Economic analysis of trade-offs and welfare implications in Offshore Wind farm development

Project Description:

This Research Project is part of the EPSRC CDT in Offshore Wind Energy Sustainability and Resilience’s Energy Economics Cluster.

Offshore wind energy presents a promising avenue for sustainable and renewable energy generation, offering significant advantages over onshore wind farms by not competing for land resources. However, their expansion raises complex economic, environmental, and social considerations due to their utilisation of ocean space. While the reduction of greenhouse gas emissions and preservation of marine ecosystems offer long-term benefits, the potential conflicts with existing maritime activities, such as fishing and shipping, pose challenges in achieving a balanced solution.

Methodology

Due to their space requirements and potential noise and visual disruptions, wind turbines often face opposition from local residents (Meyerhoff et al., 2010). As a result, offshore wind farms have been situated away from populated regions, often located in the sea. Past economic valuation research has indicated a diverse range of opinions, with some studies supporting and others opposing the implementation of offshore renewable installations (Ladenburg, 2010). Investing in offshore wind energy is anticipated to yield a combination of economic benefits and costs, contingent upon individual stances on renewable expansion. This approach would derive advantages from electricity generation, reduced CO2 emissions, and lower pollutant discharges. Conversely, opponents of specific investments may experience economic detriments. The equilibrium between benefits and costs is expected to be intricately tied to the unique circumstances of each case. Additionally, an added complexity arises from the dilemma of allocating sea zones for renewable energy projects versus earmarking the same areas as marine protected zones, which might prohibit such developmental initiatives.

This PhD research aims to comprehensively examine the economic implications of offshore wind farm development, with a focus on the trade-offs involved in reconciling economic benefits with the diverse interests of various sea stakeholders. The study will delve into various dynamics addressing questions such as:

• How do offshore wind farms impact the economic activities of fishing, shipping, and other maritime sectors?
• What are the costs and benefits of offshore wind farm development, considering short-term economic implications, long-term environmental benefits, and potential negative externalities?
• How can economic incentives and policy mechanisms be designed to ensure a fair distribution of economic gains and address the concerns of various sea stakeholders?

To achieve this objective, we will employ both theoretical and empirical approaches. Our theoretical framework will involve game theory, enabling us to model and analyse the strategic interactions among different actors. Additionally, we will adopt an empirical approach that leverages contingent valuation methods to capture individual preferences among diverse stakeholders. Stated preference methods, such as contingent valuation, have gained significant recognition for their capacity to assess the economic consequences of environmental changes (Hanley and Barbier, 2009). An innovative approach based on experimental survey will be consider generating primary data.

References & Further Reading

Meyerhoff, J., Ohl, C. and Hartje, V., 2010. Landscape externalities from onshore wind power. Energy Policy, 38(1), pp.82-92.

Ladenburg, J., 2010. Attitudes towards offshore wind farms—The role of beach visits on attitude and demographic and attitude relations. Energy Policy, 38(3), pp.1297-1304.

Hanley, N., Barbier, E.B. and Barbier, E., 2009. Pricing nature: cost-benefit analysis and environmental policy. Edward Elgar Publishing.