Climate Change Programme Consultations

Land and Seabed rents and option payments

The seabed around Scotland is owned by the Crown (the “landlord”) and managed by Crown Estate Scotland; consequently all onshore and offshore project payments will be made to them.  Approximately 15% of ScotWind acreage is inside the 12mile contour and 85% are between 12 and 200 miles.

The surplus generated by Crown Estate Scotland for the lease of seabed within the zone up to 12 miles from shore is transferred to the relevant local authority via the Scottish Government.  The formula for how these funds are distributed is the subject of bi-annual review and negotiation with COSLA on behalf of local authorities. Adjusting the 12 – 200 mile arrangements would require more fundamental overhaul by the Scottish Government. 

The detailed value of rental payments for Onshore Wind projects varies from project to project but are typically £5,000 per installed megawatt per annum. That is around 2.5% of projected wholesale generation value, assuming an electricity price of c£40 per MWh based on the last CfD pricing round and pre-price hike wholesale electricity prices.

The Crown Estate Scotland Annual Report 2021-22 estimate payments of around £4m per GW pa from offshore wind projects once operating.  These figures are to be updated as ScotWind projects progress and there is further detail on technology and final design.

In addition to rental payments, the ScotWind auction round has introduced the concept of option payments for time-bound exclusivity to develop an area of sea. In March 2021 Crown Estate Scotland conducted a review of the option fee structure and as a result, increased fees with the option fee cap increasing ten-fold.  The first 17 sites secured options payments of £700m for public spending, with NE1 securing a further £56m.  

Compensation for any activity displaced by development

Displacement of onshore activity has primarily concerned crofting and agricultural tenancies and is addressed by arrangements agreed between developers, landowners and tenants.

There are other users of the areas of interest for offshore energy, most notably fisheries. While the landlord – tenant relationship is different in detail at sea, the issues and solutions around compensation for displacement can be guided by the principles and practice developed onshore.

The seas around the islands have historically been and still are used for a wide range of purposes; those important to Shetland being fishing, navigation, aquaculture and leisure.

Fisheries and associated activity remain the most significant and enduring component of the Shetland economy. Fisheries related income, jobs and supply chain activity has remained more significant than Oil & Gas and remains the logical foundation for much of the island’s future sustainability and well-being.

Oil & Gas developments interfered with fisheries activity in the direct vicinity of platforms, but that was a relatively contained area. As of January 2018, there were 184 offshore rigs in the North Sea, with these much less concentrated than proposed offshore wind farms. Oil & Gas developments saw less restrictions over a large sea area compared to future offshore wind development.

Floating offshore wind has the potential to exclude current fishing activity from much larger areas, for NE1, c0.6% of Shetlands surrounding seas in one development, with further developments expected through future leasing rounds.

Beyond the direct impact of excluding catching activity, the wider impacts of offshore generation on fish stocks and other marine species are not well understood at this time as there is limited evidence available.  It is not clear how far the ScotWind round has fully assessed fisheries impact in its design. While the later INTOG round was accompanied by fisheries heat maps, among many other marine spatial maps, its inherent design was focused on other factors, i.e., Oil & Gas decarbonisation.

There is no substantive locus in offshore decision making for Local Authorities, affected sectors or other community representatives. That creates great uncertainty as to how local dependencies, interests or priorities will be recognised in any decision-making processes.  This is why the Council has included Sectoral Co-Existence and Environmental Protection as two of the Energy Development Principles.  We need to ensure developers commit to making disturbance payments during construction and compensation payments for the loss of fishing access and income (throughout development lifespan), along with scientific research and ongoing independent scientific monitoring. 

Direct Community Benefit to Shetland as the local host

Shetland Charitable Trust (SCT) was set up in 1974 to accept money from the Sullom Voe Oil Terminal. This was initially set at 1p/barrel until the agreement ended in 2000. This fund dispenses millions of pounds a year to the Shetland community, providing services such as support for the elderly and infirm as well as funds for local cultural and sporting activities. As a charity, SCT is restricted in what it can do.

The Scottish Government set out the expectation that energy developers should continue to offer meaningful community benefit as set out in the community benefits from onshore renewable energy developments, this publication provides the good practice principles.

These principles recommend that Community benefit packages for onshore wind developments should have a value to the equivalent of at least £5,000 per installed megawatt per annum and be index-linked for the operational lifetime of the project. In addition, they also suggest that other onshore technologies should aspire to this level. 

The updated document is expected to have a larger focus on shared/local ownership as well as community benefits. The 2.8GW NE1 ScotWind site presents a huge opportunity for the Shetland community to receive significant benefits.

The Scottish Government’s National Marine Plan (NMP) Renewables Policy states that “Good Practice guidance for community benefit from offshore wind and marine renewable energy development” should be followed by developers. The Scottish Government are currently consulting on Good Practise Principles for Offshore Renewable Energy Developments, focusing on community benefits and local ownership, with publication due in 2023. 

Their draft included three key principles:

• Designing a Community Benefit Package
• Identification of Community
• Maximising Impact

Following a review of the current community benefit payments delivered by offshore wind sites in the UK. There is a significant range in payment size, with the lowest being £20/MW per year, and the highest being £1,634/MW per year at Walney Extension. If this higher value was replicated at the NE1 site it would result in an annual community benefit payment of £4,575,200. It is worth noting that the two current floating offshore wind sites in the UK (Kincardine and Hywind) do not offer a community benefit fund.

