IMPACTS
OF
NEW ENERGY
TECHNlOLOGY,
GENERALIZED INPUT-OUTPUT
USINlG
ANALYSIS
by
James
E.
Just
February,
1973
A Report of the
ENERGY
ANALYSIS
AND PLANNING
GROUP
School of Enqineerino
Massachusetts Institute
of Technoloqy
Cambridqe, Massachusetts
REPOPT r!o.
73-1
The Massachusetts Institute of Technoloay has undertaken a program
of research
on Enerqy
The overall goals of this program
information,
and demand,
and Planning.
Analysis
are to develop
concepts,
and analyticadl tools that relate enerqy
the economy
ful to managers
and the environment
and policy makers
energy industries.
in
sunply
in a manner
overnment
use-
and the
The work reported here is the second
formal output of this effort.
Further
elopinq
research
other models
at refining
relating
this model and also dev-
to the overall goals of the
program is underway.
David C.
Ford Professor
hite
of
noineerin
2
IMPACTS OF NEW ENERGY TECHNOLOGY - USING GENERALIZED INPUTOUTPUT ANALYSIS
BY
Jares Edward
Just
Submitted to the Department
17
January
Degree
in partial
of Electrical Engineerinn on 1973,
fulfullment of the requirements for the
of Doctor of Philosophy
APSTRACT
Traditional input-output analysis was modified to include air
pollution emissions, employment, and other accessory variables.
Engineering studies of high and low DTU coal gasification and
the gas turbine topping cycle were then utilized to incorporate these new technologies into the 1980 input-output table
These
that was projected by the Bureau of Labor Statistics.
two techniques are shown to be able to correct many previous
objections to input-output analysis and to have applicability
to a wide variety of practical problems.
of 1985 projections featurin h igh , medium and low
growth of energy consumption (both with andI without the new
Economic and environmental impacts
technologies) we re also made.
were then calcul ated for these alternati ve futures. The major
A series
conclusions
1.
are:
Total
investment
in general
and capital good
indus-
tries in particular (primarily turbogenerator
manufacturers, boiler makers, and construction
equipment manufacturers) are quite sensitive to
energy use growth rates (especially electricity).
2.
Introduction of high
aggravate the demand
tu coal gasification will
for investment funds and
introduction of the second generation gas turbine
cycle
topping
(with or without
low Btu coal qasif-
ication) will decrease the demand.
These technol-
ogies will have their major impacts on the industries listed above.
3.
Sliaht
changes
in the overall
growth
rates of total
personal consumption expenditures and government
spending
result in large fluctuations
investment.
in total
4.
If high energy qrowth continues and if investment
is to remain within its historical limits as a per
centage of GNP, energy investment will become a
laraer and larqer part of total investment.
5.
While
interest
rates are assumed
to be the balancino
mechanism between supply of and demand for investment
funds, the very act of saving more money (which is
induced by hiqher interest rates) means that less can
This in turn lessens
be spend on consumption goods.
the demand for investment funds because the qrowth
rates of consumption sectors are lovwer. This
indirect effect of interest rates on investment has
been little studied but may be quite important.
The policy implications
THESIS SUPERVISOR:
TITLE:
of these results
David C. White
of Engineerinq
Ford Professor
are also discussed.
4
ACK''OWLE GErlE!TS
I
like to expres s my sincere thanks
would
David White for
this research and to Prof.
supervising
Robert Soloow and Prof.
and assistance.
to Prof
Fred Schweppe
Both professionally
for their
and nersonallv,
have enjoyed my association with them.
have helped me that it is impossible
uidance
I
So many other people
to thank them individually.
However I must express my appreciation of the special assistance
niven
to me by Miss
Istvan,
Samual
ancy Stauffer,
Dolinar,
Pr. Anne Carter,
and the members
Pudvard
of the staff of the
Office of Business Economics (now the Bureau of Economic
Analysis), and Interaqency Growth Project and the Institute
of Gas Technoloqy.
Pam Sullivan
Special
for the lon
My research
thanks should
also no to Mrs.
job of typino this report.
has been supported
by the MITPE Corporation,
the National Science Foundation (Contract #GI-34936) and
Massachusetts Institute of Technoloay Ford Professorial Funds.
Their support was
I would
reatly appreciated.
like to dedicate
this report to my mother who
has patiently waited many years for her son to finish his
education.
5
TABLE OF CONTENTS
Paqe
Abstract
2
Acknowledgements
4
Table of Contents
5
List of Finures
8
Conventions
Chapter
Chapter
1
2
13
Summary and Orqanization
15
1.1
Introduction
15
1.2
Generalized Input-Output Theory
17
1.3
Summary
30
1.4
Conclusions
47
1.5
Organization
50
of
esults
Methodoloqy: New Technologies and Generalized Input-Output Analysis
57
2.1
What is Input-Output Analysis?
57
2.2
Technoloqical Coefficients
60
2.3
Capital
68
2.4
Uses of the Coefficients
2.5
Overview
Coefficients
73
of the Generalized
Input-
74
Output Model
Chapter
3
2.6
Methodology
2.7
Output Model
New Technology Coefficients
Impacts of Capital
in the Generalized
Expenditures
Input-
79
87
for New Ene rqv 95
Technologies
3.1
Summary
3.2
Impacts of Capital Expenditures
PTU Coal Gasification
3.3
Low BTU Coal Gasification
3.4
The Gas Turbine
3.5
Cvcle
Nuclear
of the Impacts
Tonpinq
team Generation
95
for t ioh 115
122
Cycle (COGAS
123
129
6
Chapter
4
Impacts of the Technology Plant Operations
and Energy
Chapter
Chapter
5
6
133
Price Rises
4.1
Overview of Chapter
4.2
Impacts of New Technolony
4.3
Price
133
Operations
Changes
134
147
1985 Projections
159
5.1
Scope
159
5.2
Procedure
159
5.3
Issues
169
5.4
Projections
171
5.5
Sensitivity
of Investment
173
Conclusions and Recommendations
184
6.1
Conclusions
184
6.2
6.3
Implications for Energy Policy
Further Pesearch Suqgestions
6.4
Suqggestions for Policy Studies
1,97
187
190
Reference5
194
Appendix A Data Sources
200
Appendix B Some flew Energy Technologies
203
B.1
Gas from Coal
203
B.2
HIygas-Electrothermal
205
B.3
Low
B.4
The Gas Turbine Toppina
TIU Coal Gasification
Appendix C Derivation of HYGPS Capital
Coefficients
211
Cycle
214
Investment
221
Appendix D Derivation of HyQas Technical Coefficients
of Capital Coefficients for
Second Generation Texaco Low BTU Coal
Appendix E Derivation
Gasi fi cati on
244
253
Process
Appendix F Derivation of Second Generation Low PTU!
Coefficients
Coal Gasification Technical
260
of Capital Coefficients for the
266
Appendix G Derivation
Second Generation Gas Turbine Toppin Cycle
7
Appendix
H
Derivation of Technical Coefficients for
the Second Generation Has Turbine Toppino
279
Cycle
Appendix
I
Appendix J
Biographical
Analytical Convergence Procedure
Projections
or 19P5
2P3
Detailed Figures
Notes
299
8
LIST
Figure No.
OF
FIGURES
Pane
Title
1.1
1.2
Basic Input-Output Relationships
19
Two-Period Dynamic Input-Output Model
23
1.3
Quasi-Dynamic Projection Model
25
1.4
Energy-Oriented Generalized Input-Output
Model
26
1.5
few Technologies Investiqated
32
1.6
Major Iso-Energy Impacts of new Technoloqies
(Capital Investment)
34
1.7
Major Iso-Energy Impacts of new Technologies
(Operation)
36i
1.8
Effects of Fuel Price Changes
4n
1.9
1.10
1.11
1.12
1.13
2.1
1980-1985 Modifications
42
1985
43
ew Technolooy Modifications
Balanced 1985 Projections
46
Generalized Input-Output Model Sectors
52
Final Demand Sectors
56
Eiqht Sector Input-Output Table for 1958
58.
2.2
2.3
Components
62
Hypothetical Ten-Sector Economy
63
2.4
Components of Pipeline Gas Price-Preliminary
Assiqnment of Sectors
G4
2.5
Components of Pipeline Gas Price-Final Assign- 66
ment of Sectors
2.6
Technoloqical Coefficients for Coal Gasifica-
of Pipeline
Gas Price
67
tion
2.7
2.8
2.9
2.10
2.11
2.12
Investment Breakdown for Pipeline Gas Plant
Pipeline Gas Investment Summary
69
71
Liqnite Grinding & Drying Equipment Summary
72
Energy-Oriented Generalized Input-Output Model 75
Sources
of Input-Output
Data
Outputs of Generalized Input-Output Model and
Data Sources
77
7R
Fiqure No.
Title
Page
3.1
1970 Gross
3.2
New Plant and Equipment
3.3
Electric Construction Expenditures
3.4
Gas Utility Industry Construction Expendi-
National
Product
96
Expenditures
98
99
100
tures
3.5
Plans for Capital Spending
101
3.6
New Technology
103
3.7
Summary of Detailed
3.8a
Comparison
Plant Sizes and Costs
Comparisons
104
of 1980 Total Investment
with
ln6
$10 billion Investments in new Technoloqy
3.8b
Outouts Required to Support Equal Capital
Investments in ew Technology
3.9
Expenditures
BTU/Day
for 5 Trillion
Capacity
109
112
of Each New Technology
3.10
Outputs Required to Support Investment
Equal Capacities of new Technologies
3.11
High BTU Coal Gasification
3.12
Major
3.13
Coal Reserves
3.14
Low BTU Coal Gasification
3.15
Major
3.16
Gas Turbine
3.17
Major
3.18
Nuclear Generation Scenarios
130
3.19
Major Impacts of Nuclear Scenarios
Selected
Fiqures for the Energy Supply Ind-
131
4.1
in
117
Scenarios
Impacts of fligh TU Gas Scenarios
of the United States
Impacts of Low BTl
Topping
113
119
by States
120
Scenarios
124
Gas Scenarios
125
Cycle Scenarios
Impacts of Gas Turbine
127
Scenarios
128
135
ustries
4.2
4.3a
Coast of Electricity
Classification
of Gas Operatina Expenses
137
138
4.3b
4.4
4.5
Composite Gas Income Accounts
Generation Cost vs. Average Customer Cost
$10 Billion
Energy Purchases
139
141
141
4.6
Outputs Required to Support
142
Energy Purchases for
10
illion
ew Technoloqies
of
i
Figure No.
