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The Importance of Revenue Sharing for the Local Economic Impacts of a Renewable Energy Project: A Social Accounting Matrix Approach

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Author Info

  • Grant Allan

    ()
    (Department of Economics, University of Strathclyde)

  • Graham Ault

    ()
    (Institute for Energy and Environment, Electronic and Electrical Engineering Department, University of Strathclyde)

  • Peter McGregor

    ()
    (Department of Economics, University of Strathclyde)

Abstract

As demand for electricity from renewable energy sources grows, there is increasing interest, and public and financial support, for local communities to become involved in the development of renewable energy projects. In the UK, “Community Benefit†payments are the most common financial link between renewable energy projects and local communities. These are “goodwill†payments from the project developer for the community to spend as it wishes. However, if an ownership stake in the renewable energy project were possible, receipts to the local community would potentially be considerably higher. The local economic impacts of these receipts are difficult to quantify using traditional Input-Output techniques, but can be more appropriately handled within a Social Accounting Matrix (SAM) framework where income flows between agents can be traced in detail. We use a SAM for the Shetland Islands to evaluate the potential local economic and employment impact of a large onshore wind energy project proposed for the Islands. Sensitivity analysis is used to show how the local impact varies with: the level of Community Benefit payments; the portion of intermediate inputs being sourced from within the local economy; and the level of any local community ownership of the project. By a substantial margin, local ownership confers the greatest economic impacts for the local community.

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Bibliographic Info

Paper provided by University of Strathclyde Business School, Department of Economics in its series Working Papers with number 0811.

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Length: 76 pages
Date of creation: Oct 2008
Date of revision:
Handle: RePEc:str:wpaper:0811

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Keywords: renewable energy; rural economic impacts; revenue sharing; community ownership;

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References

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  1. Deborah Roberts, 2005. "The role of households in sustaining rural economies: a structural path analysis," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 32(3), pages 393-420, September.
  2. Moran, Dominic & Sherrington, Chris, 2007. "An economic assessment of windfarm power generation in Scotland including externalities," Energy Policy, Elsevier, vol. 35(5), pages 2811-2825, May.
  3. Learmonth, D. & McGregor, P.G. & Swales, J.K. & Turner, K.R. & Yin, Y.P., 2007. "The importance of the regional/local dimension of sustainable development: An illustrative Computable General Equilibrium analysis of the Jersey economy," Economic Modelling, Elsevier, vol. 24(1), pages 15-41, January.
  4. François Bourguignon & Maurizio Bussolo & Luiz A. Pereira da Silva, 2008. "The Impact of Macroeconomic Policies on Poverty and Income Distribution : Macro-Micro Evaluation Techniques and Tools," World Bank Publications, The World Bank, number 6586, October.
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Cited by:
  1. Brown, Jason P. & Pender, John & Wiser, Ryan & Lantz, Eric & Hoen, Ben, 2012. "Ex post analysis of economic impacts from wind power development in U.S. counties," Energy Economics, Elsevier, vol. 34(6), pages 1743-1754.
  2. Dombi, Mihály & Kuti, István & Balogh, Péter, 2014. "Sustainability assessment of renewable power and heat generation technologies," Energy Policy, Elsevier, vol. 67(C), pages 264-271.

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