Energy Modeling and Economics

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Energy Modeling and Economics

• Dr. Jeroen van der Sluijs
• J.P.vanderSluijs_at_chem.uu.nl

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Goals

• Obtain state of the art insight in energy
  modeling and (energy) resource economics
• Learn basic principles of modeling energy-economy
  systems
• Understand some basic modeling approaches and
  techniques and their strengths and weaknesses
• Develop the skill to critically analyze and
  reflect on (model-based) economic assessment
  studies on energy systems

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Overview of the course

• Week 1-3 Lectures on basic concepts and
  approaches to energy economy modelling (several
  guest-lectures)
• Week 4-5 TIMER model (Bas van Ruijven, Detlef
  van Vuuren Bert de Vries)
• Week 6 Uncertainty methods
• Week 7 Markal Model (Lars Dittmar Machteld
  van den Broek)
• Week 8 Model comparison assignment
• Week 9-10 Integrative assignment

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• Lectures
• Wk 1
• Introduction World Energy Assessment 2004
• Long term Energy-Economy scenarios
• Top-down Energy Modelling
• Energy forecasting models based on Engineering
  Economics
• Wk 2
• Modeling the economy
• Integrated Assessment models, an introduction
• Input-Output Modeling
• Bottom-up vs Top Down models
• Wk 3
• IKARUS
• CPB's Energy demand model NEMO
• CPB's Electricity Market model ElMar
• The power sector

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Week 4-8 Diving into models and techniques

• Models
• TIMER
• MARKAL
• Techniques
• Linear optimization
• Sensitivity Analysis Monte Carlo
• NUSAP, pedigree analysis
• Model Comparison Exercise

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Week 9-10Integrative assignment

• In groups of 6 students
• Take a recent Energy Economy study that figured
  in the policy debate
• Write a critical review of that study using the
  insights from the course on strengths and
  limitations of energy economy models
• Focus on controversies and their background
• Cases
• Peak oil controversy
• Wind Energy on the North Sea
• ?????

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Course materials

• Reader
• www.blackboard.uu.nl
• Assignments
• Power Points

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Assessment

• Halfway exam (week 6) about reader and lectures
  of first 3 weeks (30)
• Model Comparison Assignment (week 8) (30)
• Integrative Assignment (week 9 10) (40)

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World Energy Assessment Energy and the challenge
of sustainability (2000 update 2004)

• The United Nations Development Programmes (UNDP)
• The United Nations Department of Economic and
  Social Affairs (UNDESA)
• The World Energy Council (WEC)

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WEA definition Sustainable Energy

• Energy produced and used in ways that support
  human development over the long term, in all its
  social, economic, and environmental dimensions
• Production and use of energy resources in ways
  that promote-or at least are compatible
  with-long-term human well-being and ecological
  balance.

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Dimensions Sustainable Development

• Economic
• Social
• Ecological

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Sustainability of energy supply socio-economic
dimensions

• Access to energy sources varies between countries
  and between groups within countries
• Dependence on import of energy sources that are
  un-equally distributed over the globe
• Vulnarability of energy supply (disasters,
  black-outs)
• Depletion of (scarce) energy sources, need to
  timely develop alternatives.

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Economic dimension

• Meet elementary human needs
• Competitive position
• Innovative capacity
• Fair distribution
• Efficiency
• Costs and benefits

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Social dimensions

• Participation
• Social cohesion
• Public support for policies
• Safety of groups, workers, and individuals
• Institutional developments
• Keep options open for future generations

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Ecological dimension

• Conservation of biodiversity
• Health (humans, animals, ecosystems)
• Carrying capacity ecosystems
• Clean
• Safe
• Responsible management of risks

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• Unsustainabilty of current energy system
• Modern fuels and electricity are not universally
  accessible, an inequity that has moral,
  political, and practical dimensions in a world
  that is becoming increasingly interconnected.
• The current energy system is not sufficiently
  reliable or affordable to support widespread
  economic growth. The productivity of one-third of
  the world's people is compromised by lack of
  access to commercial energy, and perhaps another
  third suffer economic hardship and insecurity due
  to unreliable energy supplies.
• Negative local, regional, and global
  environmental impacts of energy production and
  use threaten the health and well-being of current
  and future generations.

