The 540MW Viking wind farm on mainland Shetland is a 50-50 partnership by energy utility SSE and Viking Energy, which is 90% owned by the Shetland Charitable Trust (SCT) on behalf of the islands community, and 10% by small local wind developer Shetland Aerogenerators. An application to build the project is currently being considered by Scottish government ministers.
An academic study, The Importance of Revenue Sharing for the Local Economic Impacts of a Renewable Energy Project, by researchers at the University of Strathclyde, looks at the long-term cash flow to the islands' economy from the wind farm when operational. It compares the effects of projected income from SCT's 45% share in the project with the more usual goodwill payment that developers voluntarily donate for the benefit of local communities. These can range between ú1,000 and ú5,000 a year for each megawatt of installed capacity.
The researchers found that a typical community-benefit payment of ú3,000/MW - along with local government taxes and land rents - would raise local GDP by 24% and increase Shetland employment by almost 3%. However, retaining a higher proportion of the profits within Shetland from SCT's 45% share means that more than five times as much of the profits are retained by the islands, boosting GDP by more than 30% and employment by 9%.
Moreover, to reach the same level of benefits for the economy as under the local ownership model would require a hefty ú26,700/MWh in community benefits - well beyond the range of any community-benefit scheme.
Yet the Viking model cannot readily be applied in its entirety to most wind projects. The SCT has access to around ú176 million of oil industry money, making it easy to put up ú52 million or more for its share of equity in the project. The trust was set up in the 1970s to process so-called disturbance payments to the local community from the Sullom Voe oil terminal. Since 2000, when the oil industry payments ceased, most of its income has been derived from investments.
World beater
With the oil revenues dwindling, wind is an obvious indigenous resource on the islands which enjoy a wind regime that is the envy of the world. Five working wind turbines on Burradale are described as the world's best performing wind farm. It is owned by Shetland Aerogenerators, one of the Viking partners.
In the decade since Burradale began operating, it has never had an annual capacity factor of less than 50% - meaning it has always operated at half its full capacity or above, calculated after all maintenance, breakdowns and internal electrical losses are deducted. The highest annual capacity factor was 56.9% in 2005.
The most productive machine is turbine number two - known as Betsy - which achieved an average capacity factor of 58% in 2007. Turbine number one, Mina, is close behind. "A few days worth of power is all that separates our top two ladies," says company director Angus Ward. "We have the world number one, but also numbers two, three, four and five."
The ten years of results from Burradale show the performance and benefits that could be expected from the much bigger Viking project, says Ward. Yet output from the 540MW project would swamp the electricity needs of the islanders and would require a transmission link between Shetland and mainland Scotland.
Shetland Isles Council also believes that the 150-turbine Viking wind farm could offer the islanders an opportunity of comparable scale to the Sullom Voe terminal.
Project manager Aaron Priest notes that the council has made it clear that no large-scale renewables development should take place in Shetland without the community having a stake. "The unique structure of the Viking Energy project gives Shetland control over how the project might come forward and will keep the greatest benefits locally," he says.
Professor Peter McGregor, director of the Fraser of Allander Institute at Strathclyde University, says that onshore wind energy projects traditionally tend not to have strong backward linkages to the local economy since turbines are mainly imported, although local contractors will be involved in construction and other jobs created. "However, the social and economic benefits of local ownership combined with community benefit should not be underestimated and can bring significant benefits to rural communities," he says.
The study's findings chime with statements so far from the UK's coalition government of the centre-right Conservative Party and the centre-left Liberal Democrats, which wants to see local people benefit more from the power produced from renewables projects. It is expected to bring in measures to encourage community-owned renewables and is considering allowing money from business rates to be retained by host communities. It believes owning a stake in wind farms will make communities more likely to accept them.
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