Community benefits from net zero energy developments: consultation

2. Consultation section 1: Offshore renewable energy developments

2.1 Scotland’s offshore wind landscape

Offshore wind will play a critical role in Scotland’s energy production over the coming decades, alongside onshore wind, hydro-power, and other developing renewable energy technologies.

The First Minister’s Investor Panel, which was established to advise the Scottish Government on the investment and infrastructure we need to transition to net zero, identified offshore wind as the single most important opportunity for attracting capital to Scotland^[13]. Scotland’s expansive territorial waters are well suited to the generation of wind power and with the very strong market ambition of Scottish offshore wind, the growth of the sector over the last decade is set to continue. This will see the continued creation of new enterprises and sustainable industry on the back of our existing port infrastructure and offshore supply chain: supporting thousands of new and existing jobs across construction, planning, engineering, manufacturing and fabrication, procurement and supply chain management^[14]; and delivering inclusive economic growth.

As a relatively new source of renewable energy, offshore wind technology is developing at pace. Floating wind, a technology where floating platforms are anchored to the seabed, offers opportunities for development in deeper waters with higher wind speeds – ultimately producing greater energy yields. Scotland’s deep waters are attractive for floating technologies, which comprise a large part of our current reported potential pipeline of projects.

As a global early mover in offshore wind, Scotland saw its first commercial offshore wind farm, the 174 MW Robin Rigg in the Solway Firth, come online in 2010 producing enough electricity to power 137,000 homes^[15]. Since then, the scale and ambition of offshore wind in Scotland has grown rapidly, with projects such as the 588 MW Beatrice project completed in 2019^[16], the 950 MW Moray East offshore wind farm located in the Moray Firth operating since 2021^[17], and the Seagreen offshore wind farm off the coast of Angus, which was completed in 2023 with capacity of nearly 1.1 GW^[18].

Our current pipeline of around 40GW of offshore wind capacity, on top of the 3GW currently installed in Scottish waters, will be transformational for our energy sector and our economic future^[19]. The UK Government has set a target to deliver up to 50GW by 2030, including up to 5GW of innovative floating wind^[20].

In 2022, the ScotWind offshore leasing round secured seabed lease option agreements for 20 projects, with ambitions to generate around 28GW of new offshore wind capacity for Scotland (subject to consents being awarded, securing a grid connection and a route to market). The 20 lease option agreements were awarded by Crown Estate Scotland (CES) within the spatial footprints of the 15 plan option areas identified through the Scottish Government’s Sectoral Marine Plan for Offshore Wind Energy. We are currently undertaking an Iterative Plan Review (IPR) process that will update our Sectoral Marine Plan for Offshore Wind Energy (SMP-OWE) and deliver the planning framework for both the ScotWind and the Innovation and Targeted Oil & Gas Decarbonisation (INTOG) leasing rounds. CES will offer full seabed leases to projects following the attainment of the necessary consents and licenses, allowing construction to proceed.

Of the 20 projects, 14 are for floating (rather than fixed bottom) technology, making ScotWind the world’s largest commercial round for floating offshore wind and putting Scotland at the forefront of offshore wind development globally. The ScotWind leasing round reflected very significant market ambition for offshore wind in Scottish waters and has already delivered over £750 million in revenues to the public purse in initial option fees.

As the projects become operational, there is a potential to deliver billions more in rental revenues to be invested for the benefit of the people of Scotland. Offshore wind developers have also committed to invest an average of £1.5 bn in Scotland per project across the 20 ScotWind projects^[21].

The Innovation and Targeted Oil and Gas (INTOG) leasing round, a ‘first of its kind’, offered potential options for up to 5 GW of offshore wind capacity targeting oil and gas decarbonisation, as well as up to 0.5 GW capacity for innovation projects in 2023. Exclusivity Agreements were offered by CES to five ‘innovation’ and seven ‘targeted oil and gas’ projects. The Scottish Government’s Initial Plan Framework, set the planning framework and the areas of seabed that formed the spatial footprint for the INTOG leasing process. As outlined above, our updated SMP-OWE will deliver a planning framework for both the ScotWind and INTOG leasing rounds in 2025. Both the innovation and targeted oil and gas aspects will be critical for a just transition to net zero and nurturing the evolution of the developing offshore wind sector.

The outcomes of the ScotWind and INTOG leasing rounds have demonstrated a strong market appetite and contributed significantly to Scotland’s potential project pipeline^[22]. Together these leasing rounds provide a large boost to Scottish and UK wide green energy production and will contribute towards the Scottish economy for decades to come.

