Senior Research Associate
Why do property values on the Canadian side of the border near a wind farm remain unchanged while the properties on the American side depreciated? Stewart Fast summarizes the latest issues in wind energy development.
Wind energy developments are often controversial in host communities. A frequent concern is the potential negative impact on property values. New research from Fulbright scholar Martin Heintzelman and colleagues has added a twist on the property value story. The Professor from Clarkson University in upstate New York who is currently visiting the University of Ottawa as a Fulbright scholar, examined the impacts of a wind farm near the Ontario / New York border in the Thousand Islands region. He found that property values on the Canadian side of the border where the wind project is located were unchanged, or possibly even increased. However properties on the American side of the border significantly depreciated in value.
The study authors hypothesize that the difference is due to the fact that American homeowners could neither participate in the siting process for the turbines located in the neighbouring international jurisdiction nor receive any of the economic benefits of the project. In the case that they examined, economic benefits accrue to the local municipal region through payments to landowners who are leasing turbines and through an annual payment to the local municipal government of $645,000.
The international dimension of this example is fascinating. Renewable energy production reduces global greenhouse gas emissions creating what is considered a global public good that is not contained within the territory in which it occurs. The fact that greenhouse gas reduction brings a global versus local benefit is one reason for requiring international coordination of GHG mitigation through UN conventions and other multilateral agreements.
However, the findings from Heintzelman et al suggest additional international considerations. New York property values are being negatively affected by renewable energy production activities in Ontario. In other words, renewable energy production is also creating a public “bad” or externality across borders. Perhaps there is a role for public policy to find a way to compensate New York property owners. Yet such policy would also have to juggle the climate benefits that are a public good accruing to residents on either side of the border. A further twist is that the interconnected electricity grid means that New York ratepayers benefit by opportunities to buy low-priced Ontario wind power at times of surplus electricity production in Ontario.
More generally, the study adds to growing scientific interest in property value impacts of new energy infrastructure projects. For wind energy projects, the evidence is mixed: some studies show no significant negative impacts, while others do show significant negative impacts. Other new energy infrastructure has its own evidence base. For example, the National Energy Board in Canada recently commissioned a review of property value impacts of oil and gas pipeline projects which showed that pipeline ruptures that result in leaks, spills, or environmental damage unambiguously lower the value of nearby properties. However, in the absence of incidents there is no evidence that proximity to pipelines reduces property values.
A final implication from the study conducted by Heintzelman et al concerns local involvement in energy infrastructure approval processes. The study suggests that communities that don’t have an opportunity to participate in decisions about location, number and other siting decisions for wind turbines are likely to experience negative property value impacts. If that it is true, then the implications for Ontario’s current wind energy procurement and planning rules are clear. The province should return to requiring local government zoning approval to mitigate against potential local property value reductions. The province has made some changes in that direction but, as my recent co-authored paper points out, wind energy developments in the province still occur without substantial local government involvement or approval.
The Positive Energy research project will also have much to say about energy infrastructure approval process. One research stream is examining public confidence in energy regulators and public authorities with a research question of “what are the sources of community satisfaction in the siting process for energy infrastructure?” Our project looks at six energy projects including a wind farm, oil pipeline, shale gas, hydroelectric dam, electricity transmission wires and natural gas generation plants. Continue to check out the Positive Energy website for research results in the coming weeks.