Strommarktgruppe,
Market'power,'fuel'subsitution''
and'infrastructure'–''
A'large8scale'equilibrium'model''
of'global'energy'markets'
DIW'Discussion'Paper'1370,'2014'
Daniel,Huppmann,
Berlin,,July,8,,2014,
1'
The'conundrum'of'climate'change'mitigation,'
environmental'policy'and'the'energy'system'
Market,power,,fuel,subsitu@on,and,infrastructure,
Daniel,Huppmann,
1'
Scenario'analysis'and'impact'assessment'in'the'policy'arena'
Analysing'energy'scenarios'and'the'impact'of'climate'change'
mitigation'policies'requires'large8scale'numerical'models'
'
EU ENERGY, TRANSPORT AND GHG EMISSIONS
TRENDS
TO 2050
REFERENCE SCENARIO 2013
Market,power,,fuel,subsitu@on,and,infrastructure,
Daniel,Huppmann,
Frederic,Edwin,Church,–,The,Iceberg,(1891),
Picture,from,Wikimedia,commons,
(downloaded,July,2,,2014),
An'example'for'the'importance'of'the'“iceberg'effect”'
Cost'estimates'for'nuclear'power'plants'vary'widely'and''
the'assumptions'have'substantial'impact'on'model'results'
in,2010€/kW,
1'
Range,found,by,literature,review,(Schröder,et,al.,,2013),
7000,
6000,
5000,
4000,
?'
3000,
2000,
1000,
0,
2010,
2020,
EU,Reference,(2013),
2030,
2040,
2050,
Energy,Roadmap,(2011),
Assump@ons,on,capital,cost,development,for,nuclear,genera@on,capacity,
Market,power,,fuel,subsitu@on,and,infrastructure,
Daniel,Huppmann,
2'
Model'types'currently'applied'
in'the'policy'arena'
'
Market,power,,fuel,subsitu@on,and,infrastructure,
Daniel,Huppmann,
2'
Introduction:'Approaches'to'applied'energy'modelling'
A'crude'attempt'at'model'classification'
Effects,between,the,energy,system,
and,climate/environmental,aspects,
Integrated'Assessment'
Models'
Effects,between,energy,markets,,
and,the,wider,economy,
(“top]down”),
Computable'General'
Equilibrium'Models''
(with'energy'focus)'
Energy'System'Models'
Analysis,of,fuel,subs@tu@on,and,
different,technology,op@ons,
(“bo_om]up”),
Market,power,,fuel,subsitu@on,and,infrastructure,
Daniel,Huppmann,
Sector8specific''
partial8equilibrium'
models'
Detailed,analysis,of,market,power,,
and,infrastructure,constraints,
1'
Examples'of'our'sector8specific'modelling'work'
Natural'gas'
Holz,,F.,,C.,von,Hirschhausen,and,C.,Kemfert.,A,Strategic,Model,of,European,Gas,
Supply,(Gasmod)."Energy"Economics"30(3):766]788,,2008.,
Egging,,R.,,F.,Holz,and,Steven,A.,Gabriel.,The,World,Gas,Model,–,A,mul@]period,mixed,
complementary,model,for,the,global,natural,gas,market.,Energy,35:4016]4029,,2010.,
Coal'
Haeendorn,,C.,and,F.,Holz.,Modeling,and,analysis,of,the,interna@onal,steam,coal,trade.,
The"Energy"Journal"31(4):201]225,,2010.,
Crude'oil'
Huppmann,,D.,and,F.,Holz.,Crude,Oil,Market,Power,–,A,shie,in,recent,years?,,
The"Energy"Journal"33(4):,1]22,,2012.,
Electricity'
Leuthold,,F.,U.,,H.,Weigt,and,C.,von,Hirschhausen.,A,large]scale,spa@al,op@miza@on,
model,of,the,European,electricity,market.,,
Networks"and"Spa;al"Economics"12(1):75]107,,2012.,
Market,power,,fuel,subsitu@on,and,infrastructure,
Daniel,Huppmann,
3'
Developing'a'large8scale''
energy'system'model'from'scratch'
'
Market,power,,fuel,subsitu@on,and,infrastructure,
Daniel,Huppmann,
2'
Our'own'motivation,'and'what'we'did'so'far...'
Why'build'an'energy'system'model'from'scratch?'
