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Finding Homes for Wind and Solar

To site new generation we must develop inclusive processes that don’t just reward the most influential.

When you fly into Maui, at some point on the approach to Kahului airport you usually get to see the Kaheawa wind farm running up the side of Pu’u Kukui, on the west side of the island. Some people call it a visual desecration of natural beauty. Others see it as a realistic step towards mankind learning to live in harmony with nature. I’m in the latter camp, but have heard a lot from those in the former.

For me, views are not like food. One sour ingredient doesn’t ruin the whole composition. I would rather there weren’t transmission lines spanning the canyon in one of my favorite hiking spots near my home, but these days I don’t really focus on them. And complaining about them has always felt a bit first world problemish. Then again, aesthetics are a very personal thing and I recognize that preferences different from my own can be equally valid (even if I secretly think they are WRONG  ;-).

NIMBYismFig4

As the world moves away from burning fossil fuels, it’s clear that no energy source is without externalities. For solar and wind, visual and noise pollution are raised most often. With increasing pressure for local renewables, we will be hearing those concerns more often.

That’s what makes the Energy Institute working paper that Stephen Jarvis released in January so timely and important. He examines how much people dislike living near electricity infrastructure by looking at the impact on property values. His paper is not the first to do this  — Lucas has a nice 2011 paper on the impact of nearby fossil fuel power plants — but Stephen’s clever empirical approach to the issue gives us the most credible answers yet for wind and solar plants. What makes the research so compelling is that he then asks how the local economic impact plays into the approval or rejection of proposed renewables projects, and the implications of that for the cost of cutting carbon emissions.

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The setting is the UK, Stephen’s native land (and where he will be returning in the fall to start as an assistant professor at the London School of Economics). What’s unusual about the dataset he studies is that it not only includes every wind and solar project ever built in the country, but also every project that applied for a siting permit and was rejected. Of the nearly 3500 projects, he can even tell which ones almost made it, but got rejected at the last stage. That sets up a nearly perfect counterfactual (yes, there’s always some reason they aren’t perfectly comparable, but this is pretty darn close), allowing him to measure how property values changed near new renewables generation compared with locations that just missed out.

In short, Stephen finds that the impact of wind turbines on property values can be substantial. For houses within 2 km, a 10 MW wind farm knocks around 6% off home values on average, compared to the homes equally near the projects that didn’t get built. That average effect turns out to be mostly driven by homes in wealthier areas and with a direct line of sight to the turbines (some fancy geospatial modeling here to figure out which homes got that sour ingredient).  For those properties, the reduction is nearly 15%, while in areas that are less well off or can’t see the wind farm the effect seems to be small and not statistically distinguishable from zero.

Solar farms, on the other hand, don’t move the needle at any distance, though that might be because UK solar farms have been pretty small so far. (It’s not the first country you think of for great solar resource.) 

NIMBYismFig2

Still, the results show wind farms can have a real impact on property values around wealthy communities. Do policymakers take that impact seriously enough? Or maybe too seriously?

The paper looks at how much these effects matter in the siting approval process, which is predominantly local in the UK. Does lost value to neighboring properties get as much weight as the value created from the electricity output, from reducing pollution or from lowering development costs? Or do effects on nearby property get more weight, which is almost the definition of NIMBYism.

NIMBYismFig1

Stephen examines which of these, and some other, factors are associated with getting a project approved. By far the most important factor is the impact on property values. A 10 million pound projected impact on local property values is estimated to lower the probability of approval by 3%. Similar size financial effects from changes in costs, output value or environmental benefits have a tiny impact on approval probability.

That raises an interesting question: if the effect on nearby, mostly wealthy, property owners gets overweighted in the local decision-making process, would regional planning that is more balanced lower the overall cost of developing low-carbon energy sources? Probably. We only have estimates of what it would have cost to build elsewhere, but using his best estimates, Stephen finds that without the NIMBY bias, the same amount of capacity could have been built in better locations at 10%-29% lower total economic cost (which includes effect on property values). There are some caveats on the exact number, but it is clear that local resistance and a lack of regional planning can have big impacts on where renewables get built and how much net economic value they produce.

