Energy demand - DNE21+
|Model Documentation - DNE21+|
|Institution||Research Institute of Innovative Technology for the Earth (RITE), Japan, .|
Population and GDP are not directly utilized to project future energy system, rather to assume the level of production or extent of service activity for individual sectors. The projected level of production or service activity is consistently satisfied by the optimal combination of various bottom-up technologies for the sectors that are explicitly modeled. For the other sectors, baseline amounts of final energy demands are assumed together with their long-term price elasticity using top-down modeling without explicitly describing bottom-up technologies.
The rest of final energy demands are estimated in a top-down manner, represented by four type of energy careers, which include solid energy, liquid energy (gasoline, light oil, and heavy oil), gaseous fuel and electrical energy, are assumed for aggregated three sectors: industry, transportation and residential and commercial.
DNE21+ is a least-cost optimization model that provides a detailed representation of energy supply and energy technology, modeling technology choice behavior of investors or consumers in a bottom up manner. Payback period, operation and maintenance cost, energy prices, technology costs and performance parameters determine the least-cost energy-equipment combination that meets a specific energy need in the model.
The payback period is a key parameter in determining their behavior, affected by numerous kinds of factors observed in the society such as interest rate, the depreciation rate, the price change rate of capital goods, income, subjective preference for risk and prospective profit rate of stockholders. A number of study reveals that payback period varies widely among technologies, countries, and sectors.
In business behavior, the return on investment (ROI) is generally 10?20%, and this means that payback period has to be 5?10 years. Most of large Japanese companies in industrial and commercial sectors make investment decisions in energy-saving technologies with 3?5 years payback periods (Energy Conservation Center, Japan [ECCJ] 2004). The payback period for the purchase of light-duty vehicles is 1.8?5 years (US EPA 2005). The payback period of consumer durable goods, such as space-heating systems, air conditioning, and refrigerators is generally 1-3 years or shorter (Wada et al. 2012; Train 1985; Dubin 1992).
Furthermore, the payback periods in developing countries are shorter than those in developed countries, and those in the residential and commercial sectors are shorter than those in industrial sectors.
Table 2 shows the payback periods of DNE21+, which come close to matching the observed payback periods in the real world, although the observed payback periods in different countries, sectors, and technologies are limited and uncertain. The model assumes different payback periods based on economic stages across countries. The periods become longer in accordance with the growth of economic level.
The selections of energy technologies and CO2 emissions for 2005 determined within the model are roughly calibrated with the historical data by adjusting the assumptions of payback periods.
Table 2 Payback period and implicit discount rate
Payback period (Implicit discount rate)
Electricity generation sector
Other energy conversion sector
Industrial sector (energy-intensive industry)
(Purchase of environment-conscious products)
Residential & commercial