Modelling the Energy Sector in GreenREFORM

11-06-2020
GrønREFORM Dokumentation Rasmus Berg Janek Eskildsen Jens Sand Kirk

This paper provides documentation of the modelling of the energy sector in the GreenREFORM model of the Danish economy at its current state of development.

Abstract

This paper provides documentation of the modelling of the energy sector in the GreenREFORM model of the Danish economy at its current state of development. The energy model is the first of several sector specific models currently being developed, and even if fully functional already, still needs further development itself. The energy model will be fully integrated with the CGE-model in a modular fashion. In the CGE-model energy transformation and distribution is divided into three sectors based on national account statistics, namely district heating, electricity and natural gas. The energy model provides a very detailed model of production of heat and electricity, and thus it does not encompass the entire energy system. It is based on bottom data, but will be calibrated to match national account statistics to ensure seamless integration with the CGE-model. During simulations, the CGE-model provides information to the energy model on input prices of intermediary input in production wage rates etc. and yearly demand for heat and electricity. Simultaneously, the energy model will provide information to the CGE-model on intermediary demand, labour demand and the yearly average price of heat and electricity.

At the current stage, the documentation outlines a model that draws on plant-level information from detailed bottom-up dispatch models. It further outlines a modelling approach that nests the traditional linear programming approach conventionally applied in bottom-up models while being compatible with conventional CGE models, thus facilitating a straightforward and efficient integration link. The approach fully accounts for the costs of intermittency of energy production by building on intra-year equilibria. The model further covers instruments aimed at mitigating the costs of intermittency as flexible short run demand, storage technologies, dispatchable back-up capacity, and transmission lines facilitating trade in electricity between neighboring countries.

Development of the energy model is currently focused on endogenous investments. Other areas on the board are individual solutions for production and storage of heat and electricity, Power-to-X technologies, dependence on its usage (electric vehicles etc.) of the intertemporal pattern and price dependency of electricity demand.