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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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  • Allan, Grant
  • Ault, Graham
  • McGregor, Peter
  • Swales, Kim

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.

Suggested Citation

  • Allan, Grant & Ault, Graham & McGregor, Peter & Swales, Kim, 2008. "The Importance of Revenue Sharing for the Local Economic Impacts of a Renewable Energy Project: A Social Accounting Matrix Approach," SIRE Discussion Papers 2008-42, Scottish Institute for Research in Economics (SIRE).
  • Handle: RePEc:edn:sirdps:55
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    File URL: http://hdl.handle.net/10943/55
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    References listed on IDEAS

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    1. McCann, Philip, 2001. "Urban and Regional Economics," OUP Catalogue, Oxford University Press, number 9780198776451.
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    Cited by:

    1. Hermannsson, Kristinn & Lisenkova, Katerina & McGregor, Peter G., 2011. "The Expenditure Impacts of Individual Higher Education Institutions (HEIs) and their Students on the Northern Irish Economy: Homogeneity or Heterogeneity?," SIRE Discussion Papers 2011-07, Scottish Institute for Research in Economics (SIRE).
    2. Wenche Tobiasson & Tooraj Jamasb, 2014. "Sustainable Electricity Grid Development and the Public: An Economic Approach," Cambridge Working Papers in Economics 1432, Faculty of Economics, University of Cambridge.
    3. repec:eee:appene:v:195:y:2017:i:c:p:487-502 is not listed on IDEAS
    4. Reynolds, Joanna & Egan, Matt & Renedo, Alicia & Petticrew, Mark, 2015. "Conceptualising the ‘community’ as a recipient of money – A critical literature review, and implications for health and inequalities," Social Science & Medicine, Elsevier, vol. 143(C), pages 88-97.
    5. Reilly, Kieran & O’Hagan, Anne Marie & Dalton, Gordon, 2016. "Developing benefit schemes and financial compensation measures for fishermen impacted by marine renewable energy projects," Energy Policy, Elsevier, vol. 97(C), pages 161-170.
    6. 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.
    7. May, Nils G. & Nilsen, Øivind Anti, 2015. "The Local Economic Impact of Wind Power Deployment," IZA Discussion Papers 9025, Institute for the Study of Labor (IZA).
    8. Hermannsson, Kristinn & Lisenkova, Katerina & McGregor, Peter G & Swales, J Kim, 2010. "The Expenditure Impacts of London-based Individual Higher Education Institutions (HEIs) and their Students on the Economy of England: Homogeneity or Heterogeneity?," SIRE Discussion Papers 2010-106, Scottish Institute for Research in Economics (SIRE).
    9. Hermannsson, Kristinn & Lisenkova, Katerina & McGregor, Peter G & Swales, J Kim, 2010. "The Expenditure Impacts of Individual Higher Education Institutions (HEIs) and their Students on the Welsh Economy: Homogeneity or Heterogeneity?," SIRE Discussion Papers 2010-88, Scottish Institute for Research in Economics (SIRE).
    10. Panagiotis Liargovas & Nikolaos Apostolopoulos, 2016. "Investment scenarios and regional factors in the solar energy sector," Economics and Business Letters, Oviedo University Press, vol. 5(3), pages 95-104.
    11. Thapar, Sapan & Sharma, Seema & Verma, Ashu, 2017. "Local community as shareholders in clean energy projects: Innovative strategy for accelerating renewable energy deployment in India," Renewable Energy, Elsevier, vol. 101(C), pages 873-885.
    12. Dalton, Gordon & Allan, Grant & Beaumont, Nicola & Georgakaki, Aliki & Hacking, Nick & Hooper, Tara & Kerr, Sandy & O’Hagan, Anne Marie & Reilly, Kieran & Ricci, Pierpaolo & Sheng, Wanan & Stallard, T, 2015. "Economic and socio-economic assessment methods for ocean renewable energy: Public and private perspectives," Renewable and Sustainable Energy Reviews, Elsevier, vol. 45(C), pages 850-878.
    13. 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.
    14. Kristinn Hermannsson & Katerina Lisenkova & Peter McGregor & Kim Swales, 2010. "The Expenditure Impacts of Individual Higher Education Institutions (HEIs) and their Students on the Scottish Economy under Devolution: Homogeneity or Heterogeneity?," Working Papers 1016, University of Strathclyde Business School, Department of Economics.
    15. Euan Phimister & Deborah Roberts, 2012. "The Role of Ownership in Determining the Rural Economic Benefits of On-shore Wind Farms," Journal of Agricultural Economics, Wiley Blackwell, vol. 63(2), pages 331-360, June.
    16. repec:eee:rensus:v:82:y:2018:i:p3:p:3400-3419 is not listed on IDEAS
    17. Slee, Bill, 2015. "Is there a case for community-based equity participation in Scottish on-shore wind energy production? Gaps in evidence and research needs," Renewable and Sustainable Energy Reviews, Elsevier, vol. 41(C), pages 540-549.
    18. Allan, Grant & Eromenko, Igor & Gilmartin, Michelle & Kockar, Ivana & McGregor, Peter, 2015. "The economics of distributed energy generation: A literature review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 42(C), pages 543-556.

    More about this item

    Keywords

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

    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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