•  Methodological:,to,bridge,the,gap,between,model,classes,,
and,to,study,market,power,in,energy,system,models,
•  Educa@onal:,to,understand,which,assump@ons,are,implicit,within,
IEA,World,Energy,Outlook,,EU,Energy,Roadmap,2050,,etc.,
•  Policy,evalua@on:,own,scenarios,,sensi@vity,analysis,,etc.,
Development'history'to'date:'
•  Joint,project,by,NTNU,Trondheim,and,DIW,Berlin,,launched,in,2011,
•  First,(conference),paper,published,in,spring,2012,
•  Model,descrip@on,discussion,paper,published,in,spring,2014,
•  Currently,par@cipa@ng,in,Energy,Modeling,Forum,(EMF),,Round,31,
Market,power,,fuel,subsitu@on,and,infrastructure,
Daniel,Huppmann,
1'
A'spatial'multi8fuel'energy'system'and'resource'markets'model'
Understanding'the'impact'of'climate'change'mitigation'
policies'requires'large8scale'numerical'models'
•  Large]scale,numerical,models,are,widely,used,for,scenarios,and,
pathway,simula@on,,as,well,as,policy,impact,assessment,
•  But,in,currently,used,approaches,,there,is,a,divide,between,…,
…,energy,system,models,
…,sector]specific,models,
,
,
fuel,subs@tu@on,,
,&,technology,op@ons,
strategic,behaviour,,
,&,infrastructure,investment,
,
,
Times]Markal,(Loulou,et,al.,,2005),
PRIMES,(EC,,2011),
NEMS,(Gabriel,et,al.,,2001),
World,Gas,Model,(Egging,et,al.,,2010),
CoalMod,(Haeendorn,and,Holz,,2010),
ELMOD,(Leuthold,et,al.,,2012),
Market,power,,fuel,subsitu@on,and,infrastructure,
Daniel,Huppmann,
1'
The'aspects'covered'by'the'multi8fuel'energy'market'model'
The'multi8fuel'model'combines'the'advantages'of''
energy'system'and'sector8specific'approaches'
Supplier''
market'power'
Infrastructure'
Energy'system'&'
resource'market'model'
Climate'policy''
&'regulatory'
constraints'
Market,power,,fuel,subsitu@on,and,infrastructure,
Daniel,Huppmann,
Fuel'substitution'
3'
Short'overview'
Players'in'the'model'
•  Suppliers,of,fuels,
•  Arc,operators,(pipeline,,ship,,rail,,LNG,,etc.),
•  Transforma@on,technology,operators,(power,plant,,refinery),
•  Storage,operators,(gas,storage,,pump]hydro,storage),
•  Final,demand,(by,sector),
•  Emission,permit,auc@oneer,
Solution'strategy'
•  Take,first]order,(KKT),condi@ons,of,each,player‘s,profit,maximiza@on,
problem,,coupled,with,market,clearing,constraints,
•  Use,conjectural,varia@ons,to,represent,market,power,by,suppliers,
•  Solve,for,(Generalized),Nash,equilibrium,,
as,Mixed,Complementarity,Problem,(MCP),in,GAMS,
Market,power,,fuel,subsitu@on,and,infrastructure,
Daniel,Huppmann,
3'
Illustration'of'the'supply'chain'in'an'energy'system'model'
Demand'sectors'
Service'providers'
Production'
Supply'chain'illustration'in'a'two8node,'four8fuel'setup'
Country'A'
Natural'
gas'
Country'B'
Crude'oil'
Biofuels'
Supplier'A'
Nuclear'
Supplier'B'
Pipeline'
Refinery'
Ship'
Power'
generation'
Storage'
Power'
generation'
Ship'
Storage'
Residential'&'
Transport'
Refinery'
Industry'
Industry'
Residential'&'
Transport'
,represents,the,nodal,mass,balance,constraint,by,supplier,and,fuel,
Market,power,,fuel,subsitu@on,and,infrastructure,
Daniel,Huppmann,
3'
Illustration'of'the'supply'chain'in'an'energy'system'model'
Demand'sectors'
Service'providers'
Production'
Illustration'of'cross8fuel'market'power'
Country'A'
Natural'
gas'
Country'B'
Crude'oil'
Biofuels'
Supplier'A'
Nuclear'
Supplier'B'
Pipeline'
Refinery'
Ship'
Power'
generation'
Storage'
Ship'
Storage'
Residential'&'
Transport'
Power'
generation'
Refinery'
Industry'
Industry'
Residential'&'
Transport'
Assump@on:,Suppliers,remain,owners,of,the,fuel,for,the,en@re,supply,chain,
Market,power,,fuel,subsitu@on,and,infrastructure,
Daniel,Huppmann,
3'
