Appendix F

The projections of world energy consumption published annually by the Energy Information Administration (EIA) in the International Energy Outlook (IEO) are derived from the World Energy Projection System (WEPS). WEPS is an integrated set of personalcomputer-based spreadsheets containing data compilations, assumption specifications, descriptive analysis procedures, and projection models. The WEPS accounting framework incorporates projections from independently documented models and assumptions about the future energy intensity of economic activity (ratios of total energy consumption divided by gross domestic product (GDP]) and about the rate of incremental energy requirements met by natural gas, coal, and renewable energy sources (hydroelectricity, geothermal, solar, wind, biomass, and other renewable sources).

WEPS provides projections of total world primary energy consumption, as well as projections of energy consumption by primary energy type (oil, natural gas, coal, nuclear, and hydroelectric and other renewable resources), and projections of net electricity consumption. By fuel projections of energy consumed for electricity generation and energy consumed at the transportation sector are also provided. Carbon emissions resulting from fossil fuel use are derived from the energy consumption projections. All projections are computed in 5-year intervals through the year 2020. For both historical series and projection series, WEPS provides analytical computations of energy intensity and energy elasticity (the percentage change in energy consumption per percentage change in GDP).

WEPS projections are provided for regions and selected countries. Projections are made for 14 individual countries, 9 of which—United States, Canada, Mexico. Japan, United Kingdom, France, Germany, Italy, and Netherlands-are part of the designation "industrialized countries." Individual country projections are also made for China, India, South Korea, Turkey, and Brazil, all of which are considered "developing countries." Beyond these individual countries, the rest of the world is divided into regions. Industrialized regions include North America (Canada, Mexico, and the United States), Western Europe (United Kingdom, France, Germany. Italy, and Netherlands, and Other Europe), and Pacific (Japan and Australasia-Australia, New Zealand, and the U.S. Territories). Developing regions include developing Asia (China, India, South Korea, and Other Asia),

Middle East (Turkey, and Other Middle East). Africa, and Central and South America (Brazil and Other Cen tral and South America). The transitional economies consisting of the countries in Eastern Europe (EE) and the former Soviet Union (FSU) are considered as a sepe rate country grouping, neither industrialized not developing.

The process of creating the projections begins with the calculation of a reference case total energy consumption projection for each country or region for each 5-year interval in the forecast period. The total energy com sumption projection for each forecast year is the product of an assumed GDP growth rate, an assumed energy elasticity, and the total energy consumption for the prior forecast year. For the first year of the forecast, the prior year consumption is based on historical data. Subse quent calculations are based on the energy consumption projections for the preceding years.

Projections of world oil supply are provided to WEPS from EIA's International Energy Module, which is a submodule of the National Energy Modeling System (NEMS). Projections of world nuclear energy consump tion are derived from nuclear power electricity genera tion projections from EIA's International Nuclear Model (INM), PC Version (PC-INM). All U.S. projections are taken from EIA's Annual Energy Outlook (AEO).

A full description of the WEPS is provided in a model documentation report: Energy Information Administra tion, World Energy Projection System Model Document tion, DOE/EIA-M050(97) (Washington, DC, September 1997). The report presents a description of each of the spreadsheets associated with the WEPS, along with descriptions of the methodologies and assumptions used to produce the projections. The entire publication may be found through the internet in portable docu ment format (PDF) at: ftp://ftp.eia.doe.gov/pub/pdf/ model.docs/m05097.pdf.

The WEPS model will be made available for down loading through the Internet on ELA's home page by May 1999. The package will allow users to replicate the projections that appear in IEO99. It is coded in Excel version 5.0, and can be executed on any IBM-compatible personal computer in a Windows environment. The package requires about 5 megabytes of hard disk space and about 640 kilobytes of random access memory (RAM).

Appendix G

In an attempt to measure how well the International Energy Outlook (IEO) projections have estimated future energy consumption trends over its 13-year history, we present a comparison of IEO forecasts produced for years 1990 and 1995. The forecasts can be compared with actual data published in EIA's International Energy Annual 1996 (IEA96). This comparison was undertaken as part of ELA's commitment to provide users of the IEO with a set of performance measures to assess the forecasts produced by this agency.24

EIA has published the IEO since 1985. In IEO85, mid-term projections were derived only for the world's market economies. That is, no projections were produced for the centrally planned economies (CPE) of the Soviet Union, Eastern Europe, Cambodia, China, Cuba, Laos, Mongolia, North Korea, and Vietnam. The IEO85 projections extended to 1995 and included forecasts of total energy consumption for 1990 and 1995 and primary consumption of oil, natural gas, coal, and "other fuels." IEO85 projections were also presented for several individual countries and subregions: the United States, Canada, Japan, the United Kingdom, France, West Germany, Italy, the Netherlands, other OECD Europe, other OECD (Australia, New Zealand, and the U.S. Territories). OPEC, and other developing countries. Beginning with IEO86, nuclear power projections were published separately from the "other fuel" category. The regional aggregation has changed from report to report. In 1990, the report coverage was expanded to include projections for China, the former Soviet Union, and other CPE countries, making IEO90 the first edition to represent the entire world in the energy consumption forecast.

