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

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  • Reinhard Madlener

    (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)

  • Barbara Glensk

    (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)

  • Lukas Gläsel

    (RWTH Aachen University, Templergraben 55, 52056 Aachen, Germany)

Abstract

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.

Suggested Citation

  • Reinhard Madlener & Barbara Glensk & Lukas Gläsel, 2019. "Optimal Timing of Onshore Wind Repowering in Germany under Policy Regime Changes: A Real Options Analysis," Energies, MDPI, vol. 12(24), pages 1-33, December.
    • Handle: RePEc:gam:jeners:v:12:y:2019:i:24:p:4703-:d:296250
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    Cited by:

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    2. Emma L. Delaney & Paul G. Leahy & Jennifer M. McKinley & T. Russell Gentry & Angela J. Nagle & Jeffrey Elberling & Lawrence C. Bank, 2023. "Sustainability Implications of Current Approaches to End-of-Life of Wind Turbine Blades—A Review," Sustainability, MDPI, vol. 15(16), pages 1-19, August.
    3. Fabianek, Paul & Glensk, Barbara & Madlener, Reinhard, 2024. "A sequential real options analysis for renewable power-to-hydrogen plants for Germany and California," Renewable and Sustainable Energy Reviews, Elsevier, vol. 192(C).
    4. Francisco Haces-Fernandez, 2020. "GoWInD: Wind Energy Spatiotemporal Assessment and Characterization of End-of-Life Activities," Energies, MDPI, vol. 13(22), pages 1-20, November.
    5. Luis M. Abadie & Nestor Goicoechea, 2021. "Old Wind Farm Life Extension vs. Full Repowering: A Review of Economic Issues and a Stochastic Application for Spain," Energies, MDPI, vol. 14(12), pages 1-24, June.
    6. Isabel C. Gil-García & Ana Fernández-Guillamón & M. Socorro García-Cascales & Angel Molina-García, 2021. "A Multi-Factorial Review of Repowering Wind Generation Strategies," Energies, MDPI, vol. 14(19), pages 1-25, October.
    7. Ahmed, Faraedoon & Foley, Aoife & Dowds, Carole & Johnston, Barry & Al Kez, Dlzar, 2024. "Assessing the engineering, environmental and economic aspects of repowering onshore wind energy," Energy, Elsevier, vol. 301(C).
    8. Sheykhha, Siamak & Borggrefe, Frieder & Madlener, Reinhard, 2022. "Policy implications of spatially differentiated renewable energy promotion: A multi-level scenario analysis of onshore wind auctioning in Germany," Energy Policy, Elsevier, vol. 169(C).
    9. Fabianek, Paul & Glensk, Barbara & Madlener, Reinhard, 2021. "A Sequential Real Options Analysis for Renewable Power-to-Hydrogen Plants in Germany and California," FCN Working Papers 1/2021, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    10. Anne P. M. Velenturf, 2021. "A Framework and Baseline for the Integration of a Sustainable Circular Economy in Offshore Wind," Energies, MDPI, vol. 14(17), pages 1-41, September.

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