Computational General Equilibrium Modelling Assessment Mr Craig - - PowerPoint PPT Presentation

Computational General Equilibrium Modelling Assessment

Mr Craig Mickle and Dr Jyothi Gali

Ernst & Young (EY) TUESDAY, 6 OCTOBER 2015

• 1. Objectives
• 2. Model description and approach
• 3. Key scenarios
• 4. Key inputs and assumptions

5.Key Outputs

Outline

• 1. Objectives
• Assess the potential economic merits for the SA economy of greater

involvement in any part of the nuclear fuel cycle

• What it means for GDP, employment etc.
• Determine the economy-wide effects on inter and intra-state flows of:
• Labour
• Capital
• Other inputs

…on the South Australian economy, industries and regions

• 1. Objectives

• 2. Modelling approach – conceptual framework

Integrated economy-energy and business cases

• 2. Modelling description

and approach

Electricity modelling

• 2. Modelling approach – CGE model
• As part our approach we are using the Victoria University Regional

Model (VURM)

• The VURM is the only CGE model that addresses all key attributes

listed in the study requirement:

• Well documented, widely used
• An up-to-date database
• Flexibility to handle embryonic industries such as NFC new

activities

• A dynamic model of Australia's six states and two territories
• Regional models of the economy, with region-specific prices,

region-specific consumers, region-specific industries, and so

• n.
• 2. Modelling description

and approach

• 2. Modelling approach – Electricity model

2.Modelling description and approach

• EY electricity model provides the future evolution of the supply side
• f the electricity market in the long run based on a optimization

approach

• Provides projections for wholesale electricity market in NEM
• Provides very rich source of supply side of the electricity market

which is mapped to the demand side of the electricity market in the CGE model

• 2. Modelling approach - CGE & electricity model
• 2. Modelling description

and approach

• The CGE model produces demand for electricity by user in the

economy as one of the model outputs.

• The demand for electricity is an important input to electricity
• modelling. The electricity model provides information on:
• Technology shares by state and fuel type
• Wholesale and retail prices by state and customer type
• Thermal efficiency, emission coefficients

• 2. Modelling approach – two parts
• 2. Modelling description

and approach

1) As a complete nuclear fuel cycle industry doesn’t not currently exit in Australia, we need to modify the VURM database to ensure its interaction with the rest of the economy is adequately captured.

• This involves a review of data sources, public submissions

and relevant business cases commissioned for this study. 2) Model simulation set-up for 3 nuclear investment scenario analyses.

• Business as usual scenario - characterised by no policy shift

leading to no additional investment in three ‘new’ parts of the cycle (BIS)

• Market driven expansion (IS2)
• Proactive investment (IS3)

• 3. Key characteristics of scenarios

Description BIS IS2 IS3 Model set-up Base year 2009-10 2009-10 2009-10 Simulation period 2010 to 2050 2017 to 2050 2017 to 2050 Inputs Official projections and assumptions CAPEX Business cases Business cases OPEX Business cases Business cases Production Business cases Business cases Sales Business cases Business cases Prices Business cases Business cases Start of construction Business cases Business cases Start of operation Business cases Business cases Fuel cycle Uranium mining and extraction Uranium mining, extraction, waste disposal Uranium mining, extraction, fabrication, nuclear power generation and waste disposal

• 3. Key scenarios

• 3. Key characteristics of scenarios

Climate change mitigation measures Atmospheric targets Stabilises concentrations of greenhouse gases at 450ppm CO2-e by around 2100 Stabilises concentrations of greenhouse gases at 450ppm CO2-e by around 2100 Stabilises concentrations

• f greenhouse gases at

450ppm CO2-e by around 2100 Burden sharing rules Global burden sharing rules consistent with the 450ppm Conservative level of burden sharing for Australia relative to the international partners Aggressive level of burden sharing for Australia to take into account of high Australian per capita level GHG emissions Basis for permit allocations To be determined To be determined To be determined Trading permits To be determined To be determined To be determined Carbon price To be determined To be determined To be determined Australian emission targets Existing RET and state Government energy efficiency measures To be determined To be determined Description BIS IS2 IS3

• 3. Key scenarios

• 4. Key inputs - BIS

Official projections for developing a baseline of Australian and State economies:

• Commonwealth Treasury 2015-16 Budget and Fourth Intergenerational

Report (IGR4)

• SA Treasury: Consider the SA Treasury projections on macroeconomic

variables in the model baseline, including GSP, population, consumption, investment, real wages etc. We also consider the fiscal and budget projections of the SA Government

• The official economic projections of the Commonwealth Department of

Industry Office of Chief Economist: we have incorporated the energy projections from the Department of industry into our CGE baseline as far as possible and also energy technology shares in the Australian and SA economies

• 4. Key inputs and

assumptions

• 4. Key inputs – Investment scenarios
• Information and data gathered through the Commission’s other activities

including that received through the public submissions process and expert

• pinions
• For NFC investment scenarios, inputs mainly sourced from the three business

cases commissioned for quantitative analyses: nuclear power plant; radioactive waste storage and disposal facilities; and uranium conversion, enrichment and fuel fabrication facilities in South Australia.

• Key inputs include:
• CAPEX, by year and major expenditure item
• OPEX, by year and major expenditure items
• Value of production enabled by year and destination of supply

(downstream component in the fuel cycle, domestic demand, exports).

• 4. Key inputs and

assumptions

• 5. Key outputs
• 5. Key outputs

Modelling results highlight the impact of the fuel cycle investment scenarios on the SA and Australian economies Key indicators include:

• Macro variables – exchange rate, current account balance etc.
• Gross national income
• Gross domestic product/gross state product/gross regional product
• Labour market variables – employment, wages, labour mobility
• Industry variables – gross value add, output, investment, employment, prices
• Tax receipts
• Electricity market – technology shares, electricity prices
• Emissions – type by user

• 5. Key outcomes
• 5. Key outputs
• Quantifiable micro and macroeconomic benefits of investing in parts of the

nuclear fuel cycle in South Australia measured as deviations from the baseline (BIS)

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