Community Ownership and Renewable
Energy in Scotland
Mike Danson,
Professor of Enterprise Policy
Heriot Watt University
CRED Seminar, Carlisle, 20th March 2013
Introduction
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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
New poll suggests Scots twice as
favourable to wind power than
nuclear or shale gas 18/3/13
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).
Literature Review
Main form of alternative energy - wind farms
Opposition as planning applications grow and scale
increases
60% 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 diminishing
Suggested 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
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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
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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
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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
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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
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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 distributed
Smaller schemes internalise the externalities
Smaller schemes also increase positive externalities
However, 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 decisionmaking 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, FeRSA
School of Management and Languages
Heriot-Watt University
Edinburgh, EH14 4AS
Scotland
+44 (0)131 451 3840 t
+44 (0)7948 276398 m
m.danson@hw.ac.uk
http://www.sml.hw.ac.uk/staff-directory/michael-danson.htm
Scottish Centre for Island Studies: http://scotcis.wordpress.com/about/
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