14

- i 

### CHAPTER 1 4

. UTILITY IMPACT ANALYSIS

TABLE OF CO NTENTS

14.1 INTRODUCTION

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

- 1 14.2 METHOD

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

- 1 14.3 RESULTS

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

- 2 14.4 IMPACT OF STANDARDS ON NATURAL GAS AND E LECTRICITY PRICES AND ASSOCIATE D BENEFITS FOR CONSU MERS

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

- 9 14.4.1 Impact on Natural Gas Prices

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

- 10 14.4.2 Impact of Changes in Natural Gas Prices on Gas Users

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

- 12 14.4.3 Discussion of Savings in Natural Gas Expenditures

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

- 13 14.4.4 Impact on Electricity Prices

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

- 14 14.4.5 Impact of Changes in Electricity Price on Electricity Users

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

- 16 14.4.6 Discussion of Savings in Electricity Expenditures

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

- 17

LIST OF TABLES Table 14.3.1 AEO2010 Reference Case Forecast

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

- 3 Table 14.3.2 Clothes Washer Trial Standard Level 1 Forecast

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

- 4 Table 14.3.3 Clothes Washer Trial Standard Level 2 Forecast

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

- 5 Table 14.3.4 Clothes Washer Trial St andard Level 3 Forecast

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

- 6 Table 14.3.5 Clothes Washer Trial Standard Level 4 Forecast

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

- 7 Table 14.3.6 Clothes Washer Trial Standard Level 5 Forecast

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

- 8 Table 14.4.1 Natural Gas Inverse Price Elasticity from Seven Energy Models

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

- 10 Table 14.4.2 Cumulat ive NPV of the Economy

- Wide Savings in Natural Gas

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

- 13 Table 14.4.3 Cumulative NPV of the Economy Wide Savings in Electricity Expenditures Due to the Projected Decline in Electricity Prices Resulting from the Propos ed Standard For Clothes Washers*

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

- 17

LIST OF FIGURES

Figure 14.4.1 Change in U.S. Natural Gas Consum ption Resulting From the Proposed Clothes Washer Product Energy Conservation Standard

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

- 11 Figure 14.4.2 Effects of the Proposed Clothes Washer Product Energy Conservation Standard on Average U.S. Wellhead Natural Gas Prices

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

- 12 Figure 14.4.3 Change in U.S. E lectricity Sales Associated with the Proposed Clothes Washer Product Energy Conservation Standard

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

- 15 Figure 14.4.4 Effect of the Proposed Clothes Washer Product Energy Conservation Standard on Average U.S. Electricity Prices (All Users)

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

- 1614-1 

### CHAPTER 14. UTILITY IMPACT ANALY SIS

14.1 INTRODUCTION

DOE anal yzed the effects of residential clothes washer 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. E ach year, DOE/EIA uses NEMS to produce a n energy forecast for the U nited States , the Annual Energy Outlook (AEO)

. The AEO for 2010 (AEO2010 ) forecasts energ y supply and demand through 2035

. 1 

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

- BT

, b 

### to account for the impacts of clothes washer ene rgy conservation standards. DOE’s utility impact analysis consists of a comparison between model results for the AEO20 10 Reference Case and for cases in which standards are in place, and applies the same basic set of assumptions as the AEO20 10

. The AEO20 10 reference case corresponds to medium economic growth.

The utility impact analysis reports the changes in electric installed capacity and generation that result for each trial standard level (TSL) by plant type , as well as changes in residen tial natural gas consumption.

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 an d scrutiny each AEO receives. 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 METHOD

The utility impact analysis uses the assumptions of the AEO20 10 and treat s residential clothes washer conservation standards as variations in policy. The effect s of the policy are calculated as the difference between the AEO20 10 Reference Case and each proposed standard

case , which is described as a trial standard lev el (TSL)

.

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 witho ut 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, DOE refers to it by the name NEMS

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

- BT was previously called NEMS

- BRS.14-2 

### DOE used the 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 numeric al 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 us ed these outputs to linearly interpolate the results to estimate actual changes in generation and capacity due to the standard.

Policy runs are executed by redu cing electricity and fossil fuel consumption in the NEMS

- BT Residential Demand Module. These energy savings are decremented with the appropriate end use. The reductions are also divided amongst the nine U.S. Census divi sions based upon the share of energy end use consumption in each division , as given in NEMS

.
Although the current time horizon of NEMS

- BT is 2035 , o ther parts of the energy conservation standards analysis extend through the year 204 4

. 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 metho d for extrapola tion of many outputs beyond 2035

. While it might seem reasonable to make simple linear extrapolations of results, in practice this is not advisable because outputs could be contradictory. An analysis of various trends sufficiently detailed t o guarantee consistency is beyond the scope of this work, and, in any case, would involve a great deal of uncertainty. Therefore , all extrapolations beyond 2035 are simple replications of year 2035 results. To emphasize the extrapolated results wherever th ey appear, they are shaded in gray to distinguish them from actual NEMS

- BT results.

