External costs of high-voltage overhead transmission lines: Evidence from a causal approach in rural France

Abstract

In light of climatic change and global warming, electricity transmission networks need to be developed for the integration of renewable sources. In North America and Europe, to achieve renewable electricity goals, massive investments in electricity transport infrastructure are planned to connect solar and wind generation sites to the grid network. However, local opposition to new installations of high-voltage overhead transmission lines (HVOTLs) is causing delays and cost overruns. Visual nuisance is an important basis of local stakeholders' opposition to a new project. Estimations of the local economic impact of HVOTLs can help in identifying the external costs of the electricity supply industry to improve both efficiency in electricity pricing and fairness in defining provision for host community compensation. Prior research has provided evidence that existing HVOTLs have negative but not substantial effects on their immediate neighbourhoods. However, these studies have applied a correlational approach. This paper revisits the external effects of HVTOLs, exploring the case of a 225 kV line connecting two medium-size cities (Saint-Privat-d'Allier to Saint-Etienne) in France. We take advantage of the public disclosure in 2009 of undergrounding 8 km out of a total of 87 km lines as a result of a network upgrade project, to develop a difference-in-difference specification of a hedonic regression model, by comparing house sale prices at different distances from existing pylons, before and after the announcement of the decision to upgrade the line. We show that undergrounding was accompanied by an increase of about 38% in the price of treated houses located within 200 m of old pylons. The implied environmental costs of proximity to high-voltage pylons are substantial and their reduction is internalized into house prices as soon as the decision to go underground is announced.