Industrial Demand Module
The NEMS Industrial Demand Module estimates energy consumption by energy
source (fuels and feedstocks) for 15 manufacturing and 6 nonmanufacturing
industries. The manufacturing industries are further subdivided into the
energy-intensive manufacturing industries and nonenergy-intensive manufacturing
industries (Table 6.1). The manufacturing industries are modeled through
the use of a detailed process flow or end use accounting procedure, whereas
the nonmanufacturing industries are modeled with substantially less detail.
The petroleum refining industry is not included in the industrial module,
as it is simulated separately in the Petroleum Market Module of NEMS. The
Industrial Demand Module calculates energy consumption for the four Census
Regions (see Figure 5) and disaggregates the energy consumption to the
nine Census Divisions based on fixed shares from the State Energy Data
System1.
The energy-intensive industries (food products, paper and allied products,
bulk chemicals, glass and glass products, cement, iron and steel, and aluminum)
are modeled in considerable detail. Each industry is modeled as three separate
but interrelated components consisting of the Process Assembly (PA) Component,
the Buildings Component (BLD), and the Boiler/Steam/Cogeneration (BSC)
Component. The BSC Component satisfies the steam demand from the PA and
BLD Components. In some industries, the PA Component produces byproducts
that are consumed in the BSC Component. For the manufacturing industries,
the PA Component is separated into the major production processes or end
uses.
Petroleum refining (NAICS 32411) is modeled in detail in the Petroleum
Market Module of NEMS, and the projected energy consumption is included
in the manufacturing total. Projections of refining energy use, and lease
and plant fuel and fuels consumed in cogeneration in the oil and gas extraction
industry (NAICS 211) are exogenous to the Industrial Demand Module, but
endogenous to the NEMS modeling system.
Key Assumptions
The NEMS Industrial Demand Module primarily uses a bottom-up process modeling
approach. An energy accounting framework traces energy flows from fuels
to the industry’s output. An important assumption in the development
of this system is the use of 2002 baseline Unit Energy Consumption (UEC)
estimates based on analysis of the Manufacturing Energy Consumption Survey
(MECS) 2002.2 The UECs represent the energy required to produce one unit
of the industry’s output. The output may be defined in terms of physical
units (e.g., tons of steel) or in terms of the dollar value of shipments.
The industrial module depicts the manufacturing industries (apart from
petroleum refining) with a detailed process flow or end use approach.
The dominant process technologies are characterized by a combination of
unit energy consumption estimates and “technology possibility curves.”
The technology possibility curve is an exponential growth trend corresponding
to a given average annual growth rate, or technology possibility coefficient
(TPC). The TPC defines the assumed average annual growth rate of the energy
intensity of a process step or an energy end use. The TPCs for new and
existing plants vary by industry and process. These assumed rates were
developed using professional engineering judgments regarding the energy
characteristics, year of availability, and rate of market adoption of new
process technologies.
Process/Assembly Component
The PA Component models each major manufacturing production step or end
use for the manufacturing industries. The throughput production for each
process step is computed, as well as the energy required to produce it.
The amount of energy to produce a unit of output is defined as the unit
energy coefficient (UEC), another term for the energy intensity of the
process.
The module distinguishes the UECs by three vintages of capital stock.
The amount of energy consumption reflects the assumption that new vintage
stock will consist of state-of-the-art technologies that are more energy
efficient than the average efficiency of the existing capital stock. Consequently,
the amount of energy required to produce a unit of output using new capital
stock is less than that required by the existing capital stock. Capital
stock is grouped into three vintages: old, middle, and new. The old vintage
consists of capital existing in 2002 and surviving after adjusting for
assumed retirements each year (Table 6.2). New production capacity is
assumed to be added in a given projection year such that sufficient surviving
and new capacity is available to meet the level of an industry’s output
as determined in the NEMS Regional Macroeconomic Module. Middle vintage
capital is that which is added after 2002 up through the year prior to
the current projection year.
To simulate technological progress and adoption of more efficient energy
technologies, the UECs are adjusted each projection year based on the assumed
TPC for each step. The TPCs are derived from assumptions about the relative
energy intensity (REI) of productive capacity by vintage (new capacity
relative to existing stock in a given year) or over time (new or surviving
capacity in 2030 relative to the 2002 stock) (Table 6.3). For example,
state-of-the-art additions to mechanical pulping capacity in 2002 are assumed
to require only 81.6 percent as
much energy as does the average existing plant, so the REI for new capacity
in 2002 is 0.816 (see Table 6.3). Over time, the UECs for new capacity
are assumed to improve, and the rate of improvement is given by the TPC.
