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The Decision to Scrap a Wind Turbine: Opportunity Cost, Timing and Policy

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  • Mauritzen, Johannes

    () (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)

Abstract

This paper attempts to empirically identify the key factors involved in the decision to scrap a wind turbine using data from Denmark. The importance of the opportunity cost of operating an older wind turbine is shown to be a prominent factor in the decision to scrap. I show the strong effect that renewable energy policy plays in the decision to scrap a turbine. Through the use of both non-parametric and semi-parametric duration models and an instrumental variables approach I identify a strong effect for scrapping schemes put in place by the Danish government. I also obtain the, initially, counter-intuitive result that more effective wind turbines have a higher hazard of being scrapped.

Suggested Citation

  • Mauritzen, Johannes, 2011. "The Decision to Scrap a Wind Turbine: Opportunity Cost, Timing and Policy," Discussion Papers 2011/17, Norwegian School of Economics, Department of Business and Management Science.
  • Handle: RePEc:hhs:nhhfms:2011_017
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    File URL: http://hdl.handle.net/11250/164182
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    References listed on IDEAS

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    1. Donald B Hausch & Victor SY Lo & William T Ziemba, 2008. "Introduction," World Scientific Book Chapters,in: Efficiency Of Racetrack Betting Markets, chapter 1, pages 1-3 World Scientific Publishing Co. Pte. Ltd..
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    3. Anna Alberini & Winston Harrington & Virginia McConnell, 1995. "Determinants of Participation in Accelerated Vehicle-Retirement Programs," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 93-112, Spring.
    4. Munksgaard, Jesper & Morthorst, Poul Erik, 2008. "Wind power in the Danish liberalised power market--Policy measures, price impact and investor incentives," Energy Policy, Elsevier, vol. 36(10), pages 3940-3947, October.
    5. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    6. Linda Steg & Erik Verhoef & Michiel Bliemer & Bert van Wee, 2008. "Introduction," Chapters,in: Pricing in Road Transport, chapter 1 Edward Elgar Publishing.
    7. Charles F. Manski & Ephraim Goldin, 1983. "An Econometric Analysis of Automobile Scrappage," Transportation Science, INFORMS, vol. 17(4), pages 365-375, November.
    8. Mario Cleves & William W. Gould & Roberto G. Gutierrez & Yulia Marchenko, 2010. "An Introduction to Survival Analysis Using Stata," Stata Press books, StataCorp LP, edition 3, number saus3, December.
    9. Morthorst, P. E., 1999. "Capacity development and profitability of wind turbines," Energy Policy, Elsevier, vol. 27(13), pages 779-787, November.
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    More about this item

    Keywords

    Wind Power; Denmark; Empirical; Duration Models; Scrapping;

    JEL classification:

    • Q00 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - General

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