John Fitzgerald of the ESRI is not normally noted for his interest in land values – certainly not when it comes to devising taxation system. He does however, see land values relevance in terms of energy investment in this post in The Irish Economy…
Tilting at windmills
This post was written by John Fitz Gerald
In considering how to value land under current economic circumstances answers may turn up in unexpected places. One of the most important state regulatory authorities, the Commission for Energy (CER), has taken the plunge and revised down their assumed value of land. In this case it is the site procurement cost for windmills. My colleague Laura Malaguzzi Valeri pointed me to page 41 of their document on Fixed Cost of a Best New Entrant Peaking Plant & Capacity Requirement for the Calendar Year 2010 where they say:
“Due to the significant movements in the economy over the last year, the value of land has reduced. An independent assessment was carried out on current land values, and the RAs are satisfied that the estimate for 2010 is an reasonable reflection of the current costs.”
As a result, they have revised downward the value which they assume by 63%.
Because wind producers are price takers on the competitive wholesale market this will not affect current electricity prices. Nonetheless, the fall in land prices should reduce the long-term cost of producing wind energy, with beneficial effects for consumers.
If NAMA want to read up on the details of this valuation it can be found at:
http://www.allislandproject.org/en/capacity-payments-consultation.aspx?article=f6ff1ea8-5f01-416d-a863-cb945a3d71d9
