14

- i 

### CHAPTER 14 . UTILITY IMPACT ANALYSIS

TABLE OF CONTENTS

14.1 INTRODUCTION

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

- 1 14.2 METHODOLOGY

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

- 1 14.3 RESULTS

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

- 2 14.4 IMPACT OF STA NDARDS ON ELECTRICIT Y PRICES AND ASSOCIA TED BENEFITS

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

- 6 14.4.1 Impact on Electricity Prices

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

- 6 14.4.2 Impact of Changes in Electricity Price on Electricity Users

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

- 8 14.4.3 Discussion of Savings in Electricity Expenditures

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

- 9

LIST OF TABLES

Table 14.3.1 AEO 2010 Reference Case Forecast

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

- 3 Table 14.3.2 Microwave Oven Standby Power: Trial Standard Level 1 Forecast

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

- 4 Table 14.3.3 Microwave Oven Standby Power: Trial Standard Level 2 Forecast

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

- 4 Table 14.3.4 Microwave Oven Standby Power: Trial Standard Level 3 Forecast

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

- 5 Table 14.3.5 Microwave Oven Standby Power: Trial Standard Level 4 Forecast

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

- 5 Table 14.3.6 Reduction in Electric Generating Capacity in 2043 Under Microwave Oven Standby Power and Off Modes Trial Standard Levels

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

- 6 Table 14.4.1 Cumulative NPV of the Economy

- Wide Savings in Electricity Expenditures Due to the Projected Decline in Electricity Prices Resulting from the Selected Standard for Microwave Oven Standby Power*

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

- 9

LIST OF FIGURES

Figure 14.4.1 Change in U.S. Electricity Sales Associated wi th Proposed Microwave Oven Standby Power Standard

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

- 7 Figure 14.4.2 Effect of Selected Microwave Oven Standby Power Energy Conserv ation Standard on Average U.S. Electricity Price (All Users)

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

- 814

- 1 

### CHAPTER 14. UTILITY IMPACT ANALY SIS

14.1 INTRODUCTION

DOE analyzed the effects of its amended standard levels on the electric utility industry using a variant of the DOE/Energy Information Administration (EIA)’s National Energy Modeling System (NEMS). a 

### NEMS is a public domain, multi

- sectored, partial equilibrium model of the U.S. energy sector. Each year, DOE/EIA uses NEMS to produce an energy forecast for the United States, the Annual Energy Outlook (AEO) . The AEO for 2010 (AEO2010) forecasts energy sup ply and demand through 2035. 1 

### DOE used a variant of this model , referred to as NEMS

- BT, b



### The utility impact analysis reports the changes in electric installed capacity and generation that result f or each trial standard level (TSL) by plant type, as well as changes in res ident ial electricity consumption

. to account for the impacts of standby power energy conservation standards for microwave ovens . DOE’s utility impact analysis consists of a comparison between model results for the AEO2010 Reference Case and for cases in which sta ndards are in place, and applies the same basic set of assumptions as the AEO2010

. The AEO2010 reference case corresponds to medium economic growth.

NEMS

- BT has several advantages that have led to its adoption as the forecasting tool in the analysis of energy conservation standards. NEMS

- BT uses a set of assumptions that are well known and fairly transparent, due to the exposure and scrutiny each AEO r eceives. In addition, the comprehensiveness of NEMS

- BT permits the modeling of interactions among the various energy supply and demand sectors, producing a complete picture of the effects of energy conservation standards. Perhaps most importantly, NEMS

- BT can be used to estimate marginal effects, which yield a better estimate of the actual impact of energy conservation standards than considering only average effects.



### 14.2 METHODOLOGY

NEMS provides reference case load shapes for several end uses. The model uses
p redicted 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. For microwave oven standby power the refrigeration end use was decremented

. The refrigeration end use is the best representation of a baseline energy load
, which is characte ristic of the standby power in microwave ovens

. The

a For more information on NEMS, refer to the U.S. Department of Energy, Energy Information Administration documentation. A useful summary is National Energy Modeling System: An Overview 2003 , DOE/EIA

- 0581(2003), March, 2003.

b DOE/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 m odifications and the model is run under various policy scenarios that are variations on DOE/EIA assumptions, DOE refers to it by the name NEMS

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

- BT was previ ously called NEMS

- BRS.14

- 2 

### energy conservation decrement is divided amongst the nine U.S. Census divisions based upon their shares of energy consumption in the specific end use, as given in NEMS.

