What is the reflection,content,application,experience of the probability!!
Answers
Of the myriad risks surrounding long-term investments in power plants, resource risk is one of the most
difficult to mitigate, and is also perhaps the risk that most-clearly distinguishes renewable generation
from natural gas-fired generation. For renewable generators like wind and solar projects, resource risk
manifests as a quantity risk—i.e., the risk that the quantity of wind and insolation will be less than
expected.i
For gas-fired generators (i.e., a combined-cycle gas turbine or “CCGT”), resource risk
manifests primarily as a price risk—i.e., the risk that natural gas will cost more than expected. Most
often, resource risk—and natural gas price risk in particular—falls disproportionately on utility
ratepayers, who are typically not well-equipped to manage this risk. As such, it is incumbent upon
utilities, regulators, and policymakers to ensure that resource risk is taken into consideration when
making or approving resource decisions, or enacting policies that influence the development of the
electricity sector more broadly.
This paper presents a new framework, grounded in statistical concepts related to probability of
exceedance (and confidence intervals more broadly), to incorporate resource risk into decision-making
processes. This framework recognizes that the same probability of exceedance concepts that are
regularly used to characterize the uncertainty around annual energy production for wind and solar
projects can also be applied to natural gas price projections, allowing one to develop a probabilistic
range of projections for not only wind and solar capacity factors, but also natural gas prices