IDEAS home Printed from https://ideas.repec.org/p/zbw/zewdip/4586.html
   My bibliography  Save this paper

Combining Top-Down and Bottom-up in Energy Policy Analysis: A Decomposition Approach

Author

Listed:
  • Rutherford, Thomas F.
  • Böhringer, Christoph

Abstract

The formulation of market equilibrium problems as mixed complementarity problems (MCP) permits integration of bottom-up programming models of the energy system into top-down general equilibrium models of the overall economy. Despite the coherence and logical appeal of the integrated MCP approach, implementation cost and dimensionality both impose limitations on its practical application. A complementarity representation involves both primal and dual relationships, often doubling the number of equations and the scope for error. When an underlying optimization model of the energy system includes upper and lower bounds on many decision variables the MCP formulation may suffer in robustness and efficiency. While bounds can be included in the MCP framework, the treatment of associated income effects is awkward. We present a decomposition of the integrated MCP formulation that permits a convenient combination of top-down general equilibrium models and bottom-up energy system models for energy policy analysis. We advocate the use of complementarity methods to solve the top-down economic equilibrium model and quadratic programming to solve the underlying bottom-up energy supply model. A simple iterative procedure reconciles the equilibrium prices and quantities between both models. We illustrate this approach using a simple stylized model.

