As we build out the electricity generation and the transmission infrastructure required to achieve a clean energy transition in the Northwest, we can avoid perpetuating past harms from fossil fuel development and ensure that renewable energy development provides benefits for host communities. One way to do this is through “community benefits” strategies that can give communities a voice in the development of new projects.
Community benefits are agreements, funds, or other mechanisms that developers can use to provide either financial or non-financial benefits to a community. Finding documented evidence of community benefits from renewable energy projects is challenging because developers may not want to reveal their strategies to competitors and may be wary of setting a precedent because each deal is unique.
From the evidence we have gathered, we find a wide variety of community benefits tools used throughout the country, but not often enough. This blog explores several community benefits strategies that clean energy developers can employ to ensure that the transition is informed by and provides lasting benefits to impacted communities.
There is no standardized definition of what constitutes a “community benefit” when developing clean energy projects. Some examples of community benefits include:
Let’s dig into three of these strategies: community benefits agreements, tax agreements, and project labor agreements.
Community Benefits Agreements (CBAs) and Host Community Agreements (HCAs) are both tools that can give local communities a voice in developing new energy projects. CBAs are legally binding, enforceable contracts signed by project developers and community groups or municipalities that can provide funds to support affordable housing, environmental mitigation, infrastructure, and other priorities identified by the community.
New York’s Host Community Benefit Program is a notable example of this strategy. In 2021, the New York State Public Service Commission established a “host community benefit program” in accordance with the state’s Accelerate Renewable Energy Growth and Community Benefit Act.
Owners of large-scale (over 25 MW) renewable energy facilities pay $500/MW for solar or $1,000/MW for wind each year for the first 10 years of the project’s operation, “to be distributed equally among all residential utility customers residing in the municipality where the facility would be located” through electricity bill credits. These funds are meant to complement, and not replace, other agreed-upon community benefits.
According to a status report submitted in June 2023, applicable facilities are not expected to commence operations until at least 2025, so the actual economic benefits remain to be seen. One example of estimated benefits is from Mill Point Solar. This 250 MW project would generate $125,000 annually to be distributed among residents of Glen, NY. With a population of approximately 2,500, this would come to $50 per resident per year, or $500 over 10 years.
A Payment in Lieu of Taxes (PILOT or PILT) agreement is another form of community benefit. The value of renewable energy projects can be exempt from property taxes, which means that the jurisdiction where a project is located foregoes that tax revenue.
With a PILOT or PILT agreement, the developer commits to pay some amount of what would have been collected in property taxes to the jurisdiction on a regular basis, providing a dependable revenue stream that is more reliable than a property tax that depreciates over time.
In places where renewable energy projects are subject to property taxes, PILOT agreements can also incentivize developers by offering more predictable or reduced payments compared to standard property tax assessments.
We turn to Oregon for an example of a PILOT program at work. Oregon’s Strategic Investment Program (SIP) offers a 15-year property tax exemption on a portion of large capital investments by "traded sector" businesses (including, but not limited to, renewable energy developers).
Approval for SIP tax treatment starts with a contract between the firm and county government, with a public hearing held by the county’s governing body before executing an agreement. The county then decides how to allocate the funds collected from SIP businesses in lieu of property tax.
SIP agreements are public: Business Oregon provides project summary tables that track payments from 2018-2024. The tables do not include information about how the counties apply the SIP payments.
Project Labor Agreements (PLAs) are a tool used by the construction industry to ensure a more direct benefit to a community’s local workforce. They are typically negotiated between construction trade unions and project developers or their contractors.
While PLAs often focus on establishing worksite conditions, protocols to resolve labor disputes, and wages and benefits, most also include provisions to increase access to jobs for local residents. They can also require apprentices to shadow journey-workers on projects, providing on-the-job training to grow a skilled workforce.
Community Workforce Agreements (CWAs) are a specific type of PLA. What makes them unique is that they include community-oriented commitments to prioritize equitable workforce development and social justice; support small businesses; make social investments; create career path opportunities for low-income individuals; and/or re-hire workers from displaced fossil fuel jobs, among other benefits.
To ensure that federal investments in clean energy projects create high-quality jobs and that workers continue to benefit from the clean energy transition, the Inflation Reduction Act (IRA) offers significant tax incentives for clean energy projects that provide high wages and create opportunities for registered apprenticeships. Developers can use a PLA or CWA to meet the IRA’s wage and apprenticeship requirements and, ultimately, unlock greater tax breaks.
Last year, Pattern Energy, Quanta Services Inc., and the International Brotherhood of Electrical Workers (IBEW) entered into a partnership with a PLA to build the SunZia transmission line across Arizona and New Mexico, one of the largest renewable energy projects in the country. The project will move 3.5 gigawatts of wind energy along 580 miles of new transmission lines between Corona, New Mexico and Casa Grande, Arizona, creating over 2,000 construction jobs across the region along the way.
IBEW workers are already building the $1.4 billion, 525-volt high voltage direct current (HVDC) transmission line. Over 500 union workers will ultimately be employed by the project, and Pattern Energy estimates that 150 permanent jobs will remain when the construction phase is complete.
While these community benefit tools exist, they are often not used enough. According to a National Renewable Energy Laboratory (NREL) presentation exploring the role of community benefits in wind energy development across the U.S., less than half (205 out of 546) of the examined wind projects had any formal community benefits.
The most common community benefit was contributions to local organizations and causes (e.g., volunteer fire departments, food banks, school programs). There were also funds established, such as community grants and scholarships, but CBAs with direct payments to local governments were uncommon. While anecdotal evidence of benefits exists, it is challenging to find documented benefits in general due to the confidential nature of clean energy project development.
Implementing community benefits strategies is expected to increase, at least for federally-funded projects. While neither CBAs or HCAs are currently required by the federal government or most U.S. states, the Department of Energy (DOE) does require Community Benefits Plans (a tool similar to CBAs) for all Bipartisan Infrastructure Law and IRA funding opportunities and loan applications.
Trust is a significant factor in setting up community benefits agreements. Unfortunately, project proposals are generally not made public until after land for the project is already secured, which can leave host communities out of the decision-making process.
Host communities may also be wary of new energy development due to past harms the fossil fuel economy inflicted on disadvantaged energy communities for generations. It is therefore important to engage with communities early and often in the development process to ensure residents have a voice in the future of their own communities.
Along with building trust comes listening to communities and developing community benefits that are responsive to each community’s desires. For example, in some cases, financial benefits may not be well received. According to a Berkeley Law report about CBAs, “academic research has shown that compensation funds, on their own, may undermine community trust in at least some instances and be seen as a ‘bribe.’”
Furthermore, funds and mitigation payments do not address other community concerns about impacts to local culture, ways of life, or environmental impacts. The Berkeley Law report goes on to recommend that CBAs should help create “community-responsive organizations with local governance that lead to long-term community improvements and a community voice” in project monitoring and management.
With the impacts of climate change on our doorstep, it is understandable that clean energy developers and local governments want to prioritize expediency. Although engaging community members in developing the community benefits strategies they see as most beneficial may elongate project timelines, it is the equitable way to proceed.
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