The transition to a low-carbon economy depends on the adoption of new technologies. It is therefore crucial that any modelling of the transition includes a realistic treatment of technology diffusion.
The power, road transport, household heating and steel sectors in E3ME are represented using a novel framework for the dynamic selection and diffusion of innovations, initially developed by J.-F. Mercure, called FTT (Future Technology Transformations).
The FTT sub-models are based on a decision-making core for investors who must choose between a list of available technologies. ‘Levelised’ cost distributions (including capital and running costs) are fed into a set of pairwise comparisons, which are conceptually similar to a binary logit model.
The diffusion of technology follows a set of coupled non-linear differential equations, sometimes called ‘Lotka-Volterra’ or ‘replicator dynamics’ equations, which represent the better ability of larger or well established technologies to capture the market. The life expectancy of these technologies is also an important factor in determining the speed of transition.
Due to learning-by-doing and increasing returns to adoption, FTT results in path-dependent technology scenarios that arise from specific sectoral policies.
The power sector model is described further here:
The road transport sector model is described further here:
The household heating sector model is described further here: