2.2. Long-term evolution of energy markets
2.2.1. New capacity installation
The production costs of new plants are determined by the cumulative
amount of capacity constructed, plant sizes and exogenous
technology learning rates. The cost of renewable resources is
expected to increase with cumulative installed capacities due to the
effects of resource supply curve, leading to an increase in the fuel
price.
In the long-term, price forecasts play a crucial role in building
new capacity. Higher wholesale prices encourage the new capacity
building. The production buffer also influences the decision to
install new capacity.When the generation buffer is high, the future
market price is scaled down. However, when supplies are tight, the
future market price is scaled up, encouraging new plant
installation.
2.2.2. Plant Selection
Whenever there is more demand than production capacity (i.e.
shortfalls), the model must decide what type of capacity to build.
The “Plant Selection” substructure of the model determines the
feasible technology and plant size based on the fuel shortfall and
resource availability. The least cost choice will qualify if the technology's
production cost is less than the forecasted future prices.
After a predetermined amount of construction time, that amount of
plant capacity will become available in the market.
2.3. Consumer vehicle choice
Fig. 2 illustrates the key variables and the simplified structure of
the feedback loops between the consumer fuel demand and the
refueling stations. The transport fuel use is determined using the
travel demand and the vehicle stock. The annual travel demand is
adjusted according to changes in the fuel cost per km. The total
vehicle fleet is expected to continue growing until the vehicles-percapita
indicator approaches a saturation level. Consumers purchase
the new vehicles based on both their own preferences and the effects
of social networks. The MNL (Multinomial Logit) model gives
the probability that consumers purchase vehicles at each time on
the basis of their preferences towards vehicles' attributes [23]. The