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INTRODUCTION

The National Research Council (NRC) Committee on the National Energy Modeling System (NEMS) was established in the summer of 1990, to advise the U.S. Department of Energy (DOE) and the Energy Information Administration (EIA) on the long-term development of a modeling system to support national energy policy analysis and strategic planning.

In reviewing the original scope of work (Appendix A-1) from the DOE that initiated the study, the committee expected that there would at least be in use at DOE a preliminary version of a system of models definable as the National Energy Modeling System (NEMS). The committee also expected that there would be preliminary plans prepared by DOE for the further development of the NEMS, which could serve as a point of departure for the committee's work. At the first meeting of the committee on July 31, 1990, it became apparent that there was no NEMS per se or definitive plans for its development. The committee learned that in response to the demands of the National Energy Strategy (NES) exercise that was underway, DOE with the assistance of the EIA and others had configured an ensemble of models to support the NES analysis.

The committee requested and received presentations from DOE and EIA on this ensemble of models and their application to a representative slate of policy issues that were being considered in the NES exercise. The committee was also briefed on a preliminary set of requirements that EIA was developing for a NEMS, and subsequently EIA presented a comparison of those requirements to existing capabilities (involving models, data, and analysis) at EIA.



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The National Energy Modeling System 1 INTRODUCTION The National Research Council (NRC) Committee on the National Energy Modeling System (NEMS) was established in the summer of 1990, to advise the U.S. Department of Energy (DOE) and the Energy Information Administration (EIA) on the long-term development of a modeling system to support national energy policy analysis and strategic planning. In reviewing the original scope of work (Appendix A-1) from the DOE that initiated the study, the committee expected that there would at least be in use at DOE a preliminary version of a system of models definable as the National Energy Modeling System (NEMS). The committee also expected that there would be preliminary plans prepared by DOE for the further development of the NEMS, which could serve as a point of departure for the committee's work. At the first meeting of the committee on July 31, 1990, it became apparent that there was no NEMS per se or definitive plans for its development. The committee learned that in response to the demands of the National Energy Strategy (NES) exercise that was underway, DOE with the assistance of the EIA and others had configured an ensemble of models to support the NES analysis. The committee requested and received presentations from DOE and EIA on this ensemble of models and their application to a representative slate of policy issues that were being considered in the NES exercise. The committee was also briefed on a preliminary set of requirements that EIA was developing for a NEMS, and subsequently EIA presented a comparison of those requirements to existing capabilities (involving models, data, and analysis) at EIA.

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The National Energy Modeling System On the strength of those briefings, and reviews of documents and reports prepared by DOE, EIA and the national laboratories, the committee assessed, in broad terms, the efficacy of the models configured by DOE to support the NES activities. At the request of the Secretary of Energy, the committee's assessment was documented in its first advisory report issued in January 1991 (NRC, 1991a; Appendix B). In light of the foregoing circumstances and what the committee learned, the committee reinterpreted its charge to best utilize its resources (see Appendix A-2) and included this charge as part of its first advisory report. The committee also met with the Secretary of Energy and apprised him of its findings, including its reinterpreted charge. Subsequently, starting with its fourth meeting in January 1991, the committee focused its efforts exclusively on the development of a NEMS, the subject of this report. This final report by the committee addresses NEMS applications and requirements, proposes a modeling architecture to satisfy these requirements, and suggests strategies for NEMS implementation. STUDY GENESIS AND BACKGROUND In a statement before the Senate Committee on Energy and Natural Resources, July 26, 1989, the Secretary of Energy, Admiral James D. Watkins, explained President Bush's plan for development of the NES. The Secretary directed the Deputy Under Secretary for DOE's Office of Policy, Planning and Analysis to coordinate the development of the first edition of the NES, issued in February 1991 (U.S. DOE, 1991a). Toward developing the requisite data, analytical tools, and forecasting capabilities for the NES, the Secretary also announced that DOE would seek the advice of the National Academy of Sciences on how best to proceed with NEMS development. I have asked the National Academy of Sciences to examine our plans for the development of the NEMS and ensure that it will, to the maximum extent possible, address the critical energy issues before us. These include major environmental issues, strategic considerations and technology research and development… NEMS development will be an ongoing effort. It will probably take several years to improve DOE's modeling capability. I am determined that the NEMS will become the best modeling system that we can employ to analyze the issues facing us. SCOPE OF THE STUDY When this study began, one of its goals was to examine the ability of the existing DOE modeling system to analyze issues for energy policy and forecasts. The committee also broadly addressed the role of DOE's modeling in the development of the 1991 NES. These

