WP 5 Developing policy scenarios

Objectives

The main task of this workpackage is to assess the impact of a range of different energy and environmental policies on the development and deployment of a large range of new energy technologies. Each model will be used to evaluate a set of agreed upon policy measures in terms of their technological impact, change of the energy system and predominance of energy resources, as well as their efficiency and costs. The set of specific policy targets and instruments is determined at the beginning of this workpackage and will be as much as possible tuned with the actuality of the day in the European policy arena. Typically, however, the set of policy scenarios to be analysed will likely include such cases as (1) carbon emission targets, (2) carbon intensity targets, (3) energy intensity targets, and (4) technology standards. Both absolute and relative policy targets are investigated, both technology-based and environment-based, and due attention will be paid to such as issues as which policy instrument (e.g. taxes or subsidies) is most effective and/or efficient to reach certain environmental (climatic) goals. While each institute employs an approach characteristic for its own model, with varying foci of interest across the heterogeneous and rich set of model types as indicated under the respective task descriptions below, they are all committed to analyze – each using their unique modeling perspective - this same set of mutually agreed policy scenarios. The main tasks performed under this workpackage are listed below, in alphabetical order by model.

Description of work

Task 5.1: CCS technology policy

Partner: UNIMAN

Model: DEMETER

This task aims at further exploring the economics of CO₂ capture and storage (CCS) and scenario relevance of CCS technology, possibly in relation to the possibility of significant leakage of CO₂ from geological reservoirs once this greenhouse gas has been stored artificially underground, as this will be among the main determinants of whether CCS can significantly contribute to a deep cut in global CO₂ emissions. For example, an analysis of the economic and climatic implications will be performed of the large-scale use of CCS for reaching a stringent climate change control target, when geological CO₂ leakage is accounted for or other relevant CCS features are represented. The natural scientific uncertainties regarding the rates of possible leakage of CO₂ from geological reservoirs are likely to remain large for a long time to come. Hence, it is useful to use an integrated assessment model to analyse the policy relevance of these types of phenomena, thus proffering insight into the economics of geological CO₂ storage and leakage. Most importantly, under this task’s core work the agreed policy measures are inspected in terms of their impact on and interaction with DEMETER’s three main CO₂ emission reduction options: energy savings, a carbon to non-carbon energy transition and the use of CCS.

Task 5.2: Coordinating Energy and Economic Scenarios

Partner: ORDECSYS

Model: GEMINI-E3

This task aims at doing scenario analysis that links to the work planned with TIAM under task 5.4. Establishing a link between TIAM and GEMINI-E3 is unique and can provide innovative insight in the analysis of energy policy scenarios for environmental control. This is why the above agreed policy scenarios will under this task be investigated through the mutual linkage and tuning of the TIAM and GEMINI-E3 models jointly. The GEMINI-E3 team is working on a methodology for coupling top-down and bottom-up models, notably under the European TOCSIN project. In particular, the GEMINI-E3 and TIAM models are coupled via advanced large-scale mathematical programming techniques, and used to evaluate climate change mitigation options in China and India and the conditions for strategic cooperation on R&D and technology transfer with the EU. The methodology developed in TOCSIN will be a starting point for the policy analysis work planned under this task of PLANETS. The coupling technique will be extended and improved to serve the investigation of the agreed policy scenarios. For example, as with many bottom-up models, TIAM is demand driven, so that in this task the demand projections need to be calibrated on GEMINI-E3 simulations. The representation of environmental costs in GEMINI-E3 is provided by MAC curves, which can be calibrated on the modeling results with TIAM. While this approach has recently been tested in a “soft coupling” between GEMINI-E3 and MARKAL-Switzerland, focusing on the residential sector, for this task this approach needs to be generalized by extracting some parts of the energy sector from GEMINI-E3 and keeping the representation given by TIAMS to obtain implicitly the marginal abatement costs. The coupling is achieved when for the economic configuration of the energy system provided by TIAM, GEMINI-E3 proposes a set of demand for the different energy services that are consistent with the ones that are used to drive the TIAMS simulations. The possibility of using OBOT as a way to realizing the linking via exchange of first order information between the two categories of models will be methodologically explored. However innovative this approach and desirable for this workpackage’s analysis, the prime goal here remains the generation of the agreed policy scenarios allowing complete and consistent cross-model comparison.

Task 5.3: Parametric programming

Partner: USTUTT

Model: PEM / TEAMS

This task aims at programming a parametric routine for a group of parameters using the matrix of TIMES. This may contribute to solving for the fact that the solution of TIMES is often sensitive to critical input data assumptions, traditionally addressed by running different scenarios. A drawback of the scenario approach is the extensive time needed for running, analyzing and comparing the scenarios. In the parametric programming approach a fixed set of standard indicators or tables is defined, which are analyzed as function of the input parameters. The consortium believes it could be insightful to explore the line of parametric programming, and ascertains that such is undertaken in support of this workpackage’s main goal, i.e. the development of a uniform set of policy scenarios consistently generated, explored and compared between all models. Related hereto is the question which activity or mix of activities is responsible for the shadow price of the constraint. The activities being responsible for the shadow price can be identified by inspecting scenario cost differences on the technology level. A sub-purpose of this task is to create an automatic routine, as this might be useful to identify these activities. Knowledge of this information is useful to understand better the model’s behavior. The use of parametric programming can give an answer to the question under which conditions and technology (cost) improvements certain technologies emerge in the solution of the respective agreed policy scenario runs.

