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

See all articles by Petros Katsoulis

Petros Katsoulis

City University London - Sir John Cass Business School

Nikolaos S. Thomaidis

School of Economics, Aristotle University of Thessaloniki

Jan Jantzen

University of the Aegean - Department of Financial Engineering & Management

Date Written: July 1, 2013

Abstract

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

Suggested Citation

Katsoulis, Petros and Thomaidis, Nikolaos S. and Jantzen, Jan, Risk Evaluation of Wind Turbine Investments (July 1, 2013). The Journal of Energy Markets, Volume 8, Number 3 (September 2015), Available at SSRN: https://ssrn.com/abstract=2447234 or http://dx.doi.org/10.2139/ssrn.2447234

Petros Katsoulis (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Nikolaos S. Thomaidis

School of Economics, Aristotle University of Thessaloniki

OPE building, University Campus
Thessaloniki, 54124
Greece

Jan Jantzen

University of the Aegean - Department of Financial Engineering & Management ( email )

31 Fostini Str
Chios, GR 82 100
Greece

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