4
IMPLEMENTATION OF THE NEMS

The previous chapters have considered the use of modeling in the context of energy policy analysis, identified general requirements that a National Energy Modeling System (NEMS) should meet, and defined architecture and data requirements for the NEMS. NEMS will also require the right implementation, management, and resources over the long term to serve its client community. This chapter addresses these NEMS needs.

LEAD ORGANIZATION FOR THE NEMS

The committee recommends that the Energy Information Administration (EIA) develop and manage the NEMS. Congress established the EIA within the Department of Energy (DOE) to serve as an independent, nonadvocacy agency to manage a central, comprehensive, and unified program of energy data collection, analysis, and reporting for the federal government. By statute, EIA provides routine, periodic data reports concerning energy supply, demand, and price forecasts for primary energy resources, fuels, and electricity; forecasts of energy supply and demand as reported in the Annual Energy Outlook; and other analyses. EIA reports are widely disseminated to Congress, the administration, and the public (EIA, 1990b, 1990d). The EIA Administrator must be confirmed by the U.S. Senate.

EIA's current personnel and operational resources provide the needed basic capability and experience to undertake NEMS development. To fulfill its mission, EIA conducts surveys and develops and maintains a variety of models. EIA data and analytic capabilities were used extensively in the recent National Energy Strategy (NES) exercise, and they will



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The National Energy Modeling System 4 IMPLEMENTATION OF THE NEMS The previous chapters have considered the use of modeling in the context of energy policy analysis, identified general requirements that a National Energy Modeling System (NEMS) should meet, and defined architecture and data requirements for the NEMS. NEMS will also require the right implementation, management, and resources over the long term to serve its client community. This chapter addresses these NEMS needs. LEAD ORGANIZATION FOR THE NEMS The committee recommends that the Energy Information Administration (EIA) develop and manage the NEMS. Congress established the EIA within the Department of Energy (DOE) to serve as an independent, nonadvocacy agency to manage a central, comprehensive, and unified program of energy data collection, analysis, and reporting for the federal government. By statute, EIA provides routine, periodic data reports concerning energy supply, demand, and price forecasts for primary energy resources, fuels, and electricity; forecasts of energy supply and demand as reported in the Annual Energy Outlook; and other analyses. EIA reports are widely disseminated to Congress, the administration, and the public (EIA, 1990b, 1990d). The EIA Administrator must be confirmed by the U.S. Senate. EIA's current personnel and operational resources provide the needed basic capability and experience to undertake NEMS development. To fulfill its mission, EIA conducts surveys and develops and maintains a variety of models. EIA data and analytic capabilities were used extensively in the recent National Energy Strategy (NES) exercise, and they will

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The National Energy Modeling System certainly be used again in subsequent NES analysis. In the recent exercise, EIA broadened its outreach efforts by collaborating with DOE's Office of Policy, Planning and Analysis, program offices, such as that for Conservation and Renewable Energy, the national laboratories, and with other organizations. This process of outreach should be extended and broadened. As explained earlier, the committee recommends that NEMS development should begin by building on existing models and data, as appropriate, capitalizing on the best capabilities available to begin configuring the NEMS. NEMS is compatible with EIA's statutory obligations. Thus, EIA can sustain the evolution of the NEMS, expand its own outreach simultaneously, and help NEMS stay current with relevant developments in other agencies and the private sector. The EIA has recently reorganized to accommodate and manage its expanded role with the NEMS. The committee concurs with this reorganization. It would be much more difficult for DOE's Office of Policy, Planning and Analysis to develop and manage the NEMS on a sustained basis. The Policy Office advances the philosophy and policies of the Department and the administration, and the director of the office serves at the Secretary's pleasure. The Policy Office is, therefore, subject to pressure by advocates from which it would be difficult to shield the NEMS. In the committee's view, the Policy Office should avail itself of NEMS services provided through the EIA, but this reliance does not preclude the office from undertaking some modeling and analytic activities on its own. The committee believes it desirable that, concurrent with the development of the NEMS, the DOE policy and program offices should continue to develop and use their own more focused modeling and analytical capabilities to pursue their missions. These activities, just as those outside DOE, represent beneficial redundancy. Such capabilities within DOE, however, should not directly duplicate those of the NEMS. SUGGESTIONS FOR IMPLEMENTATION The following suggestions are intended to strengthen the internal organization of EIA, enhance its external relationships, and improve EIA's quality of service to DOE and other clients. The committee recommends that the NEMS be quickly developed so it can be used in preparing the next NES. To achieve this goal and enjoy the significant benefits that would follow, DOE should make a major commitment in human and dollar resources to the NEMS now. NEMS development requires financial support sufficient for both staff and contract research, so that existing data and models can be further developed and new data and models created. An early EIA project in implementing the NEMS should be the development of multiyear budget and staffing projections. A formal NEMS development schedule should be prepared simultaneously, as the committee suggests later in this chapter (“Management of NEMS Development”).

