A critical analysis on wind farms has been carried out to improve the performance and reliability of wind energy system. The effect of its improvement has been studied with the Optimal Renewable Energy Mathematical (OREM) model which is developed for sustainable generation in India. The performance and reliability of the wind turbine generators have been evaluated in a demonstration windfarm (6 MW) in India. The windfarm is situated in Kayathar, a village in the south of Tamil Nadu State. The average technical availability, real availability and capacity factor have been analysed from 1991 to 1995 and they are found to be 92%, 54% and 19% respectively. Fault analysis for grid failures has been done using pareto analysis. The analysis indicates that when grid drop failures are reduced by 50%, the overall reduction in the frequency of faults would be 35.2%, which is significant. The reliability analysis has also been done for the wind turbine generator. The failure rate is high to an extent of 6.7 x 10(-5) h(-1) in the case of a yaw control defect and the factor of reliability is found to be 0.5 at 10 000 h. The OREM model developed reveals that when the reliability factor of wind energy system is improved from 0.5 to 0.9 then the utilisation of wind energy would be increased by 82%.