Examining the economic impacts of hydropower dams on property values using GIS

Abstract

While the era of dam building is largely over in the United States, globally dams are still being proposed and constructed. The articles in this special issue consider many aspects and impacts of dams around the world. This paper examines dam removal and the measurement of the impacts of dams on local community property values. Valuable lessons may be found. In the United States, hundreds of small hydropower dams will come up for relicensing in the coming decade. Whether or not the licensees are renewed and what happens to the dams if the licenses expires is a subject of great debate. Dams are beginning to be removed for river restoration and fisheries restoration and these “end-of-life” decisions may offer lessons for countries proposing or currently building small (and large) hydropower dams. What can these restoration stories tell us? In this paper, we examine the effects of dams along the Penobscot River in Maine (USA) on residential property values. We compare the results to findings from a similar (but ex post dam removal) data set for properties along the Kennebec river in Maine, where the Edwards Dam was removed in 1999. The Penobscot River Restoration Project, an ambitious basin-wide restoration effort, includes plans to remove two dams and decommission a third along the Penobscot River. Dam removal has significant effects on the local environment, and it is reasonable to anticipate that environmental changes will themselves be reflected in changes in property values. Here we examine historical real estate transaction data to examine whether landowners pay a premium or penalty to live near the Penobscot River or near a hydropower generating dam. We find that waterfront landowners on the Penobscot or other water bodies in our study area pay approximately a 16% premium for the privilege of living on the water. Nevertheless, landowners pay LESS to live near the Penobscot River than they do to live further away, contrary to the expectation that bodies of water function as real estate amenities and boost local property values. Results with respect to the effect of proximity to hydropower generating plants are equivocal. Homeowners pay a small premium for houses close to hydropower dams in our region, but the statistical significance of that result depends on the specific model form used to estimate the effect. Consideration of the social and economic impacts of dam removal-based river restoration can complement studies of the ecological impacts of the practice. Such studies help us understand the extent to which human society's subjective perception of value of aquatic ecosystems relates to objective measures of ecosystem health. The paper also illustrates how geographic information systems (GIS) can help inform these analyses.