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Subsidies
#1
Dear support team,

Trying to implement subsidies on specific technologies (processes). The results are not exactly what I have expected.


There are 2 processes (using renewable fuel) that cost 25 units of money each. Total amount to subsidize these processes are 2000 in total for period 2022-2030. 


In results in scenario without subsidies the total amount of renewable technology is installed more in total modelled period than in scenario with subsidies for this process (however in subsidy period 2022-2030 the new installed capacity is bigger). Also the installation process in subsidy scenario is much more unsteady. The aim of the subsidy is to increase the use of renewable resource but the results shows that there is no difference in fuel usage in both scenarios, although the installation of new capacity differs.

So why the installation of new RNW technologies is less in scenario WITH subsidies?

Why there is no change in fuel consumption although installed new capacity differs in scenarios?


Should I apply subsidies differently?


In attachment please see subsidy file, results and also subsidized processes form new technologies file.


Greetings,

Signe


Attached Files
.xls   Scen_SUB_S.XLS (Size: 109 KB / Downloads: 2)
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#2
You are missing the different timing of the investments, and thus also different amounts of salvaged capacities.

I tried making a plot of the available capacity for AGROEAGR-ST and AGROEAGRBIO-ST, see the attached picture below.  As you can see, when subsidies are ON, the model invests into considerably more available capacity than when they are OFF, which is quite understandable because the fixed O&M costs are zero. However, I was slightly puzzled seeing that in a few years the combined capacity falls a bit below the OFF case, although in general it is larger. But I am sure there is some explanation to that in your model.

Investment subsidies work basically just like a reduced investment costs.  Thus, if the original investment cost is 25 and there is an investment subsidy of 25 in some years, the impact will be similar to having an investment cost of zero in those years. But of course when adding a budget constraint for subsidies the result may become different. The model then optimizes the investments according to the subsidies and any budget constraints.

   
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#3
(12-09-2020, 08:13 PM)Antti-L Wrote: You are missing the different timing of the investments, and thus also different amounts of salvaged capacities.

I tried making a plot of the available capacity for AGROEAGR-ST and AGROEAGRBIO-ST, see the attached picture below.  As you can see, when subsidies are ON, the model invests into considerably more available capacity than when they are OFF, which is quite understandable because the fixed O&M costs are zero. However, I was slightly puzzled seeing that in a few years the combined capacity falls a bit below the OFF case, although in general it is larger. But I am sure there is some explanation to that in your model.

Investment subsidies work basically just like a reduced investment costs.  Thus, if the original investment cost is 25 and there is an investment subsidy of 25 in some years, the impact will be similar to having an investment cost of zero in those years. But of course when adding a budget constraint for subsidies the result may become different. The model then optimizes the investments according to the subsidies and any budget constraints.


Thank you so much for a quick replay!

Ok, I see that subsidies makes the available capacity higher. I just dont get why the amount and distribution of consumption stays same and does not switch to RNW at all. Besides, also in scenario SUB ON the fossil technologies are installed more in 2025 (when the subsidies for RNW technologies are available). Its strange why model is willing to install new capacity of fossil technologies if there is RNW technologies ensuring same demand “for free” anyway..

I would expect that model is installing RNW technologies as priority (because they are subsidized) and using more renewable resources and fossil technology installs only when demand cannot be satisfied with RNW one.  

Besides how can I make model not to switch to new technologies so fast? As can see the existing technologies (both RNW and fossil) are available until 2026 but is used only till 2019 (and then in 2025, 2026). Model is installing new capacity in 2018 plenty (base year is 2017) but I would like to see evenly switching. (And maybe it could make subsidy effect more visible in a way I would expect)

Greetings,
Signe


Attached Files
.xls   Scen_SUB_S_2.XLS (Size: 206.5 KB / Downloads: 0)
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#4
Hmm...  I think you are limiting the subsidized capacity by the limit for cumulative annualized subsidies of 2000. As far as I can see, the subsidized capacities are being installed to the maximum in the results (I don't have your full model data, but my calculation seems to imply that the budget constraint is active). So, just as you expect, installing RNW technologies is indeed a priority (because they are subsidized), and I think the model just cannot exceed your limit on the cumulative subsidies. Note also that that limit prohibits also any non-subsidized investments into the renewable technology during 2022-2030, unless you have such un-subsidized technologies modelled (it seems you don't have). Please remove that limit, and I think you should see more of the subsidized capacity installed.

The results from the model represent the optimal solution, which maximizes the total cumulative present value of the consumers' and producers' surplus (minimizes the total cumulative present value of the total system costs) under the constraints you have modelled. I am a bit confused if that is not what you expect.

As I don't have access to your full model, I am not able to explain your model behaviour in more detail.
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