TY - JOUR T1 - Modern Portfolio Theory Meets Wind Farms JF - The Journal of Private Equity SP - 83 LP - 95 DO - 10.3905/jpe.2004.391052 VL - 7 IS - 2 AU - John Dunlop Y1 - 2004/02/29 UR - https://pm-research.com/content/7/2/83.abstract N2 - The amount of wind power capacity in Europe and the U.S. is growing rapidly and becoming increasingly attractive to institutional private equity investors. We applied modern portfolio theory and the capital asset pricing model to wind farms to discover if the model can be successfully adapted to the wind power sector and if geographical diversification would reduce production volatility. By substituting stock return data with wind power production data, we found that beta can be a useful tool in risk measurement for wind farm selection. We also found that up to 30% of production risk can be diversified away in a practical portfolio to smooth cash flow returns. ER -