Methodology
Methodology for indicator calculation
Total primary energy consumption (supply) or gross inland energy consumption is calculated as the sum of the gross inland consumption of energy from solid fuels, oil, gas, nuclear and renewable sources. The relative contribution of a specific fuel is the ratio between the energy consumption originating from that specific fuel and the total gross inland energy consumption. Note that the terms "total primary energy consumption" and "total primary energy supply" are convertible within the World Energy Outlook 2004 references.
Primary energy consumption is measured in million tonnes of oil equivalent (Mtoe). The share of each fuel in total energy consumption is presented in the form of a percentage. The sum of all fuel-shares equals 100 %.
The projections are made with the use of the World Energy Model 2004 developed by Internation Energy Agency.
Overview of the World Energy Model 2004 (WEM)
The WEM is a mathematical model made up of five main modules: final energy demand, power generation; refinery and other transformation; fossil fuel supply and CO2 emissions. Figure C1. (World Energy Outlook, 2004, p.532) provides a simplified overview of the structure of the model.
The main exogenous assumptions concern economic growth, demographics, international fossil fuel prices and technological developments. The assumptions determinant the modules of the WEM. Also electricity consumption and electricity prices dynamically link the final energy demand and power generation modules. Then regional energy balance which includes the total primary energy consumption was calculated.
Description of the Modules
Final Energy Demand
The OECD and non-OECD regions have been modelled in the following sectoral and end-use detail:
- Industry which is separated into six sub-sectors.
- Residential energy demand separated into five end-uses by fuel.
- Services demand modelled as three end-uses by fuel.
- Transport demand modelled by fuel and mode.
More detail description of the module can be found in the methodology of the Final Energy consumption by sectors.
The Power Generation and Heat Plants module.
The power generation module calculates the following: amount of electricity generated by each type of plant to meet electricity demand; amount of new generating capacity needed; type of new plants to be built; fuel consumption of the power generation sector; electricity prices.
Electricity generation is calculated using the demand for electricity and taking into account electricity used by power plants themselves and system losses. New generating capacity is the difference between total capacity requirements and plant retirements using assumed plant lives. The model considers the following types of plants: coal, oil and gas steam boilers; combined-cycle gas turbine (CCGT); open-cycle gas turbine (GT); integrated gasification combined cycle (IGCC); oil and gas internal combustion; fuel cell; nuclear; biomass; geothermal; wind (onshore); wind (offshore); hydro (conventional); hydro (pumped storage); solar (photovoltaics); solar (thermal) and tidal/wave.
Capacities for nuclear power are based on assumptions on government plans or are influenced by international fossil fuel prices where market conditions prevail.
Fossil fuel prices and efficiencies are used to rank plants in ascending order of their short-run marginal operating costs, allowing for assumed plant availability.
The marginal generation cost of the system is calculated, and this cost is then fed back to the demand model to determine the final electricity price.
The combined heat and power (CHP) option is considered for fossil-fuel and biomass plants. CHP, renewables and distributed generation are sub-modules of the power generation module.
Renewable module
The projections of renewable electricity generation were derived in a separate model. It has been assessed the future deployment of renewable energies for electricity generation and the investment needed for such deployment. For a detail description of this model - developed by Energy Economics Group (EEG) at Vienna University of Technology in co-operation with Wiener Zentrum fur Energie, Umwelt und Klima - see Resch et al. (2004). The methodology is illustrated in Figure C.6 p. 543 in World Energy Outlook 2004.
The model uses a database of dynamic cost-resource curves. The development of renewables is based on an assessment of potentials and costs for each source (biomass, hydro, photovoltaics, solar thermal electricity, geothermal electricity, on- and offshore wind, tidal and wave).
Fossil Fuel Supply module
Oil sub-module
Production in the sub-module is split into three categories: non-OPEC; OPEC; and non-conventional oil production.
Total oil demand is the sum of regional oil demand, world bunkers and stock variation. OPEC conventional oil production is assumed to fill the gap between non-OPEC production and non-conventional and total world oil demand.
