Baseline Definition for Measuring New Technology Benefits Frances

Baseline Definition for Measuring New Technology Benefits Frances Wood On. Location, Inc. /Energy System Consulting March 4, 2002 Conference on Estimating the Benefits of Government. Sponsored Energy R&D

Establishing A Credible Baseline • The NRC study suggested several guidelines for benefits measurement regarding the baseline: – Use of next-best alternative, not existing average – Relative to development without government R&D, which meant acceleration of 5 years in most cases

Baseline Technology Assumptions • Several possibilities for Baseline definition – No new technologies beyond current – Improved, but inferior, technology developed in absence of government program – Same technology developed, but later, in absence of government program • Selection of baseline related to methodology for calculating share of benefits attributed to government – Either calculate full benefits of new technology and then compute government share, or – Include industry impact in baseline and then measure impact of government program

Single Integrated Framework • Consistent framework and set of assumptions needed across all programs – Same economic conditions and policies assumed for all sectors • Important for determining individual program and portfolio benefits – Some programs may target similar markets and therefore interact • Over last several years, the NEMS or IDEAS energy models have been used for the EERE GPRA integration

EERE GPRA Process • EIA’s Annual Energy Outlook (AEO) used as the Baseline for individual program benefit analyses – Sector-specific models use fuel prices and other macroeconomic outputs (market size) from AEO – Marginal fuel mix for electricity provided by NEMS • NEMS used for integrated Baseline and calculation of integrated program benefits – Programs evaluated individually or in groups and then all together • Net result is range in estimated benefits

EERE GPRA Integrated Baseline • The AEO Reference Case is modified to remove program impacts that appear to be incorporated already – Technology characterizations and market programs – Not always clear cut whether technologies are same or inferior versions of EERE sponsored ones – Other advanced technologies are retained – Requires full definition of programs at start or iterative approach • Baseline used to attribute savings to government programs

Example Baseline • Benefits are measured against a baseline derived from the AEO.

Alternative Baselines • Scenarios of alternative market behavior may also be useful in determining uncertainty ranges for prospective benefits • Scenarios using alternative assumptions regarding economic conditions, regulations, and policies are necessary for options analysis