Solar and Wind Potential Analysis in Europe

Abstract

This work investigates technological, spatial, and temporal complementarities between wind, solar and electricity demand in Europe through a generalized portfolio-based approach rooted in Modern Portfolio Theory (MPT). It introduces the theoretical basis of MPT for energy planning and uses descriptive statistics to characterize wind and solar resources across the continent. The analysis highlights complementarities across technologies and regions and employs a mean-variance optimization framework solved via quadratic programming to determine optimal renewable energy mixes. This methodology aims to maximize capacity factors and reduce output variability, thus enhancing system reliability through diversification. In this context, a novel methodology is presented to incorporate electricity demand into a literature-based analysis of wind and solar resource complementarities in Europe. The proposed approach is applied in a case study that focuses on electricity demand metrics and their implications for capacity planning. Demand is examined at multiple temporal scales - yearly, monthly, daily, and hourly - providing a detailed view of consumption patterns across Europe. The study further explores the role of different demand metrics in shaping capacity allocation strategies and presents comparative visualizations of demand dynamics. Using a generalized version of portfolio optimization, it evaluates optimal renewable capacity allocation under various capacity factor constraints, emphasizing regional differences and the use of average demand as a target. Furthermore, the Levelized Cost of Electricity (LCOE) is assessed at the country level to evaluate cost-effectiveness, highlighting opportunities for technological switching to minimize generation costs.