Introduction to Energy Systems Modelling

Andrea Herbst, Felipe Toro, Felix Reitze, and Eberhard Jochem

JEL-Classification: C63, L61

Keywords: energy modelling, bottom-up, top-down, hybrid energy system modelling, Switzerland

1. Introduction

Controversial discussions in energy science and energy policy communities about

the perspectives, feasibility and impacts of future energy demand and supply can
often be traced back to the different types of energy models used and their results
(e.g. Krause 1996). Detailed techno-economic (or process-oriented) models can
simulate the market penetration and related cost changes of a new energy tech-
nology or policy with a certain degree of technical detail (which is why they are
called “bottom-up” models). However, they cannot project the corresponding
economic, structural, or employment net impacts or net cost for society. The
results of these models are often cited by environmentally-concerned scientists,
NGOs and politicians to elucidate the feasibility of major changes to the energy
system, particularly in the context of urgent and extensive change of the mainly
fossil fuelled energy systems in almost all countries.
On the other hand, macroeconomic models (also called top-down models) can
simulate sector-specific future energy demand and supply including the impacts
on economic growth, employment or foreign trade. However, they rely very much
on energy price changes and financial policies and are not well suited to describe
the development of specific technologies or sectoral policies and related changes
in energy demand, related emissions, and investments at a sufficiently detailed
level. They may also reflect rather constant trends in structural changes of the
economy and, to an unsatisfactory extent, saturation processes and innovations.
The results of these models are often cited by representatives of trade associations,
large energy-intensive or energy supply companies, and conservative politicians.
The present discussions in Switzerland or Germany are good examples, where
anti-nuclear NGOs refer to the feasibility of a non-nuclear, low carbon Swiss
energy system and the German government has re-decided for a phase out in the
beginning 2020s by citing the results of bottom-up models. On the other hand,
economiesuisse (the Swiss Business Federation) and other Swiss trade associations

© Swiss Society of Economics and Statistics 2012, Vol. 148 (2) 111–135
112 Herbst / Toro / Reitze / Jochem

as well as the BDI (the German Trade Association of Industry) point to the high
and unacceptable economic risks of such an energy system by referring to macro-
economic results of top-down models such as losses in economic growth, employ-
ment and competitiveness.
Each of the two types of models has its specific advantages and limitations.
This paper addresses in greater detail some of the challenges that have to be met
when combining the two types of models via electronically-based modules (a so
called ‘hard’ link). There is no doubt that combining the advantages of both types
of energy models into a hybrid model will more adequately describe and project
the changes of the energy system, which may improve the quality of discussions
on future energy perspectives by being able to differentiate among technologies
and sectors, and to analyse the macroeconomic implications of large policy port-
folios and major changes of the energy system in a consistent and transparent
manner (Böhringer, 1998).

2. Overview of Energy Modelling Approaches – State-of-the-Art

Energy models are used to project the future energy demand and supply of a
country or a region. They are mostly used in an exploratory manner assuming
certain developments of boundary conditions such as the development of eco-
nomic activities, demographic development, or energy prices on world markets.
They are also used to simulate policy and technology choices that may influ-
ence future energy demand and supply, and hence investments in energy systems,
including energy efficiency policies.
However, policy and technology choices induce a dilemma in the choice of
energy model (Böhringer, 1998). Detailed techno-economic (or process-ori-
ented) models were first developed in the early 1970s, particularly after the first
oil crisis in 1973, when analysts started to examine the options of oil use and the
more efficient use of final energies. Modern macroeconomic energy models have
their origin in the late 1950s, when energy supply companies and energy admin-
istrations had to make decisions about the future energy supply to meet the rising
energy demand of the rapidly developing OECD countries.
Every modelling approach abstracts to a certain degree from reality using styl-
ized facts, statistical average figures, past trends as well as other assumptions.
Consequently, energy models represent a more or less simplified picture of the
real energy system and the real economy; at best they provide a good approxima-
tion of today’s reality. Nevertheless, it would be impossible to answer very spe-
cific questions on energy technologies or economic implications without making

Swiss Journal of Economics and Statistics, 2012, Vol. 148 (2)

Introduction to Energy Systems Modelling 113

some cut backs and approximations, with an uncertain reliability on quantitative

figures used by those models. A large diversity of modelling approaches has been
developed over time depending on their target group (policy makers, scientific
and research communities, large energy supply companies), intended use (data
analysis, ex post evaluation, forecasting, simulation, optimization, estimation of
parameters, etc.), regional coverage (regional, national, multinational), concep-
tual framework (top-down: underlying economic theory, bottom-up: technologi-
cal focus/explicitness) and the information available (data on final energy, useful
energy, energy demand by branches in the service, transport, or industrial sector).
Obviously, both types of energy models, top-down and bottom-up, have spe-
cific advantages and limitations, of which modellers, users of the results, and
policymakers are, however, often not sufficiently aware. Bottom-up models are
generally constructed and used by engineers, natural scientists, and energy supply
companies, whereas top-down models tend to be developed and used by econ-
omists and public administrations. The understanding of the two approaches
has increased substantially over the last decade (Böhringer and Rutherford,
2006, 2008; Hourcade et al., 2006); There have been first few attempts to com-
bine both approaches in one hybrid energy model system, probably so late during
the past decade due to the lack of interdisciplinary research teams of necessary
larger funds for their operation (Hourcade et al., 2006; Jochem et al., 2007;
Schade et al., 2009; Catenazzi, 2009).
Recent or current projections and studies of energy demand and supply using
energy models (E3Mlab, 2007; BFE, 2007; WWF, 2009; IEA, 2010; Prognos,
2011) are not just made for routine decisions by decision makers in administra-
tions or large energy companies; they also increasingly serve as a scientifically
derived information basis for societal debate among governments, energy com-
panies, trade associations, and NGOs. The recent discussions about greenhouse
gas emission targets (and target sharing) in EU Member countries, phasing out
nuclear energy after Fukushima in some European countries and Japan, and the
speed of introducing renewable energies and realising energy efficiency poten-
tials have been increasingly influenced by the results taken from various energy
demand and supply models developed during the last two decades.
The following sections describe selected top-down and bottom-up models,
their main advantages and limitations as well as examples of their implemen-
tation. These descriptions are also intended to shed some light on the existing
preferences of the various stakeholders in the energy field and in the economy.

Swiss Journal of Economics and Statistics, 2012, Vol. 148 (2)

114 Herbst / Toro / Reitze / Jochem

2.1 Top-Down Energy Models

Top-down energy models try to depict the economy as a whole on a national or
regional level and to assess the aggregated effects of energy and/or climate change
policies in monetary units. In contrast to bottom-up modelling, these equation-
based models take an aggregated view of the energy sectors and the economy
when simulating economic development, related energy demand and energy
supply, and employment. Driven by economic growth, inter-industrial structural
change, demographic development, and price trends (rather than energy-related
technological progress, innovations, or intra-industrial structural change), mac-
roeconomic models try to equilibrate markets by maximizing consumer welfare
using various production factors (labour, capital, etc.) and applying feedback
loops between welfare, employment, and economic growth. Currently, macroe-
conomic energy models are often being used to evaluate the economic costs and
environmental effects of general energy or climate policy instruments, such as
energy or CO2 taxes or surcharges, emission trading schemes (ETS), feed-in tar-
iffs of renewable energies, etc. (Bataille, 2005).
In the past, conventional top-down energy models considered technology
developments mainly in the context of price-based policies (taxes, surcharges, or
investment subsidies) and regulatory policies (technical standards, bans, and tech-
nological targets). In current top-down modelling approaches, efforts are made
to extend the energy demand forecasting framework of the existing models to
include technological and economic feedbacks (Löschel, 2002; Böhringer and
Löschel, 2006) as well as non-price policies (technical standards, norms, etc.;
Worell et al., 2004). A good example in this context is the global optimization
model MERGE which combines a top-down approach to model economy and
energy demand with a bottom-up approach to depict the energy sector (Manne
and Richels, 2004).The following subsections present four different types of
top-down models: input-output models, econometric models, computable gen-
eral equilibrium models and system dynamics.

