re-alliance july 2021 building trust for transmission
TRANSCRIPT
Earning the social licence needed to plugin Australia's Renewable Energy Zones
C O N N E C T I N G P E O P L E T O P O W E R
July 2021
AUTHORKate Healey | Transmission Advocate [email protected]
ABOUT USRE-Alliance is a community-driven organisationof around 500 financial members includinglandholders, farmers, small businesses, climatecampaigners, environmentalists and peopleliving across regional Australia. We work toensure the renewable energy boom deliverssustainable, long-term community benefits toregional communities.
If you like what we do, you can support our workby joining as a member.
ACKNOWLEDGEMENTSThis report has been prepared predominantly onWiradjuri land. RE-Alliance wishes toacknowledge them as Traditional Custodiansand pay our respects to their Elders, past andpresent. We wish to extend thatacknowledgement and respect to all Aboriginaland Torres Strait Islander people whoseknowledge and connection to Country isintegral to our resilient, green futures.
This report draws significant content in relationto benefit sharing, particularly relevant casestudies, from Lane, T and Hicks, J (2019) A Guideto Benefit Sharing Options for RenewableEnergy Projects, Clean Energy Council
© RE-Alliance LimitedCreative Commons LicenseThis work is licensed under a Creative CommonsAttribution 4.0 International License.
C O N N E C T I N G P E O P L E T O P O W E R
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Building Trust for Transmission
_______Contents_Executive Summary 4
Challenges to transmission deployment 6
What does best practice community consultation look like? 10
What is Community Benefit Sharing? 12
Community benefit sharing case studies 13
Neighbourhood Benefit Programs 13
Grant Funds 13
Innovative financing methods that enable community co-investment or
community co-ownership 14
Regional Community Funds 14
Training and Employment 14
Working with Traditional Owners 16
Current Land Access, Compensation and Benefit Sharing in Transmission 17
What is an easement? 17
Compulsory acquisition and negotiated voluntary commercial agreements 18
Existing Community Development funds 19
Barriers to transmission benefit sharing 21
The Regulatory Investment Test for Transmission (RIT-T) 21
Overcoming the barriers to improved landholder compensation and benefit
sharing 22
Option 1 Amendments to the National Electricity Law or its interpretation by the
AER 22
Option 2 State based legislation or regulations 24
Option 3 Privately funded transmission assets 25
What could improved landholder compensation and community benefit
sharing look like? 27
Summary of Recommendations 28
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_______Executive Summary_
In recent years, the Australian renewable energyindustry, with encouragement fromnon-government organisations like RE-Alliance1,have increasingly incorporated best practicecommunity engagement and communitybenefit sharing into renewable energy projectssuch as wind and solar farms.
Australian State and Territory Governments arecommitting to developing Renewable EnergyZones (REZs), as planned in the AustralianEnergy Market Operator’s (AEMO’s) 2020Integrated System Plan (ISP) and otherjurisdictional REZ initiatives in Victoria, NSW andQueensland. Not only will there be significantnumbers of new solar farms, wind farms, batterydevelopments and pumped hydro storageplants, there will be a commensurate roll out ofnew transmission infrastructure to transfer theelectricity from regional locations where it isgenerated to population and business centres,where it is used.
Local rural communities affected by newtransmission infrastructure, and otherstakeholders, deserve to be able to participate inhow these projects are deployed and derivebenefits from this new infrastructure and notjust bear its costs and localised impacts. Thesecommunities have argued that consideration ofsocial and environmental impacts of newtransmission projects needs to be more robustand take place earlier in the planning process.
Recent changes to the National Electricity Ruleswill require public consultation around new REZtransmission lines as well as preparatoryactivities such as preliminary assessment ofenvironmental and planning approvals. Thishigh-level assessment will apply to specifiedREZs in future ISPs.
This REZ planning stage would occur prior to theRegulatory Investment Test for Transmission(RIT-T) which assesses options and economic netbenefits to electricity consumers in more detail.The RIT-T
1 RE-Alliance was formerly known as the Australian WindAlliance.
“can be likened to a business case forany project or venture. Its purpose is toidentify the investment option thatdelivers the highest net economicbenefit to those who produce, transport,and consume electricity in the NationalElectricity Market (NEM)”.2
Currently, the RIT-T process does not includesocial and environmental risk assessments.
RE-Alliance recommends that consideration ofthe social and environmental impacts of newtransmission infrastructure be included withinthe RIT-T process. We propose that there shouldbe early engagement with stakeholders:
● landholders and asset owners alongpotential transmission line routes;
● local community members and groups;● local Councils and State Planning
Departments; and● First Nations, environment and other
special interest groups.This early engagement may reveal the level ofchallenge associated with this project and thepossible strategies to mitigate communityconcerns, such as alternative route selection ortechnical solutions such as undergrounding.
Over the last decade, community benefitsharing has become widespread in large-scalerenewable energy development. Communitybenefit sharing distributes financial benefits ofnew renewable energy developments intoaffected communities, ensuring thatcommunities as a whole benefit.
RE-Alliance proposes that community benefitsharing financial models deployed by wind andsolar energy developers also be used for newtransmission projects. This community benefitsharing would deliver positive communityoutcomes for communities around transmissionlines, be commensurate with the impacts onlocal landholders, but modest in terms of the
2 The role of the Regulatory Investment Test forTransmission process in the development of the WVTNPfact sheet available at:https://www.westvictnp.com.au/1news/news_feed/the-role-of-the-regulatory-investment-test-for-transmission-rit-t-process-in-the-development-of-the-wvtnp
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overall project cost. In the first instance,RE-Alliance recommends that reasonable costsof community benefit sharing and communitypartnerships be contributed by transmissioncompanies, as good corporate citizens. Wherefurther costs are required, we recommend thattransmission companies should be able torecover any additional costs of communitybenefit sharing and community partnershipsfrom electricity consumers through the RIT-T. Asall electricity consumers benefit from thehosting of electricity infrastructure by localcommunities, it is appropriate that the costs ofproviding benefits to local landowners andcommunities should be recoverable fromelectricity consumers.
The RIT-T rightly emphasises efficiency and priceto ensure that electricity consumers pay nomore than is necessary to ensure the safe,reliable, and secure supply of electricity.However, the RIT-T as currently interpreted doesnot incorporate benefit sharing for transmissionimpacted communities, even though resistancefrom impacted communities can materiallyimpact the cost, or “efficiency” of the project.
RE-Alliance further recommends that newmodels of landholder compensation bedeveloped that better reflect the commercialnegotiation taking place between thetransmission company and the landholder andthat any additional costs around these newmodels be recoverable from electricityconsumers as true costs of delivering theseprojects. We see that the Australian EnergyInfrastructure Commissioner could play a role indeveloping these models.
This paper explores the status quo and offersseveral alternatives, so that robust social andenvironmental feasibility assessment can occuralongside community benefit sharing in newtransmission projects, and that these projectsdevelop a strong social licence and are morewelcome in their host communities.This paper applies to jurisdictions across theNEM and the South West InterconnectedSystem (the electricity grid in the southwesternpart of Western Australia). It focuses particularlyon New South Wales and the Central-WestOrana REZ and Project Energy Connect, aproposed transmission line between NSW and
South Australia. It draws lessons fromtransmission projects under development inVictoria and Tasmania, and is relevant to anddraws on information from other Australianjurisdictions.
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_______Challenges to transmission deployment _
The AEMO’s ISP modelling confirms that theleast-cost and least-regret transition of the NEMshould bring in a highly diverse portfolio ofbehind-the-meter and grid-scale renewableenergy resources. These renewable energyresources are to be supported by dispatchablefirming resources and enhanced gridcapabilities.
