Effective Benefit Sharing

October 10, 2024

Northern Cape, South Africa - Holle Wlokas - INSPIRE

Including local communities in the design of the sharing of benefits generated by renewable energy projects plays a pivotal role in making the transition just. Shared benefits can be monetary or non-monetary, and their formulation depends on legal and financial requirements, corporate culture, community rights, and local development needs. The benefit-sharing scheme should be participatory, involving local stakeholders and relevant development actors in decision-making, with the community bringing in a holistic understanding of their immediate and long-term strategic development needs. Building trust and evaluating the community’s perspective during implementation is vital.

Renewable energy projects can enable a just transition by ensuring direct benefits flow to local host communities. Benefit sharing means giving local populations part of a project’s added value in recognition of the critical enabling role they and their surrounding ecosystems play. This chapter discusses how to share benefits and provides examples of where different methods have been effectively deployed.

Context

Shared benefits can be defined as contributions made by a project to local communities that help improve living conditions and build skills, reducing vulnerability and strengthening cohesion. If devised in a culturally appropriate and conflict-sensitive way, benefit sharing helps foster local socio economic development and creates good relations between the project and regional stakeholders, increasing the project’s social acceptance.

Benefit sharing differs from infrastructure, assets, and amenities brought to facilitate project execution. Examples of the latter include constructing roads for the transport of materials. Other social amenities for construction workers shared with the community members also do not constitute benefit sharing. Similarly, shared benefits are distinct from measures to mitigate negative impacts or compensate for loss where avoidance is impossible, such as restoring natural habitats.

Benefits can take various forms, monetary and non-monetary, including technology or equipment, skill-, knowledge-, and capacity building, such as technical assistance in livelihood development, community infrastructure and social services. The mix of investments and the form, timing, and allocation of benefits should be determined in a participatory fashion. Community needs assessments and engagement mechanisms (see Chapter 4) must be sustained throughout the project lifecycle. They should clarify and codify mutual expectations, monitor progress, and allow joint troubleshooting and adaptation during project implementation. Sustainability beyond project closure is essential and is fostered through well-targeted benefit sharing.

Emerging Good Practice

The practice of benefit sharing draws on traditions and frameworks of community development and related disciplines (e.g. local economic development, urban planning, social development, and psychology). This chapter provides a high-level overview of key considerations when planning, prioritising, implementing, and monitoring community benefit schemes.

How to get Benefit Sharing Rights

How to choose the benefit-sharing scheme?

Benefit-sharing schemes depend on the local context and involve stakeholder discussions and negotiations. The choice is influenced by various factors such as legal and financial requirements, corporate culture, community rights, local development needs, and project-specific potential to generate benefits.

How to design the benefit-sharing scheme for long-term strategic impact?

The design should be a participatory process that considers the community’s needs and involves them in decision-making. In collaboration with the community and other relevant development actors, strategic planning can achieve long-term benefits. Ideally, representatives of the community and key organisations should take leadership roles in planning, implementing, and monitoring benefit-sharing activities.^{[11]Columbia Center on Sustainable Development, 2023, Community Benefit Sharing and Renewable Energy and Green Hydrogen Projects: Policy Guidance for Governments}

How to implement shared benefits?

Implementation should consider the community’s perspective, build trust, and involve developer representatives who understand the local context and community. Stakeholder capacity building may be required.

How to monitor benefit-sharing impacts?

Monitoring mechanisms should involve all stakeholders and focus on a manageable number of key output, outcome, and impact indicators. Data collection and analysis need to inform practice learning and review. Benefit-sharing schemes should be reviewed regularly and when community development priorities change.

methodology or silver bullet exists. Some countries have specific benchmarks for mandatory compliance, while others may have voluntary guidelines. In either case, minimum standards for benefit sharing should be established to manage expectations based on discussions and negotiations with relevant stakeholders — the developer, the community, and the various spheres of government. This takes place in an iterative process that depends on multiple considerations, including construction and operating costs, grid connection costs, interest rates, resource quality, and electricity costs.

