Events at CERGE-EI

Milan Quentel, M.A.

University Pompeu Fabra, Spain

Abstract: Electricity production from wind and solar energy is projected to grow twelvefold until 2050. This paper studies the impact of renewable energy infrastructure on surrounding neighborhoods, its potential welfare costs for residents, and the implications for inequality. I focus on the wind energy expansion in Germany, 2000-2017. Using neighborhood data at 1-by-1 kilometer resolution and a novel IV strategy that exploits technology-induced changes in effective wind potential, I document that wind turbines decrease house prices and lead to residential sorting driven by the emigration of college-educated residents. Combined with a theory-consistent revealed preference argument, the reduced form results suggest that residents would be willing to pay between 0.9 and 1.4 percent of their income to avoid an additional wind turbine. I develop and estimate a quantitative spatial model in which wind turbines decrease amenities, residents can adapt, for example through sorting, and housing and labor markets respond in general equilibrium. The quantified model suggests that the disamenities from the total wind turbine expansion cost residents 0.83 percent of welfare or 31 billion USD. Allocating wind turbines to neighborhoods with low willingnessto-pay substantially reduces welfare costs but also places the burden on rural, poorer, and less educated regions. Finally, I discuss Germany’s wind development plans for 2030, and the implications for welfare and inequality.

Full Text: Gone with the Wind: Renewable Energy Infrastructure, Welfare, and Redistribution