News this morning suggests that communities near new wind-farm developments could be in for some form of compensation, through lower electricity prices or other payment schemes. The BBC reports that the compensation could be worth as much as £100,000 per community http://www.bbc.co.uk/news/business-22791815. This is probably welcome news for residents potentially affected by wind-farm developments, although provisional findings from on-going research suggests that this level of compensation may not cover the costs involved, in terms of environmental, health and other impacts. I find that an operational wind farm reduces housing prices by around 7% up to 5km from the wind farm site. Some rough calculations based on these estimates suggest that the implied social costs on the local community (within 5km) amounts to about £80 million per operational wind farm, or about £500 per household per year.
Extended (user friendly) abstract follows below
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Renewable energy technology has potential global
environmental benefits in terms of reduced CO2 emissions and slower depletion
of natural energy resources. However, like most power generation and
transmission infrastructure, the plant, access services and transmission
equipment associated with renewable electricity generation may involve
environmental costs. This is particularly so in the case of wind turbine
developments, where the sites that are optimal in terms of energy efficiency
are typically in rural, coastal and wilderness locations that offer many
natural environmental amenities. These natural amenities include the aesthetic
appeal of landscape, outdoor recreational opportunities and the existence
values of wilderness habitats. In addition, for residents local to operational
wind turbines have reported health effects related to noise and visual
disturbances.
The UK, like other areas in Europe and parts of the US has
seen a rapid expansion in the number of these wind turbine developments since
the mid 1990s. Although these ‘wind farms’ can offer various local community
benefits, including shared ownership schemes and the rents to land owners, in
the UK, and elsewhere in Europe, wind farm developments have faced significant
opposition from local residents and other stakeholders with interests in
environmental preservation. This opposition suggests that the environmental
costs may be important. This is a controversial issue, given that opinion polls
and other surveys generally indicate majority support of around 70% for green
energy, including wind farms, (e.g. Eurobarometer 2007). This contradiction has
led to accusations of ‘nimbyism’ (not in my backyard-ism), on the assumption
that it is the same people opposing wind farm developments in practice as
supporting them in principle. There is a perhaps less of a contradiction when
it is considered that the development of wind farms in rural locations
potentially represents a transfer from residents in these communities and users
of natural amenities (in the form of loss of amenities) to the majority of the
population who are urban residents (in the form of energy).
This research provides quantitative evidence on the local
benefits and costs of wind farm developments. In the tradition of studies in
environmental, public and urban economics, housing costs are used to reveal
local preferences for wind farm development in England and Wales. This is
feasible in England and Wales because wind farms are increasingly encroaching
on rural, semi-rural and even urban residential areas in terms of their
proximity and visibility, so the context provides a large sample of housing
sales that potentially affected (around 15% of residential postcodes are within
5 km of operational or proposed wind farm developments). Estimation is based on
quasi experimental research designs that compare price changes in places close
to wind farms when wind farms become operational with various comparator
groups. These comparator groups include: places close to wind farms that became
operational in the past, or where they will become operational in the future;
places close to wind farms sites that were refused planning permission; places
close to wind farms that are planned or proposed but are not yet operational;
and places close to where wind farms became operational but where the turbines
are hidden by the terrain.
All these comparisons suggest that wind farm developments
reduce local house prices. This price reduction is around 7% for housing within
5km of a wind farm. The impact increases to 9% within 1km and falls to 3% at
10-15km which is at the limit of likely visibility. At 5km, half of this impact
can be attributed to visibility and the other half to the general proximity to
the site. If we take these figures seriously as estimates of the mean willingness
to pay to avoid wind farms in communities exposed to their development, the
implied costs are very large. Aggregating over households within 5km of current
and proposed wind farm sites alone leads to an implied social cost of around
£34 billion.
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