EURO 2024 Copenhagen
Abstract Submission

EURO-Online login

1030. Linking modelling to generate alternatives and market equilibria - On the economic interpretation of near-cost-optimal solutions in energy system models

Invited abstract in session TC-9: Market-based analyses in long-term energy system models, stream Energy Markets.

Tuesday, 12:30-14:00
Room: 10 (building: 116)

Authors (first author is the speaker)

1. Jonas Finke
Chair of Energy Systems and Energy Economics, Ruhr-Universität Bochum
2. Christoph Weber
University Duisburg-Essen
3. Valentin Bertsch
Chair of Energy Systems and Energy Economics, Ruhr-Universität Bochum

Abstract

The energy transition requires complex decisions, which can be supported by energy system models. Modelling to generate alternatives (MGA) is a method to generate diverse, near-optimal solutions and address the structural and parametric uncertainties of such models. In energy planning, MGA generates almost cost-minimal but societally more feasible model outcomes. However, it neglects the economic feasibility resulting from (potentially lacking) profitability of investments based on market revenues, which in contrast is guaranteed for unconstrained cost-minimal solutions under certain conditions. Therefore, this paper aims at developing a market-economic interpretation of near-cost-optimal alternatives. Methodologically, we use results from multi-objective optimisation and the first-order Karush-Kuhn-Tucker conditions to show equivalence between MGA and cost minimisations with additional cost terms. On the way, we augment MGA to generate only Pareto-optimal solutions, i.e. to avoid costs that do not contribute to higher diversity between alternatives. Economically, the introduced cost terms can be interpreted as capacity-based subsidies or penalties that, as an intervention to an otherwise perfect market, lead to the same outcome as found with MGA. Such an intervention guarantees profitability and hence market-based feasibility. Practically, we demonstrate and validate our theoretical findings for the case study of a multi-national power system model.

Keywords

Status: accepted

Back to the list of papers