Suggested Citation

  • Rutherford, Thomas F. & Böhringer, Christoph, 2006. "Combining Top-Down and Bottom-up in Energy Policy Analysis: A Decomposition Approach," ZEW Discussion Papers 06-007, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:4586
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/24199/1/dp06007.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Frei, Christoph W. & Haldi, Pierre-Andre & Sarlos, Gerard, 2003. "Dynamic formulation of a top-down and bottom-up merging energy policy model," Energy Policy, Elsevier, vol. 31(10), pages 1017-1031, August.
    2. Bohringer, Christoph, 1998. "The synthesis of bottom-up and top-down in energy policy modeling," Energy Economics, Elsevier, vol. 20(3), pages 233-248, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jafari, Yaghoob & Engemann, Helena & Heckelei, Thomas & Hainsch, Karlo, 2023. "National and Regional Economic Impacts of changes in Germany's electricity mix: A dynamic analysis through 2050," Utilities Policy, Elsevier, vol. 82(C).
    2. Grant, Jason H. & Hertel, Thomas W. & Rutherford, Thomas F., 2006. "Extending General Equilibrium to the Tariff Line: U.S. Dairy in the DOHA Development Agenda," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25305, International Association of Agricultural Economists.
    3. Susana Silva & Isabel Soares & Óscar Afonso, 2010. "E3 Models Revisited," FEP Working Papers 393, Universidade do Porto, Faculdade de Economia do Porto.
    4. Alfredo Marvão Pereira & Rui M. Pereira, 2012. "GAMS Implementation and Excel Interface for Soft Link of a CGE Model for Portugal to TIMES_PT Models," Working Papers 125, Department of Economics, College of William and Mary.
    5. Andreas PEICHL, 2008. "The Benefits of Linking CGE and Microsimulation Models - Evidence from a Flat Tax analysis," EcoMod2008 23800106, EcoMod.
    6. Ramiz Qussous & Nick Harder & Anke Weidlich, 2022. "Understanding Power Market Dynamics by Reflecting Market Interrelations and Flexibility-Oriented Bidding Strategies," Energies, MDPI, vol. 15(2), pages 1-24, January.
    7. Andreas Peichl, 2009. "The Benefits and Problems of Linking Micro and Macro Models — Evidence from a Flat Tax Analysis," Journal of Applied Economics, Taylor & Francis Journals, vol. 12(2), pages 301-329, November.
    8. Cassoni, Adriana & Flores, Manuel, 2008. "Methodological shortcomings in estimating Armington elasticities," Conference papers 331813, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    9. Schaefer, Thilo & Peichl, Andreas, 2006. "Documentation FiFoSiM: integrated tax benefit microsimulation and CGE model," FiFo Discussion Papers - Finanzwissenschaftliche Diskussionsbeiträge 06-10, University of Cologne, FiFo Institute for Public Economics.
    10. Xiao-guang Zhang, 2017. "Solving a Partial Equilibrium Model in a CGE Framework: The Case of a Behavioural Microsimulation Model," International Journal of Microsimulation, International Microsimulation Association, vol. 10(3), pages 27-58.
    11. Sarica, Kemal & Tyner, Wallace E., 2013. "Alternative policy impacts on US GHG emissions and energy security: A hybrid modeling approach," Energy Economics, Elsevier, vol. 40(C), pages 40-50.
    12. Deppermann, A. & Grethe, H. & Offermann, F., 2011. "Effekte einer EU-Agrarmarktliberalisierung auf Betriebsebene: Simulationen anhand eines europäischen Agrarsektormodells und eines Angebotsmodells für den deutschen Agrarsektor," Proceedings “Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues e.V.”, German Association of Agricultural Economists (GEWISOLA), vol. 46, March.
    13. Mikhail Andreyev & Alyona Nelyubina, 2024. "Energy transition scenarios in Russia: effects in macroeconomic general equilibrium model with rational expectations," Bank of Russia Working Paper Series wps122, Bank of Russia.
    14. Theodoridou, Ifigeneia & Papadopoulos, Agis M. & Hegger, Manfred, 2012. "A feasibility evaluation tool for sustainable cities – A case study for Greece," Energy Policy, Elsevier, vol. 44(C), pages 207-216.
    15. Kiyama, Shoichi & Akira, Kobayashi, 2015. "Roles of payments for ecosystem services in agro-food demands and welfare," 143rd Joint EAAE/AAEA Seminar, March 25-27, 2015, Naples, Italy 202724, European Association of Agricultural Economists.
    16. Tabatabaei, Sharareh Majdzadeh & Hadian, Ebrahim & Marzban, Hossein & Zibaei, Mansour, 2017. "Economic, welfare and environmental impact of feed-in tariff policy: A case study in Iran," Energy Policy, Elsevier, vol. 102(C), pages 164-169.
    17. Avraam, Charalampos & Ceferino, Luis & Dvorkin, Yury, 2023. "Operational and economy-wide impacts of compound cyber-attacks and extreme weather events on electric power networks," Applied Energy, Elsevier, vol. 349(C).
    18. Deppermann, Andre & Grethe, Harald & Offermann, Frank, 2010. "Farm level effects of EU policy liberalization: Simulations based on an EU-wide agricultural sector model and a supply model of the German agricultural sector," 114th Seminar, April 15-16, 2010, Berlin, Germany 61083, European Association of Agricultural Economists.
