An Energy-Economy Model to Evaluate the Future Energy Demand-Supply System in Indonesia

Transcription

1 An Enegy-Economy Model to Evaluate the Futue Enegy Demand-Supply System in Indonesia Maste Thesis Executive Summay Agus Sugiyono Moi Laboatoy Industial Administation Depatment Faculty of Science and Engineeing Science Univesity of Tokyo 1995

2 An Enegy-Economy Model to Evaluate the Futue Enegy Demand-Supply System in Indonesia Moi Laboatoy Agus Sugiyono 1. Intoduction The pesent level of enegy demand in Indonesia is still vey low and it expected to continue to incease. To fulfill the demand, some enegy esouces such as coal, gas, oil and enewable enegy ae available. These enegy esouces ae chaacteized by limited oil eseves, sufficient gas eseves and abundant coal eseves. Theefoe, it is impotant to make optimal stategies fo the national enegy demand-supply system fo the long futue. Enegy-economy model is one of the tools fo the enegy decision-make to pefom it. The objective of this study is to develop an enegyeconomy model fo Indonesia to evaluate the futue enegy demand-supply systems. The whole county is divided into fou egions. The model is benchmaked against 199 base yea statistics. The evaluations cove fo ten-yea time intevals extending fom though 23. Because thee is inceasing concen about envionmental poblem ecently and fo the enegy decision-make, the elation among enegy, economy and envionment becomes a new consideation, this model also consideed envionmental aspect. The model is designed as a nonlinea optimization model with vaious components of quantitative famewok to make the model useful device fo analysis. 2. Backgound on Indonesia Indonesia is an achipelago consists of no less than 137 islands. Total aea is about 9.8 million squaes kilometes with the sea aea is fou times lage than its land aea. The land aea is geneally coveed with thick topical ain foest and pedominantly mountainous. MALAYSIA In the 197, the county expeienced elatively high economic gowth of aound 7.8 % pe annum mainly due to the high oil pices in the intenational maket. Aveage economic gowth ate fo the last 1 yeas is about 6 % pe annum. Enegy secto accounted fo slightly ove 2 % of GDP in 199 and appoximately 4 % of the expot eanings. The domestic pimay enegy supply in 1991 was accounted aound 52 MTOE and was dominated by cude oil with 41 % and by biomass, as a taditional fom of enegy, which contibuted 31 %. Natual gas supplied 18 % of the domestic enegy consumption. The emaindes shaed by coal (6 %) and hydopowe togethe with geothemal enegy (4 %). 3. Model Oveview 3.1. Enegy-Economy flow Many islands of Indonesia show a significantly non-unifom distibution of enegy esouce, enegy consumption and a diffeent status of development. Taking this into accoun the whole county is divided into fou egion:, Sumatea, Kalimantan, and othe islands (see Fig. 1) with tanspotation of fossil enegy: coal, cude oil, and natual gas (see Fig. 2). Enegy Impot Sumatea Kalimantan Othe Islands Sumatea Kalimantan Othe Islands Y : Poduction Function K : Capital L : Labou N : Non-electicity Enegy E : Electicity Enegy TOT : Total enegy supply PRO : Enegy poduction in the egion : Domestic enegy tanspotation TER_F : Enegy Impot : Flow of enegy tanspotation Fig. 1. Indonesia and egional divisions of the model Accoding to the 199 census the population has eached million, which is the thid lagest goup in Asia afte People s Republic of China and India. The population gowth ate has declined fom 2.2 % pe annum in the ealy eighties to 1.8 % at pesent. Fig. 2. Block diagam of the egional model The eal enegy flow is epesented by a complex netwok of all elevant enegy technologies inteconnected by enegy caie fom supply side to demand side. In this study an aggegate of enegy flow has been used to avoid the complexity of the model. Each of the egions has an enegy flow as shown in Fig. 3. These individual egions ae linked in the 15