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The National Energy Modeling System In light of federal fiscal constraints, the committee recommends that DOE first critically review current budget demands for data, modeling, and analysis, both within EIA and throughout DOE, and reallocate financial resources and personnel to help ensure the rapid development of the NEMS. It will be a challenge to reorder priorities, but doing so will produce great rewards in the form of better informed energy policy and planning. The committee is concerned that if the NEMS is not ready to be used in preparing the next NES, other expedient but scattered modeling investments will be made, repeating the experience of the 1991 NES as described in the committee's first advisory report (NRC, 1991a; also see Appendix B). The EIA Administrator should be directly responsible for developing and introducing the NEMS, because the NEMS will affect most other agency activities, will require new functions, and will overlap relationships with other DOE offices. Therefore, the Secretary should designate the EIA Administrator to be chief executive for the NEMS and make this assignment one of the Administrator's performance requirements. The EIA should act as the proprietor and custodian of the NEMS, by leading in its creation and introduction, and then maintaining, operating and upgrading it to provide service to its clients. This stewardship will expand EIA's role in serving those who shape policy and strategy. This new function will be in addition to, and must be accomplished in a manner compatible with, the many services EIA provides to present clients. The EIA must establish the NEMS with the understanding that its efficacy will rest on the quality of NEMS data, models, and analytical capability and also on EIA's responsiveness to clients. EMPLOYEE ENVIRONMENT The full potential of the NEMS will be realized sooner and with greater assurance with the creation of an EIA employee environment that attracts and holds highly qualified professionals. It is critical that the architects of NEMS have both a broad view of the kinds of policy issues the system must addresses, and a broad and critical understanding of the merits and demerits of various modeling approaches. Since NEMS incorporates both engineering and economic models, the design team should include people who are comfortable with both. Statistical expertise is needed to ensure that there is a well worked out protocol for incorporating data, updating model parameters, and validating model conclusions. Since principles of software design and database management are involved, there should be considerable expertise in these areas. Accordingly, the following and other complimentary actions should be actively pursued by EIA with the full support of DOE. In the committee's view, this is especially important since the existing DOE/EIA “culture” has suffered after more than a decade of budget stringency and general lack of support from the Executive Branch. Employees should be encouraged, and appropriate support provided, to advance professionally through such avenues as formal continuing education, credit for authorship of EIA publications, opportunities for applied research, and ongoing participation in

