Energy Modeling

Labys, Walter C. ; Vogely, William A. ; Wood, David O.
Organization: Society for Mining, Metallurgy & Exploration
Pages: 34
Publication Date: Jan 1, 1985
INTRODUCTION The past decade has witnessed a literal explosion in formal modeling of energy systems and markets. This rapid development was stimulated primarily by policy issues arising from the energy price shocks of 1973- 1974 and 1979- 1980. The suddenness of this interest is illustrated by comparing the current and earlier editions of Mineral Economics. The third edition, published in 1976, includes an addendum to the section of projection and forecasting methods because, Since the foregoing chapter was written, major events in petroleum have caused an explosion in formal modeling efforts in the energy field.a In contrast, this fourth edition includes the present chapter on energy modeling, and a separate chapter on nonfuel minerals modeling. The considerable interest in formal energy models is based on the complexity of the system, in particular the interaction between technical and engineering data and designs, and economic behavior of energy producers and users. Energy is a vital component in the economic and social well-being of nations, and must increasingly be explicitly considered in developing economic growth and welfare policies. Energy models can contribute to policy development and analysis, both by improved understanding of the energy system, and of the interaction between energy markets and the economy, and as an explicit means of analyzing and comparing the implications of alternative policy actions. At their best, formal models can clarify and illuminate policy options. In this chapter we will survey the objectives, methods, and potential contributions and limitations of energy system modeling. Section 2 considers the objectives, scope, and approaches to energy system and market modeling. Methodological approaches are then discussed more formally in section 3. Our approach is to intro- duce each model type and method via relatively simple generic models, illustrating their use by a selective review of the applications literature. Section 4 shifts the focus from modeling methods to procedures for model evaluation and improving model credibility especially in policy research and analysis. We conclude with some brief remarks on directions and opportunities for future modeling research. ENERGY MODELS: OBJECTIVES, SCOPE AND APPROACHES The concept of a model usually evokes an image of a complex, computerized system of mathematical or econometric equations providing detailed information concerning the operation of the process being modeled. In fact. models may be simple or complex, formal or mental, depending upon the purposes for which the model is intended. Simple judgmental models may be most appropriate when monitoring the overall performance of a process. When more detailed information is required and/or when the model
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