Thoughts on Community Benefits: Part 4 – Community Benefit Funds

Looking for the earlier posts? Here are Part 1, Part 2 and Part 3.

As previously noted, providing community benefits is increasingly becoming an expectation for those in areas where large-scale renewable energy and low-carbon projects are being built. As such, a failure to do so is likely to attract local community opposition. This is particularly true for energy transmission projects, which often pass through communities without conferring any direct local benefit, but certainly also applies to generation projects like wind and solar farms.

By the same token, developing community benefits programs in a way that is collaborative with the community’s needs can go a long way to securing local support for projects. It can also be used to develop future workforce through scholarship and apprenticeship programs and help to educate the community, building broader support for the energy transition.

Some people have suggested that community benefits are really just a form of bribery to buy social licence but, particularly for things like transmission lines and wind farms, it can also be far cheaper to pay people generously to live near the infrastructure than it is to either underground or offshore it.

As I have previously pointed out though, it’s not the case that people particularly like – or want – the infrastructure, simply the funding that they provide. As part of my Churchill Fellowship research, when asked how people in Noordoostpolder feel about transmission lines, the response from a local resident was “It depends. Are they getting paid?”

This post is going to focus on financial benefits, but it is also important to acknowledge that while money is generally the most common form of community benefits, other models exist. I covered a few of these in Part 1 of this collection of posts.

How Will It Be Delivered?

In speaking with Scottish Power Renewables, they outlined that they have in the order of 35-40 community benefit funds operating. Interestingly, no two of them operate in the same way. Whilst there is often a desire to see things standardised, this also requires that communities be standardised as well – and the reality is that every community is different.

What is critical though, is that there are organisations within or representing communities that can manage the funds. When this might mean managing hundreds of thousands of dollars (or pounds or euros), this is no small task.

Project owners (and governments) want to see any funds spent effectively and want confidence that those managing the funds can meet appropriate standards of governance, compliance and reporting. For some small communities, who would be relying on (often already stretched) volunteers, this can be a big ask.

By the same token, whilst some communities may want more flexible or potentially novel community benefits from projects, for project proponents (as I touched on in the last post) it is often faster and easier to simply provide funding.

Example Model: South Lanarkshire Council

Renewable Energy Fund (REF)

One option is for the local government to manage the funds. In the case of South Lanarkshire, the Shire have put themselves forward as an option for developers to use. Developers have a choice in this regard and, at present, the REF covers 42 wind farms contributing around £2.2m per year.

They receive the payments and run grant programs to disburse them. For grants below £20,000 the project is internally appraised by two officers, and the relevant senior manager can sign off on a rolling basis. For larger grants, a Council committee makes the decision quarterly. They also have a ‘Micro Grants’ program where they provide 21 Community Councils with £5,000 each, to award small grants of up to £500 locally.

The internal appraisal process is carried out against the advertised eligibility criteria. Generally, applications have to come from projects within 10km from wind farm contributing to the fund. They have four themes that projects should seek to meet at least one of, all of which are generally related to positive community outcomes. One of the officers responsible explained to me that at the application stage, projects either meet the criteria, clearly do not meet it, or they go back to request additional information. They also have an officer available to assist applicants through the process if required.

Matched funding, including in-kind contributions are generally encouraged, but for many of the grants, particularly the smaller ones, this is not required. Multi-year funding for projects of up to three years is also available. Since 2004 over £12m has been paid out through the REF.

Clyde Wind Farm Fund – Community Fund

An alternative model is that used by SSE Renewables’ Clyde Wind Farm, which pays out approximately £929,000 per annum and is administered by the South Lanarkshire Council. The Community Fund, which receives 70% of the funding is managed similarly to the REF, but has its own set of priorities, funding thresholds, and a 15km eligibility radius.

One key difference with the REF is that whilst Council officers undertake the initial assessment processes to determine eligibility, it is community members who make the ultimate decision around approval or rejection of applications. Two representatives from each Community Council in the area are asked to be panel members.

