Vose SoftwareModelChoice decision tree · Energy and utilities
Wind Farm Portfolio
Build the onshore wind farm, the offshore one, both, or sell the development rights?
From the model’s decision tree
Best first decision: Hybrid Portfolio (Both)
The expected value of each first option when every later decision is also made well (the tree rolled back).
| First decision | Expected value | |
|---|---|---|
| Build Onshore Farm | $251,277,440 | |
| Build Offshore Farm | $231,399,125 | |
| Hybrid Portfolio (Both) | $440,344,412 | ✔ best |
| Sell Development Rights | $30,000,000 |
| Measure | Value |
|---|---|
| Expected value of the best strategy | $440,344,412 |
| Best outcome on the best strategy | $657,606,100 |
| Worst outcome on the best strategy | $136,178,050 |
S-curve (cumulative probability) of Hybrid Portfolio (Both) from the saved simulation.
The decision
A renewable energy company holds development rights for wind farm sites. They have permits for both an onshore and an offshore location and must decide how to allocate their capital. The options are:
- Build an onshore farm (lower cost, lower capacity factor)
- Build an offshore farm (higher cost, higher capacity factor)
- Build both as a hybrid portfolio (diversification)
- Sell the development rights outright
How the inputs are linked
The tree sheet has a parameter table above the decision tree. Key parameters like Turbine Cost, Electricity Price, and O&M Cost per Turbine are defined once in the control panel and referenced by multiple branches in the tree.
The inputs that drive several branches at once:
- Turbine Cost — used in onshore, offshore, and hybrid construction costs
- Electricity Price — drives revenue calculations for all farm types
- O&M Cost per Turbine — annual maintenance cost applied to all paths
- Turbine Capacity — rated MW used in every revenue formula
- Project Lifetime — multiplier for both revenue and O&M across all paths
The decision tree
The tree has 1 decision, 3 chance events and 10 outcomes. The best path is open: at every decision the best choice is marked, and the expected value beside each branch counts every cash flow from the start. Open any other branch to see what follows it.
DecisionChance event+$ cash flow on the branch
Build Onshore Farm −$152,000,000expected $251,277,440
Chance: Onshore Wind Conditions- 30% Strong Winds +$505,033,600payoff $353,033,600
- 50% Average Winds +$412,528,000payoff $260,528,000
- 20% Weak Winds +$227,516,800payoff $75,516,800
Build Offshore Farm −$152,000,000expected $231,399,125
Chance: Offshore Wind Conditions- 40% Strong Winds +$456,572,500payoff $304,572,500
- 45% Average Winds +$375,268,750payoff $223,268,750
- 15% Weak Winds +$212,661,250payoff $60,661,250
Hybrid Portfolio (Both) −$304,000,000expected $440,344,412 ✔ best
Chance: Combined Portfolio Performance- 25% Both Perform Well +$961,606,100payoff $657,606,100
- 50% Mixed Results +$787,796,750payoff $483,796,750
- 25% Both Underperform +$440,178,050payoff $136,178,050
- Sell Development Rights +$30,000,000payoff $30,000,000
Change the numbers. Open the workbook with ModelChoice, change a probability or a cost in the tree, and the best decision updates at once.
Key assumptions
| Assumption | Value | Notes |
|---|---|---|
| Turbine Cost (per unit) | $3,500,000 | Cost per wind turbine installed |
| Onshore Turbine Count | 40 | Number of turbines for onshore farm |
| Offshore Turbine Count | 25 | Number of turbines for offshore farm |
| Onshore Capacity Factor | 32.0% | Average energy output vs. rated capacity |
| Offshore Capacity Factor | 45.0% | Higher winds offshore |
| Electricity Price | $55 | Wholesale electricity price per MWh |
| O&M Cost per Turbine (Annual) | $50,000 | Operations and maintenance per turbine/year |
| Turbine Rated Capacity | 3 | Nameplate capacity per turbine |
| Project Lifetime | 25 | Expected operating life of the farm |
| Construction Premium (Offshore) | 1.6 | Offshore install cost multiplier vs onshore |
| Development Rights Sale Value | $30,000,000 | If selling development rights outright |
| Grid Connection Cost | $12,000,000 | Cost to connect farm to electrical grid |
The figures are illustrative: the companies and numbers are invented for teaching.
Try it in ModelChoice
- Increase Electricity Price. Watch all revenue terminals rise together
- Lower Turbine Cost. See how construction costs drop across all paths
- Adjust Offshore Capacity Factor. Compare offshore vs onshore economics
- Run Sensitivity Analysis. Tornado chart shows which parameters matter most
Find similar models
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Further reading
Download the workbook and open it with ModelChoice. The free trial opens every example.
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An illustrative example: the figures are invented for teaching. Last updated 9 October 2026.