This potential will only be fully unlocked when the right market conditions and long-term investment certainty are in place and there are challenges to be addressed as the industry develops, particularly for floating offshore wind. Offshore wind farms require more complex infrastructure and are therefore significantly more expensive to develop, construct and maintain than onshore wind farms. Furthermore, the cost of building-out in Scotland’s deep waters and connecting to the grid are relatively high. The UK Government’s competitive Contracts for Difference (CfD) mechanism is essential for the delivery of renewables capacity in Scotland and across Great Britain. Challenges were reflected in the results of the Contracts for Difference Allocation Round 5 (2023), which saw no applications from offshore wind developers. Although several offshore wind projects were awarded contracts through Allocation Round 6 (2024), continued sufficient budget is needed in future years to provide long-term certainty for Scottish projects and to secure investment.

Grid constraints remain a major barrier for the development of renewable energy in Scotland, and across Great Britain. Delays to connecting offshore wind projects to the electricity network hinder bringing on new sources of electricity generation and further decarbonising our economy. Furthermore, developers face challenges in progressing projects to the investment stage without certainty around grid connection. The UK Government’s mission to upgrade Britain’s grid infrastructure and to reform the connections regime is critical or we risk jeopardising the full potential of projects, along with the associated socio-economic benefits for Scotland. We will continue to work collaboratively with the UK Government, including in relation to the Clean Power 2030 Action Plan, to ensure Scottish projects are at the forefront of delivery.

High and volatile Transmission Network Use of System (TNUoS) charges, which are paid to the National Energy System Operator (NESO) to recover the cost of installing and maintaining the transmission system, remain a key challenge for the renewables industry in Scotland. Urgent reforms are needed to deliver fair and predictable TNUoS costs and we therefore welcome Ofgem's proposal for the introduction of a cap and floor intervention for TNUoS charges and encourage NESO to engage closely with industry on the details of this intervention. We will continue to work collaboratively and constructively with Ofgem and the UK Government and push for a fairer methodology that recognises the renewable capability of Scotland.

Wider market conditions also create cost challenges for offshore wind development. As with other industries, recent high inflation and interest rates have increased the cost of construction. At the same time, the supply chain for offshore wind is still developing globally and the production of some components, such as turbines, and the availability of services, such as large jack-up vessels, are constrained. Continuing growth in the supply chain and advancements in technology will assist to bring down costs as the sector matures.

2.2 Socio-economic impact of offshore wind

The development of offshore wind in Scotland will deliver significant value to our local, regional, and national economies through expanding the supply chain, stimulating infrastructure investment, and supporting thousands of high-quality green jobs. These benefits will continue throughout the 30 year operational lifespan of projects. The Scottish Government is committed to ensuring that these positive impacts are felt by the workforce, businesses and communities.

As part of the ScotWind bidding round, applicants were required to submit Supply Chain Development Statements (SCDS) to Crown Estate Scotland setting out commitments and ambitions for expenditure across the development, manufacture, installation, and operations and maintenance project phases, and across four geographical areas; Scotland, UK, EU, and Elsewhere^[23]. Failure by developers to deliver on their commitments can trigger remedies ranging from financial penalties to an inability to progress to a seabed lease.

Ports and harbours have a critical role in unlocking our offshore wind potential and attracting investment in the infrastructure, manufacturing and fabrication facilities essential to offshore wind construction and operation. We are now seeing major manufacturing for offshore wind projects in Scotland, demonstrating the potential for future industrial and supply chain growth.

Offshore wind is already delivering positive impacts to Scotland through supporting jobs and businesses across the value chain. Scotland’s world-leading offshore supply chain, honed through decades of the production of North Sea oil and gas, is primed to participate in offshore wind build-out and operation. Indeed, many businesses are already turning their significant expertise to the renewables sector, offering a just transition for employees and their communities across areas that have a long association with the energy industry.

The economic impact of our offshore wind potential is very substantial. The sector has the potential to support thousands of high-skilled green jobs around the country, with the evidence available across a number of individual studies estimating Scotland’s burgeoning offshore wind sector could support as many as 10,400 – 54,000 jobs^[24]. The transformative and long-lasting effects of these economic stimuli will create a positive legacy across communities in Scotland for decades to come.

