Risk assessment of wind power generation project investments based on real options

Resumen

This work presents an assessment model for investment in renewable power generation projects and its associated risk. The first part presents a classic economic study whose objective is to determine the profitability of eolic energy power plants, calculating the energy productions and the price of the energy sold to the market in each case. The economic parameters used to determine the profit value of the installations have been: the Net Present Value (NPV), the payback and the Internal Rate of Return (IRR). The economic appraisal has been calculated on different settings, in which different values for significant variables have been considered in the study of the economic viability of the project. In the second part, real options valuation methods for generation investment have been applied. The work goes deeper into the deferment option to calculate the premium that a company should pay to have the option to defer the investment. The idea is to compare this premium with the result obtained in a NPV classic analysis. The main idea is to insert the values obtained by NPV analysis in different periods into the option valuation tree. Thus, a classic approach to have a more realistic trinomial option tree can be used, as well as other tools like American real options or NPV curves. This makes risk management easier and more reliable. Several practical cases will be present in order to validate the model.