Behavioural realism in a technology explicit energy-economy model: The adoption of industrial cogeneration in Canada

Traditional models to explore the effects of environmental energy policies suffer from fundamental theoretical weaknesses that limit their usefulness to policy makers. In particular, top down models lack technological detail and so cannot be used to fully explore policies influencing technology diffusion. Their traditional alternative, bottom-up models, lacks behavioural realism and so cannot be trusted to realistically simulate outcomes in the energy economy.;This paper demonstrates how discrete choice models can be used to inform the behavioural parameters of a hybrid model by estimating a discrete choice model of the industrial steam generation technology decision. A survey of 259 industrial firms in Canada was administered in 2002 and a discrete choice model was estimated from the results. The model showed that industrial cogeneration is a relatively unknown technology to many firms. Among those that were familiar with cogeneration, its high capital cost often limited its appeal. The survey results also revealed that the electricity savings offered through a cogeneration system are valued extremely highly by firms. (Abstract shortened by UMI.).;In the past two decades, hybrid models have emerged with the objective of overcoming the weaknesses of the traditional energy models. Hybrid models essentially merge bottom-up and top-down methodologies and so require an understanding of consumer behaviour at the technological level. Discrete choice models can provide this technology specific behavioural information to hybrid models.