All about shared community ownership under the Community Energy Strategy's voluntary protocol
In the case of Boyndie Wind Farm the co-operative is building up a reserve from the returns from the project to repay the initial investment at the end of the project life.
In other projects the investors take a slightly lower return and the developer is responsible for repaying the initial investment.
DECC guide to community ownership
This approach involves the community enterprise buying the right to receive a proportion of the revenue or profit from a commercial renewable energy project.
The developer enters into agreements with a community enterprise to provide a share of net project revenues or of profit (revenues less operating costs) in return for the investment from the community enterprise. The investment is configured like a share offer where investors get an annual return on their investment and can recover their original investment (subject to some limits in initial years).
In this model, the community has a financial stake in the development and a share of the profits. However the community enterprise does not own any physical asset and its ownership is of the rights to an income stream.
The ownership and ongoing responsibility for operation and maintenance of the plant remains with the commercial partner.
The community contribution is typically secured during the commissioning of the project so that community investors are not exposed to development or construction risk.
The commercial partner retains complete ownership of the project assets and so is in principle free to sell it on, provided that it is clear that any new owner would have an ongoing liability to pay the relevant revenue share.
This approach also benefits the developer in working with the community and receiving its support, and provides a further source of funding.
It is often possible to structure this arrangement so that the commnity investors can benefit from Enterprise Investment Scheme (EIS) tax relief.