EDITORS:
MARA MADALENO, MARGARITA ROBAINA, MARTA FERREIRA
DIAS, VICTOR MOUTINHO, JORGE SOUSA
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University of Aveiro
Department of Economics, Management, and Industrial
Engineering (DEGEI)
ME
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2
ndInternational Meeting on Energy and Environmental
Economics
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FINAL VERSION: 30
thSeptember 2015
2
ndMeeting on Energy and Environmental
Economics
18
thSeptember, 2015
DEGEI, Universidade de Aveiro, Aveiro
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Title
ME3 2015: Proceedings of the 2nd International Meeting on Energy and Environmental Economics
Editors
Mara Madaleno, Margarita Robaina, Marta Ferreira Dias, Victor Moutinho, Jorge Sousa
Scientific Committee
Anabela Botelho; Mara Madaleno (Chair); Marta Ferreira Dias; Margarita Robaina Alves; Victor Moutinho; Jorge Vasconcelos
Design
Organizing Commitee of the 2nd International Meeting on Energy and Environmental Economics
CHAIR: Mara Madaleno
CO-CHAIRS: Margarita Robaina, Marta Ferreira Dias, Victor Moutinho, Jorge Sousa
Publisher
UA Editora, University of Aveiro 1st edition – September 2015
ISBN
ISBN 978-972-789-459-8
Cataloging in publication
International Meeting on Energy and Environmental Economics, 2, Universidade de Aveiro, 2015
ME3 2015 [Electronic resource]: proceedings of the 2nd International Meeting on Energy and Environmental Economics / eds. Mara Madaleno...[et al.]. - Aveiro: UA Editora, 2015. - 188 p.
ISBN 978-972-789-459-8
Keywords: Economics // Energy // Environmental Economics // Renewable Energy //
Energy Policy // Environmental Policy // Allowances // Energy and Macroeconomy
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INSTITUTIONAL PARTNERS / SPONSORS
University of Aveiro
Department of Economics, Management, and Industrial
Engineering (DEGEI)
GOVCOPP - Research Unit in Governance, Competitiveness and
Public Policies
EDP - Energias de Portugal
TRUSTENERGY – Energy for the future
2
ndMeeting on Energy and Environmental
Economics
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thSeptember, 2015
DEGEI, Universidade de Aveiro, Aveiro
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DEGEI – Proud to host the 2
ndME
3, 2015
The Department of Economics, Management, and Industrial Engineering (DEGEI) of the University of Aveiro was proud to host the 2nd International Meeting on Energy and Environmental Economics conference, which brought together a total of 16 accepted papers, an effort which involved a total of 57 authors and co-authors, following the peer-review process. Research can thus be seen to increasingly be a team effort. This brings the total number of participants in the ME3 2015 to 45 people. Our thanks to the Organizing Committee, the Scientific Committee, the staff of DEGEI, the Nucleus of Economics Students (NEEC), and to the UA Editora. Special thanks to our sponsors who made the 2nd ME3 possible: DEGEI, UA, GOVCOPP, EDP and Trustenergy. In the 2nd ME3 we had the pleasure of welcoming and listening to Monica Giulietti, from the School of Business and Economics, University of Loughborough in UK and Gürkan Kumbaroğlu, President-Elected of the International Association for Energy Economics and Boğaziçi University
in Turkey. Our thanks to these keynote speakers for having shared their valuable
experience with us. We hope that the 2nd ME3 was as enjoyable for you as it was for us, at DEGEI, and wish you all the best for the future.
Carlos Costa Full Professor
Director of the Department of Economics, Management, and Industrial Engineering (DEGEI), University of Aveiro
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Organizing Committee Message
As chair of the 2nd International Meeting on Energy and Environmental Economics
(ME3) I was pleased to welcome you all at the Department of Economics,
Management and Industrial Engineering (DEGEI) from the University of Aveiro and to wish you all a very pleasant Meeting. I’m here representing four more colleagues which have been working very hard with me to turn this meeting possible. They are Margarita Robaina, Marta Ferreira Dias and Victor Moutinho, all professors from this department and also Jorge Sousa, our colleague and professor at ISEL in Lisbon. The meeting is very young because it started in 2014. In 2015 we have turned possible
its 2nd edition. It is our intention to keep it in the forward years, turning it an annual
event, given that this year we have accomplished our goal of increasing the number of submissions and also of international submissions with respect to the previous year. This year, we had 4 parallel sessions, 2 in the morning and 2 in the afternoon, with 16 papers of very high quality.
But the ME3 consists in a meeting of researchers, companies and institutions working
in the energy and environmental economic fields. The meeting has as main goal the share of experiences and results throughout the scientific, entrepreneurial and institutional communities whose interests are the areas of Energy and Environmental Economics.
