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Investments, system dynamics, energy management and policy: a solution to the metric problem of bottom-up supply curves
KTH, School of Industrial Engineering and Management (ITM), Industrial Economics and Management (Dept.), Sustainability and Industrial Dynamics.ORCID iD: 0000-0001-7028-0624
2015 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

Today, issues such as climate change and increased competition for scarce resources puts pressure on society and firms to transform. Change is not easily managed though, especially not when relating to production or consumption of energy carriers such as district heating or electric power. These systems do not only have strong dynamics internally, but dynamics between multiple technological systems must sometimes be considered to effectively manage response and strategies in relation to change.

During the early 1980s, an optimisation model founded on an expert-based approach was developed based on the partial equilibrium model to enable the evaluation of different actions to reach a target. This model — often referred to as marginal abatement cost curve (MACC) or conservation supply curve (CSC) — is used by academia, industry and policymakers globally. The model is applied for causes such as energy conservation and waste management, but also within the climate change context for optimising CO2 reductions and governmental policy. In this context, the model is used by actors such as the Intergovernmental Panel on Climate Change (IPCC), International Energy Agency (IEA) and World Bank, and by the consultancy firm McKinsey & Company, who use it extensively in different analysis.

This model has many drawbacks in relation to managing interdependencies between different options, but more specifically the metric used for ranking options with a negative marginal cost has a design flaw leading to biased results. As a solution Pareto optimisation has been suggested, but is problematic given the dynamics within and between energy systems.

The purpose of this compilation dissertation is to improve the ability for industry and policymakers to effectively manage change and reach set targets. In particular it develops our knowledge of how to account for option interdependency within and between technological systems. Furthermore, the ranking problem relating to expert-based least cost integrated planning is addressed.

This dissertation also provides policy and managerial implications relating to the issues of energy conservation, CO2 abatement, and SOx and NOx reduction in relation to the district heating system in Stockholm. Implications are also provided for the interaction with other systems such as the Nordic electric power system.

Abstract [sv]

Klimatfrågan och konkurrens om knappa resurser medför ett förändringstryck på nationer och företag. Att hantera förändringar har aldrig varit enkelt, vilket är tydligt bland företag inom energisektorn såsom el och fjärrvärmeproducenter. Energisystemen dessa företag är del av har stark intern dynamik, men även dynamik mellan olika energisystem är vanligt. Detta måste tas i beaktande när strategier och planer för att hantera förändring utformas.

Under början av 1980-talet skapades en optimeringsmodell baserad på den nationalekonomiska jämviktsmodellen för att kunna utvärdera olika specifika möjligheter att nå ett mål, t.ex. energibesparingar. Denna modell, som idag ofta benämns MACC (Marginal Abatement Cost Curves) eller CSC (Concervation Supply Curves), används idag av akademin, industrin och myndigheter inom områden så som energibesparingar, minskade CO2-utsläpp, sophantering och design av ekonomiska policyinstrument. De icke-akademiska användarna inkluderar FNs klimatorgan IPCC, IEA och Världsbanken. Även konsultfirman McKinsey&Company använder modellen regelbundet i olika studier.

Tyvärr har modellen många begräsningar när det kommer till att hantera dynamiker mellan de specifika åtgärder som identifierats för att nå ett mål. Den allvarligast begränsningen utgörs dock av ett optimeringsfel som leder till felaktiga slutsatser om prioriteringen mellan de åtgärder som har en negativ marginalkostnad. Som en lösning på detta problem har pareto-optimering föreslagits, vilket denna avhandling dock visar är problematiskt på grund av de dynamiker som finns inom och mellan energisystem.

Det övergripande syftet med denna avhandling är att förbättra möjligheten att hantera förändringar och nå uppsatta mål. Specifikt diskuteras hur beroenden mellan olika åtgärder för att nå det satta målet kan hanteras. Avhandlingen adresser även problemet att prioritera mellan åtgärder med negativ marginalkostnad.

Utöver detta bidrar avhandlingen med praktiska implikationer för politiker, myndigheter och företag involverade i fjärrvärmeproduktion i Stockholm. Slutsatser dras kring energibesparingar och minskade utsläpp av CO2, SOx och NOx. Praktiska implikationer ges även för hur system som detta fjärrvärmesystem samverkar och interagerar med det nordiska elsystemet.

