An analysis on the attractiveness of different grid configurations for offshore wind power investors
MetadataShow full item record
- Master’s theses (MINA) 
Attracting offshore wind power investors is important for the Norwegian government to reachits development goal for offshore wind power. This thesis presents an investment decisionmodel to evaluate the investment incentive in offshore wind farms and hybrid projects undervarious grid configurations. Using a real-options approach, based on a binomial lattice methodthat embeds deferral options, the model derives the investment incentive and the optimalinvestment timing for investors in an uncertain environment. The results show that the gridconfiguration has a significant impact on the investors investment incentive. A three-markethybrid configuration is generally preferred over a radial connection to Norway and a twomarket hybrid by offshore wind power investors. I find that the offshore wind farm is moreprofitable in a hybrid configuration when it is connected to markets with higher prices thanNO2, low price volatility, and a positive correlation with NO2. Under a historic electricity pricelevel, the results suggests that subsidies are necessary to attract investors. However, using asimulated future electricity price level, offshore wind farm can become viable withoutsubsidies. Additionally, the results show that a hybrid configuration does not necessarily reducethe offshore wind power project’s risk. Moreover, investors and regulators preference in gridconfiguration are partially aligned. A two-market hybrid is undesirable for wind farm investorsbut preferred by regulators, but both find a three-market hybrid configuration desirable. Theconclusion of this thesis can provide useful guidelines for policy makers determining gridconfiguration, as this decision affect investment incentive for offshore wind power investorsand the socio-economic benefit from offshore wind development.