A New Look at the Economic Evaluation of Wind Energy as an Alternative to Electric and Natural Gas-Powered Irrigation

An extension of the Guerrero et al. (2010) net present value (NPV) analysis using real options analysis (ROA) is offered to improve machinery replacement decisions. Specifically, the feasibilities of replacing natural gas irrigation systems with either electric or hybrid (electric/wind) systems are evaluated. Results indicate NPVand ROA criteria can yield opposite decisions depending on the stochastic nature of the parameters, reversibility of the investment, and flexibility of investment timing. For policy, NPV results indicate that replacing natural gas with a hybrid is on the cusp of being optimal. However, ROA indicates this NPV implication may not hold.


Editor(s):
Marchant, Mary A.
Bosch, Darrell J.
Issue Date:
Nov 01 2013
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/157399
Published in:
Journal of Agricultural and Applied Economics, Volume 45, Number 4
Page range:
739-751
Total Pages:
12
JEL Codes:
Q12; Q20; Q42
Series Statement:
45
4




 Record created 2017-04-01, last modified 2017-08-27

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