Hard-linking a top-down economic model with a bottom-up energy system for an oil-exporting country with price controls

Olivier Durand-Lasserve, Hossa Almutairi, Abdullah Aljarboua, Axel Pierru, Shreekar Pradhan and Frederic Murphy

Energy, 2023, vol. 266, issue C

Abstract: This paper presents the hard-linking between a bottom-up model of energy sectors and a top-down Computable General Equilibrium (CGE) model, for an oil-exporting country - Saudi Arabia - where domestic energy prices are set by the government. The integrated model is solved with a Jacobi algorithm where the bottom-up and the top-down model are formulated separately and solved iteratively until convergence. The model is used to assess the sectoral and economy-wide consequences of domestic energy price reforms. Removing energy price controls triggers fuel switching and energy efficiency gains, increases crude oil exports and leads to a massive deployment of solar photovoltaic. As a result of price reforms, at the 2030 horizon, Saudi Arabia's Gross Domestic Product (GDP) increases by 3 to 6% and energy-related CO2 emissions are reduced by one third.

Keywords: Energy model; General equilibrium; Hard-link; Mixed complementarity problem; Price controls; Saudi Arabia (search for similar items in EconPapers)
JEL-codes: C61 C68 H23 Q41 Q48 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:266:y:2023:i:c:s0360544222033369

DOI: 10.1016/j.energy.2022.126450

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