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The National Energy Modeling System national and international forums. Such scholarly activities provide greater credibility to EIA and its professional staff as well as enhancing their professional capabilities. There should be a regular presence within EIA of visiting professionals who work in collaboration with permanent staff. These professionals would include exceptional individuals on sabbatical, temporary transfers, interns, postgraduates, loaned personnel, consultants, and volunteer advisory groups. Such talents will be attracted if they can actively participate in EIA processes and can carry out activities that will add to their careers. The EIA should also make full use of the Intergovernmental Personnel Act of 1970 to attract critically needed competencies, including top management personnel. Such talent will be particularly important during the early development and introduction of the NEMS. Properly managed, this infusion of talent can contribute to a better NEMS while improving the esteem of EIA staff, the involved professionals, and the agency. Employees should be encouraged to see themselves as marketers of vital data, modeling, and analytical services to clients whose needs must be understood through continued communication and satisfied through products of superior quality. To prevent the NEMS from becoming irrelevant, a nonmarketing approach should be strenuously avoided; EIA should not assume it understand its users' needs. The development of an effective NEMS will require the involvement of both model developers and potential users if it is to satisfy these clients' needs. It should be a goal of EIA in establishing the NEMS to become the national center for energy modeling and analysis. Through this center will flow new ideas, some that will lead to major advances in modeling and analysis. This aim will also create excitement: staff will know their work is significant, contributing to the evolving field of energy policy analysis and modeling. In addition to enriching the employee's work environment, every reasonable opportunity should be pursued to reward employees monetarily. To meet its objectives, EIA must be able to compete for, attract, and hold competent staff with technical expertise in energy modeling. Such expertise is currently in strong demand by the private sector and current government pay scales are not competitive. Yet the Federal Employees Pay Comparability Act of 1990 provides several avenues for increasing employees' monetary compensation. This law was designed for agencies like EIA, which have major new technical responsibilities, to help them attract necessary talent (EIA, 1991). Provisions of this law allow the following: Recruitment and retention bonuses and retention allowances of up to 25 percent of base pay Hiring above minimum rates for all grades Authorization of up to 800 critical positions with base pay limited to EX-I Waiver of dual compensation restrictions on reemployed civilian and military retirees Advance pay for new employees

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The National Energy Modeling System Travel expenses for candidates and new appointees Higher limits for special pay rates Supervisory differentials of up to 3 percent Time off as an incentive award. In addition, DOE personnel officials have some authority and flexibility in classifying positions, to help agencies like EIA construct the organizations they need to undertake critical national initiatives. While other opportunities to improve EIA's employee environment will arise, if the Administrator pursues a combination of those listed above, EIA can attract, retain, and motivate the needed talent and skilled personnel. MANAGEMENT OF NEMS DEVELOPMENT An early EIA initiative must be the creation of a comprehensive NEMS development schedule, one that considers to the full extent possible needed modules, models, data and integrations. This schedule must lay out all pertinent activities, events, and relationships among NEMS elements (e.g., management techniques to assess critical paths towards achieving a given goal, such as the critical path method [CPM]). This scheduling will be an early opportunity to involve the affected clients so they can help shape the form and development timing of NEMS modules. Equally important will be early cooperation with the other EIA offices, divisions, and branches whose functions will complement those of NEMS. EIA must support an active outreach program in which key managers and specialists participate in the best forums within government, academia, and the private sector. Such a program is essential for the EIA to keep abreast of new ideas and techniques. Again, byproducts of these activities will be the greater motivation and credibility of EIA and its staff. EIA must establish close and meaningful relations with NEMS users and the scientific community. Clients should participate not only in reviewing data needs, model design, and scheduling of model development, but also in setting EIA standards for service turnaround time, quality, and other client needs. The EIA must create adequate forums for such ongoing important communication. In particular, the committee recommends that EIA form a Users Advisory Council of NEMS clients. The EIA Administrator would determine the council's makeup, which should represent DOE's Office of Policy, Planning and Analysis, and program offices, other federal departments and agencies, and key congressional committees, industry groups, and environmental organizations. This broad, cooperative involvement in NEMS will help ensure its value and credibility. The Users Advisory Council and other forums, such as focused task forces, will contribute to wider understanding and support of analytical results, especially those relating to controversial policy. Without abdicating legal responsibilities,

