Variance of power generating system production costs

Using the framework for production costs of H. Baleriaux (1967), this study provides formulae for computing the variance of the unit energy produced and the variance of the system production costs. Numerical results show that the coefficient of variation of these quantities can be quite large, highlighting the need for considering variances in addition to the expected values in production-costing models. Numerical examples show that the ratio of the standard deviation of unit energy produced to its mean value can be quite high. A similar observation applies for the system production costs. This suggests that basing utility decisions on the mean values only could be misleading and that the currently used production-costing models should be enlarged to include information on variance as well