How Integrated Energy Models Predict the Impact of Alternative Futures
As new power generation technologies emerge and gain acceptance, many different companies and organizations have a keen interest in their long-term impact. State and national energy and environmental offices, non-governmental organizations, and members of the power industry are all doing their best to keep a close watch on the progress of technologies like wind and solar power, small modular nuclear reactors, and distributed energy. These groups are interested primarily in:
- The adoption rate for these new technologies
- Their impact on electricity prices
- Their impact on the environment
- Their impact on different economic sectors
- Their impact on the electricity generation mix
Gathering this level of insight into the future of alternative power generation technologies, however, is no easy task. The difficulty lies in the complexity of the energy system. While computer modeling can be used to examine possible outcomes, most energy models focus on a single sector, for example, the natural gas market or the electricity market. What these models fail to take into account is the sometimes subtle and sometimes not-so-subtle interaction of different energy and economic sectors that can have a huge effect over the long term.
Turning again to the natural gas and electricity examples, while these two sectors may be closely linked in the economy (and increasingly so, as of late), this link may not be fully represented in models that focus exclusively on one sector or the other. The expanded adoption of efficient natural gas combined cycle plants could have a significant impact on the future price and availability of natural gas, but a single-sector model focused on electricity would not account for that.
Another example of the complex interplay of energy and economic sectors is energy efficiency. In some ways, energy efficiency efforts are competing with alternative power generation technologies. If the demand for electricity decreases, it would have a direct impact on the need for new capacity and therefore the rate of adoption of alternative technologies. Again here, a model that links multiple sectors is called for. We call this method integrated modeling.
What is Integrated Modeling?
Integrated energy models are an approach to modeling and analysis that represents multiple energy and economic sectors and regions, how they interplay, and how feedback from the actions in one sector might stimulate or dampen activity in another. If you were trying to determine the impact of efficient natural gas combined cycle plants on natural gas prices using single-sector models, you would need to make an assumption about the number of plants that the electricity sector would build and the additional natural gas demand this would create and use this as an input to your natural gas pricing model. The increased demand in natural gas might prompt a higher natural gas price in your model and you would think you were done. However, this limited model structure fails to account for the important feedback of the higher gas price on the electricity sector. Given a higher gas price, gas demand from this technology might wane which, in turn, may prompt a downturn in natural gas prices. An integrated model would pick up on this feedback, giving you more insights and richer data on possible futures for this technology.
Similarly, if you wanted to determine how decreasing demand for electricity due to energy efficiency efforts would change the demand for new solar power plants, an integrated model that includes end-use sectors such as households could provide a single framework for doing so. For a more detailed description of integrated modeling and how it can be used to analyze a variety of energy issues, download our white paper “Integrated Energy Modeling and Analysis.”
This is just an introduction to how integrated modeling can predict the impact of alternative power generation technologies. For a more in-depth discussion, download our latest white paper, “How to Assess the Impact of Alternative Power Generation Technologies.”