Electricity in the GTAP model Tony Wiskich National CGE Workshop 2013
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Electricity in the GTAP model Tony Wiskich National CGE Workshop 2013
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Electricity in the GTAP model Tony Wiskich National CGE Workshop 2013. Background. Australian Treasury is interested in electricity modelling in an economy-wide framework It has used: detailed consultant’s electricity model and - PowerPoint PPT Presentation
Transcript of Electricity in the GTAP model Tony Wiskich National CGE Workshop 2013
Electricity in the GTAP model
Tony WiskichNational CGE Workshop 2013
Background• Australian Treasury is interested in electricity
modelling in an economy-wide framework • It has used:
– detailed consultant’s electricity model and– embedded Constant Elasticity of Substitution (CET)
production nest between generation technologies.
• Interested in macroeconomic impacts of adjustment in electricity generation
Motivation• NOT to replace detailed bottom-up electricity
model• Provide some insight using an alternative
approach to a CET nest structure based on a competitive electricity market
• Provide some insight into costs of adjustment
Model basics• GTAP model made recursive through simple
capital/investment dynamic• Single region, 8 sectors including electricity
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Real GDP impact of a 1% decrease in Labour, Land & Nat Res efficiency
Temporary
Permanent
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Real GDP impact of a 1% decrease in Capital stock
Electricity Structure Assumptions
• Profit + Fixed + Variable Costs• Profit = Capital Cost (28%)• Fixed = Labour Cost (13%)• Variable = Intermediate (59%) (+ TAX)• Generators operate in a competitive electricity
market similar to Australia
Base case assumptions• Baseload, Mid and Peak generation• Same rate of return on investment between
generation types & other sectors• Same Fixed Cost per MW (MegaWatt) Capacity• Same Variable costs structure• Small load shedding period (demand > supply)
– Approx 3 hours per year
M
2M
1Duration
Load Load duration curve
1
Capacity
Base
Mid
Peak
Duration
1
Capacity
BaseMidPeakDuration
1 Time
Price =Marginal Cost
BaseMidPeak
P_Base
P_Mid
P_Peak
Price CAP
1 Time
Price =Marginal Cost
BaseMidPeak
Base Capital + Fixed (Labour) Costs
Base Variable (Intermediate) Costs
P_Base
P_Mid
P_Peak
Price CAP
Base case assumptions/numbers
Var Cost
Electricity Gen share
Capacity share
Utilisation rate
Rev Share
Marginal generator
time share
Cost to build
per MW
Baseload 1 84.9% 66% 96% 79.3% 33% 1
Mid 1.5 15% 31% 36% 20% 62% 0.33
Peak 2 0.1% 3% 3% 0.7% 5% 0.28
Policy shock
• Introduce electricity output tax on Baseload electricity generation
• Two rates, initial Baseload variable cost = 1– Fast: incremental tax increase of 0.05 per year
• Mobile capital (consider immobile later)
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Baseload generation % change
CES (elas=10)ELY
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Mid,Peak generation % change
Mid&Peak CESMid ELYPeak ELY
Back-of-envelope – ΔPrice• CES: Elasticity 10, approx 80% Base share• Price inc ~ 0.2*((1+0.8/0.2)10/9-1)-0.8 ~ 20%• ELY: Price inc ~ Base_varshare_as_marg_gen*
(Mid_varprice/Base_varprice-1)~14% * 0.5 ~ 7%
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Electricity price % change
CES (elas=10)ELY
Back-of-envelope - ΔGDP• CES: GDP impact ~
price_inc*ely_cost/GDP*dynamic_adj_factor ~ 20%* 2/56 * 1.5 ~ 1.1%• ELY: Price inc: (extra_var_cost –
cap_savings)/GDP*dynamic_adj_factor ~ (0.9*0.5 – 0.5*2/3)/GDP*dyn ~ 0.12/56*1.5 ~
0.3%
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Real GDP % change
CES (elas=10)ELY
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GDP cost per Baseload unit reduction
CES (elas=10) ELY
tax
Fixed capital in generation• Baseload Depreciation – 30 years to vanish• No limit on capital increase (build in single
period)• Capital is decommissioned if profits < 0
Slow tax introduction• From 0.05 to 0.02 increment per year
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Baseload: Fixed capital, Fast vs Slow tax introduction
fast Profit/MW
fast MW
fast GEN
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Fast vs Slow: Baseload MW, Profit/MW , Gen % change
slow profit/MWslow MWslow GENfast Profit/MWfast MWfast GEN
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GDP Cost: ELY slow vs fast tax
fast tax
slow tax
fast cost
slow cost
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GDP cost vs Baseload reduction
Fast CET
Slow CET
% reduction in Baseload Generation
% re
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Rea
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GDP cost vs Baseload reduction
Fast CET
Slow CET
Fast MOBILECAP
Slow MOBILECAP
% reduction in Baseload Generation
% re
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Rea
l GDP
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GDP cost vs Baseload reduction
Fast CET
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Fast MOBILECAP
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Fast FIXCAP
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% reduction in Baseload Generation
% re
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Rea
l GDP
Summing up• Competitive electricity market model can be
done and has different dynamics/costs to CET• Baseload-Mid substitution not Peak• Fixing capital: Adjustment cost depends on speed
of tax introduction– Inefficient capital allocation, merit order switching– Capital decommissioning
Possible further work• Simple international analysis
– based on projected capital/fixed/variable costs– Compare economic costs with CET
• Figure out way of adjusting CET implementation to approximate detailed model
• Intermittent generation
Extra slides
Tony Wiskich2013 conference
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GDP Cost: CES slow vs fast tax
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GDP Cost: CES slow vs fast tax
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