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Repowering of Wind Turbines: Economics and Optimal Timing

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  • Himpler, Sebastian

    () (RWTH Aachen University)

  • Madlener, Reinhard

    () (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))

Abstract

For more than 20 years now, wind power has been one of the main renewable energy sources, especially in countries like Denmark, one of the pioneer countries in developing onshore wind turbines. Whereas offshore wind utilization still has a high risk profile the repowering of wind converter offers an interesting alternative to further increase the use of renewable energy. This paper first provides an overview of the historical development of wind utilization in Denmark, with a special focus on incentive systems. Second, we study the economics and optimal timing of repowering for the case of Danish wind farms. We use a two-factor real options modeling framework following the Mc Donald and Siegel (1986) approach, which allows consideration of the investment costs as well as revenues, both following a continuous time, stochastic process. In a next step, a Monte Carlo Simulation is applied to determine the probability of success of repowering for each year. Finally, we discuss the results and highlight the effects necessary to increase repowering activities. We find that until now, the high uncertainty in terms of revenues hinders the further development of repowering in Denmark and lowers the probability of success significantly, while the selling price of the used turbine has only a minor effect on the optimal timing of repowering. Therefore, wind developers should argue for a larger stake of secured parts in revenues, achievable via higher governmental guaranteed incentives.

Suggested Citation

  • Himpler, Sebastian & Madlener, Reinhard, 2011. "Repowering of Wind Turbines: Economics and Optimal Timing," FCN Working Papers 19/2011, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  • Handle: RePEc:ris:fcnwpa:2011_019
    Note: revised July 2012
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    References listed on IDEAS

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    Cited by:

    1. Dergiades, Theologos & Madlener, Reinhard & Christofidou, Georgia, 2012. "The Nexus between Natural Gas Spot and Futures Prices at NYMEX: Do Weather Shocks and Non-Linear Causality in Low Frequencies Matter?," FCN Working Papers 17/2012, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN), revised Sep 2013.
    2. McInerney, Celine & Bunn, Derek W., 2017. "Optimal over installation of wind generation facilities," Energy Economics, Elsevier, vol. 61(C), pages 87-96.
    3. Madlener, Reinhard & Glensk, Barbara & Weber, Veronika, 2011. "Fuzzy Portfolio Optimization of Onshore Wind Power Plants," FCN Working Papers 10/2011, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN), revised Jul 2014.
    4. Rohlfs, Wilko & Madlener, Reinhard, 2011. "Multi-Commodity Real Options Analysis of Power Plant Investments: Discounting Endogenous Risk Structures," FCN Working Papers 22/2011, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).

    More about this item

    Keywords

    Repowering; Wind power; Real options; Denmark;

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