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Energy Systems and Technologies for the Coming Century ...

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Dynamic Power System Investment Modeling<strong>and</strong> AnalysisHans Ravn, RAM-løse edb, HansRavn@aeblevangen.dk, www.RAM-lose.dk.AbstractIn <strong>the</strong> perspective of <strong>the</strong> expected large structural changes of <strong>the</strong> energy system in <strong>the</strong>present century in relation to ambitious environmental goals it is essential to have a goodunderst<strong>and</strong>ing of investment processes in energy technologies. This encompasses severalaspects such as uncertainty, e.g. with relation to technological development, to fuelprices <strong>and</strong> to future dem<strong>and</strong>s, investors’ preferences <strong>and</strong> <strong>the</strong> timing of investments.Moreover, to properly analyze <strong>the</strong> possible developments paths of <strong>the</strong> energy sector,energy system models seem essential.In <strong>the</strong> present paper some steps towards development of a suitable energy system model<strong>for</strong> that task is described <strong>and</strong> applied. More specifically, <strong>the</strong> paper describes <strong>the</strong>enhancement of <strong>the</strong> existing energy system model, Balmorel, with an investment modulethat h<strong>and</strong>les endogenous investments in energy trans<strong>for</strong>mation technologies wi<strong>the</strong>mphasis on <strong>the</strong> linkage over time. Fur<strong>the</strong>r, by permitting settings of <strong>the</strong> investmenthorizon (varying flexibly between myopic to full technology life-time) it allows <strong>the</strong>analysis of various actors’ different requirements. This enhances <strong>and</strong> generalizes <strong>the</strong>present endogenous investments module, which is myopic in <strong>the</strong> sense that it h<strong>and</strong>lesyears sequentially.The investment considerations <strong>and</strong> logic is documented in <strong>the</strong> paper, <strong>and</strong> basic propertiesof <strong>the</strong> model are derived <strong>and</strong> described. Fur<strong>the</strong>r, it is implemented in <strong>the</strong> Balmorelmodel, <strong>and</strong> development paths <strong>for</strong> <strong>the</strong> Nordic electricity <strong>and</strong> combined heat <strong>and</strong> powersector are investigated. The emphasis is on variations of assumptions with respect to fuelprices, environmental targets <strong>and</strong> <strong>the</strong> attitude of investing companies with respect to paybacktime.Consequences of <strong>the</strong> various settings of h<strong>and</strong>ling of time linkage <strong>and</strong> investmentshorizons are presented <strong>and</strong> analyzed. The analysis topics include consequences <strong>for</strong>electricity prices, possibilities <strong>and</strong> costs of investment timings, <strong>and</strong> environmentalaspects.1 IntroductionThe energy sector plays a key role in <strong>the</strong> environmental policies in <strong>the</strong> EU <strong>and</strong>elsewhere. It is expected that large structural changes of <strong>the</strong> energy sector will take placein <strong>the</strong> present century in relation to ambitious environmental goals. Due to <strong>the</strong> large timehorizons of <strong>the</strong> investments to be undertaken <strong>the</strong> investigation of future – or moreappropriately of possible futures- is essential. The changes are governed by a mixture ofpublic planning (using various instruments such as taxes, support, regulation <strong>and</strong> o<strong>the</strong>rs)<strong>and</strong> private decisions on investments <strong>and</strong> operation.One way of properly analyzing <strong>the</strong> possible developments paths of <strong>the</strong> energy sector is touse energy system models. Many such models exist, here one such model, Balmorel, willbe described, in particular in relation to its investment capabilities, including a newfeature <strong>for</strong> providing a more dynamic perspective on investments.Risø International <strong>Energy</strong> Conference 2011 Proceedings Page 151

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