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Capturing Natural Resource Dynamics in Top-Down Energy‑Economic Equilibrium Models

Author(s)
Zhang, D.; Karplus, V.; Rausch, S.
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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.
Date issued
2015-10
URI
http://hdl.handle.net/1721.1/102607
Publisher
MIT Joint Program on the Science and Policy of Global Change
Citation
Report 284
Series/Report no.
MIT Joint Program Report Series;284

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