Modeling Technological Change in Energy Production and Use National Academy of Science May 6, 2010, Washington, D.C. Richard Newell, Administrator
Overview Key concepts in technological change how economists define technological change technology supply and demand the innovation system Representing technological change in energy-economic models examples from EIAs National…
Key concepts in the process of technological change Richard Newell, NAS, May 6, 2010 3
How do economists define technological change Technological change is the process by which the economy changes over time, in terms of the products produced and the processes used for production, so that a technological advance...…
Technology supply and demand Supply-push policies Supply of innovations State of knowledge Profit RD&D incentives Learning-by-doing Demand for technology Private and Capital cost social value Operating cost Product qualities…
Schematic of the innovation system Richard Newell, NAS, May 6, 2010 Source: IEA (2008a) 6
Representing technological change in energy-economic models Richard Newell, NAS, May 6, 2010 7
Technology change is modeled in many ways Exogenous (function of time) time profile of specified cost and performance characteristics for specific technologies time trend in efficiency and/or cost improvements Endogenous (function…
National Energy Model System (NEMS) Richard Newell, NAS, May 6, 2010 9
Technology representation in NEMS Explicit technology representations (efficiencies, capital, and O&M costs, capacity factors, date commercial) residential and commercial transportation electricity generation natural gas…
NEMS learning curves for electricity capacity expansion Literature largely uses simple curve Overnight Cost (C) = a function of cumulative capacity (Q): C(Q) = a * Q -b Progress Ratio (pr): defines speed of learning f = % cost…
New emerging technologies typically have larger learning rates than more mature technologies Electric Technologies in EU 1980-1995 10 Cost of Electricity (ECU(1990)/kWh) 1985 Photovoltaics (35%) 1 1995 1980 Wind Power -…
Installed wind project costs have increased during past 10 years for reasons beyond technology learning Installed project cost (2008 /kW) Richard Newell, NAS, May 6, 2010 Source: DOE LBNL 2008 Wind Technologies Market Report 13
Sample learning curves from NEMS learning factor 1 0.9 Advanced nuclear learning rates 0.8 0.7 0.6 IGCC with sequestration learning rates 0.5 0.4 0.3 0.2 0.1 0 0 20 40 60 80 100 number of units built Richard Newell, NAS, May 6,…
Combined heat and power costs decline, while additional efficiency gains are small Total installed cost (2005/kW) Overall Efficiency 1,200 100% Efficiencies 1,100 80% 1,000 60% Reference case Costs 900 40% Rapid Technology case…
Key drivers of technological change in energy modeling Richard Newell, NAS, May 6, 2010 16
Key drivers for energy technology change Market drivers energy prices technology costs consumer and investor behavior demand for energy services Government standards fuel economy, appliance efficiency, and building standards…
Market drivers Richard Newell, NAS, May 6, 2010 18
Success in the Barnett prompted companies to look at other shale formations in the U.S. U.S. shale gas plays Richard Newell, NAS, May 6, 2010 19
Over the last decade, U.S. shale gas production has increased 8-fold shale gas production billion cubic meters 90 80 Antrim Barnett Fayetteville 70 Woodford Haynesville Marcellus 60 50 40 30 20 10 0 2000 2001 2002 2003 2004…
Shale gas has been the primary source of recent growth in U.S. technically recoverable natural gas resources technically recoverable gas resources trillion cubic meters 60 Unproved shale gas & 50 coal-bed methane 40 Unproved 30…
EIA expects shale gas and Alaska production increases to more than offset declines in other supplies U.S. gas production billion cubic meters History Projections 750 625 Alaska Shale gas 500 Coalbed methane 375 Non-associated…
Over the past 5 years, EIA has significantly lowered its projection of LNG imports into the U.S. U.S. net LNG imports billion cubic meters History Projections 200 AEO2005 150 100 50 AEO2010 0 2000 2005 2010 2015 2020…
Government standards Richard Newell, NAS, May 6, 2010 24
New light duty vehicle efficiency reaches 40 mpg by 2035 miles per gallon 45 40 35 30 25 20 History 15 AEO2010 Reference case 10 AEO2010 High Oil Price case 5 0 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030…
The continuation of existing policies into the future would increase light-duty vehicle fuel economy miles per gallon New light-duty vehicle fuel efficiency standards and fuel efficiency achieved in two cases 50 45 40 35 30…
Changes in the adoption of efficient residential technologies significantly affect projections; new uses play a key role in projected demand growth index, 1990 = 1.0 History Projections 1.2 1.0 0.8 0.6 2009 Technology 0.4…
Changes in the adoption of efficient residential technologies significantly affect projections; new uses play a key role in projected demand growth Lighting PCs and related equipment Laundry and dishwashing Water heating…
Example of both market and regulatory induced technology change: commercial sector LED lighting Installed cost (2007 dollars per 1000 lumens) 250 LED (85 lumens per watt) LED (170 lumens per watt) 200 150 100 50 0 2010…
Mild and full hybrid systems dominate new light-duty vehicle sales by 2035 millions History Projections 10 9 Electric/fuel cell 8 Plug-in hybrid electric 7 Hybrid electric 6 Mild hybrid electric 5 Gaseous 4 Flex fuel 3 Diesel…
Government financial incentives Richard Newell, NAS, May 6, 2010 31
The continuation of existing policies into the future increases renewable generation billion kilowatthours 1,200 1,000 800 600 No Sunset 400 Extended Policies Reference 200 0 2005 2010 2015 2020 2025 2030 2035 Richard…
Emissions policies Richard Newell, NAS, May 6, 2010 33
A Carbon Policy: A Carbon Policy Example: Main Cases Case Name Assumptions Updated AEO2009 Reference Case, which includes the Reference provisions of the American Recovery and Reinvestment Act (ARRA). Illustrative Policy Cases…
Example of carbon policy impact on capacity additions, 2008 to 2030 (thousand megawatts) 600 Renewable Nuclear 500 Natural Gas with CCS Natural Gas 400 Coal with CCS 219 Coal 300 119 250 116 81 93 95 135 200 96 44 45 100…
Overnight costs of new coal with sequestration plants (CCS) show learning over time 2007 /kWh 4000 3500 3000 2500 2000 Learning rate per doubling: 1500 initially 20% then 10%, 1000 then 1% 500 0 2010 2015 2020 2025 2030…
AEO2010 includes 38 sensitivity cases of AEO2010 Case Description cases Reference EIAs starting point for projections through 2035 Lower and higher economic growth scenarios. Average annual rate of GDP from 2008 to 2035 is 1.8…
Thank you Richard Newell, NAS, May 6, 2010 38
For more information U.S. Energy Information Administration home page www.eia.gov Short-Term Energy Outlook www.eia.gov/emeu/steo/pub/contents.html Annual Energy Outlook www.eia.gov/oiaf/aeo/index.html International Energy Outlook…
Energy efficiency gains reduce consumption 15% from where it would otherwise be; structural change is even larger quadrillion Btu 200 192 Constant intensity Structural 150 change Constant efficiency 133 Efficiency change 100…
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