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The socio-economic cost of wind turbines: A Swedish case study

MDPI|Hans Westlund and Mats Wilhelmsson|June 18, 2021
SwedenProperty Values

This paper examines the impact of erecting industrial wind turbines on neighboring property values. The authors found that proximity to tall turbines produced a clear negative capitalization. The abstract and conclusions of the paper are provided below. The full paper can be accessed at the document links on this page.


Abstract

The expansion of wind turbines plays a significant role in developing the ability of a country like Sweden to achieve climate-neutral energy production without relying on nuclear power plants. Wind-turbine energy production is expected to grow in the coming decades. Conflicts may arise between, on the one hand, the government and the energy authority, and, on the other hand, municipalities and property owners, especially if this expansion affects other economic activities, such as tourism and reindeer husbandry, or property values. This report aims to analyse the negative capitalization of wind turbines on property values in Sweden over the last ten years. Our conclusions clearly show a relatively significant capitalization and that this capitalization is relatively local, within eight kilometers of the wind power plant. Large wind turbines, or larger clusters of wind turbines in wind farms, impose a greater socio-economic cost on lower value properties.

Conclusions and Policy Implications

Wind turbines are one of many eco-friendly investments necessary to ensure a climate that makes the planet habitable. The benefits of these climate-improvement measures can be seen as global public goods that everyone on earth will benefit from. However, the investment itself is a private good with local negative externalities. These negative externalities also give rise to a loss of welfare for society if they are not internalized in any way. Furthermore, the cost is unevenly distributed among regions and individuals. In order for it to be Pareto-optimal, those who bear the cost must be compensated. Our study should be seen as providing guidance for locating wind turbines with minimal local socio-economic costs, or for enabling rational compensation of effected individuals and households. Since we have only valued use-value, there may be an underestimation of the total local social cost of the investment in wind turbines. The results clearly indicate a negative capitalization of proximity to wind turbines on property values in Sweden. The relationship between wind turbines and property values is non-linear and decreases exponentially with the distance from the wind turbines.

The results also indicate that proximity to tall wind turbines and proximity to many wind turbines (wind farms) have greater impacts.

As Sweden plans to increase its wind power production fivefold in the next two decades, these results will doubtless have policy implications. Even if protests against wind power expansion remain at the local level, the expansion is likely to lead to more and better organised protests. It can also be expected that property owners will demand economic compensation for decreased property values. All this indicates the need for a national policy, not only for expanding wind power production (which is underway), and possibly abolishing municipalities’ opportunity to veto against planned wind power establishments (currently being investigated), but also for handling individual demands for compensation and local fears of the eyesore presented by nearby wind parks. Currently, a governmental investigation is analyzing the possibility of abolishing municipalities’ opportunity to veto against planned wind power establishments. As shown by international research, such a measure would probably strengthen local stakeholders’ feelings of powerlessness and reduce their trust in society’s institutions. This is a theme outside the scope of this article, but a very important topic for future research.

Regarding property values, future research could address the endogeneity problem with a difference-in-difference approach. Wind turbines have been built at different times, so an analysis of before and after construction can be calculated, even if it might be difficult to find fully alternative reference locations. Information about the entire construction process, from building permits, construction, and operation, could also be used to analyze the project’s capitalization effects. Data about rejected building permits are also interesting to further analyze. Another possible topic for further research are the regional or other locational differences in capitalization.

The significance of this type of study will become increasingly important. The policy implications are clear. Wind turbine energy production has expanded in recent years, and will certainly continue to expand to meet the goal of climate-neutral energy production. To gain acceptance for continued expansion, values beyond environmental values, including property values, must be considered when wind turbines are built. Further research can form the basis for calculating compensation to property owners.

Attachments

Sustainability 13 06892 V2

April 20, 2024


Source:https://doi.org/10.3390/su131…

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