Energy policy models for project independence

The Project Independence Evaluation System for the quantitative analysis of the national energy policy is outlined. The conceptual framework for determining an equilibrium balance of energy supply and demand is characterized. The computational procedure is indicated and an example is presented. The policy application experience and the computational implications are summarized. I. INTRoDucTroN Project Independence is the generic title describing the activities organized throu~ the Federal Energy Ad~nistration in the continuing development and implementation of a national energy policy for the United States. The analysis supporting these tasks involves many diverse groups and varying viewpoints that must be coordinated and evaluated as part of the policy development. The essential quantitative analysis must incorporate a wide range of judgments, engineering, and economic information in a manner directed at the careful and explicit consideration of the numerous policy alternatives. This quantitative analysis is accomplished through the Project Independence Evaluation System. The system generates planning estimates depicting possible states of the energy system with explicit recognition of the effect of relative prices, the potential for fuel substitution, and the technological constraints which inhibit the increase of energy supply. The purpose of the present paper is to outline the structure of the series of judgmental and quantitative models which constitute the Evaluation System with particular attention to the algorithmic pro~ed~es and the methods for combining econometric, en~neering, and optimization models. Section 2 of this paper summarizes the basic objectives of the Evaluation System. Section 3 describes the conceptual framework for the analytical problem. Section 4 presents a simple example of the energy balance problem addressed. Section 5 summ~izes the computational experience judged to be of primary interest. Section 6 outlines the capabilities and uses for policy applications. Two appendices elaborate the central computational procedure and the details of the example problem. 2. OBJECTIVES OF PROJECT INDEPENDENCE EVALUATION SYSTEM The national energy system is highly interdependent. A variety of energy forms can be employed to satisfy many ultimate requirements, alternative production modes compete for many of the same resources, physical and technological limitations can restrict the supply or potential uses of energy, environments effects or other externalities can alter the permissable production and use patterns, and new technologies can rapidly transform the available options, *The views expressed.in this paper are solely those of the author and do not represent the position of the Federal Energy Administration. tDr. Hogan is the Deputy Assistant Administrator for Data and Analysis of the U.S. Federal Energy Administration. He holds the B.S. degree from the Air Force Academy in Colorado, and the MBA and Ph.D. from UCLA, all in Operations Research. His principal interest is in large scale optimization theory and its applications to energy forecasting. He has pub&&d in Management Science, Joumat of Muthenatical Programming, Journal of Qpemtions Research, SIAM Review, Eco~met~ca and the Journal of Financial and Qaonti~atiue Anufysis.