14.3 RESULTS

This utility impact analysis reports NEMS

- BT forecasts for residential

- sector electricity and natural gas consumption , total electricity generation by fuel type, and installed electricity generation capacity by fuel type

. Results are presented in f ive

- year increments to year 2035

. Beyond year 2035 , an extrapolation through 204 4 for each proposed TSL represents a sim ple replication of the year 2035 results.

The results from the AEO20 10 Reference Case are shown in Table 14

. 3. 1.

A set of five TSLs were modeled for residential clothes washers . The results for each of these TSLs are presented in Tables 1 4 .3. 2 through 1 4

. 3. 6 , Each table shows forecasts using interpolated results, as described in section 14.2

, for total U.S. electricity generation and installed capacity as well as natural gas consumption

.

The considered residential clothes washer TSLs reduce electricity and natural gas consumption compared to the AEO20 10 Reference Case. The electricity impacts predicted by the NIA Model for the considered clothes washer products reduce consumption from a range of 0.34

to 0.71 percent of total residential elec tricity consumption in the year 2035. T he residential14-3 

### natural gas consumpti on impacts range from a decrease of 0.42 percent to a decrease of 1.23 percent of total residential natural gas consumption in the year 203 5.

Table 14.3

. 1 AEO2010 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 Clothes Washer Trial Standard Level 1 Forecast



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

2010 2015 2020 2025 2030 2035 2010 2015 2020 2025 2030 2035 2040 2042 2044 Residential Sector Energy Consumption Residential Sector Energy Consumption Electricity Sales (TWh) 1,388 1,400 1,469 1,549 1,632 1,702 Electricity Sales (TWh) 0.00 -0.47 -2.78 -4.59 -5.39 -5.73 -5.97 -6.06 -6.15 Natural Gas (EJ) 5.22 5.11 5.22 5.29 5.28 5.26 Natural Gas (EJ) 0.000 -0.003 -0.016 -0.026 -0.031 -0.033 -0.034 -0.035 -0.035 Other (EJ) 1.68 1.52 1.47 1.42 1.38 1.35 Other (EJ) 0.000 0.000 -0.001 -0.001 -0.001 -0.001 -0.001 -0.001 -0.001 Natural Gas (Quads) 4.95 4.85 4.95 5.01 5.00 4.98 Natural Gas (Quads) 0.000 -0.003 -0.015 -0.025 -0.029 -0.031 -0.032 -0.033 -0.033 Other (Quads) 1.59 1.44 1.40 1.35 1.31 1.28 Other (Quads) 0.000 0.000 0.000 -0.001 -0.001 -0.001 -0.001 -0.001 -0.001

Total U.S. Electric Generation Total U.S. Electric Generation Coal (TWh) 1,828 2,038 2,090 2,130 2,208 2,304 Coal (TWh) 0.07 0.15 -0.73 -0.02 -1.06 -1.10 -1.10 -1.10 -1.10 Gas (TWh) 857 691 769 883 1,016 1,094 Gas (TWh) 0.16 1.08 -0.36 -3.02 -1.74 -1.11 -1.11 -1.11 -1.11 Petroleum (TWh) 45 46 47 48 48 49 Petroleum (TWh) 0.00 0.00 -0.02 -0.02 -0.03 -0.04 -0.04 -0.04 -0.04 Nuclear (TWh) 813 834 883 886 886 894 Nuclear (TWh) 0.00 0.00 0.00 0.00 0.00 -0.32 -0.32 -0.32 -0.32 Renewables (TWh) 462 647 712 795 848 888 Renewables (TWh) -0.22 -1.72 -1.51 -1.80 -1.89 -2.11 -2.11 -2.11 -2.11 Total (TWh) 4,005 4,257 4,500 4,741 5,007 5,229 Total (TWh) 0.00 -0.49 -2.62 -4.85 -4.72 -4.68 -4.68 -4.68 -4.68

Installed Generating Capacity Installed Generating Capacity Coal (GW) 321 325 326 326 330 336 Coal (GW) 0.000 -0.036 -0.015 -0.015 -0.078 -0.070 -0.070 -0.070 -0.070 Other Fossil (GW) 468 445 446 467 501 534 Other Fossil (GW) -0.001 -0.103 -0.137 -0.382 -0.226 -0.227 -0.227 -0.227 -0.227 Nuclear (GW) 102 105 111 111 111 112 Nuclear (GW) 0.000 0.000 0.000 0.000 0.000 -0.042 -0.042 -0.042 -0.042 Renewables (GW) 133 171 176 186 195 209 Renewables (GW) -0.063 -0.470 -0.460 -0.401 -0.432 -0.543 -0.543 -0.543 -0.543 Total (GW) 1,024 1,045 1,058 1,090 1,137 1,191 Total (GW) -0.064 -0.609 -0.612 -0.798 -0.736 -0.882 -0.882 -0.882 -0.882 Extrapolation14-5 