With this in mind we have also invited companies and institutions whose presentations occurred in the afternoon. The realization of a meeting under these subjects intends to improve the interchange of knowledge and scientific knowledge but also to connect scientific research to company’s reality, once that in the meeting we have the simultaneous presence of persons representing companies and institutions connected to energy markets and resources, companies of high national importance. This year we had EDP, REN, Martifer and ADENE.
This 2nd ME3 was special for another additional reason. There, we also had the formal
presentation of the newly created Associação Portuguesa de Economia da Energia – APEEN (or Portuguese Association of Energy Economics), the Portuguese affiliate of International Association for Energy Economics (IAEE).
The idea of creating this association has resulted from some scientific meetings with other Portuguese University researchers, companies and institutions, and from works developed by a group of researchers/professors from University of Aveiro. Thus the opportunity to create in Portugal the APEEN emerged, a future branch of the International Association of Economists of Energy (IAEE). At the gala dinner which
happened at day 18th we have formally presented all the founding members of the
APEEN (companies, institutions and professors/researchers) and the founding president at its earlier creation and starting date, Professor Doctor Jorge Vasconcelos.
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The goals of APEEN as an organization consist in the promotion of the mutual association of persons interested in Energy Economics, in order to create a professional discussion forum; to proportionate means for professional communication and the interchange of experiences and ideas between the persons interested in Energy Economics; to promote the professional communication between the persons interested in Energy Economics in Portugal and from different countries while being an affiliate of IAEE; and to educate the community in questions about Energy Economics.
To be able to fulfil these goals, the association will promote the organization of conferences, meetings and seminars over issues related with Energy Economics and Environment (being the ME3 one of the first in this action field), the dissemination of works, debates and conclusions which result from these activities and other activities considered as relevant for APEEN and its members.
Bodies
Direction:
President Jorge Vasconcelos
Vice-President Catarina Roseta Palma
Vice-President Isabel Soares
Vice-President Jorge de Sousa
Vice-President Margarita Robaina
Vice-President Maria José Clara
Vice-President Pedro Neves Ferreira
Secretary Marta Ferreira Dias
Treasurer Mara Madaleno
General Assembly Table:
President Carlos Costa Pina
First Secretary Lígia Pinto
Second Secretary António Cardoso Marques
Fiscal Council – Audit Committee:
President Carlos Pinho
Vowel Júlia Seixas
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Legend: Founding Members photo after the signing of the by-laws
Thank you to all participants of the 2nd ME3, to the direction of this department, to the
research center GOVCOOP, to our colleagues, department staff and students who helped us is this conference, and to Trustenergy and EDP for their financial support. So, we wish that you have all enjoyed the meeting and feel free to contact us if you need anything. We wish you the best and thank you all for turning this event possible. We hope to see you again for the next year.
Mara Madaleno (CHAIR do 2nd ME3)
Professora Auxiliar – Economia – DEGEI – UA
Investigadora do GOVCOOP; Vice-Diretora do Mestrado em Economia; Tesoureira da APEEN e membro fundadora E-mail: maramadaleno@ua.pt
Margarita Robaina (CO-CHAIR do 2nd ME3)
Professora Auxiliar – Economia – DEGEI – UA
Investigadora do GOVCOOP; Vice-Diretora do Mestrado em Turismo; Vice-Presidente da APEEN e membro fundadora
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SPONSORS:
Marta Ferreira Dias (CO-CHAIR do 2nd ME3)
Professora Auxiliar – Economia – DEGEI – UA
Investigadora do GOVCOOP; Diretora da
Licenciatura em Economia; Secretária da APEEN e membro fundadora
E-mail: mfdias@ua.pt
Victor Moutinho (CO-CHAIR do 2nd ME3)
Professor Auxiliar – Gestão – DEGEI – UA
Investigador do CEFAGE; Membro fundador APEEN E-mail: vmoutinho@ua.pt
Jorge Sousa (CO-CHAIR do 2nd ME3)
Professor Coordenador do Instituto Superior de Engenharia de Lisboa (ISEL); Presidente da ADEEEA - Área Departamental de Engenharia Eletrotécnica de Energia e Automação, Secção de Energia e Sistemas
Investigador do INESC-ID Lisboa; Vice-Presidente da APEEN e membro fundador
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Contents
REVISITING COMPRESSED AIR ENERGY STORAGE ... Catarina Matos1, Patrícia Pereira da Silva2, Júlio Carneiro3 ... 14 USING CHOICE EXPERIMENTS AND CONTINGENT VALUATION TO ASSESS ENVIRONMENTAL IMPACTS OF WIND FARMS IN PORTUGAL ...
Botelho, A.1, Lourenço-Gomes, L.2*, Pinto, L.M.C.3, Sousa, S.4, Valente, M.5 ... 23 TO BE LINEAR OR NOT LINEAR, THAT IS THE QUESTION: A NEW LOOK OVER THE FINANCIAL DEPTH NONLINEARITY: EVIDENCE FROM EUROPE ...
