Positive and Negative Externalities from Renewable and Conventional Power Plants in the Backyard: The Value of Participation

Abstract

We quantify the net external effects of conventional and renewable electricity generators by analyzing housing prices in their vicinity. Using a Differences-in-Differences approach, we find that (1) wind turbines reduce prices significantly, (2) solar fields have no significant impact, and (3) conventional plants over 1 km away show positive net effects. We set out to explain this result by disentangling the positive local external effects of energy generation, which we measure in terms of local purchasing power and tax revenues. Our results show that the commissioning of conventional power stations results in a significant increase in both purchasing power and business tax income in the vicinity. We thus conclude that significant financial participation of the local public in the development of renewable energy projects, especially wind turbines, could be key to increasing their acceptance and accelerating their expansion.

Keywords: Renewable energy, Conventional power plants, Hedonic valuation, Difference-in-Differences, Wind turbines, Solar fields, Financial participation, Acceptance