2.1.1 Input-Output Models

The traditional Input-Output Analysis is based on Francois Quesnays Tab-
leau économique (1758) and Leon Walras and Wassily Leontiefs Input-
Output Economics (1966). Used for a structural description of the regarded
economy, it describes the total flow of goods and services of a country sub-
divided into different sectors and users in terms of value added and specific
input/output coefficients. Input-output tables are more suitable for short-term
evaluation of energy policies rather than long-term ones as they can only give a

Swiss Journal of Economics and Statistics, 2012, Vol. 148 (2)

Introduction to Energy Systems Modelling 115

current picture of the underlying economic structure based on historical data

(Catenazzi, 2009).
For Switzerland, Nathani et al. (2006) developed a two-step approach for
generating a balanced input-output table based on the European Union input-
output table structure (Eurostat, 2008). By using country comparisons (par-
ticularly with Austria and Germany) and the cross-entropy method, Nathani et
al. (2006) tackled data limitations concerning the Swiss economy and generated
a good overall picture of its sectoral interdependencies. However, there is still
room for general model improvements relating to deficient data as well as on a
sectoral level for specific industries (e.g. paper industry) where major uncertain-
ties have been observed.
Various studies additionally introduced energy issues into the economic frame-
work of input-output analysis. For example, Nathani (2006) showed for the spe-
cial case of Germany that the application of input-output tables could be useful
to examine the interrelationships between material use and the energy demand
of an economy with regard to material efficiency improvements using sector-
specific energy intensities. Another example is the hybrid energy input-output
table of the German Federal Statistical Office within the Environmental-Eco-
nomic Accounting for Germany (Mayer, 2007) or the input-output analysis of
the United Nations (United Nations, 1999).

2.1.2 Econometric Models

Econometric analysis has been defined as a combination of economic theory,
mathematical tools and statistical methods (Tinter, 1953). Early (basic) econo-
metrics was aimed at testing economic theory (estimation of economic relation-
ships) using empirical evidence. However, over the course of time the require-
ments made of econometrics increased from pure hypothesis testing to the
development of complex econometric models. Additionally, most of the econo-
metric energy models are open-ended, growth-driven macro econometric models
using/analysing time series data on a higher level of aggregation, e.g. output, etc.
with no assumption of equilibrium, while cross section and panel data tend to
be applied more in micro econometrics (Wooldridge, 2002; Greene, 2003).
One major disadvantage of econometric models is their heavy reliance on data.
To be able to generate credible results, econometric models need huge amounts of
data for fairly long time periods. There may be a general problem of data avail-
ability for the modellers in the case of small macro econometric models, which
will probably be exacerbated in the case of multi-country analyses where data for
some countries might not be available at all or not comparable due to national

Swiss Journal of Economics and Statistics, 2012, Vol. 148 (2)

116 Herbst / Toro / Reitze / Jochem

accounting or census differences. In this context the credibility and adequacy

of data represent additional uncertainties for model quality (e.g. rough guesses,
methods of estimation, etc.).
E3ME (CAMECON, 2011) is an annual macro econometric model simulating
GDP at the level of 41 branches for all EU Member States, with implications for
employment, gross value added, prices and several other economic, energy and
environmental variables. It has been developed by Cambridge Econometrics with
the aim to address the long-term effects of energy-economy-environment (E3)
policies at the European level, especially those concerning investment, R&D, and
environmental taxation and regulation (Jochem et al., 2007).

2.1.3 Computable General Equilibrium Models

Historically, Computable General Equilibrium (CGE) models have their origins
in the general equilibrium theory developed by Léon Walras1 in the 1870s,
Vilfredo Pareto2 in 1906 and Kenneth Arrow and Gerard Debreu3 in
the 1950s. However, current CGE models may use different approaches to ana-
lyse policy implications for economies (e.g. Keynesian models). Generally, these
kinds of model assume that all markets are in perfect equilibrium to start with
(no excess demand or supply, no obstacles to profitable potentials of energy effi-
ciency). CGE models use Social Accounting Matrices (SAM) to represent their
benchmark data in equilibrium. After policy intervention (e.g. introduction of
special taxes or subsidies, etc.), the equilibrium is preserved by price adjustments
which cannot be influenced by the involved agents (e.g. households, firms, and
government) as they act as price takers and try to maximize their welfare or prof-
its under certain constraints and quantity adjustments. In practice, researchers
and international institutions commonly use CGE models for long term simu-
lations like, e.g. the GEM-E3 model of the European Commission, the GTAP
model consortium, or the World Bank models.
Through its equilibrium approach, CGE models rule out energy efficiency
gaps, adjustment delays and consequently neglect the importance of market
failures and obstacles. Additionally, like the majority of pure macroeconomic
models, CGE models do not take technological details into account which might
be important for the assessment of certain policy measures (see Hourcade et
al., 2006).

1 Éléments d’économie politique pure, ou théorie de la richesse sociale (1874)

2 Manuale d´economia polititica (1906)
3 The Existence of an Equilibrium for a Competitive Economy (1954)

Swiss Journal of Economics and Statistics, 2012, Vol. 148 (2)

Introduction to Energy Systems Modelling 117

The recursive dynamic GEM-E3 CGE model simulates interactions between

the economy, the energy system and the environment as well as the macroeco-
nomic effects of environmental policies (taxes, standards, tradable permits, etc.)
for 15 (or 27) European countries and considering four economic agents (house-
holds, firms, governments and foreign trade) (Capros et al., 1996a, 1996b).
On the supply side, the market consists of five production sectors, agriculture,
energy, manufactured goods and services (divided into 18 branches) with labour
and capital as input factors. Technological progress enters the GEM-E3 model
through its production function, either modelled endogenously or taken from
outside the model (expert estimates, etc.). On the demand side, 13 categories
of durable and non-durable consumption goods enter the markets. In addi-
tion, foreign trade (imports and exports) enters the model under the “Arming-
ton” assumption of imperfect substitutes. Extensions were made to the basic
GEM-E3 model to cover macroeconomic effects under imperfect competition
as well as geographical expansion (Eastern European countries, Switzerland)
(CES, 2008).
GEM-E3 Switzerland was developed by Bahn and Frei (2000) and was later
merged into the European GEM-E3 model for the European Union. Their main
aim was to compile a reliable Swiss database for GEM-E3 as well as to evaluate
different CO2-emission reduction strategies for Switzerland. Another CGE model
of that family is the GEMINI-E3 model (developed by the French Ministry of
Equipment and the French Atomic Energy Agency). This model family consists
of several CGE models, one of them specifically tailored to Switzerland com-
puting the costs of the Kyoto Protocol for Switzerland with and without inter-
national emissions trading. GEMINI-E3 models very detailed indirect taxation
and social contributions rates and puts a special focus on the measurement and
analysis of welfare cost of policies (Bernard and Vielle, 2008).

