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

Published online by Cambridge University Press:  26 January 2015

Dmitry Lima ,
Gregory Colson ,
Berna Karali ,
Bridget Guerrero ,
Stephen Amosson  and
Michael Wetzstein
Dmitry Lima
Affiliation:
Department of Agricultural and Applied Economics, University of Georgia, Athens, Georgia
Gregory Colson
Affiliation:
Department of Agricultural and Applied Economics, University of Georgia, Athens, Georgia
Berna Karali
Affiliation:
Department of Agricultural and Applied Economics, University of Georgia, Athens, Georgia
Bridget Guerrero
Affiliation:
Texas AgriLife Extension Service, Lubbock, Texas
Stephen Amosson
Affiliation:
Texas AgriLife Extension Service, Amarillo, Texas
Michael Wetzstein
Affiliation:
Department of Agricultural and Applied Economics, University of Georgia, Athens, Georgia
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Abstract

An extension of the Guerrero et al. (2010) net present value (NPV) analysisusing real options analysis (ROA) is offered to improve machineryreplacement decisions. Specifically, the feasibilities of replacing naturalgas irrigation systems with either electric or hybrid (electric/wind)systems are evaluated. Results indicate NPV and ROA criteria can yieldopposite decisions depending on the stochastic nature of the parameters,reversibility of the investment, and flexibility of investment timing. Forpolicy, NPV results indicate that replacing natural gas with a hybrid is onthe cusp of being optimal. However, ROA indicates this NPV implication maynot hold.

Keywords

electricityirrigationnatural gaswind energyQ12Q20Q42
Type
Research Article
Information
Journal of Agricultural and Applied Economics , Volume 45 , Issue 4 , November 2013 , pp. 739 - 751
Copyright
Copyright © Southern Agricultural Economics Association 2013

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