A comprehensive energy model in the municipal energy planning process

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European Journal of Operational Research 33 (1988) 212-222 North-Holland

A comprehensive energy model in the municipal energy planning process Clas-Otto W E N E and Bo RYDI~N

Energy Systems Technology, Department of Energy Conversion, Chalmers University of Technology, S-412 96 Gothenburg, Sweden Abstract: Based on several years of experience, the procedural aspects of the use of a comprehensive LP-model for community energy planning is discussed. The community energy system is seen as a technically complex, open system which is managed by a network of organizations (esoteric boxes). Technical complexity, closure and lack of unique management raises specific procedural problems for which solutions are suggested. The network management gives the comprehensive model a special rSle in the planning process in providing for improved information flows and conflict resolution. The viability of the paradigm of learning is noted. A methodology to merge substantive and procedural aspects is proposed. Keywords: Energy, planning, urban affairs, learning, optimization 1. Introduction The strong increase in energy prices during the 70's followed by today's oil glut has made decisions on the development of energy systems very complex. Not only have the amount of candidate technologies for investment or the possible energy flow paths to satisfy demands increased, but also the development of important factors in the system environment have become more uncertain. One response from the system analyst to meet this increasing complexity has been the development of comprehensive optimization models where one tries to make a complete description of all energy flows and energy conversions in a well-defined energy system. The first examples of these models are found in [1-3]. During the second half of the 70's several international and multinational organizations developed their own dynamic LPmodels: International Energy Agency, MARKAL [4-6], European Community, EFOM [7,8] and International Institute for Applied Systems Analysis, MESSAGE [9,10]. Those models were used for the analysis of national, multinational and global energy systems. Examples from these works are Received September 1986; revised April 1987

found in [11-13]. Using the models it is possible also to make comprehensive studies of the competitition between supply and conservation [14]. In Sweden the IEA-MARKAL model and the IIASA-MESSAGE model have been used to study community [15-20] and regional [21] energy systems. The studies done on community energy systems at the Energy Systems Technology Group [15-19] have been made in close cooperation with the municipal authorities, the objective being that the results should be used in the community energy planning. Since 1977, there is a law in Sweden stipulating that the municipalities have to consider energy supply and demand in their planning. The original law did not demand any planning document. An amendment was made in 1982 calling for a plan for oil substitution to be decided upon by the municipal council. In 1985 the ambition was raised considerably by a new amendment demanding a complete energy plan for the whole community authorised by the municipal council. From the point of view of 'rational' planning, there is an obvious need for a comprehensive model of the community energy system. However, there are two aspects of planning that have to be discerned here: there are the technical issues that

0377-2217/88/$3.50 © 1988, Elsevier Science Publishers B.V. (North-Holland)

C.-0. Wene, B. Rvd$n / Comprehensive energy model municipal energy planning

the energy planners are confronted with, i.e. the nature and functioning of the energy system, and there are the processes adopted in deriving and implementing the plans. In the literature those aspects are sometimes referred to as the substantive and the procedural aspects of planning (see e.g. Breheny [22] for a more general discussion). A model can be a technical success but still fail to make any impact on the planning process. This paper will focus on the procedural aspects of the use of MARI,:AL or any other comprehensive LP-model for community energy planning. Two types of questions are particularly interesting: - Properties of the energy system. What system properties are important for implementing a comprehensive energy model in the planning process? From a technical point of view there are solid reasons to use a comprehensive model, however, are there also procedural aspects that favour the use of this type of model? - Merging of substantive and procedural aspects. What approach, or methodology, can be used to ensure that the model does not only produce technically valid results but also is accepted as a relevant tool in the planning process? The purpose of this paper is to discuss these two types of questions. The suggested answers are built upon seven years of studies [15-19] of community energy systems and involvement as researchers and consultants in municipal energy planning. This work is briefly reviewed in Section 2 below, in order to give a background to the following discussion. The system properties that must be considered when introducing a comprehensive model into the planning process are discussed in Section 3 and a methodology aiming at the merging of the substantive and procedural aspects is presented in Section 4.

