1. 07/14/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 11 National Petroleum Council Future Transportation Fuels Study CSC Meeting – Houston July 26, 2010 Demand Task Group Progress Report and Integrating Framework Discussion

2. 07/14/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 2 Discussion Outline Demand Task Group composition Progress on staffing Progress on framing Integrating Discussion Base model development plan General comments about models Types of models Fundamental Integrating Issue Propose to use VISION for integrating structure Demand input framework approach Thoughts on supply input approach Next steps?

3. 07/14/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 3 Demand Task Group

4. 07/14/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 4 Demand Task Group Organization Passenger Mobility Personal Vehicles Transit Bus Rail Freight Mobility Rail Air Water Truck Air Wal-mart, ATA Assoc. of Am RR United, AirTransA

5. 07/14/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 5 Report structure straw man Mobility demand – VMT, tonmiles, revenue seats… –Discussion of drivers – such as population, income, IP, freight –Historical growth rates –Discuss any events or trends that have had a marked impact on growth rate of demand Infrastructure – (Needed if mode switching is in scenarios) –Discuss historical level of investment –Investment needs – framed against current state, expected growth, etc. –Need to choose some measure that relates activity to investment –Discuss operational or system efficiencies Vehicle and fuel efficiency –Functional characteristics and timing of options to come from supply –Discuss key aspects of purchase decision –Discuss operational and system efficiencies – APUs, operator training,… For discussion purposes only

6. 07/14/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 6 Discussion Outline Demand Task Group composition Progress on staffing Progress on framing Integrating Discussion Base model development plan General comments about models Types of models Fundamental Integrating Issue Propose to use VISION for integrating structure Demand input framework approach Thoughts on supply input approach Next steps?

7. 07/14/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 7 Base Case Development Plan Review 2-3 key comprehensive studies Decide on assumptions to be used in FTF base case Insert assumptions in framework & evaluate results Fine tune assumptions for consistency between calculated results and results of key studies –Iterative process –Learning about tool Reflect sensitivity of results on a few select assumptions to generate a “cone” around the base case Note – Forces us to identify key elements of FTF study and where the analytical tool will need to be augmented

8. 07/14/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 8 Limits of Formal Framework Tool No single tool will calculate everything we want –Every subgroup will conduct some form of quantitative analysis outside of the integrating tool Everyone will not be completely satisfied with all of the features of the selected tool –Have to accept the structure and some parameters as given without reassessing

9. 07/14/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 9 Types of Models Comprehensive energy system models (NEMS) –All energy types and energy consumers –Modular supply and demand subroutines Transportation Module contains nested subroutines to derive fuel demand by the different modes and vehicles –Iterates according to specified rules to solve for market clearing prices and consistent volumes

10. 07/14/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 10 Types of Models (continued) Spreadsheet models –Partial energy market (i.e. transportation) –Useful for running scenarios Can calculate relative impact of various assumptions Provides consistent treatment of variables out of focus –Relatively transparent for user Can work from assumptions to results or results to assumptions –Sacrifice some second order or “rebound” effects Looking for how pathways compare, rather than scalar findings

11. 07/14/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 11 Fundamental Integrating Issue Solving for consistent fuel offering mix and fuel demand mix Demand determines VMT Supply determines fuel and vehicle offerings: timing, cost, availability, volumes Demand determines end user purchases of vehicles by fuel and technology type (market shares of new veh sales) Framework calculates fuel consumption by type Check for supply & demand volume consistency Re-iterate if necessary

12. 07/14/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 12 Fundamental Integrating Issue (continued) If fuel consumption is not consistent with supply volumes, then –Change relative fuel & vehicle costs and –Re-iterate consumer decision model and –Recalculate fuel mix calculation For convergence, supply must increase with price and demand decrease with price Reasons to re-iterate –A fuel is constrained such that demanded volume exceeds supply –The volume demanded is below a minimum supply required for production –A fuel required of supply has zero demand

13. 07/14/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 13 Developed for DOE Office of Energy Efficiency and Renewable Energy and maintained by Argonne National Laboratory Calibrated to the latest AEO reference case Measures energy and GHG emissions impacts of scenarios relative to a base case projection GHG coefficients represent full fuel cycle emissions and were developed using the GREET model Designed to provide quick turn around analyses of assumptions regarding increased fuel economy, advanced technology penetration, travel demand, and alternative fuel use for highway vehicles Proposal to use VISION as integrating tool

14. 07/14/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 14 Proposal to use VISION as integrating tool (continued) Key inputs to VISION are market shares of new vehicle sales, fuel prices, fuel efficiencies Requires separate analytical frameworks from supply and demand to –determine inputs for scenarios and –how the inputs change in iteration process Can probably write macros or use visual basic to assist in iteration process

15. 07/14/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 15 Demand Passenger Vehicle Choice Will have a review of the literature in report –Modeling techniques Nested Multi-nomial Logit Models (NEMS) Mixed Logit Hedonic price models –Key findings on consumer tradeoffs of fuel & vehicle characteristics Will develop a framework to take in characteristics from supply and calculate market share of new sales

16. 07/14/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 16 Demand Passenger Vehicle Choice Likely characteristics to be included in demand model –Fuel availability (+) –Fuel efficiency (+) –Acceleration (+) –Range of battery (+) –Purchase price (-) –Maintenance costs (-) –Vehicle attributes such as cargo space, weight (+) The signs are how we expect market share to respond to an increase in the characteristic, if only it changed Challenge is that usually more than one changes, so the size of coefficients on each characteristic are important

17. 07/14/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 17 Supply & Infrastructure and Technology Framework Supply needs to develop a framework for determining set of fuel volumes, costs and vehicle attributes it will pass to demand Within each scenario set, volume needs to vary with cost for iteration process Sources for supply characteristics –Technology enters through timing of availability, cost of fuels and vehicles –Feedstock, transportation, conversion, distribution determine fuel cost –Distribution determines availability –Vehicles determine other characteristics and costs

18. 07/14/2010 DRAFT – DO NOT CITE OR QUOTE For NPC Study Discussion Only 18 Next Steps Agree to key integrating issue Agree proposal is workable Decide on characteristics that –Supply can pass to demand and –Demand can construct a market share model over