Title
Page
4.7
Outputs Required to Support Purchases of
5 Trillion
BTU/Day
145
4.8
Significant Price Rises Caused by Coal
151
4.9
Significant
152
4.10
Significant Price Rises Caused by Oil
Significant Price Pises Caused by Natural
4.11
Price Pises Caused by Crude Oil
153
154
Gas
4.12
Sirnificant
Price Rises Caused by Electricity
155
4.13
Sinnificant
Fuels
Price Rises Caused by All Fnergy
156
5.1
1980-1985 Modifications
160
5.2
Istvan's Electric Utility Information
161
5.3
1985 Initial
163
5.4
Quasi-Dynamic Projection Model
165
5.5
1985 New Technology Modifications
167
5.6
Balanced 1985 Projection Procedure
168
5.7
Basic Unscaled 1985 Projection
172
5.8
Basic Scaled 1985 Projection
172
5.9
Changes in Pequired Investment
174
5.10
Balanced 1985 Projections
175
5.11
Sensitivity of Total Outputs
Final Demand
to Unit Changes
5.12
Sensitivity of Total Outputs
Chanaes in Final Demands
to Percentage
179
5.13
Investment
to Changes in Final
183
6.1
Enerqy Demand
Model Develonment
Final Demand Projection
Sensitivity
B.1
Dynamic Generalized Input Output Model
Selected Worldwide Natural Gas iqhliahts
B.2
FPC Natural Gas Estimates
B.3
Hyqas Electrothermal Process
Hyqas xyaen Process
Texaco Partial Oxidation Process
6.2
B.4
B.5
in 176
189
191
204
206
207
21n
213
11
Fiqure No.
Paqe
Title
...
Gas
B.6
Cost of One Million
BTU of Synthesis
E3.7
Waste Heat Recovery
COGAS System
B .8
C .1
Proposed COGAS Power Systems
Cost Summary for Electric Power Stations
Hygas Investment Summary
C.2
Escalated
C.3
C.13
Plant Utility Supply for Hyoas
Hygas Equipment Summary
Conventional Coal Generation Capital Vector
Expenditures for Pollution Control Equipment
C.14
Breakdown of Pollution Control Equipment
C. 15
Cost Allocation
C.16
D.1
Revised Investment Summary
Hygas Capital Fxpenditure Coefficients
Operatinq Expenses for Hyaas Process
D.2
Labor Requirements for Fyaas Process
D.3
Dy-products
D.4
Summary of Annual Material Requirements
Process and Feedwater Requirements
B .9
C. 4-11
C.12
C.17
D .5
D.6
D.7
E.1
E.2
E.3
Investments
for Hyaas Proc ess
for Various
Equipment
246
Equipment
247
248
249
250
252
254
255
of Low BTI3 Coal Gasification
256
of Hyqas Process
Coolinq ater Summary
Hyqas Technolonical Coefficients
"Add on" Estimation Technique Illustration
Low BTU Gas Process
Comparison
215
217
219
220
223
224
?25
226
235
237
238
240
241
243
245
Processes
E.4
E.5
F.1
F.2
Modal
Allocation
of Transportation
Low BTU Gas Capital
Operatinq
Costs
259
Coefficients
for Low
261
3TU Gas Process
F.3
Comparison of Material Balances
Distribution of Labor Charges
F.4
Breakdown
F.5
Low BTU Coal Gasification
of Total Maintenance
ficients
258
Costs
262
Costs
Technolonical
Coef-
263
263
265
12
Fiqure
No.
Pane
Ti tle
267
G.1-8
COGAS Equipment Summary
G.9
COGAS
G. 10
Labor MarQins
on FPC Capital
G.11
COGAS
Coefficients
H.1
COGAS Technoloqical
.2
Capital
Capital
275
Cost Summary
Accounts
276
27P
2 n
Coefficients
or Combined
Technoloqical Ccefficients
and Low BTU Coal Gasification
COGAS
2°2
3.1
Comparison
of Ulnscaled 1985 Total Final Demands 2,7
J.2
Comparison
of Ralanced
J.3
Comparison
of Ulnscaled 1985 Total Outnuts
291
J.4
J.5
Comparison
of Ealanced
23?
Comparison
of Gross
1985 Total Final nemands2P9
1985 Total
Investment
utputs
and Total
295
Output (1930)
J.6
Comparison of 1980 Investment
with Total Output (1980)
(GPDI) Impacts
297
13
CONVENTIONS
A
- capital
[aij],
letters
(underlined)
[bj], - Matrix
aij
represent
A (or vector
vectors or matrices
B) is composed
of elements
(or bj)
Aij,bj - elements of matrix A (or vector B) are subscripted
lower-case letters
a, ,c - constants are non-subscripted lower-case letters
AT - transpose
A -1 -
of matrix
or vector
inverse of matrix A (assumed
Equation Numbers
and
A
to be square)
1.1, 3.9 - umber before decimal point
refers to chapter number, while number
Figure Numbers
after decimal point indicates senuence
number with chapter.
Footnotes - Within Text - Numbered sequentially throughout
report; used for informational purposes only.
Footnotes - within Figures -
umbered berinninq with 1 with
each figure.
[39],
[2], etc. refer
Special
Symbols
to books listed under
eferences.
and Letters:
N - number of sectors in economy
A - N X N matrix
of technological
C - N x N matrix
of capital
coefficients
coefficients
Y - " X 11 total final demand vector
Y Z Y
N x 1 investment
component
- N x 1 non-investment
of final demand
component
(GPDI)
of final demand,
includes PCE exports, and government spending
X
MCF
MBTU
MMBTU
-
N
x
1
total
output
vector
- thousands of cubic feet
- thousands of BTU
- millions of BTU
14
e
I
L
P
-
u IC U
LA
nu
J
p
,, i
uI
guras ri , nt,
ducer.s
S
U*
.J
,
r
15
Chapter
Summary and
1
rganization
Introduction
1.1
"The breakdown did not come all at once -- not like the
cataclysmic nightfall that blacked out New York and
most of the Northeast in 1965 -- but it was no less
House lights went out: furnaces sputtered and
eerie.
cooled; auto traffic jammed up at darkened intersections.
Dog races were canceled because the electric rabbits
would no longer run. Factories shifted to a four-day
week,
then a three day week,
laying off 1.6 million
employees. Only the most essential services operated
full time -- hospitals, water and sewage plants -- and
nobody knew how long they could continue."
Time, June 12, 1972.n.
49 [151
describing events during
Britain's two month coal strike.
Americans use nearly twice as much electric power per
capita as the British,
and hence the potential
even greater than that described above.
can help to ward off such consequences,
new technology
to examine
as a cure-all
the impacts
The research
is
Pdvances in technology
but before embracing
for these problems,
it is important
of such technologies.
described
here exp lores only three new tech-
nologi es that could have significant
1985.
for disaster
commercial application
by
These technologies are:
(1)
High Btu coa 1
(2)
Low Btu coal qasification, and
(3)
Gas turbine
gasification,
topping cycle (combined
gas and steam
cycle).
The techni ques developed during the research are applicable
to any possible
new technologies, and provide broad but detailed
looks at the Uni ted States,
15 to 20 years
hence.
The techniques
are based
on a generalized
1
form of input-output
sis and thus can focus on the myriad
many sectors of the projected
As such,
the techniques
interactions
(I/O) analvbetween
the
future economy.
should be a useful
tool for
policy-makers who must decide what actions to take if there is
an "energy crisis". Such possible applications will be discussed at the end of this chapter.
studies
is that engineering
niques
One contribution
can be used to incorporate
Since engineering
into the I/O framework.
new technologies
of the tech-
studies can handle relative price changes and other variables,
this capability
the problem
alleviates
I/O
of simplistic
projections that ignore price changes and facilitates the
development of dynamic economic models in which technology
depends on relative prices, energy availability, etc.
The research
prepared
utilized
by the Interagency
Labor Statistics [481.
a projection
Growth
of the 1980 economy
Project
of the Bureau of
These projections were incorporated
into a mode 1 that contained environmental variables and new
technology representations that had been derived from basic
engineering studies. The research focused on the economic
impacts
nologies
of investing
in these highly
capital
intensive
operation
of such
lants.
an d of day-to-day
techAn
attempt was made to calculate the effects of fuel-switchinn
and conserv ation policies
caused by the hiah prices
of these
new energy sources but the attempt failed because of the lack
of industri al price elasticity data. Finally a dynamic model
was
used to make
a series
of 1985 projections.
These pro.jec-
tions involved different rates of energy use arowth and were
performed with and without the new technologies.
1.
"Generalized"
refers
to the inclusion
of non-economic
variables such as sulfur dioxide emissions or employment within
the I/n framework and t the use of enqineerinr studies to
update projections of the technological structure of the
economy.
17
results document
The major
capital investment
to changes
and to the adoption
illustrate
of total
the sensitivity
in the energy
of new energy
use growth
technology.
that very small changes
rate
They also
in the overall
growth
rate
of personal consumption or government expenditures can restrain
total investment
age of GNP.
to within
its historical
of these results is that the
The significance
of the U.S. can sustain
people
limits as a percent-
the huge investment
demands
created by rapid energy demand growth by reducing the growth
rate of personal
consumption
and government
spending
than 0.1% per year
through
1985.
remains
because
the sum of the growth
unchanged,
investment
rate
rates in
oods is a constant.
and non-investment
The next section (1.2)
Overall GNP growth
by less
of this chapter briefly describes
the generalized I/O model, while the followinq sections (1.3
and 1.4) summarize
the organization
1.2
The last section
of the report.
Static Input-Output Models
Input-output
sectors 2
(I/O) analysis
of the economy.
is the study of interrelations
It seeks to answer
tions as "If GNP grows
by 4
each sector grow given
that consumer's
will change?"
To perform
to characterize
per year, how will
such analysis
of
and technology
it is first necessary
the flow of goods and services
periodically
such ques-
the outputs
preferences
This is done with the aid of the interindustry
is prepared
(1.5) outlines
Generalized Input-Output Theory
1.2.1
between
the results.
between
sectors.
flow table that
as part of the governments
Census of
Business.
2
Sectors
can be agricultural,
service groups.
sectors.
industrial,
commercial
or
Households and Government are also considered
A very simple
three sector
example
economy
is presented
the table represents
to sectors
by
se ctor
along
of a flow table f or a hypothetical
the top.
Thus each row i can be read as sales
and each column j
purchases by sector j from other sectors.
3 x3
flow
Final
Demand
m atrix
3
x
1
each sector to private
House holds
1x 3
ti on
of
V =
[vil)
th e Value
components
X
=
The entries
final consumers
a re
both
The entries under Value
fo r each sector.
N1ote that the suim
t o the Gross
This
t rue by definition
is
(the 3 x 1 vector
) are the total sales of each sector either
Demand.
Thus
x
3
=
3
j=l
The objective
Output
X responds
in technology.
of I/O analysis
to changes
(Gl P)
of the account ing
[x
sectors or to Final
under Total Output
ema nd
Product
es.
]
The entries
National
ti fi
i
dded (the
esent purchases of labor, deprecia-
repr
equal
n der
such as
Added componen ts and the sum of the Final
of this econ omy.
i den
and public
changes , and profit
= [dijl by the
tor Y = [yi]) are the sales from
vec
a nd Governments.
vector
can be read as
Let
enclosed in double lines.
(the
Fach entry in
dollars of sales from se ctors on the left
to other sectors
i
in Figure 1 .1.
d
to other
+ v
1j
i
is to predict how Total
in Final Demand
Y or to changes
The first step in this analysis
forms the
technological coefficient matrix A that represents input
purchases
required
is easily
calculated
the flow matrix
per dollar
of output
by dividing
of each sector.
each column
This
of purchases
by the total output of that sector.
in
Thus
d.
A
=
[a.
1 =
13
[
x.
