# An Overview of theNEMS Residential and 

# Commercial Sector Demand Modules

Steve Wade Energy Information Administration

March 11, 1997 

# ..An Overview of 

# theNEMS

# Residential ,and Commercial SectorDemandModules,

, SteveWade Energy Information Administration March 11, 1997

### NEMS Overview 

### o NEMS is a large, regional computer-based energy-economy model of the U.S. NEMS represents all energy supply, conversion and consumption activities in the U.S. in an integrated system the model solves iteratively for prices which equate energy supply and energy demand NEMS is technology-rich o NEMS facilitates policy analysis and has many more "policy levers" than predecessor EIA models, Documentation publicly available (NEIC - 202-586-8800) 

### NEMS Overview

o NEMS is a large, regional computer-based energy-economy model ofthe U.S.
o NEMS represents all energy supply, conversion and consumption activities in the U.S. in an integrated system the model solves iteratively for prices which equate energy supply

, and energy demand

o NEMS is technology-rich
o NEMS facilitates policy analysis and has'many more "policy levers" than predecessorEIA models
o Documentationpublicly available (NEIC

- 202-586-8800)OVERVIEW OF THE STRUCTURE OF NEMS

Figure 1. National Energy Modeling System

Oil and Gas Supply Module Macroeconomic Activity Module International Energy Module Residential Demand Module

Natural Gas Transmission and Dlstr4bution Module Integrating Module Coal Market Module

Renewable Fuels Module Electricity Market Module Petroleum Market Module Commercial Demand Module

Transportation Demand Module

Industrial Demand Module Supply Components Conversion Components Demand Components OVERVIEW OF THE STRUCTURE OF NEMS
. Figure 1. National Energy Modeling System

Renewable Fuels Module Supply Components Macroeconomic Activity Module International Energy Module

Integratinq

Market Module Module Residential Demand Module

### Differences between the Residential and Commercial Buildings Modules o Buildings differ in size and complexity

residential buildings are more homogenous in size and construction (3 residential vs 11 commercial building types) residential heating and cooling loads are more shell driven, commercial cooling more a function of internal loads) o Factors affecting choices of equipment and energy efficiency vary

- ownership (homeowner, renter, commercial investor, ...) Complexity of Equipment and Capacity

wider variety of commercial equipment 

### Differences between the Residential and CommercialBuildings Modules

o Buildings differ in size and complexity residential buildings are more homogenous in size and construction (3 residential vs 11 commercialbuilding types)
. residential heating and cooling loads are more shell driven, commercial cooling more a function ofintemalloads)

o Factors affecting choices ofequipment and energy efficiency vary ownership (homeowner, renter, commercial investor,
...)

o Complexity ofEquipment and Capacity wider variety ofcommercial equipment

### Differences (continued)

o Data Availability



### incorporate shipment data in residential model (retiring equipment efficiency derived from historical shipment data) o Model Complexity

computing limitations drive the accounting system in each model residential uses typical units that directly translate to shipments, commercial models service demand which must be transformed into shipments. 

### Issues for Standards Process will be Different for Residential and Commercial - shipments vs service demand residential includes from/to switching costs (commercial does not) electricity price for the commercial sector is an average annual price and ignores the separate effects of demand and energy charges 

### Differences (continued)

o Data Availability 

### incorporate shipment data in residential model (retiring equipment efficiency derived from historical shipment data)
o Model Complexity computing limitations drive the accounting system in each model residential uses typical units that directly translate to shipments, commercial models service demand which mustbe transformed into shipments.
o - Issues for Standards Process will be Differentfor Residential and Commercial shipments vs service demand residential includes from/to switching costs (commercial does not) electricity price for the commercial sectoris an average annual price and ignores the separate effects ofdemand and energy charges

### Technology Modeling In the NEMS Residential Sector Demand Module Equipment Characterizations and Choice Methodology o Equipment choices are made from a "menu" of technologies available to serve a given end use in a particular year. o Each end use is potentially served by several technologies, each with multiple efficiency levels available (generally 2 to 4 versions of a technology are available). Equipment efficiency standards are represented by removing sub-standard equipment from the menu of technologies. Equipment costs and efficiencies vary over time. o Equipment choices are segmented by new and replacement equipment.

