WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES

DO NOT QUOTE OR CITE AS RESULTS ARE SUBJECT TO CHANGE

December 9, 2015

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 AEO2016 Macro-Industrial Working Group Meeting

Summary, presented on 12-03-2016

Attendees: 

Bob Adler (EIA) 

Gale Boyd (Duke University) 

Robert Hershey, Consultant 

Keith Jamison (Energetics) 

Tom Lorenz (EIA) 

David Daniels (EIA)

Vipin Arora (EIA)

Michael Chow (National Federation of Independent Business)

Meegan Kelly (ACEEE)

Colin McMillan (NREL)

Carl Bozzuto (Alstom Power)

David Gibson (Kaiser Associates)

David Rosner (DOE)

Frances Wood (OnLocation)

Joel Bluestein (ICF)

Kevin Dubina (BLS)

Matthew Hansen (National Energy Board of Canada)

Michael Pickens (IHS Energy)

Prakash Rao (Lawrence Berkeley Lab)

Robert Bessette (CIBO – Council of Industrial Boiler Owners)

Walt Tunnessen (US EPA)
William Morrow (Lawrence Berkeley Lab)

Presenters: Kay Smith, Elizabeth Sendich (Macro) 

Kelly Perl, Peter Gross, Susan Hicks (Industrial) 

Macro: The macro presentation provided preliminary AEO2016 projections using IHS Global 

Insights’ (IHS) long-term macroeconomic forecast and EIA’s preliminary energy prices. Key 

differences between last year’s AEO2015 and the AEO2016 include:

- Historical baseline changes were made in GDP, gross output (for some industries), 

and physical-to-dollar values for goods and services.

- IHS now uses explicit modeling of industrial gross output beyond 2025 instead of 

employing trends.

- Dynamic IO is now extended throughout the forecast. 

- Changes in productivity data which affect employment projections (AEO2016 

assumes lower productivity, resulting in higher employment in the projections) were 

made.

- GDP growth in AEO2016 is 0.1% lower than in the AEO2015.

- Both import and export growth are lower in the AEO2016 compared to the AEO2015, 

but the export growth takes a larger dip, resulting in a decline in net exports.

- Gross output projections of basic materials (metals, non-metallic minerals, bulk 

chemicals) are stronger in the AEO2016 due to larger assumed consumer demand in 

the U.S. and lower feedstock prices in the AEO2016 (compared to IHS prices).

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

development plans associated with major changes and updates for the AEO2015 version of the 

Industrial Demand Module (IDM). These include: 

- Process flow modeling is now complete (steel and paper completed for AEO2016 in 

addition to the previously completed cement & lime, aluminum, and glass industries). 

These allow for explicit tech choice within each of process flows of these industries, 

and they will allow for better representation of the new AEO2016 “Energy Efficiency” 

side case as well as future carbon policy constrained side cases. Some expected 

outcomes in the AEO2016 results include better representation of future CHP 

additions (especially in the new paper & pulp process flow model) and lower petcoke 

fuel consumption in the aluminum sector.

- Benchmarking and calibration: individual industrial published tables are now 

benchmarked to total industrial sector energy consumption; non-manufacturing data 

updates (Economic Census and EIA data) are complete; AEO2016 efforts to 

calibrate model output with fuel-specific EIA and non-EIA sources are underway.

- Regulation updates for the AEO2016 include updated motor efficiencies which now 

reflect the latest motor efficiency standards (10 CFR 431 Part B, Federal Register 

Cite FR 79 pp 30934-310104 (2014)). 
Discussion/questions: 

1. (Reflecting the lower baseline productivity change for the AEO2016): Is total 

(not just industrial) U.S. employment higher? Answer: Yes.

2. Do the current AEO2016 runs shown in today’s presentation include effects 

from the Clean Power Plan (CPP)? Answer: No, but they ultimately will 

through NEMS feedback from the Electricity Market Model (EMM) which will 

be based on the investment base differential between a CPP and non-CPP 

model run.

3. Why is there a projected dip in the single housing starts midway through the 

projections? Answer: This reflects the demographic end of the baby boomers 

in the U.S.

4. (In regards to the macro bulk chemical projections): Does ethane price follow 

the oil price? Answer: No, not necessarily, because the new ethane pricing 

methodology implemented in the AEO2015 allows for the ethane price to vary 

in its dependence on the natural gas or oil price over the course of the 

projection period.

5. (In reference to the notable flatness in the long-term U.S. projections of the 

paper & pulp industries): Can it be assumed that overall world growth in paper 

and pulp is positive, so that the flatness in the U.S. is then explicitly 

compensated by growth in other regions of the world? Answer: Our current 

IEO global paper industry growth is 2.2% average annual growth 2014-2040. 

6. Are productivity levels different in different industries? Answer: Yes, there is a 

calculation to differentiate durable goods and non-durable goods 

manufacturing, but the Macroeconomic Activity Model (MAM) does not 

differentiate between individual industrial productivities.

7. Does industrial CHP as modeled in the AEO receive credit for the Clean 

Power Plan (CPP)? Answer: No, the IDM does not participate in the CPP. We 

will look into this further as other entities (like ACEEE) believe there is some 

opportunity for industrial CHP to receive credits under the CPP. 

8. How does the “delta” between the AEO2015 and the AEO2016 CHP 

projections in slide 5 reflect the larger growth in bulk chemicals in the 

preliminary AEO2016 macro projections? Answer: It is true that one of the 

largest users of CHP is the chemicals industry, and thus the increased growth 

pattern in shipments in this industry should be reflected somewhat in the 

AEO2016 total industrial CHP projections. However, the preliminary CHP 

projections are an aggregate of all industries, and thus the change in how the 

paper & pulp industry is modeled could be significant enough to mute the 

change in bull chemical CHP growth. We will investigate further. 

The next scheduled joint macro-industrial work group meeting will occur on January 26, 2016 

from 10:30 to 12 noon.