Research has shown that energy developments generally receive more support from the local community when they are expected to deliver local economic benefits. Energy developments also present the potential to support local economic development objectives. However, the local economic benefits resulting from an energy development can vary, depending on the ownership model and community benefits offered.

This report summarises the findings of a research project that examined the comparative local economic impacts of a local energy development under two alternative ownership models.

Using a proposed wind farm development for the Shetland Islands as an example, the research analysed the potential local economic and employment effects of an energy development under two scenarios: one where there is no local ownership but a community benefit scheme provides direct payments to the local community; and one with 50% local ownership.

This research found that local ownership confers the greatest economic benefits for the local community, far above the level that community benefit payments might be expected to provide.

A link to the full report, on which this brief is based, is available in the ‘useful links’ heading on this page.

Useful links

A key aspect of the Scottish Government’s aspirations is inclusive economic growth. That is, growth across the income distribution. This project looked at the pattern of uptake of small-scale (domestic) photovoltaic devices under the UK-wide Feed in Tariff programme.

The feed-in tariff (FiT) was introduced in April 2010 for small-scale renewable electricity technologies in Great Britain. This promised the installing household a fixed price per unit of electricity – comprised from a “generation” tariff which was differentiated by technology, and an “export” tariff which was technology-blind. FITs have spurred significant development, particularly of Photovoltaic (PV) systems. During our sample period of the first 26 months of operation, over 1GW of domestic renewable electricity capacity and almost 300,000 installations were added. In all, 99.5% of these installations were PV, and 98.7% of capacity was in PV systems.

We found that installation of domestic scale PV devices is a financial, rather than an environmental consideration. There is also a clear early adopter advantage with respect to these renewable devices and our models suggest that the rate of uptake of household renewable energy devices in one area is spatially dependent upon the uptake in neighbouring areas.

As a spatially- and income-blind levy on electricity consumption, and given that uptake is greatest in wealthier areas, policies like FiTs could exacerbate economic inequalities between wealthier and less wealthy areas.

The Scottish Government’s Local Energy Challenge Fund (LECF) aims to demonstrate the potential economic and social benefits of establishing local low carbon energy economies. Projects funded through the LECF will provide valuable insights into the impacts that local energy projects can have on local economies; by attracting and distributing income, and by changing the way that energy is generated and consumed.

ClimateXChange has been asked by the Scottish Government and Local Energy Scotland to investigate the economic impacts associated with local energy projects.  This study will be undertaken by the Fraser of AIlander Institute and the James Hutton Institute. It will use information gathered from LECF projects to better understand the local and regional economic and energy impacts associated with the development of local energy production and consumption systems. 

Offshore renewable developments can have significant impacts on local and regional economies. The Scottish Government asked ClimateXChange to review UK and overseas examples where communities and community groups benefit financially from such projects.

This brief looks at specific community benefits schemes including schemes for payments to communities, direct ownership of assets or community investments. These examples can provide lessons for how communities and community groups in Scotland may benefit from offshore renewable energy development.

Most economists regard a carbon tax as the most efficient way to reduce carbon emissions. In this perspective it is interesting to consider the effect of a Scottish-specific carbon tax. It is particularly relevant given the demanding environmental targets set by the Scottish Government and the present discussions around increased fiscal autonomy. 

This brief uses an energy – economy – environment model of Scotland to simulate the impact of the Scottish Government imposing such a tax on carbon emissions and the level of aggregate, and sectoral, economic activity.