### Table 14.3

. 3 Clothes Washer 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 2042 2044 Residential Sector Energy Consumption Residential Sector Energy Consumption Electricity Sales (TWh) 1,388 1,400 1,468 1,548 1,631 1,701 Electricity Sales (TWh) 0.00 -0.53 -3.16 -5.24 -6.19 -6.60 -6.87 -6.97 -7.08 Natural Gas (EJ) 5.22 5.11 5.23 5.30 5.29 5.27 Natural Gas (EJ) 0.000 -0.002 -0.010 -0.017 -0.021 -0.022 -0.023 -0.023 -0.024 Other (EJ) 1.68 1.52 1.47 1.42 1.38 1.35 Other (EJ) 0.000 0.000 -0.001 -0.001 -0.001 -0.001 -0.001 -0.001 -0.001 Natural Gas (Quads) 4.95 4.85 4.96 5.02 5.01 4.99 Natural Gas (Quads) 0.000 -0.002 -0.010 -0.016 -0.020 -0.021 -0.022 -0.022 -0.022 Other (Quads) 1.59 1.44 1.40 1.35 1.31 1.28 Other (Quads) 0.000 0.000 -0.001 -0.001 -0.001 -0.001 -0.001 -0.001 -0.001

Total U.S. Electric Generation Total U.S. Electric Generation Coal (TWh) 1,828 2,038 2,089 2,130 2,208 2,303 Coal (TWh) 0.08 0.17 -0.83 -0.03 -1.21 -1.26 -1.26 -1.26 -1.26 Gas (TWh) 857 692 769 882 1,016 1,094 Gas (TWh) 0.18 1.22 -0.41 -3.44 -1.99 -1.28 -1.28 -1.28 -1.28 Petroleum (TWh) 45 46 47 48 48 49 Petroleum (TWh) 0.00 0.00 -0.02 -0.02 -0.03 -0.04 -0.04 -0.04 -0.04 Nuclear (TWh) 813 834 883 886 886 894 Nuclear (TWh) 0.00 0.00 0.00 0.00 0.00 -0.37 -0.37 -0.37 -0.37 Renewables (TWh) 462 647 712 795 848 888 Renewables (TWh) -0.25 -1.94 -1.72 -2.05 -2.17 -2.43 -2.43 -2.43 -2.43 Total (TWh) 4,005 4,257 4,500 4,740 5,006 5,228 Total (TWh) 0.01 -0.55 -2.98 -5.54 -5.42 -5.38 -5.38 -5.38 -5.38

Installed Generating Capacity Installed Generating Capacity Coal (GW) 321 325 326 326 330 336 Coal (GW) 0.00 -0.04 -0.02 -0.02 -0.09 -0.08 -0.08 -0.08 -0.08 Other Fossil (GW) 468 445 446 467 501 534 Other Fossil (GW) 0.00 -0.12 -0.16 -0.44 -0.26 -0.26 -0.26 -0.26 -0.26 Nuclear (GW) 102 105 111 111 111 112 Nuclear (GW) 0.00 0.00 0.00 0.00 0.00 -0.05 -0.05 -0.05 -0.05 Renewables (GW) 133 171 176 186 195 209 Renewables (GW) -0.07 -0.53 -0.52 -0.46 -0.50 -0.62 -0.62 -0.62 -0.62 Total (GW) 1,024 1,045 1,058 1,090 1,137 1,191 Total (GW) -0.07 -0.69 -0.69 -0.91 -0.84 -1.01 -1.01 -1.01 -1.01 Extrapolation14-6 

### Table 14.3

. 4 Clothes Washer Trial Standard Level 3 Forecast



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

2010 2015 2020 2025 2030 2035 2010 2015 2020 2025 2030 2035 2040 2042 2044 Residential Sector Energy Consumption Residential Sector Energy Consumption Electricity Sales (TWh) 1,388 1,400 1,468 1,547 1,629 1,699 Electricity Sales (TWh) 0.00 -0.49 -3.52 -6.35 -7.81 -8.43 -8.82 -8.95 -9.09 Natural Gas (EJ) 5.22 5.11 5.22 5.29 5.28 5.25 Natural Gas (EJ) 0.000 -0.003 -0.017 -0.029 -0.034 -0.036 -0.038 -0.038 -0.039 Other (EJ) 1.68 1.52 1.47 1.42 1.38 1.35 Other (EJ) 0.000 0.000 -0.001 -0.001 -0.001 -0.002 -0.002 -0.002 -0.002 Natural Gas (Quads) 4.95 4.84 4.95 5.01 5.00 4.98 Natural Gas (Quads) 0.000 -0.003 -0.016 -0.027 -0.032 -0.034 -0.036 -0.036 -0.037 Other (Quads) 1.59 1.44 1.40 1.35 1.31 1.28 Other (Quads) 0.000 0.000 -0.001 -0.001 -0.001 -0.001 -0.002 -0.002 -0.002

