will have been set up [ Wales Statkraft ]

It will from the outset need a flying start.

Wales present approach to renewable energy and furthermore a renewable energy plan, is to say the least limited.

It appears to consist of some industry bodies attempting some coordination and otherwise individual companies, bidding for the limited permissions and funding available.

The first marine turbine development, commercially in Welsh waters, is this year being undertaken by Spanish company Magallines.

It has a 5 MegaWatt capacity.

The first approved floating turbine in the Celtic sea is now underway.

It will deploy seven turbines at 14 MegaWatts, enough to power 93000 homes.

The Milford Haven Waterway energy skills gap study, identified significant gaps in the employment needs the industry identified and that by the supply chain.

Much of the supply chain consisted of skills supplied by several educational schemes all of which relied on project funding rather than sustainable central finance.

The renewables energy sector in Wales seems at present to consist of a small number of individual projects, poorly funded, when under the Independent Wales Plan, industrial scale development and investment is the target.

So that's where our new National Energy Company starts.

Industrial scale development and investment.

In the beginning, it will be Welsh government finance and as we have shown, the supply of which is guaranteed.

It will be, however, the National Energy Company, tasked to deliver.

They have the money and are some way to identify the first areas of development..

The Carbon Trust, Marine Energy Wales and the Crown Estate, have given them thar start, by identifying, through offshore wind, marine and tidal and floating turbines, 14 GigaWatts energy capacity.

It is now for Wales' own company to develop those sites.

This should not be seen in the present commercial context of auctions, strike prices, consent processes, subsidies and commercial investment decisions, 

This is instead, a nation investing in infrastructure, in its resources, in order to maximise its energy control and security, to move the nation to a green environment and to generate wealth and growth.

It is not constrained by the need for short term returns of commercial enterprise, nor the lengthy processes of licences and consents. The present consent process by the UK government can take between one and four years.

It is estimated that presently, offshore energy projects will take between three and ten years to complete, with tidal lagoons being the longest.

However, without the present constraints, these time scales can be significantly shortened, even though planning and environmental processes will still need to be adhered to.

So the Wales National Energy Company will confirm the viability of the sites, ensure Welsh government and local authority procedures have been followed and commission the manufacture and installation.

In parallel, it will be exploring other offshore areas for development, encouraging the expansion of existing technologies, solar and hydroelectric, green hydrogen and not least the technologies of battery storage.

It will encourage the growth of community owned projects and to do so will need to reverse the decrease in grant aid for this purpose.

Not least the Wales National Energy Company, [ we will have to find a zingy name for it ] will be researching future energy technologies to keep Wales ahead of the energy game. Using the expertise of the Welsh universities, such as Bangor and Swansea who have established marine technology departments.

There is also such as Marine Energy Wales among others in Wales, with extensive expertise in the field of renewable energy.

Exciting times.

So what about the money?

All values are in pound sterling. There is yet no Wales currency exchange rate, so pounds it is.

Wales is going to do a lot of spending over the first few years. What about the returns? 

The current wholesale price of electricity is £80 per MegaWatt/hr, on average.

Which means that for each GigaWatt of electricity produced and sold on the wholesale market  Wales would get £700 million.pa.

The commercial timescale for installations is between three and ten years, depending on the type of generation, with tidal lagoons the longest.

Without the constraints presently imposed by the UK government, this timescale would be significantly reduced.

In the short to medium term, with the projects identified, the 14 GigaWatt capacity from offshore turbines [ 2 GigaWatts ] floating turbines [  4 GigaWatts  ] and tidal and marine [8 GigaWatts ] would raise for the Wales government, through its National Energy Company, £10 billion per year.

There are costs.

The National Energy Company would need to retain part for running costs, operation and maintenance costs, exploration costs and research and development costs.

Additionally it will now be responsible for the financing of the return to community owned green energy projects.

As an example of these costs.