NIMBYismFig3

There are some other questions that Stephen hasn’t answered, yet. One is whether this effect is unique to renewable electricity generation, or is this a more general phenomenon about industrial development? 

Another question, if wealthy neighborhoods take a bigger financial hit from nearby siting of wind turbines, what is the right policy response? Should the turbines just be redirected to less wealthy areas? Or does shared responsibility for reducing GHGs mean that no one gets a pass? Maybe a community that accepts a wind farm should also receive compensation? With growing recognition of past injustices — and lack of representation — in locating industrial facilities and  environmental hazards, it is clear that now is the time to confront these issues for siting renewable generation.

President Biden’s pledge last week on greenhouse gas reductions amounts to reducing emissions by about 40% between now and 2030. That’s going to require a lot of new solar and wind farms, as well as transmission lines, battery factories, lithium mining, and other activities many people won’t want to live near or look at. To fulfill that pledge, we are going to have to figure out where all those new industrial facilities can go, and how to equitably make it happen.

I’m mostly tweeting energy news/research/blogs @BorensteinS .

Keep up with Energy Institute blogs, research, and events on Twitter @energyathaas.

Suggested citation: Borenstein, Severin. “Finding Homes for Wind and Solar” Energy Institute Blog, UC Berkeley, April 26, 2021, https://energyathaas.wordpress.com/2021/04/26/finding-homes-for-wind-and-solar/

Severin Borenstein View All

Severin Borenstein is Professor of the Graduate School in the Economic Analysis and Policy Group at the Haas School of Business and Faculty Director of the Energy Institute at Haas. He received his A.B. from U.C. Berkeley and Ph.D. in Economics from M.I.T. His research focuses on the economics of renewable energy, economic policies for reducing greenhouse gases, and alternative models of retail electricity pricing. Borenstein is also a research associate of the National Bureau of Economic Research in Cambridge, MA. He served on the Board of Governors of the California Power Exchange from 1997 to 2003. During 1999-2000, he was a member of the California Attorney General's Gasoline Price Task Force. In 2012-13, he served on the Emissions Market Assessment Committee, which advised the California Air Resources Board on the operation of California’s Cap and Trade market for greenhouse gases. In 2014, he was appointed to the California Energy Commission’s Petroleum Market Advisory Committee, which he chaired from 2015 until the Committee was dissolved in 2017. From 2015-2020, he served on the Advisory Council of the Bay Area Air Quality Management District. Since 2019, he has been a member of the Governing Board of the California Independent System Operator.

16 thoughts on “Finding Homes for Wind and Solar Leave a comment

  1. Really interesting study. I don’t recall that earlier studies found much if any effect from windmills, but this seems like a better empirical design, but also a relatively high population density country, at least compared to the U.S.

    While many complain about wind farms, surely there are many like Severin (and me), who do not mind the view, or even find windmills appealing. Over the long run, sorting should occur — people who like windmills will live near them while those who despise them will not. This should attenuate the impact.

    I see that Stephen mentions sorting in his paper, but I gather a complete sorting would take more time than we can measure at this point.

  2. I’m confused by the inherent conflict between the need to address environmental issues while also pursuing a carbon mitigation objective. Carl Wurtz comments outline some of the most often ignored land use and counter-environmental impacts inherent in major solar and wind installations. No industrial plant, home or commercial building project would be allowed to proceed given even a fraction of the bird and wildlife destruction allowed for solar and wind.
    Now consider the Biden administration carbon reduction goals and associated preference for more solar and wind which can only be achieved by covering huge land masses with more environmentally deadly plants.
    The real disconnect occurs because both hydo and nuclear offer more productive power production and more efficient carbon mitigation alternatives to solar and wind.
    So at what point do we separate the politics from the science and begin pursuing options that make more sense?

    • The best hydro sites are already developed, and the the reservoirs in the tropics are actually net methane emitters. Many of the existing hydro plants are silted up so they don’t provide much extra control beyond run of river operations. We might get a few hundred more megawatts.

      Nuclear, as has been pointed out numerous times, is a financial fiasco with the world average cost currently running at about $100/MWH. (I posted that source last fall.) We simply can’t afford that solution for now.

