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The focus of this report is the wind forecasting system developed during this contract period with results of performance through the end of 2010. The report is intentionally high-level, with technical details disseminated at various conferences and academic papers. At the end of 2010, Xcel Energy managed the output of 3372 megawatts of installed wind energy. The wind plants span three operating companies1, serving customers in eight states2, and three market structures3. The great majority of the wind energy is contracted through power purchase agreements (PPAs). The remainder is utility owned, Qualifying Facilities (QF), distributed resources (i.e., 'behind the meter'), or merchant entities within Xcel Energy's Balancing Authority footprints. Regardless of the contractual or ownership arrangements, the output of the wind energy is balanced by Xcel Energy's generation resources that include fossil, nuclear, and hydro based facilities that are owned or contracted via PPAs. These facilities are committed and dispatched or bid into day-ahead and real-time markets by Xcel Energy's Commercial Operations department. Wind energy complicates the short and long-term planning goals of least-cost, reliable operations. Due to the uncertainty of wind energy production, inherent suboptimal commitment and dispatch associated with imperfect wind forecasts drives up costs. For example, a gas combined cycle unit may be turned on, or committed, in anticipation of low winds. The reality is winds stayed high, forcing this unit and others to run, or be dispatched, to sub-optimal loading positions. In addition, commitment decisions are frequently irreversible due to minimum up and down time constraints. That is, a dispatcher lives with inefficient decisions made in prior periods. In general, uncertainty contributes to conservative operations - committing more units and keeping them on longer than may have been necessary for purposes of maintaining reliability. The downside is costs are higher. In organized electricity markets, units that are committed for reliability reasons are paid their offer price even when prevailing market prices are lower. Often, these uplift charges are allocated to market participants that caused the inefficient dispatch in the first place. Thus, wind energy facilities are burdened with their share of costs proportional to their forecast errors. For Xcel Energy, wind energy uncertainty costs manifest depending on specific market structures. In the Public Service of Colorado (PSCo), inefficient commitment and dispatch caused by wind uncertainty increases fuel costs. Wind resources participating in the Midwest Independent System Operator (MISO) footprint make substantial payments in the real-time markets to true-up their day-ahead positions and are additionally burdened with deviation charges called a Revenue Sufficiency Guarantee (RSG) to cover out of market costs associated with operations. Southwest Public Service (SPS) wind plants cause both commitment inefficiencies and are charged Southwest Power Pool (SPP) imbalance payments due to wind uncertainty and variability. Wind energy forecasting helps mitigate these costs. Wind integration studies for the PSCo and Northern States Power (NSP) operating companies have projected increasing costs as more wind is installed on the system due to forecast error. It follows that reducing forecast error would reduce these costs. This is echoed by large scale studies in neighboring regions and states that have recommended adoption of state-of-the-art wind forecasting tools in day-ahead and real-time planning and operations. Further, Xcel Energy concluded reduction of the normalized mean absolute error by one percent would have reduced costs in 2008 by over $1 million annually in PSCo alone. The value of reducing forecast error prompted Xcel Energy to make substantial investments in wind energy forecasting research and development

Wind Energy Forecasting: A Collaboration of the National Center for Atmospheric Research (NCAR) and Xcel Energy