Dynamic evaluation of the levelized cost of wind power generation.

This paper discusses an alternative computation method of the levelized cost of energy of distributed wind power generators. Unlike in the conventional procedures, it includes time of commencement as an optimization variable. For that purpose, a methodology from Longstaff and Schwartz’s dynamic program for pricing financial American options is derived, which provides the ability to find the optimum time and value while coping with uncertainty revenues from energy sales and variable capital costs. The results obtained from the analysis of wind records of 50 sites entail that the conventional levelized cost of energy can be broken down into an optimum, minimum (time-dependent) value and a penalty for early exercising, which can be employed to define investment strategies and support policies. [ABSTRACT FROM AUTHOR]