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The effect of feed-in tariffs on the production cost and the landscape externalities of wind power generation in West Saxony, Germany

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  • Martin Drechsler
  • Jürgen Meyerhoff
  • Cornelia Ohl

    ()
    (Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder))

Abstract

Although wind power is currently the most efficient source of renewable energy, the cost of wind electricity still exceeds the market price. Subsidies in the form of feed-in tariffs (FIT) have been introduced in many countries to support the expansion of wind power. These tariffs are highly debated. Proponents say they are necessary to pave the way for decarbonising energy production. Opponents argue they prevent a welfare-optimal energy supply. Thus, in a case study we try to shed light on the welfare economic aspect of FIT by combining spatial modelling and economic valuation of landscape externalities of wind turbines. We show for the planning region West Saxony, Germany, that setting FIT in a welfare optimal manner is a challenging task. If set too high the production costs are overly increased, lowering social welfare. If set too low energy production targets may not be reached and/or external costs are overly increased, again lowering social welfare. Taking a closer look at the tariffs offered by the German Renewable Sources Energy Act we find for West Saxony that the tariffs quite well meet economic welfare considerations. One should note, however, that this finding might apply only to the present data set.

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File URL: http://www.europa-uni.de/de/forschung/institut/recap15/downloads/recap15_DP_No7.pdf
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Bibliographic Info

Paper provided by RECAP15, European University Viadrina, Frankfurt (Oder) in its series Discussion Paper Series RECAP15 with number 007.

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Length: 26 pages
Date of creation: Jul 2012
Date of revision:
Handle: RePEc:euv:dpaper:007

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Keywords: feed-in tariff; spatial allocation; wind power;

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References

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  1. Severin Borenstein, 2011. "The Private and Public Economics of Renewable Electricity Generation," NBER Working Papers 17695, National Bureau of Economic Research, Inc.
  2. Drechsler, Martin & Ohl, Cornelia & Meyerhoff, Jürgen & Eichhorn, Marcus & Monsees, Jan, 2011. "Combining spatial modeling and choice experiments for the optimal spatial allocation of wind turbines," Energy Policy, Elsevier, vol. 39(6), pages 3845-3854, June.
  3. Mabee, Warren E. & Mannion, Justine & Carpenter, Tom, 2012. "Comparing the feed-in tariff incentives for renewable electricity in Ontario and Germany," Energy Policy, Elsevier, vol. 40(C), pages 480-489.
  4. del Rio, Pablo & Gual, Miguel A., 2007. "An integrated assessment of the feed-in tariff system in Spain," Energy Policy, Elsevier, vol. 35(2), pages 994-1012, February.
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  7. Dong, C.G., 2012. "Feed-in tariff vs. renewable portfolio standard: An empirical test of their relative effectiveness in promoting wind capacity development," Energy Policy, Elsevier, vol. 42(C), pages 476-485.
  8. Moran, Dominic & Sherrington, Chris, 2007. "An economic assessment of windfarm power generation in Scotland including externalities," Energy Policy, Elsevier, vol. 35(5), pages 2811-2825, May.
  9. Meyerhoff, Jürgen & Ohl, Cornelia & Hartje, Volkmar, 2010. "Landscape externalities from onshore wind power," Energy Policy, Elsevier, vol. 38(1), pages 82-92, January.
  10. del Río, Pablo & Calvo Silvosa, Anxo & Iglesias Gómez, Guillermo, 2011. "Policies and design elements for the repowering of wind farms: A qualitative analysis of different options," Energy Policy, Elsevier, vol. 39(4), pages 1897-1908, April.
  11. Lesser, Jonathan A. & Su, Xuejuan, 2008. "Design of an economically efficient feed-in tariff structure for renewable energy development," Energy Policy, Elsevier, vol. 36(3), pages 981-990, March.
  12. Bull, Pierre & Long, Noah & Steger, Cai, 2011. "Designing Feed-in Tariff Policies to Scale Clean Distributed Generation in the U.S," The Electricity Journal, Elsevier, vol. 24(3), pages 52-58, April.
  13. Möller, Bernd, 2006. "Changing wind-power landscapes: regional assessment of visual impact on land use and population in Northern Jutland, Denmark," Applied Energy, Elsevier, vol. 83(5), pages 477-494, May.
  14. Alvarez-Farizo, Begona & Hanley, Nick, 2002. "Using conjoint analysis to quantify public preferences over the environmental impacts of wind farms. An example from Spain," Energy Policy, Elsevier, vol. 30(2), pages 107-116, January.
  15. Ayoub, Nasser & Yuji, Naka, 2012. "Governmental intervention approaches to promote renewable energies—Special emphasis on Japanese feed-in tariff," Energy Policy, Elsevier, vol. 43(C), pages 191-201.
  16. Delzeit, Ruth & Britz, Wolfgang & Holm-Müller, Karin, 2011. "Modelling regional input markets with numerous processing plants: The case of green maize for biogas production in Germany," Discussion Papers 162892, University of Bonn, Institute for Food and Resource Economics.
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