Lydia Godden outlines the need for Welsh communities to benefit from a greater share of the income generated through Wales’ natural resources and explains our recommendations.
Our new research, kindly supported by Friends Provident Foundation, calls for the Welsh Government to set better terms of engagement with the commercial renewable energy sector, and ensure Wales’ communities retain a greater income share from the renewable energy developments it hosts.
Despite ambitious targets on renewable energy generation from the Welsh Government, a lack of strategic dialogue and policy guidance currently allows economic benefits from Net Zero to leak out of Wales. As a result, too little of the wealth generated within Wales benefits local communities.
Discussions regarding ensuring a ‘just transition’ in Wales understandably focus on employment, retraining, and skills development. But we believe a truly just and equitable transition must go beyond this. To avoid repeating patterns of exploitation and wealth extraction of the previous industrial revolution, a fair transition would require redistributing a larger share of the income and economic benefits produced locally and retaining them for the benefit of future generations.
Across the whole of Wales, communities that host renewable energy projects must not only retain income from commercial developments but play a meaningful part in owning local renewable energy projects to ensure long term benefits are retained, building economic resilience within communities.
Our recommendations
With this paper we aim to kickstart a national conversation, rooted in considerations of a rights-based approach to energy generation and net zero, where redistributive economics and justice play an important role.
To do this, we make four key recommendations. First, we argue there is a need to re-power communities by reforming community benefit funding, to retain greater economic impact and income from renewable energy projects situated in Welsh communities.
Second, the Welsh Government must establish best practice through Trydan Gwyrdd Cymru, ensuring a minimum of 30% of community ownership on their future developments.
There are real opportunities to ensure this next energy transition is fairer, and leads to greater economic resilience at the local level.
Third, we recommend that Welsh Government should accelerate community ownership on commercial projects, by compelling all new commercial renewable projects above 5MW to have a minimum level of 15% of community and local ownership by 2028.
Finally, we argue that the Welsh Government should establish a Wales Wealth Fund and reinvest its profits for future generations.
Repeating past mistakes: lessons from the coalfields
The green energy revolution and the net zero present transition represent crucial opportunities to transform the Welsh economy, and this new project explores the interplay of economic regeneration, green energy and fairness.
I come from a former coalfield community where the shadow of Wales’ drastic deindustrialization has always been present. The collapse of coal mining has shaped my outlook on community, politics and the economy – how it often doesn’t deliver for ordinary people. This situation made me concerned for our current energy transition, and made me wonder how we could ensure Wales would retain greater benefit.
For a country so rich in natural resources, we remain marked by poverty and a deeply unequal economy. A lack of ownership within Wales’ economy is a significant strain. According to Cardiff University Professor Calvin Jones, the lack of ownership of utilities such as energy brings with it ‘a lack of autonomy; of control over our economic – and hence social and environmental – future’. The previous industrial revolution was marked by significant extraction of resources and wealth, with little-to-no long term investment of the economic benefits for future generations. Our green energy transition must not repeat the same mistakes.
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This is why we are calling for the Welsh Government to establish a Wales Wealth Fund, to capture a return of the revenues from the commercial renewable energy sector and invest these for future generations. We also call for policy initiatives that place wealth and an increased level of ownership of energy generation in the hands of communities through enhanced community ownership.
There are real opportunities to ensure this next energy transition is fairer, and leads to greater economic resilience at the local level. We have seen how an industry can underpin a community, but we must learn from the de-industrialisation of Wales and ensure we invest the economic benefits of green energy for future generations to come.
A moment of political opportunity?
Taking a wider view, both the UK Labour Party and Welsh Labour, of course in Government in Wales, are seemingly aligned on green energy: both seeing net zero as a key economic driver. The Welsh Government has established Trydan Gwyrdd Cymru, a state-owned energy developer, and Ynni Cymru, a state-owned community energy developer – a key ask of the Cooperation Agreement. These policies are an acknowledgement that ‘the market-based approach to the energy system is not delivering decarbonisation at the scale or pace necessary’ (as stated by then-Climate Change Minister Julie James) and display efforts to retain greater benefits within communities.
Meanwhile, UK Labour are committed to establishing GB Energy, a state-owned ‘clean’ energy company. Keir Starmer and Vaughan Gething jointly visited north Wales earlier this week to announce the role of GB Energy in investing in the floating offshore wind sector. So, does this mean the willingness of politicians to suggest public ownership of energy has increased, has the time of state ownership come?
Not quite, UK Labour do not endorse the re-nationalisation of energy and remain cautious, framing the policy as a key to greater energy security and ‘taking back control’, perhaps conscious to throw off any accusations that the party hasn’t shifted enough from the policies of Corbyn. However, Starmer’s recent U-turn on the £27 billion of funding for GB Energy, (despite any criticism of the plans from industry), means the impact of the policy is significantly constrained.
Current events show our research is timely, published within a key moment of political opportunity, with greater understanding of the need for increased ownership of energy (whether for enhanced energy security or a fairer economy) and a greater retention of benefits.
On retaining private sector investment, UK Labour currently commits to establishing a ‘National Wealth Fund’ to help create jobs in a zero-carbon economy. We suggest that a separate ‘Wales Wealth Fund’ is essential for Wales to retain greater private sector investment from renewable energy projects that operate in Wales, not held at the Westminster level and handed back, but retained to Wales.
Current events show our research is timely, published within a key moment of political opportunity, with greater understanding of the need for increased ownership of energy (whether for enhanced energy security or a fairer economy) and a greater retention of benefits. So, what are the next steps the Welsh Government could take?
Next steps…
With Wales’ new First Minister in place Vaughan Gething recently announced a reshuffled cabinet. Interestingly, responsibilities for Climate Change and green energy generation now span a number of Cabinet Secretaries and Ministers. To an extent this addresses concerns that the previous portfolio of Climate Change was too large to be held by two Ministers, Julie James and her former deputy Lee Waters. In the new Cabinet, Energy and the Economy are brought together in one portfolio, held by Jeremy Miles as Cabinet Secretary for Economy, Energy and Welsh Language and shows the potential economic opportunity that Welsh Government believes low carbon energy can provide. Huw Irranca-Davies is Cabinet Secretary for Climate Change and Rural Affairs, while responsibilities for planning lay with Julie James as Cabinet secretary for Housing, Local Government and Planning.
It remains to be seen if this approach will strengthen capacity across this policy area or lead to a disjointed approach. Either way, all relevant Cabinet Secretaries and Ministers will need to work collectively to deliver on Wales’ net zero ambitions. In the immediate term we would like to see Jeremy Miles explore establishing strong policy guidance for developers and communities relating to Community Benefit Funding provision in Wales. In the medium-to-longer term, we believe Miles should explore securing a Wales Wealth Fund and enhanced community ownership on commercial renewable energy projects to retain greater economic benefit to Wales.
Ahead of a UK General Election later this year and a Senedd election in 2026, we urge all parties to engage in means through which communities in Wales can gain socio-economic benefit from Wales’ journey to net zero. We must ensure that Wales captures the benefit of the generational opportunity the renewable energy transition represents.
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