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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
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.
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- Research Article
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- Copyright © Southern Agricultural Economics Association 2013
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