Returns on Investments in Energy-saving Technologies Under Energy Price Uncertainty in Dutch Greenhouse Horticulture
Conventional net presentvalue calculations evaluating the profitabilityof investments in energy-saving technologies inDutch horticultural outlays predict a muchhigher rate of adoption of these technologiesthan is actually observed. This paper tries toexplain this gap by applying a real optionsframework. Hurdle rates for investments in twotypes of energy-saving technology are estimatedusing simulated future revenue streams, givenuncertainty regarding energy prices and energytax policies. Hurdle rates found in this wayare on average about 1.76 times the hurdlerates that result from net present valuecalculations. Furthermore, this paper tests thepredictive value of the theory by estimating alogit model. This model relates the incidenceof having invested in an energy-savingtechnology to the difference between the returnon investment and the hurdle rate. Thepredictive power turns out to be encouraging,as the statistical tests indicate that higherhurdle rates tend to reduce rates of technologyadoption. Copyright Kluwer Academic Publishers 2003
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Volume (Year): 24 (2003)
Issue (Month): 4 (April)
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- DeCanio, Stephen J, 1998. "The efficiency paradox: bureaucratic and organizational barriers to profitable energy-saving investments," Energy Policy, Elsevier, vol. 26(5), pages 441-454, April.
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- Hassett, Kevin A. & Metcalf, Gilbert E., 1993. "Energy conservation investment : Do consumers discount the future correctly?," Energy Policy, Elsevier, vol. 21(6), pages 710-716, June.
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