Looking for previous posts? Here are Part 1 and Part 2.
Let’s assume that the community benefits will flow. As I outlined in my Report, community benefits can be many different things. In this post, I’m going to have a look at a few of the options that I came across in my research; this is far from an exhaustive list.
Money
Again, there are few hard and fast rules regarding how community benefits are structured. The Scottish guidelines set the benchmark at £5,000 per MW of installed project capacity per year for onshore energy projects. As a result of the guidelines, this is increasingly the expectation from communities, even though it is not legislated. Here in Australia, it’s a bit of a patchwork of approaches across the various states. The Clean Energy Council have a set of benefit sharing guidelines which suggest $500-$1500 per MW per year, and is echoed in the Victorian Government’s guide. New South Wales has a figure of $1,050 per MW for wind (along with $850/mw for solar and $150/MWH for a BESS). Even without a guideline in Western Australia, some proponents (such as the Parron Wind Farm) are utilising the CEC guidance.
In Noordoostpolder, Netherlands, eligible communities receive an annual community payment of €10,000 each. (As discussed in the previous post though, not all communities who felt they should be eligible were deemed so.)
Whilst there are guidelines for offshore wind in the UK, they do not offer a suggestion for the amount that should be offered. In the case of Seagreen – one of the largest – they are paying a one-off grant round of £250,000 to six nearby community council areas, as well as annual microgrants.
Fundamentally, the advantage of money-based funds is the flexibility that they provide in their use. Funds can be diverted in multiple directions or held back and invested. It’s also relatively straightforward for both companies and communities to understand what the cost/benefit to them is likely to look like and budget accordingly.
In any event, there is also consideration to be made about whether all parties are eligible for equal amounts, or whether certain communities (generally those closest to the project) are entitled to a greater proportion of the benefits.
Consideration also needs to be given to how any funds will be distributed, for example, via grant programs, automatic microgrants, through direct donations, or other mechanisms. This will likely be fodder for a future post.
Ownership
“Your own pigs don’t stink” – European farming proverb.
For some communities, having an equity stake in a project can help to both use the project as a source for local revenue, as well as linking the project’s fortunes with that of the community. Naturally, a project that is part-owned by a community is also less likely to be opposed by that same community.
The Dutch Government’s 2019 Klimaatakkoord (‘Climate Agreement’ – which forms part of the country’s Climate Plan to reduce emissions 50%, compared by 1990 levels, by 2030) states that renewable energy projects should have “a balanced distribution of ownership in an area, with the aim of 50% ownership of the production of the local environment (citizens and companies)”. While this is aspirational and not enforced, this sentiment is an important one in the Dutch context. At a local level, it was supported by the Noordoostpolder local government in the draft Environmental Vision that they adopted in February 2024, which encourages the notion of shared local ownership of energy projects.
This is certainly a model which has been utilised for Windpark Noordoostpolder, where a portion of the turbines are actually owned by a local cooperative, but also sold shares in the project so that local people could buy in. It has also given rise to other benefit models, such as providing some local residents, for example retirees over a certain age, the opportunity to invest money into the project with an attractive guaranteed financial return paid out.
Organisations like Local Energy Scotland, who are funded by the Scottish Government to support communities to invest in community energy projects and co-invest in larger-scale projects, see community co-ownership as a key opportunity. They see project co-ownership as an opportunity for communities to develop long-term sources of revenue to undertake strategic community development. They also highlight the fact that an ownership stake is a genuine asset, that can appreciate and be borrowed against, as opposed to a community benefit fund, which is usually a stream of grant funding. They acknowledge that it is still relatively uncommon, however.
From an industry perspective, some proponents suggest that the model brings with it some risks, particularly where that ownership comes with decision-making responsibility and community representatives may not have experience in the energy sector. For them, providing funding or building other local projects may be viewed as more favourable, or certainly easier.
Other Benefits
There is no real limit on what can be negotiated as part of a community benefit package. As will be discussed further, this comes down, in part, to the community having the vision and capacity to plan, advocate for and manage projects. Common items include:
- Discounted electricity:
- E.g. Due to its relatively small size, one of the wind farms at Brokencross in South Lanarkshire would not have generated a significant community benefit fund, so instead provided a subsidy to all local residents’ electricity.
- Financial support for local human services, such as aged care or youth facilities:
- E.g. Project proponents in Rosamond, CA assisting to fund seniors’ accommodation.
- Sponsorship and support for local sporting teams:
- E.g. Funding of lights for a school oval in Rosamond.
- This is almost the ‘classic’ example of community benefits. The problem with some of the smaller examples like this is that they tend to relatively short-term in nature and don’t support more strategic outcomes for communities.
- Educational assistance:
- E.g. FRV in Mérida funding an annual university scholarship.
- Development Officers:
- Some proponents will fund the employment of Development Officers to support communities to plan, fund and deliver projects. These Officers can be very helpful where otherwise communities are reliant on volunteers to access and utilise benefit funds.
- Energy transition projects, such as community renewables or EV charging.
- Community engagement projects, like the Whitelee Wind Farm Visitor Centre
- Local purchasing and procurement agreements which require a certain amount of project funds to be spent with local businesses.
