Appendix C: Updates to Reference Case
The following list identifies the enhancements made to the AEO2007 reference in the preparation of the reference case for this analysis.
Macroeconomic Changes from AEO2007 Reference Case
The AEO2007 analysis assumed that the maximum ethanol import quantity that would be
available at any price through the entire projection horizon would be about 900 million
gallons per year. A review of a recent study for potential Brazilian ethanol production
and exports to the U.S. through 2012 provided new data points through which simple
exponential supply curves were estimated by year.35 Whether the levels of ethanol supply
from Brazil to the United States will increase as assumed by these curves will depend
critically on the level of investments made in Brazil to expand their sugar cane crop
production and ethanol conversion facilities and the competition for the ethanol from the
rest of the world.
The study sited above claims that there are over 90 million hectares (over 200 million acres) of cleared but idle, non-environmentally sensitive, land available for development of ethanol production. If the land was aggressively developed for sugar cane production,
Brazilian ethanol production could grow to over 50 billion gallons per year. Large-scale
investments for plant and infrastructure, estimated to be between $150 billion to $250
billion dollars, would be required to build roads, purchase farming equipment, expand the
ethanol transportation infrastructure, build new conversion plant facilities, and provide
for port and ship expansions. One of the scenarios addressed in this analysis, the Low
Import Cost Case assumes that such investments are made for Brazilian ethanol
development.
Renewable Market Model Changes from AEO2007 Reference Case
- Added offshore wind technology as a capacity expansion option in selected coastal regions, with revised cost and performance estimates.
- Updated corn and biomass feedstock costs consistent with University of Tennessee POLYSYS study.
EIA’s estimates of biomass supply curves were taken from the U.S. Department of
Agriculture’s latest estimates through 2015, which were developed under contract with
Dr. Ugarte at the University of Tennessee using an integrated land and crop competition model. EIA contracted with Dr Ugarte to extend these curves through 2030. The corn
supply curves also were developed using POLYSYS and were generally higher-priced
than those in AEO2007 for the same level of demand; however, the maximum availability of corn supply in the new estimate is much larger than the AEO2007 Reference Case and allows for corn imports when corn prices and demand are sufficiently high. In addition to the Reference Case, a High Yield Case was constructed to evaluate the impact of
potentially higher biomass crop yields. Similar to the reference case, the biomass supply curves through 2015 were obtained from the USDA and extended through 2030 by Dr.
Ugarte under contract to the EIA.
Electricity Market Models Changes from AEO2007 Reference Case
- Modified the interregional transmission cost structure to allow renewable capacity additions from one region to serve adjacent regions, with higher associated transmission costs.
- Improved the representation of competition for biomass for electricity generation and cellulosic ethanol production.
- Added offshore wind technology as a capacity expansion option in selected coastal regions, with revised cost and performance estimates.
Notes |