INTRODUCTION

Computer Modeling with Spreadsheet for Transparency and

Work Sharing

AN APPROACH OF ECONOMETRIC & DYNAMIC MODELING

KAORU YAMAGUCHI, PH.D

YAMAGUCH@TKY.IEEJ.OR.JP
THE INSTITUTE OF ENERGY ECONOMICS, JAPAN
TOKYO, JAPAN
WHAT DETERMINES ENERGY SUPPLY
AND DEMAND

2
 FRAMEWORK

Interaction between human needs, technology, and resources

Human
Needs

Technologies Resources
 TOOLS/METHODS
1. DATABASE/ENERGY BALANCE
2. ENERGY MODEL FOR DEMAND ESTIMATE
3. HOW TO SUPPLY (CASE OF ENERGY MIX FOR
POWER SUPPLY)

4
 1. DATABASE/ENERGY BALANCE

- UNDERSTANDING ENERGY FLOW AND AVAILABILITY OF DATA

- ENERGY DATA IN PHYSICAL AND ENERGY
- ENERGY BALANCE

5
 EX. ENERGY FLOW
unit: KTOE

Indigenous Production: 13,801 Imports: 111,855

Energy Balance Table

Gross Energy Supply: 126,702
Resource:
Total Primary Energy Supply: 104,568 Exports: 18,733
International Bunkers: 3,402 Primary Energy Supply
Coal: 36,916

Oil: 42,865

Gas: 11,280
Hydro: 693

145
Nuclear: 10,833
1,835
Others:
Biomass:

Stock Change: 1,046

Final Energy Consumption Supply-side Technologies:

Transformation
Coal: 5,926

Oil: 38,789

Gas: 1,833

Biomass: 102
Electricity: 17,341

Losses*: 35,825
Own Use: 4,752

Final Energy Consumption

Demand-side Technologies
and Human Needs
Transport: 11,480

Commercial: 5,348

Others: 21,606
Industry: 19,870

Residential: 5,686

Final Energy Demand

Source ADB, 2013

* Losses refer to transformation losses w hile Ow n-use refers to transmission and distribution losses
and energy sector ow n-use.
6
 SUPPLY VS DEMAND:
ENERGY BALANCE TABLE
Type of Energy
Resource
Coal and coal
PeatproductsCrude, NGLOil
and
products
feedstocks
Natural gasNuclear Hydro Geothermal
Solar/wind/other
Biofuels and
Heat
waste
production
Electricity
fromHeat
non-specified
Total combus
Production 3846627 3912 4132970 0 2805353 674006 300172 65872 61132 1310637 0 0 1075 13201756
Imports 696593 157 2299339 1077388 865301 0 0 0 0 13891 0 55781 4 5008453
Exports -726197 -42 -2210801 -1164024 -861715 0 0 0 0 -11636 0 -55811 -6 -5030231
E International marinex bunkers x
International aviation
x bunkersx
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x

n Main activity producer

-2017390
Autoproducer electricity
Main activity producer
electricity plants
-57052
plants
-147865
-968

CHP plants -1468

-2
-37496 -175481 -658426 -670417 -291793
-4109
0
-28339 -52858
-12794 -254402
0
-3568
-8379
0
-46158
-10252
-1413
-41022
-2377
0
-42641
-38433
-18353
0 1652252
0 72623
0 130893 126286 -182683
0 -2329539
0 -129179

e Heat pumps
Electric boilers
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
-140
-170
209
167
69
-3
Chemical heat for electricity0production 0 0 0 0 0 0 0 0 0 0 132 -414 -282
r Blast furnaces
Oil refineries
-190850
0
0 0
0 -4023861 3989307
-606 -83
-849
0
0
0
0
0
0
0
0
-65
0
0
0
0
0
0 -191603
0 -35403
Petrochemical plants 0 0 31372 -31807 0 0 0 0 0 0 0 0 0 -436
g Energy industry own use
Losses
-85370
-3383
-57
-38
-6470 -206710 -267514
-7867 -692 -18970
0
0
0
0
0
-147
-189
0
-10767
-187
0 -164415
0 -154288
-42645 -784136
-19358 -204929

