How much renewable energy capacity do I need?

What is it about?

This paper is for users of electric power that are considering investing in their own sources of renewable energy capacity to supplement their energy needs. Once a renewable source has been selected, such as wind or solar, the next question is how much capacity to install. This is a difficult problem because the firm's energy needs, the energy produced by solar or wind, and the cost of electric power will all fluctuate over time. Our proposed decision support tool incorporates all of these uncertainties (and potential correlations) to provide an optimal amount of renewable capacity to invest in.

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Why is it important?

We show that simply historical averages to solve this problem will lead to significant over-investments in renewable energy capacity. Thus, many renewable energy projects will be incorrectly evaluated as not cost effective.