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The National Energy Modeling System the Administrator is encouraged to rely heavily on the advice of the Users Advisory Council, and to defer to its recommendations whenever possible. Through use in the next NES and other applications, the NEMS will steadily improve. As experience illuminates NEMS strengths and weaknesses, changes can be made to upgrade the models and improve their ability to inform decision making. In time the NEMS should be used to produce the EIA's Annual Energy Outlook and its other studies and forecasts, which would lead to its continuous use and contribute greatly to the system's value. Future NEMS clients made it very clear to the committee that timeliness of service is often critical. Ability to provide service with a turnaround time of an hour or hours (including preparation of hard copy) may determine whether the NEMS is useful or not in many situations. The committee also heard presentations on the importance of documentation, quality control, and archiving to protect the integrity, objectivity, and reliability of EIA products and services. Clearly, EIA's internal regulations and policies must be carefully crafted to balance the needs of clients and internal quality control. The committee suggests that affected parties participate when EIA develops and modifies all standards and criteria for upgrading, developing, maintaining, documenting, and modifying data, models, and analytical services. One of the greatest challenges in developing the NEMS will be promulgating the use of these standards. EIA must protect its statutory independence and still serve many clients. If not anticipated forthrightly, conflicts between the two roles, enforcing internal standards and serving the needs of policy clients, may frustrate achieving the full potential of the NEMS. Conflicts can be minimized through the early and careful development of standards. An approach to avoid is establishing detailed prescriptive rules that unduly bind employees' use of judgment. Standards for clients would stress service, quality, timeliness, and ease of use. Employees should be free to use their judgment within certain guidelines. Operating within such a framework is far better than a labyrinth of rules that overly restrict employees, depriving clients of the service they expect and deserve. As discussed in Chapter 2, the DOE's Policy Office will often work in a demanding policy analysis mode. Although the EIA will develop, manage, and maintain the NEMS, the fast-turnaround analysis often required by DOE's policy and program offices can be accomplished with the use of reduced-form models (see Chapter 3). The committee suggests that during early analysis of policy alternatives, model outputs could be generated without concern for the full application of EIA standards, and these outputs could be clearly identified as not carrying the EIA imprimatur. Standards restricting EIA publication of industry-derived data should not necessarily apply to the NEMS. When the best data for a model are available only from external sources, then these data should be used. In using all data, reasonable care should be taken to preclude biases and inaccuracies. In using non-EIA data, however, special care should be taken both to examine actual bias and to avoid using biased external data.

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The National Energy Modeling System In particular, EIA standards should encourage the broad use of licensed proprietary models for the NEMS. Restrictions on the use of proprietary models create problems with transparency. Users must be able to run these models on their own computers. Because the best models available should be used in the NEMS and some of the best models available are proprietary, EIA should make every reasonable effort to negotiate provisions for their broad use to achieve the greatest quality and transparency in NEMS modeling. However, the EIA should consider rejecting any licensing agreements that unduly restrict a model's use throughout the entire NEMS system. In implementing NEMS, EIA will have an interest in both basic and applied research and development (R&D) to improve data gathering, modeling, and analytical methods. While the EIA will occasionally be engaged in applied R&D, the committee does not encourage the EIA to perform basic R&D internally. Instead, when deemed beneficial, EIA should participate in joint basic R&D with those that can help provide funding and participate in oversight and evaluation of the work. Work should also be funded in universities and other high-quality research establishments. Both basic and applied research hold promise for the NEMS, for example, in the areas of uncertainty and long-range modeling and analysis. MOTIVATION AND USEFULNESS NEMS will be of little value if not widely used by decision makers. The development of certain relationships is thus critical if NEMS capability is to be integrated in DOE's policy analysis. The committee recommends that key EIA employees should have direct access to, and involvement with, the decision makers of client organizations, particularly the DOE as needed. If NEMS is to support the development of energy policy successfully, then EIA's top analysts must work closely with decision makers. Equally important, these decision makers must engage EIA analysts in the policy analysis process. This cooperation will stimulate more accurate and comprehensive analyses of policy alternatives. To use NEMS services appropriately, decision makers must have a clear understanding of NEMS's strengths and weaknesses and of how they affect particular analytical efforts. RECOMMENDATIONS In summary, the committee makes the following recommendations for NEMS implementation: The EIA should develop and manage the NEMS, and should move quickly to configure the initial NEMS within the next one to two years and apply it to policy issues including the next National Energy Strategy.

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The National Energy Modeling System The EIA should move toward using the NEMS as a basis for its Annual Energy Outlook and toward providing modeling support for energy policy analysis more generally. The Secretary of Energy should designate the EIA Administrator as chief executive for implementation of the NEMS and make this assignment one of the performance requirements of the Administrator. EIA should form a Users Advisory Group of likely NEMS users from within the DOE, other government, federal, state, and regional agencies, and private organizations. DOE should capitalize on opportunities offered by the Federal Employees Pay Comparability Act of 1990 to attract and retain highly skilled staff for the development and operation of the NEMS. The NEMS organization should have direct access to, and involvement with, the decision makers both within and outside DOE who are potential NEMS users.