Industry R&D in a Stochastic Energy Model

The Stochastic Energy Deployment System (SEDS) is a model that fully characterizes the energy economy, including various demand sectors and the electricity, liquid fuels, natural gas, coal and renewable energy sectors. The SEDS model is designed to account for the stochastic nature of both energy R&D and the market penetration of new technologies, some of which are developed by DOE. Two different approaches are used to incorporate R&D effects in the module. For narrowly focused R&D results that are applicable only to very specific technologies, aggregate energy savings associated with this technology are used as a primary input. R&D for this group of technologies enters the module as an aggregate improvement in the energy consumption, such that savings are applied proportionately to submodules’ shares in consumption. For cross-cutting technologies associated with end-uses spanning a large subset of industries, R&D effects are reflected at the technical parameter level. These effects are characterized by improving fuel intensity and cost of these technologies through time, conditioned on a certain funding level. All R&D effects are specified as distributions to preserve the stochastic capability of the SEDS model. The paper presents results of the module simulations under various R&D levels and carbon policy scenarios.