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August 11, 2017

MEMORANDUM FOR: Ian Mead

Assistant Administrator for Energy Analysis

FROM: Jim Diefenderfer

Director, Office of Electricity, Coal, Nuclear, and Renewables Analysis

SUBJECT: Summary of AEO2018 Electricity Working Group held on August 10, 

2017

This memorandum provides an overview of the presentation given during the first AEO2018 

Electricity Working Group meeting and a summary of the resulting discussion that took place. 

The presentation materials are available in a separate document.

Model updates

EIA staff discussed how AEO2018 would handle a number of key issues. Topics included the treatment 

of current laws and regulations; enhancements to the NEMS Electricity Market Module (EMM); reported 

changes in electric generating capacity, and the analytic agenda for EMM improvements beyond the 

current cycle.

Laws and regulations

EIA staff discussed changes in federal, regional, and state programs. Due to continued uncertainty 

regarding the future of the Clean Power Plan (CPP), EIA intends to pursue a parallel development path, 

modeling cases that include the CPP, as well as No CPP cases. Regional-level programs include

California’s recent extension of its carbon cap-and-trade program to 2030 (AB 398) as well as the 

continuing Regional Greenhous Gas Initiative. 

At the state level, EIA staff described our intent to model state programs providing subsidies to nonemitting generation (zero emission credit) programs, including Illinois’ “Future Energy Jobs” bill and New 

York’s “Clean Energy Standard” legislation.

EMM Enhancements

In the AEO2017 Reference Case, EIA did not project the retirement of any nuclear plants in either New 

York or Illinois. Thus, for the AEO2018 cycle, EIA staff indicated that they would be running cases to 

characterize different conditions under which projections of generation-at-risk differ from current 

market conditions.

EIA staff indicated that four new generating technologies would be modeled for AEO2018. In AEO2018, 

EIA staff plan to improve the representation of renewables, assess parameters critical to nondispatchable generating sources, and facilitate state-level implementation of renewable portfolio 
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standards. In addition, work is being done to improve the modeling of the financial impact associated 

with the increases in distributed generation on utility rate structures. Further, results of a recent 

contractor analysis to distinguish differences in financing costs for different types of owners in different 

types of markets will likely be used to update the model.

Other key changes

EIA staff also mentioned that they have updated parameters based on reported capacity. These updates 

will be reflected in the baseline for expected retirements (or coal-fired generator conversions to natural 

gas-fired generators), announced closings, and expected uprates of nuclear plants. Work is also being 

performed to model four new generating technologies in AEO2018: battery storage, an advanced solar 

technology, an advanced wind technology, and an internal combustion engine (ICE). 

Discussion

The main discussion centered on new technologies, nuclear power, and transmission.

New Technologies

One participant asked which storage technologies were under consideration. EIA staff indicated that we 

are modeling 4-hour battery storage systems with lithium-ion batteries, allowing for load shifts hourly. 

Battery storage technologies compete in NEMS for spinning reserve requirements and load shifting over 

864 time slices annually. Another participant asked whether we were considering modeling flywheels 

and compressed air energy storage as storage technologies. EIA staff indicated that we are not 

considering those storage technologies for this AEO but may do so in the future.

Another participant questioned why we would model ICE if it is not economically viable given its cost 

relative to other technologies. EIA staff indicated that we were considering the addition of several new 

technologies, with their ultimate disposition dependent upon the availability of cost data and their 

growing deployment. There has been some interest in modeling ICE and EIA is considering some novel 

approaches in representing it, including potentially pairing it with a renewable technology to give it 

additional flexibility.

Nuclear Power

There was a discussion of a variety of issues related to nuclear power. Given the extension of the 

projections to 2050, there was some discussion of long term nuclear relicensing. In AEO2017, EIA

assumed that 25% of plants would retire after 60 years. EIA staff indicated that we are reinvestigating 

this assumption for AEO2018 and soliciting comments on alternative approaches.

Another participant questioned if EIA included small modular reactors (SMR) as a new technology choice 

option. EIA staff noted that with the early stages of this new technology there is still not reliable cost 

information to include it as an endogenous technology choice. The participant offered to provide a 

recent study including some cost information on SMRs.
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One participant asked about the methodology for developing our uprate estimate (e.g., whether or not 

it includes projected uprates or just those which are officially announced). EIA staff indicated that 

uprate estimates are based on analyst’s judgment. One participant offered new data on uprates and 

license renewal.

Another participant asked about how EIA handles the status of units which are currently being debated 

(e.g., how we handle Summer in that its closing announcement has been called into question by

affected government officials). EIA staff indicated that we are monitoring unit status on an ongoing 

basis and will respond if it changes prior to the closing of forecast assumptions.

A final participant asked if we are looking at tax reform as an issue with respect to nuclear generation 

(e.g., whether or not we are considering extension of the production tax credit to 2020). EIA staff 

acknowledged that we must also review the state of tax policy legislation. 