Actual I/O tables include investment purchase, net
For introductory
exports and inventory chanae in Final Demand.
purposes
it is better
to innore
these.
Fi gure
19
1.1
Hypothetical Flow Table ----(in Dollars)
_
I
To
-
From
Sector
_
..
.
I_
2
1
- _
-
Final
3
Demand
Total
Output
Y
X
i
1
Agri culture
4
8
2
Industry
4
4
3
Energy &
Services
I_
8
8
20
2
30
40
2
2 -
10
20
I,_
Va lue Added
16
V 12 20
,(Labor etc.)
!
__
Total
=
D
Inputs
=
=
[xi]
Total
xi
A =
[aij]
13J
X
AX
= total
+
Y
m
=
_
dollar sales by sector i
[ -1
sales to Final
dollar
i
]
emand by sector i
Coefficient Matrix
= Technological
Y
or
X
_
20
= Final Demand Vector
[yi]
where
L
G N!P
dollar sales of sector i to sector j
Output Vector
=
d
where
Y =
20 140
------
= Flow Matrix
[di j]
where
X
._
48
Basic Inout-Output
elationship
[ I -A] -ly
_
_
Matrix (in Dollars)
Technological
"------- Coefficient
-Sector
2
3
1
Agriculture
.20
.20
2
Industry
Energy & Services
.20
.10
.10
.20
.10
3
1
1
Economists
often
use
x.i
to
to represent total output .
to be less confusinn.
represent
the
flows and x.
The above not ation was
thouqht
20
coeffi cient matrix
The technological
sector economy
each sector
Final
is also shown in Fiqure
can be expressed
Output
Final
Demand,
This expression
of Final
function
as
is easily
of
matrix
product
A X.
The objective
=
(I
-
Y
(1.1)
)-1
as
if it
has been achieved
1
, which can be derived
year and a particular
GNP
for other yea rs and other Final
applies
Technological
(1.2)
y
(I-A)
from Census data for a particular
and Final Demand,
for Total Output
solved
of I/O analysis
that the inverse
can be assumed
output and
Demand.
X
Demands.
the
the sum of the immediate
is obviously
X= X+
a
The output
vector is known as total immediate output since
The resulting
Total
1.1.
b y other sectors, excluding
that is consumed
Demand,
for the three
chanqe
can be h andled by modifying
the technological coefficient matrix A to correspond
to
the
change.
can also be used to calculate
The I/O framework
ibrium
relative
price
levels for all goods.
euil-
The assumptions
behind this derivation are usually that companies set prices
to cover
the cost of material,
labor, and some nominal
profit
and that the relative
price of labor is equal to one.
added is the economic
term that describes
the labor costs,
taxes, and profits
that make up the
depreciation,
difference
business
between
of materials
the selling
that went
Let V = [v i]
the ith sector.
Value
price of a good and the cost
into it.
where
v
= value added per unit sold of
21
The per unit price pi
as
pi
=
+
vi
ood can be expressed
p
a
N
of the ith
j=1
Changing to vector notation, the per unit price vector
P =
]
[pi
is
=
p
+
V
for prices
Solving
(I
=
P
This equation
term price effects
(1.3)
A'P
-
makes
in terms of value added
AT)
1
(1.4)
V
it very simple
on other commodities
of changes
in the capital
Note that they tell
of any one sector.
or labor requirements
the long
to calculate
nothing about how rapidly these price changes would propagate
the economy,
through
nor do they indicate
other industries might react to such
above equation
be
itself
these price
used
to predict
the
price changes.
or
Thus the
the price sensitivities
in value added, but it cannot
of
response
the
to
system
changes.
1.2.2
There
to changes
industries
of various
by
can be used to explore
how consumers
Dynamic Input-Output Models
a re
many possible formulations of dynamic input-
output models , but the essential
concepts
with a simple two-period
for times to and t1.
example
can be presented
Assume
that the same technological coefficient matrix A applies for
both periods.
Two conceptual changes are required to modify the static
theory of the previous
sectors
First,
total final demand
of yF = final demand purchases
must now consist
and governments
section.
and yI = capital investment
of the economy:
Y
=
F
I
Y
by households
purchases
by all
Second,
the
capital
matrix
[cij] where
cij is the marginal
i by sector
j required
one dollar
period
t
investment
Thus if X1 were
is
C (X1
defined
purchase
from sector
the total output
in period
- X ).
as C =
of sector
the capacity
the total output
required
be
capital
to expand
of output.
and X
C must
By
j by
in
t1, the total new
defining
C in
terms
of marginal capital requirements, difficult problems of defining
capital stocks
and measuring
These
of the model
objective
output
relationships
are avoided.
are summarized
is to find for period
(X1 ) and total final demand
to (X ) and the non-investment
period
(Y1 ).
The model
investment.4
=
The basic
= C
I~~-
YI
A) - 1
(I
assumes
so that output
at 100% capacity
(X
(I-A)- 1
=
The
'e total
t
final demand
that sectors
in
always operate
by capital
can only be increased
equations
Y1
1.2.
(Y1 ) given the total output
in period
t1
in Finure
for this model are:
(Y1
+ Y1
)
(1.5)
(1.6)
-x)
-O
These equations can easily be solved for total output
and total final
X1
-1
=
(I
demand
- A
1
These equations
on investment
rates
1
(Y1 F
C X)
(1.7)
(1.8)
are easily
used to calcu late the effect
yI and total output X of changes
of individual
available
(Y1):
- C)-
--1
to assure
(X-1
1 )
components
of Y
Various
in the qrowth
methods are
that total GP
4
Slack variables can be used to modify this assumption
but such considerations
are not important at this stage.
23
Two-Period Dynamic Input-Output Model
Given:
= [x io
X
period
F
xio = total output
where
of sector
i in
to
final
by households
demand purchases
ment in period
and
overn-
t1
purchases
capital
C = [c. ij = marginal
from sector
i
by sector j required to increase sector j's output
by one dollar.
A = technical
and
Find:
for both periods
matrix
coefficient
t
Y1
F
I
Y-1 + YI
total final demand
ment purchases in period t1
Solve:
X1
= total
X
=
YI
(I-A)
C
output
in period
1 Y1
(I-A)-
(X
=
t1
(YF
X-
Resul ts:
X1
1
to
: (I-A-C)
--
-1
X
(yF-1 C -o
1 + C (X1
F
I
- Xo
)
G
U
R
E
1.2
+
y
where Y
I
invest-
24
where
Gri P
5
F
I
+
YI
Y1
I =j Y11
Y
1
i=1
and N = numbers
does not exceed
certain
in later chapters.
of sectors
in model.
limits, but these will be discussed
It should
also be noted
that, whereas
the technical coefficient matrix (A) was derived from basic
the capital matrix
Census data,
capital
(C) must be estimated
flow data or from engineering
with both sources
data.
There are problems
of data that do not arise with
coefficient calculations.
from
technical
These will be discussed in later
chapters.
The model
tions utilizes
the further
the two period
constraint
(1958 dollars).
1.3.
Given
with
used for the 1985 Proiec-
anal ysis described above with
that the 19 85 GNP equal $1.34 trillion
The model is pict;orially described
an initial
one iterates
obtained
that was actually
around
projection
in Figure
of the 1985 final demand,
the loop until a final demand
the proper GNP.
6
Con vergence
vector is
can be guaranteed
by modifying the scaling factor.
1.2.3
Generalized Input-Output Model
The generalized input-output
illustrated in Figure 1.4.
It is
model
referred
used in this
study
is
to as "qeneralized"
because
5
The magnitude signs represent the vector norm formed
by arithmetic addition of the vector elements. They do not
represent absolute value signs
6
This GNP represents a 4.47 per year
rowth rate from the
BLS projection of the 1980 GNP.
It was calculated by excluding
any contribution from BEA sectors 84, 85, and 86 (Government
Industry, Rest of the World Industry, and the Household Industry
respectively). These dummy sectors were excluded because they
do not interact
with other sectors;
they only contribute
to GNP.
2 5r
oo o
I
a)
0o
0
O
I
0
xl
L -I
12
O
OIa,- 0:,
I
o,--
xl
o
CL
0
) axl
.0
xl
0
40
I:
.m
U)
Li-
E
0
0
0
0C}
O .-
0).
o
.
,,
0L
(n U
Yl
I
-
L.
C-1
.
L-%R
ul
0
IiUU
pq
r~~~~~~~~
I
E
> Q) n
-
ii
45
zZ
Z Oc
(3
c
)C.-I<
> ) n4 E
c
1-4
oo
C
>-
0
--
C
T
o
o
'Z
.l
t
4-
a-
/
I
%
JI
I
c
.2
0o
-
*
-
N
v0
U
l
c
o, - U u..-c
-
*0
u a
L
.
C
E
I
- 0 C)
I
!
/
X
-o0
E
UL)
0 (9
0
ti
uJ
11
of,
D
0,
0
LU
0
-J
r-
0
rD
cx:
LU
N
JL
z
Z
w
LU
a)
LU
7
tO oU
U
LU
O
0
I
O
H
-C,
-O
LU
LU
-c
00
LL
I
I
I
0
0
I
0n
V
O
g
. 2
C) =
vEa
, _C zo
C(
C
t
L
27
(1)
many non-economic variables such as water usage
and S02 emissions
are included
in the framework
and
(2)
new technologies
The non-economic
variables
These
can be incorporated
quantities
and are summarized
are the outputs
proportional
variable)
of the model.
They are assumed
of SO 2
by the 1980 economy
to be
For example,
(or any other accessary
er dollar
ek is the SO 2 emitted
of the k-th industry.
then the total S02 emissions
1.4.
and let E = [ekl be the vector
for S02 emissions
In other words,
to as accessory
half of Fiqure
to total output of each sector.
of coefficients
output
are referred
in the bottom
let S be the total emissions
in it.
of total output.
er dollar
If X is the total output
S is the inner product
of
vector,
of X and
E or
S =
ET
X =
TE
(1.9)
Similar relationships hold for the other accessory
variables.
The boxes
in the upper half of Fioure
1.4 represent
the various means of interacting with the model. These boxes
are used to specify the alternative future being investigated.
This scenario
sition of GNP.
A final
conditions
can include
changes
in technology
and in compo-
Limited price changes can also be handled.
demand
vector is constructed
of the scenario
to represent
and the technological
the
and capital
coefficients modified to include the amount and kind of new
technology
that is specified.
the total outputs
(I - A)
1
Y.
Once these changes
(X) are calculated
The values
are made,
in the usual way: X =
of the accessory
variables
are then
obtained by simple multiplication as indicated above.
The sectors
i/ed
at
enrido
the
components
actually
his cnapter
of final demand
to provide
were chosen
used in the research
in Fiuure
in Figure
1.13.
.
are
: ;id
a
wnm~.th-
The sectors
at least the 83 order BEA aqqregation
scheme with further breakdown of major energy supplying,
energy consuming, or polluting industries.
1.2.4
Derivation of
The derivation
for a new technology
ew Technology Representations
of technological and capital coefficients
begins with
the engineering
cost study.
While coefficients derived from an engineering study of an
actual operating commercial plant are quite accurate, those
derived from a pilot plant study are subject to some uncertainty because of potential problems associated with scaling
up plant size.