Total U.S. Electric Generation Total U.S. Electric Generation Coal (TWh) 1,828 2,038 2,089 2,130 2,208 2,303 Coal (TWh) 0.07 0.15 -0.92 -0.03 -1.53 -1.62 -1.62 -1.62 -1.62 Gas (TWh) 857 691 769 881 1,016 1,093 Gas (TWh) 0.16 1.13 -0.45 -4.17 -2.51 -1.64 -1.64 -1.64 -1.64 Petroleum (TWh) 45 46 47 48 48 49 Petroleum (TWh) 0.00 0.00 -0.02 -0.02 -0.04 -0.05 -0.05 -0.05 -0.05 Nuclear (TWh) 813 834 883 886 886 894 Nuclear (TWh) 0.00 0.00 0.00 0.00 0.00 -0.47 -0.47 -0.47 -0.47 Renewables (TWh) 462 647 712 794 847 887 Renewables (TWh) -0.23 -1.79 -1.91 -2.48 -2.74 -3.10 -3.10 -3.10 -3.10 Total (TWh) 4,005 4,257 4,499 4,739 5,005 5,227 Total (TWh) 0.00 -0.51 -3.31 -6.70 -6.83 -6.88 -6.88 -6.88 -6.88

Installed Generating Capacity Installed Generating Capacity Coal (GW) 321 325 326 326 330 336 Coal (GW) 0.00 -0.04 -0.02 -0.02 -0.11 -0.10 -0.10 -0.10 -0.10 Other Fossil (GW) 468 445 446 467 501 533 Other Fossil (GW) 0.00 -0.11 -0.17 -0.53 -0.33 -0.33 -0.33 -0.33 -0.33 Nuclear (GW) 102 105 111 111 111 112 Nuclear (GW) 0.00 0.00 0.00 0.00 0.00 -0.06 -0.06 -0.06 -0.06 Renewables (GW) 133 171 176 186 195 209 Renewables (GW) -0.07 -0.49 -0.58 -0.55 -0.62 -0.80 -0.80 -0.80 -0.80 Total (GW) 1,024 1,045 1,058 1,090 1,137 1,191 Total (GW) -0.07 -0.64 -0.77 -1.10 -1.07 -1.30 -1.30 -1.30 -1.30 Extrapolation14-7 

### Table 14.3

. 5 Clothes Washer Trial Standard Le vel 4 Forecast



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

2010 2015 2020 2025 2030 2035 2010 2015 2020 2025 2030 2035 2040 2042 2044 Residential Sector Energy Consumption Residential Sector Energy Consumption Electricity Sales (TWh) 1,388 1,399 1,467 1,545 1,627 1,697 Electricity Sales (TWh) 0.00 -0.85 -5.05 -8.38 -9.98 -10.68 -11.14 -11.31 -11.48 Natural Gas (EJ) 5.22 5.11 5.21 5.27 5.26 5.23 Natural Gas (EJ) 0.000 -0.004 -0.026 -0.043 -0.052 -0.056 -0.058 -0.059 -0.060 Other (EJ) 1.68 1.52 1.47 1.42 1.38 1.35 Other (EJ) 0.000 0.000 -0.001 -0.002 -0.002 -0.002 -0.002 -0.002 -0.002 Natural Gas (Quads) 4.95 4.84 4.94 5.00 4.98 4.96 Natural Gas (Quads) 0.000 -0.004 -0.025 -0.041 -0.049 -0.053 -0.055 -0.056 -0.057 Other (Quads) 1.59 1.44 1.40 1.35 1.31 1.28 Other (Quads) 0.000 0.000 -0.001 -0.001 -0.002 -0.002 -0.002 -0.002 -0.002

Total U.S. Electric Generation Total U.S. Electric Generation Coal (TWh) 1,828 2,038 2,089 2,130 2,207 2,303 Coal (TWh) 0.13 0.27 -1.33 -0.05 -1.96 -2.05 -2.05 -2.05 -2.05 Gas (TWh) 858 692 768 880 1,015 1,093 Gas (TWh) 0.28 1.95 -0.65 -5.51 -3.21 -2.07 -2.07 -2.07 -2.07 Petroleum (TWh) 45 46 47 48 48 49 Petroleum (TWh) 0.00 -0.01 -0.03 -0.03 -0.06 -0.07 -0.07 -0.07 -0.07 Nuclear (TWh) 813 834 883 886 886 894 Nuclear (TWh) 0.00 0.00 0.00 0.00 0.00 -0.60 -0.60 -0.60 -0.60 Renewables (TWh) 462 645 711 794 847 886 Renewables (TWh) -0.40 -3.09 -2.75 -3.28 -3.51 -3.93 -3.93 -3.93 -3.93 Total (TWh) 4,005 4,256 4,498 4,737 5,003 5,225 Total (TWh) 0.01 -0.88 -4.76 -8.86 -8.73 -8.71 -8.71 -8.71 -8.71

