[2021-06] National offshore wind strategy for late-mover countries



National offshore wind strategy for late-mover countries



Chung, Chongwook

Moon Soul Graduate School of Future Strategy, KAIST 

Lee, Jungwoo

Technology Policy Planning Division, Korea Institute of Energy Technology Evaluation and Planning

Yang, Jae-Suk

Moon Soul Graduate School of Future Strategy, KAIST 



Abstract

This paper explores national strategies for emerging countries with ambitious policy targets for future offshore wind development. A scenario-based economic cost-benefit analysis of multiple approaches to the development of offshore wind projects is conducted based on (1) who takes the initiative on financing (public sector vs. private sector), (2) whether wind turbines are supplied locally or not, and (3) whether investment plans provide managerial flexibility to respond to changing circumstances or not (real options strategy vs. traditional investment decision-making). The analysis demonstrates that a real options strategy that allows flexibility regarding future uncertainties can significantly increase the economic value of a project regardless of the type of developer or dependence on foreign wind turbine technologies. The study concludes with a recommendation that late-mover countries focus on the combination of public-sector initiatives, a real options strategy, and the purchase of domestic turbines.

Keywords: Offshore wind; cost-benefit analysis; investment under uncertainty; real options