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The National Energy Modeling System models include EIA supply and demand models and a few others, such as Fossil2, a systems dynamics model of the entire U.S. energy system, which was used by DOE's Office of Policy, Planning and Analysis to integrate the results and construct forecasts. In assessing DOE models' support of NES activities, the committee considered the adequacy of their underlying data, assumptions, and methodology. In particular, the committee was concerned about the deterministic nature of the models used in the NES in making longer term projections, the limitations of Fossil2, the adequacy of demand-side data, and the lack of recognition and treatment of uncertainty in the NES analysis. The committee's comments about the uncertainty of projections encouraged the authors of the 1991 NES report to address this important issue explicitly, including on report graphs (U.S. DOE 1991a). In the initial phase of its work that concluded with its first advisory report, the committee heard many hours of presentations from DOE and EIA and asked many questions about the methods and models used to develop the first National Energy Strategy. No definition of the NEMS was explicitly stated by the DOE. The committee concluded that the scope and purpose for the system could be derived from the statements of DOE managers and analysts and from the recent experience with the analytical activities that supported the NES effort that was being completed as the committee began its deliberations. The NEMS was clearly viewed by DOE's management to be a comprehensive, policy-oriented, modeling system with which the existing situation and alternative futures for the U.S. energy system could be described within the global energy context. The NEMS was expected to be applied in evaluating the potential impact of a broad range of policy initiatives upon the national energy outlook in measures that are relevant to national objectives, such as environmental management and energy security. At that time, and based upon the above view of what constitutes a NEMS, the committee concluded that the ensemble of DOE and EIA models used in the NES exercise did not constitute an adequate National Energy Modeling System. Furthermore, there were no definitive plans laid out by DOE for further development of a NEMS. As mentioned above, given the mismatch between the original scope of work for the committee and the reality of the situation, the committee in its first advisory report reinterpreted its scope of work and defined a committee charter, which it presented to the Secretary of Energy (NRC, 1991a; Appendix B). The committee further concluded that if more detailed evaluations of existing models were desired, such work could be more appropriately conducted by outside groups (see Appendix A-2, the committee charge: “detailed technical assessments will not be undertaken of specific models currently in use at DOE or EIA”). The committee determined that its greatest contribution would be in first assessing the requirements of and then recommending the architecture for a future NEMS. Therefore, after the publication of its first advisory report the committee looked forward to the development of such a NEMS. The committee believes that the NEMS described in this final report embodies the characteristics needed to analyze critical national energy issues and to provide support for the ongoing NES efforts.

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The National Energy Modeling System In a more specific sense, the suite of models that had been assembled to support the NES analysis that are housed in the EIA, elsewhere in the DOE, and in various national laboratories had come to be thought of as the prototype of the NEMS. This suite of models was, in fact, being evaluated within the DOE concerning its capabilities and shortcomings as if it were the formative NEMS. The committee, therefore, referred to three sources of information in deriving an operating definition of the NEMS concept. The first is the ongoing analytical requirement to support the mission of the Department. While the NEMS is not, and should not strive to become, the sole modeling capability for the DOE's extensive analytical activities, the committee envisioned a role for the NEMS in directly supporting strategic policy formation and indirectly informing, coordinating, and disciplining analysis done with other decentralized modeling capabilities throughout the DOE. The second source of information contributing to the committee's definition of the NEMS was the contemporary experience with the NES analytical support. The NES is a unique experiment in using analysis to address national energy issues in a comprehensive way. It provided a specific set of examples of the types of policy questions being posed for analysis and of the measures of value that are being assigned priority. The NES effort, therefore, presented the committee with a catalog of policy issues of importance and an empirical evaluation of the existing modeling capability to address them. Finally the committee brought to the study the collective views of its members, who have substantial experience with public policy formulation and with applications of analytical and modeling techniques to that process. The current state of the art and the practice elsewhere throughout the analytical community were considered in comparison with the DOE approach and capability. Based upon these three sources of information concerning what the NEMS could and should be, the committee concluded that the existing modeling capability within the DOE did not meet the requirements implied by management aspirations, particularly as revealed by the NES experience, and did not reflect what external evidence suggested could be provided within the practical constraints of time and resources. This report develops a set of requirements for a NEMS as derived from the committee's consideration of the above sources of information. It prescribes the architecture of a modeling structure that can serve the purpose of the NEMS and that can evolve with the concept in the years ahead. It also discusses the approach to the implementation of a NEMS as set forth in the requirements and architecture with consideration for the work already in progress within the DOE and the practical limitations on resources that must be realized. The appendices to the report also include substantial additional discussion of the background for the committee's deliberations.

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The National Energy Modeling System ORGANIZATION OF THE REPORT The following chapters address the policy analysis environment in which the NEMS would operate, propose an architecture for the system, and recommend actions for its successful implementation. In particular, Chapter 2 discusses the policy analysis environment and the needs of the DOE. It also briefly describes the capabilities and modeling activities within and outside DOE, the NES experience, and requirements that the NEMS should satisfy. Chapter 3 then proposes an appropriate architecture and components, or modules, for the NEMS, identifies corresponding data and information requirements, compares the proposed system to present DOE modeling, and discusses some conceptual issues for the proposed modeling approach. Finally, Chapter 4 addresses issues for the successful implementation of NEMS. Beyond the committee's original scope of work in Appendix A-1 and charge in Appendix A-2, this report's appendixes include a reprint of the committee's first advisory report (Appendix B), additional discussion on DOE's mission and functions (Appendix C), brief committee case studies exploring the ways that NEMS could be employed (Appendix D), some further details about past and current EIA and DOE models (Appendix E), and a list of presentations to the committee (Appendix F).

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