Census Division (9) Building Type (3) Decision Type (new vs replacement) - Decision Rule for Replacement (unrestricted vs same technology) 

### Technology Modeling Inthe NEMS Residential SectorDemandModule Equipment Characterizations and Choice Methodology

o Equipment choices are made from a "menu" oftechnologies available to serve a given end use in a particular year.
o Each enduse is potentially served by several technologies, each with multiple efficiency levels available (generally 2 to 4 versions ofa technology are available).

o Equipment efficiency standards are represented by removing sub-standard equipmentfrom the menu oftechnologies.

o Equipment costs and efficiencies vary overtime.

o Equipment choices are segmentedby new andreplacement equipment. Census Division (9) Building Type (3) Decision Type (new vs replacement) Decision Rule for Replacement (unrestricted vs same technology)

### Residential Equipment Characterizations and Choice Methodology (continued)

Fuel and general technology choice (e.g., heat pump vs furnace) are simulated by a logistic function with life cycle costs computed using "implicit" discount rate of 20 percent. For replacement fuel/technology switching, a matrix of switching costs from one equipment/fuel type to another is added to the installed capital- costs before computing life cycle costs. o Equipment efficiency choices are simulated by logistic functions that compare first cost and operating cost. - Penetration of new technologies depends on economic considerations. - Each equipment category in NEMS characterized by a "hurdle rate" of from 15 percent to 150 percent, depending upon equipment type. Each efficiency choice function is calibrated to historical shipment efficiency data, i.e., the model replicates efficiency choices for historical `years. Selected market shares can vary depending on housing type (single family, multi-family and mobile) and for each of the nine Census Divisions. 

### ResidentialEquipment Characterizations and Choice Methodology (continued)

o Fuel and general technology choice (e.g., heatpump vs furnace) are simulatedby a logistic function with life cycle CQsts computedusing "implicit" discountrate of20 percent. Forreplacement fuel/technology switching, a matrix ofswitching costs from one equipment/fuel type to another is added to the installed capitalcosts before computing life cycle costs.
.
o Equipment efficiency choices are simulatedbylogistic functions that compare first cost and operating cost.

, Penetration ofnew technologies depends on economic considerations. Each equipment category in NEMS characterizedby a "hurdlerate" of from 15 percentto 150 percent, depending upon equipment type. Each efficiency choice function is calibrated to historical shipment efficiency data, i.e., the model replicates efficiency choices for historical years. Selectedmarket shares can vary depending on housing type (single family, multi-family and mobile) and for each ofthe nine Census Divisions.NEMS Residential Model Overview

Price and Macro Forecasts:

Existing Equipment: Inputs from NEMS Fuel Prices by I Households by Fuel Type Type and Division Residential Households and Equipment Surviving Housing Units Current Equipment Not in Need of Replacement Keep Existing Equipment Replacement if Needed: Update Efficiencies: Equipment Needs Replacement Keep Same Technology Potentially

Switch Fuel / Technology
Add Switching Costs (if any) New Construction New Purchase Required

Select Fuel and Technology Type 

# l Select Efficiency for Chosen Type Compute Average Efficiency by Equipment Type and End Use

Adjust UECs: Adjustments to Base-Year UECs from R ECS Weather, Building Price Elasticity & Avg Household Shell Efficiency Efficiency Square Footage & (New Construction vs Rebound Occupancy Existing Construction Effects

Adjusted UECs by Census Division and End-Use Energy Consumption: I Compute Energy Consumption Price and Macro Forecasts:

Existing Equipment:

Replacement if Needed: Update Efficiencies:

Adjust UECs:

Energy Consumption: , NEMS ResidentialModel Overview Inputs from NEMS Fuel Prices by Households by

Fuel Type Type and Division 

# + Residential Households and Equipment Surviving Housing Units New Construction Current Equipment Needs Replacement New Equipment Keep Potentially Purchase Not in Need of Same Switch Fuel/ Required Replacement Technology Technology 

# + 

# • ..,

# ,. Keep Add Switching Select Fuel Existing Costs 

### .... and -r" Equipment (if any) Technology Type 

# • Select

.... Efficiency I11III"'" for Chosen Type 

# .,

# , 

# .- Compute Average Efficiency by Equipment Type and End Use 

# • Adjustments to Base-Year UECs from RECS Weather, Building Price Elasticity & Avg Household Shell Efficiency Efficiency Square Footage & (New Construction vs Rebound Occupancy Existing Construction Effects 

# • Adjusted UECs by Census Division and End-Use 

# + Compute Energy Consumption

### Technology Modeling In the NEMS Commercial Sector Demand Module Equipment Characterizations and Choice Methodology o Equipment choices are made from a "menu" of technologies available to serve a given end use in a particular year. o The menu of equipment choices includes "technologies" and "models"

A technology is a relatively broad equipment class (electric heat pumps, 4-foot fluorescent lights, gas water heaters, etc...) A model is a specific version of a technology with given cost and performance data; up to 11 models are allowed for each technology. Equipment standards are included by making substandard equipment unavailable starting with the year that the standard takes effect. o Over the forecast changes in the cost and efficiency of technology models are projected. 

