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Govinda R. TimilsinaThe World Bank, Washington, DC

Skopje, MacedoniaMarch 1, 2011Sectoral Models for Energy and Climate PoliciesPresentation Outline Introduction Typology of models Energy Demand Models Energy supply models Energy system models

IntroductionEnergy modelling has a long history(Since the early 1970s, a wide variety of models became available for analysing energy systems or sub-systems, such as the power system)

Energy modelling has multiple purposes(Better understanding of current and future markets supply, demand, prices; facilitating a better design of energy supply systems in short, medium and long term; ensuring sustainable exploitation of scarce energy resources; understanding of the present and future interactions energy and the rest of the economy; understanding of the potential implications to environmental quality)

Based on different theoretical foundations(Engineering, economics, operations research, and management science)

Apply different techniques(Linear programming, econometrics, scenario analysis)Classifying Energy ModelsMethodologies for Energy Demand ForecastingMethodologies for Energy Demand ForecastingEnd-use Approach

Bottom-up or engineering approach

Use physical or engineering relationship between energy and energy utilizing devices and processes (e.g., capacity, efficiency, utilization rate)

Follows growth of driving variables (i.e., devices and processes), which are derived often scenario analysis or economic models

Could produce more disaggregated (i.e., end-use and sector) and the forecasts are relatively precise

Complex and data consuming; more appropriate for long-termEconometric Approach

Econometric approach

Use historically established relationships between energy demand and economic variables (e.g., GDP, population, household income)

Follows growth of driving variables (i.e., economic variables)

Estimation are made at more aggregated level or at sectoral level but not at end-use level

Simple but relatively less accurate; more appropriate for short-term Methodologies for Energy Demand ForecastingEnd-use Approach

Normally do not account pricing effect on demand, which is very critical when demand for a fuel is highly elastic

Econometric Approach

This approach normally considers single fuel or aggregate energy (gasoline, electricity) and does not account substitution possibilities between fuels

Use of flexible functional forms (e.g., translog, normalized quadratic ) is growing

They are unable to account technology specific features which are key determinants of fuel consumption

Comparison of some energy demand forecasting modelsCriteriaDTINEMSMAED/ MEDEELEAPPOLESTypeTop-DownHybridBottom-upBottom-upHybridApproachEconometricAccountingGeographyNationalFlexibleGlobalLevel of disaggregationDomestic, transport, service, industryAgriculture is also includedTechnology coverageRenewable and conventionalBoth conventional and renewableData needTime series and surveyEnergy Supply ModelsEnergy Supply Models These models either stand alone (e.g., MARKAL, WASP) or serve as a module of a energy system model (e.g., electricity market module, coal market module in US NEMS model)

Demand forecasts, energy resources and technologies characteristics, costs are the key driving variables

Can accommodate any policy instruments or constraints such as emission constraints

Methodologies for Energy Supply PlanningOptimization

Ensure cost minimization meeting all constraints such as resource availability, system reliability, environmental quality (if desired)

More appropriate when a large number of supply alternatives are available

Example: MARKAL, EFOM, WASP Simulation

Simulates behavior of energy consumers and producers under various signals (e.g. price, income levels)

Forecasts can be sensitive to starting conditions and behavioral parameters

Example: ENPEP/BALANCE, Energy 20/20

Energy Supply Model: MARKALMARKAL is a bottom-up model with detailed representation of energy resources and production technologies

It follows the principal of reference energy system and finds a least cost set of technologies to satisfy end-use energy service demands and user-specified constraints

MARKAL is found extensively used for both academic and consulting studies

MARKAL: MARKet ALlocation)

Developed under the Energy Technology Systems Analysis Program of IEA

Linear programming type optimization ; based on Reference Energy System

Detailed modeling of energy resources and supply chains

Includes electricity generation and transmission planningEnergy Supply Model: MARKALEnergy Supply Model: MARKAL

Total OECD Countries = 21Total Developing Countries = 23Total Other Countries = 13Electricity Supply Model: WASP WASP stands for Wien Automatic System Planning

It was originally developed by the Tennessee Valley Authority and Oak Ridge National Laboratory of the US for International Association of Atomic Energy

It is the most well-known and widely used optimization model for examining medium- to long-term expansion options for electrical generating systems

