The Value of Wind Resource Geographic Diversity for Wind Farm Profitability

Portfolio analysis theory and an econometric wind farm revenue estimation model under limited information are combined for the quantification of the value of the geographic diversity of the wind resource in the profitability of diversified wind farm investments. Investment decisions are driven by a compromise between risk and return. The proposed model draws on actual data to estimate the extent under which, by diversifying a portfolio of wind farms, revenue per MW-installed may be increased or risk may be reduced in comparison to investing all available capital on a single site. Results show that for the particular geographical setting explored, estimated benefits may provide pivotal competitiveness for wind farm investors in the estimation of optimal rates in Request for Proposal bidding processes or bilateral fixed-rate negotiation with local utilities.