INSEAD Library

Includes bibliographical references

Digitized

Agent-Based Models of Energy Investment Decisions Contents 1 Drivers of Change and Energy Models....................................................1 1.1 Introduction ....................................................................................... 1 1.2 Drivers of Change............................................................................... 2 1.2.1 Introductory Remarks................................................................... 2 1.2.2 Market Deregulation.....................................................................2 1.2.3 Technological Change.................................................................. 3 1.2.4 Energy Firm Conduct................................................................... 5 1.2.5 Climate Policy.............................................................................. 8 1.3 Energy Models -- a Review of the State of the Art........................... 9 1.4 Motivation and Research Questions.................................................. 11 2 Model Design............................................................................................ 13 2.1 Introduction....................................................................................... 13 2.2 Users and Intentions ......................................................................... 13 2.3 Geographical and Socio-economic Scope......................................... 14 2.3.1 Introductory Remarks................................................................. 14 2.3.2 Geographical Scope.................................................................... 15 2.3.3 Socio-economic Scope............................................................... 15 2.4 The Layer Concept............................................................................ 16 2.4.1 Basic Concept............................................................................. 16 2.4.2 Modeling Timeframes................................................................ 17 2.4.3 Technical Layer.......................................................................... 19 2.4.4 Agent Layer................................................................................ 23 2.4.5 Energy Markets.......................................................................... 26 2.4.6 Financial Incentives and Regulations......................................... 28 2.5 Discussion..........................................................................................28 3 Private Actor Model................................................................................ 31 3.1 Introduction ...................................................................................... 31 3.2 Private Energy Investment Decisions............................................... 32 3.2.1 Introductory Remarks................................................................. 32 3.2.2 Neoclassical Perspective............................................................ 33 3.2.3 Behavioral Perspective............................................................... 34 3.3 Bounded Rational Decision Models................................................. 36 3.3.1 Introductory Remarks................................................................ 36 3.3.2 Goals.......................................................................................... 36 3.3.3 Search Rules.............................................................................. 37 3.3.4 Analysis Tools........................................................................... 38 3.3.5 Decision Strategies.................................................................... 40 3.4 Modeling Private Energy Investment Decisions ............................. 41 3.4.1 Introductory Remarks................................................................ 41 3.4.2 Aggregation of Technology and Infrastructure Information ...42 3.4.3 Aggregation of Socio-economic Information.......................... 44 3.5 Results...............................................................................................51 3.5.1 Introductory Remarks...............................................................51 3.5.2 General Decision Matrix.......................................................... 51 3.5.3 Single Decision Outcomes....................................................... 55 3.5.4 Aggregated Decision Outcomes...............................................56 3.6 Discussion....................................................................................... 64 4 Commercial Actor Model.......................................................................67 4.1 Introduction...................................................................................... 67 4.2 Commercial Energy Investment Decisions..................................... 68 4.2.1 Introductory Remarks...............................................................68 4.2.2 Theoretical Background........................................................... 68 4.2.3 Empirical Evidence.................................................................. 71 4.3 Aggregation of the Firm..................................................................73 4.3.1 Introductory Remarks...............................................................73 4.3.2 Aggregation of Options............................................................ 73 4.3.3 Aggregation of Business Units.................................................75 4.3.4 Definition of Strategies and Perspectives................................ 77 4.4 Decisions Model..............................................................................79 4.4.1 Basic Concepts......................................................................... 79 4.4.2 Operational Decisions.............................................................. 79 4.4.3 Low-stake Structural Decisions............................................... 80 4.4.4 High-stake Structural Decisions...............................................82 4.5 Application and Results...................................................................82 4.5.1 Impact on the Decisions of Private Agents.............................. 84 4.5.2 Impact of Competition..............................................................88 4.6 Discussion....................................................................................... 92 5 Conclusions.............................................................................................. 95 5.1 Introduction..................................................................................... 95 5.2 Discussion of the Model Design..................................................... 95 5.3 Outlook............................................................................................ 97 Appendix...................................................................................................... 99 A.1 Private Actor Model......................................................................... 99 A.1.1 Supply Superstructure and Networks........................................ 99 A.1.2 Agent Specific Diffusion Curves............................................ 102 A.1.3 Results from Weighted Adding Strategy.................................103 A.2 Commercial Actor Model............................................................... 105 References..................................................................................................107