Onshore renewable energy - refreshing the good practice principles for community benefits: working paper

Section 1 – Technologies in Scope and Co-location

Summary

• This section sets out proposals on which energy technologies the refreshed Good Practice Principles would apply to, and how the guidance would be adapted to different types of developments.
• This includes proposals to broaden the scope of the Good Practice Principles to apply to energy storage developments – where previously only renewable energy generation developments have been covered.
• The guidance would be adapted to different technologies according to their likely ability to offer community benefits and expected role in the energy system.
• We also propose to provide specific guidance for ‘co-located’ developments where technologies share a site, grid connection, or area of a community-led plan.

Key Terms:

Net zero: A situation in which the amount of greenhouse gas emissions put into the atmosphere is balanced out by the amount removed from the atmosphere, so that the ‘net’ effect is zero emissions. Scotland has a target to reach ‘net zero’ by 2045.

Community benefits: Voluntary provisions made by an energy developer to the

community(ies) within the area of benefit for the development. These can be payments though an annual fund, or 'in kind' benefits such as direct contributions to specific community projects or infrastructure improvements.

Community Benefit Fund: The fund provided by an energy developer to a community group, typically provided annually.

Renewable energy: Energy from replenishable sources such as solar or wind power, or sustainably sourced biomass.

Co-location: Where multiple energy developments or technology types share a site, grid connection, or area of a community-led plan.

Grid: A system of connected infrastructure for moving electricity from where it is generated to where it is needed – including pylons and underground lines.

Revenue model: The way in which an energy development brings in income from the electricity it generates or stores.

Host community: The community(ies) living closest to the energy development.

Commercial maturity: The extent to which a technology can make a return on its initial investment and therefore be deployed more widely than in its early development phase.

Purpose

The current Good Practice Principles, published in 2019, set out guidance for community benefits to be offered as standard on all onshore renewable energy projects, and to be designed to reflect the priorities of local communities. We are refreshing the Good Practice Principles to ensure they remain current as Scotland’s renewables transition progresses. A key part of this refresh is clarifying how the guidance applies to different technologies. This will support communities and developers in agreeing the right benefits arrangements – particularly for technologies not currently referenced in the 2019 Principles, such as battery energy storage developments.

Scotland’s energy system has developed since the 2019 publication of the Good Practice Principles, and continues to evolve. To reach net zero, Scotland needs a mix of technologies such as wind, solar, battery storage, pumped hydro storage, and more. These technologies often share a site or grid connection, sometimes with multiple developments within the area of a community-led plan (referred to as ‘co-location’). This refresh is an opportunity to reflect this changing picture, so that communities know what to expect from different types of development, and to help developers plan and engage early with communities on potential benefit arrangements.

That is why we consulted on broadening the scope of the 2019 Principles, seeking views and evidence on the technologies to include. Whilst the Good Practice Principles already recognise the need for flexibility – and many developers and communities have already adapted the guidance to fit different development types – we want the refreshed Principles to reflect the variety of technologies in Scotland’s energy transition, and to be practical and ready for Scotland’s net zero future.

Approach

The consultation found significant support for the inclusion in the refreshed Good Practice Principles of a broad range of the onshore renewable and storage technologies playing a role in Scotland’s net zero transition. However, many respondents (particularly developers) said that the technologies we consulted on differ widely in their revenue models, commercial maturity and current market viability, and are unlikely to all be in a position to offer community benefits at the same level. We propose that the refreshed Principles should reflect these differences appropriately.

Our proposals are based on the following aims, to:

• Build on existing good practice for community benefits, and the significant progress made by developers and communities in the past 5-10 years.
• Encourage more widespread good practice for technologies where community benefits practice is still emerging.
• Adapt to an evolving energy system so that communities can share in benefits across the range of infrastructure they could be hosting.
• Provide clear and flexible guidance, adjusted for each technology’s commercial maturity, market circumstances, and expected role in the energy system.
• Continue to recognise different benefit models – as they do now, the refreshed Principles would make clear that different types of development may offer different forms of community benefit, such as direct contributions to specific community projects or infrastructure improvements, with arrangements to be agreed with communities.