DOE used the site energy savings developed in the national impact analysis (chapter 10) for each TSL as input to NEMS

- BT. The magnitude of the energy decrement that would be required for NEMS

- BT to produce stable results out of the range of numerical noise is larger than the highest efficiency standard under consideration. Therefore, DOE estimated results corresponding to each TSL using interpolation. DOE ran higher energy use reduction levels in NEMS

- BT, representing multipliers of each TSL, and used these outputs to linearly interpolate the results to estimate actual changes in generation and capacity due to the standard.

Although the current time horizon of NEMS

- BT is 2035, other parts of the energy conservation standards analysis extend through the yea r 204 3 . It is not feasible to extend the forecast period of NEMS

- BT for the purposes of this analysis, nor does DOE/EIA have an approved method for extrapolation of many outputs beyond 2035. While it might seem reasonable to make simple linear extrapolatio ns of results, in practice this is not advisable because outputs could be contradictory. 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 uncertai nty. Therefore, all extrapolations beyond 2035 are simple replications of year 2035 results. To emphasize the extrapolated results wherever they appear, they are shaded in gray to distinguish them from actual NEMS

- BT results.



### 14.3 RESULTS

This utility impact a nalysis reports NE MS

- BT forecasts for residential sector electricity consumption
, total electricity generation by fuel type, and installed electricity generation capacity by fuel type. Results are pres ented in five

- year increments through 2035. Beyond 2035 , an extrapol ation through 2043 for each TSL represents a simple replication of the 2035 results.

The results from the AEO2010 Refe rence Case are shown in Table 14 .3.1. The results for microwave oven standby power TSLs are presented in Tables 1 4 .3.2 through 1 4 .3. 5. Each table shows forecasts using interpolated results, as described in section 1 4 .2, for total U.S. electricity generation and installed capacity.

The considered TSLs reduce only electricity consumption compared to the AEO2010 Reference C ase. The electricity savings predicted by the NIA Model range from 0.0 73 to 0.223 percent of total residential electricity consumption in the year 2035.14

- 3 

### Table 14.3

. 1 AEO 2010 Reference Case Forecast 

## NEMS-BT Results: AEO2010 Reference

2005 2010 2015 2020 2025 2030 2035 Residential Sector Energy Consumption 1 Electricity Sales (TWh) 2 1,359 1,388 1,400 1,472 1,553 1,637 1,707

Total U.S. Electric Generation 3 Coal (TWh) 2,013 1,828 2,038 2,090 2,130 2,209 2,305 Gas (TWh) 759 857 690 769 886 1,018 1,095 Petroleum (TWh) 122 45 46 47 48 48 49 Nuclear (TWh) 782 813 834 883 886 886 895 Renewables (TWh) 358 462 649 714 797 850 890 Total (TWh) 4 4,034 4,005 4,257 4,503 4,746 5,012 5,234

Installed Generating Capacity 5 Coal (GW) 314 321 325 326 326 330 337 Other Fossil (GW) 6 439 468 445 446 467 501 534 Nuclear (GW) 100 102 105 111 111 111 113 Renewables (GW) 99 133 171 177 186 196 209 Total (GW) 7 952 1,024 1,046 1,059 1,091 1,138 1,192

1 Comparable to Table A2 of AEO2010: Energy Consumption, Residential

2 Comparable to Table A8 of AEO2010: Electricity Sales by Sector

3 Comparable to Table A8 of AEO2010: Electric Generators and Cogenerators

4 Excludes "Other Gaseous Fuels" cogenerators and "Other" cogenerators

5 Comparable to Table A9 of AEO2010: Electric Generators and Cogenerators Capability

6 Includes "Other Gaseous Fuels" cogenerators

7 Excludes Pumped Storage and Fuel Cells14

- 4 

### Table 14.3

. 2 Microwave Oven Standby Power: Trial Standard Level 1 Forecast

Table 14.3

. 3 Microwave Oven Standby Power : Trial Standard Level 2 Forecast NEMS-BT Results: Difference from AEO2010 Reference Case

