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Future smart grid has been widely conceived to be featured by its flexible supply-demand management and great exploitation of renewable energy. However, due to the volatility of renewable sources, exploitation of renewable energy introduces uncertainty in energy supply. Therefore, it is of practical importance to quantify the optimal exploitation of renewable energy based on the supply-demand framework for future smart grid, where the energy-providers (or the energy-users) adaptively adjust their energy-provisioning (or energy-demands) according to the system information that takes account of the volatility of renewable energy. In this work, we consider a residential smart grid equipped with a centralized renewable source as a supplement to the electricity acquired from the grid. Our model aims at: i) quantifying the optimal exploitation of renewable energy that trades off between the system-wide benefit from using the renewable energy and the associated cost due to its volatility, and ii) characterizing how the volatility of renewable energy influences its optimal exploitation. An efficient distributed algorithm is proposed to determine the optimal utilization of renewable energy as well as the associated energy scheduling decisions based on the supply-demand model.