Clyde Wind Farm Fund – Development Fund

The remaining 30% from the Clyde Wind Farm is for the delivery of employment and training projects benefits communities across the entire Shire.

The scope of the Development fund was to:

• Improve and develop local and national supply chains in respect of windfarms
• Improve and develop renewable energy, recycling and environmentally industries, business and activities
• Secure investment, create employment, implement training, promote or secure sustainable development
• Advance education or employment

 The Role of Local Government

There are a range of views on what role local government can and should be playing in the context of managing community benefits. In Scotland local government-managed funds are actually in the minority with other models (see below) more heavily utilised. As alluded to above, the level of trust communities have in their local governments can influence how desirous they are to see local government taking on this role.

This phenomenon isn’t unique to the UK either; a recent community consultation session in  Western Australia’s Wheatbelt asked attendees how they feel that community benefit funds should operate. 76% voted for a community board or committee structure. Only 18% were in favour of it sitting with the Shire.

That said, in the context of many small regional Australian towns, there are very few bodies besides the local government that have the financial and governance systems or resources to undertake this work. Likewise, there are often structures like Community Strategic Plans which can help to guide potential investment of funds. Most community groups rely upon already-stretched volunteers, and placing another structure (with responsibility for managing and distributing potentially hundreds of thousands of dollars) into this mix would certainly bring its own set of challenges. Some local governments have adopted models whereby the local government would manage the funds, but have a community board to make funding recommendations – somewhat similar to the Clyde Wind Farm Fund model above.

Example Models: Foundation Scotland

Not-for-profit organisation Foundation Scotland has several models that they utilise to support the flow of community benefit funds to eligible communities. They have been operating for around 20 years and, are now supporting almost 100 different community benefit arrangements and supporting the distribution of about one third of all community benefit currently reaching Scotland’s communities.

Option 1: Community Benefit Companies

A new community organisation – often set up as an incorporated company limited by guarantee is party to the community benefit agreement with the project owner. The company receives the annual payments from the project owner. The community company engages Foundation Scotland to serve as its secretariat and fund administrator. As such, Foundation Scotland provides back office services around governance, capacity building, funding distribution and reporting, to ensure funds are managed in a compliant fashion. The decision-making process sits with the Board who transact funds to Foundation Scotland to distribute following funding decisions and which will be scheduled through the year.

Foundation Scotland will assess applications using a tried and tested methodology to support the community company Board with its decision making.  The Kilgallioch Community Benefit Company is one such example, being responsible for the distribution of the Kilgallioch Wind Farm Community Benefit Fund.

Ideally the fund design, which Foundation Scotland can also assist with, will be informed by some form of community action plan or similar.  The Community Benefit Company will pay Foundation Scotland for providing this service, although sometimes the cost of utilising Foundation Scotland’s services can be shared with the project owner, or be an additional benefit in itself, on top of any community benefit payments.

Option 2: Community Panel

A Community Company model will not always be appropriate, or possibly achievable for a community or cluster of communities where the model is more commonly adopted.

The Panel model emerged in contexts where a community did not want to add in the layer of a community organisation charged with being the fund administrator. In these instances, a qualified third party like Foundation Scotland can hold the legal agreement with the project owner and hold the funds on behalf of the community. Foundation Scotland will work with local groups to establish and convene a community panel (often engaged through a formal Memorandum of Understanding with  a community/parish council or similar and support the panel to make decisions.

As with the community company model described above, the fund design, which Foundation Scotland can also assist with, will ideally be informed by some form of community action plan or similar. The Stroupster Community Fund and Burnfoot Cluster are good examples of community panels.

Option 3: Devolved Fund Arrangement

Where there are multiple communities in an area of benefit, the communities don’t want to work together as a unit and a developer only wishes to deal with one party, they can opt to channel funds through Foundation Scotland. In this situation, Foundation Scotland will work with local stakeholders to identify a local group that has the capacity and appetite to manage their ‘local’ fund , and can provide support to them in doing so.

