Using a linear cost minimization model with a 1 h time resolution, we investigated the influence of geographic allocation of wind power on large-scale wind power investments, taking into account wind conditions, distance to load, and the nature of the power system in place (i.e. power generation and transmission capacities). We employed a hypothetical case in which a 20% wind power share of total electricity demand is applied to the Nordic–German power system. Free, i.e. geographically unrestricted, allocation of new wind power capacity is compared with a case in which national planning frameworks impose national limitations on wind power penetration levels. Given the cost assumptions made in the present work, the prospect of increasing the wind power capacity factor from 20 to 30% could motivate investments in transmission capacity from northern Scandinavia to continental Europe. The results obtained using the model show that the distribution of wind farms between regions with favorable wind conditions is dependent upon two factors: (i) the extent to which existing lines can be used to transmit the electricity that results from the new wind power and (ii) the correlation for wind power generation between the exporting region and the wind power generation already in place. In addition, the results indicate that there is little difference, i.e. just over 1%, in total yearly cost between the free allocation of new wind power and an allocation that complies with national planning frameworks. However, on a national level, there are significant differences with respect to investments in transmission and wind power capacities and the replacement of conventional power generation. Copyright © 2012 John Wiley & Sons, Ltd.