In general, determining shared benefits depends on a series of considerations:^{[2] International Finance Corporation, 2019, Local Benefit Sharing in Large-Scale Wind and Solar Projects}

Legal and financial requirements
Corporate culture
Community and stakeholder rights and claims
Local development needs
Project-specific potential to generate benefits
Broader considerations regarding social acceptance (e.g., history of conflict, land tenure insecurity, multidimensional poverty and unemployment levels, legacies and trauma from other large development interventions, presence of vulnerable groups, including Indigenous Peoples, etc.)

Community members should be at the centre of the design and implementation of the benefit-sharing mechanism. A unilaterally conceived benefit-sharing package devised by the renewable energy company alone is a missed opportunity to build bridges. It will result in a less effective programme that does not adequately consider community interests or give them a direct voice in decision-making. For more information about community engagement practices, see Chapter Effective Community Engagement.

Long-term benefits can be achieved if the project is undertaken with a strategic impact objective (e.g., to improve education in the area). Initiatives executed in isolation from other ongoing development activities in the area tend to be less effective than strategic investments planned for and implemented in partnership with local stakeholders and institutions. Ideally, community members become leaders of the benefit-sharing scheme, and local implementation capacity is built. For example, if the mechanism is related to revenue sharing, communities could monitor revenue and inform residents about project performance; if the mechanism is related to public services, community members can play various roles in delivery.

A community’s worldview, knowledge and underlying assumptions may be different from those of developers. Such differences are likely to surface throughout the implementation of the benefit-sharing scheme. There is a need for continuous exchange between stakeholders to build trust. The presence of company representatives, particularly skilled social performance practitioners, is often invaluable. Practitioners can become deeply familiar with a community’s ways of life and internal dynamics and understand their perspectives and capacities. Appreciating existing local assets (social, financial, etc.) is advisable, as it supports filling capacity gaps and enables community and local government stakeholders to implement benefit schemes and manage investments effectively.

Establishing feedback mechanisms and a participatory monitoring and evaluation system that builds accountability and tracks progress and barriers to implementation is crucial. Participatory monitoring should involve legitimate representatives of all concerned stakeholders, from local governments and communities to public officials and private sector representatives, including contractors. A monitoring plan should focus on several crucial output, outcome, and impact indicators suitable to track progress made towards defined objectives.^{[3]International Finance Corporation, 2019, Local Benefit Sharing in Large-Scale Wind and Solar Projects} Benefit-sharing schemes should be reviewed regularly or whenever there is a significant change in the project’s operational context, such as shareholding changes or project expansions. This should be done through an agreed-upon guideline or procedure between the company and the community.

Opportunities for benefit sharing

Over time, various categorisations for benefit sharing have emerged based on specific national experiences^{[4]MDPI, 2019, Benefit Sharing in the Arctic: A Systematic View}^{[5]Clean Energy Council, 2019, A Guide to Benefit Sharing Options for Renewable Energy Projects} or technologies.^{[6]Nina Lansbury Hall et al, 2017, Evaluating Community Engagement and Benefit-Sharing Practices in Australian Wind Farm Development}^{[7]Julia le Maitre, 2024, Price or public participation? Community benefits for onshore wind in Ireland, Denmark, Germany and the United Kingdom} Attempts have been made to create a broader taxonomy encompassing multiple renewable energy technologies and countries. Notably, the 2019 report on benefit sharing in the context of large-scale wind and solar projects by the International Finance Corporation (IFC)^{[8]International Finance Corporation, 2019, Local Benefit Sharing in Large-Scale Wind and Solar Projects} is adapted to present practice examples.

Spectrum of benefit-sharing opportunities (IFC, 2019)

Figure 3

Revenue sharing and shared ownership

Recurring payments to local government and community
Preferential electricity rates and discounts
Shared ownership

Skills and livelihoods

Employment and local procurement
Alternative skills and livelihoods
Local institutional capacity building

Public services and infrastructure

Basic service provision and infrastructure
Community well-being and amenity improvements
Energy services

Environmental stewardship

Environmental enhancements
Low-carbon community development

This category of benefits includes financial and ownership structures where developers, employees, local community members and landowners participate in managing a renewable energy venture and share in its profits. Income generated from the project could be distributed among these stakeholders based on predefined agreements. Shared ownership is a collaborative investment model where multiple parties hold ownership stakes in the project. These may take different forms, examples of which we have set out below.