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Relationship between Human Development Index and
per capita energy use, 1999/2000
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Per capita energy use (commercial and
non-commercial), by region, 2000
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Trends

• 2/year growth in primary energy use
• Compared to 1998, world wide energy use will have
  doubled in 2035, and tripled in 2055
• Past 30 year growth in lower developed countries
  was 3.5x bigger than in OECD countries
• This has not lead to a more fair distribution of
  energy use per capita

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World primary energy use and reserves,
2001 Note 1 exajoule 1018 joule
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amount of energy (EJ) ?
Reserves Consumption in period 1985-2025

oil
natural gas
coal
uranium
renewables
Proven reserves ( commercially exploitable) for
oil, natural gas, coal and uranium (Shell, 1990)
and the world energy consumption in the period
1985-2025 (IPCC, 1990A). In this scenario, the
reserves of oil and natural gas known at present
are nearly exhausted in 2025. Source RIVM,
Bilthoven, NL, 1991.
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Question What means Business-as-Usual More
coal in the fossil fuel mix (IPCC-1999A), or more
natural gas (IIASA) ?
1600 GtC in 1990-2100


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World primary energy use and reserves,
2001 Note 1 exajoule 1018 joule
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natural gas
oil
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Proven reserves

• Four Questions / steps
• 1. What is the probability that a certain
  amount R is available of a specific energy
  carrier (Geological Reserve, GR), and what part
  of it is called proven.
• 2. What part of the proven GR can be exploited
  with present day technology? (Technical
  Exploitable Reserve, TER).
• 3. What part of TER can be exploited at
  competitive costs? (Economic Exploitable Reserve,
  EER).
• 4. Does the energy carrier fulfill quality
  requirements, such that it can be consumed in an
  acceptable manner?

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Expectations of experts in 1981 1988
concerning development of crude oil price
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Unit July 2005
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Notions on energy and development

• Energy ladder
• Environmental Kuznets Curve (EKC)
• Principle of structural change
• Dematerialisation

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Energy Ladder
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Fraction of non-commercial fuels in secondary
energy use in the SRES models Evaluation of
application of the Energy Ladder in Global Energy
Models
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A
B
Gini coefficient is calculated from the ratio of
surfaces A/(AB)
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GDP might not be the best indicator in energy
economy modeling
GINI coefficients vs. GDP/capita for 121
countries (higher GINI indicates a more unequal
income distribution). Data for different years
between 1990 and 2001, data from the World Bank
WDI (2004)
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GINI coefficient in the World
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Environmental Kuznets Curve
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CO2 emissions per capita plotted against income
(2000 data). The different GDPs account for the
lower income, lower middle, upper middle and high
income classes (Data from World Development
Indicators, World Bank, 2005) (Van Ruijven and
Urban, in prep.).
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Sulphur emission projections for ASIA from the
IPCC/SRES models Evaluation of application of
the Environmental Kuznets Curve in Global Energy
Models
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Structural change
stages in the share of employment or value added
of agriculture, manufacturing and services, based
on (Jung et al., 2000)
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Typical intensity of use curve of resources with
economic development, based on (de Vries et al.,
2001)
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• Factors driving patterns of energy use
• Shift from non-commercial to commercial forms of
  energy, industrialisation, and motorisation
  initially increase the commercial energy-GDP
  ratio.
• As industrialisation proceeds and incomes rise,
  saturation effects expansion of the service
  sector decrease ratio of commercial energy to GDP
  after it reaches a peak. Maximum has been passed
  by many countries, but not by low-income
  developing countries.
• As a result of world-wide technology transfer and
  diffusion, energy efficiency improvements can be
  the main limiting factor in the growth of energy
  demand arising from increasing populations and
  growing production and incomes.

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• Factors driving patterns of energy use
  (continued)
• The more efficient use of materials in
  better-quality, well-designed, miniaturised
  products, the recycling of energy-intensive
  materials, and the saturation of bulk markets for
  basic materials in industrialised countries
  contribute to additional decreases in energy
  intensity.
• In developing countries, technological
  leapfrogging to the use of highly efficient
  appliances, machinery, processes, vehicles, and
  transportation systems offers considerable
  potential for energy efficiency improvements.