José Alberto Fuinhas1, António Cardoso Marques1, Ricardo Carreira2 ... 36 ASSESSING ENVIRONMENTAL IMPACTS OF PHOTOVOLTAIC FARMS IN
PORTUGAL: A STATED PREFERENCE APPROACH ... Botelho, A.1, Lourenço-Gomes, L.2, Pinto, L.M.C.3, Sousa, S.4, Valente, M.5* ... 48 USING STATED PREFERENCE METHODS TO ASSESS ENVIRONMENTAL
IMPACTS OF DAMS IN PORTUGAL: LOCAL VS NATIONAL WELFARE EFFECTS .. Botelho, A.1, Lourenço-Gomes, L.2, Pinto, L.M.C.3, Sousa, S.4*, Valente, M.5 ... 63 POLICY INTERACTION AND RESOURCES SUBSTITUTION ... Susana Silva1, Isabel Soares2, Óscar Afonso3 ... 78 RENEWABLE ENERGY AND GREENHOUSE GAS EMISSIONS FROM THE
WASTE SECTORS OF EUROPEAN UNION MEMBER STATES: A PANEL DATA ANALYSIS ...
Hélde Domingos1, José R. Pires Manso2, Alexandre M. De Melo Faria3 ... 94 CLEAN AND DIRTY TECHNOLOGIES UNDER ENVIRONMENTAL POLICY ... Mónica Meireles1*, Isabel Soares2, Oscar Afonso3 ... 110 ON THE RELATIONSHIP OF ENERGY AND CO2: THE EFFECT OF FINANCIAL DEEP ON OIL PRODUCING COUNTRIES ...
Mónica Alexandra Lopes 1, José Alberto Fuinhas 2, António Cardoso Marques 3 120 CARBON EMISSION PRICES AND STOCK MARKET RETURNS OF SPANISH POWER INDUSTRY ...
Patrícia Pereira da Silva1,2,5, Blanca Moreno3,4, Nuno Carvalho Figueiredo2,5 ... 136 SOCIOECONOMICS IN THE ENVIRONMENTAL IMPACT ASSESSMENT:
EVIDENCE IN THE HYDROELECTRIC POWER PLANTS OF THE PORTUGUESE CENTRO REGION ...
António Magalhães Cardoso1, Joaquim Marques2 ... 147 RENEWABLE ENERGY IS CAUSING ECONOMIC GROWTH? AN EMPIRICAL STUDY UPON COUNTRIES WITH A BARRIER TO DIVERSIFY ENERGY
SOURCES ... Tiago Lopes Afonso1 António Cardoso Marques 2, José Alberto Fuinhas 2 ... 160 THE GLOBE ENERGY-GROWTH NEXUS: A SHORT AND LONG-RUN ANALYSIS. . Luís Miguel Marques 1, José Alberto Fuinhas 2, António Cardoso Marques3 ... 174
48
ASSESSING ENVIRONMENTAL IMPACTS OF PHOTOVOLTAIC
FARMS IN PORTUGAL: A STATED PREFERENCE APPROACH
Botelho, A.1, Lourenço-Gomes, L.2, Pinto, L.M.C.3, Sousa, S.4, Valente, M.5*
1
DEGEI and NIMA, University of Aveiro, Portugal, anabela.botelho@ua.pt
2 CETRAD and DESG, University of Trás-os-Montes and Alto Douro,
Portugal, lsofia@utad.pt
3* EEG and NIMA, University of Minho, Portugal, pintol@eeg.uminho.pt,
4 ISCAC, Polytechnic Institute of Coimbra, Portugal, ssousa@iscac.pt
5 Corresponding author, EEG and NIMA, University of Minho, Portugal,
mvalente@eeg.uminho.pt
ABSTRACT
Photovoltaic energy for electricity generation has developed considerably in recent years. In countries with high solar radiation indices, as in the case of Portugal, this energy source can be expected to play a significant role in the electricity production mix. The benefits of using this renewable energy source are undeniable, in particular in its contribution to reaching the European and Portuguese climate change goals. However, the operation and expansion of photovoltaic farms causes environmental impacts, which, unlike the benefits, only affect nearby local communities. Some of the environmental burdens that have been identified are: land use impacts, eventual reduction of farmable land, thermal pollution, fragmentation of the countryside, landscape intrusion, impacts on fauna and flora, glare effect, and electromagnetic interference. Given the asymmetry of the welfare effects expected from the construction of new photovoltaic farms, or extension of the existing ones, it is important to devise methodologies capable of integrating the welfare impacts on these two groups of stakeholders: the general population, who accrue the benefits, and local communities, who bear the costs. The main objective of this paper is to propose and test a novel approach to fully acknowledge these opposing interests and welfare impacts and thus overcome limitations in conventional analyses that fail to account for them. We propose to elicit local residents’ and general population’s welfare impacts from the presence of photovoltaic farms through the application of two stated preference methodologies, commonly used when valuing environmental goods and services: the contingent valuation method and discrete choice experiments. The former was applied to residents in the vicinity of selected photovoltaic farms installed in the region of Alentejo (Portugal): Hércules, Amareleja, and Ferreira do Alentejo. The latter method was applied among the general population. Our results show that local residents are encumbered by the presence of the photovoltaic farms, and demand significant amounts of compensation. In
2nd Meeting on Energy and Environmental
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49 addition, members of the general population are willing to pay as compensation significant monetary amounts, which, attesting to the methodology’s validity, differ depending on the specific environmental impact considered. As a conclusion, this study underlines the importance of not only acknowledging, but also taking into full consideration (in economic terms) the equity implications of photovoltaic projects when deciding their construction and location.