Case study: Ardersier Energy Transition Facility

The Scottish National Investment Bank and the UK Infrastructure Bank (now the UK National Wealth Fund) each invested £50 million into Ardersier Port, building on the £300m capital commitment from Quantum Energy Partners. This investment will underpin one of the largest regeneration projects in the Highlands for decades, enabling the creation of a nationally significant infrastructure facility to support industrial scale deployment of fixed and floating offshore wind. Not only will it considerably increase Scotland’s offshore wind port capability, but it will also re-establish the port as a major local employer, with the potential to enable an estimated 3,000 jobs and reskilling opportunities at full capacity.

To underpin this, the Scottish Government has committed up to £500m strategic investment over five years to facilitate the development of the sector and invest in essential offshore wind infrastructure and supply chain. This will support market certainty and help to create a highly productive, competitive economy. Investment will be prioritised towards projects with the potential to catalyse further private sector investment, with a focus on strategic importance, critical dependencies, and the economic impacts for Scotland. We are taking a whole systems approach to building strong clusters of activity at key locations around the country consistent with industry recommendations and feedback^[25]. This investment supports the delivery of the Scottish Government’s Green Industrial Strategy, a blueprint for realising the maximum possible economic benefit from the opportunities created by the global transition to net zero^[26]. Ultimately, realising this economic opportunity will drive social change through employment and reskilling opportunities, enhancing communities and contributing to the Scottish Government’s aim of eradicating child poverty.

2.3 Principles and key issues

2.3.1 Offshore wind communities

Unlocking Scotland’s offshore wind potential will require coordinated efforts at national, international, and local levels. The pipeline of projects is mobilising businesses and the workforce across the country to support the delivery of potential projects, from the Solway Firth to the Shetland Islands and attracting foreign direct investment to Scotland’s economy. At the same time, projects contain a hyper-local element with jobs and infrastructure created in multiple coastal, rural and island areas throughout their lifespan. We recognise that multiple communities will have a part to play in the development of offshore renewables and our understanding of ‘the community’ reflects this.

Identifying the community who will benefit is a key principle of designing and providing a community benefit package, as set out in our existing Good Practice Principles. The guidance notes that there is no single definition of community that can be applied for every project and that dialogue and site-specific characteristics should be used by the developer to identify the most relevant stakeholders. In advance of undertaking a public consultation, the developer is recommended to undertake an initial study to determine a proposal for what might be the geographical area to benefit and, within that area, the appropriate contacts and communities of interest for consultation. It is recommended that this process is undertaken at an early stage to allow communities the opportunity to contribute.

Defining the community

Offshore development involves multiple communities, often in multiple places, and at times with varying and competing interests. In some circumstances, a ‘community of locality’ based on geographical location will be key. In the case of onshore wind and other terrestrial renewable energy technologies, proximity to site is the primary indicator^[27]. Offshore wind development will be focused around strategically located port clusters with proximate communities. Other communities are based in areas where offshore energy transmission infrastructure comes ashore – although the construction of electricity transmission infrastructure is not limited to offshore wind developments. Legislation and regulations relating to electricity networks are reserved to the UK Government, which is currently considering its policy on the provision of community benefits from this infrastructure across Great Britain. However, much of the forthcoming development, particularly the floating wind projects which comprise the bulk of Scotland’s potential pipeline, is located far from shore and coastal communities, and may fall across administrative boundaries^[28]. This increases the difficulty of communities self-defining based on existing boundaries.

As set out in our existing Good Practice Principles, there is no set way to define the relevant community, and flexibility is key when considering the geographically dispersed footprint of an offshore wind project. As well as locational communities, offshore wind development has ‘communities of interest’; commercial, environmental, cultural and more. The views of these special interest groups, in particular other marine users including fishing communities, will be critical.

On ‘identification of the community’, our existing Good Practice Principles suggest starting discussions with relevant stakeholders such as: community groups; local or regional structures or organisations; wider national structures or organisations; and other organisations, individuals or groups which may not fit into the categories as listed.

Our existing Good Practice Principles set out that community benefits are not compensation for impacts on communities or other interests, including commercial interests, arising from renewable installations. It is also important to note that contributing to community benefit discussions does not affect an individual or organisation’s right to express a view on a project’s development proposals, and objecting to or supporting the development does not affect their right to discuss the community benefit proposals.

