Penny wise or pound foolish? Compensation schemes and the attainment of community acceptance in renewable energy

Abstract Compensation provision is a strategy used by developers and regulators to pacify local opposition and to reduce the costs and risks of project delays and potential cancellations. While compensation is widely used, understanding what compensation should accomplish is implicit in the rationales of different compensation schemes. This review explicates the possible causalities that link compensation schemes with the community acceptance of renewable energy projects. First, we examine the range of compensation schemes that are found across different fields of study and unpack their mechanisms, rationales, and limitations. Second, we identify the common elements of these compensation schemes and organize them as the core building blocks of a framework of compensation. The current framework allows for a comparison of different compensation schemes with different rationales and goals, such as damages, community benefits, and joint ownership schemes, according to a unified compensation framework. We then use this theoretical framework as the basis for tracing causal trajectories of compensation in four case studies, each with different conditions, mechanisms, and distinct outcomes. This allows us to pinpoint for each case study how the institutional framework governing compensation negotiations determines the balance of power and relationship between stakeholders, how this relationship informs the choice of compensation mechanism, and how this process affects community acceptance of renewable energy projects.