Since 1993, the IEA has provided medium to long-term energy projections using a World Energy Model (WEM). The WEM – a large-scale mathematical construct designed to replicate how energy markets function – is the principal tool used to generate detailed sector-by-sector and region-by region projections for both the Reference and Alternative Policy Scenarios. The model, which has been developed over many years, is made up of six main modules: final energy demand; power generation; refinery and other transformation; fossil-fuel supply; CO2 emissions and investment.
For WEO 2007 the World Energy Model updated with the co-operation of TERI in India (Tata Energy and Resources Institute) and ERI in China (Energy Research Institute).
The IEA is one of three organisations jointly co-ordinating the International Energy Workshop (IEW), an informal network of analysts concerned with international energy issues. The IEW 2007 was held in Stanford, California; and the 2008 workshop will be held at the IEA in Paris from 30 June to 2 July 2008.
The Office of the Chief Economist (OCE) developed in collaboration with the CIRED, a General Equilibrium Model (called WEM-ECO) with a detailed representation of the energy sector, by coupling OCE's WEM model with CIRED’s IMACLIM-R model. Integrating a General Equilibrium Model with the IEA partial equilibrium WEM model makes it possible for IEA to provide more insights on the economic and trade issues associated with different energy policies and scenarios (prices, GDP, trade and investment, etc…). OCE used this new WEM-ECO model for the WEO 2007 study on the implications of energy developments in China and India on the rest of the world, particularly for the assessment of the impact of different economic and energy scenarios on other countries' GDP and trade movements, as well as the impact of increased pressure on international oil markets. The WEM-ECO model is also expected to provide key inputs for the economic implications of the Alternative Policy Scenario of WEO 2008.
The development and running of the WEM requires access to huge quantities of historical data on economic and energy variables. Most of the data are obtained from the IEA’s own databases of energy and economic statistics, available here. The IEA has gained recognition as one of the world’s most authoritative sources for energy statistics. Additional data from a wide range of external sources is also used. These sources are indicated in the relevant sections of the model description.
The current World Energy Model, which is comprised of nearly 16,000 equations, is the 12th version of the model. It covers 21 regions. For a detailed description of the WEM see the link at the top of this page.
New Features in World Energy Outlook 2008
The WEM was expanded for the WEO-2008 and now includes the following new features:
- The demand module for all regions was completely rebuilt, involving re-estimating parameters using more recent time-series data and introducing more detailed coverage of demand by sector and fuel. The power generation model now includes more detailed representation of coal-fired technologies, inclusion of carbon dioxide capture and storage and endogenous modelling of nuclear power
- The oil and gas production and trade models were expanded to take better account of economic variables and to reflect the recent surge in cost inflation and the fall in the value of the dollar against most other currencies.
- Oilfield decline rates were analysed in detail on a field-by-field basis in order to assess the prospects for future decline rates (see Chapter 10).
- The WEM energy-related CO2 emissions were combined with greenhouse gas emissions from all sources to explain the relationship between the level of annual emissions and the long-term concentration of greenhouse gases in the atmosphere, which will determine the increase in the future global average temperature.
- How overall emissions limitation levels would translate back into an atmospheric concentration of CO2-equivalent gases and what means might be used to achieve stabilisation of that concentration. Energy and emissions are modelled in two scenarios: the 550 Policy Scenario, in which greenhouse-gas concentration is stabilised at 550 parts per million of CO2-eq, and a 450 Policy Scenario, in which concentration is limited to 450 ppm CO2-eq.
- Biofuels demand was modelled in more detail, taking account of technical and economic factors.
- Power-generation capital and operating costs were assessed in detail and the cost assumptions in the WEM were revised to take account of recent cost inflation (see Chapter 6).
- In addition, the integration of the WEM into a general equilibrium model, started in 2007, was taken a step further, in order to model more precisely the feedback links between energy markets and the macro-economy.
A database with over 3 000 policies and measures in OECD and non-OECD countries is available here.
