Generation vs. Social Cost
Effects on Wind Turbine Siting Decisions
Pablo Hevia-Koch
[email protected]
Context: Nearshore auctions in DK
– Closer = Cheaper?
2
DTU Management Engineering, Technical University of Denmark
28 August 2015
Context: Nearshore auctions in DK
– Recent tenders in Offshore Wind in DK
– 5 new sites for Nearshore Wind Farms (~350 MW)
– Nearshore sites potential is limited (vs offshore)
– Nearshore has higher social acceptance than onshore
– Motivation: Sites closer to the shore are cheaper (?)
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DTU Management Engineering, Technical University of Denmark
28 August 2015
Cost Curves: Nearshore advantage?
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DTU Management Engineering, Technical University of Denmark
28 August 2015
Recap on Cost Curves
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DTU Management Engineering, Technical University of Denmark
28 August 2015
Recap on Cost Curves
– Main driver for cost is water depth
– Distance to shore has a smaller impact
– Reference potential cost reduction from pure distance reduction is limited
(4-6% from 25 to 5 km)
– Benefits might exist from increased competition
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DTU Management Engineering, Technical University of Denmark
28 August 2015
Preferences: WTP vs Distances
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DTU Management Engineering, Technical University of Denmark
28 August 2015
Preferences for Nearshore
– Ladenburg et al. 2011:
• Reference scenario 3600 MW wind expansion
• Choice experiment
• Six choice sets
• Visual disamenities reduction
– Reference of 8 km.
– Possible reduction to 12, 18 or 50 km
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DTU Management Engineering, Technical University of Denmark
28 August 2015
Preferences for Nearshore
– Ladenburg et al. 2011:
• Study design and attribute levels validated via focus group
• WTP extracted through fixed increases to annual electricity bill
– WTP per household (ref. is 8 km):
• 12km: 153 kr/year
• 18km: 63 kr/year
• 50km: 233 kr/year
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DTU Management Engineering, Technical University of Denmark
28 August 2015
Marginal WTP
Yearly Marginal WTP in €/kW per km
Aggregated for DK (ref. 8km)
4000
3500
3515
Marginal WTP €/km
3000
2500
2000
1500
965
1000
500
488
0
12 km
18 km
50 km
Distance to Shore
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DTU Management Engineering, Technical University of Denmark
28 August 2015
Marginal WTP
– Decreasing Marginal WTP
– Sharp drop for distances > 12 km
– Limited decrease in WTP beyond 18 km
4000
Marginal WTP €/km
3500
3515
3000
2500
2000
1500
965
1000
500
488
0
12 km
18 km
50 km
Distance to Shore
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DTU Management Engineering, Technical University of Denmark
28 August 2015
The Question:
Does the Willingness-to-Pay due to visual disamenities compare to the
possible cost reductions from siting wind turbine farms closer to the
shore?
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DTU Management Engineering, Technical University of Denmark
28 August 2015
WTP Aggregation
• Considering a “back of the envelope” (naïve) aggregation:
– 2480879 Households in DK
– Values in €
– Marginal WTP per km (€/kw per km)
– 20 years life time
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DTU Management Engineering, Technical University of Denmark
28 August 2015
Comparison: Marginal WTP vs Marginal Cost
€/kw per km
200
180
160
Marginal Cost (€/kw per km)
WTP
140
10 m Depth
120
100
25 m Depth
80
35 m Depth
60
Change from
10 to 25 m
depth
40
20
0
0
5
10
15
20
25
Distance to Shore (km)
14
DTU Management Engineering, Technical University of Denmark
28 August 2015
Comparison: Marginal WTP vs Marginal Cost
€/kw per km
200
180
160
Marginal Cost (€/kw per km)
WTP
140
10 m Depth
120
100
25 m Depth
80
35 m Depth
60
Change from
10 to 25 m
depth
40
20
0
0
5
10
15
20
25
Distance to Shore (km)
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DTU Management Engineering, Technical University of Denmark
28 August 2015
WTP Comparison
– Changes in distance to shore while maintaining water depth constant
present very limited cost reduction opportunities
– When looking at constant depth cost reductions opportunities, they
are at the same level as marginal WTP.
– Changes in water depth present much higher cost reductions,
comparably above estimated WTP values for most distances. (Very
low distances data is not accurate)
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DTU Management Engineering, Technical University of Denmark
28 August 2015
Discussion Points
– This is not a perfect measure of the optimal siting distance!
– Definitely opens the discussion regarding the effectiveness of cost
savings by minimising distance to shore
– Water depth and distance to coast are often correlated. (Not denying
that)
– Other possible advantages of nearshore (e.g. increased competition)
might help break the parity.
– For now, we cannot assume that just minimising distance to coast will
result in cheaper wind farms. (ceteris paribus)
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DTU Management Engineering, Technical University of Denmark
28 August 2015
Thank you
Questions?
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DTU Management Engineering, Technical University of Denmark
28 August 2015