CGE equilibrium modeling in GAMS · 2015-10-03 · Power specif ic demand INDUSTRY Heat demand...
Transcript of CGE equilibrium modeling in GAMS · 2015-10-03 · Power specif ic demand INDUSTRY Heat demand...
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Comparing linking versus integration
in hybrid modeling –
Combining TIMES with CGE models
66th Semi-annual IEA ETSAP meeting
TIMES-CGE Workshop
Copenhagen 2014-11-19
Per Ivar Helgesen
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2
Outline
1. Hybrid models – different approaches
2. Analysis case
3. Numerical results
4. Modelling results
5. Conclusions
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Top down models
Bottom up
• Engineering
• Technology rich
• Physical laws of nature
• Economics
• High level of abstraction
• The economy as a whole
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TIMES CGE
Limitation: Solutions from TIMES could
indicate future energy prices that are
inconsistent with the exogenously
assumed future demand – and versus
relative prices in other sectors.
Limitation: The future energy
mix in the CGE could be
inconsistent with the technical
knowledge embedded in TIMES.
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Separate models
Soft linked models
Hard linked models
Integrated model
Hybrid models
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Research questions
6
How should a bottom-up engineering
optimization model and a top-down
economic complementarity model be linked?
Can they be integrated?
Will linked models and an integrated model
produce the same solutions?
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NLP
QP
convex
LP
Complementarity Problems
KKT conditions
Source: Prof. Steven Gabriel
CGE TIMES
LP can be reformulated into MCP
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Analysis case
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TIMES test model
Reference Energy System (RES)
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Hydropower
Gasburner
GaspowerGas
Hydro
Resources Technologies Demand for energy services
Electric heating
Power specific demand
Heat demand
Thermal heat
Electricity
Thermal heat
Solution: capacity investments, production
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Computable General Equilibrium test model
• Four producers and one (representative) consumer
Agents Markets
Firm 1
Firm 2
Firm 3
Firm 4
Household
Natural Gas Commodity
Electricity Commodity
Manufacturing Commodity
Nonmanufacturing Commodity
Capital
Labor
• Data – Social Accounting Matrix:
Solution:
relative prices,
resource allocation
GAS ELE MAN NON L K HOU total
GAS 4 2 3 1 10
ELE 1 1 7 8 5 22
MAN 1 3 6 26 2 38
NON 5 10 10 30 92 147
L 1 1 5 53 60
K 2 3 8 27 40
HOU 60 40 100
total 10 22 38 147 60 40 100
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TIMES CGE
2010 Base year 2010 Base year
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CGE
2010 Base year 2010 Base year
2020 Future equilibrium
TIMES
Demand
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CGE
2010 Base year 2010 Base year
2020 Future equilibrium
TIMES
2020 Future energy system
Demand
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CGE
2010 Base year 2010 Base year
2020 Future equilibrium
TIMES
2020 Future energy system
Demand
Energy mix
Capital
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• The production technology is described by nested CES production functions.
• In this version we have used a standard nesting structure:
• We want to adjust this structure based on the energy mix from the bottom-up
model.
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Adjusting the nesting structure
Z (i)Gross domestic output
Y (i)Composite factor
CapitalF(Cap, i)
LaborF(Lab, i)
IntermediateX(j,i)
IntermediateX(j,i)
IntermediateX(j,i)
Cobb-Douglas
Leontief
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Linking the models
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Hydropower
Gasburner
GaspowerGas
Hydro
Resources Technologies Demand for energy services
Electric heating
Power specific demand
INDUSTRY
Heat demand INDUSTRY
Thermal heat
Electricity
Thermal heat
Power specific demand
TERTIARY
Power specific demand
HOUSEHOLDS
Heat demand TERTIARY
Heat demand HOUSEHOLDS
GAS ELE MAN NON HOU
GAS 4 2 3 1
ELE 1 1 7 8 5
MAN 1 3 6 26 2
NON 5 10 10 30 92
price
price
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Numerical results
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• We assume that the energy system has unused potential for hydro electricity,
and the bottom up model invests in hydro production facilities.
• The physical share of gas in the electricity production decreases.
• We estimate the value share of gas in the electricity production from TIMES
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Bottom up situation
Hydropower
Gasburner
GaspowerGas
Hydro
Resources Technologies Demand for energy services
Electric heating
Power specific demand
Heat demand
Thermal heat
Electricity
Thermal heat
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Electricity production from TIMES (basecase)
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14
16
18
20
22
24
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
GASPOWER
EL-HYDRO
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Top down situation
• We assume that labor availability increase by 11%
(based on national projections)
• The CGE-model spends the increased labour factor,
and calculates a future equilibrium
• Relative changes (in values):
• The increase of aggregated energy demand (in volume)
is 5.9%, which is presented to the energy system.
