By Dr. L. Mantzos Energy-Economy-Environment Modeling Laboratory ICCS/NTUA

1. Tools and approaches for developing projection estimates relevant to LRTAP Convention and NEC reportingThe PRIMES model By Dr. L. Mantzos Energy-Economy-Environment Modeling Laboratory ICCS/NTUA October 2006, Thessaloniki

2. PRIMES energy system model • Energy system model: mixed bottom-up (engineering) and top-down (microeconomic behaviors) • Modular, with separate modules for demand and supply by sector • Market-oriented: market equilibrium prices drive energy balancing of demand and supply per fuel and market • Detailed (for 30 countries) and comprehensive (whole of energy system, EU-wide networks) • Environment-oriented (climate change, links with RAINS for air pollution, links with special models for transport) • Policy-oriented for a large variety of instruments (subsidies, taxes, certificates, permit markets, R&D, …) • Very detailed electricity sector sub-model

3. PRIMES: Price-driven and agent-based simulation of markets • Fundamental distinction of PRIMES from other modelling methodologies: • The behaviour of agents (e.g. households, steel industry, trade sector, power generation, etc.) is simulated individually according to microeconomic theory, including behavioural patterns, such as habits, comfort, risk management etc. • As a result of individual behaviours, demand and supply of energies is formulated, both for short term and long term including investment • Simultaneous energy markets are cleared to determine prices that balance demand and supply; prices are mostly driven according to Ramsey-Boiteux methodology (adaptable to both regulated monopoly and competitive markets) plus a mark-up reflecting market power • Market equilibrium is static within a period but evolution is dynamic in a time forward manner as investment is endogenously driven by supply demand imbalances and technology profitability expectations. • Policies and measures, the world energy markets, technology and the economy drive behaviour and market equilibrium.

4. PRIMES model features • Explicit technologies in demand and supply • Technology dynamics • vintages • penetration of new technologies • inertia from past structures and • pace of capital turnover • Time-of-use varying load of network-supplied energy carriers to synchronise electricity, steam, renewables, pipeline gas • in both demand and supply • Non-linear relations: • Economies of scale and Learning by doing for technologies • Consumer choices and saturation effects • Supply cost-curves for potential of resources, new technologies and the use of new sites for energy plants

5. Recent work on PRIMES model • New improved electricity and steam sub-model • DC linear optimal power flow • Single bus per country (34 nodes) • All present and future interconnectors • Endogenous flows and trade of electricity • Existing and under construction power plants inventory – dispatching calibrated for 2005 • Extended list of new power technologies (145) with and without cogeneration or CO2 capture • Economics of investment and pricing related to liberalized market conditions • Environmental policies including ETS represented

6. Economy Demand Supply Prices Environment Energy-Economy-Environment System Coverage Economy system • GDP, demographics, exchange and interest rates • Activity by sector (18 sectors), income of households • Transport flows Energy demand system • Consumption habits, durable goods and comfort • Manufacturing technology, kind of industry and energy needs • Transportation modes/means and technologies as drivers of energy needs Energy supply system • Primary energy supply (depletable and renewable sources) • Secondary energy supply (power generation, refineries, etc.) • Energy System Balances Energy Markets • Competition, price formation and regulation, import/export Environment Impacts • Energy-related emissions • Environmental impacts and pressures, damages • Preventive and corrective measures

7. Energy-Economy-Environment System Coverage • 12 industrial sectors, subdivided into 26 sub-sectors using energy in 12 generic processes (e.g. air compression, furnaces) • 5 tertiary sectors, using energy in 6 processes (air conditioning, office equipment) • 4 dwelling types using energy in 5 processes and 12 types of electrical durable goods (e.g. refrigerator, washing machine, television) • 4 transport modes, 10 transport means and 10 vehicle technologies • 14 fossil fuel types, 4 new fuel carriers (e.g. hydrogen, methanol, biofuels) 10 renewable energy types • Sub-systems: power and steam generation, refineries, gas supply, biomass supply(*), hydrogen supply(*), primary energy • 150 power and steam technologies • 7 types of emissions from energy processes (partly unabated)

