Capturing natural resource heterogeneity in top-down energy-economic equilibrium models

Capturing natural resource heterogeneity in top-down energy-economic equilibrium models
Rausch, S.and D. Zhang (2018)
Energy Economics, 74 (August 2018, 917-926) (doi: 10.1016/j.eneco.2018.07.019)

Abstract/Summary:

Top-down energy-economic modeling approaches often use simplified techniques to represent heterogeneous resource inputs to production. We show that for some policies, such as feed-in tariffs for renewable electricity, detailed representation of renewable resource grades is required to describe the technology more precisely and identify cost-effective policy designs. We demonstrate the hybrid approach for modeling heterogeneity in the quality of natural resource inputs required for renewable energy production in a stylized computable general equilibrium framework. Importantly, compared to the traditional approach, the hybrid approach resolves near-flat or near-vertical sections of the supply curve and improves the precision of policy simulation. We then represent the shape of a resource supply curve based on more detailed data. We show that for the case of onshore wind development in China, a differentiated feed-in tariff design that can only be modeled with the hybrid approach requires less than half of the subsidy budget needed for a uniform feed-in tariff design to achieve the same installation targets.

Highlights

• We extend the hybrid approach to model heterogeneity of resource inputs in CGE model.

• The approach can integrate detailed resource data allowing more precise simulation.

• A modeling case on China’s onshore wind shows the accuracy and flexibility of the approach.

• A differentiated FIT design requires less subsidy and is more cost-effective.

Citation:

Rausch, S.and D. Zhang (2018): Capturing natural resource heterogeneity in top-down energy-economic equilibrium models. Energy Economics, 74 (August 2018, 917-926) (doi: 10.1016/j.eneco.2018.07.019) (https://www.sciencedirect.com/science/article/pii/S0140988318302688)
Capturing natural resource heterogeneity in top-down energy-economic equilibrium models

Rausch, S.and D. Zhang

74 (August 2018, 917-926) (doi: 10.1016/j.eneco.2018.07.019)
2018

Abstract/Summary: 

Top-down energy-economic modeling approaches often use simplified techniques to represent heterogeneous resource inputs to production. We show that for some policies, such as feed-in tariffs for renewable electricity, detailed representation of renewable resource grades is required to describe the technology more precisely and identify cost-effective policy designs. We demonstrate the hybrid approach for modeling heterogeneity in the quality of natural resource inputs required for renewable energy production in a stylized computable general equilibrium framework. Importantly, compared to the traditional approach, the hybrid approach resolves near-flat or near-vertical sections of the supply curve and improves the precision of policy simulation. We then represent the shape of a resource supply curve based on more detailed data. We show that for the case of onshore wind development in China, a differentiated feed-in tariff design that can only be modeled with the hybrid approach requires less than half of the subsidy budget needed for a uniform feed-in tariff design to achieve the same installation targets.

Highlights

• We extend the hybrid approach to model heterogeneity of resource inputs in CGE model.

• The approach can integrate detailed resource data allowing more precise simulation.

• A modeling case on China’s onshore wind shows the accuracy and flexibility of the approach.

• A differentiated FIT design requires less subsidy and is more cost-effective.

Supersedes: 

Capturing Natural Resource Dynamics in Top-Down Energy"‘Economic Equilibrium Models

Posted to public: 

Friday, November 16, 2018 - 14:55