IDEAS home Printed from https://ideas.repec.org/a/eee/rensus/v11y2007i9p2191-2200.html
   My bibliography  Save this article

Profitability of wind energy: Short-term risk factors and possible improvements

Author

Listed:
  • Montes, Germán Martínez
  • Martín, Enrique Prados

Abstract

The wind energy industry has grown considerably in recent years. If the current rate of growth of installed capacity of 1500Â MW per year continues, by 2006 Spain will achieve the objective established for 2010 in the "Plan de Fomento" [Plan to Promote Renewable Energies] or for 2008 in the more ambitious "Plan de Infraestructuras Eléctricas y Gasísticas" [Plan for Electrical and Gas Installations]. Achieving these important goals, which require significant investment, depends upon the continued stability of salaries and the willingness of banks to provide financing. Therefore, we studied those factors that had the greatest short-term impact on the economic viability of wind energy projects in Spain and we found that the inherent risk within the sector can become a real obstacle in terms of development and short-term financing. Given the possibility of carrying out financial analysis that is more exhaustive than traditionally employed methods, the various models for evaluating investment in risk conditions were studied with the aim of choosing the ideal tool that takes account of the highly fortuitous nature of wind velocity.

Suggested Citation

  • Montes, Germán Martínez & Martín, Enrique Prados, 2007. "Profitability of wind energy: Short-term risk factors and possible improvements," Renewable and Sustainable Energy Reviews, Elsevier, vol. 11(9), pages 2191-2200, December.
    • Handle: RePEc:eee:rensus:v:11:y:2007:i:9:p:2191-2200
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1364-0321(06)00057-8
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Frederick S. Hillier, 1963. "The Derivation of Probabilistic Information for the Evaluation of Risky Investments," Management Science, INFORMS, vol. 9(3), pages 443-457, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Girard, R. & Laquaine, K. & Kariniotakis, G., 2013. "Assessment of wind power predictability as a decision factor in the investment phase of wind farms," Applied Energy, Elsevier, vol. 101(C), pages 609-617.
    2. Jin, Xin & Zhang, Zhaolong & Shi, Xiaoqiang & Ju, Wenbin, 2014. "A review on wind power industry and corresponding insurance market in China: Current status and challenges," Renewable and Sustainable Energy Reviews, Elsevier, vol. 38(C), pages 1069-1082.
    3. Farrell, Niall & Donoghue, Cathal O’ & Morrissey, Karyn, 2015. "Quantifying the uncertainty of wave energy conversion device cost for policy appraisal: An Irish case study," Energy Policy, Elsevier, vol. 78(C), pages 62-77.
    4. Hong, Lixuan & Möller, Bernd, 2012. "An economic assessment of tropical cyclone risk on offshore wind farms," Renewable Energy, Elsevier, vol. 44(C), pages 180-192.
    5. Jorge Arnaldo Troche-Escobar & Herman Augusto Lepikson & Francisco Gaudêncio Mendonça Freires, 2018. "A Study of Supply Chain Risk in the Brazilian Wind Power Projects by Interpretive Structural Modeling and MICMAC Analysis," Sustainability, MDPI, vol. 10(10), pages 1-24, September.
    6. Jaroslava Janekova & Jana Fabianova & Andrea Rosova, 2016. "Environmental And Economic Aspects In Decision Making Of The Investment Project “Wind Park”," Polish Journal of Management Studies, Czestochowa Technical University, Department of Management, vol. 13(1), pages 90-100, June.
    7. Kwon, Soon-Duck, 2010. "Uncertainty analysis of wind energy potential assessment," Applied Energy, Elsevier, vol. 87(3), pages 856-865, March.
    8. Gatzert, Nadine & Kosub, Thomas, 2016. "Risks and risk management of renewable energy projects: The case of onshore and offshore wind parks," Renewable and Sustainable Energy Reviews, Elsevier, vol. 60(C), pages 982-998.
    9. Gass, V. & Strauss, F. & Schmidt, J. & Schmid, E., 2011. "Assessing the effect of wind power uncertainty on profitability," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(6), pages 2677-2683, August.
    10. Caralis, George & Diakoulaki, Danae & Yang, Peijin & Gao, Zhiqiu & Zervos, Arthouros & Rados, Kostas, 2014. "Profitability of wind energy investments in China using a Monte Carlo approach for the treatment of uncertainties," Renewable and Sustainable Energy Reviews, Elsevier, vol. 40(C), pages 224-236.
    11. Kongnam, C. & Nuchprayoon, S. & Premrudeepreechacharn, S. & Uatrongjit, S., 2009. "Decision analysis on generation capacity of a wind park," Renewable and Sustainable Energy Reviews, Elsevier, vol. 13(8), pages 2126-2133, October.
    12. Kongnam, C. & Nuchprayoon, S., 2010. "A particle swarm optimization for wind energy control problem," Renewable Energy, Elsevier, vol. 35(11), pages 2431-2438.
