WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES ONLY.

DO NOT QUOTE OR CITE AS RESULTS ARE SUBJECT TO CHANGE.

October 4, 2016

MEMORANDUM FOR: Ian Mead

Assistant Administrator for Energy Analysis

James Turnure

Director, Office of Energy Consumption & Efficiency Analysis

Paul Holtberg

Team Leader, Analysis Integration Team

FROM: Industrial Energy Consumption & Efficiency Analysis Team

Subject: Second AEO2017 Industrial Working Group Meeting held on

September 22, 2016

The Energy Consumption & Efficiency Analysis Team led a discussion of initial AEO2017 model 

results and projections. Topics covered included updates to the industrial model and the initial 

results from model runs. Additional questions were addressed at the end of the meeting. The 

presentation slides used to support this discussion are provided in a separate document.

Industrial Model Updates

AEO2017 is a “light” Annual Energy Outlook (AEO), where few improvements are typically 

introduced into the model. However, a few improvements related to energy consumption and 

efficiency were made to the model during the current AEO cycle:

• Extend model to 2050 (now complete)

• Individual industry benchmark improvements 

• Regulation: Kept boiler Maximum Achievable Control Technology

• Lowered Direct Reduced Iron (DRI) and relaxed constraints on Electric Arc Furnace

(EAF) usage

In addition, we are currently trying to explain steel output increase in 2040 and may make some 

additional DRI adjustments beyond what has already been done.

Initial Results

• Energy consumption in the industrial sector is generally lower compared to AEO2016. 

We believe this is due to lower feedstock projections in the early years.

• The industrial sector does not participate in the clean power plan as far as modelling. 

There is no mechanism to model cap and trade in the industrial module outside the 

current California cap and trade regulations.

• Industry share of fuel types are fairly steady over time.
WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES ONLY.

DO NOT QUOTE OR CITE AS RESULTS ARE SUBJECT TO CHANGE.

• Higher Combined Heat and Power (CHP) generation is most likely due to bulk 

chemicals. Bulk chemicals is a major user of CHP, and this industry is growing over the 

projection period.

• Total energy consumption in the bulk chemicals industry is lower than projected in 

AEO2016. This is most likely due to lower projections of feedstock consumption.

Discussion/questions

 Can you speak to the increase in shipments from 2040 to 2050? The economy, as 

measured by Gross Domestic Product (GDP), is expected to grow for a number of 

reasons, including an increase in population. Shipments grow along with GDP.

 Is there a strong effect on the paper industry from international economic developments?

Yes, in particular, there are currency effects. In the short run, the dollar is projected to be 

relatively strong against other currencies, limiting exports.

 In light of the initial result that iron and steel grow more after 2040 as the share of coal 

decreases, is China soaking up a lot of scrap? The industrial module does not model 

supply or consumption of scrap explicitly.

 Which cases will be modeled for industrial in AEO2017? The cases will include Hi/Low

Oil Prices, Hi/Low Macroeconomic Growth, and Hi/Low Resource.

 Have you changed the rate of decrease in the Unit Energy Consumption (UEC) based 

on new technology? For end-use industry models, the Technology Possibility Curve 

(TPC) is the same as it was last year. For process-flow industry models, we are doing 

some work with technologies to allow the UEC to evolve over time, although we do not 

utilize a TPC. We are also experimenting with obsolescence parameters.

 Does the model have options for switching away from coal? Is there a growth in 

electricity as a replacement for coal? The process flow models switch fuels by switching 

processes and technologies. For a lot of heat intensive industries, it is not possible to 

substitute electricity for fossil fuels.

 Are the macroeconomic results final, and have there been any changes to the underlying 

model? The results are not final. In addition, over the last few years we’ve restructured 

the macro output. We added dynamic input-output and allowed supply changes in

downstream industries to influence results for upstream industries— for example, growth 

in the iron and steel industry is facilitated by growth in the metals based durables 

industry.

 Do you see anything different in how the US is supplying the international market in bulk 

chemicals? The shipments model does not distinguish between domestic final uses and 

exports. However, information on overall exports can be found in the macroeconomic 

working group presentation.
WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES ONLY.

DO NOT QUOTE OR CITE AS RESULTS ARE SUBJECT TO CHANGE.

 How far into the future does the International Energy Outlook (IEO) go? The IEO 

projection will extend to 2050 and will be released in the late spring of next year. We 

want the international forecast to reflect what we are doing in the domestic forecast.

 There is a big push in other countries reduce the Carbon Dioxide (CO2) footprint. Do 

you expect the EAF share, in the iron and steel industry, to grow because EAF has a 

smaller CO2 footprint? We are continuing to update the iron and steel model, which 

includes carbon measurements. At present, technology choice in the Reference case is 

not driven by the CO2 footprints of different technologies. But this could be a future 

refinement.

 How is scrap steel modeled? And is the market for scrap a constraint? At present, we 

do not model scrap steel, but we don’t expect scrap availability to be a constraint in U.S. 

steel production.

 Is there any expectation for lower demand for steel in the transportation industry? There 

is a link between the steel industry and the downstream industries, like transportation 

equipment, through the macroeconomic model.

 Why is the bulk of growth in fuels in the petroleum category? Because “petroleum” 

includes natural gas liquids and petrochemical feedstocks, which are large.

 Where is coal used in the Industrial Model? Coal is primarily used in the iron and steel, 

cement and lime, and food industries.

Attending in Person

Bob Hershey 

Keith Jamison 

Peri Ulrey

Attending by WebEx/Phone

Bharat Ramkrishnan

Chris Doleman

David Rosner

Elizabeth Dutrow

Elke Hodson

Frances Wood

Francesco Memoli

Jan Mares

Joe Cresko

Keith Benes

Marilyn Brown

Mark Bahner

Martha Moore

Michael Chow
WORKING GROUP PRESENTATION FOR DISCUSSION PURPOSES ONLY.

DO NOT QUOTE OR CITE AS RESULTS ARE SUBJECT TO CHANGE.

Peter Marsters

Wade Shafer

Whitney Herndon

William Morrow

EIA Attendees

John Conti

Kelly Perl

Susan Hicks

Paul Otis

Matt Skelton

Chris Dickerson