2010 2015 2020 2025 2030 2035 2010 2015 2020 2025 2030 2035 2040 2043 Residential Sector Energy Consumption Residential Sector Energy Consumption Electricity Sales (TWh) 1,388 1,400 1,471 1,552 1,636 1,706 Electricity Sales (TWh) 0.00 -0.24 -0.80 -1.15 -1.20 -1.24 -1.28 -1.30

Total U.S. Electric Generation Total U.S. Electric Generation Coal (TWh) 1,828 2,038 2,090 2,129 2,209 2,304 Coal (TWh) -0.01 -0.01 -0.21 -0.26 -0.33 -0.33 -0.33 -0.33 Gas (TWh) 857 690 769 885 1,018 1,095 Gas (TWh) 0.06 0.04 -0.31 -0.65 -0.54 -0.44 -0.44 -0.44 Petroleum (TWh) 45 46 47 48 48 49 Petroleum (TWh) 0.00 0.00 0.00 -0.01 -0.01 -0.01 -0.01 -0.01 Nuclear (TWh) 813 834 883 886 886 895 Nuclear (TWh) 0.00 0.00 0.00 0.00 0.00 -0.04 -0.04 -0.04 Renewables (TWh) 462 648 714 797 850 890 Renewables (TWh) -0.05 -0.28 -0.29 -0.38 -0.35 -0.38 -0.38 -0.38 Total (TWh) 4,005 4,257 4,502 4,745 5,011 5,233 Total (TWh) 0.00 -0.25 -0.81 -1.29 -1.22 -1.20 -1.20 -1.20

Installed Generating Capacity Installed Generating Capacity Coal (GW) 321 325 326 326 330 336 Coal (GW) 0.000 -0.010 -0.012 -0.012 -0.020 -0.021 -0.021 -0.021 Other Fossil (GW) 468 445 446 467 501 534 Other Fossil (GW) 0.000 -0.026 -0.045 -0.095 -0.096 -0.082 -0.082 -0.082 Nuclear (GW) 102 105 111 111 111 113 Nuclear (GW) 0.000 0.000 0.000 0.000 0.000 -0.005 -0.005 -0.005 Renewables (GW) 133 171 177 186 196 209 Renewables (GW) -0.015 -0.079 -0.078 -0.074 -0.074 -0.089 -0.089 -0.089 Total (GW) 1,024 1,046 1,059 1,091 1,138 1,192 Total (GW) -0.016 -0.115 -0.135 -0.181 -0.190 -0.196 -0.196 -0.196 Extrapolation



### NEMS-BT Results: Difference from AEO2010 Reference Case

2010 2015 2020 2025 2030 2035 2010 2015 2020 2025 2030 2035 2040 2043 Residential Sector Energy Consumption Residential Sector Energy Consumption Electricity Sales (TWh) 1,388 1,400 1,470 1,552 1,635 1,706 Electricity Sales (TWh) 0.00 -0.35 -1.15 -1.67 -1.74 -1.80 -1.85 -1.89

Total U.S. Electric Generation Total U.S. Electric Generation Coal (TWh) 1,828 2,038 2,090 2,129 2,209 2,304 Coal (TWh) -0.01 -0.02 -0.31 -0.37 -0.47 -0.48 -0.48 -0.48 Gas (TWh) 857 690 769 885 1,017 1,094 Gas (TWh) 0.09 0.06 -0.44 -0.93 -0.78 -0.64 -0.64 -0.64 Petroleum (TWh) 45 46 47 48 48 49 Petroleum (TWh) 0.00 0.00 -0.01 -0.01 -0.01 -0.01 -0.01 -0.01 Nuclear (TWh) 813 834 883 886 886 895 Nuclear (TWh) 0.00 0.00 0.00 0.00 0.00 -0.05 -0.05 -0.05 Renewables (TWh) 462 648 713 796 850 890 Renewables (TWh) -0.08 -0.41 -0.42 -0.54 -0.50 -0.55 -0.55 -0.55 Total (TWh) 4,005 4,257 4,501 4,744 5,010 5,232 Total (TWh) 0.00 -0.37 -1.17 -1.86 -1.76 -1.74 -1.74 -1.74