Installed Generating Capacity Installed Generating Capacity Coal (GW) 321 325 326 326 330 336 Coal (GW) 0.00 -0.07 -0.03 -0.03 -0.14 -0.13 -0.13 -0.13 -0.13 Other Fossil (GW) 468 445 445 467 501 533 Other Fossil (GW) 0.00 -0.19 -0.25 -0.70 -0.42 -0.42 -0.42 -0.42 -0.42 Nuclear (GW) 102 105 111 111 111 112 Nuclear (GW) 0.00 0.00 0.00 0.00 0.00 -0.08 -0.08 -0.08 -0.08 Renewables (GW) 133 171 176 186 195 208 Renewables (GW) -0.11 -0.85 -0.83 -0.73 -0.80 -1.01 -1.01 -1.01 -1.01 Total (GW) 1,024 1,045 1,058 1,089 1,137 1,191 Total (GW) -0.12 -1.10 -1.11 -1.46 -1.36 -1.64 -1.64 -1.64 -1.64 Extrapolation14-8 

### Table 14.3

. 6 Clothes Washer Trial Standard Level 5 Forecast



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

2010 2015 2020 2025 2030 2035 2010 2015 2020 2025 2030 2035 2040 2042 2044 Residential Sector Energy Consumption Residential Sector Energy Consumption Electricity Sales (TWh) 1,388 1,399 1,466 1,544 1,626 1,695 Electricity Sales (TWh) 0.00 -0.96 -5.74 -9.51 -11.28 -12.08 -12.62 -12.82 -13.01 Natural Gas (EJ) 5.22 5.11 5.21 5.26 5.25 5.23 Natural Gas (EJ) 0.000 -0.005 -0.031 -0.051 -0.061 -0.065 -0.068 -0.069 -0.070 Other (EJ) 1.68 1.52 1.47 1.42 1.38 1.35 Other (EJ) 0.000 0.000 -0.001 -0.002 -0.002 -0.002 -0.002 -0.002 -0.002 Natural Gas (Quads) 4.95 4.84 4.94 4.99 4.98 4.95 Natural Gas (Quads) 0.000 -0.005 -0.029 -0.048 -0.057 -0.062 -0.065 -0.066 -0.067 Other (Quads) 1.59 1.44 1.40 1.35 1.31 1.28 Other (Quads) 0.000 0.000 -0.001 -0.002 -0.002 -0.002 -0.002 -0.002 -0.002

Total U.S. Electric Generation Total U.S. Electric Generation Coal (TWh) 1,828 2,038 2,089 2,130 2,207 2,302 Coal (TWh) 0.14 0.30 -1.51 -0.05 -2.21 -2.32 -2.32 -2.32 -2.32 Gas (TWh) 858 693 768 879 1,015 1,093 Gas (TWh) 0.32 2.21 -0.74 -6.25 -3.63 -2.34 -2.34 -2.34 -2.34 Petroleum (TWh) 45 46 47 48 48 49 Petroleum (TWh) 0.00 -0.01 -0.03 -0.03 -0.06 -0.07 -0.07 -0.07 -0.07 Nuclear (TWh) 813 834 883 886 886 894 Nuclear (TWh) 0.00 0.00 0.00 0.00 0.00 -0.67 -0.67 -0.67 -0.67 Renewables (TWh) 462 645 711 793 846 886 Renewables (TWh) -0.46 -3.51 -3.13 -3.72 -3.96 -4.45 -4.45 -4.45 -4.45 Total (TWh) 4,005 4,256 4,497 4,736 5,002 5,224 Total (TWh) 0.01 -1.00 -5.41 -10.05 -9.87 -9.86 -9.86 -9.86 -9.86

Installed Generating Capacity Installed Generating Capacity Coal (GW) 321 325 326 326 330 336 Coal (GW) 0.00 -0.07 -0.03 -0.03 -0.16 -0.15 -0.15 -0.15 -0.15 Other Fossil (GW) 468 445 445 466 501 533 Other Fossil (GW) 0.00 -0.21 -0.28 -0.79 -0.47 -0.48 -0.48 -0.48 -0.48 Nuclear (GW) 102 105 111 111 111 112 Nuclear (GW) 0.00 0.00 0.00 0.00 0.00 -0.09 -0.09 -0.09 -0.09 Renewables (GW) 133 171 176 185 195 208 Renewables (GW) -0.13 -0.96 -0.95 -0.83 -0.90 -1.14 -1.14 -1.14 -1.14 Total (GW) 1,024 1,045 1,058 1,089 1,137 1,190 Total (GW) -0.13 -1.25 -1.26 -1.65 -1.54 -1.86 -1.86 -1.86 -1.86 Extrapolation14-9 