2.1.4 System Dynamics

The modelling concept of System Dynamics (SD) was developed by Forrester
(1958, 1962, 1971, 1980) in the 1950s at the Massachusetts Institute of Technol-
ogy (MIT) and used to analyse the long-term behaviour of social systems like
large industrial companies or entire cities. The aim here is to explain the behav-
iour of an interacting social system as a result of the assumed interdependen-
cies considering dynamic changes over time (differential equations and analysis)
among the various components that constitute the defined system. The model
developer defines flows, stocks, and central components of the defined system,
whose interconnections are established by feedback control systems or feedback

Swiss Journal of Economics and Statistics, 2012, Vol. 148 (2)

118 Herbst / Toro / Reitze / Jochem

loops represented by non-linear differential equations. Another element which

is integrated in system dynamics theory and methodology concerns the decision
theory of (designed) modelled complex social systems. In addition, information
technologies for computational analysis and a graphical interface to represent
feedback loops are typical features of system dynamics models and form the basis
for discussions of the analysed social systems by interdisciplinary teams (Krail
and Schade, 2010).
The development over time of the defined systems is described using differen-
tial analysis with mathematical formulations. Forrester and his associates devel-
oped software tools in order to use difference equations to calculate the dynamic
equations of the feedback system and its development over time incorporating
expert judgements. These programmes provide the capabilities to follow an exper-
imental modelling approach if no analytical or data-based solutions are available.
Examples of system dynamics approaches applied to analyse long-term devel-
opments in the energy sector include the TIME-model investigating long-term
structural developments within the worldwide energy system (de Vries et al.,
1999), the POLES model replicating the whole energy system (Russ and Criqui,
2007) and the ASTRA model in the transport sector (Schade, 2004) that was
extended to macroeconomic structures (Krail and Schade, 2010). The macro-
economic module integrates neoclassical production functions with Keynesian
consumption and investment behaviour and with elements of endogenous growth
theory to incorporate technological progress.
Drawbacks of system dynamics relate to the validation and calibration of the
assumed feedback loops, in particular with reference to the modelling of long-
term developments in the energy systems (Fichtner et al., 2003) and also the
inability to make detailed analyses and projections of sectoral technologies.

2.2 Bottom-Up Energy Models

The main characteristic of a conventional bottom-up energy model is its rela-
tively high degree of technological detail (compared to top-down energy models)
used to assess future energy demand and supply. In contrast to top-down models,
bottom-up models use a business economics approach for the economic evalua-
tion of the technologies simulated. They usually cannot consider macroeconomic
impacts of energy or climate policies or related investments. They do not con-
sider transaction costs which are implicitly covered by top-down models. Their
technological detail and transparency considering technological progress and the
diffusion of new energy technologies make bottom-up energy models unsuitable
for very long-term energy demand and supply projections in technology areas

Swiss Journal of Economics and Statistics, 2012, Vol. 148 (2)

Introduction to Energy Systems Modelling 119

with re-investment cycles of less than 20 years (e.g. future generations of a new
technology may be quite different from its present type).
Regarding the mathematical form, bottom-up energy models have been devel-
oped in the form of simulation or optimisation models, and more recently of
multi agent models (see below). Bottom-up modellers try to identify the best
technologies by assessing policies, their effects, investment, costs, and benefits,
by calculating external benefits (e.g. environmental, etc.) of energy efficiency
measures, by identifying synergy-effects between sectors, and sectoral costs and
surpluses. However, most bottom-up models limit their investment and cost
calculations to the conversion sector and cross cutting technologies in the final
energy sectors if it comes to energy efficiency options. This fact is often over-
looked and leads to questionable conclusions in cases of scenario comparisons
and model comparisons.

2.2.1 Partial Equilibrium Models

Partial equilibrium models do not differ greatly from the already mentioned CGE
models as the framework and mechanisms are very similar. However, partial
equilibrium models assess only one sector or a certain subset of sectors. Partial
equilibrium energy models focus on energy demand and supply. By neglecting
certain interrelations and effects on the broader economy, they can include many
more technological details than conventional CGE models. Important partial
equilibrium models include, amongst others: the POLES (Prospective Outlook
on Long-term Energy System) model from Enerdata, the WEM (World Energy
Model) of the International Energy Agency, and the PRIMES Energy System
Model of the European Commission. It should be pointed out, however, that
the cited models are not pure partial equilibrium models because they already
attempt to bridge macroeconomic and process-oriented approaches, e.g. by com-
bining explicit technology choices with microeconomic relationships.
The POLES model analyses the international energy markets for seven world
regions, eleven sub-regions and 32 countries, considers about 40 technologies of
power and hydrogen production and the final energy sectors in some detail. It is
based on a recursive simulation process in which the energy demand and supply
for each national or regional module reacts to international price changes in the
previous period. Each module considers not only price effects but also techno-
logical and economic constraints and trends (Enerdata, 2011).
The WEM is a large-scale mathematical model that generates medium- to
long-term sectoral and regional projections of energy demand, power generation,
etc. on a global and regional level. The model consists of several demand modules

Swiss Journal of Economics and Statistics, 2012, Vol. 148 (2)

120 Herbst / Toro / Reitze / Jochem

(final energy demand of industry, transport, the residential sector and services),
a refinery module, a power generation module, three fossil fuel supply modules
(gas, oil, and coal) as well as a module which calculates, amongst others, the
CO2 content factors for coal, oil and gas for different sectors and regions. Addi-
tionally the model estimates supply-side investments as well as the net change
to demand-side investments based on its energy supply and demand projections
for three scenarios (IEA, 2011).
PRIMES is used to analyse, for example, the impacts of carbon emission trad-
ing and of renewable and energy efficiency policies on energy markets by simu-
lating a market equilibrium for energy demand and supply up to 2030 within
each of the EU Member States including endogenous energy price formation.
The model consists of 11 sub-models, including several demand- and supply-
side modules and, in contrast to other energy models, utilises more recently
agent-based objective functions which, however, are not publicly documented
(E3Mlab, 2007).