Installed Generating Capacity Installed Generating Capacity Coal (GW) 321 325 326 326 330 336 Coal (GW) 0.000 -0.014 -0.017 -0.017 -0.028 -0.030 -0.030 -0.030 Other Fossil (GW) 468 445 446 467 501 534 Other Fossil (GW) 0.000 -0.038 -0.065 -0.137 -0.138 -0.119 -0.119 -0.119 Nuclear (GW) 102 105 111 111 111 113 Nuclear (GW) 0.000 0.000 0.000 0.000 0.000 -0.007 -0.007 -0.007 Renewables (GW) 133 171 176 186 196 209 Renewables (GW) -0.022 -0.114 -0.113 -0.108 -0.107 -0.128 -0.128 -0.128 Total (GW) 1,024 1,046 1,059 1,091 1,138 1,192 Total (GW) -0.022 -0.166 -0.195 -0.261 -0.274 -0.284 -0.284 -0.284 Extrapolation14

- 5 

### Table 14.3

. 4 Microwave Oven Standby Power : Trial Standard Level 3 Forecast

Table 14.3

. 5 Microwave Oven Standby Power: Trial Standard Level 4 Forecast NEMS-BT Results: Difference from AEO2010 Reference Case

2010 2015 2020 2025 2030 2035 2010 2015 2020 2025 2030 2035 2040 2043 Residential Sector Energy Consumption Residential Sector Energy Consumption Electricity Sales (TWh) 1,388 1,400 1,470 1,551 1,635 1,705 Electricity Sales (TWh) 0.00 -0.48 -1.58 -2.29 -2.39 -2.47 -2.55 -2.59

Total U.S. Electric Generation Total U.S. Electric Generation Coal (TWh) 1,828 2,038 2,090 2,129 2,209 2,304 Coal (TWh) -0.01 -0.02 -0.42 -0.52 -0.65 -0.66 -0.66 -0.66 Gas (TWh) 857 690 768 884 1,017 1,094 Gas (TWh) 0.12 0.08 -0.61 -1.28 -1.07 -0.88 -0.88 -0.88 Petroleum (TWh) 45 46 47 48 48 49 Petroleum (TWh) 0.00 0.00 -0.01 -0.01 -0.01 -0.01 -0.01 -0.01 Nuclear (TWh) 813 834 883 886 886 895 Nuclear (TWh) 0.00 0.00 0.00 0.00 0.00 -0.07 -0.07 -0.07 Renewables (TWh) 462 648 713 796 849 890 Renewables (TWh) -0.11 -0.56 -0.58 -0.75 -0.69 -0.76 -0.76 -0.76 Total (TWh) 4,005 4,257 4,501 4,743 5,009 5,231 Total (TWh) 0.00 -0.51 -1.62 -2.56 -2.42 -2.39 -2.39 -2.39

Installed Generating Capacity Installed Generating Capacity Coal (GW) 321 325 326 326 330 336 Coal (GW) 0.000 -0.020 -0.023 -0.024 -0.039 -0.041 -0.041 -0.041 Other Fossil (GW) 468 445 446 467 501 534 Other Fossil (GW) 0.000 -0.052 -0.089 -0.188 -0.190 -0.164 -0.164 -0.164 Nuclear (GW) 102 105 111 111 111 113 Nuclear (GW) 0.000 0.000 0.000 0.000 0.000 -0.009 -0.009 -0.009 Renewables (GW) 133 171 176 186 196 209 Renewables (GW) -0.031 -0.156 -0.155 -0.148 -0.148 -0.176 -0.176 -0.176 Total (GW) 1,024 1,046 1,059 1,090 1,138 1,192 Total (GW) -0.031 -0.228 -0.268 -0.359 -0.377 -0.390 -0.390 -0.390 Extrapolation