Place, publisher, year, edition, pages
Stockholm: KTH Royal Institute of Technology, 2015. , 56 p.
Series
TRITA-IEO, ISSN 1100-7982 ; 2015:03
Keyword [en]
Investments, Energy Management, Policy, MACC, CSC climate change abatement, energy efficiency and conservation, system dynamics
National Category
Business Administration Economics Energy Engineering
Research subject
Industrial Engineering and Management
Identifiers
URN: urn:nbn:se:kth:diva-161904ISBN: 978-91-7595-483-7 (print)OAI: oai:DiVA.org:kth-161904DiVA: diva2:796250
Public defence
2015-05-08, E3, Osquarsbacke 14, KTH, Stockholm, 14:30 (English)
Opponent
Supervisors
Projects
Investments in energy efficiency and climate change abatement: revising marginal cost curves as an optimization model
Funder
Swedish Energy Agency, 35894-1
Note

QC 20150414

Available from: 2015-04-14 Created: 2015-03-18 Last updated: 2015-04-14Bibliographically approved
List of papers
1. Marginal abatement cost curves and abatement strategies: Taking option interdependency and investments unrelated to climate change into account
Open this publication in new window or tab >>Marginal abatement cost curves and abatement strategies: Taking option interdependency and investments unrelated to climate change into account
2014 (English)In: Energy, ISSN 0360-5442, E-ISSN 1873-6785, Vol. 76, 336-344 p.Article in journal (Refereed) Published
Abstract [en]

Firms usually have optimization tools for evaluating various investment options; policymakers likewise need tools for designing economically efficient policies. One such tool is the MACC (marginal abatement cost curve), used to capture the least-cost sequence of abatement options. Such curves are also used for understanding the implications of government policies for markets and firms. This article explores dynamic path-dependent aspects of the Stockholm district heating system case, in which the performance of some discrete options is conditioned by others. In addition, it proposes adding a feedback loop to handle option redundancy when implementing a sequence of options. Furthermore, in an energy system, actions unrelated to climate change abatement might likewise affect the performance of abatement options. This is discussed together with implications for climate change policy and corporate investment optimization. Our results indicate that a systems approach coupled with a feedback loop could help overcome some of the present methodological limitations.

Place, publisher, year, edition, pages
Elsevier, 2014
Keyword
MACC, CO2 abatement, Investment optimization
National Category
Energy Systems
Identifiers
urn:nbn:se:kth:diva-154349 (URN)10.1016/j.energy.2014.08.025 (DOI)000344444600034 ()2-s2.0-84908488067 (Scopus ID)
Funder
Swedish Energy Agency
Note

QC 20151210

Available from: 2014-10-19 Created: 2014-10-19 Last updated: 2017-12-05Bibliographically approved
2. Biomass and waste incineration CHP: co-benefits of primary energy savings, reduced emissions and costs
Open this publication in new window or tab >>Biomass and waste incineration CHP: co-benefits of primary energy savings, reduced emissions and costs
2014 (English)In: Wit Transactions on Ecology and The Environment, ISSN 1746-448X, E-ISSN 1743-3541, Vol. 190, 127-138 p.Article in journal (Refereed) Published
Abstract [en]

Energy utility companies face trade-offs in navigating through today’s environmental challenges. On the one hand they face intense political, social and environmental pressures to move towards adopting energy systems that incorporate the use of renewable energy resources. By making this transition they would contribute to carbon reduction and mitigate climate change. On the other hand, they need to coordinate their resources and become efficient when investing in new plants or upgrading existing production systems. This paper seeks to address the gains that utility companies can make when replacing older fossil fuel base- plants with efficient combined heat and power (CHP) plants. We discuss the system effects from the changes in production of other units when new plants are constructed. Using one of the largest energy utility companies in Sweden, Fortum, as empirical point of departure, we analyzed the company’s transition from using coal and hydrocarbons to an increased use of renewables and waste incineration CHP. Our analysis was based on comprehensive production data on CO2, SOx and NOx emissions. Our findings suggest that primary energy consumption drops when older, less efficient fossil plants are substituted for new efficient CHP plants; this drop includes the effect on remaining production. The benefits in terms of primary energy savings might even be greater than what is achieved in meeting the goal of climate change abatement through reduced CO2 emissions; NOx and SOx emissions are decreased with new biomass CHPs. Waste incineration CHP increase NOx and SOx emissions, when there is less fossil fuel to replace after the use of biomass is extended. In both cases, economic efficiency increase as costs are reduced.

Place, publisher, year, edition, pages
WIT Press, 2014
National Category
Energy Engineering Business Administration
Identifiers
urn:nbn:se:kth:diva-142656 (URN)10.2495/EQ140141 (DOI)2-s2.0-84897854238 (Scopus ID)
Funder
Swedish Energy Agency, 35894-1
Note

QC 20140317

Available from: 2014-03-11 Created: 2014-03-11 Last updated: 2017-12-05Bibliographically approved
3. CO2 emissions accounting: Whether, how, and when different allocation methods should be used
Open this publication in new window or tab >>CO2 emissions accounting: Whether, how, and when different allocation methods should be used
2014 (English)In: Energy, ISSN 0360-5442, E-ISSN 1873-6785, Vol. 68, 811-818 p.Article in journal (Refereed) Published
Abstract [en]

CO2 abatement and the transition to sustainable energy systems are of great concern, calling for investments in both old and new technologies. There are many perspectives on how to account for these emissions, not least when it comes to how the roles of different alternative energy production options should be emphasized. Confusion and conflicting interests regarding the appropriate accounting methods for allocating CO2 emissions interfere with effective energy policy and the efficient use of corporate and national resources. Possible investments in the Stockholm district heating network and how they interact with the electric power grid illustrate the influence of different accounting methods on alternative energy production options. The results indicate that, for several abatement options, performance in terms of reduced CO2 emissions might be either improved or degraded depending on whether or how alternative electricity production is accounted for. The results provide guidelines for whether, how, and when different allocation methods are appropriate, guidelines relevant to academia, industrial leaders, and policymakers in multiple areas related to power production and consumption.

