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Department of Business and Management Science, Norwegian School of Economics (NHH) Discussion Papers, Department of Business and Management Science, Norwegian School of Economics (NHH)

No 2011/17:
The Decision to Scrap a Wind Turbine: Opportunity Cost, Timing and Policy

Johannes Mauritzen ()

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.

Keywords: Wind Power; Denmark; Empirical; Duration Models; Scrapping; (follow links to similar papers)

JEL-Codes: Q00; (follow links to similar papers)

30 pages, September 29, 2011

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