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Open AccessArticle

Optimal Timing of Onshore Wind Repowering in Germany under Policy Regime Changes: A Real Options Analysis

Institute for Future Energy Consumer Needs and Behavior (FCN), School of Business and Economics/E.ON Energy Research Center, RWTH Aachen University, Mathieustraße 10, 52074 Aachen, Germany
Department of Industrial Economics and Technology Management, Norwegian University of Science and Technology (NTNU), 7491 Trondheim, Norway
RWTH Aachen University, Templergraben 55, 52056 Aachen, Germany
Author to whom correspondence should be addressed.
Energies 2019, 12(24), 4703;
Received: 31 August 2019 / Revised: 5 December 2019 / Accepted: 6 December 2019 / Published: 10 December 2019
(This article belongs to the Special Issue Economics of Sustainable and Renewable Energy Systems)
In this paper, we investigate capacity expansion, the technological development of wind turbine generators, and the merits of onshore wind repowering in Germany. We analyze the regulatory framework that is presently in place and its impact on the profitability of the onshore wind parks commissioned under previous regulatory frameworks. The optimal timing of repowering under today’s market premium model is scrutinized. Repowering in a market without subsidies for onshore wind energy is also evaluated. In the two cases (regimes) investigated, the electricity price is modeled stochastically as a geometric Brownian motion process. More specifically, using a real options modeling framework for investments under a free market regime, we analyze how the regime change affects the optimal timing of repowering. Further, we check the results for their robustness via a sensitivity analysis for both analyzed regimes. We find that repowering well before the plant’s expected end of life (‘early repowering’) can be economically preferable under the German Renewable Energy Sources Act 2017 remuneration scheme and that, due to the electricity spot market price development, repowering under the market premium regime is more profitable than it is under the free market regime. The economic viability is strongly influenced by the duration of the initial tariff granted to the old installation, the expected digression factor of the future reference tariff, and the increase in electricity generation achieved through repowering. View Full-Text
Keywords: renewable electricity; real options analysis; Germany; repowering; wind power renewable electricity; real options analysis; Germany; repowering; wind power
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MDPI and ACS Style

Madlener, R.; Glensk, B.; Gläsel, L. Optimal Timing of Onshore Wind Repowering in Germany under Policy Regime Changes: A Real Options Analysis. Energies 2019, 12, 4703.

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