### 14.4 IMPACT OF STANDARDS ON NATURAL GAS AND E LECTRICITY
PRICES AND ASSOCIATE D BENEFITS FOR CONSUMERS

Using the framework of the utility impact analysis

, DOE analyzed the potential impact on electricity and natural gas prices resulting from proposed standards on clothes washer products. Associated benefits for all energy users in all sectors of the economy are then derived 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 ela sticity.” The calculated inverse price elasticity based on NEMS

- BT simulations differs throughout the forecast period in response to the dynamics of supply and demand for natural gas or electricity.

The average inverse gas price ela sticit y during 2015

– 2035 is 2.08 with TSL 3 (the proposed standard). A va lue of 2.08 means that, given a one

- percent decrease in demand, the pr ice of gas would decline by 2.08 percent.

In a review of such studies that used versions of NEMS to examine the impacts on natural gas prices resulting from reductions in natural gas demand, Wiser and Bollinger 2 

### examined analyses that reported the reductions in natural gas demand caused by certain energy policies, and the resulting decline in the average U.S. wellhead g as price. Wiser and Bollinger found that the average values of the inverse price elasticity throughout the forecast period in each study ranged from 0.7 to 4.7. The average inverse price elasticities in 13 of 19 analyses were between 0.8 and 2.0. The value f rom DOE's current analysis ( 2.08 f or TSL 3 ) falls within the overall

range.

Other widely used, complex energy demand/supply models produce price elasticities that are similar to thos e incorporated in NEMS. Table 14.4.1 compares the results of several s tudies that modeled the response of natural gas prices to changes in gas consumption. These results are summarized in a 2003 study by Stanford's Energy Modeling Forum (EMF). 3 

### Although the magnitude of the price response (as summarized by the inverse price elasticity) varies considerably among the models, they generally confirm a sizable price effect associated with changes in natural gas consumption. c 

### It is worth noting that the NEMS average value determined by the EMF study is smaller than that of most of the other models. Therefore, it is reasonable to conclude that the impacts estimated by NEMS are conservative.

c The EMF scenarios modeled the effect of increased gas demand on price. Assuming a smooth supply curve over the long term, however, the elasticitie s implied by an increase in demand should be equivalent to those implied by a decrease in demand. For undetermined reasons, two of the models studied in the Wiser and Bollinger report (NANGAS and NARG) report somewhat anomalous inverse elasticities.14-10 

### Table 14.4

. 1 Natural Gas Inverse Price Elasticity from Seven Energy Models
2005 2010 2015 2020 Average NEMS 1.8 2.2 0.53 0.11 1.2 POEMS 2.4 1.8 2.5 1.8 2.1 CRA 3.5 2.5 1.1 0.9 2.0 NANGAS 5.4 7.0 7.6 5.1 6.3 E2020 1.5 1.0 1.0 0.7 1.1
MARKAL N/A 2.0 N/A 2.1 2.1 NARG 8.7 12.4 5.6 2.4 7.3 Source: Based on EMF, 2003

. NEMS (National Energy Modeling System, 2002); POEMS (Policy Office Electricity Modeling System) ; CRA (Charles River Associates) ; NANGAS (North American Natural Gas Analysis System), E2020 (Energy 2020) ; MARKAL (MARKet ALlocation) ; NARG (North American Regional Gas model)

.



### In addition to the models listed above, studies have been conducted by the National Petroleum Council 4 

### and the National Commission on Energy Policy 5 

### that are based on the EEA model. The EEA model has higher inverse price elasticities (between 4.0 and 16.8 ) than those predicted by NEMS and most other national energy models, leading to larger natural gas price reductions for a given decrease in demand.

14.4.1 Impact on Natural Gas Prices

Figure 14.4.1 shows the annual change in U.S. natural gas consum ption, relative to the base case which involves no new standards, for the proposed standard (TSL 3 ). Because standards may decrease electricity de mand, and a significant percentage of electricity is generated using natural gas, the standards may reduce na tural gas consumption in the utility sector as well as in the residential sector.14-11 

### Figure 14.4

. 1 Change in U.S. Natural Gas Consumption Resulting From the Proposed Clothes Washer Product Energy Conservation Standard

As described in section 14.2, using NEMS

- BT to analyze impacts of relatively small annual changes in energy consumption typically involves using higher

