Technology: onshore wind
Location: Dumfries and Galloway
CARES funding: £118,123 enablement grants
Background
In 2014 Muirhall Energy approached the local communities near its wind farms at Crossdykes and Loganhead to offer community benefit funds of £5,000 per MW per annum and up to 10% shared ownership in each scheme. Muirhall recommended the communities seek impartial advice from Local Energy Scotland about this opportunity before deciding. Muirhall drew up Memorandums of Understanding (MoU) and circulated them to the community. The MoUs set out the way forward and served as an expression of interest.
With guidance and support from Local Energy Scotland’s shared ownership specialists, Upper Eskdale Development Group explored the shared ownership opportunity further, taking the lead on behalf of the community. The community applied for an enablement grant from the Scottish Government’s Community and Renewable Energy Scheme (CARES), which is managed by Local Energy Scotland. They used this grant to appoint the consultants SCENE to support their research as they needed additional time and capacity from someone to do this. They discussed SCENE’s recommendations in November 2015, and in December 2016 SCENE advised that the communities should establish a body to take the next steps on behalf of the community.
Communities in East Dumfriesshire have been receiving wind farm community benefit funds since 2008 and they came together to form the Dumfriesshire East Community Benefit Group (DECBG) on 19 July 2017. A registered Scottish Charitable Incorporated Organisation (SCIO), DECBG draws its members from the communities in receipt of funds.
Project aims and objectives
After the wind farm was consented in November 2018, the shared ownership opportunity was presented to members of the local community councils and development organisations at a meeting in Langholm. Muirhall’s financial advisors, Johnston Carmichael, presented the financial information. Following this meeting, and with further guidance and financial support from Local Energy Scotland, DECBG agreed to explore the detailed proposal on behalf of the communities.
DECBG was already established as a SCIO and already included some of the communities that were being offered shared ownership. It was agreed that DECBG was best placed to progress the project; it was already an established community development organisation with wind farm community benefit fund experience and had established back-office support from Southern Upland Partnership. The next step was to invite legal and financial advisors to tender for offering their advice to the community. This was completed in 2019.
To ensure that the community benefit funds and any income from shared ownership would be used in ways to best serve the community, DECBG completed a regional community action plan in 2020. This was funded with another CARES grant. The plan set out projects that were decided and agreed following an in-depth community consultation. The plan used the communities’ local expertise to determine where the greatest need was, which projects would provide the most benefit, and what they would like to achieve.
Outcomes and achievements
In 2019, DECBG was awarded a further CARES grant and was supported to tender for advisors for the financial and legal aspects of the shared ownership proposal.
The community met with its advisors several times from November 2019 until April 2021 to assess the proposal. The proposal offered the community a purchase of 10% of shares in Crossdykes Wind Farm Ltd and the shares were to be purchased using a loan from the Energy Investment Fund (EIF). The loan would be repaid using income from their shares over a period of about 17 years.
A community benefit fund of £7,000 per MW per annum amounting to £322,000 per annum over 23 years was also offered. This was an increase from the previous £5,000 per MW per annum.
To increase the possibility that the community could take up the shared ownership offer, Muirhall made an alternative proposal in July 2021. Muirhall reduced the investment to a 5% share, secured against part of the community benefit funds alongside revenue from the shareholding. This meant they would be able to pay back the loan in about seven years so that the community would begin to earn income from the investment sooner. The communities asked their legal and financial advisors to consider this in detail and to support setting up a body to manage the loan and hold the shares. The revised proposal was presented to the communities on 23 September 2021 and following this North Milk, Eskdalemuir and Middlebie and Waterbeck community councils agreed that they would take up the share offer. Langholm, Ewes and Westerkirk community councils also agreed on 29 September 2021.
Crossdykes Community Benefits Limited (CCBL) and Crossdykes Community Service Limited (CCSL) were created. CCBL is a company limited by guarantee with charitable status to distribute the funds, and CCSL is a wholly owned trading subsidiary company limited by shares to purchase and hold the shares. The deal was completed in 2022.
In 2022, Muirhall decided to sell Crossdykes wind farm. Although the community had the option to keep their shares and partner with the new owner, they decided it was lower risk to sell. The community subsequently received a substantial seven-figure sum from the sale of its stake in the wind farm. This allowed them to pay off the loan immediately, making a substantial profit which they could potentially use to invest in other local developments.
Lessons learned
When Muirhall Energy first approached the community with the idea of purchasing shares in the proposed Crossdykes wind farm near Lockerbie, there was initial reluctance from the community to look at the offer seriously given the uncertainty of planning permission yet to be overcome.
Chris Miles is chair of DECBG and co-ordinated the investigation on behalf of the communities. Chris said:
“Given the novel nature of the offer from Muirhall Energy, it took us a long time to bring together the expertise, consider the options, address the risks, and develop a proposal that all parties could feel comfortable with.
“We could not have done this without the support from staff at Local Energy Scotland via the funding they provided and the many meetings we held to discuss each step. It was important that we already had some community representatives from DECBG, given the dispersed communities have not worked together like this before. This helped because they have a shared ambition to ensure that their communities benefit from these major developments that are going to be a significant presence in their area for years to come. Some of that ambition was captured in a community consultation led by DECBG.
“The experts who helped us think through the possibilities were CMS Amberley, Burness Paull and QMPF. They all helped address the communities’ concerns and questions which inevitably extended the time it took to reach conclusions – and they had to do so while working within Covid restrictions too. Finally, the Energy Investment Fund played a key role and have made the finalising of this agreement significantly easier for the community to accept.
“All these bodies have broken new ground which hopefully will help with similar agreements being negotiated elsewhere. We, of course, have a willing developer in Muirhall which shares the ambition the communities have for their futures and who has been fundamental in helping the community achieve an ambitious agreement.
“The communities think this deal is especially important for their future and the next generation. It may be a step towards other similar deals locally that could be transformative if the communities grasp the opportunities this will give.”
Read more about Crossdykes on Muirhall Energy’s website.