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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.

Suggested Citation

  • Martin Drechsler & Jürgen Meyerhoff & Cornelia Ohl, 2012. "The effect of feed-in tariffs on the production cost and the landscape externalities of wind power generation in West Saxony, Germany," Discussion Paper Series RECAP15 007, RECAP15, European University Viadrina, Frankfurt (Oder).
    • Handle: RePEc:euv:dpaper:007
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    2. Patrizio, P. & Leduc, S. & Chinese, D. & Kraxner, F., 2017. "Internalizing the external costs of biogas supply chains in the Italian energy sector," Energy, Elsevier, vol. 125(C), pages 85-96.
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    7. Nordensvärd, Johan & Urban, Frauke, 2015. "The stuttering energy transition in Germany: Wind energy policy and feed-in tariff lock-in," Energy Policy, Elsevier, vol. 82(C), pages 156-165.
    8. Shen, Neng & Deng, Rumeng & Liao, Haolan & Shevchuk, Oleksandr, 2020. "Mapping renewable energy subsidy policy research published from 1997 to 2018: A scientometric review," Utilities Policy, Elsevier, vol. 64(C).

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    Keywords

    feed-in tariff; spatial allocation; wind power;
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