Coefficients
based on costs projected
from
laboratory scale models may be quite uncertain, especially
with
to total capital
respect
Attempting
to derive
yet been proven
coefficients
feasible
lead to nonsense.
cost of buildina
for a process
in the laboratory
such a plant.
that has not
(e.g. fusion) can
There are many "cost" studies of Processes
that have never been made to work.
In addition, economic
impact projections based on laboratory feasibility studies
are unrealistic
because
of the long development
eriods
For example after
two decades, reactors still product only 1% of total ele ctric
power.
The technologies studied here fall between the 1 aborainvolved (especially in the energy field).
about
the actual numbers but sensitivity analysis can usually handle
tory and pilot
this problem.
plant
stage so there is some uncertainty
-
Another significant characteristic of new technology
engineering
studies
is that the costs are calculated
certain estimation schemes.
using
These estimates detail major cost
29
i tems
fuel or reactor
i ke
costs like overhead
cost items
vessels
or piping
and then calculate
as percentages
The result is that the larger
capital co efficients
are more accurate
While
this is a disadvantage
is an
adva
other
of the major
technical
and
than the smaller one!S.
of the overall
coefficients
it
ntage when calculating economic impacts because
the larger impacts are caused by the larger coefficients.
The technological coefficients are derived from the
engineering studies by assigning all projected operating
costs
(purchased
material
and labor) to the I/O sectors
that produced the commodity.
by the total yearly
the dollar
These figures were divided
output of the proposed
flows into new technology
plant
coefficients
to convert
7
A similar
procedure was followed for deriving the capital coefficients
from the construction cost estimates.
There were a few problems of classifi cation (i.e.
which sector produced a certain item like p iping), but these
were solved by adopting certain conventions
These conventions
will be discussed
later.
The new technologies were incorporated
framework
using
the following
s cheme.
Suppose
nological process for sector i (e.g. natural
is represented
by the technical
coefficient
capital coefficient vector C 8.
Since
I/O tables
Next
into the I/O
the old tech-
gas production)
vector
Ai and
let the new technological
are in terms of producer
costs,
trans-
portation and trade markups must be removed from the engineering estimates before converting to coefficients.
8
Thus the whole technological coefficient matrix could be
represented
A similar
as the partitioned
partition
holds
matrix
A =[q1
for the capital
: A2 ·
coefficient
An]
matrix.
3n
process
(e.g. high BTU coal gasification)
If the new technology
is expected
be AN and Cr.
to take over a fraction
g of the total production
of sector i and a fraction
ital investment
i then the new technical
by sector
h of total cap-
coefficients
are
A
= (1-g) A
where
Ar
+
g = fraction
(1.10)
of total production
supplied
by new
technology and the new technical coefficients
are
C'
=
where
(1-h)
C
+
h
h = fraction
C
(1.11)
of total investment
made up of new
technology
These coefficient column vectors then replace the old
ones in the technical
1.3
Summary
1.3.1
and capital
coefficient
matrices.
of Results
Impacts
of Capital Spending
for New Energy
Technologies
The new technologies investigated are
(1)
High Btu coal gasification
(the Institute
of Gas
Technology electrothermal Hyoas process)
(2)
Low Btu coal gasification
(the 1980 Texaco partial
oxidation process with hot carbonate scrubbing)
and
(3)
Gas turbine
topping
cycle or combined
gas and
steam cycle electric generation plant (the 1980
United Aircraft high temperature gas turbine and
waste heat boiler steam cycle). This last technology will
be referred
to as a COGAS plant.
31
The salient
summarized
characteristics
in Figure
the new technology
1.5.
of these processes
In this and subsequent
impacts will be compared
steam electric generation plant.
are
sections
to that of a nuclear
Nuclear plants were chosen
for comparison because they represent a current new technology
that is unlikely
to change much by 1985.
readers will be familiar
and the projected
In addition,
with its capital
high growth
of nuclear
intensive
most
nature
Dower in the next
fifteen years.
This section summarizes the economic impact of capital
expenditures
will
for these new technologies.
look at impacts
The next two sections
from actual operation
of the new plants
and at price changes caused by higher priced energy.
It is only meaningful
the same output
as the nominal
capacity,
size.
to compare plants
so five trillion
This corresponds
form of energy,
five trillion
low Btu gas).
Btu/day
Consequently
10 high
Since electricity
is
40,000 MW was chosen as the appro-
priate comparison size because 40,000 M
requires
BTIU/day was selected
to approximately
Btu gas plants or 40 low Btu gas plants.
a secondary
of approximately
of COGAS plants
input energy
40,000 M
(in the form of
was also used as the
comparison size for nuclear plants.
The economic
First
the capital
impacts were calculated
coefficients
in a two step process.
of each new technology
and the
plant comparison sizes (converted to dollars) were multiplied
to obtain a vector
each new process,
(N) representing
broken
chases will be made.
the total investment
down by sectors
Second,
from which the
the investment
vector
in
ur-
(N) for some
particular technology was multiplied by the 1980 inverse coefficients
to obtain
new technology's
the vector
investment,
Xr
(I-
of total outputs
(X) caused by that
i.e.
A)
-1
N
(1.12
32
New Technoloqies Investiqated
High BTU Coal Gasification (1000 PTU/SCF)
Process:
Electrothermal
(Hyqas)
Data Source:
Electrothermal HIyga
s Process Escalated
Institute
Hydrogasi fi cation
Costs [421
of Gas Technology
Originator:
Efficiency:
71.7,7
Nominal Plant Size: 500 Million SCF/day (90%31oad factor)
Plant - $310-354 mllion
Nominal Cost:
Ptu
Gas -54.8-72.4¢/10
Low BTU Coal Gasification
(173 BTUI/SCF)
Partial Oxidation
(Hot Carbonate Scrubbing)
Process:
1980 Texaco
Data Source:
Technoloqical and Economi c Feasibility
381
of APdvanced Power Cycles
United Aircraft
Originator:
Efficiency:
87%
Nominal Plant Size: P42 million SCF'day i704 load factor)
Plant -27.5 million
Nominal Cost:
Gas - 17.6¢/lo0Btu
Gas Turbine Topping Cvcle (Combined Gas and Steam Cycle or
COGA
)
Process:
1980 High Inlet Temperature
(28000 F)
Turbine with Waste Heat Boiler Steam
Cycle
Originator:
Efficiency:
tu Gas)
54.5%1
1000M!.I(70% load factor)
r:ominal Plant Size:
Nominal Cost:
F
1
(Usinq Low
Technoloqical and Fconomic Feasibility
of Advanced Power Cycles [381
United Aircraft
Data Source:
I
Plant - 94 million
Electricity - 5.3 mills/kwhr
G
U
R
E
1.5
Overall efficiency
Only the efficiency of the COGAS cycle.
the two efficiencies.
by multiplying
is obtained
2
3
Includes working capital.
All dollar
figures
are in 1970 dollars.
total outputs
These
ment in each technology.
impacted
by
(I-A)
1
Low
i.e.
or impacts
This latter impact
y
output
ment-related
9
investment
the outputs
1980 investment,
XI
1980
total
projected
if
caused by it are
X
to as invest-
is referred
economic
has the smallest
small investment
of the comparatively
utilizations
of
the
can take advantage
Thus to calculate
gasification,
COGAS plant
low
BTU
gas
is
in
the
this gas
10
, it must
One of the best
point.
near its manufacturing
required
Because
coal into a low grade gas.
cannot be shipped long distances very economically
be consumed
primar-
This happens
impact of any of the new technologies.
for processing
total
the
yI is
in the figure.
TU coal gasification
ily because
to the projected
and to the impact caused
of that industry
1980 total output
invest-
the maior
Figure 1.6 compares
of each new technology
industries
of
impacts
are the economic
COGAS
which
plant
of its high volume, high temperature
the probable
the two columns
should be added.
total impact
of low
flow.
TUl coal
in Figure 1.6 for it and the
The resulting
numbers
are much
closer to those for the other two technologies.
The impacts of total investment are included because most
sectors produce several kinds of products, only a few of which
and
are capital investment goods, e.g. both turboqenerators
outboard motor remote controls are made by the same sector.
Since these products often cannot be disaggrenated and since
they are usually manufactured on different machines, a better
measure of the total output of capital goods (productive capacity) is the output sold directly or indirectly to the investHence both total output and
ment component of final demand.
output are included in Finure 1.6.
investment-related
10
It is
uneconomical
to ship
for
two
reasons:
(1)
a given
diameter pipeline has only one-fifth the energy carrying capacity of natural gas (10OOBtu/SCF) when used with low tu gas
(179Btu/SCF); (2) a significant percentage of the total energy
content of low Btu gas is in the form of heat which would be
lost
in a pipeline.
^
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35
The numbers
in Fioure 1.6 represent the mini-
presented
mum probable impact of these technoloqies because they do not
take into account any expansion of the transportation
(pipe-
lines), distribution, Ior administration
Nor do they include the effects of increased manufac-
lines or transmission
systems.
turing capaci ty required
technologies.
indicated
to supply
the equiDiment for the new
This investment would be over and above that
in Figure
1.6.
the boiler-makers
In particular,
and turbogene rator manufacturers would have to expand siqnificantly
from their
demands.
How much
1980 levels
they would
to meet
actually
upon whether the new technolony
placement
of old technology
the niew technoloqy
have to expand depends
represents
or new markets.
discussed further in the section
e volution
and re-
This will be
on the integrated
1985 pro-
jecti ons.
1.3.2
Impacts of Operating
the New Technologies
Opera ting impacts were calculated
for the three new
techno!
logies , and nuclear plants were again used as the reference
The three new technologies were:
(1)
high Btu coal gasification
(2)
low Btu coal gasification
(3)
combined
and
COGAS and low Btu goal gasification
plant.
This last combination was chosen because it represents
the most likely utilization of both processes.
Impacts
are again
defined
as the industrial
outputs
required to support the direct and indirect requirements of
five trillion Btu/day operation of each new technology.
Figure
1.7 summarizes
the projected
the major impacts
1980 total output
As would
be expected
the coal mining industry.
largest other
and compares
them to
of each sector.
the most significant impact
What may be surprising
impact of the two new technologies
is on
is that the
i s less than
36
F I G U R
MAJOR
INDUSTRIAL
1.7
OUTPUTS
REQUIRED
TO SUPPORT
5 TRILLION BTU/PAY2 OPERATION OF
EACH NEW TECHNOLOGY3
Projected
Total 1980
Outputs
Sector
Coal Mining
Low Btu
Coal
Hi h Btu
Coal
N!uclear
COGAS
Gasi ficat i on Gas ification
Steam
Generation
4329
321
374
386
9
34030
16
13
18
985
35137
33
33
136
193
7798
13
13
14
2
3839
25
1
2
5
Sanitary
Services
6928
20
9
15
6
Mineral
Mininq
2205
1
1
Industrial
Chemicals
(Nuclear Fuel
Reprocessing)
Maintenance
Repair Construction
Construction &
Mining Equipment (conveyors
& grinders)
Stone & Clay
Mining
Water &
1
36
11 Outputs in millions of 1958 dollars, calculated
All
x N: (I-A) 1
YN where
YN is the vector
of energy
from
purchases.