      As for solar, the cost effective solution is sitting on top our urban infrastructure with little environmental damage. I calculated for PJM that the incremental cost of transmission is currently running $40//MWH (in a Kentucky rate case). I expect that the CAISO costs are similar or higher. When we run a true cost effectiveness, residential rooftop might be somewhat more costly, but community scale/commercial rooftop definitely beats utility scale, exspecially when you add in the environmental damages. I dismissed the Sierra Club analysis I saw in 2012 on the DRECP cost comparisons at the time, but now I think it’s close to the mark, The only question is how do we force utility shareholders to do what every other corporate shareholder does in our capitalist economy–accept their losses.

      • Severin, I would never put readers (or myself) through another extended debunking of Richard’s claims, but I can’t let the following stand unchallenged without one (1) reply. After all, someone might believe it.

        “Nuclear, as has been pointed out numerous times, is a financial fiasco with the world average cost currently running at about $100/MWH. (I posted that source last fall.) We simply can’t afford that solution for now.”

        Richard, last fall you claimed generating electricity at Diablo Canyon costs $100/MWh, and the source for that figure could be found “at your website” – as if that would suffice. But now it’s become “the world average cost that’s currently running at about $100/MWH,” so maybe you were confused.

        Either way, it couldn’t have been Diablo Canyon because you’re not even close. Let’s take a look at the cost of generating each megawatthour of electricity at PG&E’s steam generation plants. PG&E’s 2018 FERC Form 1 filing (PDF page 329) provides those figures down to the nearest dime:

        Diablo Canyon – $29.10
        Colusa – $38.40 (+32%)
        Gateway – $38.60 (+33%)
        Renewables – $55.00 per Richard (+89%)
        Humboldt – $71.40 (+145%)

        Fact: per MWh, Diablo Canyon is the cheapest source of dispatchable grid power PG&E owns, and 89% cheaper than intermittent renewable power.

        Here’s my source. Where’s yours…at your website?
        https://www.pge.com/en_US/about-pge/company-information/regulation/regulation.page (under “Reports”).

        Fareed Zakaria (CNN): To avoid climate disaster, we need nuclear energy
        https://www.cnn.com/videos/tv/2021/04/25/exp-gps-0425-last-look-nuclear-power-us.cnn

        • Carl
          You have left out a key cost component for Diablo Canyon–the annual capital additions shown on p. 204, line 25, mostly related to refueling. Because refueling happens on 18 month cycles we need to use a 3 year average to get the annual cost. In addition we need to add the rate of return (7.7% in the 2020 GRC) to get to the annual average total of $188.4 million. (There’s also another $25.8M in various regulatory costs added as well.) That adds $0.01174/kWh to the annual going forward costs, bringing the going forward cost per kWh to $0.04084/kWh using the 2018 Form 1 values.

          I came across two large capital adjustments in 2016 and 2018 on line 25 as well, adding another $1.9 billion to Diablo Canyon’s rate base. Those additions added another $197.4 million to annual revenue requirements, raising Diablo’s cost by another $0.0108/kWh for at total of $0.05165 / kWh.

          BTW, hydropower is easily the “cheapest” dispatchable resource in PG&E’s fleet. If you had paged through starting at p.406, you can see that the vast majority of hydro plants have operating costs of 1 cent/kWh or less, using your standard. However, that cost does exclude relicensing for many of these plants, which is a going forward cost that PG&E is clearly considering as it has put more than half a dozen licenses up for sale in the last several years.

          • And note, this in only the current operational costs. As has been pointed out several times, PG&E own testimony in its 2016 application for retiring Diablo calculates that the cost of relicensing would bring the cost to $100 to $120/MWH ($0.10 to $0.12 / kWh).

            If you didn’t bother to read my reply to your post that included the reference to the study on global nuclear costs showing an average of $100/MWH, then I won’t bother to repost it again. If others want to see it and further discussion, they can go to my blog post on the issue at: https://mcubedecon.com/2019/12/26/nuclear-vs-storage-which-is-in-our-future/

          • Richard,

            Thanks for info. Most of it appears reasonable, though you’ve cut your estimate for the cost to generate electricity at Diablo Canyon in half, then doubled it again by citing the “cost of relicensing”:

            “PG&E own testimony in its 2016 application for retiring Diablo calculates that the cost of relicensing would bring the cost to $100 to $120/MWH… ”

            Whatever PG&E submitted in testimony – relicensing a nuclear plant costs $10-15 million:

            Click to access Attachment-2-Status_and_Outlook_for_Nuclear_Energy_in_the_US.pdf

            How could $15 million in relicensing expenses, amortized over 20 years, possibly double the cost of operating the plant – or justify charging customers $4.7 billion for prematurely decommissioning Diablo Canyon?

