Stefan P. SchleicherUniversity of Graz, Austria

Project LINK Meeting 2016

Toronto, 20 October 2016

Deepening structural modeling for

understanding the decoupling of energy

and emissions from economic growth

Or: Why new approaches to energy

modeling are needed

Why energy modeling is facing new challenges

SDGs and Paris Agreement

Global political commitments to limit global warming by limiting the global budget for GHG emissions

The emerging and disruptive energy technologies

Buildings, transport, renewables, business models

Current mainstream models are not able to cope adequately with these challenges

Deepened structural modeling approaches are a way forward

The upcoming energy challenges

and the deficiencies of

mainstream modeling

What might be the impact of the

Paris Agreement?

United States and China revived international climate policy with the Paris Agreement 2015

Both states ratified the Paris Agreement in September 2016

Both states with different motivation

China – fighting local smog

USA – legacy of Obama

The Paris Agreement in a nutshell

Temperature target

well below 2°C, while urging efforts to limit the increase to 1.5°C

Nationally Determined Commitments (NDCs)

all parties report in cycles of 5 years these efforts for mitigation

This translates to radical reductions of global GHG emissions

by 2050, e.g. minus 80 percent in advanced economies

Six countries account for 2/3 of global GHG emissions

0.0

2.5

5.0

7.5

10.0

1990 1995 2000 2005 2010 2015

Bill

ion

to

ns

of

CO

2

USA

EU28

IndiaRussian Federation

Japan

China

What might be the impact of

of breakthrough technologies?

The use and misuse of models for climate policyRobert S. Pindyck, MIT, 2015

The arbitrariness about crucial parameters

Discounting welfare of future generations

Dynamics of technologies

Nested production functions and their elasticities of substitution

Demand functions and their cross-price elasticities

Uncertainty about climate sensitivity

Feedbacks between emissions, temperatures, economic impacts

“Calling Integrated Assessment Models (IAMs) ‘Close to useless’ is generous.”

In a nutshell:

The building blocks for

a deepened structural energy modeling approach

Tier 1:

The physical layer

Thermal functionalities

low temperature (buildings)

high temperature (industry)

Mechanical functionalities

stationary (engines)

mobile (transport)

Specific electric functionalities

lighting

electronics

Step 1:Identify energy servicesThe functionalities of an energy system

Step 2:Consider the full energy value chain

F

Functionalitiesthermal, mechanical

specific electric

ef

Final energysolid, liquid, gaseous

heat, electricity

ep

Primary energyfossils, renewables

nuclear

Step 3:Identify physical interactions with capital stocksFunctionalities and final energy – application technologies

F = TF(ef, KF)

ef = tF(KF)-1∙F

F

Functionalitiesthermal, mechanical

specific electric

ef

Final energysolid, liquid, gaseous

heat, electricity

TF

Applicationtechology

KF

Applicationcapital stock

ef = tT(KT)∙ep

ep = tT(KT) -1∙ef

Step 3:Identify physical interactions with capital stocksFinal and primary energy – transformation technologies

ef

Final energysolid, liquid, gaseous

heat, electricity

ep

Primary energyfossils, renewables

nuclear

T

Transformationtechnology

KT

Transformationcapital stock

g = gfos(distr(ep,fos))∙(1 - sp,fos - sp,res - sp,nuc)∙ep

Step 4:Link emissions to primary energyEmissions intensities depend on fuel mix

ep

Primary energyfossil, renewable

nuclear

distr(ep)Distribution ofprimary energy

g

GHG emissions

Tier 2:

The economic layer

Step 5:Identify interactions with the economic system

Economic System

Energy System

The energy system interacts with the economic system vial the consumption of energy and investments into application and transformation technologies

Economic impacts Improving the thermal structure of buildings

Investment costs per m2 600 €

Annual capital costs 15 €/year

Saved energy per m2 150 kWh/year

Abatement costs 10 Cent/kWh

Energy prices for consumers

Oil 9 Cent/kWh

Gas 7 Cent/kWh

Electricity 20 Cent/kWh

2 percent / year of building stock

Direct investments 6.4 bill €/year

Induced investments 1,8 bill €/year

Tier 3:

Markets and institutions

This modeling design deliberately separates the analysis of structures from mechanisms that generate these structures

Price-determined mechanisms

if prices are relevant

Non-price determined mechanisms

standards and other regulations

Step 6:Add mechanisms for coordination and incentives

Implementing this

deepened structural modeling approach

Switching to a different mindset

16 Losses

27 Mobility

22 Low

Temperature

17 High Temp.

10 Light.,

Engines8 Non-energet.

2015

A new view onthe energy system

So far: Where from can we get plenty and cheap energy

Now: What fordo we need energy

The new buildingsZero or even plus-energy standards

2015 2050

22 Low Temp.

6 Low Temp.

baumschlager eberle

2226 Haus, Lustenau

The new mobilityAccess to persons and goods

2015 2050

27 Mobility

7 Mobility

Integrating all modes of mobility

Business models based on sharing

The new energy generation technologiesHighly efficient transformation and distributions

16 Losses

2015

5

2050

Volkswagen

Vaillant fuel cell

Combined generation of electricity and heat

Distributed generation

Micro and smart grids

The transition to low-energy structuresA low-carbon energy system for 2050 or earlier

16 Losses

27 Mobility

22 Low

temperature

17 High

temperature

10 Light, motors

8 Non-energ.

2015

5 Losses7 Mobility

6 Low temp..15 High temp.

10 Light, motors

7 Non-energ.

2050

10 Fossils

40 Renewables

2050

energyfutures.net

Micro grids – functionalities with highest efficienciesMicro grids – Functionalities with highest efficiencies

Thank you.Stefan P. Schleicher

stefan.schleicher@uni-graz.at

http://stefan.schleicher.wifo.at

@SPSchleicher