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Visual Disamenities of Offshore Wind Farms: Valuation and Welfare Loss

Visual intrusions from offshore wind farms result in external costs, causing economic losses. This study assesses valuation methods and societal preferences to determine the optimal location of wind farms to minimize welfare loss.

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Visual Disamenities of Offshore Wind Farms: Valuation and Welfare Loss

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  1. VISUAL DISAMENITY COSTS OF OFF-SHORE WIND FARMS

  2. Visual Disamenities of Off-Shore Wind Farms • Visual intrusions/disamenities of off-shore development cause external costs to society. • It is difficult to identify optimal location of off-shore wind farms, as visual disamenities have no market price. • In-optimal location induce welfare economic loss

  3. Externalities Cost/kwh Expected marginal benefits functions True marginal benefits function Marginal cost function Welfare loss A B â ã a Distance from shore (km)

  4. Valuation of External cost • Visual disamenity is a non-market good • Preference based economic valuation methods • Revealed preference: Actual economic behaviour • Property prices • Recreational impacts • Stated Preferences: Stated economic behaviour • Direct elicitation: How much are you willing to pay ? or are you willing to pay XX euros ? (Contingent Valuation) • Indirect: Choice between outlays of different off-shore wind farm alternatives (Choice Experiments)

  5. Choice Experiments • Choice Experiments is based on the attribute theory of Lancaster (1966) • Goods are defined by their attributes and the levels of the attributes. • By varying the levels of the attributes different goods (alternatives) are ”generated” • If a price is included as an attribute, the maximum willingness to pay for achieving/avoiding the other attribute levels can be estimated • Respondents are presented to two or more alternatives, a choice set, and choose the one preferred. • Using Maximum Likelihood Techniques, a preferences/utility model and Willingness to Pay (WTP) estimates can be derived

  6. The study • Three Samples • National: 700 respondents • Nysted (local): 350 respondents, Off-shore wind farm located at app. 10 km from the coast • Horns Rev (local): 350 respondents, Off-shore wind farm located at app. 14-20 km from the coast

  7. The Valuation Scenario (I) • 3600 MW off-shore wind power development • 5 MW turbines • Generic- not site specific • Minimised impact on biodiversity and life in the sea

  8. The Valuation Scenario (II)- Attributes/Characteristics and their Levels Distance from the coast: 8, 12, 18 and 50 km Number of turbines pr farms: 49, 100 and 144 turbines Number of farms: 5, 7 and 14 wind farms Increased electricity cost/household/year 0, 12.5, 23, 40, 80 and 175 (Euro)

  9. The Valuation Scenario (III) – Example of a choice set Distance: 8 km. Turbines: 144. Wind farms: 5. Cost pr household: 12.5 €. Distance: 50 km. Turbines: 100. Wind farms: 7. Cost pr household: 175 €.

  10. Results - Willingness to Pay (household/year)

  11. Discussion (I) - Difference in WTP • Experience and WTP: WTPHORNS REV< WTPNATIONAL< WTPNYSTED

  12. Discussion(II)- Marginal Willingness to Pay

  13. Conclusion • Danish households have significant preferences for reducing the visual disamenities. • Preferences covariate negatively with experience with off-shore wind farms • Respondents subjected to low level of visual disamenities have smaller willingness to pay than respondents subjected to higher levels of visual disamenities. • Marginal WTPs point towards that the marginal benefits of moving wind farms to larger distances than 18 km are small

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