Korean Energy Economic Review ISSN:1599-7057(Print) 에너지경제연구

Although wind power has economic dominance over other renewable energy sources, onshore wind farm has some problems such as noise, land lease and unstability of both wind direction and intensity. Offshore wind farm can reduce these problems, leading to recently attracting attentions both domestically and internationally. This study conducts economic evaluation for the Step 1 Test Bed Construction Project outlined in the Southwestern Offshore Wind Plan published in November 2011. Considering the high uncertainty surrounding the offshore wind power, we adopt the real option method as evaluating method. The project is evaluated as having about the profit of 1,000 billion won including the growth option value of about 830 billion won. This result of high option value implies a cautious decision process is required for the project.