November 13, 2008

ENERGY MODELING FORUM EXPLORES THE EFFICIENCY RESOURCE IN SHAPING FUTURE DEMAND

In early November, Stanford University's Energy Modeling Forum (EMF) convened a new modeling exercise in Washington, D.C. to explore the role of energy efficiency in shaping future energy demand. Called EMF 25 (or, the 25th such exercise organized since the late 1970s), this may be good news for energy efficiency policy analysts. While details are still emerging, it is likely that economists and modelers will spend a number of months examining ways to do a better job of integrating energy efficiency behaviors and investments into long-term policy scenarios. If this forum follows past EMF efforts, the final results are likely to emerge in perhaps 18-24 months.

ACEEE's Director of Economic Analysis John A. "Skip" Laitner is among the invited participants. He says that the good news is that this EMF exercise may open up future policy scenarios to more actively integrate the significant contributions of energy efficiency and related technologies.

Many past efforts, and even some current assessments, have a technology perspective that is still rooted in “an early 1990s technology perspective.” As an example, many economic policy models still do not integrate critical technologies like combined heat and power and recycled energy technologies on the supply side; nor do they reflect new energy productivity gains that are possible from further advances and deployment of semiconductor and information and communication technologies. They also tend to overlook new opportunities within industrial processes, smart grid infrastructures, and smart transportation systems. 

Perhaps more critically, even when they acknowledge the potential contributions from modest efficiency gains through programs like the EPA and DOE Energy Star activities, many economists have tended to simply “bend down” the supply curve to reflect some small gain in overall energy efficiency. In treating efficiency in this way, the modelers have overlooked the very real possibility that there are large energy efficiency resources which have significant returns on investments.  Those returns are a form of economic productivity that might offset other major costs that are needed to pursue effective climate and energy policies.

Finally, this forum might be a useful venue to open up thinking about “fixed elasticities.” In other words, rather than assuming unchanging behaviors as most modelers do, we might anticipate shifts in preferences that are likely to unfold much differently in a carbon-constrained world, or in a world in which other social and environmental concerns begin to shape public awareness and a resulting willingness to act.

For more information on this continuing exercise, contact Laitner at jslaitner@aceee.org.

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