25 trillion
Btu/day
is the equivalent
of 10 500 million SCF/day
high Btu gas plants or 10 100,000 bbl/day oil refineries
or 40
1000 M
3
See
electric generation
Figure
1.5 for
plants.
definitions
of processes.
37
1% of the total outputs of the affected industry
tries not shown in the figure,
Obvi ous ly COGAS electricity
are relati
i solated
vely
For indus-
the impacts were even
generation
less.
and coal gasification
sectors of the economy.
influence arises from their huge investment
described in the last section.
Their major
requ irements
as
For nuclear generation, the major affected industry is
nuclear fuel reprocessing, which resides in the Industrial
Chemicals
R:ector (BEA 27.01).
The fact that nuclear
fuel
reprocessing must be treated like the typical Industrial
Chemical product causes a problem because it has considerably
different input requirements from the typical industrial chemical.
However,
industry,
sector,
it could not be broken
since
out as a separate
it had to be as signed to the Industrial Chemical
and treated
as a typical
chemical.
It could not be
broken out because it is not a standard sub-industry and
separate technical coefficients for it are not available.
This assignment
results
i n such obvious
anomalies
as nuclear
steam generation having a large impact on mineral mining.
While part of this impact represents leaitimate purchases of
uranium
ore, most of thes e purchases
are the result of treating
nuclear fuel reprocessinq like a typical industrial
This illustrates
the need for care in interpreting
chemical.
the results
of an I/O simulation.
1.3.3
Price Changes
It is quite
easy
change, e.g. doubling
in
the
economy
if it
to
calculate how some particular price
the price of oil, will affect other prices
is
as sumed
passed onto the customer.
that such price changes
This theory was derived
are
in section
competitive situation, e.q. between
plastics, fiberglass, and aluminium. such price increases may
1.2.
However,
in a highly
38
be absorbed
there
because
of fear of losing market
share.
Also
is no data on the time it takes such price changes
propagate
through
the economy,
to assume
the changes will be complete
to
so the best that can be done is
within
two or three
years.
The most important criticism of possible price change
calculations
is that there is no data indicating
how any sectors
other than Households (personal consumption expenditures)
respond to such price changes. 11 Without this information
the price change calculation is almost useless.
ation
that would
be required
of the long term effects
matrix
for each sector
for a complete
The inform-
characterization
of any price chances would be a
that described
coefficients
for that sector would
in the price
of any commodity
how the technological
be modified
by a change
(both elasticities
and cross-
elasticities would be needed for each sector for each product
and between
products).
This is an impossible
task but, if
the more restrictive question of how industries would respond
to fuel price
derived
changes
(assuming
is asked,
then some answers could be
that the data is available).
It should
be
possible to obtain elasticities and cross-elasticities for
fuels
for each sector
that would
allow one to predict
how the
technological coefficient would change with different fuel
pri ces.
Since
total fuel costs make up only a few percent
of the
selling price of the average good sales of most products other
than fuels would
prices.
be only slightly
affected
by changes
in fuel
Those few sectors, like basic metals and perhaps
plastics, that are fuel price sensitive could be investigated
A Cornell Study [ 81 does have time responses and an
industrial price elasticity for fuel price changes but the
aggregation level (i.e. all industries lumped together) is
too great for their results to be useful in this study.
39
further.
This procedure would result in an adequate repres-
entation of industrial fuel-price elastic effects.
ately
Unfortun-
this data is not now available.
However, because Households consume large
oil, gas, and electricity,
it is useful
q uantities
of
to calcul ate how these
purchases might change with fuel price inc reases.
Therefore
the price changes resulting from doubling the value addedl2
of each of the fou r energy sectors was calculated. Next,
using the Universi ty of Maryland's
icities
fo)r Househ old purchases
2 1 long term price elast-
of these energy
sectors,
the
long term declines in Household consumption were calculated.
Figure
1.8 summari zes these results.
NIote that each rov in
the figure was cal culated separately from all others.
long term price
discussion
4,
el asticities
8,
12,
they indicate
are important
how effective
curtailing growth in energy demand.
becomes
available,
of much
34]
These elasticities
because
are still the subject
The
for poli cy purposes
price uses are for
When bette r data
this type of research
may he more fruit-
ful.
1.3.3
1985 Projections
The final exercise
projected
a series
of five alternative
1985 futures involving various energy use growth rates, both
with
and without
new technologies.
as the Low, Medium,
plus Gas Turbine
12
Value
High, High plus Hygas,
futures,
Added
taxes, and profits
cedure of doubling
These will be referred
is
to
and Hiih plus Hyqas
and are defined below.
defined
as
the
labor, depreciation, business
The seemingly strange proof each sector.
value added was c hosen because pollution
controls typically affect labor and capital (depreciation)
charges, not material requirements. Thus it makes most sense
to double these quantities and test the price sensitivity
the fuel sectors to this change.
of
40
F
EFFECTS
OF
I
G
U
R
VALUF
DOU:LI'":'
ON PERSONAL
E
1.8
ADDED
CONSUMPTION
Modi
fi
Energy P
Sector
Coal
ReI a tti eee
e
eRelRiv
Ln-eChange
L on q - te rm
Lonter
ice 2
Price
Increase Elasticity
INDUSTRIFS
ErIEPGY
OF FUELS
1 Personal
Lonq-term
in
Personal
_____
Moife
ed
FOP
3
Consumption
of Percentage
Consumption
of Total
Consu4
Consumption
of Fuel
of Fuel
71.3,%
-. 222
-15.8%
Oil
28.9%
-.094
- 2.7%
40.2%
Natural Gas
60.7%
0.0
0.0%
25.4%
Electricity
78/6%
-.214
-16.85
25.9%
Refined
! ..
.
.
2.3%
_~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~,
Each row is associated with a different case that entails
doubling the value added of the indicated industry only.
2 This
number multiplied
by the actual dollar
nrice of the
energy source gives it new dollar price increase.
3 Calculated
using
the I'niversity of
aryland's
long-term
for each fuel.
personal-consumption price-elasticities
4
Indus try (includinq electric uti lities and commercial establishments) and government are th e other consuming sectors
besides households (personal con sumption).
5
If Hal
vorsen 's [22] residential price elasticity (-1.1) is
used, this number becomes -89.4%
qi ves similar results.
The Cornell
renort
8 1
41
used the 1980 technical
All of the projections
coeffi-
cient matrix with some modifications of the energy sectors.
The investment component of final demand was recalculated for
each projection using the 1975 Battelle capital matrix modified
projection
for each alternative
of oil, natural
differed
gas, and electricity
The medium energy
use
final demand
The initial
for the new technologies.
slightly
only in the amount
purchases.
rowth rate future assumes
continuation of the 1970-80 final demand growth patterns
no change
in industrial
The high energy
demand
(than the Medium
tricity
technology
and
from 1980.
use future reflects
future)
a
a 4
for oil, natural
hiaher
final
gas, and elec
and increased industrial consumption (reflected in sli ght
increases
in the energy
matrix).
The se changes assume
and electric
rows of the technical
increased
coefficient
air conditioning
heat, worse gasoline mileage and longer yearly
driving distances.
will not be a supply
All of these projections
limitation
on natural
assume
that there
gas and that the
same domestic to foreign crude and natural gas ratios apply
in 1985 that held in 1980.
The low energy
demand
(than the Medium
use future involved
6% lower final
future) for oil, natural
gas, and
electricity and better conversion efficiency for electricity
conversion and transportation.
assumptions.
Figure 1.9 summarizes these
Two alternative high energy growth futures
were also investigated.
the introduction
The High plus Hyqas future
of high BTU coal gasification
the High plus Hyqas plus Gas Turbine
the gas turbine topping
gasification).
in Figure
1.10.
cycle
future
included
(Hynas) while
included
Hygas and
(supported by low BTU coal
These technology modifications are described
3
42
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4. 3
F
1985
I
G
U
RE
NEW TECHNOLOGY
1.10
MODI FICATIONS
Operatinr7
Capi tal
Hygas
(Coal
Gasi fi cation)
1
_
Gas Turbine
Topping Cycle
(combined
with Low Btu
coal
gas2 ifi-
5% of natural
25%, of new capaci ty
(gas) addi tions wil 1
be in form of coal
qasi fi cati on.
___I_
50% of fossil
gener-
ation (15" of total
generation) capac,ity additions will
be added in form of
qas
demand supplied
by
38% of fossil
gener-
coal qasification
· __I_
ation (23%of total
generation) will be
as turbine
by
inq cycle.
topp-
gas turbine topping
cation)
cycle.
_
1
High
above additi
.
+ Hygas Future:
High Future is modifi ed by the
(the IGT Hygas
on of High BTIJ coal gasification
process).
2
High + Hygas + Gas Turbine Future:
High Future is
modified by the addition of both new technologies indicated
above.
Note that low BTU coal gasification is used in con-
j unction with the gas turbine.
The projection procedure
trillion
(1958 dollars)13
futures.
process
This was
using
1.34
all five alternative
in 198
a three-part balancing
accomplished
the model
First,
at a GNP of
of Fiqur
the investment
req uirements
for each of the
initial final demand projections were calculated and added
to the final
different
demand
values
vectors.
of total GP
Th is resulted
(b etween
in sinnificantly
1.29 and
1.43 trillion)
because the alternative investme nts were quite sensitive
the rate of energy
growth and to the introduction
to
of new
technology.
Second, these final demands were scaled (by a constant
factor
applied
to purchases
to the proper GP.
with
the result
trillion
because
ial projection.
changed
of each sector) so that they summed
The required investments were recalculated
that the new GNP's were now less than
the investment
1.34
was not as areat as in the init
This occurred because the scalinn procedure
the 1980-85
growth
rates for each industry
and con-
sequently the required investment changed also.
Third,
projections
was
some linear combination
of the scaled
and initial
for each future was chosen so that when investment
recalculated
and added
to final demand
the total had the
proper GNP.
The proper combination or weighting factor could
be calculated analytically and eliminated any convergence
problems.
This resulted
in a balanced
projection
The major assumption in this procedure
sectors
factor
for each future.
was that all
had the same income elasticity so that a constant scaling
could be applied
This is a bad assumption
to a 11 purchases
of final demand.
for such industries
as food and
kindred products, but since the conclusions of this study
are based on a differential analysis of the various projections
13
This GNP represents
1980 GNP.
a 4.4
growth
rate from the projected
45
and not on the absolute numbers involved, this assumption is
not a major problem.
jections
ar e summarized
1.11
Figure
of the various balanced
points
The salient
in
Fiqure
1.11.
As
from low to hinh.
use increases
introduction of high Btu coal gasification
investment while the introduction
with
of coal qasification.