8. Geographical coverage Each EU-25 member-state taken individually In addition candidates and neighbours, such as Bulgaria, Romania, Turkey, Norway, Switzerland Western Balkan countries (in 2007) Network coverage Electricity and gas interconnections over Eurasia For electricity and gas markets, the European countries can be taken all together Time frame 2000 to 2030 by five-years periods Seasonal and daily patterns for electricity, steam and gas load System Coverage

9. Data input sources • NEW CRONOS - EUROSTAT • Energy Balance sheets (as available in Spring 2005) • Macroeconomic data • Population data and projection • various databases developed under EC programs • MURE, ICARUS, ODYSEE – demand sectors • SAPIENTIA, TECHPOL – supply technologies • NEMS model database, US DOE • UNIDO data • Industry associations • Various surveys and qualitative information • Specifically commissioned studies • Stakeholders’ consultations

10. Transport activity and flows SCENES model Macroeconomic/sectoral activity GEM-E3 model Energy demand-supply prices and market equilibrium for the EU area PRIMES model World energy oil, gas, coal prices POLES model EU power plants – ESAP Technologies: Tractebel EU refineries - IFP Renewables potential ECN, Observer Energy efficiency Wuppertal, … Environmental impacts RAINS Energy-Economy-Environment Models and their links

11. Inputfor a scenario with PRIMES • GDP and economic growth per sector (many sectors) • World energy supply outlook – world prices of fossil fuels • Tax and subsidy policies • Interest rates, risk premiums, etc. • Environmental policies and constraints • Technical and economic characteristics of future energy technologies • Energy consumption patterns, Parameters affecting supply curves for primary energy, siting potential for new plants, parameters about comfort, rational use of energy, tastes and habits • Parameters of supply curves for primary energy, energy savings, new sites, renewables potential…

12. Output of a scenario • Per country and time period • Detailed energy balance (EUROSTAT format) • Electricity demand per use and sector • Transport activity, modes/means and vehicles • Association of energy use and activities • Power system investment and use of plants • Energy supply per subsystem • Energy costs, prices and investment expenses • Emissions from energy • Additional material • GDP and economic outlook • World energy supply outlook

13. Baseline and Scenarios • Baseline is a reference scenario used to compare with alternative scenarios • Baseline is not a forecast, nor the most likely future • Baseline should not overestimate nor underestimate effect of current trends and policies • Alternative scenarios do reflect new policies and contrasted evolutions

14. Available Documentation • PRIMES model description and manual are available at: www.e3mlab.ntua.gr currently available PRIMES manual refers to PRIMES ver.1 (update will be available later) • Description methodology and results are available through reports and publications, e.g. • European Energy and Transport: Scenarios on Key Drivers (2005, DG-TREN) • European Energy and Transport: Scenarios on energy efficiency and renewables (2006, DG-TREN) • Economic analysis of EU climate policy based on the “European Energy and Transport – Trends to 2030” (2006, DG-ENV)

15. Accessibility and engagement with MS • The PRIMES database is not available to general public • Key assumptions and detailed results are made available to MS experts and other stakeholders for comments and feedback, e.g. • Energy economic analysts meetings (DG-TREN) • CAFE program (DG-ENV) • Normally parameter values can be given upon request to clients commissioning a study • Especially when they are important in interpreting particular results • Detailed PRIMES results are periodically published • Under the responsibility of EC

16. Database Update and Model Development • The PRIMES model database is currently being updated under the LREM project (DG-TREN): • EUROSTAT statistics up to 2004 and available information for 2005, 2006 • Revision of the power plant database, including information on new constructions and projects as well as techno-economic data on CCS • Updated information on prices, taxes and tariffs • Updated information about renewables: potential, non linear cost curves, learning by doing, etc. • A new version of PRIMES is currently in the process of being developed • Extension of time horizon to 2050 • Biomass supply - biorefineries • Hydrogen economy

17. Thank you for your attention