Wind farm land in Galicia: is there room to negotiate better conditions for rural communities?

• by OEGA
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When a wind farm is built on a hillside, there is a question that is rarely answered clearly: how much economic value does it really generate, and how is it shared between the developer and the landowners?

At the Galician Wind Observatory (OEGA) we have spent months working on an analysis that tries to answer this question using real data. The study is not yet finished —we are still reviewing and refining the model— but the first results already point to a trend clear enough to share. In any case, they should be read as preliminary results, still subject to revision.

Why does this matter to landowners?

A wind lease or easement contract can run for 25 years or more. At the time of negotiating, the developer has detailed information about the wind resource, expected output, the costs of the farm and the revenue it can obtain from selling the electricity. The landowner —whether an individual, a common land community, or a municipality— usually has no access to that same information.

This information gap, together with the fact that there is usually only one developer interested in a given hillside, makes it difficult to know whether the amount offered for the use of the land is fair. In economics, this situation is known as monopsony: there are several possible landowners to negotiate with, but only one buyer, or one party demanding the land.

If landowners do not know the economic value their land can generate, it becomes much harder to negotiate fair terms.

Three key concepts, explained without formulas

Before presenting the results, it helps to understand three basic ideas.

Economic surplus. This is the value left over once all the necessary costs of the wind farm have been deducted from its revenue, including a reasonable return for whoever made the investment. The central question is: how is that additional value shared between the developer and the landowners

Maximum Willingness to Pay (MWTP). This is the highest amount the developer could pay for the use of the land without the project ceasing to be profitable. It is not the payment actually made —which is usually lower— but rather an estimate of the economic margin available to compensate the landowner. The larger the gap between that maximum amount and the actual payment, the larger the share of the surplus retained by the developer.

Market Power Index (MPI). This is an indicator ranging from 0 to 1 —or from 0% to 100%— that estimates what share of that potential margin ends up in the developer’s hands. An index close to 100% would indicate that the developer retains almost all of the available margin, while a lower index would reflect a distribution more favourable to landowners.

To estimate all of this, we used three different, independent ways of calculating the figures, precisely so as not to rely on a single approach: one based on the present value of the wind farm’s revenues and costs, another that compares payments against international revenue-sharing standards, and a third —known as “Nash Bargaining”— which calculates how the surplus would be shared if both parties negotiated on equal terms.

What have we found so far?

We analysed 75 wind farms in Galicia, using production and payment data for the period 1997–2024. We applied three different methodologies to check whether the results hold up when different calculation approaches are used.

All three methodologies point in the same direction:

• The surplus generated by wind farms is, in general, far higher than what current contracts reflect: a very significant share of that value never reaches the landowner.
• The estimated Maximum Willingness to Pay for developers is, in almost all cases, much higher than what is actually paid for the use of the land, which indicates that there is real room to improve the economic terms of negotiations.
• Almost nine out of ten wind farms show a Market Power Index above 85%. This means that, according to our estimates, in the vast majority of cases the developer would retain a very large share of the potential economic margin. Specifically, it would mean that the developer pays the owner an amount equal to 15% of the maximum the developer would be willing to pay before the project ceases to be profitable.
• The average payment to landowners in Galicia represents approximately 2% of the developer’s gross revenue. The international benchmarks used in the analysis place this percentage at around 4%.
• If Galician contracts applied that 4% benchmark, landowners would have received, in total, close to 70 million euros more than they actually received over the period analysed.

Older wind farms, built before 2008, generally show a greater imbalance than more recent ones.

What do these results not allow us to claim?

The data should be interpreted with caution, for several reasons:

• The model uses sector-wide estimates of operation and maintenance costs, since developers do not publish the actual costs of each individual wind farm.
• One of the three methods used, known as Nash bargaining, is based on the theoretical assumption that the developer and the landowner negotiate on equal terms. We know that this equality rarely holds in practice, so the method is used only as a benchmark for estimating what a balanced distribution would look like.
• The results are still pending an external methodological review before they can be considered definitive.

We are therefore talking about preliminary results. All three methodologies show a consistent trend, but the final report, with reviewed and validated calculations, is still being prepared.

What can these data offer landowners, common land communities and municipalities?

This analysis is not an isolated academic exercise. It stems directly from the work OEGA carries out supporting landowners, common land communities and municipalities negotiating or renegotiating wind energy contracts, particularly in repowering processes.

Knowing, even approximately, the economic margin a wind farm can generate allows landowners to better assess the offers they receive, compare alternatives, and negotiate with more information. It does not automatically determine what the payment should be in each case, but it provides a useful benchmark for advocating fairer terms and greater local participation in the value generated.

We will continue working along these lines and will report back once the final report has been reviewed, validated and ready for publication.

This work, like everything OEGA does, would not be possible without the collaboration of the Juana de Vega Foundation, the Isla Couto Foundation and the Paideia Galiza Foundation, which together with the University of Vigo make the operation of the Galician Wind Observatory possible.