- decrements to isolate the impacts of the standards from numerica l noise ( i.e. , larger energy savings quantities than those resulting from the considered standards). After generating results using higher decrements to gas and electricity consumption, DOE utilized a regressed interpolation toward the origin to derive the natural gas price effects result ing from energy savings at TSL 3 , the proposed standard. Figure 14.4.2 shows the annual change in average U.S. wellhead price for natural gas, relative to the base case. The price reduction averages 1.3 cents per MMBtu (in 2010 $), this is a reduction of 0.18 percent in wellhead prices

. - 0.07 - 0.06 - 0.05 - 0.04 - 0.03 - 0.02 - 0.01 0.00 0.01

2015 2020 2025 2030 2035quads 

### Change in Total U.S. Gas Consumption

TSL 314-12 

### Figure 14.4

. 2 Effects of the Proposed Clothes Washer Product Energy Conservation Standard on Average U.S. Wellhead Natural Gas Prices

14.4.2 Impact of Changes in Natural Gas Prices on Gas Users

Although NEMS indicates that amended standards for clothes washers reduce natural gas prices by only a small amount, the associated economy

- wide savings in natural gas expenditures during the forecast pe riod are substantial. For each TSL, DOE calculated the nominal savings in total natural gas expenditures in each year by multiplying the annual change in the average

- user price for natural gas by the total annual U.S. natural gas consumption forecast by NE MS. d 

### The amended standards would continue to reduce d emand for natural gas after 2035 (which is the last year in the NEMS fo recast). DOE’s estimate for 2036

– 2045 (the period used to estimate the NPV of the national consumer benefits from amended standards) multiplied the average gas price reduction in 2015

– 2035 by estimated tota l annual gas consumption in 2036

– 2045. e 

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

Table 14.4.2 shows the calculated NPV of the economy

- wide savings in natural gas expenditures for each considered TSL at 3

- percent and 7

- percent discount rates. The need to extrapolate price effects and gas consumption beyond 203 5 suggests that one should interpret the

d The average user includes electric utilities. Presumably the decrease in expenditures of natural gas that they experience would largely be passed on to electricity consumers.

e The estimation of gas consumption after 2035 uses the average annual growth ra te in 2031

- 2035 from the AEO 2010 Reference projection

. - 0.030 - 0.025 - 0.020 - 0.015 - 0.010 - 0.005 0.000 0.005 0.010

2015 2020 2025 2030 20352010$/MMBtu 

### Change in Lower 48 States Wellhead Prices

TSL 314-13 

### post

- 2035 results as a rough indication of the benef its to natural gas users in the post

- 2035 period

.

Table 14.4

. 2 Cumulative NPV of the Economy

- Wide Savings in Natural Gas Expenditures Due to the Projected Decline in Natural Gas Prices Resulting from the Proposed Standard for Clothes Washers * Discount Rate billion $20 10
3 percent 4. 937 7 percent 2

. 313

* Impacts for units sold from 201 5 through 204 5



### 14.4.3 Discussion of Savings in Natural Gas Expenditures

A decline in natural gas consumption may lower natural gas prices for two primary reasons. One reason is that decreasing consumption would lower the output of existing natural gas production capacity, leading to increased competition and downward pressure on prices. A second reason is that reduced consumption slows the depletion of low

- cost gas reserves, lowers the future cost of finding and extracting natural gas resources, and dampens expectations for future prices.

When gas prices drop in response to a lower output of existing natural gas production capacity, consumers benefit, but producers suffer. In economic terms, the situation represents a benefits transfer to consumers (whose expenditures fall) from producers (whose revenue falls equally) f 

### . When prices decrease because extraction costs decline, however, consumers and producers both benefit, and the change in natural gas prices represents a net gain to society. Consumers benefit from the lower prices, and producers, whose revenues and costs both fa ll, are made no worse off.

The short

- term impact of lower consumption on natural gas price likely results from changes in the utilization of natural gas production and capacity. It is likely that reduced consumption has only a short

- term impact on capacity utilization in the natural gas industry. Producers can adjust to changes in consumption in the long term by either increasing or decreasing investments in infrastructure to bring capacity utilization rates back to original levels.

The long

- term impact on natural gas prices probably results from changes in extraction costs. Natural gas is an exhaustible resource, and conventional natural gas sources are limited. When those low

- cost sources are depleted, producers must turn to higher

- cost sources of natu ral gas, at which point extraction costs and wellhead prices will increase. Reduced demand creates

f Gas producers include domestic, other North American, and overseas LNG producers. The proportion of domestic producers is expected to decline in the future.14-14 

### downward pressure on extraction costs and prices because it delays the depletion of low

- cost reserves and forestalls a shift toward higher

- cost sources.

