Inventory of Energy Technologies for Least-Cost Energy Strategy

DEPARTMENT OF ENERGY

Inventory of Energy Technologies for Least-Cost Energy Strategy

AGENCY: Department of Energy (DOE) .

ACTION: Notice of Request for Comments on Least Cost Energy Strategy

Technology Assumptions.

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SUMMARY: The Energy Policy Act of 1992 requires the Secretary of Energy

to prepare a least-cost energy plan a resource and technology inventory

of the least-cost energy strategy. The inventory (1) provides a

description of each current and anticipated primary energy input

available to the U.S. economy, (2) describes the system for electricity

generation and distribution, and (3) lists available and anticipated

energy technologies that are sufficiently defined so as to permit

measurement or estimation of their cost and effectiveness over the

period from the present to the year 2015.

This notice summarizes work in progress and invites public comment

on the appropriate content for the energy resource and technology

inventory. We are particularly interested in suggestions for expansion

of the list of efficient end-use technologies expected to be available

by the year 2010, and their cost and performance parameters.

DATES: To guarantee consideration, comments must be received by October

15, 1994.

ADDRESSES: Comments related to the technology and resource inventory

should be sent in 3 copies to:

Least-Cost Plan/Energy & Technology Inventory, Office of Economic

Analysis and Competition, U.S. Department of Energy, PO-61, Washington,

D.C. 20585

FOR FURTHER TECHNOLOGY INFORMATION CONTACT: Dr. Peter Karpoff, Office

of Economic Analysis and Competition, U.S. Department of Energy, PO-61,

Washington, D.C. 20585, (202) 586-4767.

FOR MODELING INFORMATION CONTACT: Dr. Phillip Tseng, Office of Economic

Analysis and Competition, U.S. Department of Energy, PO-61, Washington,

D.C. 20585, (202) 586-3892.

SUPPLEMENTARY INFORMATION:

I. Background

II. Content of the Energy Resource and Technology Inventory

III. Alternative Least-Cost Concepts

IV. Least-Cost Energy Modeling

V. Next Steps

I. Background

Section 1602 of the Energy Policy Act of 1992 (EPAct) requires the

Department to provide a Least-Cost Energy Strategy (LCES) to accompany

the National Energy Policy Plan (NEPP) it submits pursuant to the

legislation that established the Department. Implicitly, EPAct

recognizes that the LCES and the NEPP are distinct, reflecting in part

the fact that least-cost modeling exercises may fail to account for

important real-world considerations that may enter into energy policy

formulation. Notwithstanding this distinction, the LCES can be an

important source of insights for use in developing energy policy. It

can also provide important insights into other issues facing the

Department, such as strategic planning, the identification of research

and development priorities, long-term climate mitigation policy, and

sustainable development initiatives, by identifying energy-related

technologies that have the largest leverage on attainment of social

objectives related to the nexus of energy and economic growth.

The least-cost strategy will provide a list of policy options that,

when implemented, could meet the goals and reflect the priorities

outlined in Section 1602 of EPAct. The least-cost strategy will call

upon available and anticipated resources and technologies to satisfy

final energy demands at minimum long-run cost, subject to these goals

and priorities. Section 1602(a) lists the following goals:

Stabilization and eventual reduction in the generation of

greenhouse gases

An increase in the efficiency of the Nation's total energy

use by 30 percent over 1988 levels by 2010

An increase in the percentage of energy derived from

renewable resources by 75 percent over 1988 levels by the year 2005

A reduction in the nation's oil consumption from the 1990

level of approximately 40 percent of total energy use to 35 percent by

the year 2005.

In addition, Section 1602(d) lists the following energy

production, utilization, and energy conservation priorities:

Implement standards for more efficient use of fossil

fuels;

Increase the energy efficiency of existing technologies;

Encourage technologies, including clean coal technologies,

that generate lower levels of greenhouse gases;

Promote the use of renewable energy resources, including

solar, geothermal, and sustainable biomass, hydropower, and wind power;

Affect the development and consumption of energy and

energy efficiency resources and electricity through tax policy;

Encourage investment in energy efficient equipment and

technologies; and

Encourage the development of energy technologies, such as

advanced nuclear fission and nuclear fusion, that produce energy

without greenhouse gases as a byproduct, and encourage the deployment

of nuclear electric generating capacity.