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financed by the national energy research programme, but with a strong involvement of the municipal authorities. Reference groups were appointed by the municipal councils to follow the work, discuss assumptions and evaluate and propagate the results. Working groups were formed at those municipal organisations that are involved in energy planning to evaluate data and help to validate model and data-base. After completion of the research projects, the municipalities themselves have financed further model studies of the same scope as the research projects. This is maybe the best direct indication that it is relevant to use a comprehensive model in the energy planning process. As the model studies are used for comprehensive, long-range planning it is often difficult to isolate the influence of the studies on individual decisions. Where it has been possible to see a direct effect, it is with regard to whole subsystems rather than individual techniques. In one case it is evident that the model studies were instrumental in obtaining a broad majority in the municipal council for a decision to start building a district heating system. A second example is the boosting, during a running fiscal year, of the budget for energy conservation in buildings owned by the municipality. Other examples concern cooperation between the district heating subsystems and large industries within the community. Examples of technical issues treated in the studies are -District heating: expansion of the grid, production mix and co-generation of power and heat. - H e a t i n g systems outside the district heating area. Effects on local electric grid, electrical demand and demand for fuels. - Introduction of natural gas. - Extraction and demand of regional fuels. - Balance of supply and conservation.

2. Studies of community energy systems

The community studies started in 1980. Detailed descriptions of methods and model results are found in [15-19]. Complete model studies have been made of two communities in southern Sweden: J~nkiAping, with 107000 inhabitants the ninth largest community of Sweden and N~issjiS, with 31000 inhabitants of average size for a Swedish community. The studies started as research projects, partly

3. A complex, open system without management?

Most procedural issues raised when using the existing comprehensive models can be traced to three properties of the community energy system: - I t is a technically complex system. - I t is an open system. - It has no unique management. The two first properties are also the main reasons

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for using comprehensive mathematical models to help solving technical (substantive) problems in the system. However, they may give raise to conflicts about the use of the very same models in the actual process of planning. These conflicts and their remedies are discussed in Sections 3.1 and 3.2. The third property is of special interest because it leads to an independent argument for using comprehensive models to solve procedural problems. The major part of this section is used to discuss this property and its implications.

3.1. Technical complexity In order to be both comprehensive and easy to use, the LP model must work on an aggregated level. For instance, energy conversion is described by generic technologies, e.g. all solid fuel heat plants in the district heating subsystem are described as one technology, heat pumps are characterized by the major alternatives such as heatpump air-to-water, heat-pump using groundwater as heat source etc. Energy demands are characterized by sector (housing, services, industry, transport), subsector (e.g. single and multifamily houses), geographical region, quality and load, but in order to get a manageable model only 20-25 different energy demands should be given. For the same reason, the continuous variation of the energy demand over the year, i.e. the load characteristic, is approximated for each demand by step functions. Important actors in the planning process are the managements of the different subsystems fully or partly contained in the main system (e.g. district heat, electricity, regional fuels). The need to work on an aggregated level may be in conflict with the strong interest of these managements to obtain detailed results for their subsystems. There are two reasons for this interest. The first concerns the technical validation of the model: comparison of model structure, data-base and results with existing knowledge of the subsystems. Although this is important for the acceptance of the model, the second reason is directly connected to the process: evaluating the consequences for the subsystem and comparing model results with the plans within the subsystem. In order for the results to have any influence on decision made inside the subsystem, the method as well as the results must be translated and expressed in the language used

inside the subsystem. It is tempting to satisfy the quest for details by making the comprehensive LP-model more detailed. This is not feasible already from the point of computer costs. Furthermore, this tends to make the model more complicated without improving the understanding of the system, thus impeding rather than promoting the translation of method and results into subsystem language. Instead, submodels for the different subsystems should be coupled to the comprehensive model, either in the form of input-models to produce aggregated input-data or postoptimal models to evaluate the results from the comprehensive model. Two such models are presently available at the Energy Systems Technology Group: -HOVA [23]. An input model to aggregate data on building structure and energy conservation possibilities in existing houses. - MARGOLIS[24]. A postoptimal model for district heating using a load curve with one hour resolution to study production mix and short range marginal costs. The conclusion from this is that the comprehensive model should describe the structural complexity of the system, while the details should be left to submodels. Our experience indicates that procedural problems due to technical complexity can be handled with this approach, i.e. within the paradigm of mathematical modelling and optimization. Is this true also for the other two properties? 3.2. System closure All real systems are in a sense open because they are influenced by and/or influence their environment. In [17] it is argued that the factors influencing the choices in the energy system can be put under four headings: Energy Markets, Useful Energy Demands, Energy Technology and Natural Environment. Beside linear cause-effect relations between the system and its environment, there are also important feedback loops. Large-scale use of regional energy carriers changing the markets for these carriers, is an example of such a loop. Changing life-styles and therefore energy demands as a result of increased energy costs or intense R & D efforts to improve or develop new energy technologies are two other examples. The recent

