ALTERNATIVE FUTURE ENERGY PRICE/DEMAND SCENARIOS R. U. Ayres Carnegie-Mellon University One of the notable characteristics of SPS is its enormous intrinsic scale, dictated by the massive pre-requisite research and space-hardware development commitment. Large costs must be borne before any benefits appear, and the payout period is inherently long. Thus, a 50-year period (1980-2030) has been selected for analysis purposes. Over a period of half a century many socioeconomic relationships that can be safely regarded as "quasi-static" from a short-range standpoint must be regarded as inherently dynamic. Hence, long- range forecasting is an especially difficult and demanding art. Among the factors that may change significantly over such a long period are population and productivity growth, demand or utility preferences, interindustry relationships (1-0 coefficients) —reflecting technological change— and factor prices. With regard to most of these long-range travels —which do not vary independently— we have elected to borrow heavily from a comprehensive 5- year effort recently completed by Ridker and Watson at Resources for the Future, Inc. The bulk of the effort that was undertaken specifically for the SPS evaluation has therefore been focussed on factor prices —particularly primary energy fuels (coal, gas, petroleum and uranium) and electricity. The factors that will control future energy prices in a market environment are as follows: • The level of economic activity (GNP) • The intrinsic "energy-intensity” of the economy (i.e. the elasticity of substitution) • The physical and other constraints on future supply from existing sources including regulatory limitations. • The costs of obtaining future supplies from alternative sources, including tar sands, oil shale, coal liquids or syngas and various decentralized technologies such as windmills small-scale hydropower, passive solar collectors, biomass, etc. Obviously the future growth of the GNP is, itself, affected by energy prices. A complete general equilibrium analysis at the required level of detail would be impracticable. Hence, we carry out the analysis for a single "target" GNP growth rate —somewhat below historical levels— that appears to be an upper limit of the range of plausible possibilities due to constraints on capital availability. It is understood that actual energy demands (hence prices) are likely to fall below this upper limit. The intrinsic energy-intensity of the economy —or, equivalently, the elasticity of substitution of capital for energy— is not known with high confidence. Therefore, we have taken this as one of several scenario parameters, and we have constructed scenarios assuming three different values of the elasticity. The central or "intermediate" case is the most likely. Similarly, the rightness of future supply constraints is uncertain. To deal with this, we have postulated a schedule of maximum supply availabilities for each primary fuel, that might correspond to a "tight" set of contraints. Scenarios in which
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