2.2.2 Optimisation Models

Optimisation models try to define the optimal set of technology choices to
achieve a specific target at minimised costs under certain constraints leaving
prices and quantity demanded fixed in its equilibrium. The MARKAL model
analyses energy demand and supply on a country level using a bottom-up,
dynamic modelling approach. Like the above mentioned partial equilibrium
models, MARKAL already combines a detailed bottom-up model with a sim-
plified macroeconomic approach. It was developed by the International Energy
Agency and designed to support policymakers by providing them with detailed
information about energy technologies on the demand and (mostly) supply sides.
According to ETSAP (2011), MARKAL aims at identifying a least-cost energy
system with cost-effective responses to restraints on emissions. Additionally,
price-based policies (taxes, etc.) as well as new technologies and trends in techno-
logical change are evaluated and the degree of regional cooperation is estimated.
Today, there are several versions of the original MARKAL model including a
small macroeconomic model, a microeconomic model, and various added features
such as endogenous energy demand projection, responsiveness to price changes,
trade of emission permits, uncertainties regarding endogenous technology learn-
ing (Seebregts et al., 2002; Loulou et al., 2004).
The TIMES model (The Integrated MARKAL-EFOM System) is one of
these MARKAL family models and based on the same modelling approach as
the conventional MARKAL model used for overall- and single-sector analysis of

Swiss Journal of Economics and Statistics, 2012, Vol. 148 (2)

Introduction to Energy Systems Modelling 121

the energy market. In comparison with the usual MARKAL model, the TIMES
model provides some special features: flexible time periods, data decoupling, pro-
cess generality, flexible processes, commodity related variables, climate equations,
etc. (ETSAP, 2005) Euro MM (European Multi-regional MARKAL), another
offspring of the MARKAL model family, is an multi-country energy system
optimisation model which evaluates policy and climate change impacts on the
energy conversion sector by calculating the least-cost solutions for the energy
system (Schade et al., 2009).
Another energy supply optimization model frequently cited in literature is
MESSAGE (Model for Energy Supply Strategy Alternatives and their General
Environmental Impact) developed by the Austrian International Institute for
Applied Systems Analysis (IIASA) hosting 11 regions and computing the evolu-
tion of the energy sector up to the year 2100 (Messner and Strubegger, 1995).
The DIME (Dispatch and Investment Model for Electricity markets in Europe)
model is designed as a linear optimisation model for medium- and long-term fore-
casting of the European (13 Central and Western European countries including
Switzerland) electricity generation market covering 11 technologies for electricity
generation. Based on the assumptions of a competitive power generation market
it minimises costs and is applied to simulate allocation as well as investment deci-
sions regarding the supply side of the electricity sector (EWI, 2011).
The use of optimisation models is limited to discrete energy conversion tech-
nologies and typified energy uses (such as cars, different types of insulated houses)
as the information on investment and operating cost are needed for the optimi-
sation. This central requirement of optimisation models limits their applica-
tion to certain technological areas and final energy sectors. It is impossible, for
instance, to simulate the energy demand of the service and industrial sector due
to their technological variety where cost information cannot be made available.
In addition, optimisation models neglect the fact that severe market imperfec-
tions and obstacles in many final energy sectors and also the conversion sector
(e.g. co-generation) are not simulated leading to unrealistically low projections
of energy demand.

2.2.3 Simulation Models

Simulation models aim to replicate consecutive rules that describe the associations
and interrelationships among various system elements, i.e., simulation models
attempt to provide a descriptive, quantitative illustration of energy demand and
conversion based on exogenously determined drivers and technical data with the
objective to model observed and expected decision-making that does not follow a

Swiss Journal of Economics and Statistics, 2012, Vol. 148 (2)

122 Herbst / Toro / Reitze / Jochem

cost minimising pattern. Replicating in a simplified manner final user behaviour

by modelling their technological choices is based on the variation of pre-defined
drivers (e.g. income, population, employees, living area, mileage, government
policies, energy prices, etc.). These drivers are correlated with the general eco-
nomic and demographic development (i.e. scenarios) as well as other boundary
conditions (e.g. energy and climate change policies).
Traditionally, the operation and planning of the electricity sector have been
simulated using cost minimisation models (see Section 2.2.2.). However, these
models are not well suited to the more recent framework which developed due
to the electricity sector being restructured and liberalised in most countries
(Linares et al., 2008) and therefore several scientists have developed models that
also consider imperfect competition as reviewed in Ventosa et al. (2005). Sim-
ulation models are flexible and allow aspects such as strategic behaviour or the
absence of complete information to be integrated which help to mirror market
imperfections and failures. Well-known examples of this category of simulation
model include system dynamics (SD) and agent-based simulation models (see Sec-
tion 2.2.4). Specific examples include the Residential End-Use Energy Planning
System (REEPS); World Energy Model (WEM); Mesures d’Utilisation Ration-
nelle de l’Energie (MURE); and the National Energy Modelling System – Resi-
dential Sector Demand Module (NEMS-RSDM) (Mundaca and Neij, 2009).
Game theory and accounting framework modelling approaches are also con-
sidered to be types of simulation models (Sensfuss, 2008), but also limited to
the energy conversion sector. Game theory simulation methods concentrate on
the interaction of players on energy markets (strategic decisions) and are com-
monly used in the energy conversion modelling of market design aspects and
market power analysis, especially with respect to stable equilibria analysis (Nash-
equilibrium). In addition, models such as Cournot, Bertrand and Supply Func-
tion Equilibria are simulation approaches employed to research oligopolistic
electricity markets. A recent model application for electricity sector analysis is
the hybrid Bertrand-Cournot model, where Yao and Oren propose a simulation
model of a simplified electricity sector with special emphasis on the transmis-
sion situation and prices and the analysis of market and power (Yao et al., 2010).
Accounting frameworks can be considered to be a simple form of a simula-
tion model which aims to account for the physical and economic flows of the
energy system (Heaps, 2002; Mundaca and Neij, 2009). Instead of explicitly
modelling ‘players’ decisions, this type of model accounts for the outcomes of
the assumed development (i.e. of a scenario as a consistent bundle of bound-
ary conditions or of a penetration of a particular new technology) in a descrip-
tive manner (e.g. development of technologies resulting from re-investments of

Swiss Journal of Economics and Statistics, 2012, Vol. 148 (2)

Introduction to Energy Systems Modelling 123

new generations of technologies; description of the present routines in decision

making in energy technologies) or in a prescriptive manner (e.g. impacts from
high-efficient technologies or renewable energies resulting from one or various
policy instruments). This approach is commonly applied to project future energy
demand of final energy sectors and the related emissions.
Examples of accounting frameworks include models such as Long-Range
Energy Alternatives Planning (LEAP); National Impact Analysis (NIA); Bot-
tom-Up Energy Analysis System (BUENAS); Model for Analysis of Energy
Demand (MAED); and the Policy Analysis Modelling System (PAMS). Due
to their simple structure, accounting frameworks are not commonly applied to
simulate decision processes.

2.2.4 Multi-Agent Models

Multi-agent modelling is a simulation approach which considers market imper-
fections such as strategic behaviour, asymmetric information and other non-eco-
nomic influences. The concept and architecture of multi-agent models is derived
from the distributed artificial intelligence concept whose application has been
greatly extended across several research areas (e.g. macro level complexities) since
the early 1990s. Advances in computational methods and resources and in com-
plex, multi-disciplinary ecological and natural resource research methodologies
combined with progress in more specialised statistical approaches have allowed
researchers to expand the use of agent-based modelling, especially to decision-
and policymakers (Foley et al., 2005; Heemskerk et al., 2003).
Agent-based models are considered to be more than just innovative research
tools for analysing complex systems, but are also regarded as an instrument for
end-users to improve decision-making as well as to test specific policies and pro-
ject alternative scenarios and futures (Alexandridis and Pijanowski, 2006).
An important aspect with respect to micro-level interactions relates to the role
of the defined agents as well as to the decisions and interactions between hetero-
geneous actors in the system. In this respect, agents have in common the ability
to act autonomously, interact with other agents, react to the environment, and
take the initiative to act (Wooldridge, 1995, 2009).
Agent-based models applied to the electricity sector are widespread in litera-
ture. Traditionally, they tended to focus on operational aspects rather than on
long-term simulations until recently when some agent models have been applied
to long term planning due to the reasoning that the capacities are being built up
as the result of investment decisions. Fichtner et al. (2003) suggest the com-
bined application of an agent-based approach and a linear optimisation model for

