Technological change and long-term energy demand

This paper discusses different approaches to incorporating energy technologies and technological development in energy-economic models. Technological progress is an important issue for modelling long-term energy demand and a main contributor to the different energy demand forecasts from different models. The long-term impact on energy demand from using different approaches is compared using Danish models. The description of technical progress in energy-economy models range From a fully exogenous annual change of energy efficiency to models with endogenous explanations of the innovation process for energy technologies. Energy demand consequences from one of the modelling approaches are illustrated by examining the energy demand effect of using technological models to describe a number of specific technologies and the diffusion of new technologies. The technological models applied are vintage models for specific energy sectors in Denmark. Vintage models and optimisation models of the energy system include explanation for the diffusion of new technologies and the effect on energy demand. The limitations of the vintage modelling approach in the long term are emphasised. Vintage models have a long tradition when modelling the energy supply sector. The long lifetime of capital equipment the limited number of capital units and the known technical coefficients are obvious arguments for a vintage modelling of the energy supply sector. Each capital unit (plant) has relative stable technical coefficients, as changes in energy efficiency, fuel mix etc. require large investments relative to investment costs of a new plant. Residential electricity demand is also an obvious target for vintage modelling. The stock of individual appliances is very large, but the appliances are homogenous and could be characterised by efficiencies related to vintages. A number of vintage models in this field have been constructed and applied in studies of forecasting residential electricity demand. A vintage model of residential electric appliances in Denmark is applied here.