The'current'data'set'–'key'figures'
The'model'implementation'is'flexible'&'scalable''
and'the'large8scale'data'set'allows'for'detailed'analysis'
•  Global,coverage,,represented,by,62,nodes,
•  11,nodes:,
,European,Union,members,(or,aggregates),
•  ,,4,nodes:
•  13,nodes:
,non]EU,European,countries,(or,regions),
,non]European,regions,
•  34,nodes:
,to,represent,the,LNG,chain,(liquefac@on,&,regasifica@on),
•  10,fuels,(crude,oil,,natural,gas,,hard,coal,,lignite,,oil,products,,
electricity,,hydro,,nuclear,,renewables,,biofuels,&,waste),
•  5,steps,(2010,–,2020,–,2030,–,2040,–,2050),
•  2,seasons,per,year,(winter,–,summer),
•  3,demand,sectors,(industry,,transport,,residen@al,&,commercial),
,
15,
Strategic,Behaviour,in,Energy,Markets,–,Wissenschaeliche,Aussprache,
Daniel,Huppmann,
3'
The'reference'data'set'&'base'case'
Base'year'data:'
•  Produc@on,and,consump@on,quan@@es:,,
IEA,World"Energy"Sta;s;cs"2013,
•  Produc@on,and,investment,costs,,capaci@es,,transforma@on,
efficiencies,,losses,,etc.,from,own,sector]models,and,data,collec@ons,
•  Assump@ons,on,elas@city,,seasonal,varia@on,from,various,sources,
Projections:''
•  Quan@@es:,IEA,World"Energy"Outlook"(WEO),"new"policies"scenario,
"
But,it,is,impossible,to,match,it,exactly,,because…,
…,the,WEO,doesn‘t,provide,enough,detail,
…,disaggrega@ons,don‘t,conform,
•  Poten@al:,IEA,WEO,(450"scenario);"BP"Energy"Outlook;"GreenFX"(EEG),
Market,power,,fuel,subsitu@on,and,infrastructure,
Daniel,Huppmann,
4'
Some'numerical'scenario'results'
Market,power,,fuel,subsitu@on,and,infrastructure,
Daniel,Huppmann,
4'
General'comments'and'observations'across'scenarios'
Less'optimistic'baseline'for'US'fossil'fuel'potential'
•  Natural,gas,produc@on,increases,un@l,2030,,then,starts,to,decline,
•  Crude,oil,produc@on,flat,un@l,2030,,then,starts,to,increase,
No'prospect'for'nuclear'or'CCS'
•  Unless,very,strong,policies,for,GHG,emission,reduc@on,are,enacted,,
we,do,not,find,substan@al,investment,in,either,new,nuclear,power,
plants,or,carbon]capture]and]sequestra@on,(CCS),technology,
North'America'remains'self8sufficient'w.r.t.'natural'gas'
•  In,all,scenarios,,there,are,virtually,no,imports,or,exports,of,LNG,to,
or,from,North,America,
•  But,the,net,trading,balance,for,crude,,oil,products,and,coal,varies,
according,to,global,demand,shies,or,resource,availabi@ly,scenarios,
18,
Modelling,strategic,behaviour,in,global,energy,markets,,,
Daniel,Huppmann,
4'
The'base'case'&'thee'illustrative'scenarios'
The'model'functionality'&'policy'relevance'is'illustrated'
using'three'scenarios'on'energy'and'climate'policy'
We,compare,the,calibrated,model,results,to,three,scenarios:,
•  Scenario,A"Shale"Disappointment"
"
The,US,shale,gas,boom,cannot,be,sustained,(cf.,Richter,,2013),
•  Scenario,Truly"Renewable""
"
The,European,Union,enacts,a,reduc@on,of,CO2,emissions,by,80%,,
un@l,2050,and,a,stronger,biofuel,mandate,in,the,transport,sector,
•  Scenario,US"Policy"Circus"
"
North,America,imposes,an,emission,ceiling,on,the,power,sector,
Market,power,,fuel,subsitu@on,and,infrastructure,
Daniel,Huppmann,
Scenario'results'A"Shale"Disappointment"
A'reduction'of'shale'gas'availability'leads'to'an'increase'of'
natural'gas'consumption'in'the'European'Union'
in,mtoe,
4'
800,
600,
400,
200,
0,
2010,
2020,
2030,
2040,
2050,
Power,genera@on,North,America,
Power,genera@on,European,Union,
Consump@on,North,America,
Consump@on,European,Union,
Produc@on,North,America,
Produc@on,
Natural,gas,produc@on,and,consump@on,(Base,case:,dark,,scenario:,light),
Market,power,,fuel,subsitu@on,and,infrastructure,
Daniel,Huppmann,
Scenario'results'Truly"Renewable""
