Capturing Natural Resource Dynamics in Top-Down Energy‑Economic Equilibrium Models
Name
MITJPSPGC_Rpt284.pdf
Size
1.6 MB
Format
Adobe PDF
Checksum (MD5)
581eff4341a9431bc364436b340823da
Author(s)
Zhang, D.
Karplus, V.
Rausch, S.
Date Issued
October 2015
Publisher
MIT Joint Program on the Science and Policy of Global Change
Citation
Report 284
Series/Report no.
MIT Joint Program Report Series;284
Abstract
Top-down energy-economic modeling approaches often use deliberately simple techniques to represent heterogeneous resource inputs to production. We show that for some policies, such as feed-in tariffs (FIT) for renewable electricity, detailed representation of renewable resource grades is required to describe the technology more precisely and identify cost-effective policy designs. We extend a hybrid approach for modeling heterogeneity in the quality of natural resource inputs required for renewable energy production in a stylized computable general equilibrium (CGE) framework. Importantly, this approach resolves nearflat or near-vertical sections of the resource supply curve that translate into key features of the marginal cost of wind resource supply, allowing for more realistic policy simulation. In a second step, we represent the shape of a resource supply curve based on more detailed data. We show that for the case of onshore wind development in China, a differentiated FIT design that can only be modeled with the hybrid approach requires less than half of the subsidy budget needed for a uniform FIT design and proves to be more cost-effective.
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