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Renewable Energy – Hypothetical study

This essay was written as part of a Masters in Environmental Economics Policy and Risk in 2005.  The question was purely hypothetical.





Tina Irving



Renewable energy has become a major topic on Orkney and there are several projects at different stages of development on the mainland from Deerness in the East to Billia Croo in the West of the island, as well as some on the outer islands. There are inevitable objections to some of the proposed developments. Orkney is designated as a National Scenic Area by SNH and there are conflicts of interest between what could be seen as negative impacts on tourism and the need to reduce fossil fuel usage by 18% by 2010. The vast number of visitors to the Renewable Energy Exhibition and seminars which took place in the Stromness Academy in October 2003 indicated the level of interest in what has become a real talking point on the island. The existence of the Orkney Renewable Energy Forum (OREF), the proliferation of environmental and renewable companies and recent appointment of a Community Renewable Energy adviser to the Council indicate that some parties are already convinced that renewable energy is feasible and that the technology is available to harness the natural environment by these methods.

This report concentrates on the non market aspects of the development, as opposed to the market considerations such as tourism and fishing. Fig 1 shows the inputs and outputs of environment and economy from a systems perspective11.


EEPR Consulting Ltd., a small, well established and experienced local firm, have been commissioned by Orkney Council to undertake a study to quantify the environmental and social costs of a tidal energy barrier and associated windfarm development in Eynhallow Sound and on Eynhallow Island. The proposed development is for a fixed barrage construction, similar in appearance to the Churchill Barriers, to facilitate a tidal energy unit, together with the siting of four windturbines on Eynhallow. The road would be linked from the point of Hisber to the south side of Eynhallow, and from the north east shore of the Eynhallow to the Island of Rousay. The wind turbine installation would be similar in design to existing turbines at Burger Hill. Turbine and tidal energy technology is well advanced and there are already several developments throughout Scotland.

The proposed site is of archaeological interest, and has a monastry, prehistoric houses and The Lodge, a 17th Century house designed by Lethaby architects. The Heritage walk is one of the most important walks in Scotland. The area is also a Site of Special Scientific Interest (SSSI) designated by SNH, and the base for a long project studying fulmer petrels. In addition, Eynhallow is a breeding ground for puffins. On the west mainland Evie beach is probably the largest stretch of sandy beach on the west Mainland.


· to quantify the environmental and social costs of the proposed development.
· to implement an economic model to value non market costs and benefits.
· to justify the use of such a model in valuing the costs and benefits
· to put in place a procedure to carry out the valuation in the form of a questionnaire


Wind Turbines

Visual impact1

SNH have carried out a scoping study of public and professional attitudes to landscape, and there has been a great deal of academic research on the subject2. Aquaterra use Windfarm software to create a photomontage of how windfarms may look and it is recommended that this software, together with the attached questionnaire, could be used to assess the visual impact of the turbines and the road3. The impact of wind turbines was the subject of recent research by Bishop4 using animated computer simulations in paired comparisions of scenes, with and without a turbine. The detection, recognition and judgement of the visual impact was tested in relation to distance, contrast and atmospheric conditions. The height of the turbine was 63m. The key conclusions were:

· Recognition was only made by 5% of respondents at 30km distance
· Recognition was only made by 10% of respondents at 20km distance
· The most significant drop in recognition rates occurred at 8-12km in clear air
· The most isgnificant drop in recognition rates occurred at 7-9km in light haze
· Visual impact drops rapidly at approximately 4km and is <10% at 6km in clear air
· Visual impact in light haze is not greatly different. A rapid decrease in visual impact begins at under 4km and is <10% at 5km
· Low contrast in light haze reduces the distance thresholds by 20%
· High contrast can dramatically increase the potential impact of white towers
· Ratings are highly sensitive to changing atmospheric conditions

Influences on visibility

In general it was found that the turbines were perceptible at a range of from 15-20km from the windfarm and up to 25km in specific cases and conditions. The distances only apply in clear conditions and if you are specifically looking for the turbines and not just looking at the landscape. It is likely that the turbines would be perceptible to a casual observer at distances of 10-15km, unless they were highly sensitive or observant or a resident.

The RSPB would undoubtedly have concerns about the effects of the turbines on the local bird population, although a report published by them in 1993 suggested that there were no significant impacts on the birds when they carried out a survey prior to the installation of aero-generators at Burger Hill.5

The visual impact of the turbines will be significant and a method of capturing peoples’ attitudes to the windfarm is required. The contingent valuation method described below addresses this issue.
The Road

It may be that traffic on the causeway will cause pollution and there is also the possibility of noise pollution. The Tingwall ferry, which currently makes three sailings per day to Rousay, would no longer be required on that route, making staff redundant. The livelihood of the local fishermen would be negatively affected, as access to traditional fishing grounds would be obstructed.