Swiss Journal of Economics and Statistics, 2012, Vol. 148 (2)

124 Herbst / Toro / Reitze / Jochem

strategic planning patterns of electricity suppliers in liberalised markets. Further

examples in this field include the research carried out by Wittmann (2008), who
developed an agent-based model of energy investment decisions in urban energy
systems with the focus on decentralised converting technologies.
In addition, the tool PowerACE was also developed within an agent-based
platform in order to analyse the German electricity and focused on three main
topics. First, Sensfuss (2008) and Sensfuss et al. (2008) analysed the impact
of renewable electricity generation on the electricity market. Another part of the
model investigates the role of learning algorithms in price building mechanisms
on the electricity market and the impact of market structure and design on elec-
tricity prices (Weidlich and Veit, 2008). The third topic looked at long-term
developments in terms of investment decisions in the conventional power sector
(Genoese et al., 2007) and market power (Möst and Genoese, 2009).
So far, the multi-agent models are limited to applications of the energy con-
verting technologies and a few applications on final energy sectors (e.g. Jochem,
2009). One major obstacle of developing and using multi-agent models is the
enormous demand on additional empirical data in order to simulate the behav-
iour of the different agents.

3. Top-Down versus Bottom-Up

Between the late 1970s and the 1990s many debates about the quality of energy
demand projections and the related impacts on the economy and society could
be witnessed at international conferences, energy symposia, or seminars (Krause,
1996; Manne and Richels, 1990). There was insufficient understanding of the
strengths, weaknesses, and limitations of the top-down and bottom-up models
used by the different disciplinary communities, but with the increasing inter-
disciplinary competence of energy research teams over the last decade there has
also been a growing demand to combine the two approaches and, hence, their
advantages.

3.1 Strengths, Weaknesses and Limitations

In relation to the above mentioned models one can generalise certain advantages
and disadvantages for top-down and bottom-up modelling.
One major advantage of top-down energy models is their application of feed-
back loops to welfare, employment, and economic growth. This endogenous
assessment of economic and societal effects results in higher consistency and

Swiss Journal of Economics and Statistics, 2012, Vol. 148 (2)

Introduction to Energy Systems Modelling 125

facilitates a comprehensive understanding of energy policy impacts on the econ-

omy of a country or region. On the other hand, top-down models suffer from
the lack of technological detail and deliver rather generalised information. Con-
sequently, they might not be able to give an appropriate indication of technolog-
ical progress (as they do not directly model technological change – this is only
considered via substitution elasticities), non-monetary barriers to energy effi-
ciency or specific policies for certain technologies or branches. Especially in the
long run, when substantial technological change, saturation, and intra-sectoral
structural change can be expected and has to be included in a plausible model,
top-down models are not suited to show in a transparent manner credible tech-
nology futures.
Furthermore, driven by the assumption of efficiently allocating markets, top-
down modelling approaches tend to underestimate the complexity of obstacles
and their non-monetary form like lack of knowledge, inadequate decision rou-
tines, or group-specific interests of technology producers or of whole sales. CGE
models assume that any policy implies additional cost, although highly profitable
(but unrealised) investments in energy efficiency may reduce cost and increase
profits and tax income. Transaction costs are only implicitly covered and cannot
be changed by relevant policies such as technical standards or energy efficiency
networks. Finally, as they are focused on monetary terms, they consequently
tend to favour monetary related policies, e.g. price-based (taxes, subsidies, etc.)
policies or emission certificates and regulatory (bans and rules) policies (Hour-
cade et al., 2006).
In contrast to macroeconomic modelling, bottom-up modelling approaches
incorporate a high degree of technological detail which enables them to present
very detailed pictures of energy demand and energy supply technologies, as well
as plausible technology futures. Bottom-up models can also give detailed evalu-
ations of sector- or technology-specific policies (Catenazzi, 2009). However,
this high degree of detail means that bottom-up modellers are heavily depend-
ent on data availability and credibility with regard to their many assumptions
on technology diffusion, investments and operating cost. There are also criti-
cisms of bottom-up modelling concerning the neglect of programme costs, the
feedback of energy policies as well as the lack of macro-effects of the presumed
technological change on overall economic activity, structural changes, employ-
ment, and prices.

Swiss Journal of Economics and Statistics, 2012, Vol. 148 (2)

126 Herbst / Toro / Reitze / Jochem

3.2 Hybrid Energy System Models

To overcome the above mentioned weaknesses and limitations of conventional
top-down and bottom-up energy models, energy modelling is currently moving in
the direction of hybrid energy system modelling combining at least one macroeco-
nomic model with at least one set of bottom-up models for each final energy sector
and the conversion sector. According to Hourcade et al. (2006) and Bataille
(2005) a high-quality hybrid model system should incorporate at least three prop-
erties: (1) technological explicitness, (2) microeconomic realism and (3) macroeco-
nomic completeness. Top-down modelling on its own provides energy modellers
with a high degree of macroeconomic completeness through the feedback loops
for economy, welfare, etc. combined with microeconomic realism, e.g. the deci-
sion-making processes of the different agents, etc. (see Section 2.1). Pure bottom-
up modelling, on the other hand, offers a high level of technological explicitness
and a low level of macroeconomic completeness (see Section 2.2). Merging these
three properties into one hybrid system can take place in several different ways.
The simplest form of linking top-down and bottom-up approaches, also called
‘soft linking’, is the manual transfer of data, parameters and coefficients. If this
transfer is further evolved using automatic routines, a ‘hard link’ is established
between the different models. This form of a ‘soft link’ has been applied in Swiss
energy demand and supply projections in a rather complex model setting of a
macroeconomic model and several bottom-up models for all final energy sectors
and the conversion sector by four model teams (BFE, 2007).
The rather simple hybrid bottom-up CGE model SCREEN (Sustainability
Criteria for Regional Energy policies) for Switzerland, has also been developed,
combining technological details of the electricity sector with a macroeconomic
CGE framework (Kumbaroglu and Madlener, 2001). It was used to analyse
the effects of a CO2 tax in Switzerland, but was not further developed.
The next step for connecting top-down and bottom-up models is to apply par-
tial model elements (top-down or bottom-up) in their modelling counterparts.
Catenazzi (2009) defines two hybrid energy model systems in this context:
‘macroeconomic models with bottom-up energy supply models’ and ‘bottom-up
models with some limited macroeconomic sub-models’. The MARKAL model
family is an example for the latter (see Section 2.2.2). A similar approach is used
by Hourcade et al (2006), who define the following three categories of hybrid
energy models: ‘bottom-up models with macroeconomic feedbacks’, ‘bottom-up
models with microeconomic behavioural parameters for technology choices’ and
‘top-down models with more technological explicitness or parameters for endog-
enous technological change’.

