The Impact of Heterogeneous Market Players with Bounded-Rationality on the Electricity Sector Low-Carbon Transition
Date Published: March 2020
Authors: Elsa Barazza and Neil Strachan
Meeting decarbonization goals requires large financial investments in low-carbon technologies, to be delivered by an increasing variety of market actors and investors. They operate based on past experiences, expectations and habits. Such heterogeneous behaviors add complexity to the energy transition. This paper introduces BRAIN-Energy, an agent-based model which explicitly allows analysis of actors’ heterogeneous characteristics, and of their interactions, on the transition pathways of the UK, German and Italian electricity sectors. Results show that actors’ heterogeneous characteristics pose barriers to effective decarbonization efforts, affect the speed of the transition, and impact the transition’s security of supply and affordability dimensions. Limited foresight and path-dependency lead to investment cycles (both virtuous and vicious). The country comparison highlights how such effects are stronger in markets with more heterogeneous market players.