A conceptual model for energy, trade and economy

Abstract

This thesis focuses on introducing and incorporating an explicit model for energy trade into a conceptual model for economy and energy. The inclusion of an energy market into the model where countries can buy and/or sell energy to a market price is something that was not done in the model that was used as a starting point for this study. In general, energy systems models use less explicit mechanisms to determine trade, like e.g. shadow prices from optimisation. This kind of trading model is successfully developed and introduced into a more complex, dynamic model for economy and energy. The trading mechanism is analysed extensively in itself before introducing it into the more complex model. This to ensure that it exhibits the behaviours that one would expect to observe on a market. The effects of introducing energy trade into such a more complex, dynamic model for economy and energy is then explored and it is shown that when at least one country is sitting on large enough fossil fuel assets, the possibility of energy trade will inhibit the development of renewable energy for all countries. Moreover, the possibilities of avoiding definite time effects in model simulation by modifying the utility function that is subject to optimisation is studied. It is shown that it is possible to find a utility function that in many aspects avoid the definite time effects.