Task 5.4: Global Energy-Economy-Climate Scenarios

Partner: KANLO

Model: TIAM

This task aims at readying the TIAM world energy model for its coordinated use with the other PLANETS models in the accomplishment of the project’s overall objectives, and in particular with the purpose of running the policy scenarios as agreed under this workpackage. European energy originates in great part from regions outside Europe. This is particularly true for fossil energy such as oil, natural gas, and liquefied natural gas. TIAM provides the required representation of such supplies from all world regions, and, just as importantly, a coherent representation of the competition for fossil energy from the non-European importers of fossil fuels. A sub-objective complementing the policy scenario work of this task will therefore be the investigation of such fossil fuel issues. TIAM has the ability of coherently representing global settings for climate and energy scenarios, those characterized for instance by global GHG emission targets, oil and gas prices, and oil and gas reserves. If deemed necessary, global climate scenarios additional to the agreed ones may be simulated with TIAM, such as a 2 C limit on global temperature increase, the results of which could be compared with those of the other global models. As explained in task 2, TIAM and GEMINI-E3 will be linked via a sound coupling mechanism that ensures coherence of the energy sector with the economy at large in all world regions. As part of this task, the TIAM database may be revised and augmented with the information gathered under other workpackages of PLANETS and other tasks under this workpackage. At the end of this task, TIAM will be fully ready to operate in coordination with the suite of other models in this project and will have generated the set of agreed policy scenarios.

Task 5.5: Enhancements of technology characterizations

Partner: ECN

Model: TIMES

This task aims at analyzing the agreed policy scenarios with significantly improved economic and technical features introduced in TIMES regarding a number of energy technologies, as it is known that some essential ones are poorly reflected at present and are urgently in need of refinement. While the goal is clearly a cross-model comparison of a set of policy measures, the focus of this task is specifically the set of energy technology characteristics and assumptions that strongly contribute determining the outcomes of the policy runs. Among these, to mention a few, are notably those related to coal based power generation and nuclear energy, as well as some renewables. For the former, CCS application could be a way forward to continue the use of fossil fuels, but in a clean way. Potentials for CO₂ storage space, however, needs to be correctly reflected, notably with regards to enhanced coal bed methane potentials in Europe, but also related to the other main storage options. The costs of these, and especially of the different capture technologies applied, should be carefully re-visited in TIMES. For nuclear energy, important aspects of the total fuel cycle are in principle reflected in TIMES. The aim is to improve on this, e.g. by adapting the costs related to waste disposal and incurred by accounting for all costs associated with the prevention of nuclear proliferation. Also the types of nuclear technologies, e.g. those of generation III or IV, should be revisited. In all these respects, but not necessarily excluded to these technologies, the goal is to make the model richer and more realistic, and will therefore benefit from the work as done under workpackage 4. Finally, it is worthwhile to investigate how coal and nuclear power generation will behave in the agreed energy policy scenarios, i.e. relative to each other, as these two technologies may become major rivals on the electricity production market. Of course, as with the other tasks, the behavior of these technologies under the uniform set of policy instruments will constitute the prime subject of study under this workpackage’s task.

Task 5.6: Economy-energy policy responses

Partner: FEEM

Model: WITCH

Using the set of agreed policy scenarios, this task aims at analyzing the impact of energy and environmental policies on the investments in new energy technologies and on their capacity to induce technological change. WITCH will be used to evaluate the policy impacts on electricity and energy R&D investments, on the potential to increase technology competitiveness by learning-by-doing effects, and on fossil fuel markets in terms of variations in consumption and the resulting price effects. The specific development of technologies such as renewables, CCS and new nuclear, induced by the agreed policies, will be quantified. Most importantly, this task will determine the economic repercussions of these policies in terms of global welfare losses, as opposed to the environmental and economic gains in the main regions of the world. The game-theoretical set-up of WITCH allows determining how the envisaged policies are able to reduce the world regions’ free-riding incentives that arise from global externalities such as CO₂, exhaustible resources and international technology spillovers. This latter aspect is particularly important as it will allow quantifying the effect of technology fore-runners in reducing the costs of advanced technologies and consequently spreading their adoption across the world. At the same time, the agreed policies will be evaluated in their ability to fix the above mentioned market failures and achieve a more sustainable economic development.

Workpackage 5 is carried out under the co-ordination of KANLO