PRIMES model Design and Features

1. PRIMES modelDesign and Features European Bridges of Knowledge Program Energy Policy of the EU and implications for Turkey Ankara 20/06/2003 Dr. L. Mantzos E3M-Lab / ICCS-NTUA contact: Kapros@central.ntua.gr

2. History PRIMES: Outcome of JOULE research projects Focus of model design: market mechanisms modularity for demand and supply detailed technology representation Structural formulation consistent with engineering evidence and economic optimisation behaviour of each economic agent acting in the energy market Older models EFOM, MARKAL (global optimisation) lacked market mechanisms and individual behaviour MIDAS (econometric) lacked engineering evidence in the demand side PRIMES in the stream of models developed in the US: IFFS, NEMS (US DOE) but also the simpler models GEMS, GEMINI, ENPEP Characterised as Partial Equilibrium, or generalised equilibrium model for the energy system

3. History Development started in 1994 several versions of the sub-models integration proved complex (algorithm, economic equilibrium paradigm, consistency between sub-models) PRIMES ver. 1, operational early 1997 extensively used (March-October 1997) evaluation of policies and measures of the EU for the Kyoto conference for climate change based on that experience: Development of PRIMES ver. 2 completely new design of the sub-models and interfaces further integration between centralised and independent power and steam production major change in the model mathematical formulation: Non-linear mixed complementarity formulation Solution in GAMS/PATH Advantages: Completeness, Consistency of interactions, introduction of non-linearities

4. PRIMES model overview (1) An Energy-System Model covering market-driven behaviour of energy/economic agents Solving for the whole energy system Modular structure Economic decision of agents / Price-driven clearing of energy markets Explicit technologies in both demand and supply Environment integrated: when emission constraints apply to the whole energy system the model suggests least cost allocation of effort to agents Dynamic model; includes vintages of equipment Long term 2030 Covers all EU15 member states, 13 EU candidate countries, Norway and Switzerland, individually

5. PRIMES model overview (2) Produces long term (up to 2030) projections of: production, imports, conversion, consumption and prices of energy investments, technology choice and cost of policies given exogenous assumptions for: macroeconomic and financial factors world energy markets resources, technologies and costs behavioral and technology choice characteristics of the different energy agents Linked to: POLES model (IEPE - world) GEM-E3 model (NTUA - economic growth) PRIMES-Refinery model (IFP - refineries)

6. PRIMES model overview (3) PRIMES integrates two levels: sub-models: each represents the demand and/or supply economic behaviour of an agent acting in the energy market market integration level: exchange of price and quantity signals. Determines prices/quantities of equilibrium that balance all energy markets simultaneously Economic behaviour considers the influence of policies and regulation including the environment Some of the markets clear at national level, others may clear at the EU-wide level Dynamic simulation, time forward, myopic anticipation assumption

7. PRIMES model overview (4) Demand=f(price) Supply=Demand Price=Inverse function (Supply) Detailed engineering-oriented demand sub-models mimic the economic behaviour of the consumer Complex engineering model optimising energy supply sub-system Expresses financial and pricing attitudes of suppliers reflecting market competition regimes

8. PRIMES model overview (5) Technology dynamics vintages penetration of new technologies competition between generations inertia from past structures and rhythm of capital turnover Explicit technologies in demand and supply Chronological load to synchronise electricity, steam, renewables, pipeline fuels (gas) in both demand and supply Non-linearities: Economies of scale Learning by doing Consumer acceptance

9. Short description of PRIMES model (3)

10. PRIMES Integration Non-linear mixed complementarity approach Original formulation of sub-models: NLP Transformation into MCP: Objective function replaced by KKT first order conditions Constraints as before MCP problem is a system of non-linear inequalities Integrated model: Single system of inequalities Sub-models in MCP Demand/supply equality constraints Prices, linked to market regime and marginal costs Global environmental constraints

11. PRIMES Integration Consistency demonstrated in the theoretical literature Model solution leading to the maximisation of consumer and producer surplus Powerful algorithm (GAMS/PATH) facilitates solution even in the presence on non-linearities, and very large models No Gauss-Seidel or Jacobi as in IFFS and NEMS No flip-flops Abandon of linear programming and related limitations Possibility to introduce non-linear cost curves, technology dynamics, pressures on use of capacities

12. Reporting of PRIMES model Model report files include in full detail: Demographic assumptions Macroeconomic and sectoral assumptions International fuel prices assumptions Transport activity results by mode (both for passenger and freight transport) Energy production and net imports Energy conversion in power plants, CHP plants, district heating plants, refineries, etc Energy consumption by sector and fuel Fuel prices by sector and fuel CO2 emissions by sector and fuel