Recurring payments to local government and community

Mandatory financial transfers to local stakeholders in Colombia

Regulation in Colombia mandates power generation companies to make financial transfers to the communities and municipalities in which generation plants are located. These electricity sector transfers are calculated as a percentage of gross electricity sales. Transfers will gradually increase from 1% to 6% of sales for new RE projects and up to 4% for already-operating plants. This regulation applies only to RE projects located in areas with above national average wind speeds and solar radiation. The resulting funds are allocated to projects in infrastructure, public services, basic sanitation, and/or drinking water, as well as in projects defined by local communities.^{[9]Law 2294 of 2023, Colombia’s National Development Plan 2022-2026}^{[10]Decree 1302 of 2022, Transfers from the electric sector destined for Indigenous communities}

Royalties payment in Kenya

The Kenya Natural Resource Benefits Sharing Bill (2020) sets the expectation that benefits from natural resource exploitation should be shared equitably, transparently, and inclusively among developers, the national government, county governments, and affected communities. Solar and wind are included in the list of natural resources alongside water, biodiversity, and industrial fishing. Through a consultative process, the Commission of Revenue Allocation (CRA) will determine the amount of royalties to be collected in consideration of, amongst other things, capital investment, prevailing international market conditions, impact on local communities, commercial viability of natural resources being exploited and obligations of the developer. 20% of the royalties collected will be paid into the sovereign wealth fund, and 80% will be shared between national and county governments in a ratio of 3:2. 60% of the sovereign fund shall be paid to the future fund for end-of-life waste management and 40% to the natural resource fund. 40% of the county government funds shall be channelled to the affected communities for local development, and 60% shall be held by the county governments for whole-of-county development activities, following the principle of “leave no one behind”. County benefit-sharing committees will be in charge of implementing development activities at the county level, while local community benefit-sharing forums (LCBSF) shall recommend and oversee the implementation of development activities at the community level.^{[11]Republic of Kenya, 2020, The Natural Resource (Benefit Sharing) Bill}

Preferential electricity rates and discounts

Wind farm electrifies the local community in Tanzania

The Mwengeni wind project provides affordable electricity to regional residents. The project sells electricity to national utility companies and distributes electricity to over 6,000 local connections. The company behind the Mwengeni project supported the expansion of the national grid to reach additional residents and businesses. Customers of the local connections pay less for electricity than other national grid customers. The company is cross-subsidising to ensure an affordable local electricity supply. In addition, the Mwengeni project is implementing further benefit sharing to boost local economic development. Activities include support for low-income households in purchasing domestic appliances, free training on the safety and productive use of electricity, and electricity supply at discounted prices to the elderly and people with disabilities. This ambitious benefit-sharing programme is driven by socially-minded company culture and extensive partnership work to bring together funders and implementation partners.

Shared ownership

Mandatory community ownership in South Africa’s renewable energy procurement programme

South Africa’s Renewable Energy Independent Power Producer Programme (REIPPPP) has been deemed a unique policy innovation, significantly influencing the country’s energy transition.^{[12]Franziska Müller and Simone Claar, 2021, Auctioning a ‘just energy transition’? South Africa’s renewable energy procurement programme and its implications for transition strategies} The programme mandates renewable energy companies to contribute to economic development in communities within a 50km radius of the district municipal boundary of their power projects. One of the progressive economic development requirements stipulates that a minimum of 2.5% community shareholding needs to be allocated to an entity representing historically disadvantaged communities. The programme’s forward-looking perspective focuses on economic commitments that need to be complied with over the 20-year contract period of the power projects, and to date, projects have allocated an average of 9% of total project shareholding to local communities.^{[13]Independent Power Producer Procurement Programme, 2024, An Overview — Independent Power Producers Procurement Programme — as At 31 March 2024} While this programme is not without challenges, it is nevertheless encouraging progress towards shared ownership.^{[14] Initiative for Social Performance in Renewable Energy, 2024, True community ownership in the shift to renewables — just how far off are we?}

