BottomBottom-Up Studies for Regional Models(Ajou Univ.)
Suduk Kim, Yong Gun Kim, Hoesung Lee
September 17, 2009
Asia Modeling Meeting
Tsukuba, Japan

Key Design Characteristics
 Participating Model: ARDL, Panel, AIDS Model, etc.
 Model Type: Econometric models applied to energy sectrs
 Participating Modelers: Y.G.Kim (KEI), Hoesung Lee(IPCC), Choon-Geol Moon (Hanyang Univ.), Suduk Kim (AjouUniv.) Time Step: Hourly to Monthly or Yearly Time Frame: using1997-2009 to medium range forecast
 Solution Type: stochastic, dynamic recursive
 Equilibrium Type: no market general equilibrium type,but mostly demand side analysis with no future structuralchange Underlying Computing Framework: GAUSS, C++Inputs and Outputs


Key inputs






Demographics: regional information if necessary
Economic: PI or GDP, CPI, energy prices and consumption,
government policies including taxation, subsidy on energy
sourcesResources: fossil fuel related sources, not renewables
Technology: no explicit consideration

Key outputs


Economic: energy demand forecast, subsequent impact
Energy: sectoral, regional energy demand
Agriculture: NAEmissions: sector-wise CO2 emission
Climate: NA

Regional Scope & Other Detail

Regional Details:Regional Scope: national
Number of Sub-Regions: depending on data availability
Asian Regions: NA

Other Details:
Energy Demand: detailed behavioral information on final
demand including short, long-term own price elasticity,
income elasticity, and cross price elasticity
Energy Supply: NA (most of the occasions)
CGE under criticism of the use of parameters without thoroughempirical validity while econometric model can provide
additional information for this purpose

Asian Baselines
National Baseline:
National energy master plan by MKE(ministry of knowledge,economy) – ‘Low Carbon Green Growth’
Baseline conditions



per annum(%)
2006

2010

2015

2020

2025

2030
06-10

10-20

20-30

06-30

GDP(Bil.USD)

632.7

763.7

951.8

1163.51361.91530.0

4.8

4.3

2.8

3.7

Population(Thou.)48297.048875.049277.049326.049108.048635.0

0.3

0.1

-0.1

0

2006
Agri., fishery
Industry(Manufacture)
SOC
Service Sector
Total Value Added

3.7
33.8(33.5)
10.4
52.1
100

2010
3.2
33.4
(33.2)
10.6
52.9
100

2015
2.6
33.5(33.3)
10.3
53.6
100

2020
2.2
33.3(33.2)
1054.41002025
232.6(32.5)
9.7
55.7
100

2030
1.8
31.4(31.3)
9.3
57.4
100

Crude oil price (real) – $118.7 by 2030 (based on International
Energy Outlook 2008, EIA )6

Scope of Previous Works on Korea
DES35 Retail
City Gas
Companies

Gas
Market(1)PowerCompanies

District
Heat andPower-SCG
-CES

New,
Renewable
Energy- Wind- PV- etc.

PowerMarket(1)

KEPCO

KOGAS

Distributed Energy Sources (DES)Previous Work on Korea (AIDS, manufacture)
Share of Expenditure on Energy Sources and Its Forecast(Food,Tex tile, wood & Pulp)

Share of Expenditure on Energy Sources and Its Forecast(Petro-Chemical)

0.8

0.5

0.7

0.4

0.6

0.4

0.5

0.3

COAL
Gasoline
Kerosene
DieselBunker Oil
LPG
City-Gas
ELECT

0.4
0.3
0.2

0.3
0.2
0.2
0.1

0.1
0.0

COAL
Gasoline
Kerosene
DieselBunker Oil
LPG
City-Gas

0.1

09912
9914
991

6
991899100022002

4002

60028002010221024102610281020202220242020.009912991

Share of Expenditure on Energy Sources and Its Forecast(Non-Metalic, Fabricated Metal)
COAL
Gasoline
Kerosene
DieselBunker Oil
LPG
City -Gas
ELECT

0.6
0.5
0.4

89
9
100
022002400260
0280
0201022102

41026102810249916991899
1000220024002600280020102

2102

4102

6102810202022202

4202

0.5
0.4

COALGas oline
Keros ene
Dies elBunker Oil
LPG
City -Gas
ELECT

0.1

0.1
2991

2202

0.6

0.2

0.2

099102
02

0.7

0.3

0.3

0.0

6
991

Share of Expenditure on Energy Sources and Its Forecas t(Iron & Steel)

