Chapter 15: Using System Dynamics to Model Industry's Developmental Response to Energy Policy

In this chapter we explore the potential development of the biofuels industry using the Biomass Scenario Model (BSM), a system dynamics model developed at the National Renewable Energy Laboratory through the support of the U.S. Department of Energy. The BSM is designed to analyze the implications of policy on the development of the supply chain for biofuels in the United States. It explicitly represents the behavior of decision makers such as farmers, investors, fueling station owners, and consumers. We analyze several illustrative case studies that explore a range of policies and discuss how incentives interact with individual parts of the supply chain as well as the industry as a whole. The BSM represents specific incentives that are intended to approximate policy in the form of selected laws and regulations. Through characterizing the decision making behaviors of economic actors within the supply chain that critically influence the adoption rate of new biofuels production technologies and demonstrating synergies among policies, we find that incentives with coordinated impacts on each major element of the supply chain catalyze net effects of decision maker behavior such that the combined incentives are greater than the summed effects of individual incentives in isolation.