The UECs of the surviving 2002 capital stock are also assumed to decrease
over time, but not as rapidly as for new capital stock. For example, with
mechanical pulping, the TPC for new facilities is -0.010, while the TPC
for existing facilities is -0.007. Also provided in Table 6.3 are alternative
assumptions used to reflect a more optimistic, “high tech” case.
The concepts of REI and TPCs are a means of embodying assumptions regarding
new technology adoption in the manufacturing industry and the associated
increased energy efficiency of capital without characterizing individual
technologies in detail. The approach reflects the assumption that industrial
plants will increase in energy efficiency as owners replace old equipment
with new, more efficient equipment, add new capacity, or upgrade their
energy management practices. The reasons for the increased efficiency
are not likely to be directly attributable to technology choice decisions,
changing energy prices, or other factors readily subject to modeling. Instead,
the module uses the REI and TPC concepts to characterize efficiency trends
for bundles of technologies available for major process steps or end use.
One exception to the general approach in the PA component is for electric
motor technology choice implemented for 9 industries to simulate their
electric machine drive energy end use. Machine drive electricity consumption
in the food industry, the bulk chemicals industry, the five metal-based
durables industries, and the three non-intensive manufacturing industries
is calculated by a motor stock model. The beginning stock of motors is
modified over the projection horizon as motors are added to accommodate
growth in shipments for each sector, as motors are retired and replaced,
and as failed motors are rewound. When an old motor fails, an economic
choice is made on whether to repair or replace the motor. When a new motor
is added, either to accommodate growth or as a replacement, the motor must
meet the premium efficiency standard minimum for efficiency or a premium
efficiency motor. Table 6.4 provides the beginning stock efficiency for
seven motor size groups in
each of the four industries, as well as efficiencies
for EPACT minimum and premium motors.3 As the motor
stock changes over
the projection horizon, the overall efficiency of the motor population
changes as well.
Buildings Component
The total buildings energy demand by industry for each region is a function
of regional industrial employment and output. Building energy consumption
was estimated for building lighting, HVAC (heating,ventilation, and air
conditioning), facility support, and onsite transportation. Space heating
was further divided to estimate the amount provided by direct combustion
of fossil fuels and that provided by steam (Table 6.5). Energy consumption
in the BLD Component for an industry is estimated based on regional employment
and output
growth for that industry.
Boiler/Steam/Combined Heat and Power Component
The steam demand and byproducts from the PA and BLD Components are passed
to the BSC Component, which applies a heat rate and a fuel share equation
(Table 6.6) to the boiler steam requirements to compute the required energy
consumption.
The boiler fuel shares apply only to the fuels that are used in boilers for steam-only applications. Fuel shares for the portion of the steam demand
associated with combined heat and power (CHP) is assumed fixed. Some fuel
switching for the remainder of the boiler fuel use is assumed and is calculated
with a logit sharing equation where fuels shares are a function of fuel
prices. The equation is calibrated to 2002 so that the 2002 fuel shares
are produced for the relative prices that prevailed in 2002.
The byproduct fuels, production of which are estimated in the PA Component,
are assumed to be consumed without regard to price, independent of purchased
fuels. The boiler fuel share equations and calculations are based on
the 2002 MECS.
Combined Heat and Power
CHP plants, which are designed to produce both electricity and useful heat,
have been used in the industrial sector for many years. The CHP estimates
in the module are based on the assumption that the historical relationship
between industrial steam demand and CHP will continue in the future, and
that the rate of additional CHP penetration will depend on the economics
of retrofitting CHP plants to replace steam generated from existing non-CHP
boilers. The technical potential for CHP is primarily based on supplying
thermal requirements. Capacity additions are then determined by the interaction
of payback periods CHP retrofit investment and market penetration rates
for investments with given payback periods. Assumed installed costs for
the CHP systems are given in Table 6.7.
Legislation and Regulations
Energy Improvement and Extension Act of 2008
Under EIEA2008 Title I, “Energy Production Incentives,” Section 103 provides
an Investment Tax Credit (ITC) for qualifying Combined Heat and Power (CHP)
systems placed in service before January 1, 2017. Systems with up to 15
megawatts of electrical capacity qualify for an ITC up to 10 percent of
the installed cost. For systems between 15 and 50 megawatts, the percentage
tax credit declines linearly with the capacity, from 10 percent to 3 percent.
