Robust energy system planning for decarbonization under technological uncertainty: From transport electrification to power system investments

Abstract

This work develops energy system modeling tools that identify features of a robust energy policy: a policy that performs well relative to alternatives. The tools are based on the Open Souce Modeling System (OSeMOSYS), are named the Multipurpose OSeMOSYS-based Framework (MOMF), and are applied to Costa Rica´s energy transition through the lens of its National Decarbonization Plan (NDP). The MOMF can support energy decarbonization planning exercises, and it is suitable to address the uncertainty involved in a decades-long process. It compares possible NDP futures -quantitative combinations of uncertainties and sectoral policy objectives- to a business-as-usual (BAU) scenario without decarbonization. The MOMF also evaluates actors within a country, including the fiscal impacts of decarbonization, following the best practices of applied energy modeling for policy support.

This work finds that the NDP has high economic benefits (avoided costs relative to the BAU) in the long term, equivalent to 5.5% of GDP yearly in the 2041-2050 decade. In 2031-2040, the benefits are 0.8% of GDP yearly; in 2022-30, the NDP faces net costs (more costs than the BAU) of 0.9% of GDP yearly. These results are averages across futures and can be higher or lower. The government will have lower direct tax revenue of about 0.87% of GDP yearly in 2041-2050 and will need to redistribute benefits to compensate for this. It can use vehicle-kilometer taxes (VKT), property taxes, or energy taxes for the redistribution, mainly taxing private transport owners -who have the highest benefits-. However, to facilitate the decarbonization of freight firms in 2022-2030 and 2031-2040, the government could subsidize their zero-emission vehicles (ZEV) adoption.

High benefits, low emissions complying with net-zero targets, and low electricity and public transport prices are desirable policy outcomes. Low costs for ZEVs and energy infrastructure -including renewables and storage- are crucial uncertain conditions for desirable outcomes. The robust levers the government can adopt to achieve desirable outcomes must decouple economic growth from transport activity. The specific levers include public transport investments, digitalization, non-motorized transport, ride-sharing, logistics hubs, and city densification. Moreover, low electricity prices need a low cost of capital to finance investments in the power sector.