Category — Property values and windpower

[Editor’s note: With the author's permission, MasterResource reprints a probing analysis of a recent study by the Department of Energy's Lawrence Berkeley National Laboratory, The Impact of Wind Power Projects on Residential Property Values in the United States. Albert Wilson critically examines a genre of analysis used by wind proponents, including government bodies and environmentalists, that produces a desired result. Comments are invited on this paper as well as on other examples of where methodological tricks are used to justify wind power and other politically dependent energy technologies. (Mr. Wilson's Bio is at the end of the article.)]

WIND FARMS, RESIDENTIAL PROPERTY VALUES, AND RUBBER RULERS©

by Albert R. Wilson

I recently examined a document published by the Department of Energy’s Lawrence Berkeley National Laboratory titled “The Impact of Wind Power Projects on Residential Property Values in the United States: A Multi- Site Hedonic Analysis” (hereafter “Report”). I express no opinion concerning the impact of wind power projects on residential property values and instead focus on the underlying methods used in the development of the Report, and the resulting serious questions concerning the credibility of the results.

As stated in the title, the primary bases for the conclusions drawn in the Report are hedonic analyses of residential real estate sales data. A hedonic analysis in turn is based on the assumption that the coefficients of certain explanatory variables in a regression represent accurately the marginal contribution of those variables to the sale price of a property.

While I have other issues with the Report (and again reiterate that I have no opinion on the influence of wind farms on residential sales prices), the concerns I have addressed here lead to the conclusion that the Report should not be given serious consideration for any policy purpose. The underlying analytical methods cannot be shown to be reliable or accurate.

The reasons for the conclusion may be summarized as:

1) Lack of access to the underlying data prevents the independent validation of the data, replication of the analysis, testing of alternative analyses, or testing of the conclusions against the real market.

2) The peer review process used for both the literature and the Report can only determine the acceptability of the papers for publication. It cannot reveal the validity, accuracy or reliability of the work behind the papers.

3) Given the peer review actually conducted, the fact that no published and recognized standards for the development of an accurate and reliable regression on sales price were used render the Report of highly uncertain value for any purpose.

4) The exclusive use of a test of statistical significance only indicates that the coefficients for Distance and View variables are not conclusive. What we do not know is what those coefficients actually represent. Only tests of economic significance would provide an answer, and none has been conducted.

5) Low explanatory power: 13% less than an acceptable minimum for an accurate regression on sales price.

The technical analysis underlying this conclusion follows: [Read more →]