We have therefore reviewed each of the technologies listed in the consultation^[1], and have worked closely with industry and communities, to inform the proposed guidance for each – considering factors such as:

• Technology ‘maturity’ – taking into account (for example) whether a technology is past its initial development phase, has an established business model, and is commercially deployed.
• Existing community benefits practices across Scotland for different types of development.
• Revenue predictability – for example, projects with more stable income streams are likely to be more able to commit to specific long-term community benefit funds, compared to projects with higher upfront costs and less certain returns.
• Pipeline outlook – the likelihood of developments coming forward over the next five years, so that the guidance focuses on the project types which communities are most likely to be engaging with.

This review has drawn on the research publication we commissioned by Ipsos and ClimateXChange; the significant evidence gathered via our consultation (and the published analysis of responses); and extensive engagement with our Onshore Review Advisory Group.

Policy proposals

Based on the above approach, we propose that the final updated Good Practice Principles would apply to different technologies in the following ways:

Fund level guidance

Onshore wind has a well-established track record of delivering community benefits under the existing Good Practice Principles. The refreshed Principles will continue to reflect the sector’s proven good practice in community benefit schemes.

Community benefits practice continues to emerge for solar developments in Scotland, and we want the refreshed Principles to provide clear recommendations for this as Scotland’s solar capacity grows.

For onshore wind and solar power^[2] – the refreshed Principles would set clear fund level recommendations, per Megawatt (MW) of capacity, adjusted for each technology. The specific fund levels we propose for these technologies will reflect key differences between onshore wind and solar, such as their generation (and therefore revenue) per MW of capacity, and their differences in costs like grid charges and land costs. The fund level recommendations would complement the broader guidance applying across technologies on matters such as community engagement and fund governance.

We are also proposing a fund level recommendation for b attery energy storage systems (BESS) – reflecting that this is playing an increasing role in the energy system, with some new and forthcoming BESS projects already offering or proposing community benefit funds. BESS is not currently specifically referenced in the 2019 Good Practice Principles.

BESS will play a key role in stabilising the grid by storing electricity from intermittent generation from renewables projects, and will often be co-located with generation technologies. Consultation responses generally supported the inclusion of BESS but stressed the need for flexible guidance that is proportionate to the technology’s emerging role. The proposed recommended level set out in the next section is intended to build on emerging practice so far, whilst recognising the need for flexibility given the wide variety of different BESS revenue models and development types.

Broader community benefits guidance

We propose to include hydropower generation, pumped hydro storage (PHS), and commercial-scale bioenergy in the scope of the final updated Good Practice Principles, with an overall recommendation that community benefit funds should be offered, but without recommending a specific fund level for each.

We found limited evidence to support setting a particular level for these technologies. It is clear that there is already well-established community benefits practice in the hydropower generation sector, often exceeding the current £5,000 per MW level. We are also seeing good practice, and the offer of substantial benefits, emerging for PHS projects. However, the consultation feedback and evidence review found that the site-specific economics of these technologies would make a case-by-case approach more appropriate. This also applied to bioenergy developments, which vary significantly in their nature and size.

The final updated Principles will continue to strongly encourage developers to offer substantial community benefits and agree bespoke agreements with local communities.

Emerging technologies

For hydrogen production, negative emissions technologies (NETs), carbon capture, utilisation and storage (CCUS), and heat networks – we propose that the refreshed Principles will recognise their role in the net zero transition and encourage developers to engage with communities from an early stage on the range of potential benefits from sites in planning or development.

However, we recognise that community benefits in the form of direct annual funding could be less feasible for these technologies, at this stage, compared to those listed above. This is because they operate very differently and are often at an earlier stage of commercial deployment or development. Whilst these technologies are strategically important for Scotland’s decarbonisation, detailed guidance on community benefits levels would be premature.

Electricity transmission infrastructure

Network infrastructure has a very different funding context to Scotland’s renewables developments, as this funding is ultimately decided by Ofgem as part of the regulation of the GB-wide electricity network.

We do not propose to expand the scope of the Good Practice Principles to include guidance on community benefits from electricity transmission infrastructure. Many consultation respondents supported its inclusion. However, others were concerned that, following publication of the UK Government’s community funds for transmission infrastructure guidance, and proposal for a Bill Discounts Scheme for new and significantly upgraded transmission network infrastructure, there would be limited value in adding further guidance at this time.

We will continue to engage with the UK Government and developers on the details of these transmission related schemes, to ensure consistent provision of meaningful, lasting benefits for communities in Scotland, particularly given the significant planned grid upgrades in Scotland.

Project eligibility – size and non-commercial projects

The Good Practice Principles will continue to recognise that the commercial profiles of developments could also differ due to their size, and that community benefit arrangements may need to be adjusted to take account of this. Our consultation did not find a strong case for setting a specific size threshold for which projects are in scope of the guidance. However, we note that the UK Government’s working paper proposed to set 5 MW as the threshold for projects covered by their potential mandatory scheme.

Co-location of projects

Given the above scope we are proposing for the Good Practice Principles, this refresh is also an opportunity to ensure the refreshed Principles recognise the growing role of ‘co-location’ in the energy system – where multiple developments or technology types share a site or grid connection, or are situated within the area of a single community-led plan.

The 2019 Principles do not specifically refer to co-location. The consultation found that communities would welcome clearer guidance on this subject, particularly to inform engagement between developers and communities on potential joint or co-ordinated community benefit funds across more than one development. We intend that the refreshed Principles will reflect this, in a way that is adjusted for the different types of co-location that are emerging.

The sharing of sites and grid connections is often intended to maximise the value of grid connections and land, and to increase the flexibility of energy supply – for example, battery storage being built next to a wind farm. Co-location is more common for generation and storage development, and can involve projects with multiple types of generation. Co-located developments can be under one developer or more than one developer. Together, this means that co-location can be categorised into two broad types:

• ‘Fully integrated’ co-location (sometimes referred to as ‘hybrid developments’) – a project with multiple technologies being taken forward by one developer. This includes ‘generation plus storage’ developments (such as a wind farm with a battery on site) or ‘energy parks’ with multiples types of generation (such as wind turbines and solar panels sharing a site).
• ‘Partial’ co-location – commercially separate developments that share a grid connection or, in some cases, might have separate connections whilst being within the area of a single community-led plan. These can be referred to as ‘clusters’, often under more than one developer but strategically sited close to each other. In these cases, co-ordination across multiple developers is needed.

We propose that the Good Practice Principles would set a broad principle that, given the additional infrastructure hosted by the local community, co-located developments should generally provide more community benefit funding than standalone developments. This would include an expectation that developers co-ordinate with each other on joint or co-ordinated funds where applicable. However, this guidance would recognise the need for flexibility given the diversity of types of co-location, and would apply as below. In all these cases, early engagement with communities is essential.

• For ‘fully integrated’ co-located developments under one developer – the Good Practice Principles would set an expectation that the community benefits levels from such developments should reflect the guidance on fund levels for each of the technologies involved, including storage. However, this would leave room for flexibility. For example, for co-located generation (such as wind plus solar ‘energy parks’) the community benefit fund should generally be the sum of the £ per-MW fund level guidance for both. However, ‘generation plus storage’ developments (such as wind farms with batteries) are often regarded as one integrated generation project with a built-in grid balancing function. The refreshed Principles would therefore recognise that a different way of deciding the total fund level (in collaboration with the local community) may be more suitable.
• For ‘partial’ co-located developments – the Good Practice Principles would recommend that the developers should engage with each other and local communities to establish a coordinated community benefit fund that, in all cases, should total the recommended £ per-MW fund levels across technologies. This would mean that just as the developers co-ordinate with each other on their siting or grid connection, they should likewise engage with communities together, to agree a pooled benefit fund (or closely co-ordinated funds) that reflects the preferences of the local community.
• ‘Retrofitted’ co-location – given the guidance proposed above, the Good Practice Principles would also need to recognise cases where a new development is added to an existing development already providing community benefits (such as a wind farm site being expanded with battery storage or solar panels). In these cases, there could be a risk that the site could become ‘co-located’ without the community having the opportunity to secure additional benefits. The refreshed Principles would therefore recommend that where new infrastructure is proposed in addition to an existing project, the developer should engage with the community to agree an uplifted community benefit level.

We’d like to know:

• Is the set of technologies proposed above the most effective scope for the final updated Good Practice Principles?
• Would our proposed approach of adapting guidance for different technologies be effective?
• Is our proposed approach to ‘co-located’ developments clear and practical for communities and developers?