The derivation of non-OPEC production of conventional oil uses a combination of two different approaches. A short-term approach estimates production profiles based on a field-by-field analysis. Along-term approach involves the determination of production according to the level of ultimately recoverable resources and a depletion rate estimated by using historical data.
Non-conventional oil supply is directly linked to the oil price. Higher oil prices bring forth greater non-conventional oil supply over time.
Gas module
The gas module is similarly based on a resources approach. However, there are some important differences with the oil module. In particular, Europe gas market, whereas oil is modelled as a single international market. Once gas production from each net-importing region is estimated, taking into account ultimately recoverable resources and depletion rates, the remaining regional demand is derived and then allocated to the net-exporting regions, again according to recoverable resources and depletion rates. Production in the net-exporting regions is consequently calculated from their owm demand projections and export needs.
Coal module
The coal module is a combination of a resources approach and an assessment of the development of domestic and international markets, based on the international coal price. Production, imports and exports are based on coal demand projections, and historical data on a country basis. Three marjets are considered: coking coal, steam coal and brown coal.
Investment on the demand side
WEM energy consumption, end-use prices and income are used as an input to the calculations for the investments on the demand side. These estimates are mostly based on a co-operative effort between the Argonne Laboratory in the United States and the IEA. The model uses a stock flow approach in modelling end-use energy demand. Projections of investment needs in the fuel supply chain are based on the methodology reported in the World Energy Investment Outlook 2003.
Key model assumptions for the reference case
The central projections derived from a Reference Scenario. They are based on a set of assumptions about governmental policies, microeconomic conditions, population growth, energy prices and technology.
Governmental policies and measures
The reference Scenario takes into account only those governmental policies and measures that were already enacted - though not necessary implemented - as of min-2004. The Reference Scenario does not include possible< potential or even likely future policy initiatives. Major new energy policy initiatives will inevitably be implemented during the projection period, but it is difficult to predict which measures will eventually be adopted and how they will be implemented, especially towards the end of the projection period.
Although the Reference Scenario assumes that there will be no change in energy and environmental policies through the projection period, the pace of implementation those policies and the way they are implemented in practice are nonetheless assumed to vary by the fuel and region. For example electricity and gas market reforms are assumed to move ahead, but at varying speeds among countries and regions. In all cases, the share of taxes in energy process is assumed to remain unchanged, so that retail process are assumed to change directly in proportion to international prices. Similarly, it is assumed that there will be no changes in national policies on nuclear power. As a result, nuclear energy will remain an option for power generation only in those countries that have not officially banned it or decided to phase it out.
Macroeconomic factors
Economic growth is by far the most important driver of energy demand. The link between total energy demand and economic output remains close. Detailed GDP assumptions by region are set out in Table below.
Economic Growth Assumptions (average annual growth rates, in %)
| 1971-2020
| 2002-2010 | 2010-2020 | 2020-2030 | 2002-2030 |
| OECD-Europe | 2.4
| 2.4
| 2.2
| 1.7
| 2.1
|
Transition Economies total
| 0.7
| 4.6
| 3.7
| 2.9
| 3.7
|
- Russia
| -1.1
| 4.4
| 3.4
| 2.8
| 3.5
|
- Other transition economies
| -0.5
| 4.8
| 3.9
| 3.0
| 3.8
|
European Union
| 2.4
| 2.3
| 2.1
| 1.7
| 2.0
|
| World | 3.3
| 3.7
| 3.2
| 2.7
| 3.2
|
Population Population growth affects the size and composition of energy demand, directly and through its impact on economic growth and development. The WEO population growth rate assumptions are drawn from the most recent UN populations' projections contained in World population Prospects: the 2002 Revision. Detailed populations assumptions by region are set out in Table below.
