The financial risks from wind turbine failures: a value at risk approach

Dorcas Mikindani, John O’Brien, Paul Leahy and Peter Deeney

Applied Economics, 2025, vol. 57, issue 39, 6105-6120

Abstract: This paper models the financial risk associated with the cost of turbine failures over the lifetime of a wind farm. These failures cause significant variation in realized profit on wind generation projects. A model of the fault generating process is presented and industry data is used to parameterize the model. The model is then used to measure the financial risk associated with the wind project. Risks are measured using the financial metrics Value at Risk (VaR) and Conditional VaR (CVaR) metrics. The study shows that the 95% lifetime VaR of a turbine is equivalent to 52% of the initial capital expenditure. However, as the number of turbines in a farm increases, this risk diminishes. These findings have significant implications for small-scale projects, particularly community projects.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2024.2380542 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:57:y:2025:i:39:p:6105-6120

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2024.2380542

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().