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Modelling Economic Effects of the Renewable Energy Expansion
– The German Case –
Funded by the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (FKZ 0327652)
Jürgen Blazejczak, Frauke Braun, Dietmar Edler, Wolf-Peter SchillDIW Berlin
34th IAEE International ConferenceStockholm, June 20, 2011
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Outline1. Introduction
• Renewables in Germany• Research questions
2. The model• Core model (NiGEM)• RES-specific extension (SEEEM)
3. Model application• Two scenarios• Macroeconomic and sectoral results
4. Conclusions20.06.2011 34th IAEE International
Conference2
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Outline1. Introduction
• Renewables in Germany• Research questions
2. The model• Core model (NiGEM)• RES-specific extension (SEEEM)
3. Model application• Two scenarios• Macroeconomic and sectoral results
4. Conclusions20.06.2011 34th IAEE International
Conference3
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Renewables in Germany
• Substantial growth in:– Renewable shares of energy consumption– Investments and turnover in renewable industries– Employment in renewable industries
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20052006
20072008
20092010
0
5
10
15
20
25
30
35
40
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Economic effects of renewable expansion (gross)
Investments in RES facilities in Germany
Total demand for German RES facilities, maintenance, and bio-fuels
Employment in RES industries
Billi
on E
uro
Thou
sand
jobs
19981999
20002001
20022003
20042005
20062007
20082009
201002468
1012141618
Renewable shares of final energy consumption
ElectricityHeatFuelTotal final energy
%
(BMU, 2011)
(BMU, 2011 and own calculations)
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Motivation and research questions• Positive economic impacts:
– Investment and jobs in renewable industries– Exports of RES technologies, diminished imports
• Negative impacts:– Additional costs compared to conventional energy
supply– Substituted conventional investments
• Research questions:– Economic net effects of renewable energy expansion in
Germany?– Sectoral implications?
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+
-
?
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Outline1. Introduction
• Renewables in Germany• Research questions
2. The model• Core model (NiGEM)• RES-specific extension (SEEEM)
3. Model application• Two scenarios• Macroeconomic and sectoral results
4. Conclusions20.06.2011 34th IAEE International
Conference6
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Modelling strategy
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Exogenous impulses
Macroeconomic and sectoral effects
The modelInterrelated mechanisms
Assumptions and conditions
• Investment effects• Substitution effects• Trade effects• Budget effects• Endogenous
dynamic effects
• Demand for RES facilities, maintenance, biomass
• Exports of facilities and components• Diminished imports of fossil fuels• Diminished conventional
investments• Additional costs
• Monetary and fiscal policy
• Exchange rates• Expectations of
economic agents
• Economic growth• Income and consumption• Employment• Macroeconomic and
sectoral dimensions
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Core model (NiGEM)• Strategy: Extension of NiGEM model
– Developed by the National Institute of Economic and Social Research
– Well-established econometric model of the world economy
– Multi-country model with > 5000 variables– Empirically estimated behavioural equations– Forward-looking expectations of agents
(exchange rates, prices, wages)20.06.2011 34th IAEE International
Conference8
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NiGEM – a multi-country model
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U.S.
