Modelling Economic Effects of the Renewable Energy Expansion – The German Case –

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

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






Conference3

Renewables in Germany

• Substantial growth in:– Renewable shares of energy consumption– Investments and turnover in renewable industries– Employment in renewable industries

20.06.2011 34th IAEE International Conference

4

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)

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?


5

+

-

?






Conference6

Modelling strategy


7

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

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

NiGEM – a multi-country model

20.06.2011 99

U.S.

Japan

Germany UK

LatinAmerica other

world regionsOPEC-Countries

Interrelations:

• World trade

• Capital flows

otherOECD

countries

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

Schill, Wolf-Peter

Exogene Inputs noch reinbringen?

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

Conference11

Renewableenergy

industries(14 sectors)






Conference12

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


13


14

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

Macroeconomic results

15

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

Sensitivity analysis “Decreasing competitiveness”

16

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

Sensitivity analysis “Flexible labour market”

17

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


Econometric model equations imply high natural unemployment (instead, strong productivity growth)

More flexible labour market: GDP growth leads to increased employment

An exemplary sectoral outcome

18

Manufacturing industry is the main winner






Conference19

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.


20

Backup


21


22

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

23

„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


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


24

Documents

Modelling Economic Effects of the Renewable Energy Expansion – The German Case –