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

  • Mauritzen, Johannes

    ()

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

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.

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File URL: http://hdl.handle.net/11250/164182
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Paper provided by Department of Business and Management Science, Norwegian School of Economics in its series Discussion Papers with number 2011/17.

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Length: 30 pages
Date of creation: 29 Sep 2011
Date of revision:
Handle: RePEc:hhs:nhhfms:2011_017
Contact details of provider: Postal: NHH, Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Phone: +47 55 95 92 93
Fax: +47 55 95 96 50
Web page: http://www.nhh.no/en/research-faculty/department-of-business-and-management-science.aspx
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  1. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, volume 1, number 5474.
  2. 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, November.
  3. Linda Steg & Erik Verhoef & Michiel Bliemer & Bert van Wee, 2008. "Introduction," Chapters, in: Pricing in Road Transport, chapter 1 Edward Elgar.
  4. Morthorst, P. E., 1999. "Capacity development and profitability of wind turbines," Energy Policy, Elsevier, vol. 27(13), pages 779-787, November.
  5. Hans-Ulrich Derlien & B. Guy Peters, 2008. "Introduction," Chapters, in: The State at Work, Volume 2, chapter 1 Edward Elgar.
  6. 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.
  7. 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.
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