A0901
Title: Wind energy price-quantity correlation: A gift of nature
Authors: Michail Karoglou - Aston Business School (United Kingdom) [presenting]
Izidin El Kalak - Cardiff Business School (United Kingdom)
Alcino Azevedo - Aston Business School (United Kingdom)
Abstract: Relying on a half-hourly dataset covering the time period between 2006 and 2019, the correlation between the energy market price and the energy production is estimated for each of the 60 UK wind farms in the sample. It is found important and statistically significant differences that affect the value of the wind farms, suggesting that there is a location price-quantity correlation premium that should be considered in the selection of the wind farm location. Then, an empirical and a real options model is developed to determine the value of this gift of nature that on average accounts for about 4\% of the return on investment. These findings are new to the literature and, because as wind energy production grows, the available space for new wind farms will become more scarce, therefore this factor will play a more prominent role in the selection of the wind farm sites over time.
