Evaluating the Risk-Reduction Benefits of Wind Energy

This document presents preliminary results of a study to evaluate the risk-reduction benefits of wind power for a case study utility system using decision analysis techniques. The costs and risks of two alternative decisions--whether to build a 400 MW gas-fired combined cycle plant or a 1600 MW wind plant in 2003--were compared through computer simulations as fuel prices, environmental regulatorycosts, wind and conventional power plant availability, and load growth were allowed to vary. Three different market scenarios were examined: traditional regulation, a short-term power pool, and fixed-price contracts of varying duration. The study concludes that, from the perspective of ratepayers, wind energy provides a net levelized risk-reduction benefit of $3.4 to $7.8/MWh under traditionalregulation, and less in the other scenarios. From the perspective of the utility power plant owners, wind provides a significant rist benefit in the unregulated market scenarios but none in a regulated market. The methodology and findings should help inform utility resource planning and industry restructuring efforts.