Keywords: Photovoltaic Farms, Stated Preference Methods, Contingent Valuation,
Discrete Choice Experiments, Environmental Impacts, Public Attitudes.
1. INTRODUCTION
The use of solar photovoltaic farms (henceforth PVFs) to produce electricity has increased in the last few decades. There are several advantages to using this energy source when compared with other sources, in particular relative to fossil fuels. One noteworthy example concerns the absence of greenhouse gases emissions during operation, thus contributing to European and Portuguese climate change goals. Also, solar photovoltaic energy explores an endogenous resource, reducing the external dependency of the economy. Since it is a location-specific resource (farms should be installed where the number of hours of sun is greatest), it may in this fashion contribute to local development. Finally it is a renewable resource and thus easily used in a sustainable fashion.
However, the activity of PVFs is also responsible for causing environmental burdens, which are experienced locally, namely land use impacts (e.g. Sarlos et al., 2003; Lackner and Sachs, 2005), possible reduction of farmable land (e.g. Tsoutsos et al., 2005; Srinivasan, 2009), thermal pollution (Gunerhan et al., 2009), countryside fragmentation (e.g. Chiabrando et al., 2009), landscape intrusion (e.g. Tsoutsos et
al., 2005; Torres-Sibille et al., 2009), impacts on fauna and flora (e.g. Chiabrando et al., 2009), glare effect (e.g. Clifford, 2013; Rose and Wollert, 2014), and
electromagnetic interference (e.g. Chiabrando et al., 2009).
From an efficiency point of view, costs and benefits should be compared and if the former are outweighed by the latter, then the installation conforms to efficiency criteria. Furthermore from an equity point of view it is crucial to analyse the distribution of costs and benefits between groups of stakeholders. In this respect, while the benefits of producing electricity in PVFs are global in their nature, the negative effects are mostly local. Consequently, the distribution of benefits and costs is asymmetric; in particular, local residents experience mostly the negative effects, while the general population receives the benefits.
There should thus be equity considerations, in addition to efficiency considerations in the decision to construct a PVF, and in deciding its location and size, as the presence and severity of the impacts depends on the selected location and size of the farm. To analyse the efficiency and equity of the decision it is crucial that costs and benefits of both local and general stakeholders are considered and that they are expressed in the same unit of measurement. To this end, we applied two stated preference (SP) methods: the contingent valuation (CV) and the discrete choice experiments (DCE) methods. The former method was applied to elicit the welfare effect on local residents of specific PVFs installed in a Portuguese region with a high level of solar radiation exposure, while the DCE method was applied to elicit the
50 welfare effects among the general population resident in different regions of mainland Portugal.
The reminder of this paper is organized as follows. Section 2 presents the current situation of solar photovoltaic electricity production in Portugal. Section 3 provides an overview of the main methodological issues involved in our two studies, explaining the valuation methods, the survey design and presenting a brief description of the case studies. Section 4 presents and discusses the results. Finally, in section 5 the main conclusions of this paper are presented.
2. SOLAR PHOTOVOLTAIC IN PORTUGAL
The sun annually provides to the atmosphere a huge amount of energy corresponding to about 10 000 times the world energy consumption observed during the same period. In Portugal, the available potential is quite considerable, being one of the European countries with best conditions for exploitation of this resource as shown in Figure 1. The average annual number of hours of sun ranges from 2200 to 3000 on the mainland, and from 1700 to 2200 in the Azores and Madeira, respectively (DGEG, 2014).
Figure 1: Solar Photovoltaic Energy Potential in Europe
Source: DGEG (2010)
Despite its high potential, photovoltaic (PV) electricity generation is still underexplored in Portugal, with a modest implementation in the country until very recently. Between 2010 and 2013, there was a significant progress in the exploitation of this renewable energy source, with an increase of 122% of the installed PV power. As depicted in Figure 2, in 2013, about 37% of the installed PV power was concentrated in the Alentejo region, followed by the Centre region with about 17%. The remaining regions together accounted for about 46% of installed PV capacity (Deloitte, 2014).
