IEA (2021), World Energy Model, IEA, Paris https://www.iea.org/reports/world-energy-model
Since 1993, the International Energy Agency (IEA) has provided medium- to long-term energy projections using the World Energy Model (WEM). The model is a large-scale simulation model designed to replicate how energy markets function and is the principal tool used to generate detailed sector-by-sector and region-by region projections for the World Energy Outlook (WEO) scenarios. Updated every year and developed over many years, the model consists of three main modules: final energy consumption (covering residential, services, agriculture, industry, transport and non-energy use); energy transformation including power generation and heat, refinery and other energy transformations – such as coal to liquids or hydrogen production; and energy supply. Outputs from the model include energy flows by fuel, investment needs and costs, greenhouse gases emissions and international and end-user energy prices.
Several new features have been implemented this year including:
- Employment: WEM analyses the number of people employed in major energy supply and end-use sectors, including electricity, oil, natural gas, coal and biofuels and the number of job losses and gains in the energy and related sectors as a direct product of shifting investments, production, and operation of energy assets.
- Improved and more detailed modelling of low carbon hydrogen and ammonia: including refining low-carbon hydrogen and ammonia-use in electricity generation and the implementation of feedback loops based on a unified module for hydrogen production and trade to satisfy demand for hydrogen within the end-use and transformation sectors. Additionally, we draw information from the Energy Technologies Perspective model used for the Global Hydrogen Review 2021 and including improved learning rates.
- Expanding and improving accounting of non-CO2 emissions: for the Net Zero Emissions by 2050 special report, bioenergy supply, land use and agriculture, forestry and other land use (AFOLU) emissions modelling performed by the International Institute for Applied Systems Analysis (IIASA) was coupled with the WEM.
- Investment and financing: detailed analysis of the sources of finance, the performance and targeting of capital flows against the investment needs of long-term net zero emissions goals, and, and investment projections were expanded to include additional interventions for end-use sectors and further detail on hydrogen-based fuel supply.
- Enhancing transport module: updated cost curves, implementation of scrappage functions, extended representation of synthetic fuels and adding locational granularity.
The WEM is a very data-intensive model covering the whole global energy system. Much of the data on energy supply, transformation and demand, as well as energy prices is obtained from the IEA’s own databases of energy and economic statistics. A large set of assumptions, including technical and economic parameters of energy technologies, are developed with the technology-rich IEA’s Energy Technology Perspectives (ETP) model, containing over 800 technologies. Additional data from a wide range of external sources is also used.
The development of the WEM benefits from expert review within the IEA and beyond and the IEA works closely with colleagues in the modelling community, for example, by participating in and hosting regularly the International Energy Workshop.
The current version of WEM covers energy developments up to 2050 in 26 regions. Depending on the specific module of the WEM, individual countries are also modelled: 12 in demand; 102 in oil and gas supply; and 19 in coal supply. The WEM is designed to analyse:
- Global and regional energy prospects: these include trends in demand, supply availability and constraints, international trade and energy balances by sector and by fuel.
- Environmental impact of energy use: CO2 emissions from fuel combustion are derived from the projections of energy consumption. CO2 process emissions have been estimated based on the production of industrial materials while non-CO2 emissions originating from non-energy sectors rely on the scenarios from the IPCC 5th Assessment Report scenario database. Methane from oil and gas emissions are assessed through bottom-up estimates and direct emissions measurements (see Methane Tracker 2021). Local pollutants are also estimated linking WEM with the GAINS model of the International Institute for Applied Systems Analysis (IIASA).
- Effects of policy actions and technological changes: alternative scenarios analyse the impact of a range of policy actions and technological developments on energy demand, supply, trade, investments and emissions.
- Investment in the energy sector: WEM evaluates investment requirements in the fuel supply chain to satisfy projected energy demand. It also evaluates demand-side investment requirements, including energy efficiency, electrification and other end-use sectors including industrial carbon capture and storage.
- Modern energy access prospects: these include trends in access to electricity and clean cooking facilities. It also evaluates additional energy demand, investments and CO2 emissions due to increased energy access.
The WEM is a simulation model covering energy supply, energy transformation and energy demand. The majority of the end-use sectors use stock models to characterise the energy infrastructure. In addition, energy-related CO2 emissions and investments related to energy developments are assessed. Though the general model is built up as a simulation model, specific costs play an important role in determining the share of technologies in satisfying an energy service demand. In different parts of the model, Logit and Weibull functions are used to determine the share of technologies based upon their specific costs. This includes investment costs, operating and maintenance costs, fuel costs and in some cases costs for emitting CO2.
The main exogenous assumptions are economic growth, demographics and, in some cases, technological developments. Electricity consumption and electricity prices dynamically link the final energy demand and transformation sector. Consumption of the main oil products is modelled individually in each end-use sector and the refinery model links the demand for individual products to the different types of oil. Demand for primary energy serves as input for the supply modules. Complete energy balances are compiled at a regional level and the CO2 emissions of each region are then calculated using derived CO2 factors. The model is each year recalibrated to the latest available data. The formal base year is 2019, as this is the last year for which a complete picture of energy demand and production is in place. However, we have used more recent data wherever available, and we include 2020 and 2021 estimates for energy production and demand. Estimates are based on updates of the Global Energy Review reports which relies on a number of sources, including the latest monthly data submissions to the IEA’s Energy Data Centre, other statistical releases from national administrations, and recent market data from the IEA Market Report Series that cover coal, oil, natural gas, renewables and power.