y Total final consumption

Industry
Iron and steel
903117
728684
276350
498
248
0
18756 3614512 1380497
10667 312477 506383
26 11168 54393
0
0
0
0
0
0
7755
456
0
17538 1111743
19 198147
0 4188
0 1582119 280996 8917531
0 673782 125883 2556744
0 93716 18394 458235
F Chemical and petrochemical
Non-ferrous metals 15329
64257 7
0
2125
2
46102 105668
6228 17901
0
0
0
0
0
0
0
0
3601
141
0
0
99654
72420
47007 368421
3332 115354
Transport 3414 0 19 2265214 92524 0 0 0 0 58608 0 25157 0 2444936
l Road
Rail 3287
0 0
0
14 1725034
0 30987
32085
0
0
0
0
0
0
0
0
0
58373
215
0
0
16
18925
0 1815522
0 53414
Pipeline transport 0 0 0 393 59855 0 0 0 0 0 0 2890 0 63138
o World marine bunkers
Domestic navigation 121
1 0
0
0 202582
0 44906
0
59
0
0
0
0
0
0
0
0
0
5
0
0
0
0
0 202583
0 45091
Non-specified (transport) 4 0 5 5417 525 0 0 0 0 16 0 3326 0 9293
w Other
Residential
131797
78917
250
186
505 435550 610232
253 205742 415387
0
0
0
0
7299
4680
17519 854988
5336 826154
0 883180 155113 3096433
0 428506 107647 2072808
Commercial and public24801
services 15 45 101283 178175 0 0 1789 350 17812 0 360212 30750 715232
Agriculture/forestry 11399 50 51 105217 6233 0 0 685 5 7132 0 40475 6100 177347
Fishing 9 0 0 6072 50 0 0 62 0 3 0 415 26 6636

Source: Compiled by the author 7

WHAT DETERMINES ENERGY SUPPLY AND DEMAND

Natural Resources Endowment

International Prices
Upstream Technologies

Supply Side
Primary Energy Supply
Policies

Energy Conversion
Transformation sector Technologies/Infrastruct
ures

Demand Side
Policies Final Energy Demand

End Use Policies End Use System/Infra

Human Needs: Economic Activities

Industrial Structures
Energy Prices
Climate and Environment 8
ROLE OF MODEL FOR DEMAND/SUPPLY
ANALYSIS

Theory (What will determine – how and why?)

• Demand – needs and activities of human/economy (value), Policies
• Supply -- resource constraint, technologies, and cost/price, Policies
The role of Model
• Test theory: what will determine the future of energy demand/supply
• Simplify the reality to formulate the theory
• Quantification
• Find Relation
• Use Relation
Focus and Approach
• Using Excel spreadsheet for learning
 CHARACTERISTICS OF SEMINAR APPROACH MODELING
ENVIRONMENT AND TOOLS— FOR TRANSPARENT INFORMATION
SHARING

• - Transparency
• - Transferability
• - Simplicity
• - Integration of methodologies/tools
• - Easy Operation and Maintenance
• - Expandability
• - Non intrusive
 REVIEW: TYPES OF MODELS & TOOLS: CLARIFICATION
BETWEEN MODELS AND TOOLS

Models and Tools are different and independent

• Models: Sets of conceptual or mathematical relationships
• Tools: Computer software, which can numerically
represent models
But in practice, numeric model dependent on tools; a
model has to be numerically represented to be useful
REVIEW: MODEL AND TOOL: INTEGRATION OR
DISINTEGRATION?

 Integration: Most of famous models—tools are internalized to realize the concept of

models
• Ready made to use for specific purpose
 Customized optimization models: WASP, MARKAL, EFOM
 Customized econometric (simulation) models: ENPEP, IIASA model
 Integrated models: AIM
 Accounting models: LEAP
• But usually difficult to customize for other purposes
 Disintegration: Tools are evolving to be as versatile as possible
• Increased versatility
 Ex. Excel spreadsheet for wide-range of simulation, E-Views for econometric simulation,
GAMS for optimization
• But additional works to create specific models
 TYPES OF MODELS

Type Space Primary Examples Issues Addressed Formulation Time

Sector Theories &
Methods
Top-Down Global, Macro- EDMC(IEEJ) long Relationships among macro- Econometrics, Time Short Term to
(Econometric) Atmospheric, economy term/short term, economic and energy market, series analysis Long Term
Regional policy measures and the Energy balance
impacts
Top-Down Global, Macro- Economic Equilibrium Impact of market measures Econometrics Medium to
(Economic National, economy, models (GREEN, on global emissions and cost Optimization Long Term
equilibrium) Regional industry GTAP, Edmonds- to economies I/O table
Reilly-Barns(ERB)) Energy balance

