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Energy Systems and Technologies for the Coming Century ...

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2 Myopic Investments2.1 The Balmorel modelBalmorel is a model <strong>for</strong> analysing <strong>the</strong> electricity <strong>and</strong> combined heat <strong>and</strong> power sectors inan international perspective. It is highly versatile <strong>and</strong> may be applied <strong>for</strong> long rangeplanning as well as shorter time operational analysis. The model is developed in a modellanguage GAMS, <strong>and</strong> <strong>the</strong> source code is readily available, thus providing completedocumentation of <strong>the</strong> functionalities as well as <strong>the</strong> possibility <strong>for</strong> users to adapt <strong>the</strong>model to specific requirements.The Balmorel model has been applied in projects in a number of countries around <strong>the</strong>world, <strong>and</strong> it has been used <strong>for</strong> analyses of, i.a., security of electricity supply, <strong>the</strong> role offlexible electricity dem<strong>and</strong>, hydrogen technologies, wind power development, <strong>the</strong> role ofnatural gas, development of international electricity markets, market power, heattransmission <strong>and</strong> pricing, expansion of electricity transmission, international markets <strong>for</strong>green certificates <strong>and</strong> emission trading, electric vehicles in <strong>the</strong> energy system,environmental policy evaluation. See <strong>the</strong> description in Ravn et al. (2001) as well aso<strong>the</strong>r material available at www.balmorel.com.In relation to <strong>the</strong> present investment focus <strong>the</strong> model may briefly be characterized asfollows. The model has an integrated representation of electricity <strong>and</strong> combined heat <strong>and</strong>power (chp) in an international framework. The model spans a number of years, eachyear being sub-divided into time segments, e.g. 10 years each with 300 segments peryear.The investment decisions are made taking into account investment as well as operationcosts. Essentially, investments are only made if <strong>the</strong> resulting prices provide a profit (or atleast not a loss).The basic version of <strong>the</strong> model is <strong>for</strong>mulated as a linear programming model (versionspermitting discrete size investment exist but are not discussed here). The objectivefunction to be maximized is social welfare (sum of consumers’ utility minus producers’costs). Taxes <strong>and</strong> similar may be taken into account. The optimization is constrained bytechnical <strong>and</strong> o<strong>the</strong>r conditions like physical properties of production <strong>and</strong> electricitytransmission, equality of production <strong>and</strong> consumption, etc.2.2 Investments in BalmorelSpecifically in relation to investments <strong>the</strong> following are <strong>the</strong> main features. Capacities(quantities in MW) of energy conversion technologies are specified exogenously <strong>for</strong>each geographical area <strong>and</strong> each year. New capacities may become available byendogenous investments in any year. Any invested MW in a year is available <strong>for</strong>production during <strong>the</strong> whole of that year, <strong>and</strong> will be available also <strong>the</strong> following years.In <strong>the</strong> Balmorel model investments are traditionally made in what is called model (orapproach) Balbase2. Figure 1 illustrates <strong>the</strong> myopic investment perspective ofBalbase12. In this example <strong>the</strong>re are nine years within <strong>the</strong> horizon to be analyzed,however, <strong>the</strong>y are not consecutive, such that <strong>for</strong> <strong>the</strong> first years every year is analyzed(2011, through 2014) while <strong>for</strong> <strong>the</strong> most future years only every fifth year is analyzed.In Balbase2 <strong>the</strong> nine years within <strong>the</strong> horizon are investigated sequentially. Investmentdecisions are taken <strong>for</strong> each year individually, taking into account both investment <strong>and</strong>operation costs. The investment costs consist of <strong>the</strong> annual cost (payment) per MW <strong>for</strong>each type of technology. This cost is <strong>the</strong> annuity of <strong>the</strong> investment, specified by takinginto account <strong>the</strong> invested amount of money, <strong>the</strong> assumed life time of <strong>the</strong> technology <strong>and</strong><strong>the</strong> rate of interest. Additionally <strong>the</strong> operating costs (depending on <strong>the</strong> production levels)are taken into account.A total of nine one-year Balbase2- models are solved, cf. Figure 1. After solving <strong>the</strong>model <strong>for</strong> one year <strong>the</strong> available existing technology capacity <strong>for</strong> <strong>the</strong> next model-year isRisø International <strong>Energy</strong> Conference 2011 Proceedings Page 152

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