Transmission

One participant asked how EIA models transmission buildout endogenously, including the potential 

investments in long-range DC transmission projects. EIA staff responded that EMM accounts for the 

need for additional transmission capacity to be built to accommodate renewables additions on an intraregional basis. However, on an interregional basis, EMM does not model transmission projects that 

could be considered to allow incremental renewables dedicated to out-of-region power sales. 

Another participant asked in follow up whether our approach meant that renewable additions were not 

limited by transmission line capacity limitations and how adding storage to the model would affect 

those limits. EIA staff responded that battery storage will be represented as a time shifting option, 

rather than a capacity expansion option. In addition, we noted that there is an explicit constraint in 

EMM on the total amount of renewables generation as a share of generation mix.

Additional issues

Even though most of the discussion focused on the material that was presented, additional questions 

related to distributed generation, electric vehicles (EVs), and natural gas prices arose. 

Distributed generation

One participant asked how EIA is modeling net metering. EIA staff explained that rooftop solar and DG 

solar is modeled as end-use demand. NEMS represents the value of net metering where residential

solar PV customers receive the retail rate for all generation and commercial solar PV customers receive 

the retail rate for own-use generation.

Another participant asked if we were modeling the possible impact of a tariff on imported solar panels. 

EIA staff acknowledged that we are tracking legislative developments, and will consider how to 

represent a tariff based on further developments.

Electric vehicles
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One participant asked about how electric vehicle (EV) demand is determined. EIA staff indicated that 

projections of electric vehicle demand in our transportation model are lower than projections from 

other models. EMM accounts for the load profile from charging behavior based upon a contractor 

analysis and demand from EVs is then aggregated for inclusion in total load. At present, EVs are not 

considered a storage opportunity.

Natural gas prices

One participant asked where the natural gas prices used in EMM were developed. EIA staff responded 

that projected natural gas prices are endogenously determined in NEMS by the natural gas supply 

module and are the product of an iterative process in which electric sector gas demand is optimized 

against the dynamic response of prices reflecting the natural gas supply response.

Attendees

Guests (in person)

Aaron Bergman DOE EPSA

Harsh Desai Nuclear Energy Institute (NEI)

Carla Frisch DOE EPSA

Ronald Hagen DOE Nuclear

Elke Hodson DOE EPSA

Lauren Khair National Rural Electric Cooperative Association (NRECA)

Kelly Lefler DOE EPSA

Caitlin Murphy DOE EPSA

Ann Satsangi DOE

Bob Schmidt DOE EPSA

Celeste Wanner American Wind Energy Association (AWEA)

Brad Williams DOE Nuclear

Frances Wood OnLocation

Guests (WebEx/phone)

Carrie Annand Biomass Power Association

Justin Baca Solar Energy Industries Association (SEIA)

Erin Boyd DOE

Matthew Cerrone Westinghouse

Wesley Cole National Renewable Energy Laboratory (NREL)

Leslie Coleman National Mining Association

Jerry Eyster GE Capital

Brian Fisher US EPA
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Steve Frauenheim Edison Electric Institute

Molly Garcia Edison Electric Institute

Gurcan Gulen University of Texas

Mike Hough Ohio Consumer Counsel

Andrea Hubbard GE Capital

Rick Johnson Entergy

Serpil Kayin US EPA

Andy Kellen WPPI Energy

Marcus Koblitz American Petroleum Institute

Michael Leff Con Edison

Yanghe Liu Entergy

Tom McNevin New Jersey Department of Environmental Protection (NJDEP)

William Meroney US EPA

John Meyer Leidos

Elliott Nethercutt North American Electric Reliability Corporation

Karen Obenshain Edison Electric Institute

J. Gregg O'Brien Westinghouse

Jorge Reyes New Jersey Department of Environmental Protection (NJDEP)

Chris Salmi New Jersey Department of Environmental Protection (NJDEP)

Sandra Sattler Union of Concerned Scientists

David Shin American Petroleum Institute

Sharon Showalter OnLocation

Ryan Sims US EPA

Alexander Smith Federal Energy Regulatory Commission (FERC)

Kevin Steinberger Natural Resources Defense Council

Mark Strohfus Great River Energy

Lynsey Tibbs Southern Company

Chenhao Tsai University of Texas

David White Synapse Energy

Alison Williams Edison Electric Institute

Evelyn Wright SEE Inc.

EIA attendees (in person)

Greg Adams EIA

Lori Aniti EIA

Erin Boedecker EIA

Richard Bowers EIA

Michelle Bowman EIA

John Conti EIA

Jim Diefenderfer EIA

Kenneth Dubin EIA
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Marta Gospodarczyk EIA

Howard Gruenspecht EIA

Tyler Hodge EIA

Thaddeus Huetteman EIA

Scott Jell EIA

Augustine Kwon EIA

Cara Marcy EIA

Laura Martin EIA

Fred Mayes EIA

Ian Mead EIA

Shirley Neff EIA

Manussawee Sukunta EIA

EIA attendees (WebEx/phone)

Nilay Manzagol EIA