Funds with benefits

There are points this year that it’s felt as though Ed Miliband is trying to reverse the country’s productivity crisis single-handed. May alone has seen an energy partnership with Norway, passage of legislation enabling Great British Energy and an announcement of funding to reduce energy bills for public buildings.

This week’s offering is a working paper on Community Benefits and Shared Ownership for Low Carbon Energy Infrastructure, out for consultation until 16 July 2025. The paper proposes to mandate community benefit funds for low carbon projects and explores mandating shared ownership.

The proposal for community benefit funds would apply to a wide range of technologies, from a threshold of 5MW upwards. Funds would be managed by independent administrators, with the potential for multiple developers to pay into shared or regional funds. The idea is to create a level playing field between technologies and communities for the delivery of benefits.

This may be challenging in practice. There are significant disparities in the amounts paid per MW by existing funds for wind and solar farms, rooted in commercial considerations for each technology.

Questions in the working paper on whether fund contributions should be calculated on the basis of installed capacity or generating output go to the heart of this. DESNZ should expect widely varying responses from developers working with different technologies and in different geographies.

Potentially a bigger question is whether the introduction of mandatory community benefits will go any way to making new energy infrastructure more acceptable to communities. Our experience on the ground is that the impact may be limited.

The approach taken in the paper consciously mirrors existing voluntary funding arrangements. These are already widespread across technologies, but have not delivered a meaningful shift in attitudes towards renewable energy deployment.

There are two factors at play here. The first is timing: benefits are invariably delivered after consent, but the most challenging period for any project in terms of community reaction is invariably prior to consent. By the time benefits are delivered, many people have stopped caring as much. On a related basis, people living near projects will naturally tend to focus more on potential impacts than benefits.

There is a risk that the proposal in the paper reinforces this dynamic. It includes a large section on how fund administrators should seek community input into how a fund is spent. This is clearly positive, but still leaves the detail to the imagination for people living near projects. This may change as the mechanisms set out in the paper bed in – but this is unlikely to help the large number of projects that need to be delivered before then to meet the government’s wider objective of clean power by 2030.

Developers will no doubt respond to the consultation on the detail of how funds could and should work. But it is also worth considering whether the approach set out in the paper will meaningfully shift sentiment towards renewable energy development any more than the approach already taken by many projects.