For the REZs planned in the AEMO’s ISP to besuccessfully delivered there will need to be asignificant roll out of new transmission linesacross the country. Increased investment in newtransmission infrastructure is required due totransformational change occurring within theenergy sector which includes:
● the progressive closure of coal firedgeneration;
● likely future increased demand forelectricity associated with the increasedelectrification of the economy;
● coordination of decisions about thelocation of new renewable generation;and
● planning and staged delivery of newtransmission infrastructure to supportthat new generation.
The Energy Security Board (ESB) recentlycommented:
“The transmission investment neededout to 2040 in the Integrated SystemPlan optimal development path isaround $23 billion in 2019 dollars, androutes and easements are not yetplanned or finalised in many cases.Ensuring that these major projectsremain on time and on budget onceregulatory and planning approvals havebeen granted is a significant challenge.It is many years since the transmissioncompanies have built majorinterconnectors and managed projectsof this magnitude. Delivering on timeand within budget is necessary forconnection of the new generation and
storage fleet to meet customer needs atthe lowest cost within current policysettings”.3
A fundamental issue which the energy marketinstitutions seem to have paid little attention tois the need for a strong social licence for thismassive roll out of transmission infrastructure. Inthe past, significant community opposition andchanged demand forecasts led to TransGridabandoning its proposed 330kV Stroud to TareeTransmission Line Project.
More recently we are seeing examples ofcommunity resistance to new transmissioninfrastructure roll-out. In Victoria, AusNet isdelivering the Western Victorian TransmissionNetwork Project (WVTNP)—the first majortransmission project in Victoria in over 30 years.The project is meeting with significantcommunity resistance. Farmers have capturedlocal attention by ploughing anti-transmissionmessages into their fields.
Similarly, in NSW, TransGrid is planning to deliverthe Central-West Orana REZ which has alsobeen met with community opposition includingthe formation of opposition groups.45 Thissituation is not dissimilar to the one the windindustry found itself in about five to ten yearsago, when instances of poor communityengagement, inadequate benefit sharing, and alack of awareness of local impacts led towidespread community opposition. Althoughthe roll-out of large-scale renewable projectshave at times had community opposition, theyhave also benefited from widespread and strong
5 Merriwa Cassilis Alliance established to safeguardstrategic ag land available at:https://www.theland.com.au/story/7149933/producers-fight-a-power-plan/?src=rss
4 Merriwa farmers demand answers from TransGridavailable at:https://www.nbnnews.com.au/2021/02/25/merriwa-farmers-demand-answers-from-transgrid/
3 Energy Security Board Post-2025 Market DesignConsultation Paper p. 110 available at:https://energyministers.gov.au/sites/prod.energycouncil/files/publications/documents/P2025%20Market%20Design%20Consultation%20paper.Final_.pdf
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community support. In the wind industry,improvements have been made to communityconsultation and community benefit sharinghas become standard practice for new winddevelopments. New solar developments are alsolooking to include best practice communityengagement and community benefit sharingprograms as part of their business model.6
There are varied concerns across communities,with some of the key themes being loss ofamenity and potential impacts on farmingcapacity.
Crucial to best practice community consultationis early engagement with affected communities.This diagram from an AusNet publication showsthe process AusNet is following for the WVTNP.In Victoria, AEMO, as the jurisdictional planner,has control of the project until the contract forits delivery is awarded. As project deliverer,AusNet cannot commence consultation prior tothis point.
The RIT-T (explained in further detail below) doesnot include consideration of “social and
6 For example, UPC Renewables has worked with theCommunity Power Agency and the local community todesign and establish a community Benefit SharingInitiative to help share some of the revenue generatedfrom the solar farm with the community. The NewEngland Solar Farm will fund the program by providing$250 a year for every megawatt of power generatingcapacity installed at the solar farm over its 25-yearworking life. Further information is available at:https://www.newenglandsolarfarm.com.au/community
environmental impacts on local communities inits assessment unless it conflicts with the law.The guidelines, for example, explicitly excludeconsideration of an option’s impact to theenvironment or for matters, such as, the loss ofvisual amenity, that are not regulated”.7
Thus, many of the major decisions about theroute selection have already been made bythe time the public is consulted in theplanning and approvals stage. At this stage, thetransmission company already has regulatoryapproval to build the transmission line andrecover funds from the public through theirelectricity bills to pay for it. It seems then thatonly minor matters are up for consultation in theplanning and approval stage.
Landholders should be consulted earlier duringthe RIT-T process. This will assist in shaping apathway for the proposed infrastructure thatconsiders community and landholder concerns
alongside project objectives. It should also assistin identifying project cost risks associated withpotential outcomes such as re-routing orundergrounding to avoid areas designated asimportant by the community.
7 The role of the Regulatory Investment Test forTransmission process in the development of the WVTNPfact sheet p.3 available at:https://www.westvictnp.com.au/1news/news_feed/the-role-of-the-regulatory-investment-test-for-transmission-rit-t-process-in-the-development-of-the-wvtnp
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It should be noted that transmission companiescan face problems due to being seen to consulteither too early or too late. If they go to thecommunity before there is a detailed routedesign, people will say “Why are you coming tous now? Come back when you know where youplan to place this infrastructure”. If they go outlater community members can feel that all thedecisions have already been made and that theconsultation is not genuine.
RE-Alliance recommends that socioeconomicassessment and landowner engagement onroute selection should occur early via a ’MultiCriteria Analysis’ methodology before finaltechnology selection and procurement tounderstand community viewpoints and betteridentify social licence risks.
RE-Alliance has previously argued that“consideration of community attitudes andplans for community outcomes should beelevated beyond ‘consultation’ to be a morecentral part of REZ planning and thatsocioeconomic assessments and communitybenefit plans be included as requiredcomponents” in the REZ Design report process.8
Thus, RE-Alliance welcomes the recent changesto the National Electricity Rules that stipulate foreach REZ for which the ISP requires a REZdesign report, the jurisdictional planning bodymust undertake public consultation withrelevant stakeholders, including local counciland the community. The REZ design reportincludes preparatory activities such aspreliminary assessment of environmental andplanning approvals9.
However, we note that this high-levelassessment will only apply to specified REZs infuture ISPs.
9 National Electricity Amendment (Renewable energyzone planning) Rule 2021 available at:https://www.aemc.gov.au/sites/default/files/2021-05/D21013075%20%20REZ%20Planning%20Rule%20-%20Scan%20Copy%20signed%20by%20Minister%20for%20the%20AEMC%282%29.PDF
8 Australian Wind Alliance submission to the ESB REZPlanning Rule change - Renewable Energy ZonesPlanning Discussion Paper p. 1. available at:https://www.re-alliance.org.au/submission_esb_rez_planning_rule_change
Farmers also express concern that when theyare consulted, they are not given enoughinformation from transmission companies.10
Feedback RE-Alliance has heard from locallandholders in the CWO-REZ is that whereasrenewable energy developers provide detailedinformation up-front to landholders, thesituation with regards to transmission is lessclear. For instance, a local community groupopposing the planned transmission route, theMerriwa-Cassilis Alliance (MCA) is currentlyhaving discussions with TransGrid seeking toestablish a process to engage and improvecommunication and to have a transparentconsultation process.
MCA President, Peter Campbell said that to thisend “TransGrid and MCA have agreed toestablish a working group. This working groupwill review alternative routes, explore options tolocate the route to minimize/avoid impact onprivate land and locate the route within publiclands”.11 Such working groups are valuableforums to air and resolve the interests of thevariety of stakeholders around a project.