51 Figure 2: Distribution of Installed
Solar Photovoltaic Power in Portugal by NUTS II in 2013 (MW)
Source: Deloitte (2014)
The installation of PVFs can play an important role in the economic growth of the region of Alentejo which is characterized by low population density, an aging rate above the national average and high unemployment rate (Junqueira et al., 2013). More generally, increased investment in PVFs would contribute to the diversification of the energy mix, to lowering the external dependency of the economy and to the achievement of Portuguese Renewable energy goals.
3. METHODOLOGY
Elicitation of the welfare changes caused by the operation of solar photovoltaic farms requires the application of non-market valuation methodologies as the impacts caused by their operation are not traded in organized markets. In this study we use two valuation methods: the contingent valuation (CV) and discrete choice experiments (DCE). Contingent valuation is applied to elicit the effects on the welfare of the communities in the vicinity of the farms; discrete choice experiments are applied to elicit the welfare impacts on the general population. Both methods are discussed next, as well as the case studies broadly outlined.
3.1. Contingent Valuation
The CV method is a direct survey approach to estimating consumer preferences towards a non-market good or service. Using an appropriately designed questionnaire, a hypothetical (or contingent) market for the good in question is described. This contingent market defines the good itself, the institutional context in which it would be provided, and the way it would be financed. Respondents are then asked to express their maximum willingness to pay (WTP) or minimum willingness to accept (WTA) compensation for a hypothetical change in the level of provision of the good (Mitchell and Carson, 1989; Hanley et al., 2001; Atkinson and Mourato, 2008). In this study, we designed a CV survey with the main aim of estimating the minimum monetary amount respondents would be willing to accept as compensation for all the burdens caused by the presence of a PVF in the proximity of their residence.
52 Following Whitehead (2006), each questionnaire was composed of four parts. After an introductory part with general questions on renewable energy sources, part 2 presents specific questions on the production of electricity through PVFs, of which we highlight, for its relevance, the valuation question. Due to the fact that we had no prior information on the distribution of respondents’ valuation for choosing the thresholds for a discrete-choice format, this question was formulated as an open question. The payment vehicle chosen was compensation in the monthly electricity bill. Part 3 contains some additional questions on respondents’ preferences and opinions on different energy sources, renewable and non-renewable. Finally, part 4 included some questions to gather information on the individuals’ socio, economic and demographic characteristics (e.g., gender, educational level, family situation, income, etc.). The questionnaire was subject to an interactive test and review process using pilot studies (Botelho et al., 2014).
The elicitation of local residents’ welfare changes attributable to the presence of PV farms must be preceded by the selection of specific PV farms. Considering the size and design of the farms three PVFs were selected, all located in the region of Alentejo: Amareleja, Hércules, and Ferreira do Alentejo, The questionnaires were applied during May 2014. In total 60 CV questionnaires were completed, of which 22 were collected in Amareleja, 15 in Hércules and 23 in Ferreira do Alentejo. Sections 3.1.1 through 3.1.3 describe the PVFs.
3.1.1. Hércules PVF
Hércules PV power station is located 200 km southeast of Lisbon, in the agricultural region of Alentejo, more precisely in the parish of Brinches, municipality of Serpa. At the time of its inauguration in 2007 it was the first large PV plant to be installed in the country, generating enough electricity to power up to 8000 homes. It occupies an area of 60 hectares, among olive trees on hillside pasture, and it was built with the concern of maintaining farmland productivity. Furthermore, panels were mounted two meters off the ground, allowing sheep to graze on the grass below (Maso, 2007; DGEG, 2007; GE Energy Financial Services, 2007). Figures 3 and 4 present the exact location and a panoramic image of the Hércules plant, respectively.
Figure 3: Location of Hércules PVF
53 Figure 4: Panoramic Image of Hércules PVF
Source: Maso (2007)
After eight months of construction, the project began feeding Portugal’s electricity grid in January 2007. GE Energy Financial Services owns the facility; Power Light Corporation designed the plant’s PowerTracker system, and Catavento, S.A., a major Portuguese renewable energy company, developed the project and is providing management services. The facility consists of a ground-mounted PV system that uses silicon solar cells to convert sunlight directly into energy. The use of the “PowerLight PowerTracker System”, following the sun as it moves across the sky throughout the day, increases the system’s efficiency by permitting more than 200 kWp to be controlled by a single motor with a rated power of only 0,5 KW (Maso, 2007; DGEG, 2007; GE Energy Financial Services, 2007).
3.1.2. Amareleja PVF
Amareleja PV plant is installed in the small parish of Amareleja, in the municipality of Moura, one of the most inner districts of Portugal, located on the border with Spain and in the right bank of river Guadiana. The Amareleja parish is one of the largest of Moura, with 2564 inhabitants and has the particularity of having the highest sun exposure of the country, a determinant factor in the siting decision of the project (Junqueira et al., 2013). Figures 5 and 6 show the exact location and a panoramic image, respectively, of the Amareleja PV plant, in which it is evident its large dimension, occupying a total of 250 hectares of land.
