Economic, Social, Environmental, and Institutional Factors Shaping Onshore Wind LCOE

Details

In this study, we examine a simple question: how are macro-level economic, social, environmental, and institutional conditions associated with onshore wind LCOE in Europe, and do these relationships extend beyond national borders?

We use a balanced annual panel of 10 OECD European countries from 2011 to 2023 and estimate a Spatial Durbin Model (SDM) with two-way fixed effects. The spatial framework allows us to distinguish between domestic relationships and cross-border spatial spillovers, rather than treating countries as independent units.

Our results point to several distinct patterns:

• Stronger economic performance is associated with lower onshore wind LCOE, both domestically and through spatial spillovers.
• Stronger institutional performance is also associated with lower LCOE through both channels.
• Higher emission intensity is associated with higher LCOE through domestic and spatial spillover channels.
• Higher human development is associated with higher LCOE primarily through the domestic channel.

An important result is that the spatial dimension matters. For economic and institutional performance, the estimated indirect impacts are larger than the corresponding direct impacts, indicating economically relevant cross-country spillovers. Overall, our findings suggest that policies aimed at reducing onshore wind costs in Europe should consider regional coordination and cross-country interactions, rather than focusing exclusively on national conditions.

We are also pleased to make all data and code used in the study publicly available, making the analysis fully reproducible.

Kara, Ö., Acaroğlu, H. (2027). Economic, social, environmental, and institutional factors shaping onshore wind LCOE in Europe: Evidence from spatial panel models. Energy Policy, 220, 115652. SSCISCIE