WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES

DO NOT QUOTE OR CITE AS RESULTS ARE SUBJECT TO CHANGE

August 5, 2013

MEMORANDUM FOR: JOHN CONTI

ASSISTANT ADMINISTRATOR FOR ENERGY ANALYSIS

 PAUL HOLTBERG 

TEAM LEADER

ANALYSIS INTEGRATION TEAM

JAMES TURNURE

DIRECTOR

OFFICE OF ENERGY CONSUMPTION & EFFICIENCY 

ANALYSIS

LYNN WESTFALL

DIRECTOR

OFFICE OF ENERGY MARKETS & FINANCIAL ANALYSIS 

FROM: MACROECONOMIC & INDUSTRIAL ENERGY

 CONSUMPTION & EFFICIENCY ANALYSIS TEAMS

SUBJECT: First AEO2014 Macro-Industrial Working Group Meeting 

Summary (presented on 07-30-2013)

Attendees: Tom Lorenz (EIA)

Bob Adler (EIA)

Julie Harris (EIA)

Russ Tarver (EIA)

Jim Turnure (EIA)

E. Khan (DOE-FE)

Keith Jamison (Energetics)

Robert Hershey, Consultant

Anna Shipley, SRA

Ethen Rogers (American Council for an Energy-Efficient 

Economy)

Peri Ulrey (Natural Gas Supply Asscociation)

John Meyer (SAIC)

Remote attendees: Martha Moore (American Chemistry Council)

Frances Wood (OnLocation)

Bhima Sastri (DOE-EERE)

Don Hanson (ANL)

Betsy Dutrow (EPA)

Gale Boyd (Duke University)
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WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES

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Dilo Paul (SAIC)

Gary Ambach (Michaels Energy)

Luke Davulis (Systematic Solutions, Inc.)

Aaron Bergman (DOE-PI)?

Presenters: Kay Smith, Elizabeth Sendich (Macro)

Kelly Perl, Mark Schipper, Peter Gross, Susan Hicks, Paul Otis

(Industrial)

Macro: The macro presentation provided a preliminary round of Global Insights’ (GI) long-term 

forecast of GDP, employment, productivity, and industrial gross output for a number of 

aggregate industries. The GDP, employment, and productivity results are critical inputs for many 

NEMS modules, especially the Industrial Demand Module, thus they are produced first during 

AEO development, which allows the presentation of preliminary results for the first Working 

Group Meeting. The critical changes for the overall economy model are related to population 

revisions, which result from the release of the 2010 Census. These population changes include 

reductions in growth of younger age groups, lower net migration, a lower starting population 

size, and increased life expectancies, which mean longer working life (later retirement).

In comparing the AEO2014 macro industrial forecast with the AEO2013, the presenters stressed 

the importance of incorporating EIA’s shale gas expectations (both in terms of robust supply and 

low price) and how this influenced GI’s growth expectations for natural-gas intensive industries.

In addition, GI’s lower expectations for imports of commodities such as basic chemicals, 

primary metals, and metal-based durables also contribute to the AEO2014’s higher gross output 

expectations in the short to medium term. Finally, it was pointed out that the AEO2014 reflects a 

more optimistic view of growth than the AEO2013 in metal-based durables, especially fabricated 

metal products and machinery. Finally, an updated equation for construction, which included 

more detail and better accounts for the construction of commercial buildings, was implemented 

for the AEO2014.

Specific discussion/questions:

1. Invitees asked the macro presenters why oil prices at EIA are different than GI.

a. Kay explained GI has an opinion or “view” of the future, which happens to 

include heavier effects/benefits from shale oil. Also, the current preliminary

results do not reflect a new EIA World Oil Price (WOP) path. If the past 

serves as any marker, however, GI and EIA have deviated, and it was often 

with GI being lower prices long-term.

Industrial: The industrial part of the working group presentation provided general model 

development plans associated with major changes/updates for the AEO2014 version of the 

Industrial Demand Module (IDM). These included:
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1. Process flow status and updates: an update on the status of ongoing process flow 

project, which replaces energy consumption models based on engineering judgment 

with specific technology models or equipment choice models. Cement and aluminum 

were finished in previous years and this year glass was finished. The food model has 

been updated for more detail within the food industry, but food will not be a process 

flow model because of its complexity. Also, cement was updated to allow multichannel burners. 

2. Efficiency cases will be added for cement and aluminum

3. Accomplished several data updates: 

a. 2010 Manufacturing Energy Consumption Survey, 

b. Updated the industrial model for non-manufacturing surveys to reflect better 

estimates of energy consumption from USDA and Census energy expenditure 

surveys. Corrected misclassified energy expenditures in construction from 

natural gas to LPG.

