2. Community Fund

2.1 Introduction

This report has been prepared to outline proposals for community funds associated with the Maerdy Windfarm. The report covers the reasoning for a community fund, policy and guidance on funds and consultation conducted by the Developer on possible routes for a fund.

This report is intended to facilitate discussion with interested parties and provide a basis for proposals to be agreed should the windfarm be granted planning permission. Interested parties may include: Rhondda Cynon Taff County Borough Council (RCT), Community Groups, AM’s, etc.

It is intended that a community fund, deliverable by the Windfarm Developer, is secured by RCT through either legal measure or planning condition as appropriate, to provide confidence on their delivery.

 

2.2 Reasoning Behind Community Fund Proposals

The Maerdy Windfarm will deliver financial benefit if it goes ahead to the following organisations:

• The Windfarm Developer
• The Local Landowner
• The Forestry Commission
• RCT Council

The local community may vicariously benefit through the substantial rates that RCT will collect from the windfarm. However, The Developer wishes to ensure that the local community also receive direct financial benefit as a stakeholder in the windfarm.

National Planning Policy makes clear, and the Developer endorses, that the availability of a community fund should not influence a planning decision, such that a windfarm that would have been turned down on environmental or other grounds is given the go ahead.

 

2.3 Planning Policy and Guidance

2.3.1 National Policy

Technical Advice Note 8: Planning for Renewable Energy (TAN8) provides the most up to date and relevant guidance with regard to windfarms and community benefit schemes:
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2.15 Developers, in consultation with local planning authorities, should take an active role in engaging with the local community on renewable energy proposals. This should include pre-application discussion and provision of background information on the renewable energy technology that is proposed. 2.16 Experience has shown that there are opportunities to achieve community benefits through major wind farm development. Some benefits can be justified as mitigation of development impacts through the planning process. In addition, developers may offer benefits not directly related to the planning process. Annex B provides further information and examples about the types of community benefit which have been provided. Local planning authorities, where reasonably practical, should facilitate and encourage such proposals. The Welsh Development Agency, and others can support and advise on community involvement in developing renewable energy and benefiting from it. Local planning authorities should make clear in their development plans the scope of possible “planning contributions”. However, such contributions should not enable permission to be given to a proposal that otherwise would be unacceptable in planning terms. Annex B Community Benefits Arising out of the Development of Wind Farms in Wales Developer offers 1.3 The developer might wish to volunteer “gains” outside obligations that could be legitimately described as necessary for the development to proceed. Such “gains” could be offered as part of the planning process, as outlined below, or they could be undertaken as a separate exercise. The courts have held that this approach is not, in itself, unlawful. Whether the developer enters into an agreement with the local planning authority or offers these extra benefits unilaterally (as he is permitted to do under section 106), the important point here is that, as such offers are not necessary for the development to proceed, they must not impact upon the decision-making process. 2. Community Benefits – outside of the planning process 2.1 It is perfectly acceptable for a business to enter into a legally binding agreement with third parties to deliver particular and agreed benefits to the community. Many local planning authorities would be more comfortable with this approach as it separates, more clearly, community benefits from the planning decision. It is important that the developer is able to identify suitable local representative people or organisations with whom it can negotiate. If there are funds to be administered then an appropriately constituted and regulated body must be identified or created. 2.2 Such benefits offered to local communities could take the form of one or more of:- • in-kind benefits such as the construction of a needed community facility. • a lump sum financial payment for the benefit of the community. • annual payments to the community. • a commitment from the developer to use local labour and/or contractors/services wherever possible. 2.3 It is, however, considered to be essential that:- • benefits are negotiated with appropriate and representative persons or bodies. • benefits are channelled through a regulated and properly constituted body or trust (this could include the local authority). • benefits are utilised for an agreed range of appropriate uses that would all fall within the definition of sustainable development. • at least part of any annual payment benefits should be invested in carbon emissions reduction measures in the local community. 2.4 It must be clear that the provision of benefits is on a purely voluntary basis with no connection to the planning application process

 

2.3.2 Local Policy

There is no relevant policy within the Rhondda Local Plan, however, the Cynon Valley Local Plan does state that the Council will seek provision of environmental and community benefits from Developers.

2.4 Consultation Work

2.4.1 Public Consultation

An extensive public consultation was conducted on preliminary proposals for the windfarm during December 2005 and January 2006. The public consultation covered a wide range of areas inviting people to comment on the proposals. The consultation also, specifically requested comments on community benefits; see extract from consultation questions below

Q5. How best do you think community funding from the project should flow?· to community projects· to individuals through shares in the windfarm· through discounts on electricity prices Q6. Have you any specific ideas on applying community funding?