The potential for significant communityopposition to new transmission infrastructureon this scale should not be discounted. In 2015,in Germany, transmission line rollouts associatedwith the transition to renewables were halteddue to resistance from residents. TheGovernment was pushed to undergroundtransmission lines, requiring legislative changesand increasing the cost of these projects.12
In Victoria/Tasmania, there are now twoproposed transmission lines, Marinus Link andStar of the South, which will be predominantlyunderground, whilst other projects such as theWestern Victorian Transmission Network Projectare proposed to be above ground. Recent
12 Germany's Underground Cable Law: New rules aim toaccelerate grid expansion available at:https://www.globaltransmission.info/archive.php?id=25738#:~:text=Commonly%20known%20as%20the%20Erdkabelgesetz,cables%20instead%20of%20overhead%20lines.&text=New%20power%20lines%20in%20Germany,economic%20centres%20in%20the%20south.
11 Merriwa Cassilis Alliance: 'Don't Overpower Us' 27 April2021 available at:https://www.2nm.com.au/news/local-news/103705-merriwa-cassilis-alliance-don-t-overpower-us
10 For example, Merriwa - Cassilis Alliance Facebook pageavailable at:https://www.facebook.com/MerriwaCassilisAlliance/posts/107885694763103
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high-level analysis by AusNet for their WesternVictorian Transmission Network Project foundthat:
“per kilometre, building transmissioncables underground would be in theorder of up to ten times more expensivewhen compared with the equivalentoverhead option. Given the significantdifference in cost, without providing anyadditional economic benefits meantthat undergrounding options could notbe justified under the RIT-Tregulations”.13
However, social, and environmental costs are notincluded in these assessments. Moorabool ShireCouncil recently commissioned an independentlocal economic impact assessment14 to examinethe economic advantages and disadvantagesthat had not been previously considered as partof the project’s RIT-T process, and found:
● The RIT-T does not appear to considercosts or benefits outside theelectricity market.
● The RIT-T process selects a preferredoption on the basis of net directelectricity market benefit and does nottake into account any local, indirect, ornon-market impacts (positive ornegative).
● The capital costs considered includeconstruction, operation, maintenance,regulatory costs, and easements. Itseems that no other costs areconsidered such as non-marketeconomic, social, and environmentalimpacts.
● The benefits assessed include pricebenefits to electricity consumers andthe profitability of energy productionand subsequent flow to business, no
14Moorabool Shire Council, (2021) Western VictoriaTransmission Network Local Economic Impact availableat:https://www.moorabool.vic.gov.au/sites/default/files/Western%20Vic%20Transmission%20Network-EIA-FINAL%20150221.pdf
13 The role of the Regulatory Investment Test forTransmission process in the development of the WVTNPfact sheet p.4 available at:https://www.westvictnp.com.au/1news/news_feed/the-role-of-the-regulatory-investment-test-for-transmission-rit-t-process-in-the-development-of-the-wvtnp
other benefits are considered, includingnon-market economic impacts.
When considering what is reasonable in terms offunding community benefit sharing it is worthconsidering the pressure for and the relativecosts of alternative technology choices in mind.
# Recommendation
1 That engagement start early during theRIT-T process and includes:
● landholders and asset ownersalong potential transmissionline routes;
● local community members andgroups;
● local Councils and StatePlanning Departments; and
● First Nations, environment andother special interest groups.
2 The RIT-T cost benefit analysis isexpanded to include consideration ofsocial and environmental costs andbenefits on local communities.
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_______What does best practice community_______consultation look like?_
The text below is from the Clean EnergyCouncil’s Community Engagement Guidelinesfor the Australian Wind Industry.15
Effective engagement goes beyondsimply informing communities ofproject information, decisions, andactions, it also includes:
● providing information about windpower and the wind farmdevelopment in a clear and timelymanner
● being genuinely available to meetand talk to community members
● providing opportunities forcommunities to communicate localvalues, raise concerns or supportand responding to questions andconcerns respectfully
● prioritising achievement of mutuallyagreed outcomes, wherever possible
Strong community engagement createsmutual benefits for wind farmdevelopers and communities, includingoutcomes such as:● the establishment of respectful
relationships which can fostercommunity support for andidentification with projectoperations and goals
● decreased levels of misinformationabout the project and wind energy
● reduced reputational damage● mitigated risk to projects● reduced financial and legal costs for
developers
15 Clean Energy Council (2018) Community EngagementGuidelines for the Australian Wind Industry p. 8-9available at:https://assets.cleanenergycouncil.org.au/documents/advocacy-initiatives/community-engagement/wind-community-engagement-guidelines.pdf
Each of these considerations hasimplications for a project’s social licenceto operate and, by extension, itsultimate success”.
These points apply equally to best practicecommunity engagement for transmissionprojects.
Transmission companies have made significantefforts to improve their community consultationprocesses in recent years, drawing on resourcessuch as Energy Networks Australia’s CustomerEngagement Handbook16 and the InternationalAssociation for Public Participation (IAP2) PublicParticipation Spectrum.17 A range of panels havebeen established to facilitate wide-rangingengagement with customers and communitystakeholders and to receive expert advice onengagement issues. Community stakeholderforums have been established around individualtransmission projects in New South Wales,Victoria and Tasmania.
22 energy businesses, including transmissiondevelopers, are members of the Energy Charter,a program that publicly commits its members tocontinued improvement in the way they work tomeet the needs of energy consumers.
The Energy Charter has five key principlesfocused on embedding a customer-centricculture and conduct in energy businesses:
● “We will put customers at the centreof our business and the energysystem
● We will improve energy affordabilityfor customers
17 Further information is available on the IAP2 website at:https://iap2.org.au/resources/iap2-published-resources/
16 Energy Networks Australia Customer EngagementHandbook available at:https://www.energynetworks.com.au/assets/uploads/customer_engagement_handbook_july_2016.pdf
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● We will provide energy safely,sustainably, and reliably
● We will improve the customerexperience
● We will support customers facingvulnerable circumstances”.18
Energy Charter is working on an initiative thatengages with agriculture groups to improvelandholder and community engagement withinexisting frameworks.19
Transgrid has recently established the Office ofthe Landowner and Community Advocate toassist in implementing the best possiblelandowner and community engagementpractices on all its major transmission projects.Bolstering internal capacity to undertake themost effective community engagement is awelcome development.
“The Advocate will:● be the pre-eminent source of advice
to TransGrid’s Chair, CEO andExecutive and Board on all aspectsof best practice communityengagement and stakeholderconsultation
● be consulted by TransGrid regardingcommunication plans and specificdocumentation about projects thatimpact landowners andcommunities
● contribute to and critically review allTransGrid’s policies, strategies,processes and procedures forengagement with communities andlandowners
● communicate with TransGrid staff,landowners, communities and themedia to understand issues andconcerns
● assist TransGrid to be accountablefor its undertakings andcommitments to landowners andcommunities
● facilitate the voice of landownersand the broader community in
19 See “#BetterTogether - Better Practice Landholder andCommunity Engagement”https://www.theenergycharter.com.au/bettertogether/
18 TransGrid’s The Energy Charter web page available at:https://www.transgrid.com.au/being-responsible/TheEnergyCharter/Pages/default.aspx
identifying opportunities andalternatives”.20
In the terminology of the InternationalAssociation for Public Participation (IAP2) PublicParticipation Spectrum, RE-Alliancerecommends that transmission companiesconsider moving their consultation style fromone of inform, consult, or involve to more activelycollaborating and empowering their localcommunities. Working proactively with localcommunities to co-design community benefitsharing and partnership is one way in whichrural communities can be involved indecision-making around transmission projects.
ACT and Victorian Governments have set highstandards for community engagement andbenefit sharing via their renewable energytarget auction schemes.21 RE-Alliancerecommends that all developments in the REZs(including transmission) follow a similarlyrigorous process, regardless of whether they willbid into an auction scheme or not, to ensureharmonisation of project consultation in theseareas.
# Recommendation
3 That transmission companies considermoving their consultation style from oneof inform, consult, or involve to moreactively collaborating and empoweringtheir local communities.