Swiss Journal of Economics and Statistics, 2012, Vol. 148 (2)

Introduction to Energy Systems Modelling 127

One of the presently established hybrid model systems was applied in the
ADAM project (Adaptation and Mitigation Strategies), a European energy model
(Jochem et al., 2007). The model system in ADAM combines a macroeconomic
model (E3ME), with a set of bottom-up models for the four final energy sectors
(industry, services, transport and the residential sector which has been split up
into buildings and electrical appliances). This hybrid system has been applied to
project the energy demand and supply of 29 European countries up to 2050 in
various scenarios (Jochem et al., 2007; Schade et al. 2009).
Challenges facing hybrid energy modelling include, amongst others, the need
to keep such combined model systems theoretically consistent and empirically
valid without constructing huge models that are incomputable. Additionally, the
endogenous consideration of structural change (inter-sectoral as well as intra-
sectoral) and technological progress are important issues that require further
attention and research.

3.3 Linking the Results of Process-Based Models and Macroeconomic Models

Presently, there are scarcely any hard links between process-oriented energy
models and macroeconomic models. This is due to the disciplinary cultures in
which each type of energy model has been developed. Linking the models is
mostly limited to a manual transfer of a few major drivers (e.g. population, gross
value added of the economic sectors, or energy prices on world markets) and to
investment figures (often only from the energy conversion sector of bottom-up
models being transferred to macroeconomic models). On top of this, the few
existing links have not been implemented in electronically based transformation
modules (‘hard links’), but are manually transferred by the researchers and teams
involved (e.g. the Energy Perspectives of Switzerland; see BFE, 2007).
The need to link these two ‘worlds’ is the challenge presently facing energy
demand and supply modelling. Analysts have to simulate the projected futures in
both types of models in a consistent way which may induce the need for one or
two iterative runs between the two types of models simulating those policy sce-
narios that deviate substantially from a reference scenario (e.g. a climate change
scenario with substantial reductions of greenhouse gas emissions during the next
few decades, assuming substantial increases in energy and material efficiency and
intensive use of renewable energies). For example, the TRANSFORM module
of the ADAM project translates monetary production data of basic goods indus-
tries into physical production. It also incorporates improvements in material
efficiency and material substitution and saturation by the MATEFF model; a
bottom-up model for simulating those effects on basic products like steel, cement,

Swiss Journal of Economics and Statistics, 2012, Vol. 148 (2)

128 Herbst / Toro / Reitze / Jochem

non-ferrous metals, paper, glass, etc. Finally, the IMPULSE module of this hybrid
model system collects all data of the bottom-up models on investments, changing
operating cost (including energy cost), and the programme costs, stemming from
the policies assumed in a particular scenario. (Jochem et al., 2007; Schade et
al. 2009). To relate the specific energy demand of basic materials to their physi-
cal production and not to monetary production data is very important in order
to arrive at realistic and transparent results in energy demand projections of basic
product industries.
Additional policy efforts in energy and material efficiency as well as in renew-
able energies imply a substitution of energy uses by increasing capital investments
and related employment. These policies generally induce programme costs for
governments and industrial associations which can be relevant in real terms – or
at least in the political debate. Hybrid models can analyse essential questions for
detailed climate change policies reflected in bottom-up models on the one hand
and the impacts of those mitigation scenarios on the economy by macroeconomic
models on the other hand.

4. Conclusions

Hybrid energy system models help understand the advantages and limitations
of the existing bottom-up and top-down energy models and to improve the
consultation process of the energy analysts for decision-makers in governments,
international institutions (e.g. IEA, UNEP) and large energy supply companies
as well as energy technology producers. While the energy models on both levels
(bottom-up and top-down) are further improved by more detailed structures,
more empirically based equations and adding multi-agent aspects, the progress
of the development of hard links of the two modelling levels is of crucial inter-
est. In the near future, transformation modules should intensify the interaction
between process-oriented models and macroeconomic models by implementing
computer-based hard links; example are: (1) the development of living areas of the
residential sector derived from relationships of demographic variables, income per
capita, and other preferences of private households; (2) the mileage of cars, trucks,
ship, or public transport depending on demographic variables, per capita income,
foreign trade and industrial production, and inter-industrial structural change. In
addition, the different impacts on material substitution or material efficiency in
energy-intensive industries should be modelled in more detail based on numeric
factors and relationships. In this context, export/import ratios and detailed recy-
cling data of the different basic products should be taken into account.

Swiss Journal of Economics and Statistics, 2012, Vol. 148 (2)

Introduction to Energy Systems Modelling 129

In the more distant future, company size (e.g. small, medium, big) and the
influences of barriers and supporting factors of energy efficiency measurements
should also be implemented in bottom-up models in order to improve the trans-
parency between potentials, obstacles, and impacts of sector- or technology-ori-
ented policies. The progress expected will lead to a more transparent simulation
of sector- and technology-oriented policies by governments and trade associations
and to more reliable information of the impacts of those policies at the economic
and societal level.

References

Alexandridis, K. T., and B. C. Pijanowski (2006), “Modular Bayesian Infer-

ence and Learning of Decision Networks as Stand-Alone Mechanisms of the
MABEL Model: Implications for Visualization, Comprehension, and Pol-
icy-Making”, Argonne National Laboratory and the University of Chicago.
Bahn, O., and C. Frei (2000), “GEM-E3 Switzerland: A Computable General
Equilibrium Model applied for Switzerland”, Paul Scherrer Institut (PSI),
General Energy Research Department (ENE), Villigen.
Bataille, C. G. F. (2005), “Design and Application of a Technologically Explicit
Hybrid Energy-Economy Policy Model with Micro and Macro Economic
Dynamics”, Thesis in the School of Resource and Environmental Manage-
ment, Simon Fraser University.
Bernard, A., and M. Vielle (2008), “GEMINI-E3, A General Equilibrium
Model of International-National Interactions between Economy, Energy
and Environment”, Computational Management Science, 5(3), pp. 173–206.
BFE (Bundesamt für Energie) (2007), Die Energieperspektiven 2035 – Band 1
Synthese, Bern.
Böhringer, C. (1998), “The Synthesis of Bottom-Up and Top-Down in Energy
Policy Modelling”, Energy Economics, 20, pp. 233–248.
Böhringer, C., and A. Löschel (2006), “Promoting Renewable Energy in
Europe: A Hybrid Computable General Equilibrium Approach”, Special Issue
of the Energy Journal, Hybrid modeling of energy-environment policies: Recon-
ciling bottom-up and top-down.
Böhringer, C., and T. Rutherford (2006), “Combining Top-Down and
Bottom-Up Analysis in Energy Policy Analysis”, Technical Report Discus-
sion paper 06-07, ZEW.
Böhringer, C., and T. Rutherford (2008), “Combining Bottom-Up and Top-
Down”, Energy Economics, 30, pp. 574–596.