Population growth assumptions (average annual growth rates, in %)
| 1971-2020
| 2002-2010 | 2010-2020 | 2020-2030 | 2002-2030 |
| OECD-Europe | 0.5
| 0.3
| 0.1
| 0.0
| 0.1
|
Transition Economies total
| 0.5
| -0.2
| -0.2
| -0.4
| -0.3
|
- Russia
| -0.3
| -0.6
| -0.6
| -0.7
| -0.7
|
- Other transition economies
| 0.0
| 0.0
| 0.1
| -0.1
| 0.0
|
European Union
| 0.3
| 0.1
| 0.0
| -0.1
| 0.0
|
| World | 1.6
| 1.2
| 1.0
| 0.8
| 1.0
|
Energy Prices As in previous additions of the WEO, average and-user process for oil, gas and coal are derived from assumed price trends on wholesale or bulk markets. Tax rates are assumed to remain unchangeable over the projection period. Final electricity prices are based on marginal power generation costs. The assumed price paths assumed in the table presented below should not be interpreted as forecasts. Rater, they reflect IEA judgment of the prices that will be needed to encourage sufficient investment in supply to meet projected demand over the Outlook period.
Fossil-Fuel Price Assumptions (in year-2000 dollars)
| 2003 | 2010 | 2020 | 2030 |
IEA crude oil imports ($/barrel)
| 27
| 22
| 26
| 29
|
Natural gas ($/Btu):
|
|
|
|
|
- US imports
| 5.3
| 3.8
| 4.2
| 4.7
|
| - European imports | 3.4
| 3.3
| 3.8
| 4.3
|
OECD steam coal imports ($/tonne)
| 38
| 40
| 42
| 44
|
Technological development Technological innovation and the rate of development of new technologies for supplying or using energy are important considerations. In general, it is assumed that available end-use technologies become steadily in use and the overall intensity of energy consumption will depend heavily on the rate of retirement and replacement of the stock of capital. Since the energy-using capital stock in use today will be replaced only gradually, most of the impact of technological developments that improve energy efficiency will not be felt until near the end of the projection period.
The rate of capital-stock turnover varies considerably according to the type of equipment. Most cars and trucks, heating and cooling systems and industrial boilers will be replaced by 2030. on the other hand, most existing buildings, roads, railways and airports, as well as many power stations and refineries will still be in use then. The very long life of this type of energy-capital stock will limit the extent to which technological progress can alter the amount of energy needed to provide a particular energy service. Retiring these assets before the end of their normal lives is usually costly and would, in most cases, require major new governmental initiatives - beyond those assumed in the Reference Scenario. Refurbishment can, however, achieve worthwhile improvements in energy efficiency in some cases.
Technological developments will also affect the costs of energy supply and the availability of new ways of producing and delivering energy services. Power generation efficiencies are assumed to improve over the projection period, but at different rates for different technologies. Towards the end of the projection period, fuel cells based on hydrogen are expected o become economically attractive in some power generation applications ad, to a much smaller extent, also expected to improve, lowering the unit production costs and opening up new opportunities for developing resources. But the Reference Scenario assumes that no new breakthrough technologies beyond those known today will be used before 2030.
The World Alternative Scenario
WEO also considers Alternative policy Scenario to analyze how the global energy market could evolve were countries around the world to adopt a set of policies and measures that they are either currently considering or might reasonably be expected to implement over the projection period. The purpose of this scenario is to provide insights into how effective those policies might be in addressing environmental and energy-security concerns.
Methodology for gap filling
The development and running of the WEM requires access to huge quantities of historical data on economic and energy variables. Most of the data are obtained from the IEA's own databases of energy and economics statistics. A significant amount of additional data from a wide range of external sources is also used.
The parameters of the demand-side modules' equations are estimated econometrically, usually using data fro the period 19971-2002. Shorter periods are sometimes used where data are unavailable or significant structural breaks are identified. To tae into account expected changes in structure, policy or technology, adjustments to these parameters are sometimes made over the Outlook period, using econometric and other modeling techniques. In regions such as transition economies, where most data are available only from 1992, it has not been possible to use econometric estimations. In such cases, IEA results have been prepared using assumptions based on cross-country analyses or expert judgment.
Simulations are carried out on annual basis. Demand modules can e isolated and simulations run separately. This is particularly useful in the adjustment process and in sensitivity analyses of specific factors.
The WEM makes use of wide range of software, including specific database management tools, econometric software and simulation programmes.
Methodology references
-
World energy outlook 2004
IEA (2004) International Atomic Agency (2004) . World energy outlook 2004, OECD/IEA, Paris. Online not available
Write to us
Call us
Tags:
Document Actions
Share with others