21 Lane, T., and J. Hicks (2017) Community Engagementand Benefit Sharing in Renewable EnergyDevelopment: A Guide for Applicants to the VictorianRenewable Energy Target Auction. Department ofEnvironment, Land, Water and Planning, VictorianGovernment, Melbourne available at:https://www.energy.vic.gov.au/__data/assets/pdf_file/0027/91377/Community-Engagement-and-Benefit-Sharing-in-Renewable-Energy-Development.pdf
20 The Office of the Landowner and CommunityAdvocate Charter available at:https://www.transgrid.com.au/news-views/lets-connect/stakeholder-engagement-program/Office%20of%20the%20Landowner%20and%20Community%20Advocate/Documents/Office%20of%20the%20Landowner%20and%20Community%20Advocate_Charter.pdf
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_______What is Community Benefit Sharing?_
Community benefit sharing distributes financialbenefits of new renewable energydevelopments into affected communities,ensuring that communities as a whole benefit.
In late 2019, both the CEC and RE-Alliancereleased reports on community benefit sharingfor renewable energy projects.22 The CEC reportdescribed community benefit sharing this way:
“It involves sharing the rewards of adevelopment with local communities. Itaims to integrate a development intothe local community by contributing tothe future vitality and success of theregion. It is based on a desire toestablish and maintain positivelong-term connections to the area andto be a good neighbour”.23
“In regions of intensive renewableenergy development, the ways in whicha ‘community of benefit’ is identified,and benefit-sharing options aredeveloped is becoming more layeredwith the activities of other renewableenergy developments as well as thedevelopment of transmissioninfrastructure to support these zones”.24
In mid-2021 RE-Alliance will be releasing a newNSW REZ best practice/ social licence report.Together, the reports provide strategies forvarious community benefit sharing optionsavailable to the proponents of large-scalerenewable energy projects as well as illustrativecase studies. Strategies include neighbourhoodbenefit programs, the creation of grant funds aswell as innovative financing methods thatenable community co-investment orcommunity co-ownership.
24 Ibid. p.14.
23 Lane, T and Hicks, J (2019) A Guide to Benefit SharingOptions for Renewable Energy Projects, Clean EnergyCouncil p.3. available at:https://assets.cleanenergycouncil.org.au/documents/advocacy-initiatives/community-engagement/guide-to-benefit-sharing-options-for-renewable-energy-projects.pd
22 Ibid. and Australian Wind Alliance, “Building StrongerCommunities: Wind’s growing role in regional Australia”Second Edition, November 2019, available at:https://www.re-alliance.org.au/bsc2
The CEC’s Guide also discusses benefit sharingstrategies that go beyond making cash-basedcontributions such as:
● “contributing to local communitiesthrough regional economicdevelopment approaches (e.g. localjobs and contracting);
● in-kind contributions (e.g. employeevolunteerism) and
● partnership benefits (e.g. industrycapability networks andeducational opportunities)”.25
These documents emphasise the importance ofintegrating benefit sharing with extensive andmeaningful community engagement processes.
Varying benefits may be offered to differentsections of the community. Landholders whohost renewable energy infrastructure receivelease payments over the life of the project.Neighbours within a given range of a projectmay receive compensatory payments for a lossof visual amenity. More distant neighbours andcommunity members may benefit from a localcommunity development fund, and otheropportunities such as local employment andtraining opportunities.
In communities, there may be a significant issuewith trust around the project. Trust is central toachieving positive community engagement andassociated social outcomes. RE-Alliance has seenmany instances where negotiations aroundbenefit-sharing programs have increased levelsof trust between developers and the community.
It is essential to note that neighbour benefits,and benefit sharing of any kind, should not belinked to ‘gag clauses’ or other requirementsthat prohibit people from expressing theiropinions on the project.
25 Lane, T & Hicks, J, Clean Energy Council, “A Guide toBenefit Sharing Options for Renewable EnergyProjects”, 23 October 2019, p. 1. available at:https://assets.cleanenergycouncil.org.au/documents/advocacy-initiatives/community-engagement/guide-to-benefit-sharing-options-for-renewable-energy-projects.pdf
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_______Community benefit sharing case studies_
Neighbourhood BenefitPrograms
Case Study 1:“Neighbourhood agreements for acascading payment scheme -Coppabella Wind Farm, NSW,Goldwind.Goldwind has found it useful to have benefitschemes that suit the context of a particularwind farm site. Elements of the project contextthat can influence the design of a neighbourbenefit sharing strategy include the projecttopography, visibility and density of residencesclose to approved turbine locations. These issueshave been considered in rolling out theneighbourhood payment scheme at the75-turbine Coppabella Wind Farm, where a’cascading payment structure’ has beenimplemented. The neighbours who live closestto wind turbines are eligible to receive thegreatest financial benefit if they choose to optinto the scheme. For example, residences withinapproximately 2.5 km of an approved turbinelocation could receive approximately $5000 peryear, while those located 5 km away couldreceive approximately $1500 per year. The baseamount (for those 5 km away) is intended as acontribution toward the cost of electricity forthat residence. However, how the money isspent is left to the discretion of the residents.Goldwind is transparent and open about who iseligible, what they will receive and how it iscalculated to reduce division between the“haves and have-nots”. It views the scheme as atool for building relationships that will enableresidents to raise any concerns they might havewith the project now or in the future”. 26
26 Ibid. p. 17.
Grant Funds
Case Study 2:“Establishing and Governing aCommunity Grant Fund -Crowlands Wind Farm, Victoria,Pacific HydroThe Crowlands Wind Farm, constructed in 2019,will invest more than $2.2 million into the localcommunity over a 25-year period through anannual community grant program, in-kindcontributions, and direct philanthropic support.
As part of its benefit sharing approach, PacificHydro is working with the local community toestablish the Sustainable Communities Fund,an annual community grant program that willshare a portion of revenue from CrowlandsWind Farm with the community. As part of thisprocess, Pacific Hydro is gathering communityinput into what the geographic reach of thefund should be. Ongoing governance of theannual grant program will consist of a panel ofthree members of the community,representatives from the two local shire councils(Ararat and Pyrenees) and Pacific Hydrorepresentatives. Pacific Hydro advertisesexpressions of interest for community membersto apply to serve on the committee each year. Inrecognition of their contribution, communitymembers are paid for the time they contributeto the panel. The fund operates according toclear guidelines and will support a range ofeligible local initiatives.
While engaging with the community as part ofthis process, it was revealed that the localcommunity hall needed maintenance. Insteadof spending money to organise an event tomark the start of construction of the wind farm,Pacific Hydro installed a 6kW rooftop solarsystem with a 7kW battery that was suppliedand installed by a local business”.27
27 Ibid. p.22.
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Innovative financingmethods that enablecommunity co-investment orcommunity co-ownership
Case Study 3:“Sapphire Wind Farm CommunityCo-investmentThe 270-megawatt Sapphire Wind Farm nearInverell in North East NSW is the largest windfarm in Australia and first commercial windfarm to make investment available via a publicoffer.
When its public offer formally closed in June2019, almost 100 investors had taken upapproximately $1.8m in community shares. Theoffer was originally made to residents in theNew England area but with drought biting hardon the local economy, the offer was extended toinvestors throughout NSW and the ACT.
The investment model was co-developed withthe local community through an extensivetesting process which addressed details such asgovernance structure, investment length andrate of return. Several adjustments to the modelwere made based on community feedback.
The importance of this project is that it createsa community co-investment structure andapproach which can be easily replicated inother projects”.28
Regional Community Funds
Case Study 4: South West VictorianCombined Wind Farm CommunityFund
The South West Victorian REZ enjoys strongwind resources and a high voltage power linerunning through it. It hosts several wind farms,
28 Australian Wind Alliance, “Building StrongerCommunities: Wind’s growing role in regional Australia”Second Edition, November 2019, p. 28. available at:https://www.re-alliance.org.au/bsc2
and has further projects either in construction oradvanced stages of development. While muchof the area is lightly populated, with around17,000 people, in coming years total fundcontributions could climb to as much as$700,000 each year. While there will continue tobe important local projects that need to besupported, allowing individual wind farmcommunity funds to pool their funds and worktogether opens up opportunities to target moreambitious community projects than are typicallydelivered by small grant-based funds.
