CHAPTER 13. UTILITY IMPACT ANALYSIS

TABLE OF CONTENTS

**13.1 INTRODUCTION** 

**............................................................................................................ 13­1** 

**13.2 METHODOLOGY** 

**........................................................................................................... 13­1** 

**13.3 RESULTS** 

**......................................................................................................................... 13­2** 

**REFERENCES**

**.......................................................................................................................... 13­3** 

**13­i 13­ii** CHAPTER 13. UTILITY IMPACT ANALYSIS

13.1 INTRODUCTION

**The U.S.**  **Department of**  **Energy (DOE)**  **will analyze**  **the effects**  **of proposed**  **commercial**

**refrigeration equipment**  **energy conservation**  **standards on**  **the electric**  **utility industry**  **as part**  **of**

**the Notice**  **of Proposed**  **Rulemaking analysis,**  **using a**  **variant of**  **the Energy**  **Information**

**Administration (EIA)’s**  **National Energy**  **Modeling System**  **(NEMS). a**  **The NEMS**  **is a**  **large,**

**multi­sectoral, partial**  **equilibrium model**  **of the**  **U.S. energy**  **sector. EIA**  **uses NEMS**  **to produce** 

1 **the** 2007 Annual Energy Outlook (AEO2007)

**. NEMS**  **produces a**  **widely recognized**  **baseline**

**energy forecast**  **for the**  **United States**  **through 2030,**  **and this**  **energy forecast**  **is available**  **in the** 

**public domain.**  **DOE will**  **use a**  **variant known**  **as NEMS­BT**  **to provide**  **key inputs**  **to the** 

**analysis. The**  **utility impact**  **analysis will**  **compare model**  **results for**  **the base**  **case to**  **policy cases** 

**where proposed**  **energy efficiency**  **standards are**  **in place.**  **Using NEMS­BT**  **for the**  **utility**

**analysis offers**  **several advantages.**  **As the**  **official DOE**  **energy forecasting**  **model, NEMS**  **relies**

**on a**  **set of**  **assumptions that**  **are transparent**  **and have**  **received wide**  **exposure and**  **commentary.**

**NEMS­BT allows**  **an estimate**  **of the**  **interactions between**  **the various**  **energy supply**  **and demand** 

**sectors and**  **the economy**  **as a**  **whole. The**  **utility analysis**  **will report**  **changes in**  **installed capacity** 

**and generation,**  **by fuel**  **type, which**  **would result**  **for each**  **trial energy**  **efficiency standard**  **level,**

**as well**  **as changes**  **in electricity**  **sales to**  **the commercial**  **sector.**

**DOE conducts**  **the utility**  **analysis as**  **a policy**  **deviation from**  **the** AEO2007

**, by**  **applying**

**the same**  **basic set**  **of assumptions.**  **For example,**  **the operating**  **characteristics (e.g.,**  **energy**

**conversion efficiency,**  **emissions rates)**  **of future**  **electricity generating**  **plants are**  **as specified**  **in**

**the** AEO2007 **reference case,**  **as are**  **the prospects**  **for natural**  **gas supply.**  **Also, DOE**  **will explore** 

**deviations from**  **some of**  **the reference**  **case assumptions,**  **to represent**  **alternative futures.**  **Two**

**alternative scenarios**  **use the**  **high and**  **low economic**  **growth cases**  **of** AEO2007. **(The reference** 

**case corresponds**  **to medium**  **growth.) The**  **high economic**  **growth case**  **assumes higher**  **projected**

**growth rates**  **for population,**  **labor force,**  **and labor**  **productivity, which**  **would result**  **in lower** 

**predicted inflation**  **and interest**  **rates relative**  **to the**  **reference case**  **and higher**  **overall aggregate** 

**economic growth.**  **The opposite**  **is true**  **for the**  **low growth**  **case. Starting**  **in 2012,**  **the high** 

**growth case**  **predicts growth**  **in per**  **capita gross**  **domestic product**  **of 3.5**  **percent per**  **year,**

**compared with**  **3.0 percent**  **per year**  **in the**  **reference case**  **and 2.5**  **percent per**  **year in**  **the low** 