Be cause the NEMS is a complex model, it is difficult to determine exactly how much of the model

- estimated drop in natural gas price in any given year is explained by a decrease in utilization of capacity, and how much is explained by a decrease in extraction costs. One would expect, however, that most of the forecasted price declin e after 2015 is caused by a decline in extraction costs. Supporting evidence for this conclusion derives from comparing the sources of natural gas drawn upon to supply consumers in the base case (without standards) and the standards cases of the model runs. The three principal sources of natural gas considered in NEMS for 2035 are termed conventional sources, unconventional sources, and imports. The imports are primarily of liquefie d natural gas (LNG). Conventional sources are the lowest

- cost, and imports are the highest

- cost source of natural gas, as forecast by NEMS.

The effect of standards on extraction costs is revealed by comparing the rate of natural gas production from the t hree natural gas sources in model runs for the base case with the rates for the standards cases. As shown in DOE’s furnace/boiler rulemaking (see the TSD, chapter 10), NEMS indicates that standards produce decreases in natural gas production from all three sources, but production from the higher

- cost sources declines most of all. This result suggests that, based on the NEMS model, energy conservation standards decrease future costs for natural gas extraction because they result in decreased rates of depleti on of low

- cost natural gas supplies and decreased imports of high

- cost LNG. This result further suggests that a significant part of the long

- term decreases in wellhead prices forecasted by the NEMS represents both a benefit to consumers of natural gas and a net benefit to society.

14.4.4 Impact on Electricity Prices

DOE analyzed the elec tricity price effect of clothes washer products at TSL 3 , the selected standard level. A single regression was made to calculate the total impacts at this standard level. Results were generated using higher decrements to energy consumption. A regressed interpolation toward the origin was then used to derive the price effects associated with the total energy savings.

Figure 14.4.3 shows the annual change in U.S. electricity sale s for the proposed standard

, relative to the base case which involves no new standards.14-15 

### Figure 14.4

. 3 Change in U.S. Electricity Sales Associated with the Proposed Clothes Washer Product Energy Conservation Standard

Figure 14.4.4 shows the annual change in average U.S. price for electricity, relative to the Reference case, projected to result from the proposed standard. The price reduction averages 0.0 07 cents per kWh (in 2010 $ ). This average price reduction equals 0. 07 percent

. - 8.0 - 7.0 - 6.0 - 5.0 - 4.0 - 3.0 - 2.0 - 1.0 0.0

2015 2020 2025 2030 2035TWH 

### Change in Total U.S. Electricity Sales

TSL 314-16 

### Figure 14.4

. 4 Effect of the Proposed Clothes Washer Product Energy Conservation Standard on Average U.S. Electricity Prices (All Users)

14.4.5 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 annual 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

– 2045 (the period used to estimate the NPV of the national consumer benefits from amended standards) multiplied the average electricity price reduction in 2015

– 2035 by estimated total annual electricity sales in 2036

– 2045

. g 

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

Table 14.4.3 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 electricit y sales beyond 2035 suggests that one should interpret the post

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

- 2035 period.

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

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

### - 0.00016 - 0.00014 - 0.00012 - 0.00010 - 0.00008 - 0.00006 - 0.00004 - 0.00002 0.00000

2015 2020 2025 2030 20352010$/KWH 

### Change in U.S. Electricity Prices

TSL 314-17 

### Table 14.4

. 3 Cumulative NPV of the Economy Wide Savings in Electricity Expenditures Due to the Projected Decline in Electricity Prices Resulting from the Proposed Standard For Clothes Washers * Discount Rate billion $20 10
3 percent 5

. 224 7 percent 2. 471

* Impacts for units sold from 201 5 through 204 5



### 14.4.6 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 of 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 c hanged over time. For these reasons, an assessment of the impacts on the actors involved in electricity supply from the reduction in electricity demand associated with energy conservation standards is beyond the scope of this rulemaking.

In considering the potential benefits to electricity users, DOE takes under advisement the instruction 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), s ection E, “Identifying and Measuring Benefits and Costs”). Specifically, 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 whic h a change in electricity prices that is projected to result from standards represents a net gain to society.14-18 

### REFERENCES

1 

### Energy Information Administration, Annual Energy Outlook 2010 with Projections to 2035

, 2010 . Washington, DC. Report No. DOE/EIA

- 0383(2010 ).

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

2 

### Ryan Wiser, Mark Bolinger, and Matt St. Clair, Easing the Natural Gas Crisis: Reducing Natural Gas Prices through Increased Deployment of Renewable Energy and Energy Efficiency, January, 2005. Lawrence Berkeley National Laboratory. Report No. 56756.

3 

### Natural Gas, Fuel Diversity and North American Energy M arkets

, September 2003. Energy Modeling Forum, Stanford University. Report No. EMF Report 20.

4 

### Balancing Natural Gas Policy

- Fueling the Demands of a Growing Economy, Vol. I Summary of Findings and Recommendations, September 25, 2003. National Petroleum Council.

5 

### National Commission on Energy Policy, Increasing U.S. Natural Gas S upplies: A Discussion Paper and Recommendations from the National Commission on Energy Policy, October, 2003. < www.energycommission.org >