The software is distributed for use by electric utilities and regulation agencies in over 90 countries, as well as to 12 international organizations including The World Bank

Electricity Supply Model: WASP

Countries Using WASPEnergy System ModelsEnergy System ModelingEnergy system models combine both demand and supply, they can be also used for:Energy market projections Energy policy analysis Projections of environmental pollution (e.g., GHG, SOx, NOx) from the energy system and policies for their mitigation

They can employ different methodologies for the demand and supply blocks (e.g., end-use or econometric for demand and optimization or simulation for supply)

ENPEP Optimization for supply; econometric for demand

LEAP uses end-use accounting approach for demand and simulation approach for supply

NEMS uses optimization modules for the electricity sector and simulation approaches for each demand sectorNameDeveloperNEMSUS DOEENPEPArgonne National Laboratory LEAPStockholm Environmental InstituteTIMESEnergy Technology Systems Analysis Program (ETSAP) of the International Energy Agency (IEA), MESSAGEInternational Institute for Applied Systems Analysis, AustriaPOLESLEPII (formerly IEPE - Institute of Energy Policy and Economics), Grenoble, FranceENERGY 2020Systematic Inc. (a US private company)Energy System Models - Examples

- Detailed evaluation of energy demands by sector, sub-sector, fuels and useful energy - Representation of resource availability and costs Detailed evaluation of the power system configurations

Energy System Model - ENPEPEnergy System Model - ENPEP

Global Use of ENPEP21Energy System Model US NEMSThe National Energy Modeling System (NEMS) is the tool the Energy Information Administration (EIA) of the United States has been using since 1994 to project US energy market and to analyze various energy-economic, environmental and energy security policies

NEMS projects the production, imports, conversion, consumption, and prices of energy, subject to assumptions on macroeconomic and financial factors, world energy markets, resource availability and costs, behavioral and technological choice criteria, cost and performance characteristics of energy technologies, and demographics

Based on NEMS results the EIA publishes its Annual Energy Outlook every year; it has also been used for a number of special analyses at the request of the Administration, U.S. Congress, other offices of DOE and other government agencies: Energy Market and Economic Impacts of H.R. 2454, the American Clean Energy and Security Act of 2009, requested by Chairman Henry Waxman and Chairman Edward Markey

Impacts of a 25-Percent Renewable Electricity Standard as Proposed in the American Clean Energy and Security Act, requested by Senator Markey

Source: EIA, USDOE (http://www.eia.doe.gov/oiaf/aeo/overview/figure_2.html)Energy System Model US NEMS (Model Structure) Long Range Energy Alternatives Planning System

Developed by Stockholm Environmental Institute

Scenario-based energy accounting model

It accommodates a Technology and Environmental Database

Energy demands by sectors, sub-sectors end-uses and equipment Energy transformation sectors included (e.g., electricity, refinery, charcoal)Energy System Model LEAPEnergy System Model LEAP(Overall Model Structure)

Energy System Model LEAP(Global Application)

MESSAGE stands for Model for Energy Supply Strategy Alternatives and their General Environmental Impact; it is the International Institute for Applied Systems Analysis, Austria

It is a systems engineering optimization model used for medium- to long-term energy system planning, energy policy analysis, and scenario development

It is a scenario-based energy system model; scenarios are developed through minimizing the total systems costs under the constraints imposed on the energy system; this information and other scenario features such as the demand for energy services, the model configures the evolution of the energy system from the base year to the end of the time horizonEnergy System Model MESSAGEEnergy System Model MESSAGE(Overall Model Structure)

Comparison of Selected Energy System ModelsCriteria RESGEN EFOM MARKAL TIMES MESAP LEAP Approach Optimisation Accounting Geographical coverage Country Local - national Country - multi-country National Local - global Activity coverage Energy Energy & trading Energy Sector Pre-defined User defined Pre-defined Technology Good Extensive Data need Variable Extensive Variable Skill requirement Limited High Limited Documentation Limited Good Extensive Good Extensive Thank YouGovinda R. Timilsina Sr. Research EconomistEnvironment & Energy Unit Development Research Group The World Bank 1818 H Street, NW Washington, DC 20433, USA Tel: 1 202 473 2767 Fax: 1 202 522 1151 E-mail: gtimilsina@worldbank.org