Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 1467: Wind Power and the Cost of Local Compensation Schemes: A Swedish Revenue Sharing Policy Simulation

Erik Lundin ()
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Erik Lundin: Research Institute of Industrial Economics (IFN), Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden

Abstract: Local resistance towards wind power is a central challenge for the energy transition, implying that legally imposed compensation schemes for nearby residents may become prevalent in the near future. I use GIS-coded data on detached residential buildings in Sweden to simulate a variety of revenue sharing schemes applied to every present and planned commercial scale wind power project, focusing on documenting the impact on investor costs. I compare models that entitle compensation for distances between six and ten times the tip height of the closest turbine, imposing schemes that are both constant within the eligible distance, as well as declining with the distance from the turbine. When compensations are awarded for residents as far away as ten times the turbine height, foregone revenues exceed two percent for one-fourth of the projects in the southern region even under the declining model, indicating that the scheme could have a substantive effect on the localization decisions of future investments.

Keywords: Wind power; Negative externalities; Local acceptance; Energy transition; NIMBYism

JEL-codes: D40; D62; H23; P18; P48

Language: English

31 pages, First version: June 7, 2023. Revised: May 13, 2024.

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