3 model by inte-egional flows such as coal, cude oil, and natual gas shipping. The model contains five types of pimay enegy souces: coal, natual gas, cude oil, biomass and othe enewable enegy which involves hydopowe and geothemal enegy. The pimay enegy souces ae tansfomed into seconday enegy secto consists of electicity and non-electicity. Demand secto is disaggegate into thee sectos: industy, tanspotation, and othe sectos. Coal Coal Powe Plant Natual Gas Gas Powe Plant Cude Oil Oil Powe Plant Renewable Biomass Renew. Powe Plant Pepaation Pepaation Pepaation Pepaation Coal-Ind. Coal-Oth. Gas-Ind. Gas-Ta. Gas-Oth. Oil-Ind. Oil-Ta. Oil-Oth. Electicity Biomass fuel INDUSTRY SECTOR TRANSPORT SECTOR OTHER SECTOR Fig. 3. Stuctue of egional enegy flow model 3.2. Mathematical fomulation The model is fomulated as an inte-tempoal optimization model with two-way linkages between the enegy sectos and the balance of the economy. The basic fomulation to calculate the enegy demand is the Cobb-Douglas type poduction function. Y is the poduction function in each egion with time peiod t. Y KPVS (1 KPVS ) (1 ESUB) ELVS (1 ELVS ) [ K L ] [ E N ] ESUB = A (1) Whee E and N denotes the poduction of electicity and non-electicity enegy fo the industy secto. L is a population assumed as an exogenous vaiable. K denotes capital stock and A is a technical pogess facto. The micoeconomics paametes on the above equation ae adapted fom Global 21 model [3] whee ESUB is poduction value shae of enegy, KPVS and ELVS ae capital value shae paamete and electicity value shae paamete. The enegy demand in the tanspotation secto is calculated using Equation (2). The supplies of nonelecticity and electicity enegy must be adequate to cove the demands. E N (2) α (1 α ) + B Y L EFt, whee α is a value shae of income in the tanspotation secto, EF is the electicity use efficiency and B is a constant. In the othe sectos of demand a simila set of enegy demand constaint is employed. The othe constaints ae the enegy esouces limit as summaized in Table 1. Fo the fossil enegy (coal, natual gas, and cude oil) these constaints also calculate the enegy tanspotation to each egions as shown in Equation (3). ( E + N TRE D TRE _ Ft ) RES, t _ (3) whee and ae domestic tanspotation of enegy and impot of enegy. RES denote the limit of enegy esouce of egion. Total domestic tanspotation of enegy must be balanced and is expessed with: TRE _ D t, = Table 1. Enegy eseves in 199 [4] Cude Oil 1 9 Bael Natual Gas 1 12 SCF Coal 1 9 Ton Hydopowe GW (4) Geothemal GW Sumatea Kalimantan Othe Islands Total eseves The goss value of poduction is to be distibuted among consumption, investment fo build up the capital stock and inte-industy payment fo enegy cost (EC), Y C + I + EC = (5) whee C is consumption and I is investment. The total capital stock suviving fom one peiod to the next was expessed with: K t 1, = ( 1 ) K + n I + δ (6) whee δ is depeciation ate and n denote time hoizon intevals. At the end of the planning hoizon, a teminal constaint is applied to ensue that the ate of investment is adequate. To avoid excessively apid expansion of new technologies, thee ae expansion ate constaints of the following fom. The electicity enegy poduction expansion ate constaint is expessed in Equation (7) and fo the non-electicity enegy in Equation (8). n E t 1, ( 1 δ ) E (7) + n t 1, ( 1 δ ) N (8) + t N, The model maximizes a social welfae function that is the discounted sum of the utility of pe capita consumption. In the mathematical fomulation can be expessed as: 16

4 [ ] C t Max S Lt, log 1 d (9) Lt, whee d is the discount ate and C denote consumption. S is shae of egional income pe capita. In this model depeciation ate and discount ate is set to be 1 % and 5 % pe yea. The enegy secto, which includes enegy poduction, tanspo convesion, and end-use in the secto of industy, tanspotation, and othes, is the main contibuto to man-made ai pollution. The main pollutants ae CO 2, CO, paticulate matte, NO x, SO 2, volatile hydocabons, and some heavy metals. In this study only CO 2 emission will be analyse. CO 2 emission is associated with the consumption of coal, cude oil, and natual gas. The CO 2 emissions diectly estimated if the quantity of each fuel consumed is known. If ECH and NCH ae CO 2 emission coefficient fo fuel use in electicity and non-electicity then the total CO 2 emission is calculated as: CO, = ( E ECH + Nt NCH ) (1) 2 t, 3.3 Population and income data The majo facto influencing enegy demands ae population gowth and the economic gowth. This section descibes the egional gowth of population and income. Table 2. Regional population and income Population (Million) Income (Billion US $) Sumatea Kalimantan Othe Islands Total Each egion has a diffeent gowth ate of population. Fo the last 1 yeas, Kalimantan has the highest population gowth ate which about 3.1 % pe annum followed by Kalimantan (2.7 %), othe islands (1.8 %), and (1.7 %). Indonesia has income pe capita in 199 about 56 US dolla. Kalimantan and Sumatea have highe income pe capita than the othe egions due to oil poduction. In deceasing ode of the gowth of income in US dolla base ae Kalimantan (4.7 %), (4.2 %), Sumatea (3. %) and othe islands (2.5 %). 3.4 Sensitivity analysis Sensitivity analysis is conducted to detemine how the optimum path would change if the poblems wee fomulated diffeently. The discount ate and the tanspotation cost of fossil enegy ae the main paametes of sensitivity analysis in the model in this pape. 3.5 The GAMS softwae The model is a non-linea pogamming model. A softwae called Geneal Algebaic Modeling System (GAMS) is used to solve the poblem on 386 compatible pesonal compute. It is geneally moe difficult to find the solution of non-linea poblem than that of linea one. With non-linea model, it is impotant to keep the fomulation as simple as possible and the model as small as possible. Development of the model should be incemental. Most non-linea poblems can be solved moe easily if some initial infomation is povided fo the value of impotant vaiables. This can be implemented in the GAMS using initial value, bounds, and scaling of vaiable. The GAMS [1] can solve both linea and non-linea pogamming poblems. The GAMS solves linea pogamming using eliable implementation of the standad simplex method that fist developed by G. Danzig in the 194s. The poblems with non-linea constaints ae solved using pojected Lagangean algoithm, base on a method due to S.M. Robinson. When objective function is non-linea, GAMS solves such poblem using a educed gadient developed by P. Wolfe in 1962 combined with quasi-newton algoithm developed by W.C. Davidon in Result Selected highlights of the model esults ae pesented in this section. 4.1 Aggegate Enegy demand gows in line with economic activities and population expansion. In the model population is assumed as an exogenous vaiable. A continued decline of the population gowth ate is expected because Indonesia family planning policy is attempting to futhe educe the gowth ate. The total population gowth ate until the yea is about 1.8 % pe annum and 1 % pe annum fo the long tem. With efeence case, the income gowths ae summaized in Fig. 4. In the aveage of annual income gowth ate is 5.7 % and 4.6 % until the end of the time hoizon. Taking into account the population, in the income pe capita gowth ate is 3.9 % pe annum. Because the population is still inceasing, the income pe capita gows at lowe ate of 3.5 % pe annum fo a long tem. 17

