Quantifying fossil fuel savings from investment in renewables and energy storage

In communities where electricity generation depends on fossil fuel, there is a rising interest in renewable energy as the new source of electricity. In many cases, wind and solar, two dominant types of renewables, are readily accessible. However, investing in these resources is still a risky endeavor: the initial cost of such projects is still high. Moreover, because of the intermittency in wind and solar resources, grid code may require additional equipment (such as energy storage) and new controllers (monitoring, protection, and control algorithms), adding to the cost of the new plants. This paper describes a methodology to guide investment decisions in renewable energy. For each penetration level of renewable energy, the associated projects are evaluated for their benefit and cost. The benefit, defined as fossil fuel saving (the difference between the fossil fuel used before and after a renewable project is installed), can be estimated using software tools for security-constrained economic dispatch. The cost of each project can be estimated based on market and vendors' data. The resulting Benefit-Cost curve typically reveals the effect of diminishing returns: increasing the project size (more and more renewables) requires more investment, but may not produce the desired increase in fossil fuel savings. Such results can serve as a valuable guide for decision makers.