### NEMS-BT Results: Difference from AEO2010 Reference Case

2010 2015 2020 2025 2030 2035 2010 2015 2020 2025 2030 2035 2040 2043 Residential Sector Energy Consumption Residential Sector Energy Consumption Electricity Sales (TWh) 1,388 1,399 1,469 1,550 1,633 1,704 Electricity Sales (TWh) 0.00 -0.74 -2.44 -3.53 -3.68 -3.80 -3.92 -3.99

Total U.S. Electric Generation Total U.S. Electric Generation Coal (TWh) 1,828 2,038 2,090 2,129 2,208 2,304 Coal (TWh) -0.02 -0.04 -0.65 -0.79 -1.00 -1.02 -1.02 -1.02 Gas (TWh) 857 690 768 884 1,017 1,094 Gas (TWh) 0.18 0.13 -0.94 -1.98 -1.65 -1.36 -1.36 -1.36 Petroleum (TWh) 45 46 47 48 48 49 Petroleum (TWh) 0.00 0.00 -0.01 -0.02 -0.02 -0.02 -0.02 -0.02 Nuclear (TWh) 813 834 883 886 886 895 Nuclear (TWh) 0.00 0.00 0.00 0.00 0.00 -0.11 -0.11 -0.11 Renewables (TWh) 462 648 713 796 849 889 Renewables (TWh) -0.16 -0.87 -0.89 -1.15 -1.06 -1.16 -1.16 -1.16 Total (TWh) 4,005 4,256 4,500 4,742 5,008 5,230 Total (TWh) 0.00 -0.78 -2.49 -3.94 -3.72 -3.68 -3.68 -3.68

Installed Generating Capacity Installed Generating Capacity Coal (GW) 321 325 326 326 330 336 Coal (GW) 0.000 -0.030 -0.036 -0.036 -0.060 -0.063 -0.063 -0.063 Other Fossil (GW) 468 445 446 467 501 534 Other Fossil (GW) 0.000 -0.080 -0.137 -0.289 -0.293 -0.252 -0.252 -0.252 Nuclear (GW) 102 105 111 111 111 113 Nuclear (GW) 0.000 0.000 0.000 0.000 0.000 -0.015 -0.015 -0.015 Renewables (GW) 133 171 176 186 196 209 Renewables (GW) -0.047 -0.241 -0.239 -0.228 -0.227 -0.271 -0.271 -0.271 Total (GW) 1,024 1,046 1,059 1,090 1,138 1,192 Total (GW) -0.048 -0.351 -0.412 -0.553 -0.581 -0.601 -0.601 -0.601 Extrapolation14

- 6 

### Table 14.3.6 presents the estimated reduction in electricity generating capacity in 2043 for the TSLs that DOE considered in this rulemaking.

Table 14.3

. 6 Reduction in Electric Generating Capacity in 2043 Under Microwave Oven Standby Power and Off Modes Trial Standard Levels

TSL 1 TSL 2 TSL 3 TSL 4 Gigawatts 

### 0.196 0.284 0.390 0. 601

14.4 IMPACT OF STANDARDS ON ELECTRICITY PRICE S AND ASSOCIATED
BENEFITS

Using the framework of the utility impact analysis
, DOE analyzed the potential impact on electricity prices resultin g from the standards on microwave oven standby power . Associated benefits for all electricity users in all sectors of the economy are then e stimated from these price impacts.

DOE’s analysis of energy price impacts used NEMS

- BT in a similar manner as described in section 14 .2. Like other widely

- used energy

- economic models, NEMS uses elasticities to estimate the energy price change that would result from a change (increase or decrease) in energy demand. The elasticity of price to a decrease in demand is the “inverse price elasticity.” The calculated inverse price elasticity based on NEMS

- BT simulations differs throughout t he forecast period in response to the dynamics of supply and demand for electricity.

14.4.1 Impact on Electricity Prices

After generating results using higher decrements to energy consumption, a regressed interpolation toward the origin derived the price effect s associated with the energy savings of the TSLs. R esults were then scaled to the appropriate TSL . T he selec ted standard for microwave

oven standby power is TSL 3

. The electricity price impacts are presented below.

