A stake in the game

What is the idea behind community benefit packages in the UK?

The development of energy infrastructure projects across the UK can stir strong opinions, particularly if onshore wind farms, onshore oil and gas exploration and production, and nuclear power are involved. Bitter rifts can emerge between developers and communities and even within communities themselves. This is because the wider benefits of energy infrastructure are not always felt at a local level. To address these issues, many developers and operators of energy infrastructure now offer benefit packages to host communities.

Some critics claim that community benefit packages are nothing more than legalised bribery to win planning permission, but this is not the case. The benefit packages are voluntary and fall outside the planning system. In all parts of the UK, decisions about planning proposals must be based on planning issues alone and must not be influenced by unrelated benefits offered by developers. Developers cannot therefore “buy” planning permission for otherwise unacceptable development.

What considerations typically go into these packages?

Community benefit packages vary from project to project, but can include benefits such as:

• Community funds;
• Benefits in kind, such as new community facilities or local environmental improvements;
• Profit sharing;
• Community ownership of stakes in projects.

Under Renewable UK’s Community Benefits Protocol, operators of onshore wind farms contribute £1,000 (€1,189; $1,583) per megawatt (MW) of installed capacity in community benefits annually for wind farms of 5MW and above for the life of the wind farm. However, the government is hoping that this amount will increase to £5,000 per MW, following an evidence-gathering exercise carried out last year on community engagement and benefits, focusing on how communities can have more of a say over, and receive greater economic and wider social benefits from, hosting onshore wind farms.

Are they just for renewable energy projects, or do they cover other sectors too?

The government is also expecting operators undertaking drilling for shale gas involving hydraulic fracturing (“fracking”) to provide £100,000 in community benefits per well site at the exploration stage and to pay a further 1 percent of revenues to host communities once production starts.

In July this year the government announced that local authorities in areas hosting new nuclear power stations will be able to retain 50 percent of the business rates they collect, together with the growth on that share, for up to 10 years. Extra government funding will be available for a further 30 years. The government estimates that this could be worth around £128 million to the area around the recently consented Hinkley Point nuclear power plant in Somerset.

Are there international equivalents?

Although there are a number of examples in the UK of community energy projects (where communities are actively involved in developing projects), most onshore wind farms have been developed by commercial developers. Where those developers provide community benefit packages for host communities, benefits such as community funds and benefits-in-kind tend to be the norm.

Elsewhere in Europe, however, the concept of a voluntary contribution by the developer to a community fund is almost unknown. In northern Europe, especially in Scandinavia, Germany and the Netherlands, where wind power enjoys high level of public support, community energy projects are more common.

In Denmark, developers must offer 20 percent of the shares in onshore wind projects to individuals living within 4 kilometres of sites. In 2010, individuals reportedly owned more than 51 percent of Germany’s 50,000MW of renewable energy capacity. Other types of community benefits in Europe are provided in the form of local taxes and the provision of local or regional wind turbine manufacturing and construction jobs.

According to a recently published report by the think tank ResPublica, however, interest in community-owned renewable energy projects is growing rapidly in the UK. The Community Renewables Economy report reveals that the total capacity of community-owned renewable energy projects has grown from just over 4MW in 2003 to nearly 60MW in 2013 and could grow to at least 550MW by 2020.

Angus Evers is a partner and Juliet Munn is an associate in the Planning & Environment Group at international law firm SJ Berwin LLP