Abstract
Wind energy companies must implement risk management strategies in order to successfully integrate into a liberalized energy market. This study analyses the influence of operational size (number of wind turbines in the portfolio) on the effectiveness of power purchase agreements as instrument to reduce market risk. The analysis uses wind data from 14 wind farms and data from the German Energy Exchange EEX. The results of this research reveal that the effectiveness of power purchase agreements increases with operational size. The main driver of the effectiveness, however, remains an optimal spatial diversification of wind farm locations. Overall, this study shows that smaller wind energy companies should manage their risk by spatially diversifying their wind energy investments, while larger wind energy companies should consider power purchase agreements in order to reduce the riskiness of their revenue stream.
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