Risk Evaluation of Wind Turbine Investments
The Journal of Energy Markets, Volume 8, Number 3 (September 2015)
Posted: 10 Jun 2014 Last revised: 27 Sep 2015
Date Written: July 1, 2013
We assess the risk inherent in wind turbine investments that rely on a power market in order to determine the selling price of generated power. Using scenario analysis, we calculate various indexes that attempt to highlight different aspects of the market risk to which the energy producer is exposed. Using as a benchmark a wind turbine in Denmark that relies on Nord Pool Spot for selling its output, we experiment with four different models for the dynamics of daily electricity prices using time series analysis, which are further used to calculate scenarios for the future annual project yield. The results of our analysis highlight important aspects of the risk profile of this particular project, which could provide a basis for the development of a general methodology of risk assessment if supplemented with models measuring production uncertainty.
Keywords: Wind Turbine Investment, Risk analysis, Electricity Price Forecasting, Cash Flow Estimation, Scenario Analysis
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