Indigenous communities as shareholders of utility-scale solar in Argentina

Meliquina designed the 18 MW solar project ANTÚ 1 in collaboration with the Mapuche Millaqueo Indigenous community in rural Argentina. Since its design phase, the Mapuche Millaqueo community has played a central role in the project as partners, landowners, co-developers, and shareholders. As there is no legal mandate for shared ownership, this is a unique example of a private developer company partnering with an Indigenous community to develop a solar project. The community holds partial ownership of the project in exchange for the land lease, local knowledge, acceptance, and participation. Meliquina’s model^{[15]Meliquina, ANTÚ 1 — Empowering Patagonia: a Community-Driven 18 MW Solar Venture [Accessed in June 2024]} sees the partnership with the local communities not as a required social contribution but as a competitive advantage for their projects. This perspective implies a shift in the role of Indigenous communities from passive benefit recipients to active and equal partners.

RE projects can build skills and improve employment prospects for local labour and businesses. Various jobs are created over the course of the project’s lifecycle. Job opportunities include construction workers, technicians, engineers, and administrative staff. Specialised expertise is required in engineering, technical fields, project management, environmental science, and data analysis. When a longer-term perspective is taken to recruitment and local supplier procurement, individuals can gain valuable training and experience, increasing their employability beyond the project’s lifecycle.

Additionally, renewable energy projects can stimulate local economies by creating demand for local services and products, promoting long-term employment and entrepreneurial opportunities. The projects can also offer opportunities to build institutional capacity. Whether jobs are provided to members of the local communities and the economic stimulation is sustained depends on the ability of the project company to act on its close proximity to local residents. Where mutually beneficial relationships are created, companies will experience lower risks of construction and operation delays, reduced litigation, and a lessening of cost increases in doing business in a conflictual environment.

Employment and local procurement

Community involvement in monitoring and evaluating (M&E) benefit sharing in South Africa

The Perdekraal East Wind Farm in South Africa started a project in 2023 to train local community members, including Black youth and women, to work in capturing monitoring and evaluation (M&E) data about the wind farm social projects. The objective was to develop local M&E practitioners, create job opportunities, and establish a sustainable local M&E business entity.

The project was replicated by several other RE Power Producers in South Africa. For instance, the Kangnas Wind Farm implemented an innovative M&E incubation programme over two years, starting in November 2021. This initiative, developed with the Africa Foundation for Sustainable Development, focused on training and mentoring five young women from the Nama Khoi municipality to establish a business providing M&E services. The start-up business now actively contributes to the local economy and enhances the effectiveness of community development projects.

Another case with remarkable long-term impact is the Loeriesfontein Data Collection Specialists, established by young local entrepreneurs after participating in an M&E training programme funded by Khobab and Loeriesfontein Wind Farms. This company has become a leading data-capturing agency, providing services for various local projects and significantly contributing to the town’s economic growth. Additionally, Noupoort Data Analysts, a women-owned small enterprise, was founded following an intensive M&E training programme supported by Noupoort Wind Farm. This entity provides research and data collection services for community projects, contributing to local socio economic development.

Alternative skills and livelihoods

Promoting national heritage in India

Through its flagship program, Charkha, JSW Energy highlights and responds to the challenges weavers face by promoting the Indian handloom sector. JSW has established 17 training facilities to empower rural women and enhance their financial independence through long-term livelihoods. In 2023, more than 430 craftswomen from Sholtu and Kutehr, Himachal Pradesh, joined the training.^{[16]SW Energy, 2023, Annual Integrated Report 2022-23}

Enhancing the quality of education in India

The Asha Education Centres provide education for children who lack access to the formal system, support them in exploring career paths, and train local women to be teachers. They operate in Rajasthan, Madhya Pradesh, and other Indian states and are run by Hero Future Energies (an RE company) and the Raman Kant Munjal Foundation Trust. The centres aim to create a community of capable teachers who can enable other teachers to help students grow. This is particularly valuable where high-quality teacher training is difficult to access.^{[17]Hero Future Energies, 2022, Sustainability Report 2021-22}

An innovative approach to entrepreneurship development at Umoya Wind Farm in South Africa

The Umoya Wind Farm created a business capacity-building programme with local community members. The chosen entrepreneurs were trained by established local business leaders. The entrepreneurs were incentivised to complete the training by the prospect of winning small contracts for their new businesses. The contracts would grow as more training modules were completed and helped the entrepreneurs get their businesses off the ground. In this model, the established local businesses and the students came from the same community. The success of the new small businesses became a relatable inspiration to others.

