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Wind Turbine Shutdowns and Upgrades in Denmark: Timing Decisions and the Impact of Government Policy

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  • Cook, Jonathan A.
  • Lin, C.-Y. Cynthia

Abstract

Shutting down and/or upgrading existing productive assets are important economic decisions for the owners of those assets and are also the fundamental decisions that underlie the development of new, growing industries. This paper develops a dynamic structural econometric model of wind turbine owners' decisions about whether and when to add new turbines to a pre-existing stock, scrap an existing turbine, or replace old turbines with newer versions (i.e., upgrade). We apply our model to owner-level panel data for Denmark over the period 1980-2011 to estimate the underlying profit structure for wind producers and evaluate the impact of technology and government policy on wind industry development. Our structural econometric model explicitly takes into account the dynamics and interdependence of shutdown and upgrade decisions and generates parameter estimates with direct economic interpretations. Results from the model indicate that the growth and development of the Danish wind industry was primarily driven by government policies as opposed to technological improvements. The parameter estimates are used to simulate counterfactual policy scenarios in order to quantify the effectiveness of the Danish feed-in-tariff and replacement certificate programs. Results show that both of these policies significantly impacted the timing of shutdown and upgrade decisions made by turbine owners and accelerated the development of the wind industry in Denmark.

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  • Cook, Jonathan A. & Lin, C.-Y. Cynthia, 2015. "Wind Turbine Shutdowns and Upgrades in Denmark: Timing Decisions and the Impact of Government Policy," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 204960, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea15:204960
    DOI: 10.22004/ag.econ.204960
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    Cited by:

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    3. Christine L. Carroll & Colin A. Carter & Rachael E. Goodhue & C.-Y. Cynthia Lin Lawell, 2018. "Crop Disease and Agricultural Productivity: Evidence from a Dynamic Structural Model of Verticillium Wilt Management," NBER Chapters, in: Agricultural Productivity and Producer Behavior, pages 217-249, National Bureau of Economic Research, Inc.
    4. Rojas Valdes, Ruben I. & Lin Lawell, C.-Y. Cynthia & Taylor, J. Edward, 2017. "The Dynamic Migration Game: A Structural Econometric Model and Application to Rural Mexico," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 259184, Agricultural and Applied Economics Association.
    5. Christine L. Carroll & Colin A. Carter & Rachael E. Goodhue & C.-Y. Cynthia Lin Lawell, 2017. "Crop Disease and Agricultural Productivity," NBER Working Papers 23513, National Bureau of Economic Research, Inc.
    6. Yatang Lin, 2016. "Where does the wind blow? Green preferences and spatial misallocation in renewable energy sector," CEP Discussion Papers dp1424, Centre for Economic Performance, LSE.
    7. Lawell, Cynthia Lin & Yi, Fujin & Thome, Karen E, 2017. "The Effects of Subsidies and Mandates: A Dynamic Model of the Ethanol Industry," Institute of Transportation Studies, Working Paper Series qt73n0t4pv, Institute of Transportation Studies, UC Davis.
    8. Sears, Louis S. & Lin Lawell, C.-Y. Cynthia & Walter, M. Todd, 2020. "Groundwater Under Open Access: A Structural Model of the Dynamic Common Pool Extraction Game," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304276, Agricultural and Applied Economics Association.
    9. Kheiravar, Khaled H, 2019. "Economic and Econometric Analyses of the World Petroleum Industry, Energy Subsidies, and Air Pollution," Institute of Transportation Studies, Working Paper Series qt3gj151w9, Institute of Transportation Studies, UC Davis.

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    More about this item

    Keywords

    Environmental Economics and Policy; Industrial Organization; Research and Development/Tech Change/Emerging Technologies; Research Methods/ Statistical Methods; Resource /Energy Economics and Policy;
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    JEL classification:

    • F0 - International Economics - - General

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