# Impacts on U.S. Energy Expenditures and Greenhouse-Gas Emissions of Increasing Renewable-Energy Use: Technical Report

By Michael Toman; James Griffin et al. | Go to book overview

CHAPTER TWO
How We Did the Analysis

Introduction
This chapter describes the basic components of the two market models we constructed to analyze the impacts of renewable-energy requirements (shown in Figure 1.1 in Chapter One) and our approach to addressing uncertainties surrounding key model parameters through sensitivity analyses. A more detailed description of our approach can be found in Appendix A, including the ranges of numerical parameter values we used in the analysis. As noted in Chapter One, the impacts generated by the models are calculated relative to numbers based on the 2025 reference-case projections in EIA (2006b), with discussion later about the implications of higher prices.
Overview of the Electricity and Fuel Market Models
We use simplified representations of supply and demand for electricity and motor fuels and similar models for primary fossil-energy sources (oil, natural gas, and coal) in order to account for feedback effects of renewables requirements on the prices of fossil energy. We run the electricity and fuel models separately, but (as shown in Figure 1.1 in Chapter One) we account for interactions between them in the competition over biomass feedstock that can be used to produce motor fuels or electricity.The electricity and fuel models use the same five basic steps to calculate energy demand and prices, which are then used to determine energy expenditures:
 • Construct a set of cost curves for renewable-energy technologies based on assumptions about technology costs and corresponding production capacities. • Calculate additional supply costs for meeting renewable-energy requirement. • Determine substitution effects of renewable-energy use on fossil-fuel markets. • Calculate new market prices for energy consumers. • Calculate new energy demand based on new prices.

The two models each iterate through this sequence until the deviation in demand between model runs is less than 1 percent. As noted, the two models are integrated at several steps to reflect competition over biomass supply.

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Impacts on U.S. Energy Expenditures and Greenhouse-Gas Emissions of Increasing Renewable-Energy Use: Technical Report

• Title Page i
• Preface iii
• Contents v
• Figures vii
• Tables ix
• Summary xi
• Acknowledgments xv
• Abbreviations xvii
• Chapter One- Introduction 1
• Chapter Two- How We Did the Analysis 5
• Chapter Three- Key Findings 23
• Chapter Four- Concluding Remarks 49
• References 51
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