Case study: Vattenfall’s Unlock Our Future Fund

The Aberdeen Offshore Wind Farm, also known as the European Offshore Wind Deployment Centre, is a project made up of 11 8.8 MW wind turbines located off the coast of Aberdeen^[29]. The project includes a community benefit fund which supports projects focused on environmental sustainability.

The offshore wind developer, Vattenfall, contributes £150,000 per year to the fund (as at 2019) rising in line with the Retail Price Index for the life of the wind farm, which is expected to be at least 20 years.

The fund is distributed across Aberdeen City and Aberdeenshire, a larger area than for many other community benefit funds^[30]. 10% of the overall value of the fund is ringfenced for the communities of Blackdog and Belhevie, which host the onshore electricity infrastructure for the wind farm.

Between 2019 and 2023, 68 awards were made totalling £662,526. 51% of grants were for community buildings, 17% for vehicles and active travel, 12% for outdoor space, 12% for equipment and lighting, 5% for capacity building, and 3% for feasibility studies and research.

Case study: Hornsea 3 Community Benefit Fund

The community benefit fund^[31] for Ørsted’s 2.9 GW fixed-bottom Hornsea 3 Offshore Wind Farm^[32], located off the East Coast of England, was developed via a thorough consultation with the community it serves. The Main Fund focuses on small grants for community groups. In addition, there is a Skills Fund dedicated to supporting training in the area, and a Legacy Fund which will fund a single capital project delivering long-term improvements in the region. Monies are ringfenced for respective funds, with different application processes and criteria.

Hornsea 3 also includes a separate dedicated community benefits Fisheries Fund that supports projects which directly benefit the fishing industry operating in the same area as the project’s Kittiwake artificial nesting structures^[33]. It funds, for example, port infrastructure, safety, and training. The fund aims to support good cooperation between the developer and fishing communities. Grants can be awarded to individual fishers for equipment and boat safety improvements, for example, but priority is given to projects that benefit the wider fishing community in the area.

Consultation questions: Offshore wind communities

Question 1: In the context of offshore wind development, what or who or where do you consider the relevant communities to be?

Question 2: When defining the relevant communities to receive benefits from offshore wind development, which factors should be considered, and by whom? Are there any factors which are most important, and why?

2.3.2 Maximising the impact of community benefits from offshore wind developments

Community benefits from offshore renewables have the potential to support a wide range of projects across Scotland, from infrastructure to culture and beyond^[34]. One of the guiding principles for community benefits is that funds should be directed for and by the community, in line with their needs and priorities. As set out above, the dispersed footprint and large scale of offshore wind projects often involves multiple communities and identifying appropriate decision makers and beneficiaries is key. However, there is also a need for collaboration, engagement and strategic thinking across communities and stakeholders to maximise the impact of community benefits.

Our current Good Practice Principles recommend that the “composition, delivery and structure of the [community benefits] package should be designed through dialogue with the local community”. A community benefit fund is considered a fundamental component of a community benefits package, though other components may also be considered. Decisions on the use of community benefit funding “should be led by the community and informed through identification of local needs, with guidance from the developer as necessary”.

Community benefits from offshore renewables is a relatively new area of focus in Scotland and as our national experience grows – amongst communities, developers, and public and third sector organisations – so too does our ambition. Options must enable and support communities to maximise outcomes, enhance their locality, and deliver long-lasting legacies from the opportunity offshore renewables presents for Scotland.

Understanding priorities, at both a local and regional-national level, is fundamental to making informed decisions about distributing and maximising the impact of funds. Our Good Practice Principles state that in considering effective implementation of community benefits, the following components should be optimised:

1. Focus on community benefits: developers should encourage community benefits which support sustainable development by complementing social, economic and environmental causes and building resilient, sustainable communities.

2. Delivery mechanism: benefits may take the form of direct funding of projects, financial payments or other benefits as deemed appropriate, designed through dialogue with the local community.

Community benefit arrangements in Scotland have typically followed a project specific application style fund, however other models have been put forward by local authorities and community stakeholders. These include proposals to use a portion of funds to support regional strategic funds, as well as for a nation-wide community wealth fund.

Truly maximising the impact of funds requires more than appropriate models and our Good Practice Principles sets out that capacity building is fundamental to ensuring success. Our engagement with communities and those with experience of community benefit funds has highlighted that community capacity is a critical factor in achieving positive outcomes and increasing impact. This could include support and guidance for communities around negotiations, sharing best practice, networking and collaboration across multiple communities^[35]. The Scottish Government is committed to empowering communities and supporting capacity building to facilitate effective and impactful use of funds.

