Price and Resource-Related Uncertainty in the Estimation of the Revenue of a Wind Farm

The revenue that wind farms produce is subject to the inherent uncertainty of the wind resource in the short-run and the long-term. This revenue is subject to an additional price-related uncertainty in jurisdictions where the output of the wind farms is paid at the prices cleared at the local electricity market. An econometric model is developed to estimate the risks of using limited information in the estimation of the annual revenue of a wind farm. Sensitivities that measure the influence of each uncertainty factor in the overall risks are also developed. An application example is shown by which investors or policy-makers may determine how typical wind farm capital costs may influence financial project feasibility under a predetermined risk.