MODELLING ENERGY SAVING TECHNOLOGY CHOICES IN DUTCH GLASSHOUSE HORTICULTURE - Economics of Sustainable Energy in Agriculture - page 38

Chapter 4

MODELLING ENERGY SAVING
TECHNOLOGY CHOICES IN DUTCH
GLASSHOUSE HORTICULTURE

Kyosti Pietola and Alfons Oude Lansink

1. INTRODUCTION

This chapter applies Simulated Maximum Likelihood (SML) for estimation
of a multinomial Probit model of technology choices on Dutch glasshouse
firms. The model allows for time constant firm specific effects and serial
correlation of errors and is estimated on panel data over the period 1991-
1995.

The Dutch glasshouse industry is traditionally an important user of
energy, accounting for 4% of total emissions in the Netherlands. In
order to reduce the use of energy and related emissions, the Dutch
government and the glasshouse industry made a covenant aiming at
improving the energy efficiency by 65% in 2010 compared to the level in
1980 (Stuurgroep Landbouw en Milieu 2000). Firm operators also have an
incentive for reducing energy use, since energy is a major determinant of
profitability on glasshouse firms, accounting for approximately 33% of

variable costs on glasshouse firms.
Firm operators in the glasshouse industry have several options for
saving energy in the production process. One set of options is related to the
structure of glasshouses and includes double glazing and thermal screens.
Another set of options is related to heat producing installations such as
traditional installations, co-generators 1 , heat deliveries by electricity plants
and heat storage (van der Velden 1996). This chapter aims at explaining
the relative importance of different factors underlying the choice of heat
producing installations on Dutch glasshouse firms.
Technology choices often represent long term commitments in
which timing and future returns play important roles. These choices are,
therefore, solutions to dynamic optimisation problems, which can be

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E.C. van Ierland and A. Oude Lansink (eds.), Economics of Sustainable Energy in Agriculture, 41-55.
© 2002 Kluwer Academic Publishers. Printed in the Netherlands.