Profitability and Revenue Uncertainty of Wind Farms in Western Europe in Present and Future Climate

Bastien Alonzo, Silvia Concettini, Anna Creti, Philippe Drobinski and Peter Tankov ()
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Bastien Alonzo: Laboratoire de Météorologie Dynamique-Institut Pierre-Simon Laplace, Ecole Polytechnique, Institut Polytechnique de Paris, Ecole Normale Supérieure (ENS), Paris Sciences Lettres Research University, Sorbonne Université, Centre National de Recherche Scientifique, 91120 Palaiseau, France
Silvia Concettini: Climate Economics Chair, 75002 Paris, France
Anna Creti: Climate Economics Chair, 75002 Paris, France
Philippe Drobinski: Laboratoire de Météorologie Dynamique-Institut Pierre-Simon Laplace, Ecole Polytechnique, Institut Polytechnique de Paris, Ecole Normale Supérieure (ENS), Paris Sciences Lettres Research University, Sorbonne Université, Centre National de Recherche Scientifique, 91120 Palaiseau, France
Peter Tankov: Centre de Recherche en Economie et Statistique, Ecole Nationale de Statistique et Administration Economique, Institut Polytechnique de Paris, 91120 Palaiseau, France

Energies, 2022, vol. 15, issue 17, 1-29

Abstract: Investments into wind power generation may be hampered by the uncertainty of future revenues caused by the natural variability of the wind resource, the impact of climate change on wind potential and future electricity prices, and the regulatory risks. We quantify the uncertainty of the economic value of wind farms in France, Germany, and Denmark, and evaluate the cost of support mechanisms needed to ensure the profitability of wind farms under present and future climates. To this end, we built a localised model for wind power output and a country-level model for electricity demand and prices. Our study reveals that support mechanisms are needed for current market conditions and the current climate, as well as under future climate conditions according to several scenarios for climate change and energy transition. The cost of support mechanisms during a 15-year period is evaluated to EUR 3.8 to EUR 11.5 billion per year in France, from EUR 15.5 to EUR 26.5 billion per year in Germany, and from EUR 1.2 to EUR 3.3 billion per year in Denmark, depending on the scenario considered and the level of penetration of wind energy.

Keywords: wind energy; climate variability; demand uncertainty; climate change; net present value (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2022
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