Posted on April 2, 2025 by Lindsay Taylor and Dimitrious Havadjia 11

VPAs & Benefit-Sharing for Renewable Energy Projects in NSW

Overview

One of the key features of voluntary planning agreements (‘VPAs‘) under the Environmental Planning & Assessment Act 1979 (NSW) (‘EPA Act‘) is their potential to be used to enable communities to share in the benefits of development. This type of benefit should be distinguished from the benefit communities receive through VPAs being used to provide for measures that seek to mitigate development impacts.

The Benefit-Sharing Guideline published by the Department of Planning Housing and Infrastructure (‘Department‘) in November 2024 (‘Guideline‘) provides guidance for the provision of community benefits in connection with large-scale renewable energy projects and specifically provides for benefit sharing to be implemented through VPAs in some circumstances.

The Guideline acknowledges that local or host communities may not necessarily experience a proportionate level of benefits from the uptake of renewable energy and states that benefit-sharing aims to distribute benefits generated by a renewable energy project between the applicant and the local or ‘host’ community through mutually agreed opportunities such as funding or sponsoring local community initiatives, programs or projects.

Brief summary of VPAs

Before summarising the specifics of the Guideline, a brief recap of VPAs is useful.

Planning authorities, including councils, and developers can enter into VPAs under Division 7.1 of the EPA Act.

VPAs are a flexible mechanism provided for in Division 7.1, Subdivision 2 of the EPA Act enabling planning authorities (including the Minister for Planning and local councils) to obtain public benefits from developers towards the cost of public infrastructure, facilities and services by negotiation. They can be entered into in connection with planning proposals, development applications and the subsequent modifications of development consents.

The EPA Act does not limit the potential public benefits obtainable through VPAs. The form of public benefits is also not limited – they can be monetary contributions, the dedication of land free of cost, the carrying out of public works, or other kinds of material public benefits or any combination. The public benefits need not relate to the development to which the VPA applies or the demand for public infrastructure, facilities or services arising from development.

A council can enter into a VPA to obtain public benefits in addition to or instead of local infrastructure contributions obtained through the conditions of a development consent pursuant to its development contributions plan.

The entering into of a VPA by a developer or a planning authority is voluntary except where the developer has made a written offer in connection with a planning proposal or development application, in which case the entering into of the VPA by the developer in the terms of the offer can be required as a condition of development consent.

The primary obligation imposed by the EPA Act on a planning authority that is a party to a VPA is to ensure that the public benefits provided for in a VPA are provided in accordance with the VPA and within a reasonable time.

Proposed VPAs must be publicly notified and exhibited, and community submissions must be considered by the planning authority before a VPA is entered into. They can be registered on the title to the land to which a VPA applies if all parties agree. They must provide for security for the enforcement of the developer’s obligations in the event of a breach of the VPA by the developer.

The Guideline

Benefit-sharing under the Guideline is not ‘value capture’ in the traditionally understood sense in land economics. Nevertheless, it is conceptually similar in so far as it involves a developer of a renewable energy project agreeing to share some of the development profit from the development with the community in the form of agreed net community benefits.

The Guideline provides advice on how benefit-sharing can be incorporated into the consideration and delivery of large-scale renewable energy development, specifically into State significant development (‘SSD‘) and critical State significant infrastructure applications for solar, wind, and battery energy storage systems (‘BESS‘). Benefit-sharing under the Guideline does not apply to hydrogen projects, pumped hydroelectric projects, BESS on non-rural zoned land and electricity transmission infrastructure.

The Guideline specifies recommended ‘benefit-sharing rates’ indexed to the Consumer Price Index for determining the total funding value for community benefits for different types of renewable energy projects based on the ‘installed capacity’ of a renewable energy project to be paid over the life of the development.

The Guideline identifies three different levels of benefit sharing, being at the neighbourhood level, the local community level and the regional level, and envisages that VPAs between a local council and the developer of a renewable energy project would apply to benefit sharing at the local community level. The Guideline recommends such VPAs are used to establish a local community benefit fund to facilitate and implement benefit-sharing.

In fact, VPAs could apply to any of the three levels. As far as the regional level is concerned, the EPA Act specifically allows a developer to enter into a VPA with more than one planning authority, which could, for example, be with two or more local councils whose local government areas are affected by a renewable energy project.

The guideline envisages expenditure from the community benefit fund for local community level benefit sharing for purposes such as:

• recurrent costs of infrastructure, services or facilities,
• additional or improved open spaces, public facilities or infrastructure such as upgrades to local parks, libraries, community centres, showgrounds, museums and transport infrastructure,
• providing funding or works for neighbourhood community facilities (e.g. solar panels),
• initiatives delivered in partnership with other local organisations including scholarship programs to enable local students to complete courses in specific fields (e.g. engineering and project management),
• sponsorship of community events such as fundraising events, local produce markets,
• nature walks, community clean-up events and gardening days,
• sponsorship of local groups such as sporting clubs, biodiversity volunteering groups,
• community gardens.

The Guideline provides a case study of a local community level benefit-sharing arrangement relating to a wind-farm provided for in a VPA involving a substantial annual cash contribution to the local council to be invested in a community fund administered by Council through a committee under s355 of the Local Government Act 1993 which would assess funding for community groups, projects and programs.

LTL has prepared numerous renewable energy VPAs for clients in renewable energy zones throughout NSW. They typically relate to SSD projects for solar and wind farms affecting one or more local council areas. In one project of note, the VPA prepared by LTL provided for an annual monetary contribution payable to the local council for the operational life of the project approach exceeding $10,000,000 to be applied by the council to deliver projects identified in the council’s community strategic plan and delivery program. The annual contribution is in addition to the local infrastructure contributions payable by the developer to the council under the council’s development contributions plan.

If you would like to discuss anything relating to this post, or you have any questions, contact Dr Lindsay Taylor, Senior Partner or Dimitrious Havadjia, Senior Associate.