Assessing the Market Attractiveness for a Renewable Energy Source

University essay from Lunds universitet/Produktionsekonomi

Abstract: Background The EU’s 20-20-20 targets determine that Finland’s share of energy consumption from renewable energy sources is to be 38 % by 2020, a target that the government intends to reach by expansion of wind power. The government has a beneficial feed-in tariff in place as an incentive for rapid wind power expansion, which has made both domestic and international developers evaluate the business case in Finland. Purpose The purpose of the study is to assess the attractiveness of wind power in Finland and determine the viability for a potential market entry. Objective The objectives of the study were: • Examine existing framework to assess attractiveness of a geographical market for a renewable energy source. • Map the current market structure and the key drivers. • Evaluate the Finnish business case to conclude the potential viability of the market. Methodology An exploratory approach was used to establish a framework to perform the case study on the wind power market in Finland. Both a descriptive and a predictive approach were later used when applying the framework onto the market. The concluding evaluation then followed an explanatory approach as the interaction of different factors determined the outcome of the conclusion. Conclusions The thesis’ developed CL2-model is deemed to be an appropriate framework to assess the wind power market in Finland, and quite possibly applicable onto other geographical markets and weather dependent renewable energy sources. The case study of Finland indicates that there are viable business opportunities for actors interested in acquiring projects as brand new projects are predicted not to be included in the current subsidy system. The financial evaluation indicates an internal rate of return of at least 6.5 %, given the assumptions made in the financial model. Main risks to consider are political interference causing a decrease in the subsidy system and stricter noise regulations.

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