A System Dynamics Model of the Energy Policymaking Process

Abstract

Electric energy is a fundamental commodity for any aspects of the modern world. However, there are many uncertainties in the sources of electricity that are going to be used in the future. Some of these uncertainties are inherent to the electricity technologies and to the costs of fuels, but the biggest uncertainties come from the impact of future regulations and policies on capital costs, and operations and maintenance costs. Although system dynamics models have been extensively used for applications to the electric power, all the existing models are based on the supply/demand dynamics, and policies are considered as externalities. On the contrary, the energy policymaking model (the EPM model) presented in this report focuses on the complementary problem. This is, the determination of how byproducts and issues related to the adequate supply of electric energy modify the opinions and perceptions of the diverse sectors of the social/political environment; the analysis of the aspects of this environment that account for the formation of energy policies, and the assessment of how these policies are determinants of the technology used to supply electricity. The technologies considered are nuclear, fossil and windmills. The architecture of the EPM model is based on the assumption that policies are formed to minimize societal concerns regarding energy availability and price, nuclear waste, nuclear proliferation, nuclear safety, fossil emissions including greenhouse effect, acid rain, and land requirements for windmills. In this way, each technology is measured by its ability to reduce these concerns. The resulting policies impact on the economics of each of these options. At the same time, economics determines the selection of the new source of electricity. One of the most important results derived from the simulations done through the EPM model is that the revival of the nuclear industry may not be enough to prevent the increase in the production of greenhouse gases. The limited capacity of the industry to build plants is an important factor to consider. Another result is that the opening of Yucca Mountain at the earliest date means the removal of an important barrier for the future growth of the industry, as the risk premium of nuclear power plants may be reduced. Also derived from the use of the EPM model is that the electricity market should not be completely deregulated due to the likely be shortage of electricity supply, and high concerns regarding electricity availability, during peak demands.