Getting The Governance Right
This section sets out:
- Good Governance – Principles
- Governance Structure – Options
- Effective fund administration
- Wider package of benefits
Good Governance – Principles
The Scottish Government encourages the renewables industry and communities to ensure community benefits packages are set up in a way which will support and promote local decision making, accountability and generate a lasting legacy.
The current practice adopted relatively widely by the renewables industry is to offer a community an annual payment over the lifetime of the project and to set-up a “Community Benefits Fund” to support local projects identified by the community.
However, as previously stated, and worth reiterating, while the Scottish Government will continue at a national level to promote community benefits of the value equivalent to £5,000 per installed MW per year, we understand that some renewable energy businesses will seek to offer a more flexible package of benefits for new projects being developed. That package might not necessarily be based on the national rate per MW, but may include a different rate or provide scope to directly fund projects identified by the community.
The rest of this section provides guidance on the administrative arrangements that both the renewable energy business and the community might want to consider in setting up and operating a “fund”. However, the high level principles are transferable to any community benefits arrangement that is put in place.
Good Governance – Principles
The renewable energy businesses, communities and others involved in the process should be as flexible as possible to ensure they find the best solution for their local area, including considering the feasibility of aligning with arrangements from other local renewable developments in order to maximise local benefit.
Once the key features of the community benefits package have been determined, including area of benefit, value and types of benefit, as set out in the community benefits agreement, the renewable energy business is expected to consult further with the relevant communities about the implementation of the community benefits package.
Whatever administrative arrangement used, most communities are likely to want representation in, or ownership of, the decision-making process.
Even in instances where a third party or the renewable energy business themselves are administering the package, most communities will expect the actual decision-making process to be devolved to them in some way. We would encourage renewable energy businesses to consider enabling a fund to be set up in a way which will support and promote local decision-making through an arrangement that has the endorsement of the local community as far as that can be achieved.
However, communities may require support to do this from those with experience, such as other communities or specialist consultants or other third parties.
Further issues to note are:
- Community benefits funds, do not have to reflect the conventions of more traditional funding – they can be more flexible and responsive.
- Where there is opportunity to invest in a local renewable energy project and the community wish to explore this, they may wish to consider capitalising any available community benefits payments towards their investment in the shared ownership opportunity.
- The governance structure and decision-making arrangements for the package/fund may need to change over time as local circumstances and capacity change.
- Communities may wish to explore any match funding opportunities to maximise impact of any fund or package of benefits available. Where support to spend funds is requested by the community, we would encourage the renewable energy business to signpost the community to Local Energy Scotland in the first instance who can assist and advise on further third party support to help the community to build capacity and develop ideas.
- All parties need to be prepared to be flexible to enable the best solution for the local context.
- Decision-making arrangements should seek to be inclusive of the wide range of perspectives, experience, knowledge and ambitions within the fund area of benefit. They should also be transparent.
- The group making decisions over distribution of money should be separate from any group looking to apply to the fund to deliver a project.
- The role of the decision-making group and how they award funding should be drawn up in a governance document. This will vary in nature, terminology and legal standing depending on the structure chosen for the decision making vehicle.
Governance Structure – Options
The most common structures used to deliver community benefits funds in Scotland are:
- A community council, or other unincorporated association, where the amount of money involved is small.
- A new community body established specifically for the role, which may be a community company with or without charitable status or a Scottish Charitable Incorporated Organisation (SCIO).
- An existing community body that is appropriately set up to take on this role. Again, this body may be a community company with or without charitable status or a SCIO. Where that body also delivers local services and projects, delegation of decision-making to a group with wider representation can help to ensure decisions on the allocation of funds are not obscured by conflicts of interest and have wider local ‘buy-in’.
- A specialist third party organisation that provides fund governance services, normally in conjunction with a ‘panel’ of local representatives whose role is to support decision-making on fund strategy and spend. The same body will usually also administer the fund for a fee.
- The fund donor holds the fund and maintains governance responsibility for it, either with or without a panel of local representatives.
- In some cases the organisation governing the fund may seek support with the work involved in administering it, for example grant-making, from a specialist third party. If a third party specialist is used there will be a cost attached which may be deducted from the annual monetary payment. Communities should be aware of this when seeking help.
Effective fund administration
Effective fund administration involves the ongoing business of managing and, in most cases, distributing money to groups and organisations in a timely, fair and transparent manner. It may involve a range of activities such as: producing the fund material; receiving and processing funding proposals; making payments in the form of grants and/or loans; and monitoring and evaluating impact.
Wider packages of benefit
In consultation with local communities and in line with the priorities identified and set down in the community action plan, a renewable energy business may wish to consider direct funding of an infrastructure project or provision of other in kind benefits (as appropriate). Such measures could complement an annual community benefits fund, or be combined to offer a package of benefits as an alternative if acceptable to the community. Some examples include:
- Direct sponsorship of local groups or events.
- A one-off payment relating to construction activity.
- Capital works using heavy plant that is in the area as a result of construction activity, such as improvements to a vital community facility.
- Improvements to, and affordable lease of, housing and business units.
- Support for the community’s own renewable energy project, such as help with feasibility work or sharing a grid connection.
- Strategic investments towards regional or area-wide services (renewable energy companies or their suppliers may offer this directly) like higher education courses or apprenticeship schemes (for example linked to renewable energy or engineering) or countryside ranger services.
- Local energy discount schemes. Initiatives to address energy efficiency or alleviate fuel poverty.
- In-kind support, such as donations of equipment or renewable energy business staff volunteering on local projects.
- Local jobs and contracts: employing of local contractors and using local suppliers, where effort has been made to source these directly from within the local or adjoining communities; apprenticeships and initiatives to support return to work for long term unemployed, post maternity etc.
- Tracks and walking routes: making roads, paths and tracks accessible to local users either on foot or by bike, where additional effort has been made such as signposting, the extension of paths to other local points of interest or provide car parking or other services; additional footpaths.
- Preserving local heritage/archaeology: redeveloping historic buildings, erecting statues and memorials.
- Ecological enhancements/conservation: wildlife/biodiversity enhancement, habitat expansion. These improvements often go beyond the planning condition of onsite mitigation and substantially enhance some habitats and local biodiversity.
In summary, the Scottish Government would encourage the renewables industry to offer a package of benefits that is of the equivalent value to £5,000 per installed MW per year. However, we are mindful that future community benefits packages will be more flexible to reflect the transitional period we are currently in and the commercial profiles of different renewables technologies. It is key that the community is involved in agreeing the best approach for their area: one which fits their long term needs and aspirations.
The earlier discussions take place between the renewable energy business and the community, the greater the opportunity for consensus to be achieved on the community benefits package, and for it to be viewed positively by the community.
Ensuring transparency between partners
It is important that communities are made aware of, and understand, any conditions or limitations attached to the community benefits package, including details of any common exclusions (things they don’t want to be supported through community benefits resources) and their underlying explanations to communities at an early stage.
However, the renewables industry should understand that community benefits funding can be of most value to the community where it can be used to meet the priorities the community determines for itself.