To qualify, systems must exceed 60-percent fuel efficiency, with a minimum
of 20 percent each for useful thermal and electrical energy produced. The
provision was modeled in AEO2009 by adjusting the assumed capital cost
of industrial CHP systems to reflect the applicable credit.
The Energy Independence and Security Act of 2007
Under EISA2007, the motor efficiency standards established under the Energy
Policy Act of 1992 (EPACT) are superseded for purchases made after 2011.
Section 313 of EISA2007 increases or creates minimum efficiency standards
for newly manufactured, general purpose electric motors. The efficiency
standards are raised for general purpose, integral-horsepower induction
motors with the exception of fire pump motors. Minimum standards were
created for seven types of poly-phase, integral-horsepower induction motors
and NEMA design “B” motors (201-500 horsepower) that were not previously
covered by EPACT standards. The industrial module’s motor efficiency assumptions
reflect the EISA2007 efficiency standards for new motors added after 2011.
Energy Policy Act of 1992 (EPACT)
EPACT contains several implications for the industrial module. These implications
concern efficiency standards for boilers, furnaces, and electric motors.
The industrial module uses heat rates of 1.25 (80 percent efficiency) and
1.22 (82 percent efficiency) for gas and oil burners, respectively. These
efficiencies meet the EPACT standards. EPACT mandates minimum efficiencies
for all motors up to 200 horsepower purchased after 1998. The choices
offered in the motor efficiency assumptions are all at least as efficient
as the EPACT minimums.
Clean Air Act Amendments of 1990 (CAAA90)
The CAAA90 contains numerous provisions that affect industrial facilities.
Three major categories of such provisions are as follows: process emissions,
emissions related to hazardous or toxic substances, and SO2
emissions.
Process emissions requirements were specified for numerous industries and/or
activities (40 CFR 60). Similarly, 40 CFR 63 requires limitations on almost
200 specific hazardous or toxic substances. These specific requirements
are not explicitly represented in the NEMS industrial model because they
are not directly related to energy consumption projections.
Section 406 of the CAAA90 requires the Environmental Protection Agency
(EPA) to regulate industrial SO2 emissions at such time that total industrial
SO2 emissions exceed 5.6 million tons per year (42 USC 7651). Since industrial
coal use, the main source of SO2 emissions, has been declining, EPA does
not anticipate that specific industrial SO2 regulations will be required
(Environmental Protection Agency, National Air Pollutant Emission Trends:
1990-1998, EPA-454/R-00-002, March 2000, Chapter 4). Further, since industrial
coal use is not projected to increase, the industrial cap is not expected
be a factor in industrial energy consumption projections. (Emissions due
to coal-to-liquids CHP plants are included with the electric power sector
because they are subject to the separate emission limits of large electricity
generating plants.)
Industrial Alternative Cases
Technology Cases
The high technology case assumes earlier availability, lower costs, and
higher efficiency for more advanced equipment, based on engineering judgments
and research compiled by Focis Associates in a 2005 study for EIA (Tables
6.3 and 6.7).4 The high technology case also assumes that the rate at
which biomass byproducts will be recovered from industrial processes increases
from 0.1 percent per year to 0.7 percent per year. The availability of
additional biomass leads to an increase in biomass-based cogeneration.
Changes in aggregate energy intensity result both from changing equipment
and production efficiency and from changes in the composition of industrial
output. Since the composition of industrial output remains the same as
in the reference case, delivered energy intensity declines by 1.7 percent
annually compared with the reference case, in which delivered energy intensity
is projected to decline 1.5 percent annually.
The 2009 technology case holds the energy efficiency of plant and equipment
constant at the 2009 level over the projection. Both cases were run with
only the Industrial Demand Module rather than as a fully integrated NEMS
run, (i.e., the other demand models and the supply models of
NEMS were not executed). Consequently, no potential feedback effects
from energy market interactions were captured.
AEO2009 also includes an integrated high technology case (consumption
high technology), which combines the high technology cases of the four
end-use demand sectors, the electricity high fossil technology case, the advanced nuclear case and the high renewables case.
The high renewable case assumes that the rate at which biomass byproducts
will be recovered from industrial processes increases from 0.1 percent
per year to 0.7 percent per year. The availability of additional biomass
leads to an increase in biomass-based CHP.
Industrial Demand Module Notes |
