Abstract
To address climate change, society must obtain most of its energy from carbon-neutral renewable sources, including solar, wind, hydropower, tidal, geothermal, and biomass energy. Most ambient energy sources are nondispatchable, or not available on demand. A prominent problem for renewable energy utilization is thus matching energy supply and demand, which in an electric grid, must be equal at each moment. This chapter demonstrates the use of economic methods to identify a cost-minimizing portfolio of renewable energy sources and energy storage that is sufficient to meet energy demand, given ambient energy availability. An empirical example from the US state of Vermont illustrates that to minimize total cost of energy and energy storage, marginal costs for all energy and storage sources must be equal. But this equality holds only at critical times when ambient energy is limited and/or energy demand is great.
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