RE-Alliance is working with wind farmdevelopers and operators in the region, as wellas community stakeholders, to design a fundstructure to target these outcomes.
Training and Employment
Case Study 5:Local training and employmentopportunities at Karadoc Solar Farm,MilduraBeon Energy Solutions (Beon) has implementeda strategic employment program at KaradocSolar Farm located near Mildura in north-westVictoria. The training and employment programprovided local people from diverse backgroundswith a career start in Victoria’s booming solarindustry.
Beon identified a skills gap in the local solarindustry during the planning phase of the solarfarm and subsequently partnered with localgovernment, job networks, employmentagencies and organisations to provide work formore than 250 locals, including some who hadpreviously faced employment difficulties.
“The program involved Beon andSuniTAFE developing the first solartraineeship program for large scalesolar in Australia, with 15 individualsfrom the region undertaking aCertificate II in Electrotechnology thatwere employed at Karadoc.
Beon and SuniTAFE also created 26 newelectrical apprentice positions at the site. It was
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the highest number of apprentices to work on alarge-scale solar farm in Australia”.29
# Recommendation
4 That transmission companies use communitybenefit sharing models pioneered by thewind industry to distribute financial benefitsof new transmission developments intoaffected communities, ensuring thatcommunities as a whole benefit.
29 Mildura solar farm program a finalist in Clean EnergyCouncil awards available at:https://beon-es.com.au/latest-news/mildura-solar-farm-program-a-finalist-in-clean-energy-council-awards/
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_______Working with Traditional Owners_
When designing community consultationprocesses and community benefit sharinginitiatives it is important that transmissioncompanies consult with local Traditional Ownersand Land Councils. This will allow the companiesto learn from the First Nations communities’local knowledge and ensure they understandany native title rights and related issues thatpertain to the project. It may be possible for thedesign of the project to limit, minimise orcompletely avoid areas which could impact sitesof cultural and heritage importance. There mayalso be opportunities to develop training orapprenticeship programs which would includeopportunities for local First Nations people.
# Recommendation
5 That transmission companiesmeaningfully consult local TraditionalOwners and Land Councils on projectsand associated benefit sharing initiatives;that transmission companies respect theprinciple of free, prior and informedconsent on their lands; that native titleissues are properly understood; and thattraining or apprenticeship programsinclude opportunities for local FirstNations people.
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_______Current Land Access, Compensation,_______and Community Benefit Sharing in_______Transmission_
Transmission companies require spaces for theirsubstations and transmission lines (bothregarding overground and undergroundtechnologies) to provide electricity transmissionservices to the community. To do this they mustacquire appropriate property rights for itselectricity supply network. For substations thiswill usually be a freehold title and for atransmission line this will be an easement.30
What is an easement?“An easement is an interest attached toa parcel of land that gives anotherlandowner or a statutory authority aright to use a part of that land for aspecified purpose. The easement isregistered on the title of the property
and affects a defined area of the land.The easement is generally shown on theplan of the land with a brief descriptionnoted or more fully described in afurther document (instrument)”.31
31 Understanding Easements in your Property contractavailable at:
30 TransGrid Landholder Easement and CompensationGuide p. 2, available at:https://www.transgrid.com.au/being-responsible/public-safety/Living-and-working-with-electricity-transmission-lines/Documents/Landholder%20and%20Easement%20Compensation%20Guidelines.pdf
One example of an easement is an electricityeasement. The easement may be for anelectricity transmission line over or under theproperty and may run parallel at the rear or sideof a property.
An easement provides certain rights andrestrictions and owners of land with registeredeasements should understand their legalimplications. A party who is lawfully authorisedto benefit from an easement, and who uses theeasement in the prescribed manner, will not beliable for trespass. If an authority has aneasement registered over a landholder's land,such as an easement for electricity services, thenthe authority will have the right to access theproperty and to carry out repairs andmaintenance on the easement.
TransGrid has developed an exclusion zone toenable suitable activities within easements,while providing a safe clearance area aroundtransmission lines and structures to protectpublic safety and the network3233. TransGrid’s
33 TransGrid Easement Guidelines - Living and workingwith electricity transmission lines available at:
32 Figure from TransGrid’s Landholder Easement andCompensation Guide
https://shadpartners.com.au/property/understanding-easements-in-your-property-contract/#:~:text=An%20easement%20is%20an%20interest,defined%20area%20of%20the%20land.
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Easement Guidelines clarify what activities arepermitted within their easements. Cropping andgrazing are permitted if any machinery useddoes not extend more than 4.3 metres aboveground level.
Transmission lines can be placed above groundor below ground. The current plans for MarinusLink include around 250km of undersea HVDCcable, 90km of underground HVDC cable inVictoria, around 1km of underground HVDC inTasmania, two converter stations linking to theexisting HVAC transmission infrastructure.
Compulsory acquisition andnegotiated voluntarycommercial agreementsIn NSW34, under the Electricity Supply Act 1995section 44, network operators, includingtransmission operators or distributors havecompulsory acquisition rights. This could includethe purchase of freehold title for a substation orof an easement for a transmission line.
“The Land Acquisition (Just TermsCompensation) Act 1991 (the LandAcquisition Act) sets out the process foracquiring land.
The Land Acquisition Act directsacquiring authorities to negotiate withlandowners for at least six months toacquire land by agreement. In thesecases, the Valuer General is not involved.Most land acquisitions happen this way.
If landholders cannot reach anagreement with the acquiring authoritythrough negotiation, the Governor ofNSW can approve compulsoryacquisition of the land. The ValuerGeneral will then determine the amountof compensation the acquiringauthority must pay for the land”.35
35 NSW Government Valuer General CompulsoryAcquisitions webpage available at:
34 Similar provisions exist in other states. For example, inVictoria there are compulsory acquisition provisionsunder section 86 of the Electricity Industry Act 2000.
https://transgrid.com.au/being-responsible/public-safety/Living-and-working-with-electricity-transmission-lines/Documents/Easement%20Guidelines.pdf
Section 55 of the Land Acquisition Act lists therelevant matters to be considered indetermining the amount of compensation. Theyare:
“(a) the market value of the land on thedate of its acquisition,(b) any special value of the land to theperson on the date of its acquisition,(c) any loss attributable to severance,(d) any loss attributable to disturbance,(e) the disadvantage resulting fromrelocation,(f) any increase or decrease in the valueof any other land of the person at thedate of acquisition which adjoins or issevered from the acquired land byreason of the carrying out of, or theproposal to carry out, the public purposefor which the land was acquired.”
However, recent advice to TransGrid from JLLAustralia, a real estate services firm, which ispublicly available on the Australian EnergyRegulator’s (AER) website states:
“In more recent times governments,authorities and infrastructureproponents have become more acutelyaware of reputational risk and have anincreasingly strong desire to developand maintain a Social Licence toOperate in the areas in which theyoperate.
Another key driver for this change is therequirement that all agencies (includingTransGrid) that acquire land under theLand Acquisition (Just TermsCompensation) Act 1991 (NSW) areexpected to comply with the revisedProperty Acquisition Standardspublished by the NSW Centre forProperty Acquisition.
As a result, they are more inclined tonegotiate voluntary commercialagreements in preference to acquisitionor resumption of easements and areprepared to pay an amount above
https://www.valuergeneral.nsw.gov.au/compulsory_acquisitions#:~:text=The%20Land%20Acquisition%20(Just%20Terms,Valuer%20General%20is%20not%20involved.
