Benefit sharing with Indigenous Peoples: The right of Indigenous Peoples to benefit from resource development, participate in decision-making, and determine priorities in development planning that directly affect them. This encompasses among others, national and local taxation and distribution of collected amounts, job creation, negotiated agreements, and community development programs. Co-ownership is one of several benefit-sharing approaches. Benefit sharing is not to be confused with corporate social responsibility (CSR) projects, or responsible investment initiatives.

Examples of CSR projects and responsible investment initiatives that cannot be considered benefit-sharing are included in the non-exhaustive list below, which aims to draw attention to certain corporate practices that have been observed to have been used to justify investment in and project development on community lands but frequently do not provide sustainable benefit to those communities:

• One-off; ad hoc benefits
• Corporate social responsibility (CSR) projects, led by companies, with the primary objective of gaining a social licence to operate, and not seen as providing a sustainable benefit by local communities
• Projects, led by the state, with no involvement from the local community
• Projects developed on community land/with community resources, with completely external workforces
• Projects lacking local capacitation and skills development relevant to the project
• Projects that exploit the vulnerability of communities, and obtain social licences to operate through fulfilment of basic economic, social, and cultural rights of the people, fulfilment of which is the responsibility of the state

No business project that proceeds without the free, prior, and informed consent of Indigenous Peoples, regardless of the supposed benefits it brings, would be considered benefit-sharing for the purposes of this definition.

Full community ownership of an asset: Indigenous Peoples own the totality of a business project. Usually, community-ownership models involve full ownership by the community, although in such cases other stakeholders – for example, conventional energy companies (utilities, retailers, etc.), non-profit organisations, and (local) authorities – can participate as individual members of the community. Here we consider both situations where communities own a project through a specific unique legal entity; and also situations where community members as individual owners directly own a project.

In the case of Indigenous renewable energy projects, this often means community-owned electricity generation plants, such as solar PV plants, wind power plants, run-of-the-river hydro plants, and biomass plants, which can be developed to fulfil the electricity needs of the community. It may also include the electricity grids. Consumers, bundled in communities, self-consume the electricity produced and thereby become collective “prosumers”. Any additional electricity generation from such plants can be exported to the main grid, sold to third parties and businesses, or supplied back later to the members of the community, if storage is available.

Co-ownership of an asset: In many cases, business projects are developer-led, and communities are given the option to take partial ownership of the project. In the case of Indigenous co-ownership in renewable energy projects, this often means community involvement in a commercial developer’s renewable energy project. Depending on the investment being structured through equity shares or debt instruments, this can imply shares in project assets and the dividend stream, as well as a potential shared role in governance and decision-making.

It can also mean shared business ownership in a majority community-led project: in such cases, the local community may own a majority stake, while other stakeholders can be part of the ownership arrangement as partners.

Types of shared ownership:

Documented cases and existing literature provide a categorisation for co-ownership models in renewable energy projects related to Indigenous Peoples. These models may fit in one of the following categories:

General Partnership: Indigenous Coalition

• Project is owned by an Indigenous Coalition
• 100% Indigenous-owned

Ownership is equally split between or among Indigenous partners. This may include community-based initiatives which are usually supported by NGOs and/or philanthropic donations and are particularly common for project-displaced communities.

General Partnership: Indigenous - Commercial developer

• Project is owned by Indigenous Peoples and a commercial developer
• 50% Indigenous owned; 50% business owned

Ownership is shared equally between an Indigenous community and a renewable energy developer with shared decision-making and equally distributed earnings.

Limited Partnership

• Project is owned by an Indigenous Peoples and a commercial developer
• 25% to 50% Indigenous owned; 50% to 75% business owned.

Ownership is split between energy developer and Indigenous Peoples. Highly flexible models that can distribute liability and risks.

Minority Equity Ownership

• Indigenous Peoples own equity in the project
• 25% or less Indigenous-owned; 75% or more business owned

Indigenous Peoples acquire equity in a project and act as shareholders. Indigenous Peoples may not actively participate in the project's planning or administration.