Figure 5: Location of Amareleja PVF
54 Figure 6: Panoramic Image of Amareleja PVF
Source: ACCIONA:
http://www.acciona-energia.com/activity_areas/solar_photovoltaic/installations/plantaamaraleja/amarelej a-plant.aspx?id=2&desde=
The Amareleja PV plant was considered at the time of its inauguration, in 2008, the world’s biggest, producing enough energy to supply around 30000 homes a year. This facility is owned and operated by ACCIONA, a Spanish multinational company with a prominent position in the area of renewables. Despite having created 350 jobs during the plant construction, its operation only requires 15 employees. With the aim of adding value to the local community, the initial project also foresaw the construction and operation of a solar panel manufacturing plant to be installed on the Tecnopolo of Moura industrial property. However, what was actually built was a solar panel assembly plant, which imports all the panel components from China. This company, owned by the Spanish group Fluitecnik, was responsible for employing 100 workers, but since mid-2012 it has stopped producing. With the purpose of developing the local community, the company owning the Amareleja plant set up a 3 million euros social fund to foster development initiatives linked to renewable energy sources in areas such as R&D (a research laboratory), vocational training, community awareness, and support for microgeneration projects (DGEG, 2007; Delicado and Junqueira, 2013; Junqueira et al., 2013).
3.1.3. Ferreira do Alentejo PVFs
In Ferreira do Alentejo, a Portuguese municipality in the district of Beja, in Alentejo, there are several PV power plants built and operated by distinct companies. In the following two figures, we present, respectively, the exact location and a panoramic image of some of the PV plants installed in the municipality of Ferreira do Alentejo.
Figure 7: Location of Ferreira Alentejo PVFs
55 Figure 8: Panoramic Image of Ferreira Alentejo PVFs
Source: GENERG: http://www.generg.pt/pt/portfolio/energia-solar/
Net Plan, a Portuguese renewable energy company, was the first to invest in this municipality, more specifically in the parish of Ferreira do Alentejo, with a PV project, including the construction of a group of five small plants. The installation of the PV plants, with a total of 43000 PV panels and a power of 1,8 megawatts, began in October 2007 and was concluded in May 2009. It should also be noted that the PV panels used were built in a factory installed in the municipality of Oliveira do Bairro, in the district of Aveiro (Net Plan, 2011). Located in an area of 40 hectares west of the town of Ferreira do Alentejo, there is another PV plant operating since September 2009. With an installed capacity of 10 megawatts (MW), this PV plant uses 45440 polycrystalline silicon panels, with a peak power of 230 W, installed on single axis trackers. Finally, a third PV plant, covering an area of 58 hectares in the municipality of Ferreira do Alentejo, was built by the Portuguese Group Generg and is operating since December 2009. This project, with a total installed capacity of 12 megawatts and using 64000 polycrystalline silicon modules, produces 21 GWh of electricity each year. This PV plant has the particularity of being the first in Portugal and one of the first five in the world to be awarded with the German TÜV Rheinland certification which attests the quality of the work, equipment and operation (Generg Group, 2012).
3.2. Discrete Choice Experiments
The elicitation of the general population welfare changes caused by the existence of solar PV farms, in general, was done by applying DCE. DCE is based on the notion that value is derived from the specific attributes of a good, in accordance with Lancaster (1966)’s characteristics theory of value. This survey-based approach has the advantage that respondents are simply required to choose their preferred option out of a series of sets of alternatives that differ by the attributes/levels present. In each choice task, respondents trade off changes in attribute levels against the associated cost (Hanley et al., 1998, 2001; Bateman et al., 2002; Pearce et al., 2006).
During the first semester of 2014, 250 questionnaires were conducted among the general population, residing in distinct regions of mainland Portugal. Similarly to the CV questionnaires, DCE questionnaires were also divided in four parts. First, the degree of respondents’ familiarity with renewable energy sources was assessed in an introductory section. Second, there was the choice experiment section, in which individuals were presented with six choice sets, each consisting of a choice between two alternative ways of producing electricity through photovoltaic energy, differing on the levels of specific attributes. Due to its key role in the questionnaire, and to
56 illustrate the choices respondents were faced with, we present one of the six choice sets given to respondents in the following table:
Table 1: Choice Set Example
Consider the choice between form A of electricity generation through photovoltaic energy and form B of electricity generation also through photovoltaic energy. Tick your preferred option:
Form A Form B
Significant impact on the landscape Yes Yes
Significant impact on the Fauna/Flora No Yes
Produces glare affecting population Yes No
Increase in the monthly bill € 12 8
Your choice
Then, respondents were presented with two more sections with questions on preferences and opinions on different energy sources (part 3) and to gather information on individuals’ socio, economic and demographic characteristics (part 4). The questionnaire was subject to an interactive test and review process using pilot studies.