            Back to the issue of overcharging customers via affiliate transactions: can you show where we might the annual cost of natural gas fuel PG&E uses to generate electricity at Colusa, Gateway, and Humboldt – and to whom it’s being paid? On page 429 of Form 1, “TRANSACTIONS WITH ASSOCIATED (AFFILIATED) COMPANIES”, the amount PG&E pays each year to affiliated companies for “Non-power Goods or Services” is redacted in two places.

            If PG&E is in fact buying gas “from itself”, then charging what it “pays itself” to its customers, shouldn’t customers have the right to know they’re being charged a reasonable rate for the fuel powering its power plants? Otherwise, they might think

            “[PG&E] had vertically integrated gas affiliates [which] were using the opaque gas markets to shield how they were passing through high electricity rents by charging high prices between the affiliates. And there was no real way to check the legitimacy of those prices”…

            …as you’ve eloquently stated elsewhere. The added profit, dishonest though it might be, would create a powerful incentive to plow PG&E’s state-of-the-art nuclear plant into the ground. Thanks.

          • If you have a problem with what PG&E calculated as the cost of relicensing Diablo Canyon, you can take it up with the CPUC. The issue has already been settled there, and testimony submitted by your preferred interest group was completely discounted. The cost estimate I gave you excluded the added cost of capital recovery because that’s a sunk cost that can’t be avoided (at least under the current rules). Those sunk costs add another 2.7 cents/kWh in 2021. PG&E reports total revenue requirements as $1,433.7M for 2021 for an average cost of 7.85 cents/kWh, well above the average renewable cost of 5.5 cents. (You also made a false comparison of the operating costs of PG&E’s resources versus the full costs for renewables. The operating costs for the latter are near zero–you were using the sunk costs of the PPAs that are paid so long as the renewables are generating, even if they are curtailed.)

            As I’ve pointed out before, we have paid twice for Diablo Canyon: https://mcubedecon.com/2020/02/11/weve-already-paid-for-diablo-canyon/

            As for PG&E natural gas purchases, they are required to buy on the open market and there are no direct transactions between its Alberta gas affiliate and the power plants. Even so, the total gas purchases by PG&E generation is less than $300M a year, of which a small portion is potentially profits, even if 100% came from PG&E’s affiliate (which it doesn’t). This compares to capital recovery from Diablo that amounts to almost $1B a year. It’s pretty obvious which one is the far bigger profit center.

          • Richard, in your flailing attempt to pad the cost of operating Diablo Canyon after it came in 50% lower than you expected, you’ve added an expense which, after 2025, won’t exist (capital costs will be paid off). Thus I must extend my gratitude for reminding me of the importance of keeping this valuable asset in operation as long as possible.

            “You also made a false comparison of the operating costs of PG&E’s resources versus the full costs for renewables. The operating costs for the latter are near zero…”

            True, I did make a false comparison. I hadn’t even begun to account for the full operating costs of renewables:

            First: when solar and wind threaten to overwhelm the grid with unnecessary energy, CAISO is forced to accept “decremental” bids from renewables generators to reduce their output. That’s correct: solar and wind farms must be paid to both provide clean energy, and get rid of it. Sweet deal, no? Either way, consumers get the bill.

            Second: when a cloud passes over the sun, or there’s a lull in wind at a windfarm, gas turbines in a state of “spinning reserve” must spring into action to provide energy the sun or wind was supposed to provide – but sadly, couldn’t. With dispatchable sources like nuclear, gas, or coal, planners can determine supply and demand days or weeks ahead of time, to a high degree of accuracy. Are we including the cost of running gas plants 24/7 to provide backup for unpredictable renewable sources at a moment’s notice?

