Financial and Economic Evaluation of Off-Shore Wind Projects: A Case Study
22 Pages Posted: 11 Jun 2013
Date Written: June 10, 2013
This paper tries to shed some light on the financial and economic details of an evaluation of re-newable energy projects. Different approaches of evaluation criteria, exceeding a mere accounting exercise, will be discussed, based on a German off-shore wind project (and a short addition of a similar project in China). How can an appropriate discount rate be found, which is of crucial significance for the assessment of such long-term projects? What are differences between financial and economic evaluation and how can subsidies be isolated from sustainable income? How can we evaluate externalities, in particular the value of greenhouse gas savings, but also the achievement of learning curve improvements? Even though for many of these questions a definite solution cannot be found yet, estimations for such effects are identified and it is pointed out, how the present level of subsidies compares with the estimated outcomes of such a project. The paper constructs also a framework to further evaluations of renewable energy projects.
Keywords: Beta for RE-projects, CO2–avoidance cost, externalities, financial and economic analysis, financial engineering, investment in renewable energy, off-shore wind projects, outcome, renewable energy projects, social cost of CO2 , RE-subsidies, financial sustainability
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