Example: Cedillo Solar Pueblo
In my report, I provided the following case study from Extremadura, Spain:
The award-winning solar community project that Iberdrola delivered in Cedillo saw the company build seven small solar arrays in the village of Cedillo, on municipal buildings and land. They scaled the project based on approximately half the community’s power usage, providing up to a 50% energy saving to residents and businesses who chose to opt in and connect. The project is also intended to support local growth, as businesses and people who relocate to the town in the next five years will be able access the benefits from the project.
Iberdrola will manage and maintain the solar PV systems on an ongoing basis for the town.
Example: Whitelee Wind Farm Visitor Centre
Whitelee’s Visitor Centre – provides another model of community benefit. The facility includes a learning hub, café, (highly recommended) bus tour and the ability to walk, run or cycle around the 215 turbines, including on their mountain bike track – designed by the same company responsible for the one at the 2014 Commonwealth Games in nearby Glasgow.
Built on peatland, the land is not suitable for cultivation or significant grazing, so land use conflict has not been a significant issue. There is instead an associated peatland restoration project within the project site being funded by Scottish Power Renewables.
Whilst it may not be a commercially lucrative asset, and it could be argued that the funds spent could have been distributed in other ways to the community, the visitor centre and associated public open space at Whitelee draw large numbers of visitors and regular users and provide an opportunity for people to get up close and see, hear and touch a very large wind farm. It is hard to know what kind of value that level of familiarity generates for the broader understanding and social acceptance of wind power.
Local Content
A less direct, but still important, consideration with regards to community benefit from projects is that of local content. Whilst local employment has been discussed already in this report, the use of local suppliers and flow-through impact on local businesses as a result of project development can also bring a range of economic and social benefits to host communities.
For example, in the case of Seagreen, the Montrose Community Council welcomed the fact that the Port of Montrose was hosting the Operations and Maintenance (O&M) base for the wind farm. As a large local employer, and a key part of the local community fabric, the benefits for the Port were seen in some respects as more impactful than the one-off community benefit fund payment. It should be noted that this view was likely enhanced by the Port’s positive local standing; as what is referred to as a Trust Port, rather than a privately owned operation, Port profits are reinvested back into the Port itself. This means that any local community support initiatives have the potential to deliver increased impact.
It is also the case that, with more O&M bases being sought by new wind farms in the North Sea, there is significant competition between the various ports in North East Scotland to host these projects. This is both due to the benefit this provides, as well as the hedging against potential losses as the oil and gas sector, the current mainstay in many cases, declines.
That said, the nature of projects can sometimes limit the ability of local content, even when both regulation and the policy of project developers supports it. The nature of renewable projects, with large construction but generally small O&M requirements often places a limited time horizon on the local content benefits. Whilst construction periods provide a boost, because they are limited in time, at a local level those benefits can come and go. It is generally not enough to invest in things like manufacturing or R&D.
It is also the case that defining ‘local’ can be problematic, for places like Rosamond or Mojave or the smaller towns in Lanarkshire, Los Angeles and Glasgow respectively are relatively close. As a result, the vast bulk of industry and project suppliers tend to come from the nearest urban areas, unless there are strict requirements for project proponents to behave otherwise.
At a regional or national level, when there is a significant project pipeline, these downstream industry opportunities can become more viable. For example, Sumitomo have elected to manufacture cable, to support the offshore energy sector, in Aberdeen. That said, many other elements of the supply chain require such large volumes that, even in places like Scotland, investment decisions on things like offshore wind infrastructure manufacturing facilities, have been hard to reach.
This has resulted in disappointment where communities had expected the development of new large-scale energy projects to result in a local industry boom. The reality however has been that many of the lead companies are multinationals and, whilst there has been some local suppliers and local O&M beneficiaries, much of the manufactured content had been globally tendered and found cheaper offshore. In Spain, for example, local manufacture through Siemens Gamesa has been struggling in recent years, and is receiving government support to remain in operation.
Whilst beyond the scope of my Churchill Fellowship research, the potential sovereign risk resulting from reliance on a small number of suppliers, increasingly in China, for renewable energy equipment, was raised in several jurisdictions. The reality for many project developers however, has been that the cost advantages have been so significant when planning low-margin projects that the economic imperative wins out.
Summary
- Financial benefits can be from set annual payments to communities, or calculated based upon the size or production capacity of renewable energy projects.
- Some projects offer equity stakes to local communities, allowing them to share in the profits and reducing opposition.
- The uptake of this model varies across jurisdictions.
- Benefits can be distributed through various mechanisms, including grants, microgrants, and direct donations, with consideration for whether distributions are equal or tiered based on proximity to the project.
- Projects may provide discounted electricity, support for local services (like aged care or youth facilities), sponsorships, and educational assistance.
- Support for local renewable energy projects and infrastructure are also relatively common, such as EV charging stations, or support for community energy projects.
- Local content can be a form of community benefit, but it can also be slippery to define and enforce.
Have I missed any really good examples, or novel case studies? I’d be keen to hear about other options. Contact me here.
Did you enjoy this? You can find Part 4 here.