C.-O. Wene, B. Ryd~n / Comprehensive energy model municipal energy planning

development of heat pumps, which has changed the conditions for optimal choices of technology in the system is an example of the R & D loop. The problems with system closure raise questions about suboptimal systems and the treatment of uncertainty. Studies of sensitivity cases with the help of the mathematical model is a robust albeit sometimes blunt method for dealing with system closure as a substantive issue. For the mathematical modeller system closure represents a challenge that can be met e.g. by hierarchical models contained in one another but with less details as the system boundaries are increased or by parallel, separate but interactive models for the system and different parts of the system environment. Such model development is very interesting from the substantive point of view and will probably provide important information to the scientific community. But what are the needs in the planning process? System closure as a procedural problem is best illustrated by an early client reaction: "But what you do with your model, is to increase the uncertainty!" The confusion was a result of our emphasis on the question of what, and what not to do depending on the developments in the system environment. The basic question, however, turned out to be: how, i.e. trough which mechanisms, do the uncertainties in the system environment influence the consequences of contemplated decisions in the system? Although related to each other, the two questions are asked from two quite different perspectives: 'what' being that of the optimizer, 'how' that of the learner. The conclusion is, that in the process, understanding is more important than optimizing, 'how' outranks 'what'. Considering this, sensitivity or scenario studies seem to be realistic choices to demonstrate the influence of uncertainties, while the cost-effectiveness in the planning process of the more sophisticated modelling approaches is doubtful. Is more mathematical models the only answer the system analyst can give to procedural problems? In "The poverty of problem solving" [25] Vickers points out some "misconceptions about what systems analysis should be and might be". "The first of these misconceptions is the idea that system analysis is primarily a technique for solving problems. It should rather, I suggest, be regarded as a means of understanding situations". Batty [26] in the same monography discusses

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quantitative and qualitative models, or 'arithmetical' and 'geometrical' models, and argues that, "what is required is much more 'geometry' to complement the precise modelling abilities which have been acquired during the last two decades". Both these comments regard urban policy-making and planning but can be directly carried over to the energy field. As a substantive issue, system closure is a large problem challenging the model builder. However, to better understand the situation we suggest the simple 'geometrical' model in Figure 1. The model is similar to the model in (17) and identifies four factors in the system environment influencing the choice of energy system: Energy Sources (incl. natural sources and energy markets), Useful Energy Demands, Technology Development and Physical Environment. The task for the planner is to find an efficient and robust energy system connecting energy sources and demands considering the uncertainty in the development of these four factors. Our experience here shows that the model in Figure 1 together with sensitivity studies with the comprehensive mathematical model, is a cost-effective way of introducing and improving the understanding of the problems of system closure in the energy planning process. This means, however, that we are leaving the paradigm of optimization.

3.3. Management The community energy system consists of many subsystems; electricity, district heating, fuels etc.

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Most of those subsystems have well-defined managements and organizations with well-established practices of how to run the subsystem and how to act against influences from the out-side and in relation to the other subsystems. These organisations are what Stafford Beer [27] has called 'esoteric boxes'. There is no way to enter into these boxes and be accepted within them without the appropriate passport. The passport may be a certain education and/or practical experience with the subsystem. The box is not a closed system, it has inputs and outputs but the processing of the inputs does not change the box. It is a self-regulating and self-organising very stable system. Beer characterizes the esoteric box as "a strongly robust system in equilibrium. If we try to influence its behaviour by changing variables which apparently affect it, it responds neither by collapsing nor by a violent reaction. It simply shifts the internal position of equilibrium very slightly, thereby off-setting the environmental change that has occured." [27, p. 227]. In contrast to the network of esoteric boxes, the 'community energy system' is a recent construct. There is no esoteric box whose task is to manage this system. The system can be influenced by political decisions inside the community, but only through the workings of one or more of the esoteric boxes. The true management of the community energy system is the network of esoteric boxes. The development of this system depends on the actual decisions taken inside the esoteric boxes.

