WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES ONLY

DO NOT QUOTE OR CITE BECAUSE RESULTS ARE SUBJECT TO CHANGE 

September 21, 2022

MEMORANDUM FOR: Angelina LaRose

Assistant Administrator for Energy Analysis

FROM: Jim Diefenderfer

Director, Office of Long-Term Energy Modeling

SUBJECT: Summary of AEO2023 Macro-Industrial Working Group, held on 

Tuesday, August 30, 2022

This memorandum summarizes the presentation and discussion at the Annual Energy Outlook 2023

(AEO2023) Macroeconomic-Industrial Working Group meeting. The macroeconomic and industrial 

groups presented preliminary AEO2023 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 AEO2023 are preliminary and, therefore, should not be quoted or cited. We will release 

the final AEO2023 report in early 2023.

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

• Commercial Floor Space Model and data

Industrial Demand Module (IDM) updates

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

• Benchmarking manufacturing steam coal consumption by industry to EIA’s Quarterly Coal 

Report

• Modifying cement fuel use, including by assuming no new kilns will be fueled by coal, petcoke, 

or distillate

• Making the iron and steel industry’s furnace technology choice between basic oxygen furnaces 

or electric arc furnaces sensitive to fuel price

• Splitting the balance of manufacturing sector into four separate industries

• Adding electric boilers as a technology choice

• Publishing cement and lime process emissions

• Extending the combined-heat-and-power (CHP) investment tax credit through 2024
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DO NOT QUOTE OR CITE BECAUSE RESULTS ARE SUBJECT TO CHANGE 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:

• Considering other potential effects of the Inflation Reduction Act

• Updating technology parameters for process flow industries (iron and steel, cement and lime, 

pulp and paper, aluminum, and glass)

• Enhancing the bulk chemicals industry to specifically model non-fuel hydrogen production

• Adding process emissions for more industries, including bulk chemicals and iron and steel

• Benchmarking electricity by industry to data from the U.S. Census Bureau’s Annual Survey of 

Manufactures

• Including more low-carbon functionality (hydrogen, electrification, carbon capture)

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

Discussion

For the changes to how we model the iron and steel industry, an attendee asked if the electric arc 

furnace capacity would be limited by the availability of scrap steel or the expansion of direct reduced 

iron. We said we had not yet implemented such restrictions, but we are considering them for AEO2024. 

We also said that although the IDM has a mechanism for direct reduced iron, we could develop it further 

and also take scrap supply into account.

An attendee asked to what extent we model the Inflation Reduction Act in the IDM. We replied that we 

added only the baseline investment tax credit for combined heat and power for AEO2023. We will 

consider the provisions related to hydrogen and carbon capture tax credits as well as funding for lowcarbon technology in energy-intensive industries in future AEOs.

An attendee asked which industries would have electric boiler options. We said we were planning to 

implement electric boilers in the paper and food industries, as well as possibly other end-use industries,

such as metal-based durables.

An attendee asked if our assumptions of no bonus credits for wages and apprenticeship, domestic 

content, or project siting were solely for CHP or for all of NEMS. We responded that it was only for 

industrial CHP and that other modules might make a different decision. (Post-meeting note: We are still 

evaluating the possibility of incorporating bonus credits across NEMS modules.)

An attendee commented that the $5.8 billion in funding to support lower-carbon technologies in 

energy-intensive industries might best be modeled as an acceleration of technical adoption rather than 

pricing changes. He mentioned we may also want to model industrial heat pumps as replacing steam.

An attendee asked if our assumption of no new coal-fired cement kilns was driven by regulation or by 

the cement industry itself. We responded that it was more of a simplifying assumption right now, but 

the industry does seem to be moving toward lower-carbon cement and away from coal. The assumption 

may require further investigation, including considering the possibility for increased coal use. Another 

attendee suggested we look at the Portland Cement Association’s decarbonization road map document.

(Post-meeting note: According to the Manufacturing Energy Consumption Survey, coal represented 63% 

of total fuel use in cement in 1998 but declined to 36% of total fuel use in 2018.)
3

WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES ONLY

DO NOT QUOTE OR CITE BECAUSE RESULTS ARE SUBJECT TO CHANGE 

An attendee asked if we model energy use from carbon capture and storage (CCS). We said we do not, 

but we will, once CCS is implemented in NEMS, because the CCS process will have its own intrinsic

energy demand. We are currently unsure if all CCS energy demand would be accounted for in the 

industrial sector (as defined by the IDM); some could also be in refining and possibly other sectors. On a 

related note, an attendee noted CCS for process emissions would have to be modeled differently than 

CCS for combustion.

Attendees

Guests (WebEx/phone)

Neal Elliott American Council for an Energy-Efficient Economy

Anna Johnson American Council for an Energy-Efficient Economy

Pavitra Srinivasan American Council for an Energy-Efficient Economy

Hideharu Takemoto American Honda Motor

Brett Smith American Iron and Steel Institute

Andrew Baxter American Petroleum Institute

John Meyer Leidos

Jefferson Riera OnLocation, Inc.

Hao Deng OnLocation, Inc.

Amogh Prabhu OnLocation, Inc.

Michael Schaal OnLocation, Inc.

Frances Wood OnLocation, Inc.

Robert Hershey Professional

Naveen Dasari Rhodium Group

Michael Gaffney Rhodium Group

Hannah Kolus Rhodium Group

Anna van Brummen Rhodium Group

Francesco Memoli Tenova Inc.

Joe Cresko U.S. Department of Energy

Jennifer Li U.S. Department of Energy

Chikara Onda U.S. Department of Energy

Nicole Ryan U.S. Department of Energy

Walt Tunnessen U.S. Environmental Protection Agency

Wyatt Thompson University of Missouri

Jarrett Whistance University of Missouri

EIA attendees (WebEx/phone)

Erin Boedecker

Michael Cole

Peter Colletti

Jim Diefenderfer

Michael Dwyer
4

WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES ONLY

DO NOT QUOTE OR CITE BECAUSE RESULTS ARE SUBJECT TO CHANGE 

Kathryn Dyl

Mindi Farber-DeAnda

Kevin Jarzomski

Angelina LaRose

Mary Lewis

Tom Lorenz

John Maples

Kevin Nakolan

James Preciado

Mark Schipper

Elizabeth Sendich

Estella Shi

Matthew Skelton

Courtney Sourmehi

Stephanie Tsao

Josh Whitlinger