II. Content of the Energy Resources and Technology Inventory

Section 1602(b) of EPAct requires an inventory of energy resources

and technology. Conservation technologies, which reduce the amount of

energy required to provide a given energy service, are considered as

energy technologies for purposes of this inventory.

As part of the inventory, known and anticipated primary energy

inputs will be inventoried. These include coal, oil and gas (both

domestic and imported), renewable sources (including diverse solar

forms, biomass, wind and ocean energy, hydro, geothermal, and municipal

waste methane), nuclear, hydrogen, and synthetic fuels and coal gases.

The energy technology part of the inventory will include specific

engineering applications and aggregations of applications (e.g., the

automobile is a complex aggregation of individual technical elements).

The technologies in the existing information base are drawn from the

following areas:

Energy Production

Oil and gas extraction: Reservoir mapping, Tertiary recovery,

Advanced drilling techniques;

Oil refining and gas processing;

Electricity generation: High efficiency combined cycle turbines,

Pressurized Fluidized Bed Combustion;

Fuel cells: Phosphoric, Molten carbonate and Solid oxide designs,

and Proton Exchange membrane;

Clean coal technology: Coal gasification, Improved pulverized coal

methods; Nuclear power, Advanced light water reactor designs Fusion

power assessment;

Biomass culture: Biomass waste utilization, Optimized biomass

culture and harvest;

Wind Power: Variable speed turbines, Larger capacities, Improved

control circuitry;

Hydrogen fuels: Direct use and electricity conversion;

Other renewable sources: Ethanol technologies, Solar applications,

Advanced photovoltaics, Geothermal applications, Biomass conversion to

liquid fuels, MSW gas recovery.

Energy Transportation, Storage and Load Management

Coal slurry and petroleum pipelines: Pipeline coatings and

additives;

LNG transport methods: LNG handling technology, LNG transport;

Electricity transmission: Transformer redesign, Voltage increases;

Electricity load management: Selective signaling, Improved load

forecasting, Price structure innovation;

Electricity storage systems: Pumped storage, battery, flywheel, and

compression systems.

Energy Distribution

Decentralized power generation: Efficient small stations, Fuel

cells;

District heating and cogeneration: District heat marketing, Hot

water/steam utilities, Private power marketing, IPP arrangements.

Energy Utilization

Automobile efficiency: Smaller vehicles, Smaller engines, Manual

transmissions, Greater adoption of sophisticated drive train features,

tires and lubricants, Advanced aerodynamics, Hybrid propulsion systems,

Diesel-electric motors, Regenerative braking, Electric vehicles, 2-

Stroke engines;

Light trucks: See autos, above

Heavy trucks: Efficient tires, aerodynamic designs,

Off-road vehicles;

Bus efficiency: Drive train improvements, Flywheel/regenerative

propulsion and braking, Demand driven dispatch, Efficient pricing and

fare collection, Route planning;

Aircraft and operations; Aircraft size, Curtailment of taxiing,

Airport and Air Traffic Control changes, Ultra high bypass turbofan

engines;

Ships and barges: Improved propulsion and hull efficiency (semi-

hydrofoil designs, Reduced operating speeds, Hull coatings;

Pipelines: Efficient pumps, controls, and motors, Interior

coatings, Additives;

Highway, rail and air traffic control design: Reduce congestion by

information systems and congestion tolls, Ride sharing;

Building shell efficiency: Insulation, High Performance glazing and

window films, Building orientation, Smart windows, Shading and

ventilation

Manufacturing Process efficiency: Impulse drying, Solar Process

Heating, Rapid Glass Refiner/Melter, Direct Ironmaking, Chemical

Welding, High Pressure Heat Exchanger, Chemical Sorbtion Heat Pump,

Bioprocessing;

