Climate Change Plan: third report on proposals and policies 2018-2032 – technical annex

Sector Analysis

Overview

Outputs are grouped into seven final sectors in Scottish TIMES - Residential and Services (these are grouped in the Climate Change Plan in the Buildings chapter. Note that Services comprises commercial and public sector buildings), Industry, Transport, Agriculture, Waste, and Land Use, Land Use Change and Forestry ( LULUCF).

In terms of emissions, electricity is considered a final sector, while it is also an intermediate sector in its role transforming energy. Upstream processing is an intermediate sector and emissions are incorporated in the industrial envelope. Primary resources are also discussed below and are a model input.

These sectors correspond to the Greenhouse Gas Inventory sectors as follows:

Table 2: Climate Change Plan and Greenhouse Gas Inventory Sector Comparison

For the demand driven sectors (Residential, Services, Industry, Transport, and heat and transport within the Agriculture sector), the model must meet the defined final energy demands. In the Electricity sector, demand is determined endogenously by the model and is driven by demand for electricity as a fuel in the other sectors (for example, through the electrification of Transport or heating demand).

Scottish TIMES also incorporates non-energy sectors (most of Agriculture, Waste and LULUCF). Although these non-energy sectors, for the most part, do not have final energy demands nor long potential supply chains, the model does incorporate future emissions projections for each, informed by sector analysis and models. This is a standard approach used to address non-energy components of whole system models and ensures that once the climate change targets are taken into account, emissions from energy sectors are not able to increase beyond a level consistent with the overall targets.

The Transport sector is incorporated into TIMES via fuel shares and emissions projections. While both are determined exogenously, changes to Transport fuel shares will ripple through the rest of the system, as Transport supply chains are fully incorporated into the model.

Transport emissions projections are taken into account in deriving sector envelopes in the same way as for the non-energy sectors; their inclusion ensures total emissions from all sectors do not exceed the overall targets. The emission projections and fuel shares for Transport in the draft CCP were based on data provided by Transport Scotland and sourced from research by Element Energy, providing a detailed representation of the transport sector in Scotland. The original projections have now been updated by Transport colleagues following the Programme for Government announcement.

By ensuring that emissions trajectories for all sectors are informed by sector-specific models and analysis, we can be confident of the robustness of sector emissions envelopes.

Incorporating the Scottish climate change targets and other policy and technical constraints allows the model to be used to highlight how best to deliver on our climate change ambitions, taking into account Scottish-specific data.

Cross-Sector Assumptions

There are a series of principles and assumptions that underpin the TIMES model. First, as discussed above, the model is internally consistent. Should the modeller change any assumptions, the effects will ripple throughout the model, for example, increasing one sector's use of biomass will reduce the amount available for use by other sectors.

Scottish TIMES minimises the discounted cost of meeting a series of fixed final energy demands by deploying specific technologies and other carbon abatement measures, and using a specific mix of feedstock and fuels. The costs in TIMES include capital costs, fixed and variable costs, import cost, revenues for exporting, delivery costs of inputs and any capital costs incurred just past 2050 for investments occurring right at the end of the time horizon covered by the model. The unit costs associated with each parameter are inputs to the model. It should be noted that the cost inputs to the model and the cost output (the discounted cost of the least-cost pathway or system cost) are resource costs; they represent the cost of purchasing the equipment and fuels to deliver the pathway. It should also be noted that the model does not make any assumption about who incurs these costs.

Although final demands are fixed, intermediate demands are endogenous to the model. For example, demand for electricity is derived in each TIMES run, as a decreasing/increasing function of quantity demanded by other sectors, depending on the decision within the model regarding which final demand can be met through electrification.

TIMES assumes linearity in the input to output relationship for each of the technologies, and uses linear programming to arrive at the least-cost pathway. The (shadow) price of carbon in the model therefore represents the marginal change in the discounted system cost (typically a reduction) associated with a unit increase in carbon emissions beyond the production of carbon constrained by the climate change targets. All fuels in the model also have a shadow price, which, as for the shadow carbon price, is the marginal change in the discounted system cost of requiring one more unit of the fuel or reducing demand of the fuel by one unit (perhaps by using more efficient technologies). It should be noted that the shadow fuel prices derived by TIMES do not represent the market price of fuels, which also include network charges, energy supplier operating costs and margins, and energy and climate change policy costs.

Finally, TIMES also assumes perfect foresight over the entire planning horizon, from 2012 (the base year) to 2050, so that decisions made in early years are all consistent with this overarching goal of minimising cost throughout the 38 year period, as agents know all past, present and future variables. By ensuring the model is run beyond 2032, we can be more certain that technologies and fuels deployed by the end of the Plan remain consistent with future decarbonisation efforts.

The TIMES model is run to produce data in 5 year blocks, rather than annually, in order to reduce processing time while retaining sufficient detail. We have interpolated linearly to derive values for 2018 and 2032.

It should be noted that actual emissions in the TIMES model have been updated to reflect the most recent Greenhouse Gas Inventory ^[4] for all sectors.

The TIMES results set out in the next section provide information on the potential future fuel share and technology mix, and as such, provide an indication of how Scotland may choose to approach the decarbonisation challenge, but should not be viewed as a prescription for the future technology mix. As set out in the Scottish Energy Strategy, the precise make-up of the future energy system is uncertain. Changing market, policy, technological and regulatory drivers means forecasting the precise breakdown of the 2032 energy system is not feasible and the actual distribution of technologies and processes within and between sectors could be different over the period. Our ability to store and control energy is changing dramatically, driven by growing demand for storage, technological innovation, smarter networks and the growth of the digital economy. Scotland's energy future will be, and needs to be, much more flexible than in the past, with far more choice for domestic and business users.