Economic disruptions in long-term energy scenarios – Implications for designing energy policy

Abstract

The main drivers of transformation processes of electricity markets stem from climate policies and changing economic environments. In order to analyse the respective developments, modelling approaches regularly rely on multiple structural and parametric simplifications. For example, discontinuities in economic development (recessions and booms) are frequently disregarded. Distorting effects that are caused by such simplifications tend to scale up with an extension of the time horizon of the analysis and can significantly affect the accuracy of long-term projections. In this study, we include information on economic discontinuities and elaborate on their influences on short-and long-term modelling outcomes. Based on historical data, we identify the impact of a high-amplitude change in economic parameters and examine its cumulative effect on the German electricity market by applying a techno-economic electricity market model for the period from 2005 to 2014. Similar changes may consistently occur in the future and we expect that a more comprehensive understanding of their effects on long-term scenarios will increase the validity of long-term models. Results indicate that policy decision making based on modelling frameworks can benefit from a comprehensive understanding of the underlying simplifications of most scenario studies.

Better suited or just more complex? On the fit between user needs and modeller-driven improvements of energy system models

“…Similarly, Koppelaar et al [10] found that electricity system models are able to provide scenario-based insights for some policy purposes, but not for others, and especially not for the exploration of problem solutions and political or societal paradigm shifts. At the same time, Govorukha et al [50] stress that decision-makers should be better informed about the underlying simplifications applied in modelling: for example, it must be clearly communicated what macro-economic factors are and are not considered in the scenario analysis. All in all, there is plenty of room for modelling improvements to better serve policymaking [11], which requires a better understanding of needs by diverse stakeholder groups.…”

Fictional expectations in energy scenarios and implications for bottom-up planning models

“…To stay abreast, even long-term scenarios 30 years into the future, like the World Energy Outlook (WEO), are outdated so quickly that they require substantial revision every year. Similar to forecasts, energy scenarios struggle to incorporate exogenous shocks affecting demand or fuel prices [29,20]. In addition, scenarios often neglect major changes and assume an overly conservative continuation of present trends.…”