4. RESULTS
4.1. Local Residents
Local residents’ sample is composed of respondents mostly with low education level (24% have primary school), 28% of which are retired, with mean age of 53 years old and mean per capita household income of approximately 422 Euros. Characterizing respondents’ environmental concerns, most of them find that water pollution is the most significant environmental problem in Portugal, followed by waste and atmospheric pollution. The vast majority of respondents are familiar with production of electricity through photovoltaic farms, wind farms and hydroelectric power stations, but biomass and wave energy are unknown to most respondents. In addition, most respondents consider photovoltaic, wind and hydropower environmentally friendly, while coal and crude oil are considered unfriendly. Most respondents (59%) observe in detail their monthly electricity bill, which is approximately 78 Euros. Regarding the respondents’ relationship with the PVF, the impacts that most bother respondents are: glare, landscape intrusion, and effects on fauna/flora. A considerable number of respondents (60%) stated a positive willingness to accept (WTA) compensation amount (29.59 Euros on average), varying between 5 and 300 Euros per month. In order to identify the determinants of respondents’ WTA amount we estimate a zero-inflated negative binomial model, as respondents have a two stage process, first deciding whether they are entitled to some compensation (which correspondents to a binary yes/no variable) and then decide the amount of compensation (in integer numbers). According to this specification, the variables determining the decision to be entitled for some compensation need not be the same than those determining the decision on the specific amount. In addition this specification contemplates the sometimes excessive number of zeros observed. The explanatory variables were
57 selected based on existing literature. The variables used are: annoyance_sn, takes the value 1 if the respondent reports being annoyed by the presence of the PV farm, and zero otherwise; Hercules and Ferreira Alentejo are dummy variables taking the value one if the observation was collected in Hércules/Ferreira do Alentejo, and zero otherwise, the omitted category is Amareleja; self-interested is a dummy variable taking the value 1 if the respondent, a friend or a family member worked or works in the PV farm, and 0 otherwise; glare annoyance, measures the degree of annoyance caused by the glare effect reported by respondents on a 5 point scale (with 5 being the highest level of perceived annoyance); retired, takes the value 1 if the respondent is retired and 0 otherwise; age is the age of respondents and gender takes the value 1 for male respondents. Results are reported in Table 2, where the first panel reports the results on the decision to be entitled to compensation, while the second reports the results on explaining the compensation amount demanded.
Table 2: Zero-inflated negative binomial model
Depe ndent Va ri a ble s Explanatory Variables Coefficient (robust stdev) WTA yes/no Annoyance_sn -23.2169*** (1.2912) Hércules -11.5520*** (13.6998) Ferreira Alentejo 3.1186 (1.2531) Constant -2.9682 (0.9942) WTA amount Self-interested -0.5334* (0.3103) Glare Annoyance 0.3402*** (0.1300) Retired 0.7609* (0.4160) Gender 0.0655 (0.2642) Age -0.0294*** (0.0106) Hércules -0.8296** (0.2766) Ferreira Alentejo -0.3774 (0.3367) Constant 4.4815*** (0.6355) Ln(alpha) -0.6816* (0.2568) N: 60 (zero=21); Wald chi2(9) 45.79*
Note: *significance level of 10%; **significance level of 5%; ***significance level of 1%
58 According to the results presented in table 2, general annoyance is the most important determinant of the decision to receive compensation, although it influences it negatively. In addition, location is also significant: residents in Ferreira do Alentejo are less likely to demand compensation than respondents in Amareleja. Regarding the decision about the amount of compensation, results show that retired respondents demand, on average, higher amounts. The glare effect is also responsible for respondents demanding higher compensation amounts. On the other hand, respondents having an interest in the PVF, because they work/worked or know someone that works/worked in the facility, demand lower amounts of compensation. Relative to residents near the Amareleja PVF, residents in Ferreira do Alentejo demand lower amounts of compensation. This, coupled with the result that residents in Hércules are less likely to demand compensation, might be justified by the differences in the size of the PVF: Amareleja plant is the biggest, occupying 250 ha, followed by Ferreira Alentejo (94 ha) and Hércules (60 ha) PV farms. Based on the regression model, we predict that the amount of compensation demanded would be on average 29.59 Euros per month, being 50.46 Euros in Amareleja, 21.38 in Hércules and 14.97 Euros in Ferreira Alentejo. The most significant result obtained is that compensation amounts are clearly site-specific. Also relevant is the fact that populations feel annoyance by the presence of the PVF which influences their decisions regarding the entitlement to compensation, and the amount demanded.