 

Responses

27 people made written comments in response to the consultation, 9 of these made specific comments regarding community funding. A report was prepared for RCT on the public consultation that included all responses in full: Maerdy Windfarm Project: Report on Public Consultation on Preliminary Proposals 20/02/06 (included within planning documents as ES appendix). The responses regarding community funding are summarised in the Table 2.1 below:

Table 2.1: Responses to Public Consultation Regarding Community Benefit

1 Balance funding between the most disadvantaged and needy and as many people as possible; Community groups, subsidising core services; Benefits identified as consequence of windfarm and highly visible and credible 2 Resources for young people – networked centres, internet cafes, somewhere to play pool 3 Discounts in electricity prices 4 Reduction in energy costs, not community projects; Direct grant funding for household wind turbines / solar panels 5 Fund community projects 6 Benefits are illusionary, dwarfed by disadvantages 7 Tourist development, but windfarms are not a tourist attraction 8 Yes to community projects; No to individual shares in windfarm; No to discounts on electricity prices; Funding to Maerdy Community Centre 9 Mountain bike path, and footpath; Natural woodland planted

2.4.2 Consultation with RCT and Community Groups

Meetings have been held with Maerdy Communities First and RCT Council. No specific issues came out of the meetings.

 

2.5 Proposals

The key questions to be decided by any community fund scheme are:

• How much funding ?
• Where is the funding applied ?
• To what is the funding applied ?
• How is the funding applied ?

 

2.5.1 How Much Funding?

The level of funding available depends on the financial viability of the windfarm in question and what is equitable.

Windfarm viability is dependent on the size of the windfarm, the wind speed and the electricity sale price available. Windfarm economics are highly sensitive to all of these factors. Economies of scale are significant; revenues rise at an exponential rate to windspeed and electricity sales prices are very un-reliable as they are exposed to large political and economic risk.

Maerdy Windfarm is 24MW installed capacity, there are bigger projects in more remote locations and also smaller projects. Windspeed is average; there are more exposed windier sites and also less windy lowland sites.

The electricity price that Maerdy can secure is dependent on how quickly it can secure planning permission and be constructed. The UK Government Energy Review 2006 announced proposals to band the support mechanism for renewable energy. If progressed this would reduce the economic support that onshore windfarms receive in the future, with projects commissioned after 2009/10 receiving lower funding. Maerdy would still proceed if built after this date, but its electricity sale price would be lower and hence the economics worse and the fund available to all stakeholders reduced.

The developer has evaluated the project economics and proposes a total fund of £50,000 per year, indexed at 1.5%. Windfarm revenues are variable from year to year, however fixed funding options are deemed more appropriate to the local community enabling planning with confidence. The need for clarity and certainty in funding came through as a comment in public meetings held during consultation.

The fund is indexed at 1.5% so that it inflates. 1.5% is the average of UK and EU inflation targets. The windfarm is likely to experience declining sale prices over the course of its life.

This fund equates to just over £2,083 per MW of installed generating capacity. As comparisons the fund established for the local recently commissioned Ffynon Oer Windfarm has a community fund of £1,000 per MW installed and the fund proposed for the Mynydd y Gwair windfarm proposal north of Swansea also has a proposed fund of £1,000 per MW

Should a capital sum, or part capital sum payable at the beginning of the project be preferable for the funding schemes envisaged then a proportionate sum would be discounted back from the annual fund. If the whole fund was discounted back then a fund available at the beginning of the windfarm operation would be £600,000.

This funding is dependent on the windfarm being constructed within time to secure the current government electricity sale price arrangements. The planned timetable is for construction to start in 2008 and finish in 2009. Should the project be constructed later, and fall outside the limits then the fund would need to alter in line with the altered price arrangements. The Government have not said by how much the funding will alter at this stage, or the exact cut off date.

Although a voluntary fund, the fund is being offered to be legally secured by the Council. The commitment is over a long period and it will therefore be necessary to include some protective measures to address certain risks beyond the windfarm operators control. These would be established through legal agreement, but the principle one is the political risk surrounding government support mechanisms. Should the support mechanisms applicable to the windfarm be removed or materially reduced then it may be necessary to re-appraise the income of all stakeholders, including the community fund. To avoid concern that commitments were being weakend it is proposed that an independent arbitrator would decide on any adjustments proposed by the windfarm operator in this situation. For the avoidance of doubt should the scheme be larger or smaller than planned this would reflect in the available community fund also.

 

2.5.2 Where is the funding applied?

It is suggested that funding should be concentrated on communities that have the strongest link with the windfarm. This link is more clearly evident in a visual link. Maerdy windfarm has a discrete visual profile such that it is not visible from most surrounding communities. A detailed analysis of visibility is provided in the Landscape and Visual Chapter of the Maerdy Windfarm ES. Figure 2.1 below shows the zone of theoretical visibility of the windfarm.

The communities with the strongest visual link are Treorchy in the Rhondda Fawr and Maerdy in the Rhondda Fach; a weaker visual link exists with some communities in the Cynon Valley, principally part of Cwmdare and Llwydcoed.

Figure 2.1 Zone of Theoretical Visibility

Note: This ZTV should not be used for visual evaluation of the windfarm – Reference should be made to the ZTV’s within the ES.

Visual influence is not black and white and there are no clear cut off lines to be drawn, but the above locations are the centres of visual influence.

It is likely that with other windfarm proposals being made over time, eg the proposed Hirwaun Windfarm, there will be closer and more relevant windfarms to the Cynon Valley.