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Figure 2 schematically illustrates the nested relations between the policy, organisational (executive) and technical levels. On the first level sector policies are formulated. Actors on this level are political parties, political committees etc. Activities outside the community also influence the policy formulation, e.g. decisions on the national level. We are not here interested in how the policies actually are formulated but only in their r61e as inputs to the esoteric boxes on the next level. One policy area of large importance to the energy system is the built environment, another would be natural resources inside the community borders (not shown in the figure). However, also decisions on social service, transport system and policies for industrial development are important inputs to the esoteric boxes. The esoteric boxes on the organisational (executive) level are found both in the public and in the private sectors. Examples of boxes in the private sector are subsiduaries to the international oil companies, national companies supplying coal or local enterprises for domestic fuels as peat or fuelwood. Those boxes all come under the heading 'Fuel' in Figure 2. Considering the large changes on the fuel markets it may look as if those organisations could not be characterized as 'robust systems in equilibrium'. However, considering the fact that major environmental parameters are changing by up to one order of magnitude, those esoteric boxes have shown remarkable abilities of self-organisation and self-regulation. The enterprises for domestic fuels are new organisations which have not yet reached the internal stability of a mature esoteric box, however many of them are subsidiaries to already existing energy enterprises so that a steep learning curve can be forecasted. The energy utilities, i.e. the enterprises supplying electricity, district heat and gas, form a special group of boxes with distribution monopolies. In Sweden, most of the electric utilities working inside the communities and all district heating utilities belong to the public sector. Of all the esoteric boxes discussed here the electric utilities are probably the ones whose points of equilibrium have been least effected by the changes in the energy field during the last two decades. The inputs and outputs have changed, however, the internal structures and processes remain the same. The environmental pressure on the district heating to change

C.-O. Wene, B. Ryd~n / Comprehensive energy model municipal energy planning

their structure have been greater than for the electric utilities, involving new relations both to the fuels and electrical sectors as well as to the industrial and buildings sectors. The headings 'Buildings' and 'Industries' stand for two autonomous networks of esoteric boxes, whose major input/output is outside the energy sector, but who still are important stakeholders in the community energy system. They should therefore be included in the network that is running this system. The 'Building'-network contains esoteric boxes from both the public and private sectors. The municipal building authority is an important box because it is responsible for the technical systems in the buildings owned by the municipality, strongly influences the choice of energy supply to new buildings and gives advice for retrofitting existing buildings with better insulation and other conservation measures. Another important box is the regional building authority who, after advice from the local authority, gives state loans for conservation measures. Houseowners are public and private companies, cooperative associations and individuals. Most of the individual house-owners are found in associations of house owners which also handle an important part of their relations with other members of the network. For the analysis we will consider the individual house-owners acting collectively as an esoteric box. The members of the network processes information, invest in energy technology and buy and sell energy carriers between themselves. The energy carriers are processed by the technical components on the technical level. The network of technical components and the energy flows in this network form the technical energy system in the community. Every technical component has at least one owner among the members in the network of esoteric boxes. The discussion above gives a brief account of the relations and entities implied by the term 'community energy system'. Where in this complicated net does a comprehensive energy model fit in? Figure 3 shows a naive approach; let us call it 'a hierarchical planning approach'. MARKAL is here seen as a model to optimize a general technical system. This approach will most surely fail because it has difficulties to accommodate the network of esoteric boxes, which is managing the

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technical energy system. Figure 4 shows the most probable outcome if one tries to insert a general technical system between the policy and organisational (executive) levels. The detailed knowledge about the technical components resides by the self-organizing and self-regulating esoteric boxes and any technical prescription from a superior level, that did not fit into the picture accepted inside the box, would either be politely ignored or brusquely refused on professional grounds. The result would be that the model work would have no or only spurious impact on the energy system. We must turn the question around: What use is a comprehensive model to the community energy system? In what way does it improve the efficiency of the system? i Regional/ [ace[

