An Overview of theNEMS Residential

and

Commercial Sector Demand Modules

Steve Wade

Energy Information Administration

March 11, 1997

.. An Overview of the NEMS Residential 

,and 

Commercial Sector Demand Modules, 

, Steve Wade 

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 of the 

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 

predecessor EIA models 

o Documentation publicly 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 

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 intemalloads) 

o Factors affecting choices of equipment and energy efficiency vary 

ownership (homeowner, renter, commercial investor, ... ) 

o Complexity of Equipment and Capacity 

wider variety of commercial 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 must be transformed 

into shipments. 

o - 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 
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 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 

gi ven 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). 

o Equipment efficiency standards are represented by removing sub-standard 

equipment from the menu of technologies. 

o 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) 
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.

Residential Equipment Characterizations and Choice Methodology (continued) 

o Fuel and general technology choice (e.g., heat pump vs furnace) are simulated by a 

logistic function with life cycle CQsts 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. 
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 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

Energy Consumption: I Compute Energy Consumption

Price and 

Macro Forecasts: 

Existing 

Equipment: 

Replacement 

if Needed: 

Update Efficiencies: 

Adjust UECs: 

Energy Consumption: 

, 

NEMS Residential Model 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 

.... Efficiency 

Select •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 Sector Demand Module 

Equipment Characterizations and Choice Methodology 

o Equipment choices are made from a "menu" of technologies av'ailable to serve a 

given end use in a particular year. 

o The menu of equip'ment 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. 

o 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. 
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 Equipment purchases are required for new construction, equipment retirement, and 

potentially for existing equipment that becomes economically obsolete (present 

value of operating costs exceeds prese'nt value of capital and operating costs of an 

. alternate equipment type). 

o Choices are determined by minimizing annualized costs across decision sets. 

o Flootspace "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) 
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.

Adjust EUIs: (HDD,CDD) (New Construction vs Rebound

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 Commercial Model 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 

Existing 

Keep --. • 

Equipment 

Purchase • 

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