Economic considerations underlying the introduction of capacity mechanism in Korean offshore wind farms: Economic Analysis of Offshore Wind Farms

Summary Previous studies on the economic evaluation of offshore wind farms (OWFs) have paid limited attention to the cost model. On the contrary, the emphasis in this paper is on eliciting the economic feasibility of OWFs in South Korea by means of the capacity mechanism in a proper revenue context. In the proposed scheme, revenues from the capacity mechanism are duly represented by the product of the capacity credit and the capacity price alike. Three scenarios for neighboring seas near Jeju Island in South Korea are specifically adapted for use of the proposed revenue-centered structure by similar OWFs in real-world situations. And the sensitivity analysis is executed to find some influencing financial parameters such as energy price or corporate tax rate and their correlation with the investigated subsidization strategies. Obviously, the economic values for each independent case will ensure that the economics of OWFs are contingent upon the level of the capacity price. Copyright © 2015 John Wiley & Sons, Ltd.