The UK Department of Business, Energy and Industrial Strategy [ BEIS ]  estimates the operation and maintenance costs of offshore wind, to be be £36300 per MegaWatt per year, which would make the operation and maintenance costs of our identified 6 GigaWatts of offshore wind at £219,800,000 per year.

The costs relating to tidal lagoons and tidal stream turbines are considerably less, however for our purpose it would be reasonable to retain a total of £500 million per year for this purpose.

The capital costs and operating and maintenance costs would be significantly reduced, as Wales moves to a local supply chain regime.

Wales Energy Company will need to retain from anticipated future income monies for exploration, innovation and research and development.

Present levels give us no guide as they are largely governed by UK government policy, which in turn influences private sector investment. 

Wales' present levels of investment in R+D and innovation is low, due in part to the ending of European Development funding and that this area of Wales budget allocation from the UK has historically been skimmed to provide additional funding to the likes of the NHS.

It is estimated that Wales provides 1% of its GDP to this area, rather than the 2.4% which is the European standard, also bearing in mind, the low level of Wales GDP, compared to its European neighbours.

1% of GDP amounts to £750 million overall investment in R+D in Wales. And includes private sector investment.

In our Plan, energy will be publicly owned, therefore investment will need to come from the nation. In this case the Wales National Energy Company.

Marine Energy Wales argues that approximately £120 million of private sector money has been invested in the marine and tidal sector.

There are other investments such as the Crown Estates to Swansea University regarding site research into floating turbines, however there is no long term plan, no coordination and investment is on an ad hoc basis.

Our Plan requires a more systematic approach, with planned investment.

The present system of one offs, gives little guidance on future requirements, however given that there will now be generally only one source of investment in energy R+D and the need to expand from present ambitions, it would appear that a figure of £500 million pa would be reasonable.

Then there's the transition costs.

As previously observed, Wales produces electricity.

Presently less than 20% of total energy usage in Wales is electricity [ The remainder being oil and gas }

For Wales to gain the maximum benefit from its resources,  control of energy security and environmentally, it is vital that transition from fossil fuels to green electricity is accelerated.

Much of the acceleration will be market driven.

Wales electricity pricing internally, must ensure that it is economically advantageous for both domestic and commercial users to switch to electricity.

But Wales Energy Company, as the sole provider, also takes responsibility for ensuring the infrastructure is there for such transition. 

In addition for domestic and commercial support where necessary and electrification of transport links.A comprehensive electric vehicle charging system is needed.

The UK Commission on Climate Change estimated that change to electric vehicles and electrified heat, would require an investment of up to £50 billion over 10 years, with Wales commitment on a per capita basis, £1.04 billion or £100 million per year.

Deloitte estimated that EV charge point infrastructure would cost Wales, on a per capita basis, between £38 to £86 million per year for 10 years.

Transition costs to the Wales government, through its Energy Company, of £150 million per year would seem a reasonable estimate. kept under review.

So as a self-financing operation, responsible for all things energy in Wales, including exploration, R+D for energy, community projects and transition costs from fossil fuel to green electricity. The Wales National Energy Company will need to retain the income from 2 GigaWatts of income £1.5 billion, from the eventual £10 billion initially identified { 14 GigaWatts capacity ]. This is of course phased income from approximately year two to year eight of development.

This however, is not the complete income from this investment..

In addition to the fees and tax revenues from existing output, which now comes under Welsh government control. There is growth from investment.

In order to generate the wealth from energy, the Welsh government, either directly, or through its agency, will have invested, over the lifetime of this particular development, £14 billion [ as estimated, approximately £1 billion per GigaWatt ]

This will in turn generate a further £14 billion of wealth through the public spending multiplier which is generally agreed, generates economic activity on a 1:1 ratio, that is, for every £1 billion spent by the government, a further £1 billion is generated in the economy.

The nation gains economically by the extra economic activity and directly by extra tax revenues  from corporate tax, income tax and VAT.

