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CHAPTER 13. UTILITY IMPACT ANALYSIS

TABLE OF CONTENTS

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

13.2 METHODOLOGY ........................................................................................................ 13-1

13.3 RESULTS ...................................................................................................................... 13-2

REFERENCES .......................................................................................................................... 13-3
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CHAPTER 13. UTILITY IMPACT ANALYSIS

13.1 INTRODUCTION

The U.S. Department of Energy (DOE) will analyze specific effects of its proposed 

standard levels on the electric utility industry as part of the notice of proposed rulemaking 

analyses, using a variant of the DOE/Energy Information Administration’s (EIA’s) National 

Energy Modeling System (NEMS). The NEMS is a large, multi-sectoral, partial equilibrium 

model 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, and 

this energy forecast is available in the public domain. DOE will use a variant known as NEMSBT to provide key inputs to the analysis.a

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

base case and for policy cases in which proposed standards are in place. The use of NEMS-BT 

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. NEMS-BT allows an estimate of the interactions between the various energy 

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

the changes in installed capacity and generation, by fuel type, that result for each candidate 

standard level, as well as changes in electricity and natural gas sales to the commercial and 

industrial sectors.

DOE plans to conduct the utility impact analysis as a policy deviation from the 2010

version of the AEO (AEO2010),

1 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 AEO2010 reference case. DOE 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. (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. 

13.2 METHODOLOGY

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

installed capacity, sales, and prices. NEMS provides reference case load shapes for several end 

uses. 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 to predict the necessary additions 

 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. 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 EIA assumptions, DOE refers to the model 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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to capacity. NEMS-BT accounts for the implementation of efficiency standards by decrementing 

the appropriate reference case load shape. DOE will determine the size of the decrement using 

data 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 (chapter 9).

The predicted reduction in capacity additions is sensitive to the peak load impacts of the 

standard. DOE will investigate the need to adjust duration of the high load period that could 

impact this end use in NEMS-BT.

Because the AEO2010 version of NEMS forecasts only to the year 2035, DOE must 

extrapolate results to 2045. DOE conducts an extrapolation to 2045 to be consistent with the 

analysis period being used by DOE in the national impact analysis. It will not be feasible to 

extend the forecast period of NEMS-BT for the purposes of this analysis, nor does EIA have an 

approved method for extrapolation of many outputs beyond 2035. While it might seem 

reasonable in general to make simple linear extrapolations of results, in practice this is not 

advisable because outputs could be contradictory. For example, changes in the fuel mix implied 

by extrapolations of those outputs could 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 involve a great deal of uncertainty.

Therefore, for all extrapolations beyond 2035, DOE intends to use simple replications of year 

2035 results; in this way results are guaranteed to be consistent. As with the AEO reference case 

in general, the implicit assumption is that the regulatory environment does not deviate from the 

current known situation during the extrapolation period. Only changes that have been announced 

with date-certain introduction are included in NEMS-BT.

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, installed 

capacity and generation by fuel type for each candidate standard level, in five-year increments 

extrapolated to the year 2045.
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REFERENCES

1. U.S. Department of Energy–Energy Information Administration. Annual Energy Outlook 

2010 with Projections to 2035. 2010. Washington, D.C. DOE/EIA-0383(2010).