The appearance of the road may be intrusive on the eye, being 10m above the mean high water spring (MHWS) tide level, and being a dual carriageway. There would also be an impact on the seabed and on marine life. Fish would no longer have unrestricted access to the ocean via that route, having an impact on their established pattern of feeding and movement. Cetacean migration and breeding grounds may be affected, causing disorientation and difficulties for feeding due to impact on fish. Noise during construction may also impact on cetaceans and fish in the area, causing them to find other alternatives for living. Fatalities may occur as they become confused and caught up in machinery.
On the Tourist Trade

The tourist trade is very important to Orkney and is a significant source of income both for the main island and the outer isles. There are many seasonal jobs created by the tourist industry from accommodation providers to wreck diving holidays. There are numerous sites of archaeological, historical and cultural interest, as well as opportunites for outdoor activities such as walking, bird watching and wildlife watching. Over 120,000 tourists visited Kirkwall6 in 2003 although of course not all visited Rousay or even saw the area. The likelihood of tourists being adversely affected by the development is one which should be seriously considered, and a survey of tourists’ opinion would be carried out under the contingent valuation methodology.

Social Benefits

The residents of Rousay would have unrestricted access to mainland Orkney for socialising and shopping as well as employment, education and medical facilities. This would provide them with a better quality of life. The indigenous population is decreasing as young people move away to find jobs. If economic regeneration of the area could be achieved through better access to employment and education, the rate of loss of young people from the island may be arrested.

The development could be approached as a further tourist attraction with interpretation and information facilities explaining the purpose and importance of renewable energy and its benefits to the island. There is also an educational aspect where visitors would have the opportunity to learn about renewable energy and the benefits to the area. The visitor would then have the benefits of the beach, learning about renewables (tidal and windpower), watching the birdlife and the heritage. The different aspects could be combined to make an attractive, interesting place to visit, with the chance to learn about something new.


A full environmental impact assessment is being carried out which will establish more precisely the effects of the development on the environment.

· Travel Cost
· Hedonistic
· Contingent valuation

All of the methodologies considered were based on the willingness of the individual to pay the price for having the development. In the case of the tourists, the questionnaire asks whether they will be prepared to pay an entrance to a visitor centre. A MORI poll carried out in in Argyll in 2002 showed that most tourists (80%) said that they would be intrested in visiting a wind farm if it were opened to the public with a visitor centres, with over half (54%) saying that they would be very interested7. See Fig. 2. A further MORI poll carried out on residents of Argyll revealed that they were mostly concerned about the visual aspects of the landscape.



Travel Cost Method (TCM)

The travel cost method of valuing environmental attributes was developed by Hotelling (1947)8. A person may travel to a site where there is no entrance fee, and will incur costs in doing so, in terms of time and travelling costs, thereby valuing the facility in at least those terms. If there is an admission charge this must be added to the cost of travel to obtain the willingness to pay for the attribute. The TCM attempts to gauge the demand curve for a particular facility. The curve will be downward sloping with demand decreasing as distance (cost) increases9.

The three basic forms of TCM are:

· Zonal travel cost approach – the cost of travelling from different places on the globe.
· Individual travel cost approach – assesses the actual distance travelled by each individual rather than allocating visitors to zones.
· Random utility approach – examines the likelihood that an individual will choose to visit a particular site out of a number of sites. The decision making process requires a significant amount of data and resources to establish whether the site will be selected and is therefore expensive.

TCM can only deal with very specific locations and fails to take into account existence, that is to say the very fact that a natural attribute exists gives utility to people and therefore gives it a value5. Nor does the method take into account the option value, that is to say, the retention of an option to experience aesthetic or non use value4. Non use value is concerned an individual’s non use of or intention to make use of an environmental asset or attribute but which the individual would nevertheless feel a “loss” if such things were to disappear9. In the case of the proposed development, it may be that individuals value the space and landscape of Eynhallow and Rousay. Even if they have never been there or intend going there it may be that they have seen photographs or simply do not wish the landscape to change.

In the absence of a market, the hedonistic price approach measures the quality of the environmental services by observing the prices of surrogate goods affected by different environmental conditions4. The methodology is normally used for other types of markets, such as property and labour. The main disadvantage of the hedonistic approach when considering the project is that environmental attributes cannot be measured accurately. The theory is that the value of any good is the accumulation of the values of the attributes. However, it could be that the whole is more than the sum of its parts, and provide a value which is not inherent in any one value of the good. It is very difficult to assign values to each attribute individually. In this study, the attributes could be viewed as the developments themselves and the impacts, both market and non market, viewed as individual attributes.

The hedonistic method assumes that there is perfect information, that is to say, that all parties have equal knowledge about the development and environmental quality, whereas not all will have. For example, some may not know that there are puffins on Eynhallow but may be passionate about puffins. If they did know there were puffins in the vicinity, they would be less likely to encourage the development as they would be concerned about the impact on them.

Other disadvantages of the hedonistic method are that it does not take into account existence or option value.