4. Updated the model for major CHP-using industries. The model updates will allow 

variation in utilization, risk factor, penetration rate for four major CHP industries 

allows to run mini side cases

Specific discussion/questions:

1. Invitees requested definition for acronyms, UEC and SEDS? 

a. Susan explained these are Unit Energy Consumption and State Energy Data 

System.

2. Invitees asked if the MECS sample is the same for the update?

a. A MECS expert present confirmed, yes, it was approximately 15,000.

3. Invitees asked, regarding the decline in energy consumption between the MECS 2006 

and the MECS 2010 results, how do you know if the decline was due to 

improvements in energy efficiency or the shutdown of inefficient plants?

a. We don’t. The MECS is not designed to provide that level of detail regarding 

the reasons for changes in energy consumption.

Open discussion/questions:

1. When changing from TPCs to process flow models is there an account of 

current/commercially-available technology, do we use state of the art technology in 

our assumptions?

a. The IDM uses what is commercially available at the time of the models are 

run, which includes state of the art technologies. Manager noted the positives

and negatives of the new process models is each can be researched 

individually but each must also be filled in and maintained with all 
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possibilities given that technology is ever changing and new issues will crop 

up often. Another upside is increased stakeholder interaction.

2. Will this meeting’s slides be available?

a. Yes, a link to the webpage for our Working Group will be sent around, and at 

that site anyone can access the slides as well as a non-attributed memo 

summarize the discussion. Reminder was given that all results are extremely 

preliminary and are not to be cited or distributed.

3. Why is there a difference between the GI baseline and the NEMS estimation for 

Primary Metals?

a. The GI baseline estimations are used as inputs into NEMS, which then 

simulates a variety of energy related metrics, with feedback to the MAM. The 

effects seen in this industry are due to energy prices, and are most pronounced 

because of the heavy reliance on a wide range of energy types. For example, 

this industry is affected by oil, NG, and electricity prices.

4. The effect of shale was noted, specifically which industries have higher output in 

these preliminary runs?

a. The non-energy-intensive industries most affected in this year’s baselines are 

fabricated metals and machinery. The energy-intensive industries most 

affected are bulk chemicals, mostly by way of the feedstock price, and 

primary metals. 

a.

5. Overall, does EIA have a sense of how much natural gas demand will be in the 

future?

a. In short, no too many calculations and updates remain to make any result 

meaningful, however it was pointed out that given the higher output in the 

preliminary results it is likely that the consumption calculations will yield 

higher NG consumption.

6. What is EIA’s baseline with respect to LNG exports?

a. In general, exports are supply side constructs. In addition, EIA does not 

explicitly model international demand as part of the Industrial Demand 

Module (IDM).

7. At EIA’s conference Tom Fanning had outlined scenarios in which approximately 80 

to 100 Bcf of NG per day of demand was possible, but in EIA’s last High Resource 

side case consumption still does not reach this level; could the AEO include a special 

case to model natural gas demand greater than 100 Bcf per day? It was also pointed 

out that there was a recent Black and Veech study that reached these levels as well.

a. Not sure - we would need to increase natural gas demand in all sectors, not 

just the industrial sector, and none of EIA’s side cases are specifically 
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designed to force NG into any one sector. The transportation sector includes 

the option to take up NG, but only if it is economical. Another proxy would be 

to make natural gas really cheap in a model run. However, the EMF26 runs 

which should be available in 2 -3 months did explore some extreme natural 

gas scenario that combines EIA’s High Resource and High Macroeconomic 

Growth side cases for low prices and high demand. Modelers offer to review 

existing side cases to determine how far from the 100 Bcf/d current cases are 

to determine what is keeping the consumption at the levels reported. The 

audience was reminded that EIA is mandated to include existing laws, rules, 

and regulations, and that our Reference case is just that, a reference by which 

to measure other things.

8. What is the percentage overall of natural gas consumed by the industrial sector?

a. It is about 30-33%

9. To what degree are the short- and mid-term the focus of work in AEO modeling 

given their importance with regard to shale?

a. It was noted that the preliminary results presented, when compared to the last 

AEO, show our effort to address economic recovery and shale effects in the 

short and mid- term. It was highlighted the extreme uncertainty is: in the short 

term due to instability in the recent past and overseas; in the mid-term due to 

current project announcements not yet being built and the timing of shale; and 

in the long term because it’s so long in the future.

10. Is DRI (Direct Reduced Iron) technology currently represented in the IDM?

a. No, but DRI will be added when the iron and steel process flow model is 

added for the next full AEO.

The next scheduled joint macro-industrial work group meeting is on September 26, 2013, 

from 10am to 12 noon.