MARKAL PRESENTATION

P.R. Shukla

MARKet ALlocation Model

Multi-period linear programming formulation Decision variables like,

Investment in technology capacities & their utilization

Energy consumption Emissions Electricity generation in different time periods

MARKAL Overall Functioning

Techno-economic Database

Economic Scenario

EmissionScenarioMARKAL

•Consumption and production of energy•Marginal ‘values’ of energy forms and emissions

•Introduction and abandonment of technologies

Bottom up View of the Energy-Economy-Environment System

MINING IMPORT COLLECTION RENEWABLE EXPORT

COALN. GAS

OILBIOMASSNUCLEAR

RENEWABLE

45

ENVIRONMENT

ELECTRICITY PRODUCTION

COAL GAS HYDRO

NUCLEAR SOLAR

ENERGY

FUEL PROCESSING

PETROLEUM REFINERY GAS PROCESSING

75

ENDUSE DEVICES

PUMP TRACTOR

FURNACE MOTOR

LIGHT BULB COOLER

BUS TRAIN

STOVE FAN

ECONOMY

AGRICULTURE

INDUSTRY

TRANSPORT

COMMERCIAL

RESIDENTIAL

35

90

TECHNOLOGY CAPITAL

EMISSIONS

Typical Reference Energy System

EXTRACTION

IMPORT

EXTRACTION

EXTRACTION

EXTRACTION

IMPORT

IMPORT

IMPORT

COAL BASED

GAS BASED

REFINERY 2

REFINERY 1

ELECTRIC TRAIN

DIESEL BUS

TRANSPORTEND USE

TECHNOLOGIES

ELECTRICITY GENERATION

PETROLEUM PROCESSING

S O

U R

C E

S

D E

M A

N D

Model Formulation

Objective FunctionTo minimize the discounted sum, over 40 yrs, of investment, operating and maintenance cost of all technologies plus the cost of energy imports and carbon tax

Subject to1. Demand Constraint (one for each end use demand)

Cig(t) >=

demandk (t)

i DMD G GRD

V k DM, t TWhere

DMD…end-use demand technologyGRD…set of grades technologies/energy sourcesDM….class of all end use demandsT…..set of time periodsCig(t)…capacity of technology i of grade G in period t

Model Formulation (cntd.)

1. Capacity transfer constraints

(to account for technology vintage carry over time periods)

2. Energy carrier balance constraints

(supply >= demand of fuel)

3. Cumulative reserve constraints

(fuel extraction <= total reserves)

Model Formulation (cntd.)

4. Electricity balance constraints

(day and night time modelling for electricity system)

5. Process technology capacity utilization constraints

(process activity <= available capacity)

6. Electricity production capacity constraints

(electricity generation <= available capacity)

Model Formulation (cntd.)

7. Electricity peaking constraints

(extra capacity to meet peak demand)

8. Total emissions constraints

(Carbon, SO2 etc)

Model Formulation (cntd.)

Software Configuration of the Indian MARKAL

ScenarioGenerator

MUSS

COMPILATION

ADAPTED TO IM

GAMSADAPTED TO IM

ANALYSIS

MUSS COMPATIBLE DATA

GAMS DEFINITIONS

TEXT OUTPUT

.DBF FILESFOXPRO

FOXPRO/LOTUS

SPREADSHEETS

TABLES GRAPHSWORDPERFECT DRAWPERFECT

LOTUS

DATA

FOXPRO/LOTUS

LEGENDSIM: INDIAN MARKALMUSS: MARKAL USERS SUPPORT SYSTEM

Modelling Non-linearities

Grades for:

Technologies Energy Resources

TECHNOLOGY DEPLOYMENT

A Probabilistic Approach

Pacific Northwest National LaboratoryBattelle Memorial Institute

`

Median CostTechnology 2

Market Price

TECHNOLOGY COMPETITION

A Probabilistic Approach

`

Median CostTechnology 1

Median CostTechnology 2

Median CostTechnology 3

Market Price

What are likely Future Energy Trends What are likely Future Energy Trends underunder Business-as-Usual (BAU)Business-as-Usual (BAU)

From 1995-2035

Energy Grows 3 times

Commercial Energy 4 times

Coal remains mainstay

High Oil/Gas Imports

Traditional Biomass Stagnates

0

10

20

30

40

50

1995 2005 2015 2025 2035Year

Exa

Jou

les

Coal Oil Gas HydroNuclear RenewablesBiomass

From 1995-2035

Industry & Residential Grow 3.5 times

Commercial Grows 9 times

Agriculture Stagnates

Transport Grows 5 times

Sectoral Energy consumption (EJ)