Local institutional capacity building

Creating capacities in community shareholding trusts in South Africa

In South Africa, communities participate in renewable energy projects through government-mandated community shareholding and other required community investments. However, community shareholding entities are deemed vulnerable and need more capacity to govern and manage their revenue income effectively. A platform was created where community trusts can connect, learn from one another, and collaborate to maximise the developmental benefits possible for their respective communities.^{[18]INSPIRE, 2024, New project: Trust Matters} The objectives of this initiative include creating networking opportunities, fostering best practices and building capacity.

This type of benefit sharing involves the development of infrastructure and community services. These can encompass but are not limited to increasing access to energy, educational facilities, health and cultural centres, markets, recreational areas, public lighting systems, and water facilities.

Basic services provision and infrastructure

Funding the construction of Indigenous towns in Colombia

The Terra Initiative is a 162 MW solar project in Colombia in the territory of the Arhuaco Indigenous People. The project’s capital investments include the construction of three Indigenous towns next to the solar plants, which will provide housing for 150 families (~1,000 people), each with water sources, traditional schools, health clinics, farms, and clean energy. The community is responsible for the design, resource management, and construction of the towns, which have been planned under the traditional guidelines established by their highest authorities, thus guaranteeing the preservation of their traditions and culture.^{[19] Greenwood Energy, 2023, Terra Initiative}

Supporting the development of community “Planes de Vida” (Life Plans) in Colombia

In Colombia, Life Plans is an autonomous planning tool for Indigenous communities that defines concrete actions to strengthen cultural, social, political, economic, and cultural aspects based on communities’ worldviews and interests. The tool produces officially recognised documents describing the changes a community wants to achieve and its various land uses. Jemeiwaa Ka’ I wind energy complex in La Guajira has supported the creation of Wayuu communities’ Life Plans to strengthen self-governance structures, identify local development priorities and facilitate community planning and management while integrating their concept of well-being. During the development of Life Plans, Wayuu communities identified energy access as pivotal for their social and economic progress. In response, Jemeiwaa Ka’ I forged strategic partnerships to implement rural electrification initiatives intended to provide reliable energy to communities currently lacking this essential service.^{[20]AES, 2022, Acelerando la transición energética de Colombia}

Environmental stewardship consists of maintaining or improving the local ecosystem. It is important not to confuse such actions with remediation of impacts from a power plant’s installation and operation. Examples of this type of benefit sharing include reforestation programmes, projects to improve households’ energy efficiency, and building sustainable local economies resilient to climate and disaster risks.

Environmental enhancements

Biodiversity conservation and local economic development in South Africa

The Perdekraal East Wind Farm Biodiversity Project aims to improve biodiversity conservation, ecosystem preservation, resilience to climate change, and protection of water resources. The initiative includes activities such as environmental education, ecological monitoring patrols, and asset management. The project’s success is rooted in effective collaboration with key stakeholders such as municipalities, agricultural departments, local schools, and community members.

Wind farms collaborate in environmental stewardship initiative in South Africa

The Greater Kromme Stewardship (GKS) is a conservation initiative in the Eastern Cape focused on protecting the unique biodiversity of the Greater Kromme area, home to many endangered species and ecosystems exclusive to the region. Named after the vital Kromme River, the GKS aims to preserve critical habitats and biodiversity in the Kouga-Koukamma region beyond offsetting the environmental impacts of local wind farms. The initiative involves a partnership among several wind farms, farmers, conservationists, government bodies, and the local Kromme Enviro-Trust NGO. Together, they use a Biodiversity Stewardship approach, a legal framework that enables the creation of private nature reserves with fewer legal hurdles, fostering conservation on private lands. This collaborative approach has led to the establishment of two new nature reserves, demonstrating how renewable energy projects can incorporate significant environmental sustainability measures and emphasise the importance of cooperative efforts in conservation.