### Technology Modeling In the 

### NEMS Commercial SectorDemandModule Equipment Characterizations and Choice Methodology


### o Equipment choices are made from a "menu" oftechnologies av'ailable to serve a given end use in aparticularyear.
o The menu ofequip'ment choices includes "technologies" and "models" A technology is arelatively broad equipment class (electric heatpumps, 4-foot fluorescent lights, gas water heaters, etc
...) A model is a specific version ofa technology with given cost and performance data; up to 11 models are allowed for each technology.
o Equipment standards are includedby making substandard equipmentunavailable starting with the year that the standard takes effect.

o Over the forecast changes in the cost and efficiency oftechnology models are projected.Commercial Equipment Characterizations and Choice Methodology (continued)

Equipment purchases are required for new construction, equipment retirement, and potentially for existing equipment that becomes economically obsolete (present value of operating costs exceeds present value of capital and operating costs of an alternate equipment type). o Choices are determined by minimizing annualized costs across decision sets. Floorspace "market segmentation" allows for rich behavior (i.e., minimum life cycle costs for an unsegmented market would result in a single "winning" technology). Segmentation is by: - Census Division (9) - Building Type (11) - Implicit Discount Rate (6) - Decision Type (new, replacement, retrofit) - Decision Rule (unrestricted, same fuel, same technology) 

### Commercial Equipment Characterizations and Choice Methodology (continued)
o Equipmentpurchases are required fornew construction, equipmentretirement, and potentially for existing equipmentthatbecomes economically obsolete (present value ofoperating costs exceeds prese'nt value ofcapital and operating costs ofan

. alternate equipmenttype).
o Choices are determinedby minimizing annualized costs across decision sets.
o Flootspace "market segmentation" allows for rich behavior (i.e., minimum life cycle costs for an unsegmented market wouldresult in a single "winning" technology). Segmentation is by: Census Division (9) Building Type (11) Implicit DiscountRate (6) Decision Type (new, replacement, retrofit) Decision Rule (unrestricted, same fuel, same technology)NEMS Commercial Model Overview

Price and Macro Forecasts:

Existing Equipment:

Replacement if Needed: Keep Existing Equipment 

# }

Update Efficiencies: Compute Average Efficiency by Equipment Type and End Use Adjustments to Base-Year EUIs from CBECS

Building Price Elasticity & Weather Shell Efficiency Efficiency. (HDD,CDD) (New Construction vs Rebound Adjust EUIs: Existing Construction Effects nputs from NEMS Fuel Prices by Floorspace by Fuel Type I Type and Division Commercial Floorspace and Equipment Surviving Floorspace New Construction No Replacement Equipment at End New Needed, Candidates of Service Purchase for Retrofitting Life Required



# LL^ Adjusted EUIs by Census Division, Bldg Type and End-Use Energy Consumption: Compute Energy Consumption Price and Macro Forecasts:

Existing Equipment:

Replacement if Needed: Update Efficiencies:

Adjust EUls:

Energy Consumption: I NEMS CommercialModel Overview Inputs from NEMS Fuel Prices by Floorspace by

Fuel Type Type and Division**~**

# ,. Commercial Floorspace and Equipment Surviving Floorspace New Construction No Replacement Equipment at End New Needed, Candidates of Service Purchase for Retrofitting Life Required

## ~ I 

# • • Keep 

# --. Purchase Existing Equipment Equipment**~**

# , .,

# ,. Compute Average Efficiency by Equipment Type and End Use 

# • Adjustments to Base-Year EUls from CBECS Building Price Elasticity & Weather Shell Efficiency Efficiency (HDD,CDD) (New Construction vs Rebound Existing Construction Effects 

# •

.Adjusted EUls by Census Division, Bldg Type and End-Use 

# + Compute Energy Consumption