Swiss Journal of Economics and Statistics, 2012, Vol. 148 (2)

130 Herbst / Toro / Reitze / Jochem

CAMECON (2011), Cambridge Econometrics, website: http://www.camecon.

co.uk/ ModellingTraining/suite_economic_models/E3ME.aspx.
Capros, P., et al. (1996a), “Double Dividend Analysis: First Results of a General
Equilibrium Model (GEM-E3) Linking the EU-12 Countries”, in Environ-
mental Fiscal Reform and Unemployment, C. Carraro and D. Siniscalco, eds.,
Kluwer Academic Publishers.
Capros, P., and P. Georgakopoulos (1996b), “Coordinated versus Uncoordi-
nated European Carbon Tax Solutions Analysed with GEM-E3 Linking the
EU-12 Countries”, in Economic Aspects of Environmental Policy, S. Proost,
eds., Kluwer Academic Publishers.
Catenazzi, G. (2009), “Advances in Techno-Economic Energy Modeling: Costs,
Dynamics and Hybrid Aspects”, Dissertation, Swiss Federal Institute of Tech-
nology (ETH), Zürich.
CES (2008), “The GEM-E3 Model. A General Equilibrium Model for Europe
and the World”, Centre for Economic Studies, KULeuven, Belgium.
De Vries, B., M. Janssen, A. Beusen, et al. (1999), “Perspectives on Global
Energy Futures: Simulations with the TIME Model”, Energy Policy, 27,
pp,477–494.
E3Mlab (2007), “The Primes Model: Version Used for the 2007 Scenarios for
the European Commission including new Sub-Models Recently Added”,
website: http://www.e3mlab.ntua.gr/DEFAULT.HTM.
Enerdata (2011), Enerdata global energy intelligence, website: http://www.
enerdata.net/enerdatauk/solutions/energy-models/poles-model.php.
ETSAP (2001), ETSAP, website: http://www.etsap.org/markal/main.html.
ETSAP (2005), “Documentation for the TIMES Model: Part 1”, April 2005,
website: http://www.etsap.org/tools.html.
Eurostat (2008), “Eurostat Manual of Supply, Use and Input-Output Tables”,
Methodologies and Workingpapers, 2008 edition, Luxembourg.
EWI (2011), Energiewirtschaftliches Institut an der Universität zu Köln, website:
http://www.ewi.uni-koeln.de/Elektrizitaetsmodell.154.0.html.
Fichtner, W., D. Möst, M. Wietschel, C. Weinhardt, and O. Rentz
(2003), „Zur strategischen Planung bei Energieversorgern in liberalisier-
ten Energiemärkten“, WiSt- Wirtschaftswissenschaftliches Studium, 32 (12),
pp. 707–713.
FSO (2010), Federal Statistical Office, website: http://www.bfs.admin.ch/bfs/
portal/en/index.html.
Foley, J., et al. (2005), “Global Consequences of Land Use”, Science, 309, 570,
DOI: 10.1126/science.1111772.

Swiss Journal of Economics and Statistics, 2012, Vol. 148 (2)

Introduction to Energy Systems Modelling 131

Forrester, J. W. (1958), “Industrial Dynamics – A Major Breakthrough for

Decision Makers”, Harvard Business Review, 36(4), pp. 37–66.
Forrester, J. W. (1962), Industrial Dynamics, 2nd edition, MIT Press, John
Wiley & Sons, New York.
Forrester, J. W. (1971), World Dynamics, Wright-Allen Press, Cambridge MA.
Forrester, J. W. (1980), “System Dynamics – Future Opportunities”, in System
Dynamics. TIMS Series in the Management Sciences, Augusto A. Legasto,
Jay W. Forrester, and James M. Lyneis, eds., vol. 14, pp. 7–21, Amsterdam:
North-Holland.
Genoese, M., F. Sensfuss, and D. Moest (2007), “Power Plant Investments
under Different Emission Allocation Schemes”, Proceedings of the 9th IAEE
European Conference on Energy Economics (10–12 June 2007), Florence,
Italy.
Greene, W. H. (2003), Econometric Analysis, Fifth Edition, New York Univer-
sity, Pearson Education, New Jersey.
Heaps, C. (2002), “Global Scenario Group Futures”, SEI, technical notes, report
9.
Heemskerk, M., K. Wilson, and M. Pavao-Zuckerman (2003), “Conceptual
models as tools for communication across disciplines”, Conservation Ecology,
7(3): 8.
Hourcade, J. C., et al. (2006), “Hybrid Modeling: New Answers to Old Chal-
lenges”, The Energy Journal 2, Special issue (2006) pp. 1–12, C.I.R.E.D.,
Nogent-sur-Marne cedex.
IEA (2010), “World Energy Outlook 2010”, International Energy Agency, Paris
Cedex, France.
IEA (2011), “World Energy Model – Methodology And Assumptions”, Interna-
tional Energy Agency, Paris Cedex, France.
Jochem, E., T. Barker, S. Scrieciu, W. Schade, N. Helfrich, O. Eden-
hofer, N. Bauer, S. Marchand, J. Neuhaus, S. Mima, P. Criqui, J.
Morel, B. Chateau, A. Kitous, G. J. Nabuurs,, M. J. Schelhaas, T.
Groen, L. Riffeser, F. Reitze, E. Jochem, G. Catenazzi, M. Jakob,
B. Aebischer, K. Kartsoni, W. Eichhammer, A. Held, M. Ragwitz,
U.Reiter, S. Kypreos, and H. Turton (2007), “EU-Project ADAM: Adap-
tion and Mitigation Strategies: Supporting European Climate Policy – Deliv-
erable M1.1: Report of the Base Case Scenario for Europe and Full Descrip-
tion of the Model System”, Fraunhofer ISI, Karlsruhe, November 2007.
Jochem, E., T. Barker, S. Scrieciu, W. Schade, N. Helfrich, O. Eden-
hofer, N. Bauer, S. Marchand, J. Neuhaus, S. Mima, P. Criqui,
J. Morel, B. Chateau, A. Kitous, G. J. Nabuurs,, M. J. Schelhaas,

Swiss Journal of Economics and Statistics, 2012, Vol. 148 (2)

132 Herbst / Toro / Reitze / Jochem

T. Groen, L. Riffeser, F. Reitze, E. Jochem, G. Catenazzi, M. Jakob,

B. Aebischer, K. Kartsoni, W. Eichhammer, A. Held, M. Ragwitz,
U.Reiter, S. Kypreos, and H. Turton (2007) (2008), “EU-Project ADAM:
Adaption and Mitigation Strategies: Supporting European Climate Policy –
Deliverable M1.2: Report of the Reference Case Scenario for Europe”, Fraun-
hofer ISI, Karlsruhe, November 2008.
Jochem, P. (2009), “A CO2 Emission Trading Scheme for German Road Trans-
port – Assessing the Impacts using a Meso Economic Model with Multi-
Agent Attributes”, Nomos, Baden-Baden
Krail, M., and W. Schade (2010), “The Potential of Alternative Fuel Cars for
Achieving CO2 Reduction Targets in EU27”.
krause, F. (1996), “The Costs of Mitigating Carbon Emissions: A Review of
Methods and Findings from European Studies”, Energy Policy Vol 24, no 10,
p. 899–915.
Kumbaroglu, G., and R. Madlener (2001), “A Description of the Hybrid Bot-
tom-Up CGE Model SCREEN with an Application to Swiss Climate Policy
Analysis”, CEPE Working Paper No. 10, Zürich.
Linares, P., F. J. Santos, M. Ventosa, and L. Lapiedra (2008), “Incorporat-
ing Oligopoly, CO2 Emissions Trading and Green Certificates into a Power
Generation Expansion Model”, Automatica, vol. 44, no. 6, pp. 1608–1620.
Löschel, A. (2002), “Technological Change in Economic Models of Environ-
mental Policy: A Survey”, Ecological Economics, 43, pp. 105–126.
Loulou, R., G. Goldstein, and K. Noble (2004), “Documentation for the
MARKAL Family of Models”, Energy Technology Systems Analysis Pro-
gramme (ETSAP), website: www.etsap.org.
Manne, A, and R. G. Richels (1990), “CO2 Emission Limits: An Economic
Cost Analysis for the USA”, The Energy Journal vol. 11(2), pp. 51–74
Manne, A., and R. G. Richels (2004), “MERGE: A Model for Evaluating the
Regional and Global Effects of GHG Reduction Policies”, website: www.
standford.edu/group/MERGE.
Mayer, H. (2007), “Calculation and Analysis of a Hybrid Energy Input-Output
Table for Germany within the Environmental-Economic Accounting (EEA)”,
Paper presented at the 16th International Input-Output Conference 2–6 July
2007 Istanbul/Turkey, Statistisches Bundesamt, Wiesbaden.
Messner, S., and M. Strubegger (1995), “User’s Guide for MESSAGE III”,
WP-95-69. International Institute for Applied Systems Analysis, Laxenburg,
Austria.
Möst, D., and M. Genoese (2009), “Market Power in the German Wholesale
Electricity Market”, The Journal of Energy Markets, 2 (2), pp. 47–74.