Japan
Germany UK
LatinAmerica other
world regionsOPEC-Countries
Interrelations:
• World trade
• Capital flows
otherOECD
countries
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Input-Output module
Sectoral and RES-specific extensions (SEEEM)
10
NiGEMGermany
Transfer modulefor final demand
Standardindustry structure
(71 sectors)
Renewableenergy
industries(14 sectors)
~ 3000 sectoral variables• Domestic production only
Final demand
Sectoral gross value added Employment
~ 170 macro variables
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Modelling of renewable sectors• Seven renewable technologies
– Wind– Photovoltaic– Solar thermal– Hydro power– Biomass– Biogas– Geothermal
• Two sectors for each technology:– Production of facilities– Operation and maintenance of facilities
14 additional sectors in Input-Output structure20.06.2011 34th IAEE International
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Renewableenergy
industries(14 sectors)
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Outline1. Introduction
• Renewables in Germany• Research questions
2. The model• Core model (NiGEM)• RES-specific extension (SEEEM)
3. Model application• Two scenarios• Macroeconomic and sectoral results
4. Conclusions20.06.2011 34th IAEE International
Conference12
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Two Scenarios• Renewable expansion scenario for Germany (EXP)
– Reflects official “Lead Study“ 2009 (BMU)– Projection of RES exports
• Counterfactual NULL scenario– No renewable expansion in Germany– No RES exports
• Sensitivity analyses– “Decreasing competitiveness”– “Flexible labour market“
• Scope of analysis: 2000-2030– Historic data for RES expansion and exports until 2008
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Expansion scenario 2000-2030: Real prices (2000), billion Euro
2000 2010 2020 2030
Additional costs
Investments in RES facilities,operation and maintenance,demand for biomass
Diminished conventional investments
Diminished importsof fossil fuels
-30
-20
-10
0
10
20
30
40
Exports of components
Exports of facilities
Scenario inputs: economic impulses
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Macroeconomic results
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2010 2020 2030
GDP 1.7 2.6 2.9
Private consumption 1.0 2.3 3.5
Private investments 9.1 8.9 6.7
Exports 0.9 1.2 0.9
Imports 1.0 1.0 1.0
Productivity 1.7 2.6 2.9
Employment 0.1 0.0 0.0
Employment (1000 persons)
22 15 3
Differences EXP-NULL in %
Increase of GDP and productivity
Small (positive) net employment effects
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Sensitivity analysis “Decreasing competitiveness”
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EXP Decreasing competitiveness
0,0
0,5
1,0
1,5
2,0
2,5
3,0
2010 2020 2030
2010 2020 2030
2010 2020 2030
GDP Exports Imports
Differences to NULL in %
Increased unit costs decrease international competitiveness of German economy
Lower exports, higher imports, slower GDP growth
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Sensitivity analysis “Flexible labour market”
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EXP Flexible labour market
0,0
0,5
1,0
1,5
2,0
2,5
3,0
2010 2020 2030 2010 2020 2030 2010 2020 2030
2298
15
166
3
270
GDP Productivity Employment
Differences to NULL in %
Econometric model equations imply high natural unemployment (instead, strong productivity growth)
More flexible labour market: GDP growth leads to increased employment
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An exemplary sectoral outcome
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Manufacturing industry is the main winner
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Outline1. Introduction
• Renewables in Germany• Research questions
2. The model• Core model (NiGEM)• RES-specific extension (SEEEM)
3. Model application• Two scenarios• Macroeconomic and sectoral results
4. Conclusions20.06.2011 34th IAEE International
Conference19
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Conclusions• Development and application of a flexible economic
model
• Case study: German RES expansion has positive net effects on economic growth
• Net employment effects tend to be small, but positive; depend on labour market conditions
• Identification of winning and losing sectors
• Model could be further expanded to cover energy efficiency measures, electric vehicles etc.
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Backup
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Development of shares of imported intermediates at gross production in EXP
0%
5%
10%
15%
20%
25%
30%
35%
40%
2010 2020 2030
Agriculture, Forestry, Fishery
Manufacturing industry
Building sector
Services
Total
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„Moderate export success“
Slightly lower GDP growth
2010 2020 2030
Basisvariante Moderate Exporterfolge
2010 2020 2030
22 15 15 11 3 2
GDP Productivity Employment
0,0
0,5
1,0
1,5
2,0
2,5
3,0
2010 2020 2030
Differences to NULL in %
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Core model (NiGEM)• Strategy: Extension of National Institute’s NiGEM model
– Well-established econometric model of the world economy– Multi-country model with > 5000 variables– Empirically estimated behavioural equations– Error-correction specification long-term equilibria– Forward-looking expectations of agents (exchange rates, prices,
wages)
• Causal relationships modelled:– Multiplier effect and accelerator effect– Price-wage mechanism– Adjustments of exchange rates, balance of payments
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