Wind electricity subsidies — A windfall for landowners? Evidence from a feed-in tariff in Germany

Journal article

Subsidies for renewable energy sources are increasing around the globe and amounted to more than 100 billion euro in 2013. This study aims to answer whether the subsidies only ensure that green electricity plants are profitable or whether other market participant – as, for example, landowners – benefit from the subsidy in the form of windfall gains as well. To identify the causal effect of the subsidies, we investigate the impact of the introduction of a price guarantee in the form of a feed-in tariff for wind electricity in Germany on land prices. We employ two different approaches. Both approaches exploit quasi-experimental variation in wind strength across 260 non-urban counties in combination with the introduction of the subsidies. Based on a difference-in-differences design, we find that land prices increased by roughly 1100 euro in high-wind areas after the introduction of the subsidy. Further, using an instrumental variable estimator we document that around 18% of expected wind turbine profits are capitalized into land prices. Finally, we show that wind turbine subsidies account for 4% of overall agricultural income in 2007.

Authors: Haan, P; Simmler, M

• Publication status: Published
• Peer review status: Peer reviewed
• Publisher: Elsevier
• Journal: Journal of Public Economics
• Volume: 159
• Pages: 16-32
• Publication date: 2018-02-02
• Acceptance date: 2018-01-26
• DOI: 10.1016/j.jpubeco.2018.01.011
• ISSN: 0047-2727
• Keywords: incidence; wind turbines; subsidy; land prices; renewable energy