Wind Power Capacity Credit
A wind power capacity credit is an avoided cost for building and maintaining a conventional power generation.
A wind power capacity credit is measured by the amount of conventional energy generation that could be replaced by an additional megawatt of a wind power installation.
The capacity credit of wind power projects can range from zero to some fraction: no capacity credit when no impact on the power generation capacity of a system, and a capacity credit when a wind farm expands a power generation capacity (World Bank 2015).
As an intermittent renewable energy source, the output of a wind turbine varies over time, and it cannot be directly compared with conventional power plants. Another factor to be considered is whether wind power generation replaces peak or off-peak generation in a power system (European Investment Bank 2013).
A capacity credit of a wind power project displacing a conventional power plant is case-specific: roughly a wind power capacity credit for replacing thermal power is the same as its capacity factor (World Bank 2015). For example, 1000MW of wind power generation with 34% capacity credit will save the costs of building and maintaining a 378MW conventional power plant with 90% availability (378MW times 0.9 = 340MW), (Denny 2007).
References
Denny, E., 2007. A Cost-Benefit Analysis of Wind Power. The National University of Ireland.
European Investment Bank, 2013. The Economic Appraisal of Investment Projects at the European Investment Bank.
World Bank, 2015. Volume 2: Guidelines for Economic Analysis of Power Sector Projects, TECHNICAL NOTES, Washington, D.C.