Mining efficiency: In-situ reduction of ores, Chemical ore

separation

Agriculture efficiency: Wider use of no-till methods, Natural and

vacuum crop drying, Organic and compost-fed culture, Hydroponics

Aquaponic combined culture cycles, Cultivar variety and crop-mix

changes;

Retail and service efficiency: Wider adoption of efficient

lighting, Efficient equipment to reduce cooling loads, Electronic

interface with suppliers and customers, Direct-ship practices;

Urban system efficiency: Public transport expansion, Higher Vehicle

occupancy, Congestion tolls, Reduce trip demand by land use planning;

Increased Appliance Efficiency: Refrigeration, laundry, dishwashers

(reluctance motors), water heating, video displays, cooking appliances,

lighting, heating and cooling;

Reduced Heating, Cooling and Lighting loads: Shell improvements,

heat exchanges, parallel hot water piping, ozone laundering, water

recycling.

Summaries of cost and performance parameters for specified

technologies in the existing information base are available upon

request. This technology information is structured in a format suitable

for least-cost modeling purposes. For example, an existing electricity

conversion technology, a coal combined cycle plant fueled with

bituminous coal, might be described as follows (parameter values are

illustrative):

Bituminous Coal Combined Cycle Electricity Generation

Fuel conversion efficiency.................... 41.6%

Availability/Utilization...................... 60%

Cost of capacity (real $)..................... $1569 MM/Gigawatt

Fixed O&M cost................................ $47.4 MM/Gigawatt

Variable O&M cost............................. $0.37 MM/Petajoule input

Delivered fuel cost........................... $0.64 MM/Petajoule

Peak availability............................. 100%

Life span..................................... 40 yrs.

Installed capacity (current).................. 1.0 Gw

Commercial availability....................... Currently available

Some technologies included in the inventory, such as the power

plant example presented above, are cohesive single engineering

processes. In other cases, a technology in the inventory will reflect

an aggregation of engineering innovations, reflecting our inability to

separately model each individual device. For example, a future vehicle

technology might embody several innovations such as ultra light-weight

construction, low rolling resistance tires, hybrid propulsion with

automatic engine shut-off, and regenerative braking.

Suggestions and comments are invited on both the addition of

categories for the Energy Resource and Technology Inventory and for the

nomination of specific technologies to be included. To be considered

for inclusion, a technology must be sufficiently concrete that

parameters for its cost, performance and applicability to the U.S.

economy are discernible.

Respondents are invited to suggest either single technologies or

logical aggregates of technologies, as in the examples above, so long

as the performance parameters can be described in terms similar to

those in the example provided above. Respondents are requested to

provide performance parameters in a standard format (Appendix A) for

technologies that they nominate for the technology inventory, but may

supplement this minimum requirement with additional information.

Appendix A

Standard Format for Providing Technology Information For LCES

Technology Inventory

Technology name and description:---------------------------------------

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Primary Fuel:----------------------------------------------------------

Fuel conversion efficiency:--------------------------------------------

Availability/Utilization:----------------------------------------------

Cost of capacity (real$)-----------------------------------------------

Fixed O&M cost---------------------------------------------------------

Variable O&M cost------------------------------------------------------

Delivered cost---------------------------------------------------------

Peak availability %----------------------------------------------------

Life span (yrs.)-------------------------------------------------------

Installed capacity (current)-------------------------------------------

Year of Comm'l. Availability:------------------------------------------

Maximum capacity potential:

in initial year of availability--------------------------------------

5 years after initial availability-----------------------------------

III. Least-Cost Concepts

The term ``least-cost'' is open to various interpretations.

Depending on how the term is defined, a wide variety of energy

strategies might be categorized as meeting a least-cost criterion. It

is our intent to explore strategies consistent with a variety of

``least-cost'' concepts reflecting alternative treatments of issues

including, but not limited to, private versus social cost minimization,

environmental impacts, and the role of non-modeled attributes and

institutional factors.

