Valuing Wind Turbines on Farmland: Evidence of Option Values and Saturation Effects

While wind turbines have been rapidly increasing across the United States, especially in Iowa, research on how they would change the underlying farmland values is limited. We develop a model of farmland value based on the net present value (NPV) approach, extended by implementing landowners’ option to lease their land for wind energy and the effects of the saturation of turbines in the region. Leveraging detailed farmland transactions and wind turbines data throughout Iowa, the empirical estimation generally supports our hypotheses derived from the model. Farmland values increase with wind turbines installed, and a higher wind energy suitability that provides option values. These effects are either attenuated or amplified as the region becomes saturated with wind turbines.