WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES ONLY

DO NOT QUOTE OR CITE BECAUSE RESULTS ARE SUBJECT TO CHANGE 

October 18, 2021

MEMORANDUM FOR: Angelina LaRose

Assistant Administrator for Energy Analysis

FROM: Jim Diefenderfer

Director, Office of Long-Term Energy Modeling

SUBJECT: Summary of second AEO2022 Macro-Industrial Working Group, held on 

Thursday, September 30, 2021

This memorandum summarizes the presentation and discussion at the second Annual Energy Outlook 

2022 (AEO2022) Macro-Industrial Working Group meeting. The macroeconomic and industrial teams

presented preliminary AEO2022 results and model updates. A question-and-answer discussion followed 

the presentations.

The presentation slides are available in a separate document on our website. All slides, charts, and 

discussions for AEO2022 are preliminary and, therefore, should not be quoted or cited. We will release 

final AEO2022 materials in early 2022.

Macroeconomic Activity Module (MAM) updates

We discussed the key updates to the MAM this year, which included the following models:

• IHS Markit’s U.S. Macroeconomic Model

• Industrial Output Module

• Employment by Industry Module

Industrial Demand Module (IDM) updates

We discussed the key updates for the IDM this year, including:

• Updating the base-year energy intensities with the newly released Manufacturing Energy 

Consumption Survey (MECS) data; this update also includes an update to the non-manufacturing 

baseline data for 2018 using both EIA and non-EIA data sources

• Improving combined-heat-and-power (CHP) calculations, including technology parameters and 

the paper industry’s ability to sell excess CHP-generated electricity to the grid

• Improving the ethane and propane price forecast by employing more accurate chemical 

shipment drivers and feedstock consumption drivers

• Allowing ethane versus naphtha feedstock switching in the bulk chemicals subroutine and 

making ethane and propane feedstock prices more sensitive to supply and demand dynamics
2

WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES ONLY

DO NOT QUOTE OR CITE BECAUSE RESULTS ARE SUBJECT TO CHANGE 

We also discussed longer-term plans for updates to the IDM, including:

• Allowing electric boiler use in the end-use industries (such as bulk chemicals and food)

• Integrating more fuel price sensitivity into the process flow models (cement and lime, iron and 

steel, paper, glass, and aluminum)

• Enhancing the sensitivity of industrial energy intensity to changes in capacity utilization

• Investigating the source of the apparent large amount of nonmanufacturing natural gas 

consumption, calculated as the difference between total natural gas consumption from our 

Natural Gas Annual and manufacturing natural gas consumption from MECS

• Restructuring the IDM and data preprocessing in various ways, including by using Python

Discussion

An attendee asked if a change in the forecast for natural gas production would be included in the new 

ethane and propane pricing model. We said hydrocarbon gas liquid prices depended inherently on the 

Henry Hub natural gas spot price, so any changes in that price as a result of production differences 

would be reflected in ethane and propane prices.

An attendee wondered if the Reference case included possible climate damage. We said it did not.

An attendee asked if we anticipated structural reshoring of imports. We responded that assumptions 

regarding structural reshoring of imports would be made by IHS Markit economists and would,

therefore, be a part of the U.S. model that IHS Markit provides to us.

An attendee noted that Illinois just passed a law that requires electric generating units, including CHP 

units, to stop using fossil fuels by 2045. The law does not address industrial units that just make steam, 

and the attendee said this factor would force industrial steam units to remain coal- and natural-gasfueled and not convert to CHP.

An attendee asked if we could review how the MAM couples to the main energy model and if it was a 

one-way or two-way connection. We said the MAM is a distinct, integrated module of the National 

Energy Modeling System (NEMS). Energy assumptions from the remaining modules of NEMS supplant 

energy concepts in the MAM. The modules in the MAM solve using these NEMS energy assumptions. 

The resulting economic projections are then supplied to the remaining NEMS modules. This cycling 

continues as the modules of NEMS solve over the projection period.

An attendee asked if an update from the Census Bureau for its long-term population forecast is 

forthcoming. We said that IHS Markit economists include updates to population projections in the U.S. 

model as the Census Bureau makes those projections available. We advised that we are not sure when 

the next population projection release would be.

An attendee asked if the Reference case included the effects of outdated infrastructure as suggested by 

the American Society of Civil Engineers. We said it did not.
3

WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES ONLY

DO NOT QUOTE OR CITE BECAUSE RESULTS ARE SUBJECT TO CHANGE 

An attendee asked if we saw the many decarbonization commitments from companies affecting fuel 

use. We said that we do not incorporate stated goals of companies in our modeling, only laws on the 

books concerning decarbonization or otherwise. We said that the number of companies that have 

announced decarbonization plans does indicate interest in industrial decarbonization technologies, 

however, and industrial decarbonization technologies are something we are continuing to look into as 

we look to expand and update our equipment technology base in the process flow model industries.

An attendee inquired what the change in energy intensity would be if feedstocks were not included in 

the calculation. We said that number has not yet been calculated, but it will be in the final AEO.

An attendee asked if we had explored the possibility of increased demand for construction materials, for 

example, cement and steel. We responded that industrial shipments of intermediate goods such as 

cement and steel are determined by final demands, such as consumption, investment, government 

expenditures, and trade, which are projected in the IHS Markit U.S. model.

An attendee noted that work from MIT has shown that the energy intensity of the U.S. economy has 

declined by 1% per year since 1945.

Attendees

Guests (WebEx/phone)

R. Neal Elliott III American Council for an Energy-Efficient Economy

Pavitra Srinivasan American Council for an Energy-Efficient Economy

Brett Smith American Iron and Steel Institute

Carl Bozzuto Council of Industrial Boiler Owners

John "Skip" Laitner Economic and Human Dimensions Research Associates

John Meyer Leidos

Colin McMillan National Renewable Energy Laboratory

Robert Boteler Nidec Motor Corporation

Amogh Prabhu OnLocation

Jae Edmonds Pacific Northwest National Laboratory

Haewon McJeon Pacific Northwest National Laboratory

Sha Yu Pacific Northwest National Laboratory

Robert Hershey Professional

Ben King Rhodium Group

Hannah Kolus Rhodium Group

Thomas Budd Simon Fraser University Energy and Materials Research Group

Clayton Vernon Sunoco

David White Synapse Energy Economics

Kevin Dayaratna The Heritage Foundation

Kevin Dubina U.S. Bureau of Labor Statistics

Joe Cresko U.S. Department of Energy

Elizabeth McNamee U.S. Department of Energy

Danny Macri U.S. Environmental Protection Agency
4

WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES ONLY

DO NOT QUOTE OR CITE BECAUSE RESULTS ARE SUBJECT TO CHANGE 

Ana Han U.S. House of Representatives

Ryszard Wycisk Vanderbilt University

EIA attendees (WebEx/phone)

Eugenio Aleman

Lindsay Aramayo

Erin Boedecker

Caroline Campbell

Peter Colletti

Jim Diefenderfer

Michael Dwyer

Kathryn Dyl

Mindi Farber-DeAnda

Travis Freidman

David Fritsch

Kevin Jarzomski

Ari Kahan

Mala Kline

Mary Lewis

Perry Lindstrom

Tom Lorenz

John Maples

Elizabeth May

Mark Morey

Kevin Nakolan

April Patel

James Preciado

Elizabeth Sendich

Matthew Skelton

Courtney Sourmehi

John Staub

Stephen York