ETA: A Model for Energy Technology Assessment

Alan Manne

Bell Journal of Economics, 1976, vol. 7, issue 2, 379-406

Abstract: This article explores some of the options by which the U.S. could move away from its present heavy dependence upon oil and gas toward a more diversified energy economy. Through nonlinear programming, our model incorporates both own- and cross-price elasticities of demand. In this way, it allows for price-induced interfuel substitution and energy conservation. Among the supply options studied are: direct combustion of coal to generate electricity; conversion of coal to synthetic fuels; nuclear energy -- first from the light water reactor and later from the fast breeder; hydrogen via electrolysis; and distant future technical options such as fusion and central station solar power (aggregated and described only as an "advanced technology"). Each energy source has its own cost parameters and introduction date, but is interdependent with other components of the energy sector. For example, the amount of coal consumed in electric power plants can affect the marginal cost of production -- and hence the cost of coal-based synthetic fuels for nonelectric energy. The converse is also true. Thus, it is not sufficient to look at individual technologies in isolation. We must attempt to compare their effects upon the system as a whole.

Date: 1976
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