Xcel Energy is turning off coal-fired plants and substituting that power with wind power. Utilities need to keep supply and demand of power in close balance in the grid. Using constant energy from coal is far easier to plan for than wind power, which is volatile. More accurate predictions of when the wind blows is helping wind power’s cause, however.
As predictions of when the wind blows improve, utilities will be able to take their coal and gas-fired plants off-line, (in finance terms, this is a real option) thereby conserving coal and gas. Real options are options to abandon, delay, or start and then delay a project, etc. Like all options they are valuable.
Accurate predictions should help the environment as well as the utility, which may be mandated to use more alternative energy sources, like wind. The better future wind predictions become, the more valuable the real option.