Additionally, the Crown Estate estimated that approximately 5000 skilled, well paid jobs and an additional £1.9 billion to the Welsh economy, would be generated from the supply chain for floating turbines alone and not forgetting the additional 20 GigaWatts of floating turbine capacity they identified for the future off the Welsh coast.

There is also another way.

The Welsh government could sell its energy internally at a discount.

If, for example, they sold energy, internally to Wales, at a 40% discount, it would take energy prices closer to pre energy crisis and pre covid levels.

The 40% would not be passed in full to the end user, as wholesale prices account for only 60% of the final cost, the rest being transportation and administration etc.

Even so, such reduction would lead to a 25% reduction in end user bills.

That's a 25% reduction in household electricity bills.

A 25% reduction in business electricity costs.

Public services, NHS etc would also see a 25% reduction in electricity costs.

The Welsh household would see the typical electricity bill of £1600 per year, reduced to £1200. A savings of £400 per year. Increasing domestic disposable income per household in total, the extra that can be spent into the economy, by over £500 million per year, [ 1.35 million households in Wales ]

The total electricity usage for business enterprises in Wales is difficult to accurately estimate. There are over 250,000 business enterprises in Wales, with 95% of them micro enterprises [ 1 to 9 employees ] with different usages and tariffs. However using averages from USwitch, a crude measurement, the total electricity usage by business enterprises in Wales is in excess of £1 billion giving a 25% saving of approximately £250 million.

Moer savings, more profit, more tax revenues.

Public services also are complex in energy usage in total, however as an example, in the last year Morriston hospital spent £5 million on electricity. A 25% saving  would mean a £1.25 million saving.

Spread across Welsh hospitals, then to other public services, schools, offices and local authorities, leading to a substantial amount that could then be passed to front line services.

This policy, being direct, would have a greater feelgood than money going directly to the Wales Exchequer, with very little financial difference.

Wales would still be raising money from sales, albeit from a lower rate, compensated by increased corporate tax revenues, increased disposable income for spending into the economy and improved public services.

It is also the case that the amount of electricity being discounted is less than 2 GigaWatts of the initial 14 GigaWatts capacity identified [ 15% ]

To summarise.

There are no tables, graphs, or equations, they seem to have a purpose far from enlightenment.

But if there were, it wouldn't change the conclusion. 

Wales is abundant in energy resources, clean renewable electricity.

The abundance of resources can be only fully utilised for Wales benefit by an Independent sovereign Wales, 

Wales with its own sovereign currency.

Wales would maximise the benefits and have maximum control and energy security by having energy in public ownership. A Wales National Energy Company..

Prior to Independence, Carbon Trust, Marine Energy Wales and the Crown Estates had between them offshore wind, marine and tidal and floating turbines, identified 14 GigaWatts capacity off the Welsh coast.

On Independence, the rights and control of those resources reverted to the Welsh nation.

We have used these initial surveys, as the springboard to generating energy benefits, together with the wealth and economic growth from this sector.

Over the short to medium term of these initial projects [ 2 to 8 years ] Wales will invest approximately £14 billion in capital costs and installation.

In return it will have gained a return of between £10 billion to £15 billion per year, from direct income [ less costs ] £8 billion, licence fees and tax revenues from existing energy generation in Wales, £1.9 billion from the supply chain for floating turbines [ Crown Estate estimate ] and the increased economic activity from the billions of pounds public investment into the economy, with the accompanying tax revenues.

There are welfare benefits with public sector costs being transferred to frontline services.

A more business friendly environment created , with lower energy costs, together with greater energy stability and security.

This without the Wales National Energy Company even yet using its own resources for exploration or research.

This without the traditionally predicted tax rise or public service cuts,{ it's all about about the proper use of sovereignty ]

So, Independence is starting to look good.

Buts that not all

Next up

Investment in skills and technology.

 

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