    19. Zhang, Xiao-Guang, 2016. "Solving a partial equilibrium model in a CGE framework: the case of a BMS model," Conference papers 332742, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    20. Yao-Jen Fan & Shuo-Fang Liu & Ding-Bang Luh & Pei-Shan Teng, 2021. "Corporate Sustainability: Impact Factors on Organizational Innovation in the Industrial Area," Sustainability, MDPI, vol. 13(4), pages 1-24, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fortes, Patrícia & Pereira, Rui & Pereira, Alfredo & Seixas, Júlia, 2014. "Integrated technological-economic modeling platform for energy and climate policy analysis," Energy, Elsevier, vol. 73(C), pages 716-730.
    2. Rivers, Nic & Jaccard, Mark, 2006. "Useful models for simulating policies to induce technological change," Energy Policy, Elsevier, vol. 34(15), pages 2038-2047, October.
    3. Chris Bataille, Mark Jaccard, John Nyboer and Nic Rivers, 2006. "Towards General Equilibrium in a Technology-Rich Model with Empirically Estimated Behavioral Parameters," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 93-112.
    4. Meng, Sam & Siriwardana, Mahinda & McNeill, Judith & Nelson, Tim, 2018. "The impact of an ETS on the Australian energy sector: An integrated CGE and electricity modelling approach," Energy Economics, Elsevier, vol. 69(C), pages 213-224.
    5. Chrisoph Böhringer & André Müller & Marcel Wickart, 2003. "Economie Impacts of a Premature Nuclear Phase-Out in Switzerland: An Applied General Equilibrium Analysis," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 139(IV), pages 461-505, December.
    6. Jaccard, Mark & Murphy, Rose & Rivers, Nic, 2004. "Energy-environment policy modeling of endogenous technological change with personal vehicles: combining top-down and bottom-up methods," Ecological Economics, Elsevier, vol. 51(1-2), pages 31-46, November.
    7. Murphy, Rose & Jaccard, Mark, 2011. "Energy efficiency and the cost of GHG abatement: A comparison of bottom-up and hybrid models for the US," Energy Policy, Elsevier, vol. 39(11), pages 7146-7155.
    8. Martin T. Ross, Patrick T. Sullivan, Allen A. Fawcett, and Brooks M. Depro, 2014. "Investigating Technology Options for Climate Policies: Differentiated Roles in ADAGE," The Energy Journal, International Association for Energy Economics, vol. 0(Special I).
    9. Sebastian Rausch & Valerie J. Karplus, 2014. "Markets versus Regulation: The Efficiency and Distributional Impacts of U.S. Climate Policy Proposals," The Energy Journal, , vol. 35(1_suppl), pages 199-228, June.
    10. Standardi, Gabriele & Cai, Yiyong & Yeh, Sonia, 2017. "Sensitivity of modeling results to technological and regional details: The case of Italy's carbon mitigation policy," Energy Economics, Elsevier, vol. 63(C), pages 116-128.
    11. Dellink, Rob & van Ierland, Ekko, 2006. "Pollution abatement in the Netherlands: A dynamic applied general equilibrium assessment," Journal of Policy Modeling, Elsevier, vol. 28(2), pages 207-221, February.
    12. Lugovoy, Oleg & Potashnikov, Vladimir, 2013. "Forward-Looking Energy Elasticity Parameters for Nested CES Production Function," Conference papers 332336, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    13. repec:grz:wpaper:2013-02 is not listed on IDEAS
    14. Inglesi-Lotz, R. & Pouris, A., 2012. "Energy efficiency in South Africa: A decomposition exercise," Energy, Elsevier, vol. 42(1), pages 113-120.
    15. Kassian T.T. Amesho & Emmanuel Innocents Edoun, 2019. "Financing Renewable Energy in Namibia - A Fundamental Key Challenge to the Sustainable Development Goal 7: Ensuring Access to Affordable, Reliable, Sustainable and Modern Energy for All," International Journal of Energy Economics and Policy, Econjournals, vol. 9(5), pages 442-450.
    16. Horne, Matt & Jaccard, Mark & Tiedemann, Ken, 2005. "Improving behavioral realism in hybrid energy-economy models using discrete choice studies of personal transportation decisions," Energy Economics, Elsevier, vol. 27(1), pages 59-77, January.
    17. Povellato, Andrea & Bosello, Francesco & Giupponi, Carlo, 2007. "A Review of Recent Studies on Cost Effectiveness of GHG Mitigation Measures in the European Agro-Forestry Sector," Natural Resources Management Working Papers 10268, Fondazione Eni Enrico Mattei (FEEM).
    18. Nolan, Tahlia, 2024. "Is pivoting offshore the right policy for achieving decarbonisation in the state of Victoria, Australia's electricity sector?," Energy Policy, Elsevier, vol. 190(C).
    19. Frei, Christoph W. & Haldi, Pierre-Andre & Sarlos, Gerard, 2005. "Double-dividend analysis with SCREEN:: an empirical study for Switzerland," Energy Policy, Elsevier, vol. 33(5), pages 633-650, March.
    20. Böhringer, Christoph & Wickart, Marcel & Müller, Andre, 2001. "Economic impacts of a premature nuclear phase-out in Switzerland," ZEW Discussion Papers 01-68, ZEW - Leibniz Centre for European Economic Research.
    21. Berglund, Christer & Soderholm, Patrik, 2006. "Modeling technical change in energy system analysis: analyzing the introduction of learning-by-doing in bottom-up energy models," Energy Policy, Elsevier, vol. 34(12), pages 1344-1356, August.

    More about this item

    Keywords

    Mathematical Programming; Mixed Complementarity; Top-Down/Bottom-Up;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:zewdip:4586. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/zemande.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.