For these reasons it is suggested that funding should concentrate significantly, if not completely, on the communities of Maerdy and Treorchy in the Rhondda Fach and Fawr. It is suggested that the windfarm would have approximately equal influence and association with both valleys and as such funding should be split equally between the two.

Influence of the windfarm and needs of the community do not neatly end at the Maerdy and Treorchy boundaries. However, trying to apply complicated dispensations to other affected communities is thought to be a recipe for argument and conflict. It is suggested that the best and most community engaging way to address peripheral benefit outside Maerdy and Treorchy is to allow the goodwill of the Maerdy and Treorchy communities to dictate. It is suggested that each community has dispensation to apply funding as THEY see fit, including neighbouring communities etc, through their goodwill and sense of fairness. It is hoped this solution to geographical discrimination will foster settlement of difficult issues in a spirit of community engagement rather than division.

Therefore it is the proposal for consultation that the community fund be split equally between Maerdy and Treorchy. Comments are requested.

 

2.5.3 To what is the funding applied?

TAN8 planning policy has guidance on the application of funding including possible beneficiaries. Past windfarm schemes have funded educational grants, environmental measures, etc..

The public consultation conducted by the Developer has provided some ideas and direction on local feeling about how funds should be applied. It is acknowledged that the number of people who responded to the consultation is not a statistical sample and ideas rather than conclusions should be drawn. The Developer plans to conduct a further period of consultation in parallel with the planning application and it is hoped this will provide further guidance. It is also hoped that further ideas may arise from community groups including the Council.

The Developer wishes that while it facilitates development of the fund and its management it should not decide on the application of the fund; that should be decided by the local community. While the Developer specialises within its industry in community engagement, they do not have the expertise warranted to maximise community benefit locally. Further, while they have three and a half years experience in the area, there is greater knowledge about local needs held with others.

Lastly, it is desirable to foster a sense of ownership of the community fund and it is therefore for the community, not the Developer, to decide on fund application.

 

2.5.4 How is the funding applied?

The key questions are the mechanism of funding and the control of that funding.

Some windfarm benefit schemes are managed by the windfarm developer, however several have an independent trust. TAN8 recommends that “benefits are channelled through a regulated and properly constituted body or trust” A trust provides independence from the windfarm developer or operator and ensures local control. It also provides a tried and tested legal mechanism for protecting the funding. It is therefore suggested that two independent, properly constituted, community trusts be established for the Maerdy and Treorchy Funds.

One comment coming through the community consultation was the need for a clear and visible connection between the windfarm and the fund. The Developer is therefore keen that the funds are independently managed i.e. they are not managed by another group. This way there is a direct link and identification between the community fund and the windfarm.

Further, the Developer is keenly aware, from the consultation done, how control of funding within a community has the danger to be divisive. If control of funding rests with a single group, this can cause resentment and political division, no matter how good a job the controlling group may be making of managing the fund. The Developer does not want any community fund to be divisive, but to be constructive to community relationships.

The Developer proposes that two democratic funds are established that have written into their constitution the principal of one resident, one vote. Hereby every resident of Treorchy or Maerdy would have equal say over what happened to their fund. It is hoped that this would:

• avoid any group control issues;
• create a real sense of “ownership” of the fund amongst the community;
• create empowerment amongst all members of the community, particularly the disadvantaged and less involved in the community;
• put the decision making in the hands of those who best know what the local needs are.

The trust funds would have a management board similar to most trusts, including upstanding members of the community, accounting and legal advisors, political representatives, etc. However, the critical difference would be that the trust board did not have decision making powers over application of the fund, only its management.

Running such a democratic fund is practical for communities the limited size of Maerdy and Treorchy with today’s communication facilities. Proposals for funding would be invited and then publicised on a Community Fund website, in libraries, by leaflet and hopefully in newspapers. Then there would be an annual meeting, with the opportunity for residents also to vote by post, or internet on which applications were successful.

It is suggested that the funds are called the “Maerdy Wind Fund” and the “Treorchy Wind Fund” to establish connection between the source of the funding.

Recommendations for membership of trust boards are invited.

 

2.5.5 Security of Community Fund

TAN 8, above, sets out the legal and planning issues regarding funds such as this. Difficulty can occur in enshrining commitments in planning conditions. The Developer therefore intends to enter into an appropriate legally binding agreement that secures the commitments offered.

 

2.6 Summary and Conclusion

This report contains information relevant to the development of a community fund from the Maerdy Windfarm proposal.
It is argued that two community funds be developed, one for Maerdy and one for Treorchy; and that these are democratic funds where each resident of the community has a vote on how the funds are spent.

Total funding of £50,000 per year, indexed at 1.5%, for the life of the windfarm (circa 25 years), or alternatively a £600,000 capital sum at the beginning of the windfarm is offered (or combination in between these two alternatives); this total funding to be split equally between the two funds.

These are sensitive and difficult decisions, and the Developer welcomes comment on all aspects of the suggestions outlined. The intention is that after consultation a legally binding agreement would be entered into that the Council can rely upon.