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Agent based modelling of a heat market

Pilot project by Frontier Economics to illustrate how modelling the behaviour of individual 'actors' can support policy making

Tagged: Energy & WasteNational Infrastructure Assessment

The Commission asked Frontier Economics to develop an ‘agent based model’ (ABM) to explore the potential implications of different behaviours by property owners, installers and networks in the transition to low carbon home heating.

This work is a pilot project to test the potential role of ABMs in providing insights into questions such as how the heat market may develop. The report sets out various scenarios and seeks to illustrate how interactions between market participants could mean policies have greater impacts than the sum of their impacts on individual customers.

While this work is not intended to assess specific policies, it seeks to illustrate how this type of modelling may be a useful tool for policymakers: “The very structure of an ABM, where the behaviours of each agent is made explicit, provides a clear and objective framework around which to build the evidence base for consumer decision-making. The process of constructing an ABM requires codifying a wide variety of assumptions – for example, the factors that property owners and installers take into account when making decisions, and their relative importance. While there may be substantial uncertainties around these assumptions, documenting them formally can help subject-matter experts engage more deeply” (p10).

Frontier’s conclusions are explored in an accompanying blog written by the Commission’s Modelling Lead, David Menzies.

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Status: Analysis

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