community ownership and renewable energy in scotland
DESCRIPTION
Community Ownership and Renewable Energy in Scotland. Mike Danson, Professor of Enterprise Policy Heriot Watt University CRED Seminar, Carlisle, 20 th March 2013. Introduction. Rationale Literature Review Externalities Methodology – critical discourse analysis Case Studies Findings - PowerPoint PPT PresentationTRANSCRIPT
Community Ownership and Renewable Energy in Scotland
Mike Danson,
Professor of Enterprise Policy
Heriot Watt University
CRED Seminar, Carlisle, 20th March 2013
Introduction
Rationale Literature Review Externalities Methodology – critical discourse analysis Case Studies Findings Conclusion
Rationale Commitment to renewables at EU, UK and Scottish
levels Community Buy-Outs tend to develop alternative
energy schemes But different forms of asset ownership do not utilise
alternative energy schemes in the same way Need to analyse impacts of these differing ownership
structures Under- explored area is the power relationships
which exist in establishing alternative energy schemes
Findings of a YouGov poll suggest 62 per cent of Scots would be generally for large scale wind projects in their local council area, more than double the number (24 per cent) who said they would support shale gas, and almost twice as much as nuclear (32 per cent).
It was an even more positive outcome for hydro power which scored top with 80 per cent of those surveyed saying they would be generally for a large scale hydro project in their area, considerably more than other forms of generation such as gas (42 per cent), oil (37 per cent) and coal (34 per cent).
New poll suggests Scots twice as favourable to wind power than nuclear or shale gas 18/3/13
Literature Review
Main form of alternative energy - wind farmsOpposition as planning applications grow and scale
increases60% refusal rate for planning applications in
England and Wales (Cass et al., 2010)Recent press reports in Herald, Guardian, Shetland
Times etc. would suggest this is not diminishingSuggested that ownership in the UK impacts on
refusals (Khan, 2003; Brunt and Spooner, 1998; Toke and Elliot, 2000)
Literature Review
Khan (2003) identifies three ‘conflict dimensions’
1.Conflict between private and public interests
2.Conflict between national and local interests
3.Conflict between economic growth and environmental protection
‘Conflict Dimensions’ aka externalities
Externalities
Loosely defined as ‘costs or benefits of an activity which are not reflected in the price’
Positive and negative externalities exist through wind farm production
Usual way of dealing with externalities - attempt to ‘internalise the externality’
Encourage the positive (e.g. subsidy), reduce the negative (e.g. taxation)
Methodology
Three research questions:
1.which renewables projects are chosen and how are they structured and managed;
2.what revenue flows are generated and how are these distributed;
3.how are ‘public’ perceptions both constructed and managed across media forms in relation to renewable energy and island communities in Scotland?
Methodology
To date, insufficient examples of renewable schemes across the different forms to address these research questions in a formal quantitative way. So,
Case study approach, secondary data supplemented with primary data collection
Critical discourse analysis - examining media accounts as indicators of power identities, institutions and relationships (work in progress)
Four Main Types of Ownership
a) Community ownership: land and renewable energy projects owned by the community
b) Shared ownership: where the equity is split between a commercial operator and community trust
c) Co-operative ownerships: partial community share in commercial operation
d) Commercial ownership: no direct community ownership
Community ownership project structure Relatively small scale Driven by community Fewer planning problems Finance problems Example: Gigha (3 turbines, 800kW)
Only a small number of wind projects are running. Gigha; Udny 800kw community wind turbine in Aberdeenshire
Relatively small scale
Shared ownership project structure Commercially driven Financial risk and profits shared Land is privately owned Management through LLP Example: Neilston Development Trust (4
Turbines, 10MW)
Neilston Development Trust’s community windfarm – in planning. (49.9% / 50.1%) with, Carbon Free Development Ltd, four turbines installed capacity of 10 MW. commercial company undertakes all technical aspects including obtaining finance.
Co-op ownership project structure Commercially driven Larger scale Fewer finance problems Land is privately owned Example: Isle of Skye Co-op (10 turbines,
23MW)
Limited ownership: owns 6%
Commercial ownership project structure
Commercially driven Significantly larger scale Finance less of an issue More planning difficulties Example: Whitelees wind farm (140 turbines;
322MW)
Community ownership: revenue flow, distribution and externalities Revenue flows back to communities Negative externalities are internalised Positive externalities associated with local
economic development Minimal positive externalities associated with
CO2 reduction
In other words, those who are paying the visual "price" of having the construction of wind turbines are receiving the benefits of the revenues they generate.
Stimulates and supports social capital
Shared ownership: revenue flow, distribution and externalities Negotiate operational risk and reward Negative externalities are partially internalised Some positive externalities associated with local
economic development Higher positive externalities associated with CO2
reduction
In the case of Neilston, the plan is for profits to be shared almost 50/50. This would lead to a revenue flow of £2.4 million over the first 10 years and a total of £10.5 million (before tax) over 25 years.
