Offshore renewable energy developments - good practice principles for community benefits: consultation

3 Background

3.1 Definitions

Community Benefits

'Community benefits' in this document are understood to be additional voluntary measures which are provided by a developer outside of the planning and licensing processes.

Community benefits as defined in this document are independent of supply chain benefits (the maximisation of which remains a priority for The Scottish Government), and of funds accrued through the Crown Estate leasing process (more detail in section 3.2.1). Community benefits may include:

1. Voluntary benefits which the developer provides to the community, (i.e. in-kind works, direct funding of projects, or any other voluntary site-specific benefits),

2. Voluntary monetary payments to the community that are not related to anticipated impacts of the planning application usually provided via an annual cash sum, often referred to as a community benefit fund.

The Scottish Government considers a community benefit fund to be a fundamental component of a community benefit package, though other measures may be considered.

Supply chain

A channel of distribution, beginning with the supplier of materials or components, extending through a manufacturing process to the distributor and retailer, and ultimately to the consumer. 'Supply chain benefits' will refer to positive impacts arising from such a channel.

Socio-economic benefits

A specific set of supply chain impacts. Socio-economic benefits are understood to be created by renewable energy developments, often specifically through jobs and employment opportunities.

Renewable energy can also be understood to have wider positive impacts such as providing a sustainable energy supply and reduced reliance on carbon intensive fossil fuels.

3.2 Context

In 2014, the Scottish Government commissioned research to review good practice in community benefits from offshore renewables internationally.

The research confirmed that there are a number of ways in which communities can and will benefit from the offshore renewable energy industry, and that the Scottish Government is first in considering formalising good practice for voluntary 'community benefits' as understood and defined in this document. This is an opportunity to create a world class industry and to 'replicate the positive experiences of the onshore wind industry'^[1]. There are considerable differences between the two industries as explored below in section 3.2.3, but it is the intention of Scottish Government to transfer knowledge where applicable.

3.2.1 Community benefits and the supply chain

There is opportunity for Scotland to benefit from a competitive and innovative UK supply chain that creates sustainable exports and benefits for the economy. These positive benefits are likely to be focused on specific locations and groups of people (i.e. workforces) and there is therefore scope to more equitably disperse benefits. Additionally, some positive supply chain impacts such as job creation may be concentrated at specific phases of development, such as construction. Community benefits provide an opportunity for communities to see positive effects throughout the lifetime of a development and to invest in a long-term legacy for generations to come. The UK Government's Offshore Wind Industrial Strategy sets a pathway for the creation of 30,000 FTE jobs and delivery of £7 billion GVA to the UK economy by 2020 through a strong growth delivery scenario – further information on this is available in Case Study 4. Maximising supply chain benefits is a focus for the Scottish Government, but this topic is outside the scope of this document.

The benefits to Scotland from the offshore industry have been complemented in recent years by additional funding opportunities through the Coastal Communities Fund. The equivalent of 50% of revenue received through seabed leasing and other Crown Estate marine activities has been made available through the Coastal Communities Fund, benefitting coastal communities across the UK. More information on this fund is available in Case Study 5. The Treasury is responsible for decisions on the availability of future funding under the Coastal Communities Fund.

Scottish Ministers have committed to providing coastal and island communities 100 per cent of the net Crown estate revenue from marine activities out to 12 nautical miles following the forthcoming devolution of the management and control of the Crown Estate in Scotland.

Complementary to these positive effects focused on specific groups as listed above, there is an opportunity for the benefits of exploiting Scotland's renewable energy resource to be shared more widely across the country^[2]. The Scottish Government believes that the benefits of renewable energy should be shared across Scotland, and should be invested in our communities for long-term stability.

3.2.2 Why Community Benefits from Renewable Energy?

Community benefits are encouraged by The Scottish Government from projects which exploit a national resource, including those which exploit a renewable energy resource^[3].

