Repowering of Wind Turbines: Economics and Optimal Timing

FCN Working Paper No. 19/2011 (revised July 2012)

43 Pages Posted: 21 Mar 2013

See all articles by Sebastian Himpler

Sebastian Himpler

RWTH Aachen University

Reinhard Madlener

RWTH Aachen University; Norwegian University of Science and Technology (NTNU)

Date Written: July 2012


For more than 20 years now, wind power has been one of the main renewable energy sources, especially in countries like Denmark, one of the pioneer countries in developing onshore wind turbines. Whereas offshore wind utilization still has a high risk profile the repowering of wind converter offers an interesting alternative to further increase the use of renewable energy. This paper first provides an overview of the historical development of wind utilization in Denmark, with a special focus on incentive systems. Second, we study the economics and optimal timing of repowering for the case of Danish wind farms. We use a two-factor real options modeling framework following the Mc Donald and Siegel (1986) approach, which allows consideration of the investment costs as well as revenues, both following a continuous time, stochastic process. In a next step, a Monte Carlo Simulation is applied to determine the probability of success of repowering for each year. Finally, we discuss the results and highlight the effects necessary to increase repowering activities. We find that until now, the high uncertainty in terms of revenues hinders the further development of repowering in Denmark and lowers the probability of success significantly, while the selling price of the used turbine has only a minor effect on the optimal timing of repowering. Therefore, wind developers should argue for a larger stake of secured parts in revenues, achievable via higher governmental guaranteed incentives.

Keywords: repowering, wind power, real options, Denmark

Suggested Citation

Himpler, Sebastian and Madlener, Reinhard, Repowering of Wind Turbines: Economics and Optimal Timing (July 2012). FCN Working Paper No. 19/2011 (revised July 2012), Available at SSRN: or

Sebastian Himpler (Contact Author)

RWTH Aachen University ( email )

Templergraben 55
52056 Aachen, 52056

Reinhard Madlener

RWTH Aachen University ( email )

School of Business and Economics / E.ON ERC
Mathieustra├če 10
Aachen, 52074
+49 241 80 49 820 (Phone)
+49 241 80 49 829 (Fax)


Norwegian University of Science and Technology (NTNU) ( email )

Trondheim NO-7491, 7491

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