[1, 2] Adapted from: “Community Ownership of Renewable Energy: How it Works in Nine Countries (2023)”, Institute for Human Rights and Business and “Remote Energy Project Ownership Models (2021)”, Bledsoe

In addition to the above co-ownership frameworks, Indigenous Peoples have engaged in other arrangements in the context of renewable energy projects and energy grids, that may or may not involve private project developers. These include some of the following, as illustrative examples:

Local enterprise-initiated system

• An outside company sells energy to an Indigenous community. All operation and other costs are maintained by the company.
• Benefits: Indigenous Peoples benefit through the creation of employment opportunities.

Renewable energy-powered - Community solar energy development centre

• A local solar energy centre is owned by the Indigenous community.
• Instead of paying using cash, members of the Indigenous community pay by raw materials, agriculture and livestock.

Community institution initiative

Indigenous community water management infrastructure, which can also apply to renewable energy infrastructure. The funds generated by the project are used as revolving funds to fund other projects. In other words, these are funds that allow for continuous financing of new projects or initiatives.

Community mini-grid initiative

The Indigenous community operates a mini-grid and purchases power from micro-hydro or solar and sells it to the community.

Larger-scale mini-grids

• A joint venture between an Indigenous community and investors to build mini hydro and sell power to the national grid.
• Indigenous community cooperatives get dividends from the arrangement.

[3] Informed by presentations of and conversations with Adrian Banie Lasimbang, Executive Director, Right Energy Partnership

Benefit-sharing: Approaches, other than co-ownership

There are other benefit sharing approaches, such as community payments, local employment and procurement, and alternative skills and livelihoods development, related to renewable energy deployment, that are important for many Indigenous Peoples in relation to large scale wind and solar, and other renewable energy projects. In the context of these projects, the term “local” usually means host communities, Indigenous and other previously disadvantaged groups, as well as regional and national suppliers. In our set of definitions, we are focusing on benefits for Indigenous Peoples specifically. We list some of the common approaches below:

Types of benefit sharing

Revenue sharing through community payments

Required, negotiated payments to the Indigenous community of a percentage of revenues or profits generated by the project, for example — for instance, into a community development fund or bank account controlled by community members. These funds can be used for local development projects that benefit the community. Payments for land are not included in this category as they are considered a compensatory mechanism.

Preferential electricity rates and discounts

Preferential rates or discounts applied to existing electricity services for a certain consumer group, such as local communities, including Indigenous communities, or businesses. Vertically integrated developers and developer/retailer partnerships could make use of this approach.

Local employment

Employment of local Indigenous people throughout the project lifecycle — for example, through the project company and/or subcontractors — along with skills development and training either prior to or during employment.

Local procurement

Procurement of locally produced goods and services, such as food, housing and fuel, throughout the project lifecycle. This includes support for local Indigenous businesses that are already supplying the project or have the potential to become a supplier. Opportunities for local procurement might be limited in some communities, so the focus can be on regional and national suppliers.

Alternative skills and livelihoods

Support for alternative skills development and income generation, such as microcredits for Small and Medium Enterprises (SMEs) development and skills audits, in areas unrelated to local procurement for the wind or solar project. Livelihood restoration activities to mitigate livelihood impacts resulting from the project are not included in this category.

[4] Adapted from: “Local Benefit Sharing in Large-Scale Wind and Solar Projects (2019)”, International Finance Corporation

[5] Another form of revenue sharing, more common in the extractives industries, is through 'subnational revenue sharing', where subnational governments receive public funds through a combination of direct tax collection and transfers from the national government; see: https://resourcegovernance.org/sites/default/files/documents/nrgi_undp_exec-summary.pdf

Sources:

1. Community Ownership of Renewable Energy: How it Works in Nine Countries, Institute for Human Rights and Business
2. Project Ownership Models for Remote Renewable Energy Development in Partnership with Indigenous Communities, Arthur Bledsoe
3. Presentations by Adrian Banie Lasimbang, Executive Director, Right Energy Partnership
4. Local Benefit Sharing in Large-Scale Wind and Solar Projects, International Finance Corporation
5. Natural Resource Revenue Sharing, Natural Resource Governance Institute
6. Virtual and in-person consultations with over 50 Indigenous experts from around the world (August 2023)
7. Community Ownership Models: Innovation Landscape Brief, International Renewable Energy Agency - IRENA