Our analysis relies predominantly on the PATHWAYS** model, a bottom-up, stock rollover model with similar structure and inputs as the National Energy Modeling System (NEMS) maintained by the U.S. Energy Information Administration. PATHWAYS projects the energy system costs (and CO2 emissions) associated with meeting an exogenous demand for energy services. The modelers choose to deploy technologies over time within a specified pathway in a way that meets that demand, both in terms of specific technological characteristics and how they would interact within the entire energy system.
A key strength of the PATHWAYS model is the very granular level of detail it brings to modeling of the energy system as a whole, and to the electricity sector in particular. PATHWAYS builds new generation, transmission, and distribution infrastructure to meet reliability needs in each of the nine census regions, and dispatches generation resources to balance supply and demand in each of the three main interconnection regions in the U.S. The model has several options for maintaining load balance in the case of high levels of variable renewable generation.
The model estimates the changes in investments, fuel expenses, and other operating expenses of low-carbon pathways relative to what we label the “High-Carbon Reference Case.” Investments can be estimated annually on an “as spent” basis, and they can be annualized over the lifetime of the investment. PATHWAYS combines changes in annualized investments, fuel costs, and operating expenses to estimate the annual net cost of a pathway, i.e., the “change in total energy system cost” for any given year (one of the key cost metrics of the model). The Appendix provides additional details about the PATHWAYS model. Appendix can be found at www.riskybusiness.org.
Notably, PATHWAYS does not model the effects of price on supply and demand. It is not a partial or general equilibrium economic model, nor is it an optimization model. It is not designed to project macroeconomic impacts or to determine which clean energy pathway is “best” in terms of the narrow criterion of cost-effectiveness. Nevertheless, the model’s estimates of changes in investment, fuel costs, and total energy system cost illuminate the key questions of economic feasibility and affordability.
We gained additional insights into macroeconomic impacts by reviewing a study using PATHWAYS and the Policy Insight Plus model, a macroeconomic model developed by the Regional Economic Models, Inc. (REMI). Using outputs from PATHWAYS (changes in energy use and investments) as inputs, the REMI model can project how those changes would affect the U.S. economy relative to a reference case. A 2015 study using PATHWAYS and REMI in this way modeled very similar clean energy pathways with reduction goals for CO2 emissions of 80 percent by 2050 from 1990 levels. The macroeconomic projections from that study are presented here.
Uncertainties abound in any modeling exercise that looks 35 years into the future. We explored two key uncertainties as part of this study:
- If the global economy succeeds in making a transition to clean energy, fossil fuel prices are likely to decrease significantly. We developed a plausible price scenario reflecting this, and explored the implications.
- Rapid advances in Autonomous Vehicle (AV) technologies suggest that AVs could revolutionize how we conceive of and provide “personal mobility.” We explored a scenario in which AVs expand rapidly in the decades ahead.
In addition to the modeling using PATHWAYS and REMI, we critically reviewed more than a dozen studies that examine the technical and economic feasibility of achieving major reductions in greenhouse gas emissions (see Appendix), and also developed seven case studies on key aspects of a clean energy economy, such as energy storage technologies and transportation advances.
** PATHWAYS was originally built by Energy and Environmental Economics, Inc. (E3) and used to model the U.S. as part of the Deep Decarbonization Pathways Project (http://deepdecarbonization.org/). Evolved Energy Research (EER) further developed the model and we engaged EER to apply it for this study (“EnergyPATHWAYS” is currently the official name of the model).