**growth case.**  **While supply­side**  **growth determinants**  **are varied**  **in these**  **cases,** AEO2007

**assumes the**  **same reference**  **case energy**  **prices for**  **all three**  **economic growth**  **cases. Different** 

**economic growth**  **scenarios will**  **affect the**  **rate of**  **growth of**  **electricity demand.** 

13.2 METHODOLOGY

**The electric**  **utility industry**  **analysis will**  **consist of**  **NEMS­BT forecasts**  **for generation,** 

**installed capacity,**  **sales, and**  **prices. The**  **NEMS provides**  **reference case**  **load shapes**  **for several** 

**end uses,**  **including commercial**  **refrigeration. The**  **model uses**  **predicted growth**  **in demand**  **for**

**a For**  **more information**  **on NEMS,**  **please refer**  **to the**  **U.S. Department**  **of Energy,**  **Energy Information** 

**Administration documentation.**  **A useful**  **summary is**  **National Energy**  **Modeling System:**  **An Overview**  **2000,**

**DOE/EIA­0581(2000), March**  **2000. EIA**  **approves use**  **of the**  **name NEMS**  **to describe**  **only an**  **official version**  **of**

**the model**  **without any**  **modification to**  **the modeling**  **code or**  **data. Because**  **this analysis**  **entails some**  **minor code** 

**modifications and**  **the model**  **is run**  **under various**  **policy scenarios**  **that are**  **variations on**  **EIA assumptions,**  **DOE**

**refers to**  **it by**  **the name**  **NEMS­BT (BT**  **is DOE’s**  **Building Technologies**  **Program, under**  **whose aegis**  **this work**  **has**

**been performed).**  **NEMS­BT was**  **previously called**  **NEMS­BRS.**

**13­1 each**  **end use**  **to project**  **total electric**  **system load**  **growth for**  **each region,**  **which it**  **uses in**  **turn to** 

**predict the**  **necessary additions**  **to capacity.**  **The NEMS­BT**  **accounts for**  **the implementation**  **of**

**energy efficiency**  **standards by**  **decrementing the**  **appropriate reference­case**  **load shape.**  **DOE**

**determines the**  **size of**  **the decrement**  **using data**  **for the**  **per­unit energy**  **savings developed**  **in the** 

**life­cycle cost**  **and payback**  **period analysis**  **(chapter 8)**  **and the**  **forecast of**  **shipments developed** 

**for the**  **national impact**  **analysis (chapter**  **9).**

**The predicted**  **reduction in**  **capacity additions**  **is sensitive**  **to the**  **peak load**  **impacts of**  **the**

**standard. DOE**  **will investigate**  **the need**  **to adjust**  **the hourly**  **load profiles**  **that include**  **this end** 

**use in**  **NEMS­BT. Since**  **the** AEO2007 **version of**  **NEMS forecasts**  **only to**  **the year**  **2030, DOE** 

**must extrapolate**  **the results**  **to 2042.**  **DOE will**  **use the**  **approach developed**  **by EIA**  **to forecast** 

**fuel prices**  **for the**  **Federal Energy**  **Management Program**  **(FEMP). FEMP**  **uses these**  **prices to** 

**estimate life­cycle**  **costs of**  **federal equipment**  **procurements. For**  **petroleum products,**  **EIA uses** 

**the average**  **growth rate**  **for the**  **world oil**  **price over**  **the years**  **2010 to**  **2025, in**  **combination with** 

**the refinery**  **and distribution**  **markups from**  **the year**  **2025, to**  **determine the**  **regional price** 

**forecasts. Similarly,**  **EIA derives**  **natural gas**  **prices from**  **an average**  **growth rate**  **figure in** 

**combination with**  **regional price**  **margins from**  **the year**  **2025.**

13.3 RESULTS

**Results of**  **the utility**  **impact analysis**  **will include**  **changes in**  **commercial electricity**  **sales,**

**and installed**  **capacity and**  **generation by**  **fuel type,**  **for each**  **trial standard**  **level, in**  **five­year**

**forecasted increments**  **extrapolated to**  **the year**  **2040.**

**13­2 1**  REFERENCES

**EIA (Energy**  **Information Administration).**  **2007.** Annual Energy Outlook 2007

**, EIA,** 

**Washington, D.C.,**  **Report No.**  **DOE/EIA­0383(2007).**

**13­3**