Private and Social Cost Minimization

It is widely accepted that private and social costs may fail to

coincide unless all markets are perfectly competitive. Energy-related

markets provide many instances where the assumption of competition may

be called into question. For example, pricing in electricity markets,

which are generally subject to economic regulation at the state level,

are based on average, not marginal, costs. Least-cost decisions based

on the prices actually paid by electricity users may differ from least-

cost decisions based on marginal costs. Capital markets provide another

example of possible departures from perfect competition. Capital costs

may differ significantly from the social opportunity cost of

investment, and vary widely across and within groups of decisionmakers.

Projects that minimize costs using social discount rates may fail to do

so at discount rates reflecting the opportunity cost of capital faced

by decisionmakers in the market.

DOE plans to consider a wide range of cases that reflect the

differences between social and private cost minimization, and consider

how each affects least-cost choices.

Environmental Impacts

Environmental impacts can also enter into the definition of a

``least cost'' energy strategy. For example, in a case where two

technologies that differ widely in energy efficiency can be used to

provide the same energy service, purchasers will often ignore the

social costs of environmental impacts that may be associated with

higher levels of energy use. Theory and regulatory practice in some

states suggests that this issue can be addressed by incorporating a

``shadow price'' for environmental impacts in the least-cost objective

function. The least-cost strategy will consider alternative approaches

to addressing the impact of recognizing environmental costs on least-

cost choices.

Role of Non-Modeled Attributes and Institutional Factors

No model can adequately capture the full detail of all influences

on energy-related decisions. For example, decisions regarding personal

transportation technologies may involve issues such as safety,

performance, and room, as well as tradeoffs between acquisition cost

and fuel cost. Institutional factors, such as the divorce between

ownership and tenancy in many commercial buildings, can also have an

important influence on energy-related decisions. Ignoring the range of

attributes that enter into consumer decisions or institutional factors

could lead to ``apples to oranges'' cost comparisons that do not

compare alternative approaches to providing the same service. On the

other hand, adoption of a pure ``revealed preference'' approach, in

which the fact that a particular technology is used in the market is

prima facie evidence of its least-cost nature, is both tautological and

inconsistent with the spirit of the least-cost strategy exercise. Given

the unsuitability of the two extremes, we intend to explore a range of

intermediate cases.

The public is invited to comment on these issues, as well as others

that may bear on the interpretation or definition of the ``least-cost''

concept.

IV. Least-Cost Modeling

The methods selected for developing the least cost energy plan

include use of the optimization model known as MARKAL-MACRO described

in ``MARKAL-MACRO: A linked model for energy-economy analysis,'' BNL-

47161, Brookhaven National Laboratory, February 1992. Copies of this

report are available by request from the Office of Economic Analysis

and Competition (202) 586-4767.

MARKAL-MACRO links the MARKAL model that is used to determine

least-cost provision of fixed end-use energy service demands with the

substitution opportunities between energy services and other productive

inputs in MACRO. MARKAL is an optimization model that minimizes the

cost of providing its target level of energy services drawing on the

available set technology and resources. Information from the energy

resource and technology inventory is directly reflected in the MARKAL

data structure, so that changes in the parameters for technologies

already represented or the inclusion of new technologies may

significantly influence the modeling results.

In MACRO the inputs of capital, labor and energy services are

substitutes for each other under an assumption of diminishing marginal

returns. With the link between MARKAL and MACRO, rising energy costs

can change the composition of energy supply, of energy technologies and

of energy investments (through MARKAL), and may also change the balance

among energy services, labor and capital input decisions, and affect

future output levels (via the MACRO link).

IV. Next Steps

The LCES report required by Section 1602 of EPAct is scheduled for

completion in early 1995. It will be available to the public for review

and comment prior to its submission to Congress.

Issued in Washington, D.C., on August 23, 1994.

Abraham E. Haspel,

Deputy Assistant Secretary for Economic and Environmental Policy,

Office of Policy.

[FR Doc. 94-21375 Filed 8-29-94; 8:45 am]

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