The data for total regional energy consumption in 1990 show that the IEO projections were-with few exceptions-lower than the actual data for the market economies. For the four editions of the IEO printed between 1985 and 1989 (no IEO was published in 1988) in which 1990 projections were presented, total projected energy consumption in the market economies ran between 2 and 5 percent lower than the actual consumption number published in the IEA96 (Figure G1).

In addition, market economy projections for 1995 in the 1985 through 1993 outlook reports (EIA did not release an international forecast for 1995 in either the 1994 or 1995 edition of the report) were consistently lower than the actual 1995 data (Figure G2). Most of the difference was for countries outside the OECD. Through the years, EIA's economic growth assumptions for OPEC and other market economy countries outside the OECD have been low. The 1993 forecast, which was, as might be expected, the closest to the actual 1995 number, still was more than 10 percent lower than the actual value.

'In IEO90, energy consumption forecasts for the entire world were first released. Since then, the IEO forecasts of world energy consumption for 1995 have been consistently higher than the amount actually consumed (Figure G3), primarily because of the unanticipated collapse of the Soviet Union economies. IEO90 projected that the FSU would consume 66 quadrillion Btu. whereas 40 quadrillion Btu of energy was actually consumed. The "other CPE" countries-driven mainly

0 50 100

273

Actual 1995

366

269

268

IE093

375

260

IE092

377

258

256

IE091

374

251

245

IE090

363

247

150 200 250 300 350 Quadrillion Btu

Sources: 1995: Energy Information Administration (EIA), Office of Energy Markets and End Use, International Energy Annual 1996, DOE/EIA-0219(96) (Washington, DC, February 1998). 1995 Projections: EIA, International Energy Outlook, DOE/EIA-0484 (Washington, DC, various years).

by consumption in the countries of Eastern Europe but also including Cambodia, Cuba, Laos, Mongolia, North Korea, and Vietnam-showed a similar pattern. The magnitude and duration of the economic declines in the FSU were not anticipated, and projections for the region ran about 30 percent higher than actual consumption.

As might be expected, the IEO projections for the use of specific fuels reflect the tendency of the total regional consumption projections to underestimate energy use in the market economies outside the OECD and overestimate energy use in the FSU and "other CPE." For instance, IEO85 underestimated 1995 oil use in the "other developing market economies" by more than 40 percent, and IEO90 overestimated 1995 oil use in the FSU by 84 percent.

It is interesting to consider the forecasts in the historical context that certainly influenced the analytical thinking of the day. For example, IEO85, published after the oil price shocks of the 1973-1974 Arab embargo and the 1979-1980 Iranian revolution but before the Chernobyl nuclear accident of 1986, projected that oil would lose share of total energy consumption in the market

Sources: 1995: Energy Information Administration (EIA) Office of Energy Markets and End Use, International Energy Annual 1996, DOE/EIA-0219(96) (Washington, DC, February 1998). 1995 Projections: EIA, International Energy Outlook DOE/EIA-0484 (Washington, DC, various years).

economies over the 1985-1995 decade, declining by as much as 5 percentage points as natural gas, coal, and "other fuels" all gained share. Nuclear was expected to be the fastest growing energy source, with a projected growth rate of nearly 4 percent per year.

In reality, the IEO85 forecast for nuclear energy turned out to be fairly accurate. Nuclear power consumption did increase more rapidly than any other energy source In the market economies, at a rate of nearly 5 percent per year between 1985 and 1995. On the other hand, of use did not decline as projected but maintained a 45-percent share of energy consumption. The natural gas share grew more slowly than projected, reaching 21 percent of energy consumption in the market economies by 1995. rather than the projected 22-percent share. The largest divergence between projected and actual trends was for coal, which in IEO85 was expected to see increasing use for electricity generation and industrial applications in Western Europe. Those expectations did not materialize Coal's share of energy consumption in the market economies declined from 21 percent in 1985 to 18 percent in 1995, whereas IEO85 had projected an increase to a 22-percent share in 1995.