Crete and Rhodes represent the two biggest isolated power systems in Greece. The energy production in both islands is based on thermal power plants. The annual wind energy rejection percentage is calculated for Crete and Rhodes in this paper. The rejected wind energy is defined as the electric energy produced by the wind turbines and not absorbed by the utility network, mainly due to power production system's stability and dynamic security reasons. A parametric calculation of the annual wind energy rejection percentage, in terms of the installed wind power, the power demand and the maximum allowed wind power instant penetration percentage, is accomplished. The methodology takes into account (i) the wind power penetration probability, restricted by the thermal generators technical minima and the maximum allowed wind power instant penetration percentage over the instant power demand; and (ii) the wind power production probability, derived by the islands' wind potential. The present paper indicates that isolated power systems which are based on thermal power plants have a limited wind power installation capacity—in order to achieve and maintain an adequate level of system stability. For a maximum wind power instant penetration percentage of 30% of the power demand, in order to ensure an annual wind energy rejection percentage less than 10%, the total installed wind power should not exceed the 40% of the mean annual power demand. The results of this paper are applicable to medium and great size isolated power systems, with particular features: (i) the power production is based on thermal power plants; (ii) the power demand exhibits intensive seasonal variations and is uncorrelated to the wind data; (iii) the mean annual power demand is greater than 10MW; and (iv) a high wind potential, presenting mean annual wind velocity values greater than 7·5ms−1, is recorded. Copyright © 2007 John Wiley &Sons, Ltd.