5 Billion 199 US dolla Total Sumatea 199 Kalimantan 21 OthIsland Fig. 4. Income gowths The futue of total pimay enegy supplies of the efeence case was shown in Fig. 5. In the shae of coal supply comes to about 34 % of the total pimay enegy supply that almost same to the shae of cude oil and natual gas supply. In 21 and 22 the shae of pimay enegy supply in deceasing ode is coal, natual gas, cude oil, biomass, and enewable enegy. The enewable enegy is not gowing significantly because the poduction cost is expensive that the othe technologies. MTOE Biomass Geothm. Hydo. Oil Gas Coal Fig. 5. Total pimay enegy supplies Although the CO 2 emission in Indonesia still low compaing with total CO 2 emission in the wold, Indonesia is awae if this issue. As one of the 15 signatoy states of the Rio Convention, Indonesia ageed to epot on the status and tendency of CO 2 emission in its teitoy. The CO 2 emission expected by 23 has been estimated as shown in Fig. 6. Million Ton of Cabon OthIsland Kalimant Sumatea Sensitivity analysis is pefomed by vaying the discount ate fom 5 % to 1 % and vaying the domestic tanspotation cost of fossil enegy fom 5 % to 15 % of domestic tanspotation cost of fossil enegy in the efeence case. At a highe discount ate, the total income deceases and also the enegy demand declines in a long tem. A cheape domestic tanspotation cost makes incease of the total enegy demand. The inceasing demand will be supplied by an expansion of coal and natual gas poduction. Supply of cude oil will gow if the domestic tanspotation cost of fossil enegy is goes up. 4.2 Regional pespective On the egional pespective, coal is attactive fo the enegy supply in and Sumatea due to the high gowth of enegy demand in these egions. In Kalimantan natual gas has a significant shae fo enegy supply in a long tem. In the othe islands, aea is extensive and the enegy demands ae fewe but much moe spead out. Renewable enegy such as hydopowe and geothemal enegy ae attactive in these egions. 5. Concluding emaks Abundant coal eseves make coal attactive as the majo domestic enegy supply in Indonesia. These huge amounts using coal seem to ceate high emission of ai pollutants. The second majo enegy supply is natual gas and followed by cude oil. Cude oil supply is expected not gowing significantly due to limited of esouce. When one consides the inceasing of electicity consumption, it would be desiable to extent the model with electicity enegy tanspotation to the othe egions, such as using submaine cable fom Sumatea, that abundant of fossil fuel, to that shoes apidly incease of enegy demand in the futue study. Refeences [1] A. Booke, D. Kendick, A. Meeaus. Release 2.25 GAMS Use s Guide, The Scientific Pess, [2] A. Sugiyono and S. Moi. Integated Enegy System to Impove Envionmental Quality in Indonesia, SICE, Octobe, [3] A.S. Manne and R.G. Richels. Buying Geenhouse Insuance: The economic costs of CO 2 emission limi The MIT Pess, [4] BPPT-KFA, Envionmental Impact of Enegy Stategy fo Indonesia: Final Summay Repo May, [5] IMF, Intenational Financial Statistics Yeabook, Publication Sevices IMF, Washington, Fig. 6. CO 2 emission 18