Portfolio Assessment

Actual Vs. Expected Wind Performance

Wind speeds experienced by a project can vary unpredictably (though generally within well-defined bounds). Other sources of deviation include:

  • Fluctuations in plant performance factors such as equipment availability
  • Errors in the pre-construction energy production estimates relating to plant losses
  • Equipment performance
  • Spatial distribution of the wind resource (wind flow modeling), wind shear, and wind measurements

Are they correlated?

When summing the P75-P99 net production values for a portfolio of renewable projects directly, it is assumed that the uncertainties are perfectly correlated, which is not usually the case. Analysts would estimate the probability distribution of deviations for each project and sum the probability distributions of the individual projects to get the probability distribution for the entire portfolio. In reality, unless the projects are right next to each other, resource fluctuations are uncorrelated, as are other sources of uncertainty, so that deviations at one project are offset by other projects.

The Portfolio Benefit

By evaluating a portfolio as a whole, the result is that the error distribution for the combined output of the projects is often narrower than the summed error distributions of the individual projects. This is known as the portfolio benefit, which may translate into lower risk to the net income for the portfolio owner. To determine the portfolio benefit, it is necessary to estimate the correlations of the various sources of uncertainty and then to combine the results to arrive at an estimate of the likely deviations of the aggregated output. Perfectly correlated project uncertainties yield no benefit, while perfectly uncorrelated project uncertainties would yield the maximum benefit.

Our Approach

AWST has developed a framework for carrying out such an analysis. The portfolio benefit is defined as the amount of error reduction by evaluating a portfolio as a whole compared with evaluating each project individually. This benefit, if realized, should translate into less risk to net income for the project owner. This requires subjective judgments in many cases, with the important exception of resource variability, which can be determined from historical data.

Sources of wind uncertainty typically evaluated include:

  • Resource Measurement Uncertainty
  • Historical Climate Adjustment
  • Plant Losses
  • Future Resource Variability

To learn more about the portfolio benefit view our on-demand Portfolio Effect webinar.