Note: Shared ownership and joint venture arrangements can be very complex and carry significant risks for both parties. It is crucial that any community organisation seek independent expert advice before entering any type of legal agreement.
Community investment in commercial renewables projects is often referred to as shared ownership and usually involves some form of joint working between the developer and the community. The Scottish Government is preparing guidance to assist communities and developers in developing shared ownership schemes and have consulted on Good Practice Principles for Shared Ownership of Onshore Renewable Energy Developments.
The Good Practice Principles identify the following common models of shared ownership:
- Split ownership – where a scheme is divided into two or more separate generating systems, each of which can then produce energy for the benefit of an identified owner. For example the community might get the revenue generated from a single wind turbine.
- Joint venture – the commercial operator and community organisation work together to create a joint venture to develop, own and manage the renewables scheme. For example a new company is formed to develop and manage a new hydro scheme.
- Shared revenue – the commercial operator develops the project and offers a revenue share to a community enterprise who invest a financial stake in the development in return for a share of the profits; however the community enterprise does not own a physical asset.
The risks and rewards associated with each will vary and communities considering investing in shared ownership should seek advice before proceeding.
There are only a handful of examples of successful community shared ownership renewable energy ventures in Scotland and one of them is located in Argyll and Bute.
In 2011, Ardrishaig Community Trust made the decision to enter into a joint venture partnership with Allt Dearg Wind Farmers LLP, purchasing a 1/12th share of the nearby 10MW Allt Dearg wind farm. Thanks to the projects successful completion Ardrishaig Community Trust will receive a 1/12th share of the net profits from the wind farm for the next 20 years. The estimated total financial benefit over the lifetime of the project to the Ardrishaig Community Trust is £3-4 million pounds.
To assist communities in finding opportunities for shared ownership investment, Local Energy Scotland operates the Partnership Portal where you can view developers looking for funding or post that you are looking to invest in a project.
There are also a number of opportunities for communities in Argyll and Bute who are interested in getting involved in a joint venture agreement thanks to proposals from the Forestry Commission Scotland (FCS) .
FCS has released the rights of development of its estate to a number of hydroelectric and wind farm developers. In the Argyll and Bute Council area, E.On Climate and Renewables and PNE Wind have the development rights for wind farms over 5MW and Scottish Power Renewables have the development rights for sub 5MW renewable energy schemes. For hydroelectric developments in the Argyll and Bute Council area a consortium of Broadland Properties and Gilbert Gilkes & Gordon (BGC) have the rights to develop all hydro schemes located on the FCS estate. A map of the potential hydro schemes is on the BGC website
As part of the sale of the development rights, FCS ensured that the successful developers are obligated to provide 3 investment options to local communities.
These options are:
- Option A: Community Benefit Payment of £5000 per MW is made to the community, index linked to account for inflation.
- Option B: Communities can convert the community benefit payment into a financial stake for the community vehicle.
- Option C: Communities can make a capital investment into the project.
There is also the opportunity to combine the options to create a hybrid option:
- Option A and C: Community Benefit Payment to and Capital Investment by Community Vehicle
- Option B and C: Convert the Community Benefit Payment into a financial stake for community vehicle and invest additional capital on behalf of the community
These options represent a significant opportunity to communities close to wind farm and hydro developments on the FCS estate. An overview of the information is available on the FCS renewables page. Interested individuals should take note of the disclaimer contained within the Forestry Commission Scotland advice notes.
A number of commercial developers are now starting to offer a community stake in windfarm developments.
Support and advice on Joint Ventures is available from:
The Scottish Government’s Community and Renewable Energy Scotland (CARES) scheme is delivered by Local Energy Scotland and can assist communities considering shared ownership; their shared ownership webpages provide further information.
Community Energy Scotland (CES) provide free and impartial advice to community organisations. If you are interested in setting up a joint venture CES staff will be able to provide help and advice to get you started. Information on shared ownership structures of renewable energy projects are contained within section 7.6 of the Community Renewable Energy Toolkit
Development Trust Association Scotland (DTAS) are can provide support and advice to new or existing development trusts on joint ventures and setting up arm’s length trading subsidiaries.