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GAS ELE MAN NON HOU total price increase
GAS 11,1 % 11,6 % 11,8 % 10,0 % 11,3 % 5 %
ELE 11,3 % 11,1 % 11,6 % 11,9 % 9,0 % 11,1 % 5 %
MAN 11,5 % 11,2 % 11,8 % 12,0 % 9,5 % 11,8 % 5 %
NON 10,1 % 9,9 % 10,4 % 10,7 % 10,8 % 10,7 % 4 %
L 13,2 % 12,2 % 12,2 % 10,8 % 11,0 % 0 %
K 13,2 % 14,4 % 13,3 % 8,7 % 10,3 % 10 %
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Bottom up response - electricity production
14
16
18
20
22
24
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
GASPOWER
EL-HYDRO
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• The nonlinear production function of the electricity good is adjusted in the top-
down model. In this version we have used a standard nesting structure:
• A reduced share of gas input is necessary to produce the same amount of
electricity.
• This change is a result of capital investments.
- Could also have been caused by other technology improvements
• The bottom-up effect should increase the household utility
further (in addition to the effect of the increased labour factor). 22
Top-down response
Z (i)Gross domestic output
Y (i)Composite factor
CapitalF(Cap, i)
LaborF(Lab, i)
IntermediateX(j,i)
IntermediateX(j,i)
IntermediateX(j,i)
Cobb-Douglas
Leontief
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Aggregated energy demand
Due to the change in production tehcnology, the top-down model
reallocates resources, and (somewhat surprisingly) calculates a
reduced energy demand after the inital increase:
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0 %
1 %
2 %
3 %
4 %
5 %
6 %
7 %
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Capital is the scarce factor
We have more labour available, and power generation is cheaper
(thanks to capital investments).
Relative prices:
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0,96
0,98
1,00
1,02
1,04
1,06
1,08
1,10
1,12
ELE
GAS
MAN
NON
K
L
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25
Electricity production (converged)
14
16
18
20
22
24
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
GASPOWER
EL-HYDRO
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Sector activity
-12 %
-10 %
-8 %
-6 %
-4 %
-2 %
0 %
2 %
4 %
6 %
8 %
10 %
ELE
GAS
MAN
NON
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27
Household consumption
0 %
2 %
4 %
6 %
8 %
10 %
ELE
GAS
MAN
NON
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The household utility increases monotonically.
We have used a Stone-Geary utility function.
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Household utility increase
0 %
2 %
4 %
6 %
8 %
10 %
12 %
14 %
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Energy system costs mimics the energy demand changes.
29
Energy system costs
48 000
50 000
52 000
54 000
56 000
58 000
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30
Modelling results
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Model implementations
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TIMES CGE
Linked MCP LP
Linked MCP MCP
Integrated MCP MCP
Integrated MPSGE MCP Demand
Energy mix
Demand
Demand
Demand
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MPSGE Mathematical Programming System for General Equilibrium
• Instead of using standard GAMS language, an MCP can be formulated using MPSGE as
programming interface.
• The nonlinear equations are automatically generated from a tabular description.
• The MCP version of TIMES is included as auxiliary constraints.
• Integration: Defining model structure using variables from the other model.
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Model implementations
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TIMES CGE
Linked MCP LP
Integrated MPSGE MCP Demand
Energy mix
Capital
Demand
Energy mix
Linked MPSGE MCP Demand
Energy mix
Capital
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This was what I hoped for:
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Energy system costs
44 000
45 000
46 000
47 000
48 000
49 000
50 000
51 000
52 000
53 000
Integrated solution
The linked models and the integrated model producing
the same solution
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Conclusions
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Conclusions
How should a bottom-up engineering optimization model and a top-down economic complementarity model be linked?
The economic model can provide projected demand, the engineering model can provide energy mix and capital investment
Can they be integrated?
Yes – at least the simple test models can be integrated
Do linked models and an integrated model produce the same solutions?
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37
"Corner solution"
-
5,00
10,00
15,00
20,00
25,00
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
GASPOWER
EL-HYDRO
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Conclusions
How should a bottom-up engineering optimization model and a top-down economic complementarity model be linked?
The economic model can provide projected demand, the engineering model can provide energy mix and capital investment
Can they be integrated?
Yes – at least the simple test models can be integrated
Do linked models and an integrated model produce the same solutions?
Not necessarily
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Conclusions
We have successfully implemented linked and integrated models in different modelling configurations.
The hybrid modelling leads to different solutions than running the models separately.
The linked and the integrated models currently do not converge to the same solution.
Results may depend on modelling approach.
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