14

- i CHAPTER 1 4 . UTILITY IMPACT ANALYSIS

TABLE OF CONTENTS

14.1 INTRODUCTION

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

- 1 14.2 METHODOLOGY

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

- 2 14.3 RESULTS

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- 214-1 CHAPTER 14. UTILIT Y IMPACT ANALYSIS

14.1 INTRODUCTION

As part of preparing for i ts notice of proposed rulemaking, t he U.S. Department of Energy (DOE) will analyze effects of its proposed energy efficiency standards on the electric utility industry . DOE will perform this analysis using a variant of the DOE/Energy Information Administration (EIA)’s National Energy Modeling System (NEMS). The NEMS is a large, multi

- sectoral, partial equilibrium mo del 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, which is a vailable in the public domain. DOE will use a variant known as NEMS

- BT to provide key inputs to the util ity impact analysis. a

The utility impact analysis will involve compar ing model results for the base case with those for policy cases in which pr oposed standards are in place. The use of NEMS

- BT for the utility analy sis 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 enable s an estimate of the interactions among the various energy supply and demand secto rs and the econo my as a whole. The utility impact analysis will report the changes in installed capacity and generation, by fuel type, as well as changes in electricity and natural gas sales to the residential sector , that would result f rom each trial standard level

.

DOE plans to conduct the utility impact analysis as a policy deviation from the 201 1 version of the AEO to reflect provisions of the American Recovery and Reinvestment Act (ARRA) and recent changes in the economic outlook ( AEO2011 )

, 1 applying the same basic se t of assumptions. For example, the operating characteristics ( e.g. , energy conversion efficiency, emissions rates) of future electricity generating plants are as specified in the AEO2011 reference

case

. DOE also will explore deviations from some of the reference case assumptions to represent scenarios involving high and low economic growth

. (The reference case corresponds to medium growth .) The case of high economic growth assumes higher projected growth rates for population, labor force, and labor productivity, resulting in lower predicted inflation and interest rates and higher aggregate economic growth relative to the reference case. T he opposite is true for the low

- growth case. Because EIA does not plan to produce high and low economic growth

cas es for the AEO2011 that includes the ARRA, DOE will estimate tho se cases based on the March 20 10 release of the AEO2011 that excludes the ARRA. 2

a For more information on NEMS, refer to the DOE/EIA documentation. A useful summary is National Energy Modeling System: An Overview 2000 . DOE/EIA

- 0581(2000). March 2000. EIA approves use of the name NEMS only to describe an official version of the model without any modification to code or data. Because this analysis entails some minor code modifications, an d the model is run under policy scenarios that are variations on EIA assumptions, DOE refers to the model as NEMS

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

- BT previously was called NEMS

- BRS.14-2 14.2 METHODOLOGY

The electric utility impact analysis will consist of NEMS

- BT forecasts for electricity generation, installe d capacity, sales, and prices. For the reference case

, NEMS provides loa d shapes for several end uses. The model uses predicted growth in demand for each end use to build a projection of the total electric system load growth for each re gion, which in turn is use d to predict necessary additions to capacity. NEMS

- BT accounts for the implementation of efficiency standards by decrementing the appropr iate load shape for the reference case. DOE will determine the size of the decrement using da ta for the per

- unit energy savings developed in the life

- cycle cost and payback period analysis (Chapter 8) and the forecast of shipments developed for the national impact analysis ( NIA; Chapter 1 0 ).

P redicted reduction s in additions to capacity are sensit ive to a standard’s effect on peak load. DOE will investigate the need to adjust in NEMS

- BT the hourly load profiles that include this end use.

Because the AEO2011 version of NEMS forecasts only to 2030, DOE must extrapolate results to 204 5

. DOE extra polat es effects to 2045 to be consistent with the analysis period it is using in the 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 appr oved method for extrapolating many outputs beyond 2030. Although it might seem reasonable to make simple linear extrapolations of results, in practice th at is not advisable because o utputs could be contradictory. C hanges in the fuel mix implied by extrapolations of outputs , for example, cou ld 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 involv e a great deal of uncertainty. F or all extr apolations beyond 203 5
, therefore, DOE intends to use simple replications of 203 5 results ; in this way results ar e guaranteed to be consistent. As with the AEO reference case in general, the assumption is that the regulatory environment does not deviate fr om the current known situation du ring the extrapolation period. NEMS

- BT includes o nly those changes that have been announced with date

- certain introduction.

14.3 RESULTS

Results of the utility impact analysis will include changes in residential electricity sal es, installed capacity

, and generation by fuel type for each trial standard level, in 5

- year increments extrapolated to 2045

.14-3 REFERENCES

1 U.S. Department of Energy

– Energy Information Administration. An Updated Annual Energy Outlook 2009 : Reference Case Reflecting Provisions of the American Recovery and Reinvestment Act and Recent Changes in the Economic Outlook

. April 2009

. Washington, D

. C. SR/OIAF/2009

- 03. (Last accessed March 29, 2010.)

< http://www.eia.doe.gov/oiaf/servicerpt/stimulus/pdf/sroiaf(2009)03.pdf >

2 U.S. Department of Energy

– Energy Information Administration. Annual Energy Outlook with Projections to 2035. December 2009. Washington, D.C. Report No. DOE/EIA

0383(2010). (Last access ed March 29, 2010.)

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