    13. Mohamed, Emad & Seresht, Nima Gerami & Jafari, Parinaz & AbouRizk, Simaan, 2024. "Risk assessment for onshore wind projects in Canada," Renewable and Sustainable Energy Reviews, Elsevier, vol. 191(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Klein, Martin & Deissenroth, Marc, 2017. "When do households invest in solar photovoltaics? An application of prospect theory," Energy Policy, Elsevier, vol. 109(C), pages 270-278.
    2. Borgonovo, Emanuele & Gatti, Stefano, 2013. "Risk analysis with contractual default. Does covenant breach matter?," European Journal of Operational Research, Elsevier, vol. 230(2), pages 431-443.
    3. Nibouche Fatima & Belmokhtar Oumhani, 2009. "Corporate Model of the Algerian National Marble Company," Folia Oeconomica Stetinensia, Sciendo, vol. 8(1), pages 19-48, January.
    4. Zopounidis, C., 1999. "Multicriteria decision aid in financial management," European Journal of Operational Research, Elsevier, vol. 119(2), pages 404-415, December.
    5. Van Groenendaal, Willem J. H. & Kleijnen, Jack P. C., 2002. "Deterministic versus stochastic sensitivity analysis in investment problems: An environmental case study," European Journal of Operational Research, Elsevier, vol. 141(1), pages 8-20, August.
    6. Constantin Zopounidis & Michalis Doumpos & Dimitrios Niklis, 2018. "Financial decision support: an overview of developments and recent trends," EURO Journal on Decision Processes, Springer;EURO - The Association of European Operational Research Societies, vol. 6(1), pages 63-76, June.
    7. Uwe Kehrel & Walter Schmitting, 2008. "Jenseits der Grenzen der klassischen Investitionsrechnung: Integration von Vollständigen Finanzplänen, flexibler Planung und Simulation," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 19(1), pages 59-83, May.
    8. Dimitris Andriosopoulos & Michalis Doumpos & Panos M. Pardalos & Constantin Zopounidis, 2019. "Computational approaches and data analytics in financial services: A literature review," Journal of the Operational Research Society, Taylor & Francis Journals, vol. 70(10), pages 1581-1599, October.
    9. Rajaratnam, Myuran & Rajaratnam, Bala & Rajaratnam, Kanshukan, 2014. "A novel equity valuation and capital allocation model for use by long-term value-investors," Journal of Banking & Finance, Elsevier, vol. 49(C), pages 483-494.
    10. Carmichael, David G. & Ballouz, Joseph J. & Balatbat, Maria C.A., 2015. "Improving the attractiveness of CDM projects through allowing and incorporating options," Energy Policy, Elsevier, vol. 86(C), pages 784-791.
    11. Reid, Donald W. & Skees, Jerry R., 1985. "Some Potential Effects of Changing From a Progressive to a Flat Income Tax Rate Structure," 1985 Annual Meeting, August 4-7, Ames, Iowa 278654, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    12. Anderson, J.R., 1989. "Forecasting, uncertainty, and public project appraisal," Policy Research Working Paper Series 154, The World Bank.
    13. van Groenendaal, W.J.H. & Kleijnen, J.P.C., 1997. "On the assessment of economic risk : Factorial design versus Monte Carlo methods," Other publications TiSEM fd2a2307-0812-4543-8151-7, Tilburg University, School of Economics and Management.
    14. Hon-Shiang Lau & Amy Hing-Ling Lau & Chrwan-Jyh Ho, 1998. "Improved Moment-Estimation Formulas Using More Than Three Subjective Fractiles," Management Science, INFORMS, vol. 44(3), pages 346-351, March.
    15. Lau, Hon-Shiang & Lau, Amy Hing-Ling & Kottas, John F., 2000. "A comparison of procedures for estimating the parent probability distribution from a given set of fractiles," European Journal of Operational Research, Elsevier, vol. 120(3), pages 657-670, February.
    16. Jean-Paul Paquin & Alain Charbonneau & David Tessier, 2015. "The derivation of the NPV variance of a risky capital investment project with first-order autoregressive cash flows and autoregressive conditional heteroscedastic variances," Applied Economics, Taylor & Francis Journals, vol. 47(12), pages 1170-1186, March.
    17. Grubbström, Robert W., 2022. "On the net present value distribution affected by a random walk process," International Journal of Production Economics, Elsevier, vol. 250(C).
    18. Marcin Dec, 2021. "From point through density valuation to individual risk assessment in the discounted cash flows method," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5621-5635, October.
    19. Manel Baucells & Emanuele Borgonovo, 2013. "Invariant Probabilistic Sensitivity Analysis," Management Science, INFORMS, vol. 59(11), pages 2536-2549, November.
    20. Marcin Dec, 2019. "From point through density valuation to individual risk assessment in the discounted cash flows method," GRAPE Working Papers 35, GRAPE Group for Research in Applied Economics.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:rensus:v:11:y:2007:i:9:p:2191-2200. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/600126/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.