The
increases
of the gas turbine
topping
decreases
it.
dramatically
is seen to increase
of coal mining
the in troduction
further
low Btu coal gasification)
(with or without
The output
in
indicated
L total investment becomes a larger percentage of
the 1985 GN P as energy
cycle
is
1985 pro-
The three illus-
trated capi tal producing industries (Plumbing, etc.) respond
to differen t energy
ment
a w,hole.
as
use growth
Total employment is approximately constant,
but there i s no indication
Ce rtainly
change.
and in the capital
goods industries
the
fa ct that the
skills mioht
in construction
for the hiaher
Air pollution
The large decrease
the introdu iction of the
from
of how the required
more people will be employed
growth rate scenarios.
as expected S.
rates more than total invest-
energy
and steel usage behave
in water usage caused by
as turbine topping
as turbines
cycle results
are air cooled and that
the conversion efficiency is higher than the standard qeneration plant.
The most important fact concerning these balanced-projections
is not found in Finure
1.11.
The non-investment
components of the balanced final demand projections were
within
0.3% of the initial projections.
In other words,
only
a very slight chanqe in personal consumption and government
expenditures was enough to balance the investment demands of
the rapidly growing eneray sectors. It seems unlikely that
most sectors would notice a difference in sales of .3% over
a five year period.
U R E 1.11
F I G
BALANCED 1985 PROJECTIONS
(1958 dollars)
Low
Medium
Plus
Hygas
High
$1340.8
S 1343 .0
51339.0
70.2¢I
69.6'
70 .0F" i
17.5
16.6
16 .8
GNP (billions)
PCE (% of GNP)
Investment (%)
Government (%)
Total Output
(billions)
Coal Mining
Plumbing, Structural
Metals
Enqines & Turbines
Construction Equipment
13
13.8
$
$
5.0
5.1
18R 2
7.5
5134n0.9
69.3 '
17.7
13.6
13.b
.H
S
$
5.2
I
6.5
S1341.0
69.44
17.5
13.6
c
10.0
19.3
I
Hiqh +
Hyqas +
Gas Turbine
Hi gh
6.6
19.7
P. 0
7.6
11.1
11.5
12.5
12.9
12.6
99.2
99.2
99.2
99.2
99.2
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49.0
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50.1
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78.2
78.2
122.7
1 23.9
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50.2
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124.8
124.2
30.4
31.8
32.6
32.6
32.5
194.0
195.0
198.1
199.6
198.6
278.1
126.0
280.6
128.3
286.7
134.3
291.2
137.8
266.5
24.9
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46.1
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28 .5
28,.5
33.8
34.9
44.4
48.5
34.8
44.4
46.7
26.0
44.5
48.5
Private Employment
(mi 11
ioS
Air Pollution
- mi-tlTiontons)
Particulates
Hydrocarbons
S02
CO
NO
Steel Usage
(million tons)
Water Usage
(trillion orallons)
Gross
Cooling
11/.Q
1 17
Energy Use
Co ita1
-5
BTU)
Oil
Gas
Electricity
33.0
__
__
-
-~_
4P8.2
__
34.8
__
47
If most sectors were qrowlinq at the same 4.4% per year
to grow at, a decrease
that GNP is projected
would
decrease
the qrowth
of 0.3% in sales
rate to 4.35%, hardly a significant
change.
1.4
Conclusions
The major
1.
of this study are the following:
conclusions
Total
in general
investment
and capital
good indus-
tries in particular (primarily turbogenerator
manufacturers, boiler makers, and construction
equipment manufacturers) are quite sensitive to
energy use
2.
rowth rates (especially electricity).
aggravate
the demand for investment funds and
introduction of the second generation
topping
cycle
ication)
will
of high Ptu coal gasification
Introduction
gas turbine
low Btu coa 1
(with or without
gasif-
These technol-
will decrease the demand.
on the indus-
ogies will ha ve their major impacts
tries listed above.
3.
changes
Slight
in the overall
growth
rates of total
personal consumption expenditures and government
spending
result in large fluctuations
in total
investment.
4.
If high energy
growth
is to remain within
continues
and if investment
limits as a per-
its historical
centage of GNP, energy investment will become a
larger and larger part of total investment.
5.
While
interest
rates are assumed
to be the balancing
mechanism between supply of and demand for investment
funds,
induced
the very act of saving more money
by hiqher
can be spent
interest
on consumption
rates) means
oods.
(which is
that less
This in turn
4p
lessens
the demand for investment
the qrowth
rates of consumption
This indirect
effect
sectors
of interest
ment has been little studied
funds because
are lower.
rates on invest-
but may be
uite
important.
The policy
ant.
implications
of these results
are quite import-
Different sectors of the economy respond differently to
changes
in the interest
particularly
sensitive
of what investment
rate.
Hlousing construction
to interest
demands
rates.
seems to he
Vnowrledqe in advance
are likely to be provides
additional
information for planning government spending and taxes.
more work on consumer
changes
needs
and industrial
to be performed.
response
Certainly
to interest
There are also questions
rate
of
whether enough skilled construction labor will be available to
build all of the new required energy facilities.
training
programs
can be predicted
model
can be developed
long enough
either
in pointing
if the need for such lahor
in advance.
is, in fact, applicable
The generalized
I/n
to all of the above questions,
out the need for policy
effects of new policy.
Manpower
or in analyzing
the
1!hile the major government Policy
variable represented in the generalized input output framework
is government spending (broken down by sectors), the outputs provide
insights
into the possible
effects
of other types of policy
decisions like Manpower training.
The input-output
standard
simulation
models
models
are not generally
are.
used the way
W!hile they can be used to make
point predictions of future events, their major use is in
comparative analysis. The basic model provides what might be
called Nominal Futures against which the modified futures
(changes
in technology
comparative
analysis
or final demand)
often
results
can be compared.
in conclusions
This
that are not
as sensitive to particular assunrptions as point predictions would
be.
point
Of course, sensitivity
of any research.
sutdies
are still an important
AQ
to incorporate
It is the ability
into the generalized
that ne gates many
framework
input-output
Enqineerina
previous objections to input-output analysis.
can be used to determine
studies
change
if relative
price
how technology
is likely
to
chanqes or if some fuel be comes un-
available
or how technology
is needed
to improve
payoff
studies
engineering
technology
'lore work
time.
may improve with
but the potential
forecasting
is great.
Inree areas stand out now as both important
policy decision p oint of view and as areas where
from the
eneralized
input-output anal ysis can provide some unique capabilities.
Obviously more te chniques than just input-output would he
needed to answer the whole
play
t he
uestion,
central integrating
but innut-output
will
role in these studies.
These
areas are:
(1)
for Environmental
of Capital Expenditures
Impacts
Quality.
There
air auality
is a question
standards
the electric
of whether
could be met
utilities)
the 1975
(especially
by
even if the technology
were now available because of capacity constraints
on the production
of such equinment.
best that can he done environmentally
cost?
This study Swould require
production
economy,
capacity
of emissions
available
standards.
at the national
more useful.
renional
knowl edqe
options
of the
(like fuel switching
to meet
level but renional
in regional
I/O tables which
the different
levels
The study could be performed
This would entail
above information
at reasonable
of the many sectors of the
and the various
or S0 2 control)
!Jhat is the
studies
obtaining
iwould be
all of the
form and the use of
are now available
[361.
50
(2)
Impacts
of M!ultiple Investment
Programs
Energy and Pollution Controls).
ment and industry
have
(e.g.
Roth the
overn-
oals which entail
large
investment programs as in the industries attempts
to meet energy demand and the government attempts
to control pollution.
Generalized innut-output
analysis is valuable for examining the combined
impacts of these various programs on different
sectors
of the economy.
This is another
form of
bottleneck analysis and requires information
(3)
similar
to that described
Impacts
of Alternative
Gas Demand.
program
the
Methods
Two extreme
the U.S. can rely
on
above.
can
internally.
and sizes
ferent
a massive
The economy,
(a)
and gas impor
oil
t
needs or (b)
energy
in terms-
iuf erp
Iovment
he
quite
of various industries, w JiI
to answering
and
il
oil and gas development
stimulate
in the se two cases.
ignoring
Meetina
cases are possible:
to me et its aro!inn
U.S.
of
d
A firs t approximatio
n
these questions could he obtained
by
the effects
or gas products
of any price
and
ocusin
;
chanaes
in
oil
on the diffexrent final
demands and industrial structures that might result.
These are important questions and the techniques 'eveloped
in this study
can help to answer
arts of them.
More
research
is needed to expand the applications of generalized inputoutput
analysis,
there is a value
1.5
but hopefully
to such research.
Organization
The methodology
I/O
format
this report has shown that
and using
beqi n in Chapter
2
the new technologies
of transforming
it as described
here
impacts
engineering
in Chapter
data into the
2.
The results
of capital exnenditures
are calculated.
for
Operatinq and price impacts
51
are then presented
in Chapter
4.
These results are then
integrated in Chapter 5, where a series of hiah, medium,
and low energy
conclusions
growth
futures
are projected
and recommendations
for 1985.
are made in Chapter
Final
6.
The
Appendices contain detailed derivations of the new technoloqy
coefficients, background information on the economy, enerqv
use, and the environment
the model.
[28].
The model
and a summary
itself
of data sources
is fully documented
in
for
eference
52
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56
F
I
G
U
R
F
1.13
FINAL DEMAND SECTOP
Sector
Number
1
(105)
BEA (ISP)
1
Classification
Sector
96.60
Person al
ame
Consumption
F xnenditures
(PCE)
2
(106)
96.70, 96.80
Gross Private Domestic Investment
(GPDI)
3 (107)
96.90
Net Exports
4
(108)
97.10(, 97.20
Federal Government Purchases
5
(109)
98.60-98.90
State and Local Government
ases
6
(110)
99.02
Total Final Demand
These
numbers apply if final demand components
sequential ly after the main 104 industries.
1
Purch-
are listed
57
Chapter 2
Methodology:
New Technologies and Generalized
Input-Output Analysis
2.1
What is Input-Output Analysis?
2.1.1
Methods of Representinc Fconomic Activity
Ever since
berries
the first two cavemen
got together
for meat, man has been interested
economic
activity
entation
that he has used depended
to answer.
to barter
in representing
in some form or another.
The type of repres-
upon the question
he wanted
For example, the forecast macroeconomic variables
of GNP growth and interest
rate provide
average stock market behavior.
a good barometer
of
Or the microeconomic theory
of the firm and general equilibrium
help to explain
Adam
Smith's Invisible Hand whereby the maximum social "good" is
attained by individuals pursuing their own interests.
determines
the usefulness
Purpose
of any of these representation
techniques.
2.1.2
Input-Output Analysis
The object
detail
of input-output
the interactions
services
between
analysis
is to represent
the various
that make up the U.S. economy.
industries
in
and
This form of renres-
entation is quite useful for forecasting industrial demand
in a manner
consistent
with growth
It is also very useful in policy
or regional
level, where
of the economy
planning
decision
makers
studies
as a whole.
at the federal
much be cognizant
of
the detailed impacts of alternative programs.
The heart of input-output
flow table that traces
the economy
contains
is the interindustry
the flow of goods between
on their way
an 8-sector
analysis
to the final consumer.
sectors
of
Figure 2.1
flow table for the U.S. economy
in 1958.
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59
Obviously with only 8 sectors in the whole economy, industries
must be highly aggregated. Much more detailed tables have
been prepared; the Bureau of Labor Statistics has gone as high
as 450 sectors,
while the standard Office of Business Economics
tables are publ ished at 365 order.