13. Policy issues covered PRIMES supports policy analysis in the following fields: standard energy policy issues: security of supply, strategy, costs etc environmental issues pricing policy, taxation, standards on technologies new technologies and renewable sources energy efficiency in the demand-side fuel efficiency and modal split in transport alternative fuels conversion decentralisation, electricity market liberalisation

14. The demand side in PRIMES (1) Industry: 9 sectors according to EUROSTAT Energy Balances definitions; further decomposed to sub-sectors, for each one different energy uses defined Households: decomposition along typical patterns of household energy/technology behaviour Tertiary: decomposition along types of services (market services, non-market services, trade), agriculture Transport: decomposition along passenger and freight transport Passenger transport: private cars, motorcycles, public road transport, rail, aviation, inland navigation Freight transport: trucks, rail, inland navigation Fuels detail at the level of EUROSTAT Energy Balances Alternative technologies defined at the level of energy uses

15. The demand side in PRIMES (2) Structure of the demand side model

16. The demand side in PRIMES (3) Minimise total energy and environmental costs subject to: Total useful energy needs Energy use capacities Technology availability Emissions constraints Through Changes in the fuel mix Capacity replacement Technological choice Pollution permits and other Three types of mechanisms are considered simultaneously: Economic optimality Dynamics; I.e. constraints from existing capacity Gradual market penetration and acceptance Different formulation by sector so as to reflect inherent characteristics

17. The demand side in PRIMES (4)

18. Power and steam generation in PRIMES (1) Electricity and steam generation in PRIMES: Three different types of generators considered: utilities, industrial autoproducers, other generators Different characteristics and decisions Economies of scale, market privileges Installed capacity categorised in 45 different plant types Capacity expansion: 88 different plant types for new plants (technical and economic characteristics evolve over time); possibility for re-powering of existing plants Chronological load curves; synchronisation of four loads: demand of electricity/steam, intermittent, fuel pricing Simultaneous decision on electricity/steam production: Strategic capacity expansion problem Operational plant selection and utilisation problem Cost evaluation and pricing policy

19. Power and steam generation in PRIMES (2)Design Principles ENTITIES existing plants, candidate plants (not discrete) network nodes and links companies exchange contracts fuel contracts and prices intermittent sources abatement LOAD (chronological) synchronization of four loads: electricity, steam, intermittent, fuel pricing Generic Code The model code accommodates for different structural features Dynamics possibility for myopic anticipation or perfect foresight Regions possibility for single country or multiple countries runs Non linearity technical-economic features, economies of scale, learning by doing

20. Power and steam generation in PRIMES (3)The plants A plant is an element of the Cartesian product of the following elements: Technology Multiple fuel or single fuel capability CHP technique, electricity only or steam only Size of Plant Company Technical-economic characteristics, potential etc. differ according to five dimensions Restrictions on possible choices of companies e.g. industrial generator only small size plants Technology types 8 conventional thermal according to thermodynamic cycle 6 GTCC technologies 6 clean coal 3 peak devices, 3 fuel cells, 3 nuclear, 2 boilers 10 renewables CHP: 9 types Fuel type: 13 of which 3 multiple fuel Companies Utilities Industrial generators Tertiary generators

21. Power and steam generation in PRIMES (4)The network Nodes: Production, Transmission, Distribution groupings: by company and country as some constraints apply only at a group level (e.g. reserve margin, environmental regulation, fuel or exchange contracts) Flows: electricity and steam over different topology of the network Plants are linked to Production nodes, owned by companies according to the grouping Customers (from PRIMES demand side) are connected to Distribution nodes: multiple connections are possible, as well as privileges Exchanges are conveyed via transmission nodes constrained by capacity, losses, contracts etc.

22. Power and steam generation in PRIMES (5) Structure of power/steam generation model

23. Power and steam generation in PRIMES (6) Flows over the Network Electricity Consumption Exchanges Thermal Power Intermittent Power Steam Industrial District Heating Fuel Purchased stackable (coal, oil) load related (natural gas) Contracts vs. Spot for the above items Determined over Chronological Load time segments of typical days linked to demand two seasons Items with load pattern electricity consumption, production, exchanges steam consumption, production, exchanges intermittent supply inflow to reservoir hydro contracts, some fuels

24. Conversion Decentralisation Comparative advantage availability of fuel (e.g. waste) or site for RES avoiding costs of self-supply of energy uses (e.g. steam) Obstacles market relationships supply contracts support (fixed costs, risk) Benefits Efficiency, Economics

25. Mathematical Form Minimize Total system cost for expansion, operation, trade both for electricity and steam