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Developing strategies for robust energy systems. II: Application to CO 2 risk management
Author(s) -
Larsson Tomas
Publication year - 1993
Publication title -
international journal of energy research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.808
H-Index - 95
eISSN - 1099-114X
pISSN - 0363-907X
DOI - 10.1002/er.4440170607
Subject(s) - constraint (computer aided design) , order (exchange) , energy system , energy (signal processing) , value (mathematics) , economics , baseline (sea) , risk management , environmental economics , risk analysis (engineering) , microeconomics , operations research , business , computer science , engineering , mathematics , finance , mechanical engineering , statistics , oceanography , machine learning , geology
One of the most important determinants for the design of the future energy system is whether or not constraints on CO 2 emissions will be imposed. Here, this issue is treated as a decision under uncertainty. Three strategies have been considered: immediate action to adapt to a future emission constraint (Commitment), business as usual (No Hedging), and hedging (Hedging). In the case of hedging, preparations are made outside the energy system, but the energy system itself is allowed to develop according to baseline assumptions until the uncertainty has been resolved. The IEA‐MARKAL model has been used to show how efficient and robust the three strategies are under different developments. The development of the Swedish energy system has been studied for two rates of economic growth in combination with three nuclear policies and two CO 2 policies. The value of preparations for meeting a possible restriction on CO 2 emissions, i.e., following either the Commitment or the Hedging strategy, is considerably higher when the energy demand increases rapidly. In the low growth case, the choice of strategy is largely dependent upon the decision maker's estimate of the likelihood of an emission cap. In the high growth case, this likelihood must be considered to be very small in order to choose the No Hedging strategy, even with reinvestments in nuclear capacity beyond 2010.