Returns on Investments in Energy-saving Technologies Under Energy Price Uncertainty in Dutch Greenhouse Horticulture

Paul Diederen, Frank van Tongeren and Hennie van der Veen

Environmental & Resource Economics, 2003, vol. 24, issue 4, 379-394

Abstract: Conventional net presentvalue calculations evaluating the profitabilityof investments in energy-saving technologies inDutch horticultural outlays predict a muchhigher rate of adoption of these technologiesthan is actually observed. This paper tries toexplain this gap by applying a real optionsframework. Hurdle rates for investments in twotypes of energy-saving technology are estimatedusing simulated future revenue streams, givenuncertainty regarding energy prices and energytax policies. Hurdle rates found in this wayare on average about 1.76 times the hurdlerates that result from net present valuecalculations. Furthermore, this paper tests thepredictive value of the theory by estimating alogit model. This model relates the incidenceof having invested in an energy-savingtechnology to the difference between the returnon investment and the hurdle rate. Thepredictive power turns out to be encouraging,as the statistical tests indicate that higherhurdle rates tend to reduce rates of technologyadoption. Copyright Kluwer Academic Publishers 2003

Keywords: energy saving; horticulture; real options; simulation; technology adoption; uncertainty (search for similar items in EconPapers)
Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

Downloads: (external link)
http://hdl.handle.net/10.1023/A:1023617318184 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:enreec:v:24:y:2003:i:4:p:379-394

Ordering information: This journal article can be ordered from
http://www.springer. ... al/journal/10640/PS2

DOI: 10.1023/A:1023617318184

Access Statistics for this article

Environmental & Resource Economics is currently edited by Ian J. Bateman

More articles in Environmental & Resource Economics from Springer, European Association of Environmental and Resource Economists Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().