Energy Outlook

EIA Annual Energy Outlook 2021 Provides Insights and Opportunities

On February 3, the U.S. Energy Information Administration (EIA) released its latest Annual Energy Outlook (AEO). The AEO 2021 report describes the key assumptions and results of a reference case and several alternative scenarios performed with the National Energy Modeling System (NEMS), a complex energy supply and demand model created and maintained by EIA. The scenarios provide insights into potential energy futures resulting from a range of assumptions about oil prices, oil and natural gas resources, macroeconomic levels, and renewable costs.

Since NEMS was created, OnLocation has worked closely with EIA providing NEMS modeling support ranging from model design and development activities to data updates to operational services. Our modeling experts have made major updates and improvements to many of the modules of NEMS, especially to the Electricity Market (EMM) and Liquid Fuels Market (LFMM) Modules. In the EMM we have added numerous new technologies and policy capabilities over the years, including adding CO2 capture retrofit options for existing coal and natural gas power plants and redefining the EMM regions to better reflect recent changes in regional electricity markets, including creating a dynamic regional tool to facilitate updates in the future. For the LFMM, we worked with refinery modeling experts to completely redesign and recreate the module with new features such as flexible regional and technology detail and an improved representation of biofuels and other alternative liquid fuels. We also built new modules for use in NEMS including the CO2 Transport, Utilization and Storage (CTUS) Module for CO2 capture technologies and the Renewable and Electricity Storage (REStore) Module that performs an hourly dispatch of electricity storage and variable renewable generation. See our recent blog to learn more about the REStore model’s design and implementation using the AIMMS modeling platform.

In addition, over the past few months OnLocation has provided assistance to EIA with problem-solving and documentation of the many model integration processes involved in running the AEO scenarios, and we are currently working with EIA to improve those processes for future analyses. EIA staff rely on OnLocation’s unique knowledge of the NEMS model structure and the systems and processes needed to support its operation in order to assist them in their mission to produce unbiased annual reports on energy trends and projections.

The release of the AEO each year also provides OnLocation with new opportunities for using the AEO scenarios and the updated NEMS model as the basis for exploring alternative energy futures for both government and private clients. The AEO scenarios and model assumptions are built around existing energy and environmental laws, the current slate of technology options, and historical trends in consumer choice and behavior. They do not predict what will happen but instead reflect what could happen if current laws and trends remain the same in the future. This provides an excellent starting point for creating scenarios to explore the impact of new policies and technologies by changing the underlying assumptions and comparing the model results to the AEO “business as usual” approach. Examples of some recent energy and environmental scenarios performed for clients include CO2 mitigation scenarios such as a CO2 tax or clean electricity standards, tax incentives to support clean technologies such as electric vehicles or CO2 capture technologies, and restrictions on domestic oil and gas production and pipeline expansion.

OnLocation works with clients to determine the best approach to meet their needs, including designing and implementing model scenarios, customizing the model with new capabilities, interpreting the model results, and presenting them in a format that can be shared with other stakeholders, including Congressional and White House staff. We also perform research and supplemental spreadsheet analyses to support these modeling services and assist our clients in solving their energy issues. To learn more, download our free Services Guide.

For more information about the NEMS model and integrated energy modeling, visit our website and read our NEMS blogs that provide answers to common questions about the model including its capabilities and limitations, the cost of a model run, and the time it takes to perform model scenarios.

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