Keyword
District heating, Emissions accounting, Power production
National Category
Energy Engineering Other Engineering and Technologies not elsewhere specified Business Administration
Identifiers
urn:nbn:se:kth:diva-142659 (URN)10.1016/j.energy.2014.01.098 (DOI)000335874300085 ()2-s2.0-84898039009 (Scopus ID)
Projects
Investments in energy efficiency and climate change abatement: revising marginal cost curves as an optimization model
Funder
Swedish Energy Agency, 35894-1
Note

QC 20140613

Available from: 2014-03-11 Created: 2014-03-11 Last updated: 2017-12-05Bibliographically approved
4. Big meter data analysis of the energy efficiency potential in Stockholm's building stock
Open this publication in new window or tab >>Big meter data analysis of the energy efficiency potential in Stockholm's building stock
2014 (English)In: Energy and Buildings, ISSN 0378-7788, E-ISSN 1872-6178, Vol. 78, 153-164 p.Article in journal (Refereed) Published
Abstract [en]

The City of Stockholm is making substantial efforts towards meeting its climate change commitments including a GHG emission target of 3 tonnes per capita by 2020 and making its new eco-district Stockholm Royal Seaport a candidate of Clinton Climate Initiative's Climate Positive Program. Towards achieving these policies, this study evaluated the energy efficiency potential in the city, in collaboration with the district heating and electricity utility Fortum. Drawing on their vast billing meter data on the housing stock in Stockholm, a new understanding of energy use in the city emerged. Analysis of the energy efficiency potential of different building vintages revealed that the retrofitting potential of the building stock to current building codes would reduce heating energy use by one third. In terms of market segmentation, the greatest reduction potential in total energy was found to be for buildings constructed between 1946 and 1975. This is due to the large number of buildings constructed during that era and their poor energy performance. However, the least energy-efficient buildings were those built between 1926 and 1945 in contradiction to commonly held beliefs. These findings indicate the need for a shift in public policy towards the buildings with highest retrofitting potential.

Keyword
Retrofitting, Big Data, Climate action planning
National Category
Other Civil Engineering
Identifiers
urn:nbn:se:kth:diva-149188 (URN)10.1016/j.enbuild.2014.04.017 (DOI)000339133200018 ()2-s2.0-84900461549 (Scopus ID)
Note

QC 20140818

Available from: 2014-08-18 Created: 2014-08-18 Last updated: 2017-12-05Bibliographically approved
5. Corporate response to climate change mitigation: What can we learn from annual reports of European industries?
Open this publication in new window or tab >>Corporate response to climate change mitigation: What can we learn from annual reports of European industries?
2011 (English)In: International Journal of Industrial Engineering and Management, ISSN 2217-2661, Vol. 2, no 3, 77-86 p.Article in journal (Refereed) Published
Abstract [en]

Climate change and how best to mitigate its impact has in recent decades prefigured in the industrialdevelopment debate. Awareness about future costs related to increased atmospheric temperaturesprovides an incentive for lowering greenhouse gas emissions such as CO2. At the same time,measures to mitigate climate change do not only induce corporate uncertainty and pressure, but it isalso provides opportunities for new businesses domains and models. The coverage of climate changeissues from mass media broke with earlier trends and increased in the middle of the last decade. Howabout corporate focus? Was climate change issue on the corporate agenda by then?This study presents a content analysis of more than 1100 shareholder letters from 131 of the largestEuropean public liability companies between 2000 to 2009. The main purpose of this paper is toanalyze climate change from a corporate perspective. Was climate change discussed by ChiefExecutive Officers (CEO) and board chairmen during this time? If so, to what extent and are thereindustrial differences?This study shows that climate change appeared on the corporate strategic agenda in year 2005, frompreviously occupying a marginal place. In 2008, corporate climate change discussions were largelypushed aside by the financial crisis. It also show a trend where a shift has occurred from a generalinterest, towards one more divided between different industries.

Place, publisher, year, edition, pages
University of Novi Sad, 2011
Keyword
Annual Report, Climate Change, Corporate Strategy
National Category
Business Administration
Identifiers
urn:nbn:se:kth:diva-65522 (URN)
Note

QC 20120127

Available from: 2012-01-27 Created: 2012-01-25 Last updated: 2015-12-10Bibliographically approved

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