Objective Function

TIAM’s objective function is minimization of total aggregated discounted costs summed over the regions the time horizon (2018-2100), compare (1). The main cost components included in this function are the investment costs and fixed and variable operation and maintenance costs. The structure and mathematical formulation of the model are described in detail by Loulou and Labriet respectively. [1–4]

(1)\[ NPV=\ \sum_{r=1}^{R}\sum_{y\in y e a r s}{(1+d_{r,y})}^{refy-y} \cdot ANcost(r,y) \]

Considering the objective function of the model (i.e., minimization of total discounted system costs), a model parameter that plays a critical role in evaluating future costs and reim- bursements of the energy system is the (social) discount rate. The selection of an appropriate value for this parameter is crucial because it affects the assessments of system costs, technological preferences, mitigation measures and policies (Goulder and Williams [5]). The higher the discount rate, the lower the present value of the future costs. Despite the strengths of the TIAM model, it is criticized for two issues arise from its partial equilibrium perspective. Similar to other bottom-up models the energy-service demands in TIAM are projected exogenously. This means that the model ignores feedback between energy-service demands and their prices. Therefore, it is not able to fully address the role of energy-service demands. In addition, being restricted to the energy sector limits the ability of the model to account the repercussions on the rest of the economy.

References

[1] ETSAP, TIMES Documentation - Part II. [Online]. Available: https://github.com/etsap-TIMES/TIMES_Documentation/blob/master/Documentation_for_the_TIMES_Model-Part-I.pdf [2] ETSAP, TIMES Documentation - Part II. [Online]. Available: https://github.com/etsap-TIMES/TIMES_Documentation/blob/master/Documentation_for_the_TIMES_Model-Part-II.pdf [3] ETSAP, TIMES Documentation - Part II. [Online]. Available: https://github.com/etsap-TIMES/TIMES_Documentation/blob/master/Documentation_for_the_TIMES_Model-Part-III.pdf [4] ETSAP, TIMES Documentation - Part II. [Online]. Available: https://github.com/etsap-TIMES/TIMES_Documentation/blob/master/Documentation_for_the_TIMES_Model-Part-IV.pdf [5] Lawrence H. Goulder and Roberton C. Williams III, “The Choice of Discount Rate for Climate Change Policy Evaluation, 2012”