The paper examines the value of variable power sources, such as wind and tidal energy, on electricity supply systems. A statistical approach is developed for assessing the operational impacts, including thermal plant cycling and operating reserve requirements. It is shown from this analysis that operating penalties are negligible when the capacities involved are small relative to the overall system, as long as reserve is optimally scheduled. Simplified equations are also presented for estimating operating penalties from limited data. The paper then discusses the impact of variable sources at higher system penetrations, and uses modelling studies to examine the possible economic value of wind energy up to very high capacities. The possible technical characteristics of future power systems are discussed in this light. Finally, the paper examines the contribution of variable sources to system reliability and the nature of capital savings arising from this. The capacity contribution in many circumstances is equivalent to conventional sources, but in general the importance of capacity issues is much less than generally believed. The overall conclusion is that for a given energy output, variable sources are often as valuable as equivalent conventional sources when the capacity is small, and their contribution can be very large before the penalties of variability become significant.