Strong'carbon'reduction'policies'in'the'European'Union'lead'
to'an'electrification'of'the'transportation'sector'
in,mtoe,
4'
Biofuels,
Electricity,
Renewables,
Gas,
Oil,
Coal,&,Lignite,
600,
400,
200,
0,
2010,
2030,
2050,
2010,
2030,
2050,
2010,
2030,
2050,
Industry,
Residen@al,
Transport,
Secondary,energy,consump@on,in,the,European,Union,(Base,case:,dark,,scenario:,light),
Market,power,,fuel,subsitu@on,and,infrastructure,
Daniel,Huppmann,
Scenario'results'Truly"Renewable"'
Unilateral'emission'reduction'policy'by'the'European'Union'
leads'to'substantial'leakage'to'other'regions'
in,Gt,CO2,
4'
WEO,(aggregate),
Gas,
Oil,
Coal,
Leakage,
4,
3,
2,
1,
0,
2010,
2020,
2030,
2040,
2050,
Emissions,according,to,WEO,and,model,results,(Base,case:,dark,,scenario:,light),
Market,power,,fuel,subsitu@on,and,infrastructure,
Daniel,Huppmann,
4'
Scenario'results'US"Policy"Circus"
in,Gt/y,,
A'sector8specific'mandate'leads'to'higher'total'emissions''
by'substituting'electricity'with'direct'use'of'fossil'fuels'
6,
5,
4,
3,
2,
1,
0,
2010,
2020,
2030,
Final,consump@on,
2040,
2050,
Power,genera@on,
CO2,emissions,by,sector,(dark:,base,case;,light,colors:,scenario,results),
23,
Modelling,strategic,behaviour,in,global,energy,markets,,,
Daniel,Huppmann,
4'
Scenario'results'US'Policy'Circus'
in,Quad,BTU,,
Natural'gas'does'not'see'an'increase'in'power'generation'
as'it'is'used'directly'in'industrial'processes'instead'
60,
50,
40,
30,
20,
10,
0,
2010,
2020,
2030,
Biofuels,&,renewables,
Coal,&,Lignite,
2040,
2050,
Gas,
Nuclear,
Fuel,mix,in,power,genera@on,(dark:,base,case;,light,colors:,scenario,results),
24,
Modelling,strategic,behaviour,in,global,energy,markets,,,
Daniel,Huppmann,
4'
Scenario'results'US"Policy"Circus'
in,Quad,BTU,
The'emission'ceiling'in'power'generation'leads'to'a'drastic'
shift'to'direct'use'of'natural'gas'
40,
30,
20,
10,
0,
2010,
2020,
2030,
Final,consump@on,
2040,
2050,
Power,genera@on,
Natural,gas,use,in,North,America,(dark:,base,case;,light,colors:,scenario),
25,
Modelling,strategic,behaviour,in,global,energy,markets,,,
Daniel,Huppmann,
4'
Conclusions'and'Outlook'
The'multi8fuel'model'is'a'first8of8its8kind'“proof'of'concept”'
to'a'more'comprehensive'approach'to'energy'modelling'
•  Methodological,advances:,,
"
Combining,market,power,,infrastructure,considera@ons,and,fuel,
subs@tu@on,in,an,integrated,large]scale,par@al]equilibrium,model,
•  Policy,relevance:,
"
The,model,will,be,used,in,the,analysis,and,impact,assessment,of,
various,energy,,climate,and,emission,reduc@on,policies,
•  Going,open]source?,
Market,power,,fuel,subsitu@on,and,infrastructure,
Daniel,Huppmann,
4'
The'next'modelling'frontier'
Energy'efficiency'offers'the'biggest'potential'for'carbon'reduction,'
but'poses'methodological'and'practical'hurdles'
•  The,“old,approach”,to,energy,system,modelling,
"
Assume,some,exogenous,energy,demand,,find,least]cost,supply,
•  Energy,efficiency,promises,an,easy,way,to,decarbonize,energy,supply,
"
But,we,have,to,capture,and,quan@fy,the,“rebound,effect”,
"
Subjec@ve,discoun@ng,by,final,demand,and,incen@ve,compa@bility,
•  Implemen@ng,energy,efficiency,properly,is,not,straighuorward,
"
How,to,properly,formulate,investment,in,energy,efficiency,in,a,
sufficiently,aggregated,model?,
"
How,to,find,data,to,parametrize,the,model?,
Market,power,,fuel,subsitu@on,and,infrastructure,
Daniel,Huppmann,
Thank,you,very,much,for,your,a_en@on!,
German'Ins*tute'for'Economic'Research'(DIW'Berlin)'
Deutsches'Ins*tut'für'Wirtscha;sforschung'e.V.'
Mohrenstraße,58,,10117,Berlin,
www.diw.de/english,
,
Daniel,Huppmann,,[email protected],