The identification of priorities, be those hyper-local or reflecting the wishes of multiple communities, along with decisions about the allocation and ongoing use of funds, should be reached through consensus. Good governance and transparency have therefore been highlighted as crucial components of any community benefits arrangements.

Our existing guidance suggests that community benefits could be used for the following areas:

• Apprenticeship schemes.
• Building capacity in the community;
• Contributing to charitable causes;
• Cultural assets;
• Development and support of natural capital, for example upgrades to areas of cultural or environmental interest;
• Educational support such as extra-curricular engagement with schools, colleges and universities;
• Environmental communities;
• Infrastructure upgrades;
• Local business support;
• Local electricity bill discounts;
• Local facilities or services to complement and not replace statutory provisions;
• Skills development programme;
• Support of local tourism such as creation or support of local facilities i.e. museums or visitor centres;
• Supporting local marine management issues;
• Supporting and developing women’s empowerment networks.

Consultation questions: Maximising the impact of community benefits from offshore wind developments

Question 3: Who should decide how offshore wind community benefits are used (decision-makers)? Are there any groups, organisations or bodies you feel should have a formal role in this?

Question 4: What are the best ways to ensure that decision-makers truly reflect and take into account the needs and wishes of communities when determining how community benefits are used?

Question 5: What could be done to help maximise the impact of community benefits from offshore wind? What does good look like?

Question 6: How do you think directing community benefits towards larger scale, longer term, or more complex projects would affect the potential impact of community benefits from offshore wind?

Question 7: The development of offshore wind is often geographically dispersed with multiple communities who could potentially benefit. To what extent do you agree or disagree that a regional and/or national approach to delivering community benefits would be an appropriate way to address geographical dispersal of development and multiple communities? Please explain your answer.

Question 8: Are you aware of any likely positive or negative impacts of the Good Practice Principles on any protected characteristics or on any other specific groups in Scotland, particularly: businesses; rural and island communities; or people on low-incomes or living in deprived areas. The Scottish Government is required to consider the impacts of proposed policies and strategic decisions in relation to equalities and particular societal groups and sectors. Please explain your answer and provide supporting evidence if available.

2.3.3 Determining appropriate levels of community benefits from offshore wind

A fundamental of community benefits, as set out in our existing Good Practice Principles, is that each package should be tailored to reflect the characteristics of the development. This allows communities and developers to agree an approach which delivers the best outcomes for the circumstances at hand. However, we have heard from some stakeholders that there is a need for clarity, transparency, and a degree of parity on the level of funding.

Our current guidance recommends that a community benefits package should be proposed by the developer and further developed in discussion with the community. Factors which should be taken into account when designing the package include the scale of project, the technology, the distance of the project from shore and the nature of project (e.g. research or trial site). Compensation for impacts arising from development is not a relevant factor.

The Scottish Government’s Good Practice Principles for Community Benefits from Onshore Renewable Energy Developments recommends a rate of benefit based on the generation capacity of the project^[36]. In Ireland, for onshore and offshore developments, the rate is based on the amount of electricity produced, with a national rate of €2 per Megawatt hour of generation^[37]. In addition, some have advocated for a ‘floor and ramp’ approach, where a defined level of benefit is provided based on installed capacity, along with a variable benefit based on energy output, with flexibility for different technology types. Under these approaches, projects which produce more electricity provide larger payments to communities. Defined levels of community benefits may reduce the burden on communities to negotiate with developers, with a focus on quality of engagement and outcomes^[38].

Case study: Ireland

In Ireland, a government mandate applies for all wind generators to make minimum Community Benefit Fund (CBF) contributions set at €2 per MWh, approved under State-Aid provisions^{[39] [40]}. Different CBF regimes apply to Onshore RESS and Offshore ORESS projects. Under ORESS, generators are required to procure a professional Fund Administrator to facilitate the local community in maximising the opportunity of the funding.

Based on anticipated levels of generation for ORESS, it is estimated that each ORESS CBF may amount to €4 million to a fund per annum from a 500 MW offshore wind project. Decisions on the use of the fund are to be taken by communities through the creation of a Community Benefit Fund Committee. The Committee must create a Development Delivery Plan in collaboration with the local community. The plan should identify key priorities and needs across the relevant local communities, including medium and long-term priorities and multi-annual funding initiatives. Developers are also required to make early contribution payments prior to the operational phase of the project which can assist with building capacity and planning. RWE’s Dublin Array project expects the community benefit fund could be worth up to €6.5 million per year in due course^[41].