Low-carbon community development

Wind farm funds home improvement programme in South Africa

Driven by the national policy requirements for renewable energy projects to invest in socio economic and enterprise development in local communities, the Home Improvement Programme at the Umoya wind energy farm focuses on enhancing the energy efficiency of low-cost homes and providing vocational training to unemployed members of the local community. Initially aimed at boosting energy efficiency, the project’s second phase emphasises skills development in plumbing, electrical work, and carpentry. The programme provides employment and entrepreneurship support and improves living conditions by installing solar water heaters, insulated ceilings, and energy-efficient lighting. It also offers extensive training in business skills and mentoring for community-based enterprises, and it plans to expand these services to more homes and towns. This initiative not only improves health, education, and gender equality by providing better access to hot water but also fosters significant community development.

Future glimpse

Priyanka remembers when people came to talk about the first solar park in 2025. It was a heated discussion, not least because the AC in the old hall wasn’t working due to one of the common power cuts in those days. She was sceptical that anything would really change. She’d heard the stories of what had happened in a couple of neighbouring districts.

Years later, as she walks her son to school before heading to her nursing practice, she knows the school and hospital buildings would not exist without the solar park. Her uncle still works with Legendary Builders, who constructed both buildings and continue to help with repairs. The initial injection of money from the solar project’s CSR fund for local infrastructure meant that Legendary could demonstrate their experience, and from then on, they’ve worked across the state.

Power cuts don’t worry her as she flicks the switch for the monitors. She knows she will have electricity to perform the day’s scheduled procedures. Today will be busy! Later that evening, she will attend the shareholders’ meet-up. It’s a big day for the representatives of the community shareholder trusts across the District. Priyanka enjoyed the last one despite being tired from work. She was inspired by some of the ideas from other communities that now have an emerging ecotourism and conservation sector. Priyanka loves her town by the river and is sure others would love to visit, too.

International Finance Corporation, 2019, Local Benefit Sharing in Large-Scale Wind and Solar Projects
International Finance Corporation, 2010, Strategic Community Investment: A Quick Guide Highlights from IFC’s Good Practice Handbook
International Council on Mining and Metals, 2012, Community Development Toolkit
World Wild Forest, 2015, A review of the local community development requirements in South Africa’s renewable energy procurement programme

[1] Columbia Center on Sustainable Development, 2023, Community Benefit Sharing and Renewable Energy and Green Hydrogen Projects: Policy Guidance for Governments
[2] [3] [8] International Finance Corporation, 2019, Local Benefit Sharing in Large-Scale Wind and Solar Projects
[4] MDPI, 2019, Benefit Sharing in the Arctic: A Systematic View
[5] Clean Energy Council, 2019, A Guide to Benefit Sharing Options for Renewable Energy Projects
[6] Nina Lansbury Hall et al, 2017, Evaluating Community Engagement and Benefit-Sharing Practices in Australian Wind Farm Development
[7] Julia le Maitre, 2024, Price or public participation? Community benefits for onshore wind in Ireland, Denmark, Germany and the United Kingdom
[9] Law 2294 of 2023, Colombia’s National Development Plan 2022-2026
[10] Decree 1302 of 2022, Transfers from the electric sector destined for Indigenous communities
[11] Republic of Kenya, 2020, The Natural Resource (Benefit Sharing) Bill
[12] Franziska Müller and Simone Claar, 2021, Auctioning a ‘just energy transition’? South Africa’s renewable energy procurement programme and its implications for transition strategies
[13] Independent Power Producer Procurement Programme, 2024, An Overview — Independent Power Producers Procurement Programme — as At 31 March 2024
[14] Initiative for Social Performance in Renewable Energy, 2024, True community ownership in the shift to renewables — just how far off are we?
[15] Meliquina, ANTÚ 1 — Empowering Patagonia: a Community-Driven 18 MW Solar Venture [Accessed in June 2024]
[16] JSW Energy, 2023, Annual Integrated Report 2022-23
[17] Hero Future Energies, 2022, Sustainability Report 2021-22
[18] INSPIRE, 2024, New project: Trust Matters
[19] Greenwood Energy, 2023, Terra Initiative
[20] AES, 2022, Acelerando la transición energética de Colombia