Abstract Although wind power is currently the most efficient source of renewable energy, the installation of wind turbines (WT) in landscapes often leads to conflicts in the affected communities. We propose that such conflicts can be mitigated by a welfare-optimal spatial allocation of WT in the landscape so that a given energy target is reached at minimum social costs. The energy target is motivated by the fact that wind power production is associated with relatively low CO2 emissions. Social costs comprise energy production costs as well as external costs caused by harmful impacts on humans and biodiversity. We present a modeling approach that combines spatially explicit ecological–economic modeling and choice experiments to determine the welfare-optimal spatial allocation of WT in West Saxony, Germany. The welfare-optimal sites balance production and external costs. Results indicate that in the welfare-optimal allocation the external costs represent about 14% of the total costs (production costs plus external costs). Optimizing wind power production without consideration of the external costs would lead to a very different allocation of WT that would marginally reduce the production costs but strongly increase the external costs and thus lead to substantial welfare losses.