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Executive Summary The aim of REACT is to demonstrate the potential to achieve energy autonomy through the maximisation of RES penetration and involving final users as key players on the demand side. Using the results from previous findings and deliverables within the REACT project tasks, primarily Tasks T2.1Assessment of RES potential at pilot sites, T2.2RES/storage enabled infrastructure planning, T2.3 Techno-economic impact assessment, and T2.4 Environmental Impact Assessment, this task attempts to produce a socio-economic analysis based on the recommended simulated energy system scenarios for the project’s pilot islands. In doing so, we assess the impact that decarbonization of the islands and the transition to 100% energy autonomy will have on the main economic sectors in the three pilot islands and the five follower islands of the REACT project. We assess the propensity of enabling the decarbonisation and 100% energy autonomy of geographical islands’ energy systems to affect positive socio-economic change through local employment and income benefits. This is evaluated using an approach based on the Keynesian Income Multiplier methodology. To deduce the economic benefits from these investments, basic econometric analyses have been employed, and relevant economic series have been used to estimate the economic benefits of these investments. The Keynesian Income Multiplier model is an appropriate model to capture the full income effects. Further, a gender aware approach has been adopted to address gender income differentials by modelling consumption as a function of income from female-wage employment, male-wage employment, and profits. The overall approach is outlined in Figure 1 (Figure 1. Outline of the decarbonisation socio-economic analysis.). Method and approach The analysis will be based on the energy mix scenarios developed in D2.3. A value for energy generation on the island is indicated for each scenario. In this task, we will identify the energy generation in kWh that is required on each island to make it energy autonomous. A scale-up factor is calculated to determine the final size of the energy mix needed for each of the scenarios from D2.3. Based on the feasibility analysis conducted as part of the REACT D2.1, a factor will be devised to represent the per kWh cost of the REACT ICT solution for each island. The Levelised cost of Electricity (LCOE) will be multiplied by the COE to determine the starting point of the socio-economic analysis. Socio-economic analysis This task will measure the socio-economic benefits for the islands by identifying the Marginal Propensity to Consume (MPC), which measures how consumer spending changes with a change in income. Based on Keynesian Theory, an increase in production will result in an increase in income, and hence, an increase in spending. Therefore, the value of the MPC allows us to determine the size of the income multiplier used in the formula: Keynesian Income Multiplier (KIM) = 1/(1-MPC) In this task, we outline the different economic sectors and activities impacting employment and income generation in the local economies of each of the islands. An Analytical Hierarchy Process (AHP) approach was used to determine the weight of the different economic activities impacting the local economies of each island. Interviews were conducted with local experts and stakeholders on each island to determine the relative importance of different economic sectors to the relevant island’s local economy. The AHP approach develops a weightage of income for the different economic sectors. Information on the distribution of employment between females and males was collected and calculated into the model. Thus, we were able to determine the MPC for each category of economic activity, allowing us to examine impacts across genders. The LCOE is then multiplied by the weights to obtain the local economy impacts per KWh. We identified the income effects of decarbonation based on the amount of energy required for each island. The results have been critically evaluated in light of the island economies and their potential for decarbonisation. The study highlighted the overwhelming impact of Tourism for all the studied islands, followed by the Agriculture/ Fishing and the Services sectors. |
