Major concern in utilising renewable energy sources, such as solar or wind, is their intermittent nature. Therefore, whether they can be reliable energy sources to provide uninterrupted energy demand when reaching a high share of renewable energy in the system depends on the whole energy supply network. Higher flexibility of RES-based systems can be reached through the development of smart energy concepts. The system dynamics model coupled with a geographical information system platform has been used to analyse space and time dimensions of RES potential using geo-referenced information. This approach allows analysing the whole energy system by determining the best-suited development scenario for each region separately, based on their resource, economic, and technological capabilities. Furthermore, the system dynamics model is complemented with different policies to evaluate their impact on renewable and local energy resource development and economic potential. The results show that the potential for large-scale onshore wind farm capacities with suitable land conditions could be around 5.5 GW, but the forecasted necessary wind power capacity to reach climate neutrality in 2050 is 1.55 GW. Therefore, onshore wind turbines should be promoted to move toward a smart and renewable power system in Latvia.