            Third: unlike the steam generators at Diablo Canyon, California wind turbines don’t all rotate (and solar farm inverters don’t all invert) in sync with grid electricity at a given moment. Electricity provided by gas “peaker” plants and/or batteries is necessary to provide voltage and phase correction of grid A/C to ensure reliability. Providing these ancillary services is of brief duration, but is lucrative – in 2019 it made up 2% of the total wholesale cost of grid electricity.

            How “near zero” are the operating costs for renewables with these costs included?

          • Given that I have previously pointed out that Diablo going forward costs have been in excess of $40/MWH (I can’t give the specific number do to confidentiality restrictions), and then I used public figures to show that the cost is in excess of $50/MWH, I would say that I pretty much hit dead on what I said it was.

            As for post 2025 costs, you simply refuse to accept reality as spelled out by PG&E, the owner of the plant, who has no incentive to inflate those costs as much as you claim. (I already pointed out that they can’t make as much from added gas sales as the profit foregone from Diablo.) That cost is in excess of $100/MWH (and even higher with the lower output that PG&E forecasted.)

            In 2020 renewable curtailments totaled 1,587 GWH which was 0.56% of the 285 TWH of generation–a truly trivial amount. Ancillary services have always been about 2% of the system costs regardless of the mix if renewables. A/S costs may have gone up slightly, but again a trivial amount. So pretty near to zero even accounting for these costs.

            BTW, the CAISO has to run extra spin reserves to allow for the larger risk contingency that Diablo represents, so let’s not forget that added cost. That contingency is provided by those dreaded gas plants…

  3. Seems like wealthier areas compensating less wealthy areas to take wind farms is optimal policy. You get a carbon reduction, wealthy areas are happier (no wind farms in sight), less wealthy areas are happier (additional funding), it fights gentrification (wealthy people don’t want to move next to wind farms), and it improves health in less wealthy areas (wind farms don’t pollute, unlike fossil fuel plants…sorry Trump, they don’t cause cancer either). It’s a win-win-win-win-win.

  4. Perhaps there could be a bidding system. Neighbors to proposed wind installations would be entitled to compensation based on some formula of distance from the turbines, visual impact etc. Then, neighbors around potential sites would state how much compensation they want if the project is built. Those who like wind turbines could bid negative. The developer would pick the site with the lowest overall cost, including the compensation.

  5. “With growing recognition of past injustices — and lack of representation — in locating industrial facilities and environmental hazards, it is clear that now is the time to confront these issues for siting renewable generation.”

    Severin, as someone pointed out in last week’s webinar, there seems to be a confusion of cause with effect regarding the location of industrial facilities and environmental hazards near low-income areas. Though I lack any data to support this hypothesis, I will suggest the following: the majority of area residents in those areas moved there after industrial development had happened, and corresponding environmental hazards were already known – that reduced home prices had made them attractive to low-income home buyers.

    No one believes low-income home buyers, or anyone else for that matter, should have to bear the environmental impact of living in those areas. But it’s a fact: solar and wind farms have a massive land-use footprint for the amount of clean energy they provide.

    It’s not just the visual aesthetics of industrial hardware, or the whirring of wind turbine blades. When we build a concentrated solar farm in the desert we can expect it will fry 6,000 birds in mid-flight each year. By locating U.S. wind farms in windy areas frequented by eagles, hawks, vultures, falcons and other soaring birds, we can expect 500,000 of them will be killed by spinning turbine blades annually. Recent evidence reveals similar rates of bat and migratory bird fatalities.

    Long ago was the time to confront the land impact issues of renewable generation and its associated transmission. I can only imagine the wails of anti-nuclear activists were Diablo Canyon Power Plant responsible for 6,000 avian deaths each year – much less, a number proportional to its power output (a 2013 Bechtel study estimated recycling two billion gallons of seawater daily at Diablo Canyon is responsible for killing 710 lbs. of fish – each year).

  6. In the U.S., it is common for wind developers to make substantial contributions to the affected local communities (in addition to paying substantial property taxes that those local communities benefit from).

  7. If wind farms do affect property prices [‘value’ by my English is subjective] perhaps the developer can provide free or subsidized electricity to those pre-existing homes whose prices are degraded! Perhaps all or a portion of the imputed rental value reduction.

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