Simulation of Alternative Fuel Markets using Integrated System Dynamics Model of Energy System

An integrated system-dynamics model of energy systems is employed to explore the transition process towards alternative fuel markets. The model takes into account the entire energy system including interactions among supply sectors, energy prices, infrastructure and fuel demand. The paper presents the model structure and describes the algorithm for the short-term and long-term simulation of energy markets. The integrated model is applied to the renewable-based energy system of Iceland as a case study to simulate the transition path towards alternative fuel market during the time horizon of 2015-2050. The transition pathways towards hydrogen and biofuels are investigated for the numerical results. The market simulation algorithm effectively exhibits the continual transition towards equilibrium as market prices dynamically adjust to changes in supply and demand.The application of the model has potential to provide important policy insights as it can simulate the impact of different policy instruments on both supply and demand sides.