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valuation to reach such a voluntaryagreement”.36
JLL continues:
“Wind farm developers in particular areprone to paying royalties on a “perturbine” basis which are generally notbased on valuation principles and aremore based around commercialnegotiations which are generally well inexcess of compensation assessed underthe applicable land acquisitionlegislation for transmission lines.
It should be kept in mind that transmissioncompanies may have a limited period in whichto negotiate land access agreements, as theymay have contracted with subcontractors tobuild the transmission line. If delays extend toofar beyond initial estimates, it will end up costingthe transmission company vastly more throughpenalty clauses in their agreements with theirsubcontractors.
JLL puts it thus:
Landowners and their advisors in thecurrent environment are very astuteand are more cognisant of their abilityto drive a higher compensation amountif proponents are under pressure toachieve access to land in a shorttimeframe.37
The Australian Energy InfrastructureCommissioner, Andrew Dyer has recently been
outspoken on the issue of landholder payments:
“There is a terrific opportunity topositively bring the farmingcommunity along and becomesupportive of hosting newtransmission lines — by finding a waythat the landholder can share in the
37 Ibid. p. 5.
36 Letter from JLL to TransGrid re Land & EasementAcquisition Forecast Costs for Project Energy Connect p.6-7 available at:https://www.aer.gov.au/system/files/Transgrid%20-%20JLL%20Report%20Land%20Acquisition%20Costs%20Revised%20-%2025%20August%202020.pdf
ongoing economic benefits beingdelivered by the transmissioninfrastructure,”
“None of this infrastructure can existwithout land, and the landholder’sco-operation and use of their asset isessential for these new projects toproceed.”38
Existing CommunityDevelopment funds
Case Study 6:TransGrid’s existing communityprogramsTransGrid has some small-scale communitybenefit programs in place including aCommunity Partnerships Program and aCorporate Sponsorship Program. TransGrid’sCommunity Partnerships Program is
“designed to benefit communities inareas where their assets are located orunder development. Through theprogram, TransGrid providesnot-for-profit groups with funding tohelp deliver initiatives that will have atangible and lasting impact on localcommunities”.39
TransGrid’s website does not say how muchmoney was provided to these initiatives. They arespread throughout the State.
TransGrid also has a Corporate SponsorshipProgram
“which provides financial, professionaland volunteer support to organisationsthat benefit the community. Programaims are to:● support or contribute to the
long-term wellbeing of communitiesin NSW and the ACT.
39 TransGrid’s Community Partnerships Programwebpage available at:https://www.transgrid.com.au/being-responsible/community-partnership-program/Pages/default.aspx
38 The Weekly Times, ‘Farmers Call Ongoing Paymentsfor Powerline Easements’, June 30 2021
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● contribute to important issueswithin the communities where wework.
● contribute to important issueswithin the electricity industry
● align with the delivery of ourDiversity and Inclusion strategy.
Current sponsorships include:● National Renewables in Agriculture
Conference (Dubbo 2021)● Career Trackers● STEM programs for women● The Clontarf Foundation● The Royal Botanic Gardens● UTS Galuwa Experience● Vivid Sydney”.40
While community programs such as thoseprovided by TransGrid will continue to makesense at a corporate level, it is likely that formajor transmission projects there will be a needfor more substantial funding that is targeted tohost communities. Those communities will bekeen to see “what’s in it for them” if they are tobecome hosts to hundreds of kilometres of newtransmission lines. Corporate-level programs arecurrently funded from transmission companies'profits. While it is reasonable that transmissioncompanies shoulder the reasonable costs ofthese programs as a cost of doing business,community outcomes in impacted regionsshould exceed the level of these reasonablecosts.
RE-Alliance recommends that transmissioncompanies should be able to recover anyadditional costs of community benefit sharingand community partnerships from electricityconsumers through the RIT-T. As all electricityconsumers benefit from the hosting ofelectricity infrastructure by local communities, itis appropriate that the costs of providingbenefits to local landowners and communitiesshould be recoverable from electricityconsumers.
40 TransGrid’s Sponsorship Programs webpage availableat:https://www.transgrid.com.au/being-responsible/sponsorship-programs/Pages/default.aspx
Consideration should also be given to the rolestate governments can play in furtheringregional development goals where there aresynergies with transmission projects.
# Recommendation
6 Transmission companies substantiallyexpand existing community developmentand partnership programs to targetcommunities impacted by their projects.
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_______Barriers to transmission benefit sharing_The rules administered by the AER make itdifficult for transmission companies to usecommunity benefit sharing models pioneeredby wind farms and increasingly used by solarfarms. Under these models, proponentcontributions are made to the local communitywhich in turn contribute to enhanced sociallicence and improved community goodwilltowards the project.
The Regulatory InvestmentTest for Transmission (RIT-T)Under the National Electricity Rules:
“The RIT-T process requires transmissionnetwork planners to identify thenetwork need, assess the cost, andevaluate the economic and technicalbenefits of a range of potentialsolutions.
The RIT-T process can be likened to abusiness case for any project or venture.It represents an early hurdle that needsto be crossed to progress to the nextstage of investment and planning. Itspurpose is to identify the investmentoption that delivers the highest neteconomic benefit to those who produce,transport, and consume electricity inthe NEM. This is done to ensure theproposed investment is in the long-terminterests of electricity consumers whoultimately fund this project. Thiscontrasts with privately fundedinitiatives which do not require a RIT-T,such as in the case of a company thatseeks to build a powerline to connect itswind farm to the network”.41
The regulatory investment test for transmission(RIT-T) is based on the National Electricity
41 The role of the Regulatory Investment Test forTransmission process in the development of the WVTNPfact sheet available at:https://www.westvictnp.com.au/1news/news_feed/the-role-of-the-regulatory-investment-test-for-transmission-rit-t-process-in-the-development-of-the-wvtnp
Objective (NEO) from the National ElectricityLaw (NEL). The NEO, as stated in the NEL is:
“to promote efficient investment in, andefficient operation and use of, electricityservices for the long-term interests ofconsumers of electricity with respect to:● price, quality, safety and reliability
and security of supply of electricity● the reliability, safety and security of
the national electricity system”. 42
The emphasis on efficiency and price is toensure that consumers pay no more than isnecessary to ensure the safe, reliable, and securesupply of electricity. The NEO requires efficientexpenditure and does not incorporate benefitsharing for transmission impacted communities.
42 National Electricity (South Australia) Act 1996 NationalElectricity Law—Schedule, Section 7 available at:https://www.legislation.sa.gov.au/LZ/C/A/NATIONAL%20ELECTRICITY%20(SOUTH%20AUSTRALIA)%20ACT%201996.aspx
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_______Overcoming barriers to improved landholder_______compensation & benefit sharing_
Option 1Amendments to the NationalElectricity Law or itsinterpretation by the AERIf the current national regulatory regimecontinues to be used by States, benefit sharingcould be facilitated by a change to the NationalElectricity Law (NEL) or to the AER’s currentinterpretation of the law. The law could beamended to broaden the concept of efficiencyin the NEL. The Australian Energy MarketCommission (AEMC), which has published aguidance document “Applying the EnergyMarket Objectives,” discusses the elements ofefficiency, including productive efficiency,allocative efficiency, and dynamic efficiency.43
The AEMC states:“the focus of the energy objectives is onefficient investment in, and operationand use of, electricity and gas services inthe long-term interests of consumers.The question to be answered in theassessment process is therefore, woulda proposed change to the rules (orrecommendation) promote moreefficient decisions across theseactivities, which would ultimatelypromote the long-term interests ofconsumers”.44
It is in the long-term interests of consumers thatthe proposed Renewable Energy Zones andtheir supporting transmission infrastructure inthe Australian Energy Market Operator’s(AEMO’s) Integrated System Plan (ISP) isdeveloped. AEMO comments:
“Provided that the transmissioninvestments are timely and kept at anefficient level, the combined supply and
44 Ibid. p.4.
43 AEMC, Applying the energy market objectives, 8 July2019, p.12. available at:https://www.aemc.gov.au/sites/default/files/2019-07/Applying%20the%20energy%20market%20objectives_4.pdf
network investments proposed in theISP are expected to deliver $11 billion innet benefits to the National ElectricityMarket (NEM)”.45
However, without an adequate social licence,many of the projects may not be built, or notbuilt in a timely way, or may be forced ontocommunities unwillingly. These are not desirableoutcomes. Community benefit sharing canalleviate many of these issues and make newtransmission assets more welcome in ruralcommunities.
It is instructive to view TransGrid’s Contingentproject application to the AER for Project EnergyConnect, an interconnector which will runbetween New South Wales and South Australia.
For land and easement acquisition costs,TransGrid
“forecast $121.4 million ($2017-18) incapex for the purchase of neweasements, land for substations, andassociated costs relating tocompensating landowners along theroute between the South Australianborder and Wagga Wagga. Thiscomprises 6.5 per cent of total projectforecast capex”.46
The AER has“found that the majority of theeasement and land acquisition costsare likely reasonably estimated and aresupported by independent data on landvaluations in New South Wales.
46 AER (2020), Preliminary Position TransGrid ContingentProject - Project EnergyConnect, p.21 available at:https://www.aer.gov.au/system/files/AER%20-%20Preliminary%20Position%20-%20TransGrid%20-%20Project%20EnergyConnect%20Contingent%20Project%20-%20December%202020_0.pdf
45 AEMO, 2020 Integrated System Plan, July 2020, p. 8,available at:https://aemo.com.au/-/media/files/major-publications/isp/2020/final-2020-integrated-system-plan.pdf?la=en
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However, TransGrid’s forecast includes acontingency for negotiating withlandowners to secure easements atabove market rates. This contributes to$30 million in forecast capex. [The AER]found that the majority of thisallowance for negotiating withlandowners is likely not required tosecure land for the project.
The AER considers“that a negotiating margin of $6 millionis reasonable for TransGrid to secureaccess to easements for the project. Thisreflects an amount that is broadlyconsistent with the average negotiatingmargin that TransGrid has required onthe land and easements it has beenable to secure to date”.47
Thus, for Project EnergyConnect, TransGridsought to include a contingency for negotiatingwith landowners to secure easements at abovemarket rates. The AER found that thiscontributed to $30 million in forecast capex. TheAER found that most of this allowance fornegotiating with landowners was likely notrequired to secure land for the project. The AERconsiders that a negotiating margin of $6 millionis reasonable for TransGrid to secure access toeasements for the project.
Thus, changes to the NEL may be required fortransmission companies to recover additionalexpenditure for land and easement acquisitioncosts, as the AER is already prepared to approveexpenditure above market rates. It thenbecomes a question of what is “reasonable” andwhat has been achieved before.
But as JLL notes:
“Wind farm developers in particular areprone to paying royalties on a “perturbine” basis which are generally notbased on valuation principles and aremore based around commercialnegotiations which are generally well inexcess of compensation assessed underthe applicable land acquisitionlegislation for transmission lines…. Such
47 Ibid, p. 22.
agreements can set unrealisticexpectations in the community andinevitably drive up compensation”.
The question of what is “unrealistic” or what is“reasonable” to quote the AER, is a contestedmatter.
RE-Alliance considers that maintaining a goodsocial licence is essential for these projects toproceed and for the REZs to likewise succeed. Inthese circumstances we argue for best practicecommunity consultation, and increasedlandholder and neighbour compensationarrangements which also includes communitybenefit sharing arrangements.
RE-Alliance suggests that the energy marketinstitutions have not given sufficientconsideration to the importance of social licenceand the possibility that the REZ’s may not besuccessful if there is significant communitybacklash against new transmissioninfrastructure.
Improved landholder compensation andbroader community benefit sharing may bepossible under the NEO as it stands andrequests the AEMC and AER to consider thematter further and to provide some clarifyingadvice to industry and the community.
RE-Alliance seeks guidance as to whether it ispossible under the current NEL and NER fortransmission companies to provide enhancedcommunity benefit sharing such as funding forcommunity development funds or upgradedroads.
These costs are not currently built into the RIT-Tprocess, however conceivably they could be.Initiatives such as this are likely to greatlyenhance the social licence of transmissionprojects in regional communities.
RE-Alliance recommends that an extra line itemis built into the RIT-T for social licence costs. Weconsider that there may be innovative optionssuch as allowing for affected landholders andcommunities to be paid annually for the life ofthe transmission asset. This would includeincreased multi-year affected landholdercompensation, affected neighbour payments
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and the capacity for funding local communitydevelopment funds.
This could potentially be funded from anadditional component being added to the rateof return payments provided to the transmissioncompany or alternatively as a standing item ofopex, or an amount linked to the depreciation ofthe long-lived assets.
This possibility needs to be considered by theAEMC and AER in more detail so that they canadvise what is possible. We should not beconstrained by the status quo. It is vital thatthe REZ’s are successful and that newgenerators are able to connect into the NEMas old generators retire.
The Australian Energy InfrastructureCommissioner has worked specifically in thearea of landholder compensation for renewableenergy projects since his inception of the role in2015. We recommend that the Commissionerengage with the AER to determine an efficientlevel of landholder compensation to be factoredinto the RIT-T analysis and revenue settingarrangements across various jurisdictions. Thisprocess should be consulted on publicly.Affected landholders, neighbours andcommunities should receive an agreed amountbased on publicly available criteria.
# Recommendation
7 The RIT-T is expanded to include a sociallicence line item which could be used topay for improved landholdercompensation and community benefitsharing in affected communities.
8 The AEMC and/or the AER clarifywhether community benefit sharing canbe funded under the current NEL andNER including the RIT-T, and if not,advise on the changes that would benecessary to enable this.
9 Transmission companies developlandholder compensation models thatbetter reflect the nature of recentcommercial negotiation that occursbetween renewable projects and host
landholders. This should be informed bythe quantum and duration ofcompensation paid by wind farms tolandholders.
10 RE-Alliance requests that the AER andthe Australian Energy InfrastructureCommissioner work together toformalise advice regarding what level oflandholder compensation is acceptableunder the RIT-T, noting that they havealready approved expenditure abovemarket rates for existing transmissionprojects.
Option 2State based legislation orregulationsSeveral States have flagged potentially movingaway from the national electricity rules to planand fund certain new transmission investments.If states decide not to use the national RIT-Tarrangements, RE-Alliance advocates theinclusion of early best-practice stakeholderconsultation, community benefit sharing andimproved landholder compensation in the newState investment tests. This community benefitsharing would be commensurate with theimpacts on local landholders, but modest interms of the overall project cost.
New South WalesNSW has proposed moving away from the RIT-T.They propose an independent regulator whomay be the AER or the Independent Pricing andRegulatory Tribunal (IPART) but will use theirown investment test.
The NSW Electricity Infrastructure Roadmapstates:
“reforms will establish a bespoke NSWregime, similar to the RIT-T and NationalElectricity Rules cost recovery provisionsfor REZ transmission projects, to allowscale-efficient transmission investmentsto proceed. To do this, a TransmissionEfficiency Test (‘the test’) will beintroduced.”
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These powers were confirmed in late November2020 with the passage of the ElectricityInfrastructure Investment Act 2020. No furtherdetails about the identity of the NSW regulatorhave been released yet and the NSWDepartment of Planning, Industry andEnvironment are understood to be in theprocess of developing Electricity InfrastructureInvestment regulations.