0

5

10

15

20

25

1995 2005 2015 2025 2035Year

Exa

Joul

es

AgricultureCommercialTransportResidentialIndustry

From 1995-2035

Industry share stagnates around 45%

Agriculture share declines from 28% to 10%

Commercial and Residential grow faster

Sectoral Electricity consumption (TWh)

0

500

1000

1500

2000

1995 2000 2005 2010 2015 2020 2025 2030 2035

Con

sum

ptio

n (T

Wh)

Industry Residential Commercial Agriculture Transport

From 1995-2035

Coal share declines from 63% to 45%

Gas share increases from 8% to 23%

Hydro stagnates around 20%

Electricity Generation Capacity (GW)

0

100

200

300

400

1995 2005 2015 2025 2035

Cap

acit

y (G

W)

Coal Gas Oil Hydro Nuclear Renewable

From 1995-2035

Coal share declines from 74% to 61%

Gas share increases from 7% to 19%

Hydro stagnates around 16%

Electricity Generation (TWh)

0

500

1000

1500

2000

2500

1995 2000 2005 2010 2015 2020 2025 2030 2035

Gen

erat

ion

(TW

h)

Coal Gas Oil Hydro Nuclear Renewable

Carbon Emissions (MT)

0

200

400

600

800

1995 2000 2005 2010 2015 2020 2025 2030 2035Year

Car

bon

(M

T)

212

730

Sectoral Carbon Emissions (MT)

0

200

400

600

800

1995 2005 2015 2025 2035Year

Mil

lion

Ton

s

Power Sector Industry TransportResidential Agriculture Commercial

Carbon Emissions

RESIDENTIAL COMMERCIAL INDUSTRY

TRANSPORT AGRICULTURE POWER SECTOR

RESIDENTIAL COMMERCIAL INDUSTRY

TRANSPORT AGRICULTURE POWER SECTOR

0%

28%

22%1%

2%

47%

0%

33%

18%2%

3%

44%5% 0%

14%1%

35%45%

1995 2010

2035

SO2 Emissions ('000 Tons)

0

1

2

3

4

5

6

7

1995 2000 2005 2010 2015 2020 2025 2030 2035

Year

Em

issi

ons

Power sector Industry Total

SO2 Kuznets Curve

20352020

0

2

4

6

8

10

0 2000 4000 6000 8000 10000 12000

GDP per Capita (PPP$)

SO2

Em

issi

ons

(Mill

ion

Ton

s)

High Base Low

2025

NOX Emissions (Million Tons)

0

2

4

6

8

10

1995 2000 2005 2010 2015 2020 2025 2030 2035

Year

Em

issi

ons

Power sector Transport Total

GDP, Energy and Electricity

0

500

1000

1500

2000

2500

3000

1975 1985 1995 2005 2015 2025 2035

Year

En

ergy

GDP Commercial energy Electricity

Marginal cost of electricity generation (Cents/kWh)

0

1

2

3

4

5

6

7

8

9

1995 2000 2005 2010 2015 2020 2025 2030 2035

Year

Cos

t

Peak Off-Peak Average

Mitigation ScenarioAnalysis

Marginal Cost of Carbon MitigationMarginal Cost of Carbon Mitigation(1995-2035)(1995-2035)

6 billion tons of mitigation below $25/ ton of carbon

0

10

20

30

40

50

60

1 2 3 4 5 6 7

Carbon abatement (billion ton)

Co

st (

$/T

on

of

Car

bo

n)

Coal Demand

0

4

8

12

16

20

1995 2005 2015 2025 2035

Exa

jou

les

Gas Demand

0

2

4

6

8

10

12

1995 2005 2015 2025 2035

Exa

jou

les

Reference 1 BT (5%) 2 BT (10%)

3 BT (15%) 4 BT (20%) 5 BT (25%)

Implications of Mitigation TargetsCoal to Gas Switch

Electricity Price under Mitigation Scenarios

Average LRMC

0

1

2

3

4

5

6

7

8

9

10

1995 2005 2015 2025 2035

ce

nts

pe

r k

Wh

Reference 1 BT (5%) 2 BT (10%)

