An economic assessment of windfarm power generation in Scotland including externalities

Abstract

This paper uses cost–benefit analysis to assess the economic feasibility of a large scale windfarm project, taking into account positive and negative externalities of generation. The issue of non-use value (i.e. a welfare change among those who will never visit the area and see the windfarm) is addressed with reference to the study by Bergmann et al. [2006. Valuing the attributes of renewable energy investments. Energy Policy 34, 1004–1014], which determined a social cost of £19.40 per household for the non-use disamenity associated with a large scale windfarm in Scotland. This paper demonstrates the extent to which this estimate affects the economic feasibility of the project. We find that for all but one of the 16 scenarios considered, the project returns a positive net present value despite the inclusion of this non-use value, thus suggesting that in these cases the windfarm delivers a net welfare gain to society.