Although the provision of community benefit is voluntary at this point (onshore and offshore), we believe that it is a fundamental component of any agreement developed between the community and the developer.  Shetland recognises the future significance of offshore wind in global decarbonisation and is open to the potential to development of a successful offshore renewable energy industry in an environmentally responsible manner. However, we are equally determined that must be done in a balanced fashion, is aligned with just transition principles and that it has to deliver benefits locally as well as nationally.

For this reason Benefits to the Shetland Community is included as one of the Energy Development Principles.  With the key points:

• Fair Share of value from all developments, offshore and onshore
• Financial Benefits to the community
• Product Benefits; e.g. affordable energy for Shetland households
• Public Goods Benefits

Identification of Host Community

Community Benefit is accepted as being intrinsically local, and the Scottish Government have stated they will not set up any fund or arrangements with central management or administration in order to avoid confusion with statutory provision and possible state aid issues.

It is widely accepted that land proximity is used to demarcate sea boundaries and to identify the most adjacent community.  Shetland residents and businesses have long been active across all the waters within the area identified as the Shetland Exclusive Economic Zone (EEZ).  Those boundaries have been identified in line with that principle of geographical proximity. In addition, Shetland fishermen operate in all these waters.

Shetland has historically depended on our surrounding waters for economic, social and cultural activity and has a long track record of interest, activity and dependence on the seas around the islands. Offshore renewables is another chapter in the productive history of those seas and one which the Shetland community has a fundamental right to share in.

There are comments in Scottish Government guidance around whether developments would be visible or not. A large offshore turbine of the type under development within 40 miles of the Shetland coastline would be visible from the islands and many sea areas commonly visited. Further technical development may extend those ranges. In any case, we do not believe that visibility is a material component in defining host community; the host community is simply the one that is geographically closest.

Onshore Community Benefit arrangements have been negotiated on the basis of Shetland as a single overall community. However, there are provisions within the agreements for differences in detailed benefit values and decision making arrangements for specific geographical communities deemed to be most immediately identifiable as the explicit host for turbine siting.

We would suggest that these principles are also replicated for offshore development. Umbrella arrangements should recognise all of Shetland as the host community, although variations in detailed benefits could be agreed for different communities within the islands if that was deemed appropriate by the Shetland community as a whole.

Community Ownership

Community energy refers to the delivery of community-led renewable energy, energy demand reduction, and energy supply projects. Community energy puts people at the heart of the energy system. To achieve a Just Transition to net zero, we need to consider all the options, but key to success will be high levels of community engagement and demonstrating community benefit from an early stage.

There are many different opportunities for community ownership of energy projects.

• Wholly community owned
• Joint venture with a commercial or public sector partner
• Co-operative where members of the community can own a share of the business
• Community scale projects which are privately owned, but where community benefit may occur

There is no ‘one size fits all’ solution.

Community groups are uniquely placed to influence and ensure that the new developments help their people. It is important that the community approach is built on and wider challenges such as the local supply chain and skills availability are considered.

Community Energy Scotland state of the nation report.

Case study – Garth Wind Farm

The 4.5MW Garth Wind Farm is operated by the North Yell Development Council (NYDC) – a charity dedicated to community development in their area. Their motto ‘Enterprise, Initiative and Self Help’ fits the project’s aspirations well. 

After a lengthy lead in phase work began on site in late 2016.  Local company EMN Plant Ltd was the contractor for the roads, turbine bases and the electrical cables.  The project encountered some early issues which delayed getting on site.  However the contractor was able to accelerate the programme of works through the winter of 2016-17 to ensure the turbines could still be erected and commissioned by the 8th March 2017, ahead of the Feed in Tariff deadline.  The total construction cost of the windfarm was £8.3m.  Now that the wind farm is operational, NYDC manage the farm’s operation and finances.

The benefits of the Garth Wind Farm to the community are two-fold:

1. five 900kW wind turbines generate clean electricity for the local grid,
2. profit created is invested back into the local community via NYDC.

These funds have allowed NYDC to employ a Development Manager who is available to assist groups, businesses and individuals within the community.  NYDC also have small scale community grants and donations available to local facilities, groups and charities, and provided COVID response packages to community members during the pandemic.  The group have recently completed a community consultation to update their development plan for North Yell. 

As of March 2022 the Garth Wind Farm had produced 67,341,700 kWh of electricity since it was commissioned.

Lessons learnt

• Anticipate delays for issues such as obtaining permissions, grid access etc.
• Check landownership early
• Look for local input for maintenance and support service once windfarm commissioned

We will statement creating and retaining local wealth

• We will use the Energy Development Principles as the basis for discussion on Local supply chain integration, Sectoral co-existence and benefits to the Shetland community.
• We will support and encourage community and local ownership in energy transition projects.

Securing external funding

The scale of investment required to transition to Net Zero is significant especially at a time of budget cuts both locally and nationally.  We would like to see a change to the current inefficient competitive approach to funding that has no guarantee of success and is often unsuccessful.  Switching to an alternative model with greater cooperation and collaboration between areas would be preferable. But until a more logical system emerges we must build our expertise to apply for external funding, develop a pipeline of projects in line with the priorities identified through the Shetland Net Zero Route Map and stakeholders to help streamline the grant application process, which is often reactive and operates at very short notice. 

We will statements securing external funding

• We will support and encourage applications for external funding which align with the four long term outcomes.
• We will use of the governance structure and action planning toolbox, as a mechanism to speed up the process of identifying consortia for funding bids.