Abstract
We investigate how macro-level factors—economic, social, environmental, and institutional—shape the levelized cost of electricity (LCOE) for onshore wind energy in Europe over time, while accounting for spatial dependence. Using a balanced annual panel of
10OECD European countries from 2011 to 2023, we estimate a Spatial Durbin Model with two-way fixed effects, which receives the strongest overall support among the non-spatial and spatial models considered. By decomposing total impacts into direct and indirect impacts, we find that macro-level factors are associated with LCOE through domestic and spatial spillover channels. Stronger economic and institutional performance is associated with lower LCOE through both channels, with spatial spillovers larger than the corresponding direct impacts. Higher emission intensity is associated with higher LCOE through both channels, whereas higher human development is associated with higher LCOE primarily through the domestic channel. Among the control variables, the association with LCOE is negative for cumulative onshore wind electricity generation and cumulative wind energy patents, but positive for renewable electricity generation share. Overall, our findings highlight cross-country spatial dependence and suggest that onshore wind energy cost-reduction policies in Europe should consider regional coordination rather than focusing exclusively on national conditions.