A Risk Analysis Of Wind Farm Project Investment By Using Of Copula And Monte-Carlo Method

Currently, ascertained means is generally taken to evaluate the economic benefit for construction projects. Nevertheless, describing an in-coming thing, the net cash flow of each year of the project is a random variable in a specific range. Consequently, risks and their effects should be considered in project economic evaluation. For project investments especially for grand-size ones, a primary task is to estimate the probabilistic distribution of the cash flow by considering main risk factors, and research into their correlation among each other.Copula is a mathematical method of picking up dependency from union distribution of multidimensional random vectors. Copula itself is a distribution function which representatives union distribution of multidimensional random vectors. If a certain Copula family is resumed, a union distribution could be estimated by using of single distribution and sample data. By introducing Copula into risk evaluation, the whole risk distribution could be estimated from each risk factor's distribution. It makes risk evaluation easier and much more accurate.Monte-Carlo simulation method samples randomly after risk estimation according to the distribution of each risk variable. It then calculates representative economic index which makes risk effects more intuitionist.As power supply construction projects, wind farm projects have characteristics of construction projects. The implementation of Concession Projects and Renewable Energy Policy of China has promoted the development of wind farm industry. Chinese government aims to set up 500kW and 3000kW wind power specifically by the year of 2010 and 2020. Thereby, a research into risk-related investment-and-payback is indispensable. This paper researched into investment-and-payback risk by using methods described above, set up a quantative model and made an empirical study on a wind farm project.The innovation of this paper is of introducing Copula theory into risk analysis of grand-size construction project. This paper connected risk analysis with type economic index, made a quantative analysis by using Monte-Carlo method, and put the whole idea into a real wind farm project evaluation. Similar risk analysis of invested projects can use for reference.