Dynamic Equilibrium Energy Modeling: The Canadian BALANCE Model

Abstract

We discuss the development and structure of the University of Alberta BALANCE model of Canadian energy supply and demand. The model is a multi-time-period linear programming formulation of Canadian energy supply integrated with a large econometric model of price-sensitive energy demands in the Canadian economy. The model finds an equilibrium set of prices, supplies and demands over all time periods using a new dynamic version of the equilibrium-seeking algorithm developed for the Project Independence Evaluation System. The special aspects of a dynamic model and equilibration are described. An example illustrating the convergence properties of the algorithm is given. Finally, the question of whether or not to increase Canadian natural gas exports to the United States is examined using the model.