Page 476 - A Comprehensive Guide to Solar Energy Systems

Chapter 25 • Optimal Renewable Energy Systems 489

The marginal costs of energy sources may vary greatly by location. in the United states,
for example, a given solar PV panel produces more electricity in the sunny southwest than
in the rainy northwest, and the cost of solar PV is thus lower in the southwest (as indicated
by Eq. (25.1), as the capacity factor is greater in the southwest). The spatial equimarginal
principle is that marginal costs of renewable energy from sources in different locations
should be equal, where marginal cost includes transmission from point of production to
point of use. Again this is substitution principle: if importing solar energy from a sunnier
region is less expensive than producing locally, total cost can be reduced by substituting
imported energy.
depending on differences in production and transmission costs, this could imply that
renewable energy costs are minimized with large, centralized production facilities, which
could be at great distances from users. yet such an energy system might not meet energy
resiliency criteria, and optimal systems should balance energy cost and resiliency. Just as
many countries now subsidize domestic food production for greater food security, domes-
tic and localized energy production may be attractive despite greater costs.
The variability of individual renewable energy sources is mitigated by having multiple
sources in different geographic locations. For example, the mean wind speed across an
area is less variable than in any particular place. increasing distance between generation
sites typically reduces the covariance between sites, providing a more constant flow of
energy [4].
For electrical energy, supply must always equal demand—unlike in other markets,
temporary electricity shortages and surpluses can create severe problems. yet the sup-
ply of ambient energy varies both systematically (e.g., seasonally) and randomly (e.g.,
daily), creating a significant challenge for matching supply and demand. Approaches to
intermittency include having a diversity of energy sources (which may have complemen-
tary variability), having a renewable energy portfolio that includes dispatchable sources
such as biomass and hydropower, oversizing generation, and storing energy. All of these
approaches have costs that must be considered to minimize the total cost of a renewable
system, the problem to which we now turn.

25.3 Economic Theory of Renewable Energy Intermittency

As described in section 25.2, the equimarginal principle suggests that to minimize total
cost of obtaining energy, marginal costs of different renewable sources should be equal.
But the problem is considerably more complex when temporal dimensions are consid-
ered. Ambient energy sources are unable to be delivered on demand, or are nondispatch-
able—we cannot control when the sun shines or the wind blows. This may be the most
prominent issue in renewable energy economics: marginal costs of delivering renewable
energy vary over time. Moreover, in an optimal renewable energy system marginal costs of
different energy sources are not necessarily equal at every moment in time, but rather are
equal only at specific critical times.