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Each esoteric box is the expert on how to run that particularly part of the energy system over which it has control by owning certain natural resources or technical components. Each esoteric box is internally stable and can easily accommodate new knowledge on how to run its technical subsystem more efficiently. Instabilities occurring in the energy system are not due to the esoteric boxes but to what is going on between the esoteric boxes [27]. Three causes for malfunction or suboptimization of the system are identified here: - Dominating boxes. One esoteric box or group of boxes may become dominating and force system solutions suited to particular subsystems. -Information flow. The flow of information between the boxes or from outside the network may be disrupted, the information may be distorted or misinterpreted. Faultly information flow may be a consequence of dominating boxes, however, there are other independent causes such as the appearance of new factors in the flow for which the individual esoteric boxes have not set up the appropriate filters. Examples could be given from the debate on the physical environment. -Conflict resolution. There exist languages to express a conflict and methods to resolve a conflict inside an esoteric box. This is an important factor for the internal stability of the box. One would expect the market forces to solve the dayto-day conflicts between the esoteric boxes. How-

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ever, there are conflicts between boxes where neither the existing self-regulating market mechanisms nor any combination of the internal languages or models will provide efficient frameworks for conflict resolution. The balance between supply and conservation is an example of such inter-box conflicts. This balance should be set considering the total system cost [14,15], a concept foreign to the internal languages. However, also other system aspects should be considered, e.g. the rSle of conservation in improving the physical environment [28] and for hedging against uncertainties in the system environment [29]. To resolve the type of conflicts exemplified by the supply/ conservation issue, a metamodel and a metalanguage are necessary, i.e. a model that describes all the important subsystems and their relations and a language that can handle propositions that are undecidable in the internal languages, such as where the balance between supply and conservation should be (see e.g. [27,30] for discussion of the 'meta' concept!) The problem of dominating boxes is basically a political problem, where a comprehensive model can at best supply arguments for a political decision. However for the other two causes of malfunction a comprehensive model can supply an immediate remedy: - I t can support the information flow between the boxes and provide a reliable filter for informa-

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C.-0. Wene, B. Ryd$n / Comprehensive energy model municipal energy planning

tion external to the network of esoteric boxes. - It is the metamodel needed for inter-box conflicts and provides a metalanguage for a discussion of these conflicts. Figure 5 illustrates the rhle of MARKAL as a metamodel. One can call this a metasystemic approach, as the system consisting of all energy flows and technologies in the community is only treated as a logical construct, needed to improve information flow and conflict resolution between the esoteric boxes. In an actual case the comprehensive model is used interactively in the way discussed in the next section. Chosing a cybernetic language, one could say that the model and the system analyst together with decision makers and technical expertise from the esoteric boxes become elements of new, positive feedback loops. Thus, if the fundamental paradigm in a hierarchical approach was one of optimization, the paradigm in a metasystemic approach is one of learning [31].

4. A procedural methodology

Considering the problems of system complexity, closure and management, where is the place of the mathematical models in an efficient planning process? Figure 6 suggests a procedural methodology built on the experiences obtained in the community studies in [15-19]. The triangle indicates the problematic properties of the community energy system and the means to handle these properties in the planning process. Each side should be given equal importance, together they set the stage for the process. Below, the three sides of the planning triangle are discussed in more detail. An experienced analyst can certainly make short-cuts in the program suggested here. However, the cost-effectiveness of such short-cuts should be considered not only for the substantive issues but also for the procedural issues. 4.1. Demands on and opportunities for the energy system The analysis of the present and future demands on and opportunities for the energy system starts from the simple 'geometrical' model in Figure 1. The work on the substantive issues begins along

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this side of the triangle. The analysis show similarities to e.g. the 'Woxs-uP' technique [32] used in strategic planning, where the acronym stands for weaknesses, opportunities, threats and strengths. Apart from data collection and classification, major tasks are scenario generation and previews of the effects of different scenarios on the energy system. The objectives for the community energy system are also set during this analysis. The output from the first phase of the planning is five working documents: -Reference Energy System, RES [33] for the chosen Base Year. RES shows all energy flows and installed capacities in the base year. - Forecasts of Useful Energy Demands over the period studied and for all the demand categories chosen. - Potential Energy Systems, PES. PES shows all opportunities for energy technologies and all possible combinations of energy technology, energy markets and demand categories. An example of a PES is given in [18]. Tables giving the present and forecasted technical properties, investment costs and O & M costs for all energy technologies included in the study. Technical properties are energy carrier input/output, efficiency, emission factors. Any constraints due to technical factors should also be specified in these tables. -Supply tables. These tables contain the assumptions on prices and availability of the energy carriers supplied on the energy markets outside -

