Table 4.3. Assumed Long-Run Costs per Million Btu (1978 $) Note that two price cases for ’’alternative sources” were considered. The higher ($9/10$ Btu) is consistent with continued dependence on centralized electric or gas utilities. However, the lower-price case ($4.50/10$ Btu) would presumably lead to more decentralized energy production. Two scenarios of the latter type are considered. The procedure for quantifying scenarios is outlined briefly as follows. First, from the assumed GNP growth rate and assumed price elasticities of demand, a set of projections of alternative energy (E) to GNP ratios can be derived, as shown in Fig. 4.3. Detailed demands by each of 185 sectors of the economy are computed from an input-output model for this economic scenario, assuming fixed prices.30 Next, demands for specific fuel types are generated, and a supply-demand balance is computed for each of six scenarios, representing combinations of the levels of price elasticity and constraints, as follows: UH, UI, UL, CH, CI, CL. The supply-demand balances are displayed in Fig. 4.4 (2000) and Fig. 4.5 (2030). The next step was to calculate the energy prices (for each primary fuel and for electricity) that would match supply and demand in each year. Adjustment lags of unknown length make this calculation approximate. The final steps involve recomputation of total demand, by sector, for the revised energy prices; recomputation of total E and E/GNP; and reiteration of the whole sequence until convergence is achieved. Our baseline scenario is the constrained case with an intermediate value of price elasticity (designated Cl). This choice reflects our belief that constraints on production growth are likely to continue, rather than abate; that the intermediate value of elasticity is more likely than either of the extremes; and that the higher cost level ($9.00/10$ Btu) is more realistic for "alternative sources" than the lower cost ($4.50/106 Btu).
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