Navigating the selection of renewable energy trading partners: A multi-objective optimization approach

Abstract

Decarbonizing economies and energy systems is urgently needed in order to meet current climate change mitigation targets. However, many countries, particularly in Europe, will not be able to meet their rapidly growing demand for renewable energy by expanding domestic production alone in the near future. Consequently, these countries are planning to import renewable energy using chemical carriers such as hydrogen and metals. This raises the question of which countries to partner with for renewable energy trade. Selecting the appropriate trading partners is a complex task that requires balancing several potentially conflicting objectives, including cost-efficiency, sustainability, governance, and security of supply. In this article, we present a novel approach to selecting partner countries in the presence of such trade-offs. Our approach uses empirical indicators, abstract selection rules, and the epsilon constraint method to combine these objectives into a single objective optimization problem with additional constraints. We demonstrate our approach by examining the case of Germany as an importer of renewable energy using iron as an energy carrier. Our approach identifies the optimal set of potential trading partners and their respective shares of supplied renewable energy by minimizing costs while meeting the added constraints. For instance, under the most stringent sustainability and security constraints, the model identifies Australia, the United States, Brazil, Spain, Canada, and Chile as potential trading partners for Germany. Relaxing these constraints adds more countries such as Morocco and Oman. Our approach is the first to identify trade networks, i.e., concrete sets of partner countries, that can bridge gaps in renewable energy supply, offering valuable guidance for developing trading partnerships.