Co-operative ownership: revenue flow, distribution and externalities Negative externalities are marginally internalised Limited revenue flow through community fund
and co-op profits Land owners receive rental Modest positive externalities associated with
local economic development More positive externalities associated with CO2
reduction
Internalisation of negative externalities is constrained - an individual or household must have income to invest - and even this is limited to 5% of the project value. Also a disconnect between those bearing the brunt of the negative externalities and those who profit from co-operative membership. There is the community fund, but this represents only a small proportion of the total project revenue.
Commercial ownership: revenue flow, distribution and externalities
Surplus revenue flows to commercial company Negative externalities are minimally internalised Community fund small in proportion to revenue Limited expenditure in the local community Modest positive externalities associated with
local economic development Land owners receive rental Largest positive externalities linked to CO2
reduction
Isle of Gigha
“We have now created a new normality, when people take control of their own destiny, run their own affairs, build their own future, create the opportunities for their children instead of having a big house which dominates proceedings over all who live under it.” (Isle of Gigha Trust, chairman)
Isle of Skye
Isle of Skye renewables cooperative holdings vary from £250-£20000, with in total 520 members raising £800k, or some 5% of the project’s value. Profits are proportionate to membership share, with those individuals and organisations who could afford to purchase the maximum amount (£20,000 in the case of Isle of Skye renewables cooperative) receiving the maximum amount of profit
Isle of Skye II
“… we’ve got 520 members and we raised I think about £800k and then more importantly because the return is very good … with interest rates anything between 0.5 and 1% so it’s not a surprise that everybody was attracted to it, you get that for 25 years guaranteed 6.5% and the capital back – so it’s an incredibly good investment if you’ve got some money”
“the returns and dividends in the first year were 9% and 12% in the second year, now your best ISA at the moment is 3% so that’s an incredible return, it’s the minimum share of £250 investment and a maximum of £20,000”
Isle of Skye III
So even in cooperatives : revenue flow to individuals, how profit spent, saved or invested also up to individuals.
Community: a direct financial flow from the commercial energy company and the co-operative. In the case of Skye, Falck Renewables agree to pay £30,000 pa to local community fund; each year co-op provides some money to the local community, currently around £4-£5000 a year
Debate within the co-operative about whether the amount provided to the local community should be increased.
Individual v community
“There was a bit of a furore at our AGM about giving community benefit as a percentage of their overall dividend, there was quite a few people who didn’t want that to happen, they see it as their financial income and anything that gets hived off at even 10% or 1% of the end dividend, a lot of them aren’t in this investment for that, they see it as an investment for themselves, as individuals.”
Constraints on positive externalities
Individual or household must have the necessary income to invest - and even this is limited to 5% of the project value.
Likely to be a disconnection between those bearing the brunt of the negative externalities and those who profit from co-operative membership (location, noise pollution, etc.)
Community fund to compensate ~ but represents only a small proportion of the total project revenue (which would be around £2.3 million at a rate of hundred thousand pounds net profit per megawatt)
Who is the community?
The Sealladh na Beinne Moire company operates in the name of the islands South Uist, Benbecula and Eriskay as formally held under the ownership and management of South Uist estates. The conflation of the term Sealladh na Beinne Moire and the community, or the ‘local community’ is noted here as exemplifying the slippage between the discursive constructions of ‘identity’ and institutional and ideological frames of reference. Whilst reasonably distinct as geographic islands the nature of community identity is not so easily detailed and in fact is invariably conflated in local relations and articulations of both identity references and resource claims (Burnett, 1997).
Experiences in Denmark
Oil crisis - shift to renewables Develop new model of economic governance around
decentralisation and localised forms of collective ownership Partnerships between local neighbours or cooperative forms -
‘critical’ (Cumbers, 2012) Electricity distribution system
democratic, cooperative and heavily decentralised (contrasts with most other countries, including UK) >100 local distribution companies (primarily cooperative and municipally owned)
Acceptability and internalising negative externalities v economies of scale
Conclusions I
Different ownership models of renewable schemes (esp. wind)
Focus on how the revenue produced is distributedSmaller schemes internalise the externalitiesSmaller schemes also increase positive externalitiesHowever, positive externalities from reduction of CO2
lower so the impact is much less.CBOs and Danish experiences – more equitable, build
popular participation, spread ownership and decision-making rights
Supportive state institutional and regulatory mechanisms to promote and foster more decentralised forms of collective and public ownership
Conclusions II
Contribution of renewable schemes to sustainability of local rural communities but there is a cost. Need for learning processes so that such communities with limited resources can learn from each other (KE) and maximise shares from externally owned schemes. But beware of rhetoric: ‘alternative energy’ is good but for whom?
Professor Mike Danson, DLitt, AcSS, FIED, FeRSASchool of Management and Languages
Heriot-Watt University Edinburgh, EH14 4AS
Scotland+44 (0)131 451 3840 t+44 (0)7948 276398 m
http://www.sml.hw.ac.uk/staff-directory/michael-danson.htm
Scottish Centre for Island Studies: http://scotcis.wordpress.com/about/
CHECK OUT www.pemabo.net A PLACE WHERE YOU MEET COLLEAGUES WHO ARE INVOLVED IN PERIPHERAL, MARGINAL
AND BORDER REGIONS