Renewable energy developers raise questions about apparent cap on community funds in NSW

A number of renewable energy and battery storage developers have raised questions about the impact of new renewable energy benefits guidelines in New South Wales which they say may act as an effective cap on the amount of money made available for neighbours and community funds. 

The renewable energy industry was relieved when the updated NSW Renewable Energy Planning Framework, released this week, closed controversial loopholes, such as those relating to phantom dwellings, but the Benefit Sharing Guideline section has thrown up new potential pain points. 

The final guideline appears to put a cap on the total monetary value of a developer’s total contribution to neighbour and community funds, using language that wasn’t in the draft.

“The total value of benefit-sharing, calculated by adding together the proposed funding amounts for any neighbourhood and local community benefit programs (whether council managed or otherwise), should not exceed the rates outlined above,” the document says.

The rates are $850 per megawatt (MW) per year for solar over the life of the project, $1050/MW per year for wind, and $150/MWh per year for battery energy storage systems (BESS), all indexed to CPI. 

The rates themselves are in line with the draft and are reasonably generous as many funds already announced by large scale projects don’t come close to touching them.

In response to questions from Renew Economy, a Department of Planning, Housing and Infrastructure spokesperson said the guidelines set out the government’s expectation for how benefits from hosting renewable energy projects should flow to regional communities.

“Proponents can offer further benefits if it makes sense and is financially viable to do so,” the statement said, but promised a later update on the final document appears to say the opposite.

A number of developers have been working to the draft version of the guideline, which only said the above rates were fair.

One developer whose fund is above the guideline’s limit is Someva Renewables, which is developing the 1.3 GW Pottinger energy hub. 

The company has dedicated a $1.5 million annual fund to community use, as well as a one-off $500,000 fund to mitigate disruptions during construction. It expects to disburse $40 million in benefits over the lifetime of the project.

It has been doing its community fund work according to the draft guidelines, signing deals with two councils to manage 85 per cent of the total fund.

“Someva is already deeply committed to the co-design of community benefits funds, so the new guidelines won’t significantly alter what we believe is an already industry leading approach,” says Someva Renewables director of community and government engagement Felicity Stening.

“Consistency and transparency is key to building social licence, and so we believe the new guidelines will contribute significantly to building the sector’s social licence. Communities now have a reference point to refer to if developers are not negotiating in good faith, and we believe this added transparency can only be a good thing for the sector.” 

French developer Engie says the rates create a standardised approach for benefits sharing and the development of voluntary planning agreements.

They ensure “fairness and consistency across the state, as well as helping to manage expectations,” says Engie managing director of renewables Laura Caspari.

“The state government’s new benefit sharing guidelines announced yesterday will be helpful in providing clarity and certainty for project developers like us, as well as neighbouring communities and local councils,” she told Renew Economy.

“ENGIE welcomes the benefit sharing rates in the guidelines and is pleased to see that our current approach is already meeting this expectation or exceeding the benefit sharing rates.”

Are councils the best manager?

The guidelines also strongly recommend at least 85 per cent of any renewable energy community fund be turned over to councils to manage.

It’s a detail that was in the draft and that developers such as Someva and Andrew Forrest-owned Squadron Energy have been working to, signing deals with councils to adminster that percentage of their funds.

The NSW government wants the expected $414 million in shared benefits from NSW’s REZ zones to be shared equally among the communities, with a focus on those most affected by projects. 

The guidelines suggest a wind farm might do a community-run fund, but a BESS which may not have many affected neighbours or a project that covers more than one local government area (LGA), might turn to a council. 

But there is a concern the language of the guideline could see funds paying for general operations rather than actual benefits: One source who spoke to Renew Economy was concerned that funds could be spent on ordinary council business, such as roads, that the state should ordinarily pay for.

While the guideline stops councils from putting renewables funds to work on things that are their ordinary bread and butter and says communities should be driving the spending decisions, it also says councils could spend on “recurrent costs of infrastructure, services or facilities”.

Transparency is also an issue.

Clean Energy Council policy director Nick Aberle says there needs to be transparency around where benefits are coming from — whether it’s the solar farm down the road, or the wind project, or multiple different ones if a council is pooling a number of funds, as the government suggests could be useful.

Benefits need to be focused closely on the community that will feel the impact, says Stride Renewables partner Amy Kean. 

“Giving 85 per cent to the local council does not address the impacts of the project,” she told Renew Economy. 

“The problem with that is it doesn’t allow a bespoke approach and doesn’t encourage innovation on a  project-by-project basis. What we should be asking industry is how are you achieving social licence or community acceptance. So the focus is on outcomes for community, not the process to get there.”

Focus on the end goal not the journey

To date, tenders run by NSW and the federal government have pushed developers to show the outcomes of community benefit schemes, a move that has encouraged companies to be innovative in how they approach this area of social licence, Kean says. 

The federal Capacity Investment Scheme (CIS) and state Long Term Energy Storage Agreements and Renewable Energy Zone (REZ) access agreements ask developers to show how they’re sharing the benefits from their projects, rather than explain the road they will take to get there.

One example of innovation is Engie’s 1.9 GW Plains wind and solar project south of Hay in the South-West REZ.

Engie will give all households within 20km a $1000 rebate on their energy bill, a move that will directly link a renewable energy project to lower power bills.

The company is not the first to do bill rebates, but it is the first retailer to do so and its scheme encompasses the largest distance of any to date.

*This article has been updated to include comments from the NSW Department of Planning, Housing and Infrastructure.