Impact of foresight horizons on energy system decarbonization pathways

Abstract

Energy system optimization models often assume a perfect foresight of all defining future influences, assuming full knowledge of technological and socio-political developments over a long time horizon. In addition, many models impose annual emission reductions to prevent short-sighted decisions from deviating from these reduction paths. In this paper, we analyze different approaches to model foresight horizons and compare the influence of a perfect foresight approach with a rolling horizon and a purely myopic approach. For the first time, we explore the combination of incrementally increasing limited foresight horizons combined with a cumulative emission budget. Results from a case study of the German energy system indicate that the foresight horizon significantly affects the decarbonization trajectory. Short-sighted decisions that only consider the next five years even lead to infeasible pathways, failing the transition of the energy system by missing complying with the emission constraint. In contrast, long-sighted decision-making shows earlier investments in renewable energies and decarbonization, which can save billions of euros. Short-term cost-efficiency conflicts with long-term decarbonization goals, underscoring the importance of incorporating long-term perspectives into policy and decision-making, as well-defined decarbonization plans to achieve sustainable climate targets. This study underscores the importance of well-defined annual emissions targets and their achievement, highlighting the potential consequences of missing emissions targets.