Background
Local electricity discount schemes (LEDS) can be designed to provide an annual discount on the electricity bills of consumers living near participating wind farms. A scheme of this nature is one way of channeling funds received as part of the community benefit fund that wind farm operators share with communities living near wind farms.
About RES and its LEDS
RES was the first developer to design such a scheme in 2012, following consultation with the communities around its wind farm projects. RES’ initiative is called LEDS (Local Electricity Discount Scheme).
Callum Whiteford, UK&I Head of Communications at RES, explains that when they consulted local communities on their preferred choice of a community benefit fund, discounts on electricity bills came up as a top priority. RES then put the communities’ wishes into practice and developed the scheme. It now serves as a direct and meaningful benefit to the people living or working near participating wind farms and is typically administered throughout the full operational life of the wind farm.
Communities can choose how they would like to distribute the funds from the community benefit fund. For example, a share of the fund could go towards LEDS and another share could go towards funding community projects.
To implement the scheme successfully, RES developed a governance structure to ensure that communities have confidence in the scheme. Because the thinking was done 10 years ago, RES can now administer LEDS at scale. Callum explains that there have been instances where a community has approached RES, asking for a LEDS to be administered by them, because the complexities of establishing a standalone scheme are so significant.
In 2022, 5,000 properties in the UK benefited from LEDS, and RES paid more than £1million to eligible properties on behalf of its clients. There are currently 24 participating projects and most recently two solar projects have gone live.
RES has transitioned from being an owner operator of wind farms, to a developer that constructs and operates wind farms for third party clients. It continues to work closely with its clients and continues to operate LEDS for communities. In the last three years, RES started speaking to developers who wanted to benefit from its scheme. Callum Whiteford mentions that, once a wind farm is built, RES can offer its unique LEDS to operators who want to offer LEDS to their community, in return for an administration fee.
The RES methodology ensures transparency about which households and businesses are eligible for the scheme, and where the boundary around the wind farm is for being included in the scheme. The boundary depends on the density of housing, the size of the wind farm and the total value of community benefits directed towards LEDS. In England, the boundary could be a few kilometres, whereas a scheme in Scotland may have a boundary around seven km from the wind farm.
One advantage of LEDS is that the benefits can reach people who are not involved in their local community activities day-to-day.
The RES’ LEDS administrator speaks regularly to people who receive the electricity discount, and who really value the benefit it brings, particularly with the high electricity prices seen during the energy crisis.
The process of setting up a LEDS
If a community wants to receive community benefit in the form of a LEDS, they can approach the developer of a wind farm to see whether that is something they are willing to consider.
Once a scheme is set up, applications typically open about one month after the construction of the wind farm is completed and the project is operational. The application period is open for a set time. Payments are made to those who apply. As some residents don’t apply, there is usually an excess which is then put back towards a community fund or a community body. If people miss the application deadline, they can apply through the year and be included in the next year’s payment. Once people are in the system they will be automatically paid in future years.
If new houses are built within the boundary to a wind farm, they are generally not eligible for the scheme, as the terms and conditions state that a house must have an electricity meter at a certain date. This ensures that existing beneficiaries of the scheme are not disadvantaged by new housing developments.
To ensure the scheme is accessible, RES has occasionally had staff at the village hall to for a day to help members of the community fill out their applications.
Suppliers
LEDS can be administered through any supplier. It works in a similar way to the UK Government’s Energy Bills Support Scheme (over the 2022-2023 winter). The money is credited to a household’s or business’ electricity account. Customers with a pre-payment meter receive their discount as a voucher.
Thinking of starting a new Energy Discount Scheme?
If a community is thinking of starting its own energy discount scheme, there are pros and cons to consider. The advantage is that a community can design a scheme that is specific to its needs. However, challenges include setting up a GDPR compliant system that ensures the members’ details are safe and secure. Communities would also need to develop their own infrastructure to market the scheme to eligible residents, process applications, and allocate funds to the members’ respective suppliers.
The benefit of using the existing RES scheme is that the infrastructure and data processing protocols have been tried and tested and successfully rolled out across many wind farms in the UK.