From a national
$100 million
increases
income
or GNP point of view, a decline
in automobile production combined with offsettino
of $50 million
each
in bicycle
transit usage produces no net charge.
industries
of
do not consider
Obviou i ly the affected
the situations
is the gap that input-output
analysis
prod u cti on and mass
equ i val ent.
fills.
Thi
As the economy
becomes more complex
and as economic interde pendencies grow,
input-output analysis becomes more important. Fortunately
this coincides with many recent developments that extenrd the
usefulness and timeliness of input-output dat a. Traditionally
the time lags involved
census
in the preparation
data forced economists
of the tables
from
to rely on tabl es that were five
(not censuses)
to update the tables has brought current data one step closer.
or more years
old.
The use of annual surveys
In addition, the Interagency Growth Project of the federal
government has begun to project input-output tables ten to
fifteen years into the future to show what the economy may
look like then.
[48, 49, 50, 511.
excellent introduction
This report
analysis
See
studies,
ing cycle were directly
incorporated
information
assessment.
an
Using
such new industries
or such new technologies
The basic economic
for
the first use of input-output
as a tool for new technology
gasification
55j
to I/0 analysis.
documents
data from engineering
dn
as coal
as the qas turbine
topp-
into the T/n framework.
in the flow tables was also
augmented with a variety of environmental indicators, such
as SO 2 emissions
and water
usaae.
input-output
representations
requirements
of the new industries
oped.
To perform
this task,
of both the canital
or
and operating
rocesses hdd
to be devel-
The next section describes this process in dtail.
G0
2.2
Technological Coefficients
2.2.1
Historical Derivation
Referring
to Figure
2.1, the question
can be asked:
"What would be the input requirements for each industry if
each
industry
produced
only one unit of output?"
In other
words, what is the fractional input requirement per unit of
output
for each industry14?
calculation
column
that only involves
by the total output
resents.
This is a very simple
dividing
of the industry
So far all the operations
ties to basic
census
each entry in a
data and cannot
that column rep-
and the data have direct
really be disputed.
The
leap between input-output data and input-output analysis
involves
the assumption
input
requirements
other
levels
assumption
wered.
that the same fixed proportions
that held during
of output.
the Census
It is this linear,
of
also hold at
fixed-proportions
that allows tlhat-if types of questions
to be ans-
Other assumptions involving the relationship between
inputs
and outputs
simple
and has some empirical
such as farming,
could be made, but this linear one is
where
validity.
the output
For some industries
is determined
as much by
the weather as by other material inputs, this assumption may
not be very good,
but nevertheless,
It is important
to notice
it is used.
that in deriving
the input
requirement coefficients, the process went from flows to
coefficients. In attempting to project new technology's
impacts
on the economy,
the opposite
approach
must be used.
That is, the input requirements are first determined and
then future flows are calculated. The next section discusses
the actual
14
derivation
Economists
refer
of the coefficients.
to these input requirements
per unit
output for each industry as technological coefficients.
terminology
will be adopted
throughout
This
the rest of the text.
2.2.2
Derivation of Technological Coefficients for
New Technologies
The process of deriving tecnoloqicdl
coefticients
for new technologies is best explained using an example.
The example
Institute
we shall
use is taken from a report by the
of Gas Technology
(IGT) [42].
This report
des-
cribes a 500 billion BTU/day gasification process that
operates via hydrogasification and electrothermal gasification of lignite. This particular report specifies an MHD
power cycle
as the primary energy
producer
to run the plant.
Other reports in the IGT series have specified other power
cycles
[43].
This example was
availability.
used because
of its ready
Its use does not imply that it is or is not
the most likely future gasification process.
Figure
pipeline
2.2 describes
quality
10 sectors
the components
of the price of
gas from such a process.
in our hypothetical
economy
households or value-added sector).
Figure
2.3 lists
(not including
the
The construction of
technical coefficients for coal gasification involves transforming
the pie chart of Figure
purchases
2.2 into a chart where
are from one of the eleven
sectors
all
in the model.
Obviously, these eleven sectors are being used for illustrative purposes
only.
The model
actually
used in this study
had 110 sectors, with manufacturing especially broken up into
much more detail.
(See Figure
1.11).
A first pass at this process
Supplies
are assumed
10% of Local
Taxes.
ties or services
or supplies
them.
appears
in Figure
to be 15% of Maintenance
and Insurance
In this figure, all purchased
are assigned
Retail
to the sector
trade is ignored
2.4.
commodi-
that manufactures
in this round.
For example, catalysts and chemicals are assumed to be purchased directly from the chemical manufacturina sector even
though
they may have been purchased
from a local distributor.
F
I
G
U
R
F
2.2
COMPONENTS OF PIPELINE GPS PRICE
GAS PRICE: 32.9 / 106 Btu
(INCLUDES 7.86 /10 6 Btu
BY- PRODUCT CREDIT)
AND
CHEMICALS
1.54%
A- 881101
Source:
Tsaros
[421,
p. 67
F
I
G
U
R
E
2.3
HYPOTHETICAL TEN-SECTOR ECONOMY
Number
Sector Name
1
Agriculture, Forestry, and Fishing
2
Mining
3
Construction
4
5
Nondurable Manufacturing (Food Processing,
Textiles, etc.)
Chemicals, Petroleum Refining
6
Durable Manufacturing
7
Transportation, Communications, Utilities
8
Wholesale
9
Finance, Insurance, Real Estate
and Retail Trade
10
Other Services
11
Value Added
a.
Labor (wages, salaries)
b.
Investors (interest and dividends)
c.
Capital
d.
Government (state, local, Federal taxes)
Depreciation
FIGURE
COMPONENTS
PRELIMINARY
(7!
2.4
OF PIPELINE
GAS PPICE
ASSI GNMENT OF SECTORS
GAS PRICE: 32.9 ¢ /10 6 Btu
(INCLUDES 7.86¢ /106 Btu
BY- PRODUCT CREDIT)
AND
CHEMICALS
1.54%
A-881101
65
The convention followed in input-output analysis is
that wholesale
for resale.
and retail
trade do not purchase
any goods
Instead, the purchaser is shown as having
bought any particular good directly from the manufacturer
at the producer's price (i.e., what the manufacturer receives
from a wholesale
up directly
buyer)
and paying
to the wholesale
any transaction
the manufacturing
is recorded
sector
the trade margin
and retail
or mark-
trade sector.
as two separate
entries,
Thus
one to
and one to the trade sector.
Transportation charges are handled similarly to trade
margins.
The purchaser is shown as paying the transporta-
tion charges directly to the transportation sector. Figure
2.5 applies
these concepts
of the price
charges.
of lignite
to the IGT example.
is assumed
Here 25%
to be transportation
No trade margin for lignite purchases is included
because the company is assumed to buy directly from the
mine.
Supplies and catalysts and chemicals are assumed to
have a 30% trade margin
and a 10% transportation
All that remains now is to collect
ponding
items.
This result is displayed
margin.
and sum all corresin Figure 2.6.
What we have referred to as technelogical coefficients
in this paper
and in the I/O literature
be called operating input coefficients.
might more properly
Technological
coefficients is clearly a misnomer since only in the crudest
sense
could
these coefficients
technology of the industry.
of revealing
trade secrets
be said to represent
the
There certainly is no danger
from this approach.
The operat-
ing input coefficients are much more analogous to the ingredients
list in a cooking
recipe.
By combining
inputs
in some artful way, a car, transistor,
all of these
etc., results.
66
F
COMPONENTS
I
G
U
R E
2.5
OF PIPELINE
GAS PRICE
FINAL ASSIGNMENT OF SECTORS (INCLUDING
TRADE AND TRANSPORTATION MARGINS)
0.73%
0.97%
0.16%
0.49%
0.93%
GAS PR ICE: 32.9 t / 106 Btu
AND
(INCLU[ )ES 7.86¢/10 6 Btu
BY-PF?ODUCTCREDIT)
CHEMICALS
1.54%
7-
.15%
8 ).46%
A-881101
a .i
u
67
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68
Especially when dealing with new technologies such as
coal gasification, there are many competing processes that
perform
the same function
or yield
the same product.
In
developing the technological coefficients to represent such
it is important
technology,
are representative
done,
that the coefficients
to make sure
of all the processes
to be sure that any conclusions
or if this cannot be
from such a study are
not sensitive to the exact process chosen.
2.3
2.3.1
Capital Coefficients
Historical Development
Capital coefficients describes the capital equipment
purchases necessary to build a new plant for some industry.
There are a number of problems associated with attempting to
derive capital coefficients from historical data, not the
least of which is the rapidly inflating cost of capital
Does one look at replacement
equipment.
Does human
capital,
such as knowledge
cost or original
in an engineer's
cost?
head,
or patent rights (such as Xerox or Polaroid hold) enter into
the numbers?
Does one look at the best new technology
or the
average technology for any given process?
Fortunately these questions
do not arise when
one is con-
cerned with the economic impacts of building new technology
from scratch at one point in time. The next section discusses
this.
2.3.2
Capital Coefficients for New Technology
The process involved in deriving capital coefficients is
quite
similar
to that for the technological
coefficients.
The
basic starting point is the engineering design study. We shall
continue using the IGT coal gasification example. Figure 2.7
6
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oL.
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Lo
0
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illustrates
the type of pie chart obtained
ing study.
This is not very informative
but Figure
from the engineer-
for our purposes,
2.8, taken from the same source,
down of equipment
of the process.
and installation
The numbers
provides
a break-
costs for the various
in parentheses
parts
are the fraction
of total fixed investment that each entry represents before
trade and transportation
margins
are taken out.
The engin-
eering study contains many more detailed tables than this.
For example, Figure 2.9 gives a detailed description of the
equipment required for the lignite drying section of the plant.
The basic strategy for the derivation of capital coefficients
then
is
to assign
e ach piece
of equipment
industry; remove the transportation
to its producing
and trade margins;
allo-
cate construction, insurance, engineering, interest, etc.,
charges; and divide the total purchases from each section
by the total cost o f the plant.
The procedure
yields
a vec-
tor whose elements sum to 1.0 and which can be used to allocate each dollar
sp ent on coal gasification
plants
to the
respective industry of ori gin.
From this basic percentage capital distribution vector,
the capital coefficient vector can be found by multiplying
by the capital/output
ratio that describes
the dollars of
capital investment in plant per dollar of product output from
the plant.
This is calculated
cost of a new plant
These
easily
by dividing
by the value of its yearly
are the procedures
that were
the capital
output.
foll owed to derive
capital and technological coefficients for all the various
new energy technologies that are discussed later. Detailed
derivations of the coefficients and the ass umptions behind
them are found
in the Appendices.
71
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oCD_
E--a
*-C o0::
4
CD
O
) N C
CI ^
O
0o4- E
C
a-
4- 0
LALO
"C a
Z
4 M
*U X
4.)
'-4
C
L
4)
C
O
,-.
LO
C 4O
S-
I-
-j
C
*er-
V
4) 4)
I
CDL~>
4-'VS
0.
C0
C-)
L 4'C
S-
CA
4.)
C
4-
a)
o
0
SO
a)
.0
E
3 '0
Z
73
2.4
Uses of the Coefficients
Given AN, the new process's technical coefficient vector
and K N , the percentage
a number
capital
distribution
of useful calculations
the economic
vector1
that can be made.