Contingent valuation

Over the last twenty years there has been a rise in public concern about the environment, especially noise pollution, loss of natural habitat and other natural resources10. EU legislation has arisen from these concerns, initiated by the Treaty of Rome. The market mechanism does not recognise the value of goods and services, and benefits such as landscape and natural heritage cannot be valued in monetary terms. Typically the value of the ecosystem can only be recognised once there is a problem, such as an oil spill and the clean up costs involved. The contingent valuation (CV) method attempts to address this issue by creating a surrogate market, that is to say, there is no supply of goods or services, and balancing development against the environment. By identifying the environment as a good and asking the public what they would be willing to pay for the quality of the environment, a number of non-marketed values can be quantified in monetary terms. In theory the financial damage on the environment should be assessed and.

The advantages of CV are that it is a direct method of valuation, it captures all methods, can be applied to any scenario and takes into account existence value11. The disadvantages are that it has the potential to introduce bias by loading the questions in favour of the development.
There are five stages to the process:

· Stage one – identifying the hypothetical market, establishing the scenario.

· Stage two – obtaining bids, identification of the bids by interviewing a representative cross section of tourists and residents, using two different questionnaires.

· Stage three – estimating average willingness to pay this can be done by using open ended questions or by dichotomous choice which offers a randomly selected figure, for example £5 to £100. For each questionnaire different amounts from £5 to £200 are used. For example, “would you be prepared to pay £200 to save seals – yes/no.” This is inceasingly the preferred method but is time consuming, more expensive and requires a larger representative sample.

· Stage four – identifying the effect of variables. Examine whether any responses have a significant impact on the outcome. The dependent variables include income, age, gender, education and location. It is considered that income will have the biggest influence, that is to say, whether the respondent can afford to pay.

· Stage five – aggregating data. Add up the responses from tourists and from residents separately.

The issues with the contingent valuation method are that people are unfamiliar with scenario, that there may be bias due to fear of the unknown. The questions are open ended and people may not wish to give a sensible answer, causing protest votes. Other influences are that the scenario is hypothetical. The market is a surrogate one and the surveyor needs to make the respondent believe it is a real market. Respondents know what the survey is about and act strategically. They may say that they will offer £100 but in reality would not offer that amount. The respondents’ income needs to be taken into consideration. Bias can be introduced by the surveyor as well by the way the questions are asked.

Taking all of the above into account, the methodology is considered as the one most appropriate to ascertain views of residents and tourists by means of the questionnaire provided with this report.


The development is extremely controversial and care needs to be taken not to jeopardise it while carrying out the questionnaire. The economic impact of the development, of jobs and potential for employment will be weighed up by individuals and others will be against the development however much information is provided and consultation takes place. The output from carrying out and analysis of the questionnaires and the environmental impact assessment will give an overall assessment of the development and, together with the findings of the Economic Development Committee (EDC), will provide all the information the Council needs to make a decision regarding the development.


That residents be consulted with regard to the development and enlist their support.

That a public meeting be held to introduce the development, including the financial aspects and the economic and environmental impacts.

That all stakeholders be appraised of the development and their buy-in sought.

That the EIA, financial statement and analysis of the output from the questionnaire be used as decision making tools with regard to the development, as well as public consultation.

That the contingent valuation method is used to elicit a valuation of the area.

That surveys be carried out on tourists and residents which should reveal their preferences and attitudes to the development. A brief, questionnaires and a photograph of how the development may look have been prepared, should the Council wish to follow this recommendation.

That use of the Windfarm software be used to demonstrate how the development could look.

1. Visual Assessment of Windfarms: Best Practice – University of Newcastle (2002) SNH Commissioned Report F01AA303A

2. Public and Professional Attitudes to Landscape – Scoping Study Report No F01AA303 – SNH and University of Newcastle.

3. Aquaterra – Windfarm software Release 3.1 Demo – ReSoft Ltd.

4. Bishop, Ian D (in press) Determination of thresholds of visual impact: the case of wind turbines. Environment and Planning B: Planning and Design.
5. The effects of aero-generators on moorland bird populations in the Orkney Islands, Scotland, E.R. Meek, J.B. Ribbands, W.G. Christer, P.R. Davy and I. Higginson 1993

6. Kirkwall Tourist Office

7. MORI – Polls and Surveys – Tourists ‘Not Aware’ of Wind Farms – http://www.mori.com/polls/2002/windfarms.shtml web accessed: 11/12/03.

8. Economics of Natural Resources, the Environment and Policies – E. Kula 1992

9. Dixon, J, Carpenter, R., Fallon, L., Sherman, P. and Manipomoke, S. (1989) Economic Analysis of the Environmental Analysis of the Environmental Impacts of Development Projects (London, Earthscan Publications Ltd.)

10. Valuing Environmental Preferences – Bateman & Willis – Oxford University Press – 2001

11. MSc Course notes – Dr. Sandy Kerr



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