3 BT (15%) 4 BT (20%) 5 BT (25%)

Electricity Price Rises with Mitigation

In 2035, price can more than double

Reference 1 BT (5%) 2 BT (10%)3 BT (15%) 4 BT (20%) 5 BT (25%)

Electricity Price under Mitigation Scenarios

Peak

0

3

6

9

12

15

1995 2005 2015 2025 2035

cen

ts p

er k

Wh

Off-Peak

0

3

6

9

12

15

1995 2005 2015 2025 2035ce

nts

per

kW

h

Renewable Electricity Capacity

0

20

40

60

80

100

120

1995 2005 2015 2025 2035

Gig

a W

att

Share of Renewable

0

5

10

15

20

25

30

1995 2005 2015 2025 2035

Per

cen

tag

e

Reference 5 % Mitigation15 % Mitigation 25 % Mitigation

Implications of Mitigation TargetsRenewable Electricity

Reference 5 % Mitigation

15 % Mitigation 25 % Mitigation

Implications of Mitigation TargetsWind and Small Hydro Power

0

4

8

12

16

20

1995 2005 2015 2025 2035

Cap

acit

y (G

W)

0

2

4

6

8

10

1995 2005 2015 2025 2035

Cap

acit

y (G

W)

Wind Small Hydro

Reference 5 % Mitigation15 % Mitigation 25 % Mitigation

Implications of Mitigation TargetsSolar PV and Biomass Power

0

10

20

30

40

50

60

1995 2005 2015 2025 2035C

apac

ity

(GW

)0

2

4

6

8

10

12

14

16

18

1995 2005 2015 2025 2035

Cap

acit

y (G

W)

Solar PV Biomass

Consumption Trends(Million Tons)

High Growth Medium Growth Low Growth

Oil Products Coal

0

300

600

900

1200

1500

1975 1985 1995 2005 2015 2025 2035

0

100

200

300

400

1975 1985 1995 2005 2015 2025 2035

Commercial Energy Demand and Intensity

0

200

400

600

800

1000

1200

1975 1985 1995 2005 2015 2025 2035

Mto

e

0

10

20

30

40

50

1975 1985 1995 2005 2015 2025 2035

toe

/ mill

ion

Rs.

High GrowthMedium Growth

Low GrowthLow efficiency

Commercial Energy IntensityCommercial Energy

0

5

10

15

20

25

30

35

40

45

50

1995 2005 2015 2025 2035

Exa

jou

les

High Growth5.5%

Medium Growth5%

Low Growth4.5%

Commercial Energy Demand

Economic Growth Drives Energy Demand

Gradual Efficiency Improvement

Limited Fuel Substitution

Coal and Oil Demand

Coal

0

200

400

600

800

1000

1200

1400

1995 2005 2015 2025 2035

Mil

lio

n T

on

s

Oil

0

50

100

150

200

250

300

350

1995 2005 2015 2025 2035

Mill

ion

To

ns

High Growth Medium Growth Low Growth

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

1975 1985 1995 2005 2015 2025 2035

toe/

tho

usa

nd

$

High Growth Medium Growth

Low Growth Low efficiency

Energy Intensity

Energy Intensity improvement rate

1.5%

0

200

400

600

800

1000

1200

1995 2005 2015 2025 2035

Mill

ion

To

ns

High Growth Medium Growth Low Growth

Carbon Emissions

From 1995-2035

Under BAU, Carbon Emissions rise 360%

Rise can be 470% for high growth case

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1975 1985 1995 2005 2015 2025 2035

ton

s o

f ca

rbo

n/ t

ho

usa

nd

$

High Growth Medium Growth

Low Growth Low efficiency

Carbon Intensity

Carbon Intensity Improvement rate

1.8 %

Coal Demand

0

4

8

12

16

20

1995 2005 2015 2025 2035

Exa

jou

les

Gas Demand

0

2

4

6

8

10

12

1995 2005 2015 2025 2035

Exa

jou

les

Reference 1 BT (5%) 2 BT (10%)

3 BT (15%) 4 BT (20%) 5 BT (25%)

Implications of Mitigation TargetsCoal to Gas Switch

How Carbon Mitigation affects Production Cost?

20152035

0

50

100

150

200

250

Cos

t of

Alu

min

um

Pro

du

ctio

n

ALUMINUM

20152035

0

50

100

150

200

250

300

350

Cos

t of

Ste

el P

rod

uct

ion

STEEL

1 BT (5%) 3 BT (15%) 5 BT (25%)