The economic potential value of offshore wind near Berlengas

Offshore wind energy is currently too expensive to compete with alternative energy sources, such as fossil fuels. However, taking into account both decreasing capital costs in real prices over time, positive externalities of offshore wind energy production, as well as factors at local level which influence the viability of the investment, the value of offshore wind from a social perspective might be positive in the medium-run, even if the private profits remain negative. We develop a dynamic model to assess the economic potential value of installing wind turbines in two locations near the Berlengas archipelago, which are found to have fewer spatial conflicting uses. Our results indicate that offshore wind energy is viable at these locations, despite representing a loss for the private investor, if the energy mix which is displaced by offshore wind includes coal-based electricity.