Dynamics of Energy Systems Methods of analysing technology change Lena Neij May 1999 Thesis for the Degree of Doctor of Philosophy in Engineering Department Environmental and Energy Systems Studies Lund University © 1999, Lena Neij and the respective publishers Printed at KFS AB, Lund, Sweden ISRN LUTFD2/TFEM—99/1019—SE + (1-136) ISBN 91-88360-42-3 LenaNeij Department of Environmental and Energy Systems Studies Lund Institute of Technology Lund University P.O. Box 118 SE-221 00 Lund, Sweden DISCLAIMER Portions of this document may be illegible in electronic image products. Images are produced from the best available original document. Organization Document name LUND UNIVERSITY DOCTORAL DISSERTATION Department of Environmental and Date of issue Energy Systems Studies May 21,19 99 Gerdagatan 13, SE-223 62 LUND, SWEDEN CODEN. LUTFD2/TFEM - - 99/1019 - - SE + (1-136) Author(s) Sponsoring Organization Lena Neij Title and subtitle Dynamics of Energy Systems: Methods of analysing technology change Abstract Technology change will have a central role in achievinga sustainable energy system. This calls for methods of analysing the dynamics of energy systems in view of technology change and policy instruments for effecting and accelerating technology change. In this thesis, such methods have been developed, applied, and assessed. Two types of methods have been considered, methods of analysing and projecting the dynamics of future technology change and methods of evaluating policy instruments effecting technology change, i.e. market transformation programmes. Two methods are focused on analysing the dynamics of future technology change; vintage models and experience curves. Vintage models, which allow for complex analysis of annual streams of energy and technological investments, are applied to the analysis of the time dynamics of electricity demand for lighting and air-distribution in Sweden. The results of the analyses show that the Swedish electricity demand for these purposes could decrease over time, relative to a reference scenario, if policy instruments are used. Experience curves are used to provide insight into the prospects of diffusion of wind turbines and photo voltaic (PV) modules due to cost reduction. The results show potential for considerable cost reduction for wind-generated electricity, which, in turn, could lead to major diffusion of wind turbines. The results also show that major diffusion of PV modules, and a reduction of PV generated electricity down to the level of conventional base-load electricity, will depend on large investments in bringing the costs down (through RD&D, market incentives and investments in niche markets) or the introduction of new generations of PV modules (e.g. high-efficiency mass-produced thin-film cells). Moreover, a model has been developed for the evaluation of market transformation programmes, i.e. policy 21 instruments that effect technology change and the introduction and commercialisation of energy-efficient 41 technologies. The method of evaluation has been applied to assess methods used to evaluate Swedish market 61 transformation programmes. The evaluation model, and the assessment of the Swedish evaluation methods, SIS illustrates a need for more extensive evaluation methods than those used today. enl Key words Energy, energy system, energy efficiency, renewable energy, sustainable energy, vintage models, lighting, air- distribution, experience curves, wind power, PV modules, market transformation, evaluation Classification system and/or index terms (if any) Supplementary bibliographical information Language English ISSN and key title ISBN 91-88360-42-3 Recipient’s notes Number of Pages Price 136 Security Classification Distribution by (name and address) Department of Environmental and Energy Systems Studies, Gerdagatan 13, S-223 62 Lund, Sweden I, the undersigned,being the copyright owner of the abstract of the above-mentioned dissertation, hereby grant to all reference sources permission to publish and disseminate the abstract of the above-mentioned dissertation. Signature. Date April 9. 1999 Dynamics of Energy Systems Methods of analysing technology change Lena Neij AKADEMISK AVHANDLING som for avlaggande av teknologie doktorsexamen vid tekniska fakulteten vid Lunds Universitet kommer att offentligen forsvaras i Horsal A vid Institutionen for fysik, Solvegatan 14, fredagen den 21maj 1999, klockan 13.15 Preface This thesis is performed within the interdisciplinary research field of environmental and energy systems analysis. Energy systems involves the interplay between several factors such as energy, social and economic development, technology, the environment, resource management, equity and security. The work presented in this thesis is directed to the analysis of technological systems. The thesis includes five articles which have been published in, or submitted to, scientific journals. The original articles, which are referred to by their Roman numerals I-V, are collected at the end of this thesis. The introductory essay (Chapters 1-8) is intended to provide a summary of the articles and put the research into perspective. The first chapter presents the issues that form the background and the motivation for the work carried out. Such issues include, for example, the need for technology change within energy systems as well as the need for methods to analyse and effect such changes. Chapter 2 describes the theory of technology change, and more specifically technology change within energy systems. The theoretical background presented in this chapter forms a platform for all the methods that are developed, applied and assessed within this thesis, for the analysis of the dynamics of technology change within energy systems. These methods are presented in Chapters 3-5. Chapter 3 characterises the method of vintage models, which is applied to the analysis of the dynamics of energy efficiency. This chapter opens with a general presentation of such models, and is followed by a summary of the work presented in Articles I and II. Chapter 4 characterises the method of experience curves, which is applied to analyse cost reduction as a function of cumulative production. A general description of experience curves is given, followed by a discussion on potential and limitations of such curves. The work presented in Articles III and IV is also summarised. Chapter 5 discusses different policy instruments and the evaluation of energy efficiency programmes, specifically market transformationprogrammes (Article V). The conclusions of the work and a discussion on the aims and directions for future work are presented in Chapter 6. The articles are based on independent work performed by the author of this thesis at the Department of Environmental and Energy Systems Studies at Lund University. However, Article I was drafted mainly by my co-author and advisor at the time, Dr Joel Swisher. In this process, I assisted Dr Swisher in the modelling work, and I also performed the analysis of energy use in industry and street lighting. It should also be mentioned that the work resulting in Articles III and IV, i.e. the use of experience curves, was initiated during my participation in the Young Scientists’ Summer Programme at HAS A in the summer of 1994 under the supervision of Dr Arnulf Griibler. The work presented in the five articles has been further extended and discussed in conference papers, reports and book chapters not included in this thesis. In the introductory essay, however, reference is made to such additional publications. Acknowledgements First, I would like to thank my advisor, Professor Thomas B Johansson, for guiding me into the field of energy system analysis. I would also like to thank my assistant advisor, Lars Nilsson, for his support and constructive criticism throughout the course of this work. I would like to express my appreciation to Dr Joel Swisher for supervision and fruitful co-operation during the first year of my post-graduate studies. Likewise, I owe many thanks to Dr Arnulf Griibler, for enthusiastic discussions and supervision during my time as a summer student at HAS A in 1994. I would also like to thank my colleagues, Bengt Johansson and Peter Helby, for constructive criticism. In fact, I would like to thank all my colleagues at the Department of Environmental and Energy Systems Studies for encouraging me in my work. Finally, I would like to thank my husband Hans, for his never-ending encouragement and emotional support. Financial support by the Energy System Studies (AES) Programme of the Swedish National Board for Industrial and Technical Development (NUTEK) is gratefully acknowledged. Abstract Technology change will have a central role in achieving a sustainable energy system. This calls for methods of analysing the dynamics of energy systems in view of technology change and policy instruments for effecting and accelerating technology change. In this thesis, such methods have been developed, applied, and assessed. Two types of methods have been considered, methods of analysing and projecting the dynamics of future technology change and methods of evaluating policy instruments effecting technology change, i.e. market transformation programmes. Two methods are focused on analysing the dynamics of future technology change; vintage models and experience curves. Vintage models, which allow for complex analysis of annual streams of energy and technological investments, are applied to the analysis of the time dynamics of electricity demand for lighting and air-distribution