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Improving understanding -- Capacity credit

As fossil fuel prices rise, the fuel-saving value of wind energy also increases. As a result, wind energy's "capacity saving value" -- the additional value attributed to savings made from not having to invest in other generation due to the existence of wind power -- is likely to become less significant. Even so, it remains an important parameter in any serious study of wind power economics.

For this reason, the poor understanding of how to calculate wind power's capacity credit, from which capacity value is derived, remains a serious barrier to greater uptake of wind power on power systems everywhere. A 100 MW wind farm, with a capacity credit of 30%, will displace 30 MW of conventional plant. Many an energy industry commentator, however, will contend that the capacity credit of wind power is insignificant and even power system planners disagree on the topic.

In practice, capacity credits tend to be specific to particular electricity systems. Rigorous calculation and analysis of several years worth of wind data must be done for each system and its particular mix of generation technologies. In America, some consistency in conducting capacity credit calculations may result from a new Resource Adequacy Assessment report by the North American Electric Reliability Council, according to Michael Milligan of the US National Renewable Energy Laboratory and Kevin Porter of Exeter Associates.

Among the important variables that must be taken into account when determining capacity credit, is the correlation (or lack of it) between wind power output and system demand at times of peak demand, say Milligan and Porter in a report aired to the annual conference of the American wind industry in June. The proportion of wind energy on the power system is also important, since wind power's capacity credit, in percentage terms, declines with increasing levels of wind penetration level.

In detailing the rules that apply in a number of power pools in America for calculating capacity credit, the authors point to the wide range of estimates in operation. At one end of a spectrum of 17 electricity jurisdictions analysed, Idaho Power assigns quite low values of capacity credit to wind, while California at the other end assigns values roughly equal to the average capacity factor.

After taking a look at practice in Europe, too, the authors conclude that the same procedures that are used for thermal plants should be used for wind energy and that probabilistic methods to determine capacity credit should be used for all types of plant.

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