Economic Evaluation of Offshore Wind Investments in Taiwan: An Uncertainty Approach

Nguyen Thi Hong Nhung; Chia-Hua Chang; Hsiao-Jung Chen

Nguyen Thi Hong Nhung College of Business, Southern Taiwan University of Science and Technology, Tainan 71005, Taiwan http://orcid.org/0000-0002-3243-3965
Chia-Hua Chang Department of Industrial Management and Information, Southern Taiwan University of Science and Technology, Tainan 71005, Taiwan http://orcid.org/0000-0002-8584-993X
Hsiao-Jung Chen Department of Finance, Southern Taiwan University of Science and Technology, Tai-nan 71005, Taiwan http://orcid.org/0000-0002-5201-0521

Abstract

The offshore wind technology in Taiwan's market is in its early stages and has many uncertainties, despite its high growth potential. The emerging market is facing the challenge of establishing a cost-competitive offshore wind industry. This paper aims to evaluate offshore wind power investments in Taiwan using the probability-based Levelized Cost of Electricity (LCOE) model in order to investigate ways to overcome this challenge. To capture the project's uncertainties, a probabilistic approach and the Monte Carlo technique are utilized, and their effects on project evaluation are portrayed through the probability distribution of LCOE and sensitivity analysis. Additionally, a simulation based on a chronological approach is developed to directly investigate the probability density function of the capacity factor for a specific wind farm site. The study concludes that the proposed approach provides better insights into projects and performs better in project evaluation, especially for projects located in high-frequency wind areas.

Research paper

Keywords: Offshore Wind; Energy; Investment Evaluation; Uncertainty; Monte Carlo

Reference to this paper should be made as follows: Nguyen, T. H. N., Chang, C., & Chen, H. (2023). Economic Evaluation of Offshore Wind Investments in Taiwan: An Uncertainty Approach. Journal of Entrepreneurship, Business and Economics, 11(2), 1–28.