Energy-Economy Modeling: Principles and Applications

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Energy-Economy ModelingPrinciples and
Applications

• Youngho Chang
• Division of Economics and ERI_at_N
• Nanyang Technological University
• 29 June 2013
• Workshop at Meijo University

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Agenda

• Models in energy sector
• Analysis of energy technologies
• Economic impacts of energy choice
• Conclusions

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Energy

• Socio economic development and energy
• Rise in oil price
• is a reminder of resource crunch that must be
  continuously tackled
• Energy supply must be done more efficiently and
  with more environmentally friendly and efficient
  technology
• This also means that energy demand must also be
  managed

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Group of Energy Resources

• Traditional (often called biomass resources )
• fuelwood, crop residues and livestock residues
• due to large volume and traditional use, they
  fall under traditional category
• They are considered non-monetized although they
  are sold in some of the markets
• Commercial
• fossil fuels and electricity
• both can be used to obtain an energy service
• Non-conventional or renewable
• mainly renewable energy sources such as solar
  wind and biogas.

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What Is a Model?

• We must understand the best way to supply energy
  for a reasonable demand
• Therefore, two end points are supply and demand
• Various types of models available
• Suitability of model depends on the goal of
  modeling, data and software availability and
  competence of the modeler.
• Simplification of complex amalgamation of systems
  and variables.
• Back of the envelope calculations.
• Complex computer calculations

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Energy Modeling

• Model types
• Supply based models
• Demand based models
• Hybrid models
• Simulation models can fall under this category as
  well (ENPEP/BALANCE, Energy 20/20)
• In the analysis of climate/energy related
  policies, two general types of models have been
  used
• Top-down (e.g., general equilibrium or
  macro-economic frameworks) and
• Bottom-Up (e.g., energy system models).

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Supply based models

• Accounting model
• Mainly based on database
• If the status quo pattern stays, what would be
  the energy requirementmost popularly used model
• Long Range Energy Alternatives Planning Model
  (LEAP)
• Optimization models
• Linear to non-linear optimization models
• Developed a multi-period linear optimization
  model with stochastic and non-stochastic
  parameters
• Combining generation and transmission
• Market Allocation Model (MARKAL)
• Both are mainly used on a macro level- country
  level energy analysis

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Hybrid model

• Econometric model
• various socio-economic parameters
• population, stretch of road (KM extension),
  number of vehicles, number of houses built,
  economic performance of the country, and family
  income.
• Based on time series data of actual consumption.
• The best model fits the actual consumption.
• The projection is based on the status of
  parameters assumed for the future.
• Econometric models are not the end but the
  beginning of energy modeling exercise

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Econometric model

• Good for medium range planning (5-10 years)
• But economy is changing very fast
• As the structure of economy can change, the
  pattern of energy consumption might also change
• Many companies manufacturing heavy equipment have
  shifted to China.
• This changes the requirement for reliable motor
  power
• This will also shift the energy requirement to
  other sector such as servicing
• Singapore, Hong Kong, Britains economy has
  shifted from materialized economy (heavy
  manufacturing) to non materialized economy

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Changing economic structure
http//www.sml.hw.ac.uk/logistics/Decoupling_of_Ro
ad-tonne-km_and_GDP.pdf
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Reference Energy System
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Model Building Blocks - Data Categories
Demand for Energy Service
End-Use Technologies
Conversion Technologies
Primary Energy Supply
(Final Energy)
(Useful Energy)
Industry, e.g. -Process steam -Motive
power Services, e.g. -Cooling -Lighting Househol
ds, e.g. -Space heat -Refrigeration Agriculture,
e.g. -Water supply Transport, e.g. -Person-km
Industry, e.g. -Steam boilers -Machinery Services
, e.g. -Air conditioners -Light
bulbs Households, e.g. -Space heaters -Refrigerat
ors Agriculture, e.g. -Irrigation
pumps Transport, e.g. -Gasoline Car -Fuel Cell
Bus
Fuel processing Plants e.g. -Oil
refineries -Hydrogen prod. -Ethanol prod. Power
plants e.g. -Conventional Fossil Fueled
-Solar -Wind -Nuclear -CCGT -Fuel
Cells -Combined Heat and Power
Renewables e.g. -Biomass -Hydro Mining
e.g. -Crude oil -Natural gas -Coal Imports
e.g. -crude oil -oil products Exports
e.g. -oil products -coal Stock changes
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The MARKAL Model

• Utilizes a bottom-up approach to represent and
  characterize technology specific portfolios of
  the entire energy - materials flow system
  synergies, offset and feedback effects
• Provides a dynamic integrated framework to assess
  market competition, technology diffusion and
  emission/waste accounting
• Facilitates Program Managers in selecting
  technology mix over the entire energy - materials
  system based on life cycle accounting and least
  cost
• Solves as a mathematical programming problem

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MARKAL-MACRO Overview

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How MARKAL-MACRO Reacts to Environmental
Constraints?

• Intra-technology substitution (i.e., within a
  particular technology category) occurs to meet
  the energy demand more efficiently.
• Inter-technology substitution (i.e., among
  competing technologies servicing a particular
  energy demand) occurs.
• Less carbon-intensive energy resources/ fuels are
  used to meet energy demands across sectors.
• It reduces energy demand, which reduces economic
  output consequently.

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Example