WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES ONLY

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June 2, 2021

MEMORANDUM FOR: Angelina LaRose

Assistant Administrator for Energy Analysis

FROM: Jim Diefenderfer

Director, Office of Long-Term Energy Modeling

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

Thursday, May 20, 2021

This memorandum summarizes the presentation and discussion at the Annual Energy Outlook 2022

(AEO2022) Macro-Industrial Working Group meeting. The industrial team presented:

• A review of key Annual Energy Outlook 2021 industrial sector energy trends

• Module updates to be incorporated into AEO2022, including a detailed look at the 

Manufacturing Energy Consumption Survey (MECS) data update

• Plans for longer-term modeling and data enhancements

• A summary of regular data 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 were preliminary and, therefore, should not be quoted or cited. Final AEO2022 

materials will be released in early 2022.

Macroeconomic Activity Module (MAM) updates

We discussed the key updates planned for the MAM this year, including for the following models:

• The IHS Markit U.S. Macroeconomic Model

• Industrial Output Model

• Employment by Industry Model

• Regional Economic Activity Model

• Commercial Floor Space Model

Industrial Demand Module (IDM) updates

EIA staff discussed the key updates planned for the industrial module this year, including:

• Updating the MECS data used for benchmarking industry-level consumption

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

and the paper industry’s ability to sell excess CHP electricity to the grid
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• Allowing ethane versus naphtha feedstock switching in the bulk chemical subroutine

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

and steel, paper, glass, and aluminum)

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

• 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 our Manufacturing 

Energy Consumption Survey

• Restructuring the industrial module in various ways, including by using Python

Discussion

An attendee asked if allowing excess CHP electricity from the paper industry to be sold back to the grid

was based on any specific assumptions and whether it might result in increased investments in new CHP 

systems. We said this change reflects something that is already occurring in the real world but that the 

IDM was previously unable to account for the sale of excess electricity from the paper industry.

An attendee was glad to hear about the IDM’s eventual transition to Python.

An attendee wanted to know if we could update MECS more frequently. We responded that it is not 

possible at this time.

An attendee asked how we are planning to incorporate the trend of companies shifting toward carbon 

intensity reductions into the AEO. We responded that we have no plans to incorporate deep 

decarbonization in AEO2022. However, we are currently working on an assessment for Congress to 

determine what resources would be needed to implement deep decarbonization in the National Energy 

Modeling System (NEMS).

An attendee asked for more details on how industrial capacity utilization would be examined. We

responded that we are still in the early stages of this investigation. Basically, energy intensity should not 

really change linearly between a plant operating at a high capacity and a plant operating at a low 

capacity, but the IDM currently functions in this manner. For example, a lot of blast furnaces were kept 

operating during the early months of the COVID-19 pandemic, even though they were producing very 

little steel, and the IDM ideally should be able to account for such behavior.

An attendee wondered if we had noticed any shift in the intent of petrochemical companies to build 

ethylene cracker facilities. We responded that the ethylene cracker forecast came from an analyst 

outside the industrial group, but as far as we could remember, the forecast for ethylene cracker 

additions has not changed much recently, other than perhaps some delays in 2020. We said the 

industrial group does look into facilities that use natural gas feedstock, mainly ammonia and methanol
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plants. Not many new U.S. facilities for these types of chemical plants have been announced recently, 

although a few methanol plants are under construction, some of which have had delays.

An attendee was interested in more details about improving the fuel price sensitivity in the process flow 

industries. We responded that currently, for some industries (such as cement and lime), changes in fuel 

price do not shift the technological choices for a given process much, so fuel shares for those industries 

also do not shift very much. We need to improve this sensitivity to price in the IDM. For example, high 

coal prices do not shift the cement industry away from coal as quickly as we believe they should.

An attendee asked whether we have considered collecting or providing analysis in the AEO on 

renewable energy attributes being purchased or generated by industry. We replied that it would be 

difficult for NEMS to account for all carbon offsets that are used because many offsets are outside the 

scope of the model.

An attendee noted that supply chains have recently shifted toward being located in the United States 

and wondered how the AEO reflected this shift. We said that current and expected near-term 

relocations of business operations back to the United States are included in the baseline of IHS Markit’s 

U.S. Macroeconomic Model used in the AEO.

An attendee asked if industrial energy use affects the macro economy. We responded that industrial 

energy use has no direct effect on the macro economy. However, it does have some indirect effects 

because the MAM is integrated with the other NEMS modules. Industrial energy use from the IDM will 

indirectly affect energy price, production, and consumption drivers used as assumptions in the U.S. 

model as that energy use makes its way through NEMS.

An attendee wanted to know if we have a forecast for onsite renewables at industrial facilities. We

confirmed that we have an industrial renewables consumption series. Papermaking waste products 

(biomass) that are consumed for heat and power account for most of this series. Solar and other 

renewable generation in the industrial sector do have a series, but it is small. In addition, existing 

industrial solar photovoltaic installations are under the commercial sector in NEMS.

An attendee asked how the industrial module accounts for state-level policies and carbon taxes. In 

terms of state-level policies, the IDM accounts for SB-32 in California, which is designed to reduce 

greenhouse gas emissions in the state by adjusting fuel prices.
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Attendees

Guests (WebEx/phone)

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

Ed Rightor American Council for an Energy-Efficient Economy

Lowell Ungar American Council for an Energy-Efficient Economy

Benjamin Caplan BP plc

Kevin Dubina U.S. Bureau of Labor Statistics

Katy Laurence U.S. Bureau of Labor Statistics

Doug Vine Center for Climate and Energy Solutions

Matthew Doolin Duke University

John A. Laitner Economic and Human Dimensions Research Associates

Kenta Shimizu Energetics

Betsy Dutrow U.S. Environmental Protection Agency

Ozge Kaplan U.S. Environmental Protection Agency

Danny Macri U.S. Environmental Protection Agency

Walt Tunnessen U.S. Environmental Protection Agency

Rishi Garg Federal Energy Regulatory Commission

Marilyn Brown Georgia Tech

Eric Fox Itron

Michael Russo Itron

John Meyer Leidos

Rachel Jones National Association of Manufacturers

Amogh Prabhu OnLocation

Jae Edmonds Pacific Northwest National Laboratory

Haewon Mcjeon Pacific Northwest National Laboratory

Sha Yu Pacific Northwest National Laboratory

Robert Hershey Professional

Naveen Dasari Rhodium Group

Hannah Kolus Rhodium Group

Alfredo Rivera Rhodium Group

Beatrix Jackson RTI International

Thomas Budd Simon Fraser University

David White Synapse Energy Economics

Francesco Memoli Tenova Inc.

Bob Gemmer U.S. Department of Energy

Alan Fox U.S. International Trade Commission

Eric Masanet University of California, Santa Barbara
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EIA attendees (WebEx/phone)

Eugenio Aleman

Aaron Bergman

Erin Boedecker

Caroline Campbell

Michael Cole

Peter Colletti

Jim Diefenderfer

John Duff

Kathryn Dyl

Joshua Eiermann

Mindi Farber-DeAnda

Kevin Jarzomski

Ari Kahan

Mala Kline

Angelina LaRose

Mary Lewis

Perry Lindstrom

Tom Lorenz

John Maples

Elizabeth May

Mark Morey

Kyle Morley

Kevin Nakolan

Albert Painter

April Patel

Andri Rizhakov

Elizabeth Sendich

Estella Shi

Courtney Sourmehi

Dana Van Wagener

Warren Wilczewski

Stephen York