Clean Electricity, Dirty Electricity: The Effect on Local House Price​s

Electricity demand in the European Union is expected to increase by around 1 percent per year until 2050. Most of us would agree that we should serve this demand with as much “clean” energy as possible. Until last year, the European Commission followed its Europe 2020 strategy, which committed all EU member states to reduce greenhouse gas emissions by 20 percent and to increase the share of renewable electricity production to 20 percent by the year 2020. As a result, we saw a massive increase in the share of renewable electricity production in the EU-28. The average share of renewable energy production across EU countries increased from 2.6 percent in 2003 to 32.1 percent in 2018. However, we also see significant variation across individual countries, some exceeding the 20% goal while others failed to reach it.

One of the member countries furthest away from reaching its targets is the Netherlands, with a share of renewable energy production of around 8% in 2019. As wind is abundant along the Dutch coast though, the Netherlands planned to increase the share of renewable energy production by installing 6,000 megawatts (MW) of onshore wind capacity or around 100 new wind turbines per year. Unfortunately, wind energy requires a lot of space per MW unit capacity and the Netherlands is one of the most densely populated countries in Europe, leading to a convergence of space usage.

In our paper “Clean Electricity, Dirty Electricity: The Effect on Local House Prices”, we analyse how this expansion strategy on renewable energy affects local house prices. We compare the external effects of different energy production facilities on local house prices, looking at the time of construction and demolishment. We argue it is a multi-dimensional question whether renewable (or “green”) electricity generation is a superior solution to conventional generation and not straight forward to answer. Besides global environmental aspects, such as air pollution, we need to study cost-benefits aspects, reliability, and the effects on the local population (Among other, this is one reason why some policy makers and scientists argue in favour of nuclear power to fight climate change).

We know from the literature that there is a Not-in-my-backyard effects (NIMBY) effect if it comes to energy production, meaning people are generally in favour of new power plants but just not in their neighbourhood. As the Dutch government showed limited involvement of the local population in their plans this led to even stronger local opposition. We can therefore assume that there are perceived negative effects of nearby wind turbines, leading to reduced house prices. However, this might be the case for all electricity types. We don’t know how the effects compare as no study analysed multiple electricity sources over a large scale, yet. This is the aim of our study, putting the different effects in comparison by using a large scale micro-level dataset.


In our analysis we look at construction and demolishment of coal, gas, and biomass plants in comparison to wind turbines in the Netherlands. We use a dataset of 2.3 million residential property transactions between 1985 to 2015 (houses and apartments). For our setup, we compare transactions within 2.5 km distance of energy production facilities to transactions up to 20 km away from any facility, looking at the differences over time (Difference-in-difference strategy).

Our results show a reduction in house prices after wind turbines and gas plants are constructed. For wind turbines, prices decrease by around 2%, whereas for gas the decrease is around 5%. For the two other types we don’t find a significant effect. However, we must consider the pre-opening price differences as plants are more likely to be constructed in lower priced areas. Doing so we don’t find that house prices in wind turbines areas are lower prior to construction! However, we do find a small ex-ante price increase for gas plant areas, which is most likely because gas plants are often used as peak-plants in high demand areas, and are therefore located in bigger cities.

Looking at size, we don’t find that bigger gas plants increase the effect and only a small increase in the effect for big wind parks, both indicating that people generally dislike the facilities and not distinguishing for bigger or smaller projects. Examining closings, we look at house prices during the presence of a facility and after the removal, excluding any other electricity production facilities. We find negative effects for biomass plant closings (-7.4%) but positive effects for the removal of wind turbines (+6.5%).

The results initially looked a bit surprising to us, so we dug deeper and talked to some participants in the energy sector. Conventional plants, such as coal or gas plants, require a lot of labour, creating up to 800 new jobs at construction. In addition, their supply chains require additional infrastructure investments, such as new roads. This can be quite beneficial for areas with lower economic performance. Therefore, local politicians often try to actively convince suppliers to open a new plant in their area, offering generous subsidises to the investment costs.

In contrast, wind turbines don’t have any positive economic effects for the local area. Their owners are often far away. The land they are on is often private, benefiting just a few individuals in the form of leases. Their parts are built somewhere else and just locally assembled once, which is relatively quick and easy onshore. Additionally, they operate nearly autonomously and require nearly no local employees, creating no significant number of jobs nearby the site.

How can we overcome these problems? Studies in Denmark show that local involvement changes people’s attitude a lot! It is therefore important that the government involves locals in their decisions and maybe even giving them a chance to participate. If, for example, people get the chance to co-invest into the wind turbines, they will perceive wind turbines as something positive rather than negative. Such investments could be tied to the location of properties, allowing to transfer involvement to future homeowners.