Swiss Journal of Economics and Statistics, 2012, Vol. 148 (2)

Introduction to Energy Systems Modelling 133

Mundaca, L., and L. Neij (2009), “A Multi-Criteria Evaluation Framework for

‘Tradable White Certificate’ Schemes”, Energy Policy, 37(11), pp. 4557–4573.
Nathani, C., M. Wickart, R. Oleschak, and R. van Nieuwkoop (2006),
“Estimation of a Swiss Input-Output Table for 2001”, CEPE Report No. 6,
Centre for Energy Policy and Economics (CEPE), Zürich.
Nathani, C. (2006), “Material Use and Induced Energy Demand: an Input-
Output Analysis,”, ETH Zürich, Paper to be presented at the Intermediate
International Input-Output Meeting on Sustainability, Trade and Produc-
tivity, Japan.
Prognos AG (2011), „Das Energiewirtschaftliche Gesamtkonzept. Konzept eines
beschleunigten Ausstiegs aus der Kernenergie in Deutschland“, im Auftrag
der Vereinigung der Bayerischen Wirtschaft e. V.
Russ, P., and P. Criqui (2007), “Post-Kyoto CO2 Emission Reduction: The Soft
Landing Scenario Analysed with POLES and Other World Models”, IPTS
and Grenoble University.
Schade, W. (2004), “Strategic Sustainability Analysis: Concept and Application
for the Assessment of European Transport Policy”, Dissertation, NOMOS-
Verlag, Baden-Baden.
Schade, W., and M. Krail (2006), Modeling and Calibration of Large Scale
System Dynamics Models: The Case of the ASTRA Model.
Schade, W., E. Jochem, T. Barker, G. Catenazzi, W. Eichhammer, T.
Fleiter, A. Held, N. Helfrich, M. Jakob, P. Criqui, S. Mima, L.
Quandt, A. Peters, M. Ragwitz, U. Reiter, F. Reitze, M. Schelhaas, S.
Scrieciu, and H. Turton (2009), “ADAM – 2 degree scenario for Europe –
policies and impacts. Deliverable M1.3 of ADAM (Adaptation and Mitiga-
tion Strategies: Supporting European Climate Policy)”, Project funded by the
European Commission 6th RDT Programme. Karlsruhe, Germany.
Seebregts, A. J., G. A. Goldstein, and K. E. Smekens (2002), “Energy/envi-
ronmental modeling with the MARKAL family of models”, in Operations
Research Proceedings 2001, Chamoni, R., Leisten, A., Martin, J., Minneman,
Stadtler, H., eds., pp. 75–82, Duisburg, Germany.
Sensfuss, F. (2008), “Assessment of the Impact of Renewable Electricity Gen-
eration on the German Electricity Sector – An Agent-Based Simulation
Approach”, Doctoral Thesis, University of Karlsruhe.
Sensfuss, F., M. Ragwitz, and M. Genoese (2008), “The Merit-Order Effect:
A Detailed Analysis of the Price Effect of Renewable Electricity Generation
on Spot Market Prices in Germany”, Energy Policy, 36 (8), pp. 3086–3094.
Tinter, G. (1953), “The Definition of Econometrics”, Econometrica, 21(1),
pp. 31–40.

Swiss Journal of Economics and Statistics, 2012, Vol. 148 (2)

134 Herbst / Toro / Reitze / Jochem

UNEP (2011), “Recycling Rates of Metals – A Status Report”, 2nd Report of the
Global Metal Flows working group of the International Panel of Sustainable
Resource Management of UNEP.
United Nations (1999), “Handbook of Input-Output Table Compilation and
Analysis”, Studies in Methods, Series F No. 74, UN, New York.
Ventosa, M., Á. Baíllo, A. Ramos, and M. Rivier (2005), “Electricity Market
Modeling Trends”, Energy Policy, 33(7), pp. 897–913.
Weidlich, A., and D. Veit (2008), “A Critical Survey of Agent-Based Whole-
sale Electricity Market Models”, Energy Economics, 30(4), pp. 1728–1759.
Wittmann, T. (2008), “Agent-Based Models of Energy Investment Decisions”,
Doctoral Thesis, Technical University of Berlin, Physica-Verlag Heidelberg.
Wooldridge, M., and N. R. Jennings (1995), “Intelligent Agents: Theory and
Practice”, Knowledge Engineering Review, 10 (2), pp. 115–152.
Wooldridge, J. M. (2002), Econometric Analysis of Cross Section and Panel Data,
Massachusetts Institute of Technology, The MIT Press, Cambridge, London.
Wooldridge, M. (2009), An Introduction to MultiAgent Systems, John Wiley
& Sons, Chichester.
Worrel, E., S. Ramesohl, and G. Boyd, (2004), “Advances in Energy Forecast-
ing Models Based on Engineering Economics”, Annu. Rev. Environ. Resour.,
29, 345–81.
WWF (2009), „Modell Deutschland. Klimaschutz bis 2050: Vom Ziel her
denken“, WWF Deutschland, Prognos AG, Öko-Institut e.V., Basel/Freiburg/
Berlin.
Yao, J., S. S. Oren, and B. F. Hobbs (2010), “Hybrid Bertrand-Cournot Models
of Electricity Markets with Multiple Strategic Subnetworks and Common
Knowledge Constraints”, in Restructured Electric Power Systems, X.-P. Zhang,
eds., John Wiley & Sons, Inc., Hoboken, NJ, USA.

SUMMARY

The energy demand and supply projections of the Swiss government funded by
the Swiss Federal Office of Energy and carried out by a consortium of institutes
and consulting companies are based on two types of energy models: macroeco-
nomic general equilibrium models and bottom-up models for each sector. While
the macroeconomic models are used to deliver the economic, demographic and
policy framework conditions as well as the macroeconomic impacts of particular
scenarios, the bottom-up models simulate the technical developments in the final
energy sectors and try to optimise electricity generation under the given boundary

Swiss Journal of Economics and Statistics, 2012, Vol. 148 (2)

Introduction to Energy Systems Modelling 135

conditions of a particular scenario. This introductory article gives an overview of

some of the energy models used in Switzerland and – more importantly – some
insights into current advanced energy system modelling practice pointing to the
characteristics of the two modelling types and their advantages and limitations.

Swiss Journal of Economics and Statistics, 2012, Vol. 148 (2)