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the system as well as availability of natural resources within the system (cf. Figure 1 !). 4.2. The mathematical models The backbone in the package of available models is the comprehensive LP-model. In the works that are done at the Energy Systems Technology Group [15-19] the IEA-MARKALmodel has been used. The use of this model and the results that can be obtained from it are discussed in detail in [15-19]• Detailed models for the different subsystems are coupled to the main model, e.g. [23,24]• 4•3. A stage for the esoteric boxes The problem on the third and bottom side of the planning triangle is how to formulate the metasystemic approach in operational terms• Procedural issues begin and end here. Our experience is that a stage for the esoteric boxes can be

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provided by rather conventional means• In an actual planning situation a reference group and a working group can be set up [18]. To show the working of a metasystemic approach a role-playing exercise with MARKALhas been developed and played with actors from the network of esoteric boxes as well as graduate students from Chalmers University of Technology [34]. The learning process must be in focus when organising the work in the reference and working groups• It is important that the members of the reference group follow the analysis continuously and take part not only in writing up a final report, but also in collecting the data. The members of the groups come from all the major esoteric boxes with interest in the community energy system• If organisations outside the community authorities cannot participate, informal contacts should be taken to ensure a continuous exchange of information and arguments. Figure 7 shows the roles of the reference group

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a n d the w o r k i n g g r o u p (task force) relative to the o t h e r two sides of the p l a n n i n g triangle. T h e reference group is p o l i c y oriented, while the w o r k i n g g r o u p evaluates data, runs the m o d e l s a n d evaluates m o d e l results. T h e two g r o u p s meet over the analysis of d e m a n d s on a n d o p p o r t u n i t i e s for the energy system.

5. Conclusions A n y o n e using an L P m o d e l to s t u d y technical issues in the c o m m u n i t y energy system is tacitly working within the paradigm o f optimization. T h e goal is to find the system that b e s t satisfies the system objectives with a p r o p e r hedge a g a i n s t uncertainties in the system e n v i r o n m e n t . However, looking at the use of the m o d e l in the p l a n n i n g process, the analysis in Section 3 shows that it should p r i m a r i l y be seen as an i n s t r u m e n t within the paradigm of learning [31]. T h e goal is to start a l e a r n i n g process for the o r g a n i s a t i o n s within the n e t w o r k of esoteric boxes. T h e p r e s e n t m o d e l dev e l o p m e n t is t o w a r d s integrating energy a n d physical e n v i r o n m e n t to l o o k at the c o m b i n e d p r o b l e m of energy system d e v e l o p m e n t a n d env i r o n m e n t a l c o n t r o l [28]. This will involve m o r e o r g a n i s a t i o n s into the n e t w o r k of esoteric boxes a n d further e m p h a s i z e the m o d e l as an i n s t r u m e n t for learning. Does this indicate a h i d d e n conflict? Is it possible to merge the s u b s t a n t i v e a n d p r o c e d u r a l aspects of p l a n n i n g as p r o p o s e d in Section 4 above? C a n the two p a r a d i g m s really co-exist? O n e answer is that the m e t h o d o l o g y in Section 4 has p r o v e n itself in practical a p p l i c a t i o n s a n d that ' o p t i m i z a t i o n ' a n d ' l e a r n i n g ' are b u t w o r k i n g p a r a d i g m s a p p l i e d to explain the goals for the p l a n n i n g on two quite different levels: the technical level and the o r g a n i s a t i o n a l level. A n o t h e r answer is that there is a genuin dialectical situation for the clients a n d that the p r o p o s e d m e t h o d ology is provisional awaiting a m o r e f u n d a m e n t a l synthesis.

Acknowledgements This p a p e r has benefitted from c o m m e n t s b y P. Agrell. The w o r k has been s u p p o r t e d b y research grants from the Swedish E n e r g y R e s e a r c h C o m mission.

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