Hybrid diesel-wind power generation systems have a great potential in the application of providing energy supply for remote communities and facilities. Compared to the traditional diesel system, hybrid power plants can offer many advantages such as additional capacity, being more environmentally friendly, potential reduction of cost, etc. One of the problems for the hybrid system is the uncertain profit due to the uncertain nature of the wind. In this paper a general model is presented based on real option theory for valuating a hybrid diesel-wind generation plant. A dynamic programming method is used to generate the optimum operational option by maximizing the net cash flow of the plant. Results show that operational options can provide additional value to the hybrid power system when this operational flexibility is correctly utilized. The optimal scale of wind turbines generators (WTGs) can be calculated as a consequence of the limitation of demand and local wind power density. This paper also provides a framework to find the optimal operating decision at each time step based on the real option model. (C) 2012 Elsevier Ltd. All rights reserved.