Exclusion zones for renewable energy deployment: One man’s blessing, another man’s curse

Exclusion zones, like protected areas or setback distances, are the most common policy instrument to mitigate environmental impacts of human land-use, including the deployment of renewable energy sources (RES). However, exclusion zones may also increase generation and environmental costs of RES deployment. This paper aims to understand and quantify these trade-offs. Using a simple analytical model, we propose that cost effects of exclusion zones can be decomposed into a substitution effect (because RES generation is shifted to sites with higher or lower marginal costs) and an output effect (because more sites may be needed to attain a given RES generation target). We provide a numerical illustration for two examples of exclusion zones – setback distances to settlements and forest bans – which are implemented for wind power deployment in Germany. We find that moderate setback distances reduce disamenity costs but also lead to increases in generation and other environmental costs. This trade-off is primarily due to the output effect. Importantly, the output effect also implies that very restrictive setback distances may fail to reduce, and even increase, aggregate disamenity costs of wind power deployment. For forest bans, our analysis reveals substantial increases in disamenity costs. This trade-off mainly results from the substitution effect. Our analytical insights can be transferred to other fields of environmental policy, for example, exclusion zones regulating agricultural land-use or urban development.