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Wind power feasibility analysis under uncertainty in the Brazilian electricity market

Author

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  • Aquila, Giancarlo
  • Rotela Junior, Paulo
  • de Oliveira Pamplona, Edson
  • de Queiroz, Anderson Rodrigo

Abstract

Investors must be able to plan and analyze their investments in order to optimize decisions and turn them into profits associated with a particular project. Since electricity producers in the Brazilian electric power system are exposed to a short-term market, the goal of this paper is to propose a framework for investment analysis capable of encompassing different uncertainties and possibilities for wind power generators in a regulated market, characterized by auctions. In order to reach the proposed objective we employ a simulation technique which allows modeling cash flows considering uncertainties in variables related to project financial premises, electricity generation and producer exposure to the short-term market. For such goal, this study presents a new approach for investment analysis that allows the identification of the main uncertainty parameters and risks associated to this class of projects in the Brazilian electricity market. We also employ the Value at Risk technique to perform a risk management analysis in such context.

Suggested Citation

  • Aquila, Giancarlo & Rotela Junior, Paulo & de Oliveira Pamplona, Edson & de Queiroz, Anderson Rodrigo, 2017. "Wind power feasibility analysis under uncertainty in the Brazilian electricity market," Energy Economics, Elsevier, vol. 65(C), pages 127-136.
  • Handle: RePEc:eee:eneeco:v:65:y:2017:i:c:p:127-136
    DOI: 10.1016/j.eneco.2017.04.027
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    More about this item

    Keywords

    Wind power; Stochastic power generation; Electricity markets; NPV; Renewable energy;

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration

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