Ireland is at an early stage of offshore wind deployment, with its own legal and policy frameworks and market conditions. It is therefore too early to draw direct comparisons with other markets, including Scotland.

A key condition for the provision of community benefits is the ability of renewable energy developers to finance them^[42]. Offshore wind energy generation is a relatively new technology with relatively high costs, and the development and construction process can take up to a decade or more before projects begin generating revenue^[43]. The immaturity of the sector, particularly for floating offshore wind, and the difficulty of operating in the marine environment also mean that projects carry a significant risk profile. The economics of most projects are therefore challenging and uncertain, with costs higher than for the development of onshore wind.

The UK Government’s competitive Contracts for Difference (CfD) subsidy mechanism remains the key route to market for offshore wind projects in Great Britain and provides a 15-year contract to electricity generators to buy electricity at a certain price (the strike price). Developers must compete with renewable energy projects across the UK to secure a contract through ‘allocation rounds’, with all project costs reflected in the bid. For floating offshore wind, which makes up around two thirds of the ScotWind leasing round and the majority of INTOG leasing round projects, the costs are significantly higher than for fixed bottom offshore wind projects and onshore renewables projects. These higher costs were reflected in Contracts for Difference Allocation Round 6 (AR6) where the administrative strike price for floating offshore wind projects was £176, compared to £73 for fixed bottom offshore wind projects, £64 for onshore wind and £61 for solar^[44]. Other offshore renewable energy technologies, such as wave and tidal, remain at an earlier stage of development.

We welcome indications that the UK Government is reviewing its approach to community benefits, including the work already underway in relation to exploring community benefits from transmission infrastructure, and we look forward to seeing more detail. Some Scottish projects already face higher construction and maintenance costs and higher Transmission Network Use of System (TNUoS) charges, all of which have an impact on a project’s competitiveness and CfD bid. Placing additional costs on Scottish projects could put them at a disadvantage with projects elsewhere in the UK and in the long run the cost of any community benefit scheme may ultimately be borne by the consumer through higher strike prices in the project’s Contract for Difference^[45].

Community benefits should be delivered in a manner which is proportionate to the scale and impact of development, not inhibiting its commercial viability^[46] and not disproportionately affecting consumer costs. A balanced approach is therefore needed.

Case study: The Beatrice Community Fund

Beatrice Offshore Wind Farm Ltd established a community benefit fund during construction of the 588 MW project in 2016/17 to support the coastal communities of Caithness, Sutherland and Moray^[47]. The wind farm, which comprises 84 fixed-bottom turbines located approximately 13 km from the Caithness coast, became fully operational in 2019, following seven years of development and three years of construction. The fund had two components:

• Regional fund: worth a total of £3m which supported larger projects aimed at providing a lasting impact, identified following consultation with stakeholders.
• Local funds: worth up to £3m over five years, which focused on community councils in parts of Moray and Caithness closest to onshore infrastructure, and supported capacity building in local communities.

The Fund closed for applications in June 2023 having provided £6 million across 361 projects, including supporting 73 rural jobs and the enhancement of 64 community assets. Social impact research has shown that for every £1 invested by the Beatrice Partnership Fund, £3.21 in wider value was generated^[48].

Examples of projects supported include improvements to the ferry slipway at Nigg and the new East Beach Bridge at Lossiemouth.

Consultation questions: Determining appropriate levels of community benefits from offshore wind

Question 9: In your view, what would just and proportionate community benefits from offshore wind developments look like in practice?

Question 10: What processes and guidance would assist communities and offshore wind developers in agreeing appropriate community benefits packages?

2.3.4 Shared ownership of offshore wind developments

Shared ownership is distinct from community benefits, however opportunities for shared ownership of offshore wind developments have the potential to deliver long-term economic and social benefits. Shared ownership is not included in our existing good practice principles, however, there is an increasing interest from both communities and industry in how shared ownership could increase the distribution of wealth generated through offshore wind assets. Shared ownership projects can support community development aims by encouraging local partnerships and have the potential to increase community power through establishing defined rights over aspects of a development^[49].

