2. Major Demand Sectors
Three major energy demand sectors are modelled; residential, industrial and commercial, and transport. Each sector has a number of models underlying it. Approximately two thirds of the total energy is modelled using a sophisticated multi-variate approach. About a fifth of the total energy is modelled based on forecasts directly from the industries concerned. The remaining portion is modelled using simple ordinary least square linear regression (OLS).
Table 1: Demand Sectors and Modelling Techniques| Major Sector | Sub-Sector | Model | Net Energy (PJ, 2004) | Percentage |
| Residential | Residential | Multivariate, GDP, Price, HDD, Lagged Demand | 52 | 10% |
| Industrial & Commercial | Forestry | MAF forecasts | 23 | 4% |
| Metals | Company forecasts | 40 | 8% |
| Petrochemicals | Company forecasts | 52 | 10% |
| Other Industrial and Commercial | Multivariate, GDP, Price, HDD, Lagged Demand | 105 | 20% |
| Transport | Petrol (Land) | Multivariate, GDP, Price, Lagged Demand | 104 | 20% |
| Diesel (Land) | Multivariate, GDP, Price, Lagged Demand | 80 | 15% |
| Aviation | OLS | 48 | 9% |
| Sea | OLS | 22 | 4% |
| Other | OLS | 9 | 2% |
| TOTAL | | | 533 | 100% |
2.1 Residential Sector
This sector has been modelled based on time series information since 1961 for five fuels - electricity, gas, coal, coke, and oil. Over this period the fuel mix has changed from approximately a 40:50 electricity:coal domination to a 90:10 electricity:gas domination. The demand drivers used in this model are price, GDP, and Degree Days (DD).
Figure 1: 1961 Residential Fuels (PJ)
Figure 2: 2004 Residential Fuels (PJ)
The above graphs illustrate the amount of energy consumed from each fuel, and the changes in the fuel mix over the past 40 years. The model however is based on the "effective energy" delivered. For electricity this is 100% of the fuels energy, however for coal it is just 30%, while gas falls at the higher end at 80%. This factor is reflected in the way fuel switching occurs between these options.
Projecting forward to 2025 the price of electricity is expected to increase slightly but the price of gas will increase markedly as reserves dwindle.
Degree Days (DD) are measured from two points. Heating degree days are recorded when the average temperature falls below 15°C, while cooling degree days are recorded when the average temperature rises above 21°C. Degree days are projected to reduce having a slightly suppressing effect in their contribution to demand. The two key drivers for this are long-term warming trends pushing up average temperatures, and the continuing regional shift of the population balance from the cooler south to the warmer north in particular Auckland.
Residential energy demand is projected to increase at an average of 1.9% p.a. from 2005 to 2025. Figure 3 highlights the difference between the current projection and Energy Outlook 2003.
Figure 3: Residential Energy Demand (PJ)
→ Full size version of Figure 3 [10 KB GIF]
2.2 Industrial and Commercial Sector
This sector includes heavy industrial metals refining (BHP, Comalco, Pacific Steel), petrochemicals (Methanex and Urea), forestry processing (pulp and paper and milling), and "other industrial and commercial" (OI&C).
For the heavy metals sector, energy growth is projected to be negligible as there are unlikely to be additional amounts of relatively cheap electricity and gas that would make expansion of this sector economically attractive. For the petrochemicals sector a greater than 90% decline in gas use from 2003-2007 (principally Methanex) is expected due to the decline of known gas reserves causing sharply increased gas prices. For the forestry processing sector strong growth is expected due to increased harvesting from the maturation in 2010-2025 of forest plantings made in the late 1980's and early 1990's.
The OI&C sector has been modelled since 1961. During that period there has been strong growth in demand particularly in the electricity and gas components. The only exception to this was a period in the mid-1970's when the oil crisis created a temporary period of high prices. This has shifted the fuels mix from approximately 60% coal in 1961 to a mix of fuels dominated by 40% electricity in 2004. The demand drivers used in this model are price, GDP, and Degree Days (DD).
Figure 4: OI&C Fuels Mix 1961 (PJ)
Figure 5: OI&C Fuels Mix 2004 (PJ)
OI&C energy demand is predicted to increase at an average of 1.2% p.a. from 2004 through to 2025. This is significantly less than was recorded for Energy Outlook 2003 due to clearer lines of allocation between OI&C and the Forestry and Metals sectors, and revision of electricity consumption actuals for 1999-2001.
Figure 6: Other Industrial and Commercial Energy Demand (PJ)
→ Full size version of Figure 6 [10 KB GIF]
2.3 Transport Model
This model contains 5 sub-sectors namely petrol (land), diesel (land), aviation, sea, and other. Petrol (land) and diesel (land) make up 70% of energy in this sector and are modelled using a multivariate approach. Aviation is 18% and is modelled using a simple OLS approach.
2.3.1 Petrol Model
Petrol is used almost exclusively (99%) for transportation purposes. Whilst the type of transportation has not been explicitly determined it can be assumed that most of it is for private cars.
The demand drivers used in this model are price and GDP. The sensitivity to price is however very small compared to GDP. For example a 0.6% drop in GDP would suppress demand by only 0.1%. The change in oil price needed to suppress demand by the same amount is an increase of US$2.20/bbl (7%).
Demand is predicted to increase at an average of 0.6% p.a. through to 2025.
Figure 7: Petrol (Land) Energy Demand (PJ)
→ Full size version of Figure 7 [9 KB GIF]
2.3.2 Diesel Model
This model is based on diesel demand for land transportation purposes. Diesel demand for industrial and commercial purposes and domestic sea transport is removed from this model. These other sectors account for approximately 30% of diesel consumption. Domestic air transport (jet fuel) is also modelled separately. International transport (sea and air) is excluded from all GHG analysis.
Previously the Diesel model in Energy Outlook 2003 and the previous April 2004 CCO projections significantly underestimated demand. This model has now been substantially improved.
There is also some switching occurring from petrol to diesel for automotive purposes, which accounts for part of the difference in growth rates between the petrol and diesel models.
Diesel demand is predicted to increase at an average of 3.1% p.a. through to 2025.
Figure 8: Diesel (Land) Energy Demand (PJ)
→ Full size version of Figure 8 [10 KB GIF]
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