Onshore renewable energy - refreshing the good practice principles for community benefits: working paper
It’s vital that Scotland’s communities benefit from our renewable energy resources. This paper has new proposals to strengthen our guidance for community benefits from onshore renewables projects, including on fund levels, technologies, governance, distribution, and support for communities.
Appendix – More information on fund levels analysis
To give an example of the analysis behind the proposed fund levels in Section 3:
On the effects of inflation and the changing market environment – an uplift of the current £5,000 per MW recommendation, adjusted solely for inflation since different ‘benchmark’ years, and compared to 2024 (the latest available whole-year data), found the following:
| 2010 | 2014 | 2017 | 2019 | 2020 | |
|---|---|---|---|---|---|
| 2024 equivalent fund level | £7,234 | £6,698 | £6,440 | £6,165 | £5,868 |
This suggests that adjusting the fund level from when it was first set in the Good Practice Principles (2014) would lead to a new figure of almost £6,700, and projected 2025 inflation data suggests that figure could be now over £6,900 (approximately). However, the findings of our research suggested that community benefits payments at the current level now take up a larger proportion of a typical development’s profits than they did in 2014. This has been driven by recent market challenges such as increased ‘hurdle’ rates of return needed for developments to go ahead, and increased capital costs, grid costs, and supply chain costs. We have therefore taken the approach that an inflationary uplift to the onshore wind fund level should be mitigated to reflect these challenges.
On differences across technologies – using each technology’s load factors, along with Contracts for Difference (CfD) prices[5], our analysis suggested that the ‘gross revenue’ (before costs) of a typical solar development could be approximately a third that of an onshore wind development. However, developers also submitted evidence on other factors that could affect the profit of a solar development and its ability to offer community benefits. These include: lower solar irradiance in parts of Scotland than in England; higher cost of land per MW compared to onshore wind; and grid charges and planning costs potentially disproportionately affecting solar developments due to their lower generation per MW of capacity. We therefore found a strong case for setting a lower fund level recommendation for solar developments than if this were set solely in proportion to estimated gross revenue.