Recommendations for mandatory community benefits and shared ownership

Blog by Amanda Grimm, Policy Manager at Community Energy Scotland

The recommendations in this blog have been developed by the Scottish Community Coalition on Energy with input from our members.

Everyone is talking about community benefits and shared ownership from energy developments. It feels we’re at a juncture: we have the opportunity to secure a much fairer deal for communities from the energy transition – but will this actually happen?

The Clean Power 2030 Action Plan shows that the vast majority of new onshore wind that is ‘needed’ by 2030 will be in Scotland, and new storage and grid infrastructure is already being built to distribute renewable electricity from new offshore and onshore renewables projects to meet demand across the UK. It’s crucial that this build out is just, and gives communities control. Too many people feel that the energy transition is being done *to them*, not with them or by them. They are shouldering too much of the burden, without enough benefit. We need to change that.

The Climate Change Committee said that in order for the energy transition to succeed, the public need to be more actively involved, and that fairness is fundamental to public support. Enabling communities to benefit more from the energy transition should increase public and political support, helping energy developers to secure investment (a key challenge right now, particularly for offshore wind) and complete their projects.

How do we achieve this?

 We have an excellent opportunity to secure a fairer deal from the energy transition through the UK Government consultation on community benefits and shared ownership, which includes the possibility of making these a legal requirement or right.

Community Energy Scotland will share a draft response with members, before the deadline of 16th July. We strongly encourage community energy groups and individuals to respond. We need a large number of responses that ask for mandatory, proportionate community benefits and shared ownership, in order to achieve this.

What are we calling for?

1. Mandatory Community Benefit, with full control for communities

In Scotland, there is Government guidance that encourages developers to pay £5,000/MW/year to communities that are close to onshore wind projects. While some developers do align with this benchmark, and some even exceed it, in many cases this guidance is not being followed. That’s why we are pressing for community benefits to become mandatory, not voluntary.

The UK Government should set a minimum level of community benefit for each renewables, storage or transmission development. For renewables and storage, we recommend that this be calculated as a percentage of project revenue:

  • Onshore technologies: 4% of project revenue
  • Offshore wind (floating/fixed): 1% project revenue

To provide some security of income, for each technology there should be a ‘floor’ (minimum payment level) of £X per megawatt per year, which would be paid even in years when revenue is low:

  • Onshore wind: £7.5k/MW/year (this is the level that the current benchmark of £5,000/MW would be at if it had increased in line with inflation since it was set in 2010.)
  • Offshore wind: £2.5k/MW/year
  • Transmission: the community benefit payments should be calculated according to the new UK Government Guidance, but this should become a legal requirement.
  • Other technologies and storage: to be determined, based on different levels of revenue.

Just as important as the level of financial benefit is the level of control for communities. Benefit funds should be conditionless, with total control over spending decided by the community, through democratically accountable governance structures, for the mutual benefit of the whole community.

For more information, see our updated paper on New Standards for Community Benefit Funds.

2. A Scottish Community Wealth Fund to share additional wealth generated in Scotland

Every community should be able to access finance for wealth-creating projects like local shops and cafes, affordable housing or their own renewable energy generators. This opportunity should be open to communities situated near to renewables developments, but also to those who are not. We are all funding the energy transition and grid build out through our energy bills, and we all deserve a share of the financial wealth that is being consolidated through this process.

We propose the creation of a Scottish Community Wealth Fund, similar to Norway’s sovereign wealth fund from oil revenue. Community Energy Wales and Community Energy England are calling for equivalent funds to be set up for their countries as well. In addition to the higher, mandatory community benefit funds for local communities affected by each development, the UK Government should require developers to make separate and additional contributions to the relevant CWF.

The CWF revenue would be made available to community organisations across the country, for investing in assets like land, buildings, staff or their own renewables. Decision-making on how this fund is disbursed to local communities would be made by an independent board with community representation (not by the Scottish Government).  

We recommend that developers who want to demonstrate best practice contribute to the Scottish Community Wealth Fund:

  • Offshore wind: 4% of gross project revenue
  • Onshore wind, solar, hydro: 1% of gross project revenue
  • Transmission: Sum per kilometer of cable or substation (amounts to be determined)

For details, see our paper on the proposed Scottish Community Wealth Fund

Taken together, we are calling for clean power developments to contribute 5% of gross revenue to communities. This aligns with calls from the Scottish Liberal Democrats, who are pushing for 5% of revenue from all new onshore and offshore renewables to be paid to community benefit funds. Shetland Islands Council have also approved the principle to seek 5% of revenue from onshore wind farms to go to communities.

3. Mandatory offers of shared ownership plus support for community take-up

We advocate a model of shared ownership where a community organisation invests in a commercial energy development and owns a stake in it. In time they receive a return on their investment, and they reinvest this in projects that benefit the whole community. Fintry Development Trust provides a good example: they have paid off their loan and now have half a million pounds coming in each year from their 7% ownership stake in Earlsburn Wind Farm.

As well as financial benefit, community organisations that buy into shared ownership should receive voting rights and a meaningful say over how the development is managed. For more information see our paper on credible community shared ownership.

We are asking the UK Government to require clean energy developers to offer at least 20% shared ownership to community groups, on new, expanding or repowering projects. We are also calling for government-backed loans for communities; these could be provided through GB Energy. Government should also ensure that clean energy projects are appropriately subsidised to enable developers to offer shared ownership as standard. More details are included in our shared ownership briefing note to the UK Government.

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