Local Costs and Benefits of Power Installations: Hedonic Evidence from Germany

Abstract

The German energy system is in the midst of a massive transformation: The last three nuclear plants went off-line in 2023, coal power is slated for nixing by 2038 at the latest, while renewable energy generation facilities are further expanding substantially. The reverberations of these changes within the residential sector are of key policy importance given the centrality of the sector to the economy. Previous literature using hedonic price models has aimed to quantify how surrounding house values are impacted by changes in energy infrastructure, yet often with a focus on the opening or closing of just a single type of facility. In this study, we holistically consider the entire electricity production portfolio, adopting a spatial difference-in-differences approach to assess the impact of different types of facility openings and closures simultaneously under a unified modeling framework. To this end, we leverage an extensive geo-referenced data set of house sale advertisements from 2008 to 2019 containing almost 2.4 billion observations on asking prices and property characteristics. We find that the opening of both wind and coal power facilities is associated with significant discounts on surrounding house values, with the discount of coal power plant openings being of much larger magnitude. Somewhat surprisingly, we also find evidence that closures of coal power plants are associated with reduced house prices, a possible result of economic channels, such as reduced employment in the aftermath of a large plant closure. Our results highlight potentially important distributional implications that warrant consideration in ensuring a just energy transition.

Keywords: Coal power, wind power, hedonic price model

JEL Classification: Q21, D12, R31