Cutting Local Communities in on Renewable Energy

In a recent European study found that opponents to new wind and solar power have two key desires: “people want to avoid environmental and personal harm” and they also want to “share in the economic benefits of their local renewable energy resources.”  It’s not that people are made physically ill by new renewable energy projects.  Rather, they are sick and tired of seeing the economic benefits of their local wind and sun leaving their community.

Such opposition is perfectly rational, since investments in renewable energy can be quite lucrative (private developers and their equity partners routinely seek 10% return on investment or higher).  And the economic benefits of local ownership far outweigh the economic colonialism of absentee owners profiting from local renewable energy resources.

Of course, NIMBY-ism only sometimes manifests itself as an economic argument, and there’s a good reason for that, too.  In the project development process, there are precious few opportunities for public comment, and almost all of them represent up-or-down votes on project progress.  None offer an opportunity to change the structure of the development to allow for greater local buy-in or economic returns.  And no project will be halted simply because it isn’t locally owned.  Projects can and have been stopped on the basis of health and environmental impacts.  Enter Wind Turbine Syndrome.

There are alternatives.  In Germany, Ontario, Vermont, and Gainesville, Florida, local citizens can use a renewable energy policy – a feed-in tariff – that offers them a guaranteed long-term contract if they become a renewable energy producer.  This contract guarantees a reasonable, if small, return on investment and helps them secure financing.  In Germany, the program’s simplicity means that half of their 43,000 megawatts (MW) of renewable energy are owned by regular farmers or citizens.

In Ontario, the provinicial clean energy program specifically requires project developers to use local content, guaranteeing a higher economic benefit for the province in exchange for its robust support for renewable energy.  The program is forecast to generate 43,000 local jobs in support of 5,000 MW of new, renewable energy.

In the United Kingdom, public officials are piloting a “community wind fund” program for all new wind projects.  Under the program, each wind project must pay in £1000 per megawatt (~$1600 per MW) per year, for 25 years, into a community fund where the project is located.

One clear result from both studies and experience is that local communities are more amenable to renewable energy when they have some financial stake in it, some sense of ownership and benefit. (John Farrell at the Institute for Local Self-Reliance is great on this stuff.)

community solar

The impact for the community is significant.  Compared to the typical land leases (often $5,000 per turbine for the host landowner), the community fund payments would increase local revenue by over 60 percent, with the additional funds spread to the entire community rather than just the lucky turbine hosts.

The impact on turbine owner net revenue is small but not negligible, reducing the net present value of the project by about 3 percent.

It’s not that any of these policies represent the silver bullet for local opposition to new renewable energy projects, but they do address the underlying problem.

The truth is that many people are frightened of being left behind by the clean energy revolution or angry that their local resources are tapped without commensurate local benefit.  They find that there’s no way to be heard in the (democratic?) process without resorting to tangental arguments about health and viewsheds.

NIMBY has been misunderstood by the clean energy community.  It is not a knee jerk, it’s a market failure.

When citizens see a new wind or solar energy project, it shouldn’t be from the sidelines.  They should see it from the front seat, where they have hitched their wagon to environmental and economic progress by investing in a local energy project.

Our energy policy should make that possible.  It doesn’t.

Federal tax policy makes it very difficult to share renewable energy tax incentives among multiple investors.  Federal and state tax-based incentives preclude many local organizations (nonprofits, cities, schools) from owning wind turbines or solar panels.  And utility billing rules make it nearly impossible (in most states) to share the electricity output from a shared project that isn’t utility owned.

There are brilliant examples of entrepreneurs overcoming these barriers to install community-based projects.  Developer Dan Juhl and others have a record of success with community wind in Minnesota.  The Clean Energy Collective is piloting a new community solar program in Colorado.

There are even some policy ideas bringing hope.  Virtual net metering laws in eight states allow for sharing electricity output.  Colorado’s solar gardens bill enshrines a small amount of community solar.

The theme is one of triumph over adversity, with local ownership the exception rather than the norm.  And without better energy policies that give locals a chance to buy in, the wind turbine syndrome epidemic will likely continue.

A list of benefit-sharing mechanisms follow (from an EU report that is no longer online):

1. Community Funds: the local developer provides funds which are at the disposal of the community for common projects or lowering local taxes. These funds are either paid directly into a community fund or collected indirectly through local taxes by the municipality. The use of the funds is managed either by the community or the municipality.

2. Local (Co-)Ownership: the developer grants or offers shares in the project to the local community.

3. Compensation: the developer compensates for possible damages such as ecological damages (e.g. by creating a new habitat for species endangered by the development).

4. Benefits-in-kind: the developer creates improvements to the community, usually during the construction phase.

5. Local Employment: local employment is prioritised the construction phase and/or in the operation phase.

6. Local Contracting: local business are awarded contracts or involved in the development.

7. Energy Price Reduction for the Local Community: the local community is granted the opportunity to either consume energy directly from the development at a discount or to purchase energy at lower prices.

8. Indirect Social Benefits: any other benefit accruing to the community which is not directly quantifiable such as prestige, eco-tourism, knowledge etc.

What if Strata, as part of its proposal for another solar farm outside of Woodland, had pledged to power Woodland itself with cheap solar power? What if it had pledged to train and employ Woodland residents to maintain and manage the solar farms? What if it had offered citizens of Woodland the chance to purchase a small ownership stake in the farm?

Any of these benefit-sharing initiatives could have muted, if not eliminated, the opposition to solar farms in Woodland. And they would have been cheaper for Strata — certainly cheaper than not getting to build on this prime piece of land at all.

The cure for NIMYism is energy democracy

It’s not kooky beliefs driving Woodland’s opposition to solar farms, it’s the entirely valid perception that they are getting nothing out of the industrialization of their land — that, at least for now, renewable energy is just one more face of a contemporary world that has devalued and forgotten them.

yimby(Shirari Industries)

If you want to satisfy Woodland’s concerns about solar power — and the concerns of many more small towns and rural areas to come — don’t focus on photosynthesis or cancer or any of the other inarticulate expressions of anxiety. Cut them in on some of the benefits of the clean-energy economy.

This model of local ownership is known informally as “energy democracy.” The declining cost of small-scale, distributed renewable energy, along with the flourishing of new forms of ownership like community wind, has created an enormous opportunity to put more of the benefits of energy into the hands of ordinary Americans.

Advocates for energy democracy are often dismissed as idealists, fixated on a quest orthogonal to the more important goal of reducing emissions. But episodes like Woodland show that energy democracy may be a necessary prerequisite.

Ownership (and Money) a Cure for NIMBY