Energy systems modeling to support policy making

Summary for policymakers

In October 2013, KAPSARC convened a workshop in Washington, DC attended by some 30 international energy economic modeling and policy experts. Discussions addressed the need to match evolving policy imperatives with new and improved modeling approaches.

The main needs of energy system models over the past three decades trace a journey from an era in which concerns about security and sufficiency of supply were the dominant themes (1970s and 1980s), through a swing towards liberalizing markets, particularly North American natural gas and electric power (1980s and 1990s), to a growing concern about climate change and greenhouse gas emissions (2000s). In addition, there are now numerous countries with quickly developing economies under central economic controls. Perhaps the future will require models that optimize the energy economies of such countries, developing under a centralized state capitalism model and administered prices.

As policy imperatives evolved over time, so did the various models and their types, changing their techniques and evolving their data sources. As a result, there is now a plethora of different models that cater to the evolving needs of policy makers, including optimization, equilibrium, and macroeconometric models.

Successful models to support policy interventions distinguish between: 

- the policy objectives or needs for the degree of intervention necessary, 

-the measures and targets used to influence the decision making environment in the sector or economy, and 

- the actions which address the policy objectives and meet the targets. 

As valuable as these models are in describing various scenarios, policy makers can, nonetheless, benefit from remembering that model outputs are not forecasts so much as descriptions of what would happen if the representation of reality they describe were to play out. Models are always simplifications of reality and there will always be exogenous factors that lead to a difference between “forecasts” and the actual outturn