VictoriaIn February 2020, the Victorian Governmentpassed the National Electricity (Victoria)Amendment Bill 2020 which allows the VictorianGovernment by order published in theGovernment Gazette to specify an alternativeregulatory investment test. During her secondreading speech Minister D’Ambrosiocommented that:
“The Bill will enable the Minister forEnergy, Environment and Climate … tomake Orders to facilitate urgenttransmission projects … An Order maymodify or dis-apply parts of the nationalregulatory framework that have thepotential to delay timely investment inthe transmission network, including theregulatory investment test fortransmission (RIT-T) and rules relating tocontestable procurement foraugmentations. The RIT-T can add yearsto a transmission project, frustratinginvestment to address Victoria’s urgentreliability needs. If appropriate, an Ordermay also specify an alternative test inplace of the RIT-T”.
She also stated:This Bill is being introduced as a resultof the inability of the current nationalregulatory framework to effectivelyaddress the pressing andunprecedented challenges affectingVictoria’s electricity system. TheVictorian Government will continue toadvocate for changes to the nationalframework to ensure that it is effectiveand fit for purpose”.
When NSW and Victoria establish their ownregulatory processes , RE-Alliance recommends
that their regulatory tests facilitate communitybenefit sharing.
We note that in Victoria any reform tocommence stakeholder engagement at anearlier stage in the process than is currently thecase will need AEMO (or Vicgrid, the Vic Govt'sproposed REZ coordination entity) to take onthat role.
# Recommendation
11 When New South Wales and Victoriaestablish their own regulatory tests inplace of the RIT-T, new regulatory testsshould facilitate increased landholdercompensation, neighbour compensation,and funding community benefit sharingin the transmission sector to enhancesocial licence and facilitate the success ofthe REZs.
It should also consider cost benefitanalysis of social and environmentalimpacts on local communities. The newregulatory investment test should includeconsideration of non-network solutions.
Option 3Privately funded transmissionassetsA third option is the development of privatelyfunded transmission infrastructure. For example,Walcha Energy has recently proposed plans tobuild a major transmission line, linking the NewSouth Wales coal power centre of Liddell to thefuture solar and wind energy hub of Urallathrough the Walcha Plateau48.
Walcha Energy is a joint venture between MirusEnergy and Energy Estate. Walcha Energy hasambitious plans to develop roughly 3,400MW ofwind generation capacity, up to 700MW of solar,and multiple 500MW/3000MWh pumped hydroenergy storage facilities between Walcha andUralla.
48 Walcha Energy proposes to “go it alone” on majorNSW transmission link available at:https://reneweconomy.com.au/walcha-energy-proposes-to-go-it-alone-on-major-nsw-transmission-link/
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In April 2021, Walcha Energy proposed a 178kmdouble circuit 330kV line which would stretchfrom Liddell to Walcha Road. This would be agenerator-led private transmissiondevelopment, independent of the RIT-T andunderwritten by Walcha Energy’s pipeline ofrenewable energy and storage projects.
The WalchaLink would then, in the future, havepotential to join the shared network at the UrallaHub and facilitate a transmission pathway forgeneration within the wider New England REZto the NSW load centres and a secondconnection to Queensland.
WalchaLink claims that its plan is consistentwith the grid development from the REZ to theHunter Valley outlined in the AEMO’s 2020 ISPand TransGrid’s 2020 Transmission AnnualPlanning Report.
Depending on the project economics, in thecase of privately built transmissioninfrastructure, it may be easier for the proponentto include both best practice communityconsultation, improved landholdercompensation and community benefit sharingwithin the project, as privately builtinfrastructure assets are not subject to theregulatory requirements of the RIT-T.
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_______What could improved landholder_______compensation & community benefit sharing_______look like?_
As stated above, community benefit sharingoptions include:
● neighbourhood improvement programs;● the creation of grant funds;● innovative financing methods that
enable community co-investment orcommunity co-ownership.
The CEC’s Guide also discusses benefit sharingstrategies that go beyond making cash-basedcontributions such as:
● contributing to local communitiesthrough regional economicdevelopment approaches (e.g. local jobsand contracting);
● in-kind contributions (e.g. employeevolunteerism) and
● partnership benefits (e.g. industrycapability networks and educationalopportunities).49
RE-Alliance suggests that payments to hostlandholders and other directly affectedlandholders could be ongoing over the course ofthe transmission infrastructure’s serviceable life.
Neighbour payments could be used ascompensation where visual impact is severe.Whether neighbours are severely visuallyaffected by new transmission infrastructure maybe assessed in a similar way to assessmentsmade for large wind farms in NSW, which arerequired to use the methodology described inWind Energy: Visual Assessment Bulletin forState significant wind energy development.50
50 Planning & Environment (2016) Wind Energy VisualAssessment Bulletin for State significant wind energydevelopment available at:https://www.planning.nsw.gov.au/-/media/Files/DPE/Bulletins-and-Community-Updates/wind-energy-visual-assessment-bulletin-2016-12.pdf
49 Lane, T. and Hicks, J. (2019) Clean Energy Council, “AGuide to Benefit Sharing Options for Renewable EnergyProjects”, 23 October 2019, p. 1. available at:https://assets.cleanenergycouncil.org.au/documents/advocacy-initiatives/community-engagement/guide-to-benefit-sharing-options-for-renewable-energy-projects.pdf
Community development funds could be usedto meet a range of local community needs. Forexample, transmission companies could pay forupgrades to local infrastructure such as roads ortelecommunication infrastructure and maycontribute to local or regional communitydevelopment funds. Local involvement in fundgovernance is desirable and gives localcommunities a sense of agency andempowerment. Any grant funding should besimple to administer, apply for and report to.
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_______Summary of Recommendations_# Recommendations
1 That engagement start early during the RIT-T process and includes:● landholders and asset owners along potential transmission line routes;● local community members and groups;● local Councils and State Planning Departments; and● First Nations, environment and other special interest groups.
2 The RIT-T cost benefit analysis is expanded to include consideration of social and environmental costsand benefits on local communities.
3 That transmission companies consider moving their consultation style from one of inform, consult, orinvolve to more actively collaborating and empowering their local communities.
4 That transmission companies use community benefit sharing models pioneered by the wind industryto distribute financial benefits of new transmission developments into affected communities,ensuring that communities as a whole benefit.
5 That transmission companies meaningfully consult local traditional owners and land councils onprojects and associated benefit sharing initiatives; that native title issues are properly understood; andthat opportunities for training or apprenticeship programs include opportunities for local First Nationspeople.
6 Transmission companies substantially expand existing community development and partnershipprograms to target communities impacted by their projects.
7 The RIT-T is expanded to include a social licence line item which could be used to pay for improvedlandholder compensation and community benefit sharing in affected communities.
8 The AEMC and/or the AER clarify whether community benefit sharing can be funded under thecurrent NEL and NER including the RIT-T, and if not, advise on the changes that would be necessary toenable this.
9 Transmission companies develop landholder compensation models that better reflect the nature ofrecent commercial negotiation that occurs between renewable projects and host landholders. Thisshould be informed by the quantum and duration of compensation paid by wind farms to landholders.
10 RE-Alliance requests that the AER and the Australian Energy Infrastructure Commissioner worktogether to formalise advice regarding what level of landholder compensation is acceptable under theRIT-T, noting that they have already approved expenditure above market rates for existingtransmission projects.
11 When New South Wales and Victoria establish their own regulatory tests in place of the RIT-T, newregulatory tests should facilitate increased landholder compensation, neighbour compensation, andfunding community benefit sharing in the transmission sector to enhance social licence and facilitatethe success of the REZs.
It should also consider cost benefit analysis of social and environmental impacts on local communities.The new regulatory investment test should include consideration of non-network solutions.
RE⌁ALLIANCE | Building Trust for Transmission 28
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RE-ALLIANCE | BUILDING SOCIAL LICENCE FOR TRANSMISSION
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