4.2. Non-Residents
The questionnaires were administered during the first semester of 2014 to a sample of 250 residents in continental Portugal. The average age is 50, 47% are men, 35% retirees and most have secondary schooling. Characterizing respondents’ environmental concerns, most of them find that waste (65%) is the most significant environmental problem in Portugal, followed by water pollution (57%) and air pollution (55%). For respondents, the most important environmental problem associated with the use of energy from fossil fuels is water pollution (55%), followed by climate change (52%) and CO2 accumulation (49%). The vast majority of
respondents are familiar with production of electricity through photovoltaic farms, hydroelectric power stations and wind farms; biomass energy is unknown to most respondents. Furthermore, 93% of respondents consider wind energy the most environmentally friendly, followed by PVF (92%) and hydropower (86%), while crude-oil and nuclear are considered environmentally unfriendly (76% and 72% respectively). Most respondents (87%) consider important or very important to know the type of energy used in the production of the electricity they consume. Average electricity bill is 75 Euros. Regarding respondents’ answers to the choice questions, 42% stated they considered all attributes in their choices, while the others considered only some of the attributes.
Considering that each of the 250 respondents made 8 x 2 choices we have a total of 4000 distinct observations for the choice decisions, 16 for each subject. Thus, in practical terms our data set can be described as a panel data set.
59 Table 3: Binary logit model (with cluster correction)
Note: *significance level of 10%; **significance level of 5%; ***significance level of 1%
Table 3 reports the estimated partial effects of each attribute on individual choice and also respondents’ predicted willingness to pay (WTP) for avoiding each environmental impact. All estimates are statistically significant. On average, respondents are 37 percentage points less likely to choose a form of producing electricity in PVFs with impacts on the fauna/flora, than they are if this impact is avoided. In a similar fashion, the presence of significant impacts on landscape decreases the probability of being chosen by the respondents by 31 percentage points, on average. The attribute that most significantly affects respondents’ preferences for the form of production is the impact on fauna and flora, and on average respondents are willing to pay a price premium of 8.13 Euros per month to avoid this impact. To avoid significant impacts on landscape they are willing to pay on average 7.12 Euros monthly. The least significant impact is the glare effect, with an average WTP of only 4.84 Euros per month to avoid it.
In sum, the results show that all attributes considered are statistically significant in explaining respondents’ choices. In addition, we are able to elicit the order of importance concluding that the impacts on fauna and flora are the most important determinants followed by the effect on the landscape. Least important are the glare effect and the effect of the increased electricity bill. In terms of policy implications, our preliminary results indicate that PV farms, as perceived by the general population, are understood as affecting most significantly the fauna, flora and the landscape, thus the location decision should contemplate these impacts seriously. In addition, it is important to develop more effective information campaigns thus reducing the eventual misinformation regarding some of the impacts. Finally, it is important to stress the robustness of the DCE method revealed by the results as respondents distinguish between different impacts by valuing them differently.
4.3. Comparing Results
Application of the CV and DCE methods allowed the estimation of the welfare effects of PV farms for two distinct groups of stakeholders: residents in the vicinity of the
V a ria bl e s Partial effects (stdev) Mean WTP (stdev) Landscape -0.3120*** (0.0223) 7.1243*** (0.7494) Fauna/Flora -0.3713*** (0.0236) 8.1294*** (0.8486) Glare -0.1852*** (0.0140) 4.8365*** (0.5790) Price -0.0401*** (0.0018) --- Log likelihood function -1531.53155***
60 farms, and population in general. The most relevant difference between the two samples regarding its composition is income, age, and education, with local residents being older, less educated and with less income. This however reflects the different statistical universes from which the samples were drawn.
Through the CV method, we were able to predict that the compensation amount demanded by local residents would be on average 95 Euros per month. On the other hand, the application of the DCE method among the general population allowed us to conclude that, on average, respondents are willing to pay an amount between [4.8 Euros; 8.1 Euros] depending on the impact considered. Thus, as the number of residents to be compensated are those living close to the installations, while those willing to pay are the entire population, it is safe to conclude that the welfare benefits more than compensate the costs and thus, pending equity considerations, the use of PV farms is potentially welfare improving.
5. CONCLUSIONS
PVFs are generally seen as environmentally friendly, however they are not environmentally impact free.
In deciding between energy sources to produce electricity, public decision makers should, in addition to the more traditional efficiency considerations, analyse the “equity implications” of the projects. A proper equity analysis requires identifying all stakeholders and a comparison of the welfare change for each group following the installation of a PVF. This study applies the CV and the DCE approaches in order to elicit an economic value for the environmental impacts caused by the PVFs’ activity near two distinct public targets: local residents and the general population. With the answers given by the local residents, we were able to estimate the minimum monetary amount demanded as compensation for the negative impacts caused by the proximity of three Portuguese PVFs. While the answers given by the general population in mainland Portugal, we computed the value of each environmental impact caused by the PVFs’ activity, by asking individuals the monetary amount they were willing to pay in order to have electricity generated through solar photovoltaic, but with the possibility of avoiding specific adverse impacts. The results of this paper confirm the relevance of considering the environmental impacts of PVFs in the siting decision process. Moreover, as the impacts depend on the site and location of the dams, policy makers should use this information to integrate these parameters into their decision-making process.
Acknowledgments
The authors gratefully acknowledge the financial support from PTDC/EGE-ECO/122402/2010
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