Financial modeling to support decisions in offshore wind power projects

Wind power plays an important role in European low carbon’s energy transition. Offshore wind investments have reached a reasonable maturity over the past decade with more than 90 wind farms in operation in the European countries. The advantages of wind power are many resulting in a considerable growth demand for this technology. This thesis is the result of an intensive collaboration with RINA S.p.A, company sited in Genoa (Italy). An innovative and accurate Discounted Cash Flow Financial Model for Offshore wind power is verified and developed, with the objective to facilitate the evaluation and the decision-making process in Offshore wind projects for possible investors. This thesis is a result of a deep analysis of the entire value chain of wind power. The initial section of the work is a focus on the state of art analysis documenting the general investment trends in the market, the emerging evolutions in the different countries and the presentation of important index to predict the possible actual and future interest in the technology. After a brief and non-technical explanation of how a wind turbine works is developed an environmental and risks assessment for an offshore wind power project. After that, in chapter two is performed the literature review regarding Offshore financial model to analyze what is available in the literature regarding this topic, the chapter finishes with a theoretical sub-chapter regarding the financial and non-financial methods to evaluate the profitability of an investment. The final section is dedicated to the case study that is analyzed in depth along the five typical phases of an energy project here mentioned: Development and Consenting, Production and Acquisition, Installation and Commissioning, Operation and maintenance and Decommissioning and Disposal. To each of this phase are linked different costs, costs are estimated using the most recent equations available in the literature. After having set a series of financial hypothesis, investments returns are calculated with a detailed assessment that takes in consideration the technical parameters of the problem. The paper develops a detail assessment taking into account the most recent data available in the literature and databases. First, a deterministic model is developed, based on a realistic case study of an Offshore wind farm in UK, follows a sensitivity analysis to test how input parameters influence the model output. The sensitivity analysis highlights that the model outputs are extremely sensitive to the initial capital expenditure, as well as to some financial parameters and revenue parameters. In addition, all the main critical issues faced during the assessment of an Offshore project are evaluated and explained.