Harnessing renewable energy resources offers the opportunity for sustainable energy supply for the UK, as well as economic opportunities for companies across the country. Over 11,000 individuals are employed in renewable energy in Scotland^[4], with 2,100 in offshore wind^[5], and this is to be celebrated. There is often a desire from communities near to renewable energy developments to benefit more directly from a project. Furthermore, where communities may feel they are 'hosting' a development, it may be appropriate to acknowledge this through a 'goodwill gesture'. This issue is explored in more detail in this document. There is no legal obligation to provide community benefits, and any such voluntary measures are delivered outside of the planning and licensing systems. This is a new and emerging topic, and Scotland is keen to lead the way by engaging with industry and encouraging good practice rather than formally legislating for such provisions. Some developers may also wish to view community benefit provision as corporate social responsibility^[6].

Other non-renewable energy industries have explored community benefits, but it must be recognised that there are a range of factors which makes comparison of industries difficult. In Shetland, the oil industry in the 1970s required payments through local authority policy. While very different to the offshore renewables industry, the process was seen to be successful, and there are lessons which can be learnt from this. Further information is available in Case Study 3.

The definition of community and design of a community benefit package will be influenced by the understanding of why such provisions are necessary^[7]. The Scottish Government believes community benefits are an opportunity to share the positive effects of renewable energy. This should be borne in mind when designing a community benefits package.

3.2.3 Differences from Onshore

Community benefit provision from the onshore renewable energy industry has been viewed positively and there is scope to transfer learnings where appropriate. The rationale for community benefit provision is similar for the two industries, driven by a desire to equitably share the benefits gained by harnessing a national natural resource. However, given the differences in identifying nearby communities, maturity of the industry, technology and project economics, community benefit packages are unlikely to be realised in precisely the same manner.

• While significant development is planned to occur, commercial scale projects in the deeper, more challenging waters off Scotland are currently in very early stages of development, the resulting costs and risks associated with these projects will be much higher than for onshore.
• Cost reduction is a key driver for the offshore wind industry, particularly in the context of increasingly competitive Contracts for Difference allocation. More so than for onshore projects, the scale of community benefits may be highly dependent on the financial means of the developer.
• Existing practice has informed the development of in-depth principles for the provision of community benefits from onshore projects. Such detail is not appropriate for the offshore industry where replicable good practice has not yet emerged.
• There are additional technical challenges of constructing and maintaining sites offshore and the timescales and phased development process of offshore projects differs greatly from the onshore industry where construction is less complex.

3.2.4 Distinction from Compensation

Community benefits as described and discussed in this document are not a compensation for any perceived negative impacts. Community benefit provisions should not be confused with any compensatory payments or provisions for example to specific stakeholder groups. Where developers consider it appropriate to provide individual compensation for a development, this arrangement should be agreed between the relevant parties and is separate from any community benefit proposals. Nor should these compensatory agreements be construed or publicised as 'community benefit'.

The principles and guidelines in this document assume that discussions are held separately regarding visual impact, impacts upon fishery industries, and any other reported negative impacts.

3.3 Good Practice Principles

It is recognised that the offshore wind industry is at a critical stage in its development and the UK is competing globally to attract this investment. The industry's focus is therefore on ensuring the deployment of offshore renewable energy projects and the creation of a strong, diverse supply chain which will deliver sustainable benefits to Scotland and the UK through the creation of jobs and inward investment. Complementary to the delivery of supply chain benefits, developers are encouraged to consider a community benefit package.

These principles are intended to apply to developers in the offshore wind industry, but may be of interest to those in wave and tidal technologies. The onshore wind industry is more mature than other offshore renewable technologies. The provision of a community benefit package must therefore be considered separately in the context of each industry. It is the expectation of The Scottish Government that relevant principles of community benefit will be applicable to any renewable energy technology once commercially viable. It is recognised that wave and tidal technologies are not yet at this stage in their development.

In acknowledgement of some of the challenges raised above in delivering community benefits from offshore projects, there is a heightened need for transparency in all discussions. Developers should 'consider, reveal and discuss openly what is achievable' from an early stage where possible^[8].