Abstract
We aim to examine the impact of wave risk on the project value of wave power generation by modeling the uncertainties in wave period variations and utilizing multiple generation strategies based on real options valuation. This paper offers three primary contributions: first, wave risk for power generation is primarily driven by wave period changes, with risk increasing in the Ocean and decreasing in the Marginal Sea: second, we propose a novel model of wave power generation, considering wave characteristics and applicable globally to the Ocean and Marginal Sea types: third, empirical analyses show that, according to net present value (NPV) from discounted cash flow renders projects unfeasible in both sea types, while two real option strategies of suspension and expansion find that the feasibility of project within ten to eleven years on both sea types from operation start. This study highlights the necessity of accurately accounting for uncertainties and integrating overlooked risks into project strategies to effectively assess wave power project value. A key policy implication is that wave power projects should incorporate wave uncertainties and strategic options, tailored to the specific characteristics of sea types. The finding encourages the expansion of wave energy utilization and the effective use of marine energy resources.