COMMERCIAL DEMAND MODULE

Floorspace Submodule
Energy Service Demand Submodule
Equipment Choice Submodule
Energy Consumption Submodule

The commercial demand module (CDM) forecasts energy consumption by Census division for eight marketed energy sources plus solar thermal energy. For the three major commercial sector fuels, electricity, natural gas and distillate oil, the CDM is a "structural" model and its forecasts are built up from projections of the commercial floorspace stock and of the energy-consuming equipment contained therein. For the remaining five marketed "minor fuels," simple econometric projections are made.

The commercial sector encompasses business establishments that are not engaged in industrial or transportation activities. Commercial sector energy is consumed mainly in buildings, except for a relatively small amount for services such as street lights and water supply. The CDM incorporates the effects of four broadly-defined determinants of energy consumption: economic and demographic effects, structural effects, technology turnover and change effects, and energy market effects. Demographic effects include total floorspace, building type and location. Structural effects include changes in the mix of desired end-use services provided by energy (such as the penetration of telecommunications equipment, personal computers and other office equipment). Technology effects include changes in the stock of installed equipment caused by normal turnover of old, worn out equipment to newer versions which tend to be more energy efficient, the integrated effects of equipment and building shell (insulation level) in new construction, and the projected availability of equipment with even greater energy-efficiency. Energy market effects include the short-run effects of energy prices on energy demands, the longer-run effects of energy prices on the efficiency of purchased equipment, and limitations on minimum levels of efficiency imposed by legislated efficiency standards.

The model structure carries out a sequence of four basic steps, as shown in Figure 6. The first step is to forecast commercial sector floorspace. The second step is to forecast the energy services (space heating, lighting, etc.) required by the projected floorspace. The third step is to select specific technologies (natural gas furnaces, fluorescent lights, etc.) to meet the demand for energy services. The last step is to determine how much energy will be consumed by the equipment chosen to meet the demand for energy services. 

Floorspace Submodule

The base stock of commercial floorspace by Census division and building type is derived from EIA's 1992 Commercial Buildings Energy Consumption Survey (CBECS). The CDM receives forecasts of total floorspace by building type and Census division from the macroeconomic activity module (MAM) based on DRI-Dodge definitions of the commercial sector. These forecasts embody both economic and demographic effects on commercial floorspace. Since the definition of commercial floorspace from DRI-Dodge is not calibrated to CBECS, the CDM estimates the surviving floorspace from the previous year and then calibrates its new construction so that growth in total floorspace matches that from the MAM by building type and Census division. The CDM models commercial floorspace for the following 11 building types:

• Assembly
• Education
• Food sales
• Food service
• Health care
• Lodging
• Office-large
• Office-small
• Mercantile and service
• Warehouse
• Other

Energy Service Demand Submodule

Energy consumption is derived from the demand for energy services. So the next step is to forecast energy service demands for the projected floorspace. The CDM models service demands for the following ten end-use services:

• Heating
• Cooling
• Ventilation
• Water heating
• Lighting
• Cooking
• Refrigeration
• Office equipment personal computer (PC)
• Office equipment other
• Other end uses.

Different building types require unique combinations of energy services. A hospital must have more light than a warehouse. An office building in the Northeast requires more heating than one in the South. Total service demand for any service depends on the floorspace, type, and location of buildings. Base service demand by end use by building type and Census division is derived from estimates developed from CBECS energy consumption. Projected service demands are adjusted for trends in new construction based on CBECS data concerning recent construction.

Equipment Choice Submodule

Once service demands are projected, the next step is to project the type and efficiency of equipment that will be used to satisfy the demands. The bulk of equipment required to meet service demand will carry over from the equipment stock of the previous model year. However, equipment must always be purchased to satisfy service demand for new construction. It must also be purchased for equipment which has either worn out (replacement equipment) or reached the end of its economically useful life (retrofit equipment). For required equipment replacements, the CDM uses a constant decay rate based on equipment life. A technology will be "retrofitted" only if the combined annual operating and maintenance costs plus annualized capital costs of a potential technology are lower than the annual operating and maintenance costs of an existing technology.

Equipment choices are made based on a comparison of annualized capital and operating and maintenance costs across all allowable equipment for a particular end-use service. In order to add "inertia" to the equipment choices, only subsets of the total menu of potentially available equipment may be allowed for defined market segments. For example, for replacement space heating equipment in large office buildings, 8 percent of floorspace is free to consider all available equipment using any fuel or technology. A second segment of 33 percent must select from technologies using the same fuel as already installed. A third segment, the remaining 59 percent of floorspace, is constrained to consider only different efficiency levels of the same fuel and technology already installed. For lighting, all choices are limited to the same technology, where technologies are broadly defined to encompass principal competing technologies (outdoor lighting types do not compete for indoor lighting service demand).

When computing annualized costs for determining equipment choices, commercial floorspace is segmented by what are referred to as "implicit discount rates" (to distinguish them from the generally lower and more common notion of financial discount rates). Six segments are used to simulate consumer behavior when purchasing commercial equipment. The segments range from rates as low as 20 percent, to rates high enough to guarantee that only equipment with the lowest capital cost (and least efficiency) is chosen. As real energy prices increase (decrease) there is an incentive for all but the highest implicit discount rate segments to purchase increased (decreased) levels of efficiency.

The equipment choice submodule is designed to choose among a discrete set of technologies that are characterized by a "menu" which defines availability, capital costs, maintenance costs, efficiencies, and equipment life. Technology characteristics for selected space heating equipment are shown in the following table, derived from the report Assumptions to the Annual Energy Outlook 1998.⁽¹⁰⁾ This menu of projected equipment models projects technological innovation, market developments, and policy interventions. For Annual Energy Outlook 1998, the technology types that are included for seven of the ten service demand categories are listed in the last table.

The remaining three end use services (PC-related office equipment, other office equipment, and other end uses) are considered "minor services" and are forecast using exogenous equipment efficiency and market penetration trends.

Energy Consumption Submodule

Once the required equipment choices have been made, the total stock and efficiency of equipment for a particular end use are determined. Energy consumption by fuel can be calculated from the amount of service demand satisfied by each technology and the corresponding efficiency of the technology. At this stage, adjustments to energy consumption are also made.

Characteristics of Selected Space Heating Equipment

These include adjustments for changes in real energy prices (short-run price elasticity effects), adjustments in utilization rates caused by efficiency increases (efficiency "rebound" effects), and changes for weather relative to the CBECS survey year. Once these modifications are made, total energy use is computed across end uses and building types for the three major fuels, for each Census division. Combining these projections with the econometric/trend projections for the five minor fuels yields total projected commercial energy consumption.

10. Energy Information Administration, Assumptions to the Annual Energy Outlook 1998, ftp://ftp.eia.doe.gov/pub/forecasting/ aeo98/aeo98asu.pdf (Washington, DC, December 1997).

TO:Industrial Demand Module
National Energy Modeling System: An Overview

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