The Scottish Government has published Good Practice Principles for Shared Ownership of Onshore Renewable Energy Developments, which sets out our ambition for 2GW of shared ownership of onshore renewable energy capacity by 2030^[50]. The Good Practice Principles guide interaction between communities and developers with a view to creating a lasting legacy, building community capacity and strengthening corporate social responsibility. The Scottish Government’s Community and Renewable Energy Scheme (CARES), managed by Local Energy Scotland, supports local and community ownership of renewable energy assets through loan finance, grant funding and specialist advice^[51].

Shared ownership models have been implemented for commercial scale onshore wind projects in Scotland. However, the relative immaturity of offshore wind along with the immense scale of many projects result in high costs associated with their development, construction, and operation. Access to finance to meet these costs presents a considerable barrier to communities who might be interested in the shared ownership of offshore wind assets. In addition, community capacity has also been found to be a significant barrier to shared ownership, with the resource and expertise of community organisations seen as critical to the success of projects^[52].

Whilst recognising these challenges, the Scottish Government is committed to exploring all options available to us of maximising the benefits of offshore renewable energy generation for Scotland’s communities. This consultation seeks to test the views of stakeholders on the potential for shared ownership opportunities across Scotland’s offshore wind pipeline, as well as the appetite for developing models amongst communities and energy developers.

Case study: Denmark

An early global developer of offshore wind, Denmark has legislated for local citizens to have the option to purchase shares in wind turbines. Through the 2008 Promotion of Renewable Energy Act, at least 20% of a development’s ownership shares must be offered to residents less than 4.5km from the nearest turbine, or residents of the relevant municipality^[53]. A 2016 study estimated that 52% of installed wind capacity in Denmark contained a citizen ownership model^[54].

However, this approach has drawn criticism around transparency, lack of investment returns, and the financial capability of citizens to partake in the scheme^[55].

Offshore wind development in Denmark has its own legal and policy frameworks and market conditions and it is therefore difficult to draw direct comparisons with other markets, including Scotland. Note, for example, Denmark's recent offshore wind farm tender, which failed to attract any bids from developers^[56].

Consultation questions: Shared ownership of offshore wind developments

Question 11: What do you see as the potential of shared ownership opportunities for communities from offshore wind developments? Please explain your answer.

Question 12: Thinking about the potential barriers to shared ownership of offshore wind projects, what support could be offered to communities and developers to create opportunities and potential models, and for communities to take up those opportunities? Potential barriers include high costs of offshore wind development, community access to finance and community capacity.

2.4 Summary of offshore consultation questions

Offshore wind communities

Question 1: In the context of offshore wind development, what or who or where do you consider the relevant communities to be?

Question 2: When defining the relevant communities to receive benefits from offshore wind development, which factors should be considered, and by whom? Are there any factors which are most important, and why?

Maximising the impact of community benefits from offshore wind developments

Question 3: Who should decide how offshore wind community benefits are used (decision-makers)? Are there any groups, organisations or bodies you feel should have a formal role in this?

Question 4: What are the best ways to ensure that decision-makers truly reflect and take into account the needs and wishes of communities when determining how community benefits are used?

Question 5: What could be done to help maximise the impact of community benefits from offshore wind? What does good look like?

Question 6: How do you think directing community benefits towards larger scale, longer term, or more complex projects would affect the potential impact of community benefits from offshore wind?

Question 7: The development of offshore wind is often geographically dispersed with multiple communities who could potentially benefit. To what extent do you agree or disagree that a regional and/or national approach to delivering community benefits would be an appropriate way to address geographical dispersal of development and multiple communities? Please explain your answer.

Question 8: Are you aware of any likely positive or negative impacts of the Good Practice Principles on any protected characteristics or on any other specific groups in Scotland, particularly: businesses; rural and island communities; or people on low-incomes or living in deprived areas? The Scottish Government is required to consider the impacts of proposed policies and strategic decisions in relation to equalities and particular societal groups and sectors. Please explain your answer and provide supporting evidence if available.

Determining appropriate levels of community benefits from offshore wind

Question 9: In your view, what would just and proportionate community benefits from offshore wind developments look like in practice?

Question 10: What processes and guidance would assist communities and offshore wind developers in agreeing appropriate community benefits packages?

Shared ownership of offshore wind developments

Question 11: What do you see as the potential of shared ownership opportunities for communities from offshore wind developments? Please explain your answer.

Question 12: Thinking about the potential barriers to shared ownership of offshore wind projects, what support could be offered to communities and developers to create opportunities and potential models, and for communities to take up those opportunities? Potential barriers include high costs of offshore wind development, community access to finance and community capacity.