A system dynamics model for energy transition: Substituting fossil fuels with renewable energy

Authors

  • Joko Sulistio Industrial Engineering Department, Universitas Islam Indonesia, Yogyakarta 55584, Indonesia
  • Winda Nur Cahyo Industrial Engineering Department, Universitas Islam Indonesia, Yogyakarta 55584, Indonesia
  • Daffa Alamsyah Industrial Engineering Department, Universitas Islam Indonesia, Yogyakarta 55584, Indonesia
  • Danang Setiawan Department of Sustainability and Planning, Faculty of Technical IT and Design, Aalborg University, Denmark

DOI:

https://doi.org/10.31315/opsi.v19i1.16581

Keywords:

Elasticity of substitution, Renewable energy, Systems Dynamics, Energy transition, Willingness to Invest

Abstract

This study develops a system dynamics model to analyse the gradual transition from conventional to renewable energy in Indonesia. The model was built in Powersim Studio 10 and aims to capture the interplay among economic conditions, regulatory signals, and investor behaviour over time. The model represents two major components of the system: conventional energy demand and renewable energy development, connected by a substitution flow to illustrate the gradual transition. The model parameter remained hypothetical but was relevant to the literature on Indonesia's energy transition. The result indicates that the transition does not follow a linear path, but evolves through three phases: an initial acceleration, a stabilisation period, and a dynamic equilibrium phase. Sensitivity analysis shows that substitution elasticity alone does not directly determine the speed of transition. Instead, a transition dynamic emerged from the interaction between substitution elasticity and the relative willingness to invest between renewable and conventional energy technologies. The model indicates that a rapid transition occurs only when renewable energy is more economically attractive than fossil energy, whereas a high substitution elasticity is insufficient to accelerate the transition when conventional energy remains economically dominant. Rather than being used to obtain a precise forecast, the model provides a conceptual system-level framework for understanding how the energy system behaves with respect to interactions among different factors. The model’s structure can be used to identify which conditions matter among the combined effects of economics, regulation, and investment behavior in designing strategies for renewable energy transition.

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Published

2026-07-30

Issue

Vol. 19 No. 1 (2026): OPSI - June 2026

Section

Article

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