A general equilibrium model to forecast market penetration of energy supply technologies

Energy supply is a preoccupation of planners, managers and government. Energy demand is a fact of society.

Dynamic relations between energy supply and demand are difficult to establish in the long run and even in the short run. Prices of fuels and their availability in specific regions are the main driving elements to determine investment in energy generation.

A model to forecast market penetration of energy supply technologies is presented here. The model is a general equilibrium end-use energy type model that simulates energy supply and energy demand in the context of the whole economy of a country. Given base year input-output coefficients, the composition of final demand, bounds for energy generation and prices for capital and labor; the model determines the level of operation and optimum prices for fuel and services.

The dynamics are simulated forecasting the input-output coefficients for the energy demand sectors by two lag equations which relates the energy demand and the total demand with the optimum prices of fuels, demand sectors and capital and labor by means of two logit functions and a constant elasticity of substitution function.

The model is validated using U.S. energy supply-demand data over the years 1961 to 1985 for ten energy sectors. The base year is 1977 and bench-reference years are 1961, 1974 and 1985.