Out-Law Guide 2 min. read
25 Aug 2021, 1:50 pm
In Ireland and elsewhere, renewables development has frequently drawn criticism for insufficient local and community-based sharing of revenues. Under the rules of Ireland’s first Renewable Electricity Support Scheme auction (RESS 1), successful bidders are obliged to set up and contribute to a community benefit fund.
The principal purpose of the fund is to provide funds for the benefit of the community in the area where RESS 1 projects are situated. Although the level of contribution is calculated at a fixed rate, bidders and participants of RESS need to be familiar with the complex practicalities and methodologies of complying with the community support obligations.
RESS is a support scheme aimed at incentivising and increasing the supply of power to Ireland’s electricity grid from renewable energy sources – the Irish government has set a target of delivering 70% of the country’s electricity needs from renewables by 2030.
The scheme is based on a Contract for Differences (CfD) structure and will operate through a series of competitive auctions, with each auction intended to evolve so as to fit with Ireland’s generation needs and facilitate competing or complimentary technologies.
The RESS 1 auction completed in July 2020 with 63 solar power projects and 19 onshore wind projects qualifying. The design of the next RESS auction, RESS 2, is under consultation until 20 August 2021. It is clear that community benefit will be a core thread in the successive RESS schemes.
Any renewable energy project funded under RESS must establish a community benefit fund. The fund should be operated by the developer of the project for the economic, environmental, social, and cultural well-being of the local community. The community fund benefit is a core element of RESS 1 and failure by a project to comply with these terms may result in its ‘letter of offer’ being withdrawn. Moreover, developers in receipt of a letter of offer from RESS 1 cannot put that same project forward to participate in the next RESS auction.
The contribution to the fund to be made by a qualifying project is set at a rate of €2 for every MWh of ‘loss-adjusted metered quantity’ produced.
Contributions to the fund begins when the project reaches commercial operation. The first payment of the annual amount due must be made by the first anniversary of the day operation began. However, payments can be made in advance of this date, with the balance to be paid on the anniversary. This timeline of payment continues throughout the period in which the project receives RESS support.
Both the RESS 1 and RESS 2 terms and conditions set out the basis on which the fund should be distributed and to whom. This includes a requirement that onshore wind farms are to make “near neighbour” payments of €1,000 to any house within one kilometre of the wind farm. Outside of this, at least 40% of the fund must be used for not-for-profit community enterprises. A maximum of 10% of the fund can be used to cover any administration costs associated with the fund. If there are residual funds after those payments are made, developers must also make payments to houses based within one and two kilometres of their site.
The developer is obliged to run a yearly application process for local initiatives to apply for a share of the funding. They must advertise this application process through newspapers, online ads and notices delivered to locals.
An annual report on the operation of the fund needs to be sent to the Sustainable Energy Authority of Ireland. This report must outline the main activities of the fund, the financial status of the fund, and the promotional activities carried out for the fund.
Some changes are anticipated to the terms and conditions for RESS 2. The government has suggested that the community benefit fund requirements be complemented by an aspect of citizen investment to RESS projects. RESS 2 is therefore expected to include details of how citizens and communities can get involved and invest in renewable energy projects in Ireland. Full details of what this might look like have not yet been published, but the Department of the Environment, Climate and Communications has said that a standalone consultation process will open in due course to allow stakeholders have their say on this matter.
Co-written by Shani Stallard and Bridin Redmond.