In rare cases – where communities are in conflict and cannot make decisions on how to distribute funds – Foundation Scotland can step in as decision-makers, but they consider this  the option of last resort and seek to avoid it wherever possible.

If you want to go deeper on the Scottish perspective, this report from the University of Strathclyde has a lot of relevant content, including some Foundation Scotland case studies. They have also put together a really good resource examining the Guiding Principles of Community Benefit Funds.

Other Model: Existing Community Group

It may be that a community already has a capable and resourced representative organisation in place, such as a Progress Society or Development Association, capable of taking on the management of a community benefit fund. Where such a group is already administering grants and funding, and has a suitable skilled and capable board or decision-making group, they may be an alternative consideration for fund management.

While this would keep any decision-making at the community level, the degree of community representation (and diversity of interests in that representation) in a situation like this would be critical. It is entirely possible to foresee a situation where selection of one particular organisation in a given community could spark competition or opposition from other organisations that missed out.

Other Model: Community Trusts

One option, less common Australia for this purpose, but present elsewhere is the idea of a community trust. Such a body, set up to serve the community’s interests can provide a community-driven body with a clear, legally sound, structure to support fund investment and distribution.

Such bodies could also aggregate funds from multiple projects, helping to amplify the impact of any available funds.

That said, the structure can be complex, and will still run up against the same challenges as any representative group with regards to the attraction and retention of suitably qualified and suitably representative decision-makers.

Just Transition

A consideration that is alluded to in the tables above is the representation of any decision-making body. Is the local government’s elected Council, or the board of the organisation actually representative of their community? In many cases (by virtue of the fact that they are volunteer roles) councillors or community board volunteers tend to be older and wealthier than the average community member. This is no criticism, but merely reflects the fact that the ability to volunteer is, in some respects, a privilege that not all can undertake.

As such, when designing an organisation, or its charter, it’s important to think about the purpose of the funds. If they are being used to improve equality in a given locality, and truly share the benefits of the renewable energy project, are the more marginalised members of the community being actively consulted or invited to take part in the decision-making process? If not, any community benefit program runs the risk of simply further entrenching existing inequality within that community.

The same goes for processes of planning and designing where the funds should be allocated. As a former Local Government CEO, my go-to would typically be the Community Strategic Plan to get an idea of what priorities might exist for the community. While this is a valid method, it’s only as good as the consultation done on any such planning document. If it was the usual group of 10-15 engaged community members (who have the time and ability to attend consultation sessions or respond to surveys) it won’t necessarily capture the views and aspirations of the entire community.

Summary

The above isn’t exhaustive, but covers off a few ways that community benefit funds can be held and distributed. Perhaps one of the bigger weaknesses in Australia at present is that – besides local governments, and a handful of existing community organisations, there aren’t many other options; we don’t have a Foundation Scotland equivalent, and Community Trusts aren’t widespread.

What has become clear from examining different models though is that there is no one-size-fits-all approach. Each community has different priorities, governance capabilities, and levels of trust in different institutions, meaning that flexibility in benefit delivery is key.

However, successful models tend to share several common elements:

• Strong governance and financial oversight, ensuring transparency and credibility.
• Community-driven decision-making, allowing locals to shape how funds are used.
• Capacity-building support, particularly for smaller communities that may struggle to administer funds effectively.
• Strategic alignment, ensuring benefit programs contribute to broader regional and economic development goals.

At the same time, key challenges—such as ensuring diverse representation, avoiding excessive bureaucracy, and maintaining long-term community trust—must be addressed upfront in fund design. It is also crucial that benefit programs consider who within the community is being consulted and included in decision-making to avoid reinforcing existing inequalities.

Ultimately, whatever the method chose, models must be collaborative, adaptable, and built for the long term. Done well, they have the potential to not only smooth the path for renewable projects but also create lasting socioeconomic benefits for communities—helping to build a more inclusive and equitable energy transition.