Integration of Power Generation Capacity Expansion in an Applied General Equilibrium Model

This paper presents a version of a hybrid (top-down bottom-up), multi-region multi-period forward looking applied general equilibrium model, MERGE, that includes a capacity expansion submodel of the electricity sector with demand represented by various time segments. This model is solved numerically using the decomposition method proposed by Bohringer and Rutherford (2006). In the decomposition, the bottom-up (energy) submodel of MERGE is embedded in a quadratically constrained program (QCP) that maximizes a welfare function calibrated on a linear approximation, around a benchmark point, of aggregated energy and capital demand . This latter is provided by constraining energy supply in a nonlinear programming problem (NLP) that essentially contains the MERGE top-down (macro) submodel. The method is illustrated with a simulation that provides projections of load duration curves and hours of activity of various electricity technologies.

[1]  Alain Haurie,et al.  An Oracle Method to Couple Climate and Economic Dynamics , 2005 .

[2]  T. Rutherford,et al.  Combining Top-Down and Bottom-Up in Energy Policy Analysis: A Decomposition Approach , 2006 .

[3]  Dale W. Jorgenson,et al.  Economic and Technological Models for Evaluation of Energy Policy , 1977 .

[4]  W. Pizer,et al.  Modeling Economy-wide vs Sectoral Climate Policies Using Combined Aggregate-Sectoral Models , 2006 .

[5]  Alan S. Manne,et al.  MARKAL-MACRO: A linked model for energy-economy analysis , 1992 .

[6]  Christoph Böhringer,et al.  The synthesis of bottom-up and top-down in energy policy modeling , 1998 .

[7]  Ian Sue Wing,et al.  The synthesis of bottom-up and top-down approaches to climate policy modeling: Electric power technology detail in a social accounting framework , 2008 .

[8]  Alan S. Manne,et al.  MERGE. A model for evaluating regional and global effects of GHG reduction policies , 1995 .

[9]  John Freidenfelds,et al.  Capacity expansion: Analysis of simple models with applications , 1981 .

[10]  T. Negishi.  WELFARE ECONOMICS AND EXISTENCE OF AN EQUILIBRIUM FOR A COMPETITIVE ECONOMY , 1960 .

[11]  Thomas F. Rutherford,et al.  Computation of Equilibria in OLG Models with Many Heterogeneous Households , 2007 .

[12]  Leo Schrattenholzer,et al.  MESSAGE-MACRO: Linking an energy supply model with a macroeconomic module and solving it iteratively , 2000 .

[13]  K. Arrow,et al.  EXISTENCE OF AN EQUILIBRIUM FOR A COMPETITIVE ECONOMY , 1954 .

[14]  Alan S. Manne,et al.  ETA-MACRO: A model of energy-economy interactions , 1977 .

[15]  Thomas W. Hertel,et al.  Poverty and the WTO: Impacts of the Doha Development Agenda , 2005 .

[16]  Henry D. Jacoby,et al.  Technology detail in a multisector CGE model: Transport under climate policy , 2005 .

[17]  Axel Pierru,et al.  Sensitivity of policy simulation to benchmark scenarios in CGE models: illustration with carbon leakage , 2012 .

[18]  Richard Loulou,et al.  A master program that will drive the coupling of GEMINI-E3 and MARKAL TIMES models , 2008 .