The Energy Information Administration has released a collection of papers discussing topics in analysis and modeling pertinent to prior and upcoming editions of the Annual Energy Outlook and other products. Issues in Midterm Analysis and Forecasting 1999 includes eight papers on current energy issues, aspects of EIA's National Energy Modeling System (NEMS), and key analytical assumptions:

Trends in Power Plant Operating Costs

Deregulation and increasing competition in power generation markets have created compelling incentives to reduce power plant operating costs (see figure). In real terms, average total generating costs at coal-fired plants fell from 3.5 cents to 1.8 cents per kilowatthour during the 17-year period 1981-1997, while generating costs at oil- and gas-fired steam plants dropped from 7.2 cents to 3.5 cents per kilowatthour. Coal prices are projected to continue to fall. Oil- and gas-fired steam plant costs are projected to remain high relative to those of alternatives, and utilization of those plants is expected to decline.

Sectoral Prices in a Restructured Electricity Market

Under full regulation, both equity and economic efficiency figure into determining the rates that residential, commercial, and industrial customers pay for electric power. Increased competition could change the relationships among the prices paid by different customer classes. This paper presents a framework for evaluating such price differentials and explores how prices may change under greater competition.

Modeling the Costs of U.S. Wind Supply

Wind power now contributes only 0.1 percent of total U.S. electricity generation, but that share may rise if pressures increase to reduce carbon emissions and conserve fossil fuels. This paper describes the NEMS methodology used to represent wind generation, with particular focus on the adjustment factors necessary to model wind energy cost and availability.

Modeling Technology Learning in the National Energy Modeling System

New technologies, including energy technologies, may diffuse slowly even if they offer clear benefits over existing technologies. The effects of the processes whereby manufacturers learn to improve, and consumers learn to adopt, new technologies are difficult to separate. While technology diffusion is modeled in NEMS, the treatment of technological learning varies from sector to sector, reflecting differences in the NEMS modules and the markets they represent.

Employment Trends in Oil and Gas Extraction

As oil prices fluctuate, so do drilling activity and the number of jobs in oil and gas extraction. There were 325,900 such "upstream" jobs in the United States in 1998. Based on the model described in this paper, upstream employment is projected to peak at 356,000 jobs in 2007, largely because of increased drilling, and fall back to 350,000 jobs in 2010.

Price Responsiveness in the NEMS Buildings Sector Models

This paper summarizes end-use energy consumption behavior under different fuel price assumptions as modeled by the NEMS residential and commercial modules and compares the elasticity results with those of other studies.

Annual Energy Outlook Forecast Evaluation

Although policy analysis is the chief purpose of NEMS and earlier EIA energy models, their value in forecasting is also of interest. Forecasts published in the Annual Energy Outlook since 1982 have generally been more accurate with respect to energy production and consumption, and less accurate for prices and net imports of natural gas and coal. Forecasts of world oil prices also show significant errors, although more recent forecasts have, in general, improved considerably (see table). Forecasts of other variables, such as total energy consumption and total electricity sales, have been accurate to within an average of less than 2 percent. Unforeseeable changes in laws, regulations, and technology, and unexpected weather, political, and economic developments can all force forecasts to deviate from long-term trends.

World Oil Prices: AEO Forecasts and Actual Values, 1985-1998 (Nominal Dollars per Barrel)
Report	1985	1986	1987	1988	1989	1990	1991	1992	1993	1994	1995	1996	1997	1998
AEO82	28.49	32.47	37.38	41.90	45.66	49.02
AEO83	28.44	28.18	30.67	36.07	41.41	46.93					74.25
AEO84	28.92	28.67	29.56	31.76	34.27	37.00					56.65
AEO85	27.00	25.70	24.38	25.26	28.60	32.23	34.75	36.99	37.95	40.22	41.14
AEO86		14.57	15.89	17.28	18.91	20.72	22.20	24.74	28.25	32.08	35.49	38.41	41.03	42.92
AEO87			18.11	17.41	19.01	20.06	20.97	21.54	23.17	25.76	28.98
AEO88				14.70	15.00	16.31	17.52	18.47	20.38	23.07	25.72	28.61	31.50	34.06
AEO89					17.70	17.53					24.45
AEO90						22.00	24.95	25.64	26.31	26.95	27.56	28.08	28.62	29.16
AEO91							19.13	20.19	20.72	22.23	23.89	25.50	27.30	28.92
AEO92								18.90	20.09	20.96	21.99	22.85	23.74	24.69
AEO93									17.12	17.27	18.26	19.34	20.40	21.50
AEO94										15.26	17.19	18.04	18.98	19.79
AEO95											17.24	17.69	18.44	19.30
AEO96												19.88	19.25	19.11
AEO97													18.51	18.53
AEO98														18.19
Actual	26.99	14.00	18.13	14.56	18.08	21.76	18.70	18.20	16.14	15.51	17.14	20.64	18.53	12.10
Source: Energy Information Administration

National Energy Modeling System/Annual Energy Outlook Conference Summary

This paper summarizes addresses given at EIA's March 1999 conference. Participants from government, trade associations, energy industries, corporations, consulting firms, and academia spoke on U.S. climate policy, U.S. carbon targets under the Kyoto Protocol, the Asian economic crises' impact on oil markets, electricity restructuring and related issues, emerging transportation technologies, the expanding natural gas market, and the prospects for renewable energy under carbon constraints.

Issues in Midterm Analysis and Forecasting 1999, DOE/EIA-0607(99); 104 pages, 34 tables, 49 figures. For information on ordering a hard copy of the report, contact the U.S. Government Printing Office at 202-512-1800.

Report Contact:

Susan Holte, Office of Integrated Analysis and Forecasting

susan.holte@eia.doe.gov

Phone: (202) 586-4838

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File last modified: October 26, 1999