Shared ownership

By participating in shared ownership of a renewable energy project, communities can share in a range of benefits including developing a sustainable income stream of which they have control, creating strong partnerships, and building resilience in their local area.

Developers have also benefited from shared ownership, such as through increased community engagement, accessing incentives such as rates relief and potentially adding value to their planning application.

Communities have the capacity to raise funds and invest them in a project. They may be working on volunteer time, but their abilities should not be underestimated.

Community groups often have the passion and enthusiasm to drive a project forward, and their involvement may bring a range of benefits over and above their financial investment. Furthermore, community involvement does not necessarily lead to increased project costs as the developer and community group can agree on the approach that can work best for their business models.

Opportunities to participate in shared ownership tend to be offered via community councils that are close to the project site. However, shared ownership opportunities can be made available to communities further away from the immediate project area, particularly when a local community does not have the ability to take up the offer or where there is strong appetite to co-invest with other communities of interest and build wider partnerships.

Community councils are required to be consulted on the project. However, other community groups should be encouraged to actively engage in discussions with a renewable energy business and explore the opportunity for investment.

There are three notable sources of finance available for a community.

• Debt finance: A loan to raise money for investment into a project. Commonly the community will have few assets it can use as security for a loan, so banks and other lenders will provide non-recourse finance, where debt is secured against the physical assets and future cash flow stream from the renewable energy project (also known as project finance).
• Equity: The community may already have money from other sources. This would be classed as equity. Equity may also be a share offer that a group uses to raise funds such as through crowdfunding.
• Grants: Public sector grants are generally provided to projects to fund a particular service or activity.

For more information, watch our Shared ownership: financial basics for communities webinar or look at the ‘How community projects are financed’ section in the shared ownership module. CARES can provide support and access to financial advice, please get in touch with the shared ownership team.

The availability of financial information from the developer will depend on the stage of the project.

For example, there is often insufficient financial information available pre-planning consent (see common terms) to estimate returns. Whereas once the development is at the point of operation, the developer could provide the exact investment figures and potential returns.

As each project will have different returns, risks, and feasibility, it is important that you seek professional advice. The Financial Conduct Authority requires that communities get financial advice from an approved professional. Local Energy Scotland is not authorised to provide investment advice but offers impartial support via CARES so that communities can afford access to the right advice.

There are several structures used for shared ownership and your legal advisor will help you consider what type of model will be best for your project.

These are three of the most common structures:

• Joint ventures – the developer and community work in partnership to develop, own, and manage a project. The company may be referred to as a Special Purpose Vehicle (SPV, see common terms below).
• Shared revenue – the developer agrees to provide a share of project revenues or profit. The community has a financial stake but does not own any asset.
• Split ownership – the developer and community own separate, distinct entities – eg one turbine out of five.

CARES can provide support and access to legal advice; if you need this, please get in touch with the shared ownership team.

Engagement should begin as early as possible. Usually, developers should begin discussion about shared ownership as they prepare their planning application. Where shared ownership has not been offered, communities should ask developers to consider and explore opportunities. Our shared ownership team can support this as well as each following stage.

It is vital the community receives information about the project as it becomes available. Financial information is particularly important and should be provided with enough time to seek professional advice ahead of project milestones.

if you need help getting started, get in touch with our shared ownership team.

Whatever stage your project is at, we have a variety of resources to help.

• Webinars:
  • Conference 2021: Let’s do Shared Ownership – This session shares learning and current practice from recent projects.
    o Shared ownership: financial basics for communities – get to grips with the financial basics.
    o Shared ownership and renewable energy projects – all you need to know about shared ownership.
• Shared ownership module – learn the basics of shared ownership
• Support throughout your project from our shared ownership team
• The Scottish Government’s Good Practice Principles for Shared Ownership. You can read guidance on good practice principles for business, communities, local authorities and others on the Scottish Government website
• If your project is sited on a National Forest Estate, visit the Forestry and Land Scotland website for more information.

Community Vehicle

The legal body set up by the community to become involved in the project. It is a requirement that the community vehicle is incorporated – for example, a company limited by guarantee, a Scottish Charitable Incorporated Organisation (SCIO), or Community Benefit Society (BenCom). Becoming incorporated provides the community vehicle with the legal status required to issue shares, receive grants, secure loans, enter contracts, and employ staff etc.

Memorandum of Understanding

A document describing an agreement between two or more parties. This document is not usually legally binding but indicates an intended common line of action.

Pre-planning consent

In advance of approval of a planning application by the relevant planning authority.

Post-planning consent

Following approval of a planning application.

Special Purpose Vehicle (SPV)

A distinct company with its own assets/liabilities and legal status. Usually, an SPV is created for a specific purpose, eg to own one wind farm and to isolate risk.