0.8
0.7

4
991

4202

0.00991

2991

4991

6991

8
991

0002

2002

4002

6002

80020
10221024102

6102

8102020222024202

Previous Work on Korea (City Gas, Panel Model)
Dependent Variable: ln y = ln(city gas demand for industrial sector)
Sample: Jan.1999 to Dec. 2007
Number of observations: 108
Cross-sections included: 14
Var.
cnst
ln y(-1)
ln P_citygas
ln PI
ln P_elec
ln P_BCln Nhous
Feb.
Mar.
Apr.
MayJunJulAug
SepOctNov
Dec
Fixed Effects
Seoul
Pusan
Deaku
DaejeonKwangju
Incheon
Ulsan
Kyunggi
Kyungnam
Jeonbuk
Jeonnam
Chungbuk
ChungnamKangwonR-squared
Adj. R-squared
log likelihood
F-stat.
prob(F-stat)

Estimates
1.024290.77934-0.11629
0.225650.30936
0.05167-0.17172-0.07528-0.03986-0.13598-0.11201-0.10067-0.13385-0.17295-0.06007-0.00534
0.04051
0.06514std.
0.149400.02095
0.046200.039540.105880.025480.023530.019960.020450.02095
0.02172
0.02157
0.026360.02926
0.02166
0.022110.021730.02066

t-valueP-value

6.8559837.20587-2.51725
5.706672.921812.02780-7.29727-3.77075-1.94866-6.49146-5.15733-4.66617-5.07746-5.91117-2.77294-0.241721.86467
3.15295-0.16636
0.16463
0.11348-0.24738-0.10208
0.224280.345030.37006-0.24388-0.21600-0.31556-0.28629
0.19966-0.29807
0.985430.98509666.3922903.91
0.00000

0.00000
0.00000
0.011900.00000
0.00350
0.042800.00000
0.000200.05160
0.00000
0.00000
0.00000
0.00000
0.00000
0.00560
0.80900
0.062500.00170

Model: panel data model estimation with crostyssection fixed-effects and partial adjustment
scheme (2008.10) – Industrial Gas Demand
Own Price Elasticity
Short-Run: -0.116 (Significant, inelastic)
Long-Run: -0.527 (Significant, inelastic)
Electricity (Cross Price Elasticity)
Short-Run: 0.309 (Significant, inelastic)
Long-Run: 1.402 (Significant, elastic)*Substitution effect of electricity in the analysis ofcity gas demand should be explicitly
considered.
BC Oil (Cross Price Elasticity)
Short-Run: : 0.052 (Significant, inelastic)
Long-Run: : 0.234 (Significant, inelastic)

Mean of YS.D. of Y
AIC
SIC
Burbin-Watson

3.811644
1.210019-0.963446-0.841593
2.066227*Substitution effect of BC oil in the analysis of city
gas demand should be explicitly considered

Done for KOGAS (Korea Gas Corporation)

Previous Work on Korea (Industrial Power Demand, ARDL)Previous Work on Korea (KNOC, ARDL)• ShortShort-term

Petroleum Product
Demand Analysis-Gasoline
Gasoline-For
For KNOC(KoreaNational Oil Company)• LongLong-term

Previous Work on Korea
Impact of Wind Power Generation on Peak Time Power Demand (2030)
S1S2

S3

S440001400Previous Work on Korea

13

Energy Modeling Lab.’s Research Plan for the Future
Macroecono
mic Sector(Domestic &Foreign)

Integration Work
under progress

EnergyDemand(Primary,Final,Sectoral)

EnergySupply(SourceWise)

EnergyConversion(Heat,Power, CityGas)

Additional Thoughts for Asia Model






With over 90% of GHG being produced from energy sector in Korea,
detailed specification of elasticities for this sector (both demand andsupply side) with empirical validity being pursued.
Over 2000TOE of energy consuming companies’ census data availablefrom KEMCO for future analysis.
With market clearing price system being calculated from demand andsupply in most of models, would it be possible to test ‘desirable’ relative
price structure of energy within the general equilibrium type of model?
It would be giving us the better choice of parameters in the process ofmodel calibration, say, utility function and CES production function in CGE
model..
Study a way to incorporate the estimates for demand side priceelasticities (including cross price elasticity).
Trade-off between time to be taken to refine models and ‘warming
globe’!
Building an integrated econometric model for its comparison with CGE forthe robust performance of ongoing Korean model within the context ofAsian model.