Figure 1 4 .4 .1 show s the annual change in U.S. electricity sales for the selected standard
, relative to the base case which involves no new standards.14

- 7 

### Figure 14.4.1 Change in U.S. Electricity Sales Associated with Proposed Microwave Oven Standby Power Standard

Figure 14.4.2 show s the annual change in average U.S. price for electricity, relative to the Reference case, projected to result from the proposed standard

. For TSL 3, the price reduction
averages 0 .001 cents per kWh (in 2010 $)

, or a price reduction of 0 .01 percent, over t he period from 2014 through 2035

. - 3.0 - 2.5 - 2.0 - 1.5 - 1.0 - 0.5 0.0

2014 2019 2024 2029 2034TWH 

## Change in Electricity Sales from Microwave Oven Standby Power

TSL 314

- 8 

### Figure 14.4.2 Effect of Selected Microwave Oven Standby Power Energy Conservation Standard on Average U.S. Electricity Price (All Users)

14.4.2 Impact of Changes in Electricity Price on Electricity Users

Using the estimated electricity price impacts, DOE calculated the nominal savings in total electricity expenditures in each year by multiplying the annual change in the average

- user price for electricity by the total ann ual U.S. electricity sales forecast by NEMS, adjusted for the impact of the standards. The amended standards would continue to reduce demand for electricity after 2035 (which is the last year in the NEMS forecast). DOE’s estimate for 2036

– 2043 (the period used to estimate the NPV of the national cons umer benefits from amended standards) multiplied the average electricity price reduction in 2015

– 2035 by estimated tota l annual electricity sales in 2036

– 2043

. c 

### DOE then discounted the stream of reduced expenditures to calculate a NPV.

Table 14 .4 .1 shows the calculated NPV of the economy

- wide savings in electricity expenditures for each considered TSL at 3

- percent and 7

- percent discount rates. The need to extrapolate price effects and electricity sales beyond 2035 suggests that one should interpre t the post

- 2035 results as a rough indication of the benefits to electricity users in the post

- 2035 period.

c The estimation of el ectricity sales after 2035 uses the av erage annual growth rate in 2031

- 2035 of total U.S. electricity sales forecasted by NEMS. This forecast includes the impact of the standards. 

### - 0.00003 - 0.00002 - 0.00001 0.00000 0.00001

2014 2019 2024 2029 20342010$/KWH 

## Change in Electricity Prices From Microwave Oven Standby Power

TSL 314

- 9 

### Table 14.4

. 1 Cumulative NPV of the Economy

- Wide Savings in Electricity Expenditures Due to the Pro jected Decline in Electricity Pr ices Resulting from the Selected Stan dard for Microwave Oven Standby Power * Discount Rate MWO Standby Power (billion $2009) 3 percent 0. 730 7 percent 0. 384
* Impacts for units sold from 2014 to 2043



### 14.4.3 Discussion of Savings in Electricity Expenditures

Although the aggregate benefits for all electricity users are potentially large, there may be negative effects on the actors involved in electricity supply. The electric power industry is a complex mix o f power plant providers, fuel suppliers, electricity generators, and electricity distributors. While the distribution of electricity is regulated everywhere, the institutional structure of the power sector varies, and has changed over time. For these reaso ns, an assessment of impacts on the actors involved in electricity supply from reduction in electricity demand associated with energy conservation standards is beyond the scope of this rulemaking.

In considering the potential benefits to electricity user s, DOE takes under advisement the provided by the Office of Management and Budget (OMB) to Federal agencies on the development of regulatory analysis (OMB Circular A

- 4 (Sept. 17, 2003), section E, “Identifying and Measuring Benefits and Costs”). Specifical ly, at page 38, Circular A

- 4 instructs that transfers should be excluded from the estimates of the benefits and costs of a regulation. DOE is continuing to investigate the extent to which change in electricity prices projected to result from standards rep resents a net gain to society.14

- 10 

### REFERENCES

1. Energy Information Administration, Updated Annual Energy Outlook 2010 Reference Case Service Report , 2010 . Washington, DC. Report No. DOE/EIA

- 0383(2010 ).

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