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CHAPTER 13. UTILITY IMPACT ANALYSIS

TABLE OF CONTENTS

13.1 INTRODUCTION .................................................... 13-1

13.2 METHODOLOGY .................................................... 13-2

13.3 RESULTS ........................................................... 13-2
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 2000, DOE/EIA-0581(2000),

March, 2000. 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 modifications and the model is run under

various policy scenarios that are variations on DOE/EIA assumptions, we refer 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 previously called

NEMS-BRS.

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CHAPTER 13. UTILITY IMPACT ANALYSIS

13.1 INTRODUCTION

The Department will analyze the effects of proposed residential furnace and boiler standard

levels on the electric utility industry, using a variant of the U.S. DOE/Energy Information Administration

(EIA)’s National Energy Modelling System (NEMS).a The NEMS is a large, multi-sectoral, partial

equilibrium model of the U.S. energy sector. DOE/EIA uses NEMS to produce the 2003 Annual

Energy Outlook (AEO2003).

1

 NEMS produces a widely recognized base case model energy

forecast for the U.S. through 2025, and is available in the public domain. The Department will use a

variant known as NEMS-BT, as well as some exogenous calculations, to provide key inputs to the

analysis. The utility impact analysis will consist of a comparison between model results for the base

case forecast and for policy cases in which proposed standards are in place. The Department will

conduct this analysis during the notice of proposed rulemaking (NOPR) stage of this rulemaking.

The use of NEMS 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. The NEMS allows an estimate of the interactions between the various

energy supply and demand sectors and the economy as a whole. The utility analysis will report the

changes in installed capacity and generation, by fuel type, that result for each trial standard level, as

well as changes in natural gas and electricity sales to the residential sector.

The Department will conduct the utility analysis as a policy deviation from the AEO2003,

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

AEO2003 reference case, as are the prospects for natural gas supply. 

The Department also will explore deviations from some of the reference case assumptions, to

represent alternative futures. Two alternative scenarios use the high and low economic growth cases of

AEO2003. (The reference case corresponds to medium growth.) The high economic growth case

assumes higher projected growth rates for population, labor force, and labor productivity, resulting in

lower predicted inflation and interest rates relative to the reference case and higher overall aggregate

economic growth. The opposite is true for the low growth case. The high growth case predicts

growth in per capita gross national product (GDP) of 2.5 percent per year, compared with 2.2 percent
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per year in the reference case, and 1.9 percent per year in the low growth case. The model predicts

that economic output grows at 3.5 percent per year in the high growth case, 3.0 percent per year in the

reference case, and 2.5 percent per year in the low growth case. While supply-side growth

determinants are varied in these cases, AEO2003 assumes the same reference case energy prices for all

three economic growth cases. Different economic growth scenarios will affect the rate of growth of

electricity demand.

13.2 METHODOLOGY

The electric utility industry analysis will consist of NEMS-BT forecasts for generation, installed

capacity, sales, and prices.

The NEMS model provides reference case load shapes for several end uses, including

commercial space cooling, by Census Division. 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. NEMS-BT accounts for the implementation of

efficiency standards by decrementing the appropriate reference case load shape. The Department

determines the size of the decrement using data for the per-unit energy savings developed in the lifecycle cost (LCC) and payback period (PBP) analysis (Chapter 8) and the shipments forecast

developed for the national energy savings (NES) and consumer impacts analysis (Chapter 9).

Because the predicted reduction in capacity additions is very sensitive to the peak load impacts

of the standard, the Department also will use the hourly load data from the building simulations (Chapter

6) to provide an independent estimate of the resulting total system load decrement for a given trial

standard level.

Since the AEO2003 version of NEMS forecasts only to the year 2025, DOE must extrapolate

the results to 2035. The Department will use the approach developed by EIA to forecast fuel prices for

the Federal Energy Management Program (FEMP). FEMP uses these prices to estimate life-cycle

costs of federal equipment procurements. For petroleum products, EIA uses the average growth rate

for the world oil price over the years 2010 to 2025, in combination with the refinery and distribution

markups from the year 2025, to determine the regional price forecasts. Similarly, EIA derives natural

gas prices from an average growth rate figure in combination with regional price margins from the year

2025. 

13.3 RESULTS

Results of the analysis will include changes in commercial electricity sales, and installed capacity

and generation by fuel type, for each trial standard level, in five-year, forecasted increments

extrapolated to the year 2035.
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1. U.S. Department of Energy-Energy Information Administration, Annual Energy Outlook 2003,

January 2003. Washington, DC. Report No. DOE/EIA-0383(2003).

REFERENCES