World Energy Outlook 2006

Box 1.1: Improvements to the Modelling Framework in WEO-2006
The IEA’s World Energy Model (WEM) – a large-scale mathematical
construct designed to replicate how energy markets function – is the
principal tool used to generate detailed sector-by-sector and region-byregion
projections for both the Reference and Alternative Policy Scenarios.
The model, which has been developed over several years, is made up of five
main modules: final energy demand; power generation; refinery and other
transformation; fossil-fuel supply; and CO 2 emissions. The WEM
underwent a major overhaul in 2004, involving the addition of several new
features, including new regional demand models, more detailed coverage of
demand by sector and fuel, and new supply models for oil and coal
production and trade. The model has been further extended for the WEO-
2006, including the following new features:
� Greater regional disaggregation, with the development of new, separate,
models for the United States, Canada, Japan, Korea and North Africa.
� More detailed sectoral representation of end-use sectors for non-OECD
countries, including aviation and detailed transport-stock models.
� Detailed analysis of the use of cooking and heating fuels in developing
countries.
� More sophisticated treatment of biofuels use and supply, and of
renewables for heating in end-use sectors.
� An updated analysis of power-generation capital and operating costs,
including a more detailed assessment of nuclear power and renewableenergy
technologies.
� Calibration of the oil and gas production and oil-refining models to the
results of a detailed analysis of the near-term prospects for investment.
A key reason for implementing these improvements has been to deepen the
analysis contained in the Alternative Policy Scenario. With the revised
WEM, the impact of specific policies and measures on energy demand,
production, trade, investment needs, supply costs and emissions can be
evaluated with greater precision.
Population
Population growth affects the size and pattern of energy demand. The rates of
population growth assumed for each region in this Outlook are based on the
most recent projections contained in the United Nations’ report, World
Population Prospects: The 2004 Revision (UNPD, 2005). Global population is
projected to grow by 1% per year on average, from an estimated 6.4 billion in
mid-2004 to over 8.1 billion in 2030. Population growth slows progressively
Chapter 1 - Key Assumptions 55
© OECD/IEA, 2007
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