The aim of making socioeconomic analyses of projects is to improve the basis for a qualified societal prioritisation of resources. A sensible societal prioritisation of resources across sectors over various time frames etc. requires that the analyses are based on similar and transparent methods while certain issues and non-valued consequences are described in the best possible way. The result will always be a tradeoff between economic and non-economic considerations related to social and ethical issues etc.
It is important to be aware of the limitations in socioeconomic analyses.
First of all, there is often uncertainty about the future development of crucial assumptions such as energy prices, salaries etc. The significance of these can be considered through sensitivity calculations.
Second of all, important societal values can be involved. These include security of supply, the environment and technological developments, which are not priced on a market or where market prices do not reflect the full societal values. There can also be distributional, social and ethical considerations, which are impossible to qualify in monetary terms.
The Energy Agency’s Guidance to socioeconomic analyses on energy describe the calculation method, which should be used when conducting socioeconomic analyses of projects within the field of energy. The guidance builds on the Ministry of Finance’s guidance on socioeconomic feasibility studies.
The world market prices on fuel has a great impact on both the energy consumption in Denmark and the value of Denmark’s net energy exports. The assumptions for the socioeconomic analyses include estimates of future fuel prices and electricity as well as calculated prices for CO2-emissions etc. and emissions factors, calorific values etc.
It is important to underline that such evaluations are associated with a very large uncertainty as fuel prices, among other things, are determined by political realities and expectations to new energy forms, the economic cycle, the currency markets etc.
The Energy Agency updates the socioeconomic assumptions on a regular basis. The method for the projections of prices and costs is adjusted on an ongoing basis in order to provide the best picture of the socioeconomic costs of energy initiatives.
The projections and evaluations behind the assumptions are described in more detail in the following reports.
The prices of fossil fuels and CO2-quotas are based on an evaluation from the International Energy Agency (IEA), World Energy Outlook 2013.
Projection of fossil fuels
The projection of the fossil fuels prices includes two main steps:
- Convergence between forward/future prices and the IEA’s long-term pricing scenarios. This aims to ensure a correlation with actual market expectations in the short to medium term and the IEA’s projections in the long term (pdf).
- Estimate of price additions / deductions for converting IEA prices – from step 1 above – to Danish prices at consumption (pdf).
The projection of solid biomass prices consists of two steps:
- In 2013, EA Energy Analysis produced a projection for import prices (CIF prices) for solid biomass (wood pellets, wood chips and hay) for the period 2013-2050 with a special focus on the period until 2035 (pdf).
- Estimate of price additions / deductions for converting CIF prices at Danish ports from step 1 above to Danish prices at consumption (only available in Danish).