14

- i CHAPTER 1 4 . UTILITY IMPACT ANALYSIS

TABLE OF CONTENTS

14.1 INTRODUCTION

................................ ................................ ................................ ......... 14

- 1 14.2 METHODOLOGY

................................ ................................ ................................ ........ 14

- 114

- 1 CHAPTER 14. UTILIT Y IMPACT ANALYSIS

14.1 INTRODUCTION

The U.S. Department of Energy (DOE) will analyze specific effects of its proposed standard levels on the electric and natural gas utility industry as part of the notice of proposed rulemaking analyses, using a variant of the U.S. DOE ’s Energy Information Administr ation (EIA)’s National Energy Modeling System (NEMS)

. The NEMS is a large, multi

- sectoral, partial equilibrium model of the U.S. energy sector. EIA uses NEMS to produce the Annual Energy Outlook (AEO)

. 1 NEMS produces a widely recognized baseline energy forecast for the United States, and this energy forecast is availa ble in the public domain. DOE will use a variant known as NEMS

- BT to provide key inputs to the analysis. a

The utility impact analysis will consist of a comparison between model results for the base case and for policy cases in which proposed standards are in place. The use of NEMS

- BT 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. NEMS

- BT allows an estim ate of the interactions between the various energy supply and demand sectors and the economy as a whole. The utility impact analysis will report the changes in installed capacity and generation, by fuel type, that result for each trial standard level, as w ell as changes in electricity and natural gas sales to the residential sector.

DOE will conduct the utility impact analysis as a policy deviation from the latest available version of the AEO , 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 AEO reference case, as are the prospects for natural gas supply.

14.2 METHODOLOGY

The electric util ity impact analysis will consist of NEMS

- BT forecasts for generation by plant type , installed capacity, sales, and prices. The gas utility impact analysis will consist of forecasts of change in sales due to standards . NEMS provides reference case load shap es for several end uses. The model uses predicted growth in demand for each end use to build up a projection of the total electric system load growth for each region, which it uses in turn to predict the necessary additions to capacity. DOE uses NEMS

- BT to account for the implementation of energy conservation standards by decrementing the appropriate reference case load shape. DOE will determine the size of the decrement using data for the per

- unit energy savings developed in

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 200 3

, DOE/EIA

- 0581 (2003), March 2003. EIA approves use of the name NEMS to describe only an official version of the model without any modification to 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 the model by the name NEMS

- BT (BT is DOE’s Building Technologies Program, under whos e aegis this work has been performed). NEMS

- BT was previously called NEMS

- BRS.14

- 2 the life

- cycle cost analys i s ( c hapter 8) and the forecast of shipments developed for the national impact analysis ( c hapter 9).

Since the AEO version of NEMS forecasts only to the year 203 5 , DOE must extrapolate results after that year to be consistent with the analysis period being u sed by DOE in the national impact analysis (NIA). It will not be feasible to extend the forecast period of NEMS

- BT for the purposes of this analysis, nor does EIA have an approved method for extrapolation of many outputs beyond 2030. While it might seem reasonable in general to make simple linear extrapolations of results, in practice this is not advisable because outputs could be contradictory. For example, changes in the fuel mix implied by extrapolations of those outputs could be inconsistent with the extrapolation of marginal emissions factors. An analysis of various trends sufficiently detailed to guarantee consistency is beyond the scope of this work and, in any case, would involve a great deal of uncertainty. Therefore, for all extrapolations beyond 203 5 , DOE intends to use simple replications of year 203 5 results ; in this way results are guaranteed to be consistent.

Results of the analysis will include changes in residential electricity sales, installed capacity and generation by fuel type, and res idential natural gas sales for each trial standard level, in five

- year increments over the forecast period

.14 -3 REFERENCES

1. Energy Information Administration, Updated Annual Energy Outlook 2009 Reference Case Service Report , 2009. Washington, DC. Report No. DOE/EIA-0383(2009).

< http://www.eia.doe.gov/oiaf/aeo/ >