Energy Systems Modeling at ERC The SA TIMES Model

Overview of Modeling Inputs to optimization model Outputs from optimization model Intermediary information flow Economic Analysis Demand Sectors (commercial and agriculture omitted from diagram) MARKAL/TIMES optimization energy model (GAMS with CPLEX solver) Base Year Energy Balance Residential sector Demand projections Industrial sector future technologies Industrial sector Demand projections Transport sector future technologies Transport sector Demand projections Supply Technology Existing power system Existing liquid fuel supply system Socio-Economic Variables (GDP, Population) Energy Resources/Import and Exports Residential sector future technologies Policy objectives/constraints Socio-economic growth objectives Environmental objectives, taxes Energy security objectives Future power generation technologies Existing coal/gas supply system Future coal/gas supply technologies Future liquid fuel supply technologies Fossil fuel reserves Renewable energy resource potential Import/export (elc, oil, gas) Residential sector base- year calibration Results Analysis Industrial sector base-year calibration Transport sector base- year calibration Investment Schedule/Plan Imports, exports, consumption, production, Emissions System costs, energy costs

Components of a MARKAL/TIMES model

Simple Reference Energy System

Energy model components Made up of 2 simple components: – Energy Carriers (e.g. fuels, demand) – Technologies (e.g. Light bulb, power plant) all characterized in the same way: – Input and Output Carrier – Efficiency – Investment Costs per unit of capacity – Annual Activity Costs – Existing Capacity – Annual Availability – Expected Life – Emissions

Useful energy demand Calculated using spreadsheets Based on assumptions – Useful energy calculated for base year – Projected into future Affected by – GDP assumptions – Structure of the economy – Changes in per capita income – Assumed income distribution, electrification etc

Sectors SectorDisaggregationDriver AgricultureBy end use, irrigation, transport etcAgriculture GDP ResidentialHigh, medium and low income/ electrified and non-electrified POPULATION, Household income By end use, cooking, lighting etc CommercialBy end use, lighting, HVAC, etcCommercial GDP, building stock IndustrialBy sector, Iron and Steel, Pulp and paper etcSectoral GDP By end use, thermal fuel or electricity (compressed air, cooling, motive, etc TransportAir, Freight, passenger, pipelineTransport GDP, Population and household income By end demand, passenger km, ton km By end use, diesel car, petrol car, taxi etc

Variation of the Load (electricity) 20 Time-slices Year divided in 3 seasons Each season represented by 2 typical days Season 1 and 3 (summer), each day is broken up into 3 parts (night, day, evening) Season 2 (winter) week day is broken up into 5 parts (night, morning, afternoon, evening, peak)

Other elements Emissions: – Emissions coefficient/energy carrier – Emissions Tax Constraints: – Committed build plans – Resource limits – Mode shares – Fuel shares – Policy Objectives (e.g. CO2 limit)

Model Outputs Reported globally: – Total Costs – Total tax/subsidy – Total Investments – … Reported for demands each year: – Actual energy demand met – Marginal Price (Shadow price/cost of supplying one extra unit of demand) Reported for each energy carrier each year: – Imported/exported – Mined

Model Outputs (Continued) Reported for technologies each year: – Fixed costs – Capacity Level and Marginal – Capacity Unused – Fuel Used – Investment Costs – Investment Levels and Marginal costs – … Reported for emissions each year: – Emission Levels Reported for tax/subsidy each year: – Tax/Subsidy

The SAGE Model Calibrated to a 2005 SAM (Arndt et al., 2011) – 54 industries and 46 commodities – 7 factors of production (4 education-based labour groups; energy and non- energy capital; agricultural productive land) – 14 household groups based on per capita expenditures – Energy Supply Sector disaggregated Resource constraints – Upward sloping labour supply curves for less-educated workers – Sector Specific capital and endogenous capital accumulation Macroeconomic closures – Fixed current account with flexible real exchange rate – Savings-driven investment Model has already been used by Treasury to look at some CO2 tax scenarios and recycling options

SAGE Model (continued) Previous Runs of SAGE model with Power sector production shares and investment fixed by IRP plan

The CGE-TIMES Link -GDP and sectoral growth -Household income growth - Electricity Generation Shares -Investment -[Electricity production costs] - Simple Extrapolation of sectoral and income growth, used to re- calculate useful energy demand.

Sectoral Linkage

The CGE-TIMES link continued The Idea is to replicate IRP/IEP process in TIMES Fix committed build See how the economy responds Adjust forecast and update investment plans Re-iterate