Bottom-Up National, Energy, MARKAL, EFOM Technology, market Optimization: Medium to

(Optimization) Regional industry structure and policies (like Minimum Cost Long Term
sub-sectors subsidies, technology allocation,
regulations) Maximum profit
Bottom-Up National, Sub-Sector End-use sector models Subsectoral policies and Accounting Medium
(Optimization Regional (e.g. AIM/ END USE), technology mix, Power Optimization: Term/Short
/ Financial) WASP(ENPEP) Planning Minimum Cost Term
allocation,
Maximum profit
AN APPROACH
(SPREADSHEET FOR TRANSPARENCY AND MODEL SHARING)

Use Excel as modeling platform, do not focus on packaged

models or specific method
Build model of own original
Advantage:
• Can concentrate of the key objective/idea free from the existing models
• Can make framework in consideration of available data
Disadvantage
• Need to build model from scratch (with some examples)
• Constrained by the capacity of Excel and its Add-ins
 LEARNING BY DOING

 Take advantages of existing models:

• Expand the scope and the time frame of existing models if possible.
• Compare the various approaches with a clear understanding of the capabilities and
limitations of the existing models.

 Elaborate questions to be answered from models.

• Questions may be not only the forecast, but rather causal-effected relations in the
forecast—clarify interested cause and effects of forecasted future

 Improve quality of data by establishing or clarifying a legislation and institution that

gathers energy statistics.
 1. ENERGY MODEL (DEMAND)

- ROLE OF MODEL
- ECONOMETRICS FOR FINAL ENERGY DEMAND

16
 Economic Theory

1. Economic Data
Econometric Model 2. Energy Demand Data
3. Energy Supply Data

Estimation

Specification testing
and diagnostic
checking

NO
Is the model
adequate?

YES

Hypotheses tests

Forecast and policy simulation

STATEMENT OF THEORY OR HYPOTHESIS

90
80
70
60 • Examples:
Quantity

50
• Demand decreases as price
40 increases
30
• Supply increases as price increases
20
10 • Energy demand increases as GDP
0 increases

10 20 30 40
Demand
Price
Supply
CONCEPTUAL DIAGRAM OF FORECASTING BY
SIMPLE.E

19
APPROACH FROM HUMAN NEEDS:
AN ECONOMETRIC MODEL

External/
International

Energy Costs/
Macroeconomic
Benefit

Energy Supply/
Environment
Demand

Select Policy Variables

Formulate & Solve

Simulation Objective Function & Decision
Variables
 1. ENERGY MODEL (SUPPLY)

- UNDERSTANDING OF THE SUPPLY SIDE ECONOMY

- ALLOCATION OF RESOURCES

21
MODEL BUILDING ENVIRONMENT

Macro Investment
Econometric Plan/Optimization

Add-in Econometrics
Simple E.
Built-in Database
Built-in Iteration
Calculation
Control
EXCEL
Built-in Function
Built-in Graphics

Add-in Solver
Optimization

MonteCarlo- Input/Output,
Stochastic SAM-Eq. Model
APPROACH FROM SUPPLY-SIDE:
EX. POWER DEVELOPMENT PLAN
A FLOW OF POWER INVESTMENT PLAN

Solution for Various Scenarios

Regulations & Power Investment Planning
Priorities Primary Decision Varibale
Fuel Import/Export MINIMUM and MAXIMUM Condition by Type of Plant
Energy/Power Mix (Energy Mix) in Min & Max Capacity (50yrs:2014-2063)
Price Control
Rural Electrification
Variable Condition
Available Annual Capacity by Type/Unit

External Assumptions

Fuel Prices Solution for Annual Optiimum Level

Value Allocation Fuel Availability

Tariff Variable Conditions

Options of Plant
FIT Demand & (<) = Supply
Min/Max Capacity
Subsidy Reserve Margin
Capital Cost
Tax Thermal Efficiency Min/Max Ope. hrs
Plant Life Peakload allocation

GDP Total Demand

- Price Elasticity
- Income Elasticity
Optimum allocation: Objectives (Annual)
Ｏperating hours of Economics (min. cost)
Demand Scedule CO2 Emission
each available power Off-Grid Operation
plant
Capacity & Energy
Required by Sector

- Residential
- Business/Industry
or Others