Wind Turbines on German Farms—An Economic Analysis

Clemens Fuchs, Karl Marquardt, Joachim Kasten and Katharina Skau
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Clemens Fuchs: University of Applied Sciences, Departement of Agricultural Economics, 17033 Neubrandenburg, Germany
Karl Marquardt: University of Applied Sciences, Departement of Agricultural Economics, 17033 Neubrandenburg, Germany
Joachim Kasten: University of Applied Sciences, Departement of Agricultural Economics, 17033 Neubrandenburg, Germany
Katharina Skau: University of Applied Sciences, Departement of Agricultural Economics, 17033 Neubrandenburg, Germany

Energies, 2019, vol. 12, issue 9, 1-15

Abstract: Only a small number of German farmers invest in wind turbines on the land they own; rather, they tend to lease land for that purpose to external investors. In this study, an explorative qualitative analysis of the reasons for this investment pattern was conducted. Calculations of the economic efficiency (e.g., net present value, payoff) of wind turbines built the foundation of the study. In addition, farmers in the northeastern federal state of Mecklenburg-Western Pomerania were interviewed to assess their motives for capital expenditure. A considerable amount of equity capital is required to set up a wind turbine. The capital invested frequently competes with the purchase of agricultural land. Erecting wind turbines involves risks. Substantial financial means for planning permission and other examinations precede the construction of a wind turbine. Only at the very end of these costly investigations will a construction permit be issued; as such, farmers face a high level of uncertainty during the whole process. Fluctuations in wind yield resulting in volatile revenues confront farmers with additional financial uncertainties. The risk-taking behavior of farmers was assessed normatively by the Hurwicz criterion. The results showed that farmers with the necessary funds at their disposal and a high level of optimism were more likely to take the risk to set up a wind turbine on their own land. They make this decision despite the fact that leasing one’s own land to external investors is predictably profitable and clearly less risky.

Keywords: renewable energy; investment; leasing; profitability; risk (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jeners:v:12:y:2019:i:9:p:1587-:d:226043

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