Variance Estimates of Wind Plant Capacity Credit

As the utility industry adapts to meet the changing regulatory and business climate, it is becoming increasingly important for utilities to identify and quantify the risks in various aspects of doing business. To reduce the risk of depending too heavily on one specific type of generation or fuel, generation expansion planning techniques are incorporating methods of portfolio diversificationtheory. Financial option theory is also used to evaluate the relative costs of building now or building later. Applying these theories to utility planning helps utilities assess risks in the emerging competitive environment. This document describes a technique that can help generation planners evaluate the variance of the capacity credit for wind power plants when there is limited wind data, andalso shows some results of these calculations.