5
there are
For example,
impact of c dollars worth of production
using the
new process can be found without modifying the original technical coefficient matrix A, assuming that the new process results
in additional
purchases
ment for another
itional
and is not a replace-
If this is the case, then the add-
process.
sales by each sector XA can be found by treating
purchases
demand
from all sectors
of c dollars worth of the new process
vector,
the
as a final
c AN. Thus
-NN
XA
= c
(I-A)
(2.1)
-1
Similarly the economic impacts of d dollars of capital expendfor new process equipment
itures
=
XB
d
(I-A)
-
1
can be found by
(2.2)
KN
if the new process does not replace
an old process
(e.g.
Polaroid prints).
Since most new technology does replace some older process,
a different methodology is required to calculate economic
impacts
for these cases.
in sector
Assume
i in the technology
capital matrix
C and let A
vectors for this
procesJ 6
an old one completely
that the old process
coefficient
and C
matrix
occurs
A and the
be the respective
column
A new process rarely replaces
instantaneously.
If g is the fraction
15
This vector was defined in the previous section.
The
capital vector for the new technology will be designated CN.
16
See footnote
10 for the definitions
of A i-i and C.
-i I
74
of total output
i produced
for sector
using the new technol-
ogy, then the composite new technology coefficient vector
A'1
can
be
expressed
as
vector
capital
C'1
capital investment
equipment,
i in new technology
can be expressed
C'
-1 =
The new composite
(1 - h)
technical
+ g AN . Similarly
A
(1 - g)
of additional
if h is the fraction
sector
=
A'1
C
-1
by
then the composite
as
(2.3)
(.
+ h
hN
and capital
coefficient
vectors replace the old ones in their respective matrices.
These
matrices
can then be used as they would be normally.
of combining
The above process
representative
Carter
[6] refers
It is also possible
technology".
nology
of what
as a completely
is
new and old technologies
to as "imbedded
to introduce
new industry
a new tech-
and add it to the capi-
tal and technical coeffical matrices as sector N + 1, when
number
N is the original
two reasons.
of sectors.
This was not done for
First, most new processes are replacements for
older processes and hence the problem of relative weights
whether
must be addressed
it is represented
sector or combined with another sector.
historical
I/O tables,
the Commerce
as a separate
Second, in compiling
Department
relies on the
Standard Industrial Classification scheme, and this scheme
forces
new industries
into old classifications
large enough
industry
becomes
scheme.
For these
reasons,
to justify
until the
a revision
the two above methods
in the
of cal-
culating impacts and incorporating new technologies were
used rather than addinq new sectors.
2.5
Overview of the Generalized Input-Output Model
The generalized input-output model is
Figure
2.10.
contains
The core of the model
final demands
r:
diaqrammed
is the I/O framework
and technological
coefficients
that
for 1963
75
I
I!
0-
D
0
a
_-,
LU
0:2
-J
Lu
0
0
0
t-
4
N
z
<
L
C
E
U
L
a UU
w
0)
LLI
_
_
U
LU
Z
U
C
LL
0
LIU
C
o
°
-
C
O)
0
a,-
I
I
a
LU
0O
-
CN
M
'
Ln
7C
(actual), 1970 (projected) and 1980 (projected).
coefficients
are also capital
2.11 summarizes
There
Fiqure
for 1958 and 1975.
the data sources
for this I/0 information
and for the long-term residential price elasticities.
The boxes
below
the horizontal
line of Figure 2.10
represent the non-economic outputs available from the model.
Section
1.2 3 described
assumed
to be proportional
Each set of accessory
variables
how these accessory
vector
to the total output
coefficients
(used to convert
are
(X).
the total
output into values of accessory variables) can be considered
a separate module of information. The mere separation of
these modules adds several major advantages to the model,
the most
being its ease of update:
important
can be updated without
second
the rest of the model.
is that it allows
advantage
with any number of
Because of the separation each module could
other models.
be a part of an entirely
interface
The
possibilities,
for expansion
the central model to interact
enabling
easily
affecting
any one module
between
the I/O model
separate
model,
acting
and a second model
as the
(e.g. a
separate model could predict pollution coefficients which
would
in turn be used by the I/O model).
There are many
potential applications of this approach.
Another advantage of the accessory coefficient approach
is that it allows
other
variables
the accessory
in I/O.
ized in a particular
(Ai), its capital
column
vector
total output
Thus each industry
coefficient
of its accessory
to include
X).
to be treated
column
coefficients
any variables
coefficient
(Ci), and by a
(which can be
that are proportional
This is a very flexible
like
can be character-
year by its technological
column
expanded
variables
scheme.
to the
Figure 2.12
The 1970 coefficients are projected and not actual
I/O table for that year.
because there was no Census-derived
17
77
F
I
G
U
R
E
2.11
SOURCES OF INPUT-OUTPUT DATA 1
Source
Reference
Item
Description
104 x 6 Final Demand Vectors
FINAL DEMANDS
1963
1970
[49] 2
[52]
1980
[51]
Actual
4% unemployment basic projecti on by
Bureau of Labor Statistics ( BLS)
4% unemployment basic projecti on by
Bureau of Labor Statistics ( BLS)
TECHNOLOGICAL COEFFICIENTS
104 x 104 Technological
(Basic)
1963
1970
1980
Matrix
Actual
[49] 2
[52] 2
Projected
Projected
[51]
CAPITAL COEFFICIENTS
1958
1975
[2113
by BLS
by BLS
104 x 104 capital
coefficient
Battel le Memorial
Insti tute projections
[211
ELASTICITIES
Coefficient
matrix
Universi ty of Maryland Long-term Personal
Consumption Expenditure Price Elasttcitie
[2]
NEW TECHNOLOGIES
High BTU [42,
43]
Coal Gasification
Low
BTU
Insti tute of Gas Technology
Hygas Process
[391
1980 Texaco Process
[39]
1980 United Aircraft Combined Gas &
Steam Cycle
Coal Gasification
Gas Tur-
bine
Topping Cycle
--
-
1
A 1
All
sources and modifications
are documented in [28]
2Originally had 83 sectors but disaggregated to 104
sectors (see [28])
3Original ly had 112 sectors but aggregated to 104
sectors (see [28])
FIGURE
2.12
OUTPUTS OF GENERALI7ED INPUT-OUTPUT MODEL
AND DATA SOURCES
Reference
Item
Source
Final Demand
by Se ctor
See Figure 2.11
Total Output
by Sector
Calculated
Air Pollution
Emissions
[25]
International Research and
Technology
[38]
Battel le Memorial Institute
S02
CO
NOx
Parti cul ates
Hydrocarbons
Energy
Usage
(Reardon)
Coal
Crude Petroleum
Refined Petroleum
Natural
Gas
Electri city
Steel
Usage
Employment
Water Usage
[ 44, 47]
[51, 52]
[46,
47,
54]
Gross (including
reci rcul ati on )
Cool i ng
Censuses of Manufactures
Bureau of
and Mining
Labor Statistics
Censuses of Manufactures
Water Resources Council
and Mining
7
summarizes
the outputs
of the model and the basic data
sources used to construct the accessory coefficients.
The only special
tion of electricity
which
consumption
is the thermodynamic
any thermal
ity.
convention
utility sector.
References
and which
and does not include
with the generation
losses are attributed
of electric-
to the electrical
This convention is discussed more in
28, 29 and 37.
the thermal
the calcula-
on the basis of 3412 BTU/kwhr,
equivalent
losses associated
All such thermal
used involved
It has the advantage
losses to the sector
gets credit
that actually
for any efficiency
of assigning
causes
increases.
them
It has
the disadvantage of making the total electrical utility number
(since waste
heat is twice as large as the total useful electri-
cal energy).
The only other energy
is that the projected
related criticism
of the I/O data
1970 and 1980 I/O tables imply more
natural
gas will be used than any other authority
Whether
this was done purposely
28 discusses
2.6
in projecting.
or not is unclear.
Reference
this further.
Methodology in the Generalized Input-Output Model
This section
generalized
and section
I/O model
ogy coefficients.
and with
The problems
2.7 discuss-problems
the derivation
the
of new technol-
are summarized
recommendations made to correct them.
with
and various
These two sections can
be skipped without loss of subject continuity.
2.6.1
Problem Areas
Overall,
in this study
regional
the two major
deficiencies
of the model used
are the lacks of both dynamic
impacts.
In other words,
behavior
and
it would have been very
nice
via
to tie
the
final demand
value
represent
added
state
this defect
dynamrically to the incom~e nenera tc '
coefficients
or reqional
is a defect
as well as to be able
effects
of the particular
"f
course
tation
imnleen
u
eneralize d input-
in the
and not a defect
for this report
in the model.
to
output methodoloqy itself.
are two methods
There
the i np ut-output framework.
of the representations.
senti n
pollution
of representin
nollution within
Leontief is rsponsi ble for both
He seems to be inclined
twithin the
matrix
industr y or set of industries,
such
as
toward repre-
anti-pollution
a separate
that other se ctors
of the
ollution
desirinq to eliminate a certain amount of
f rom th eir output, purchase ollution abatement rom the anti-
economy
poll uti
on industries.
There is some economy
approac h since there are relatively
abateme nt processes
of e ffort in this
few types of poll uti on
and these could
for all industries
be
adequately represented by several anti-pollution industries.
This wo uld enable
in pollution
one merely
to calculate
the des ired
reduction
and have each industry purchase that amount from
the various anti-poll uti on industries.
Conceptually we nrefer the actual mrodification of the
technical coefficients
or each industry to represent nollution abaterent
activity.
,Pfter all, there is no anti-
pol luti on i ndus try and the i ndi vi dual deci si on unit
input-output
whether
framework
is the factory
to install pollution
resorti nq
industry
torts the actual industry structure.
pollutants
can easi lyv be renreserterd
coefficients.
or plant and it decides
abatemrent equipmnent.
to the anti -pollution
i thin the
artifice,
Thus, hy
one dis-
Actual emissions of
hy
a set
This coefficient anproach is
to handle nutputs other thar nollu
1 tion.
o
eission
easily neneralized
1
The general coefficient approach assumes linearity of
pollution
or whatever
and it assumes
processes.
with a rising
a homogeneity
of the industry's
methods
each of these four methods
impact depending
processing
is quite different.
upon whether
material.
finer the scale
and
Best of all would
each industry
Or, as another
have a different
The conclusion
pollution
of all of this is that the
of industries
it is to use the general
be to represent
as a weighted
impact of
they are used for heat or as a
of representation
the easier
processes
product
and the pollution
fuels used by an industry
economy,
sales
For example, the paper industry can produce paper
by any of four different
example,
level of industry
the economy
to produce
the
coefficient
approach.
or represent
sum of the various
used by that industry
within
technological
its output.
For
example, within the input-output table the paper industry
would
be represented
which
would
as a single set of technology
be a weighted
each of the methods
easy to carry
sum of the process
of making
the definition
paper.
coefficients
coefficients
for
It would be extremely
of process
to an extreme;
for
example, the difference between plastic and paper cartons as
packing material could be viewed as a different process. Thus
it is important
that process
and also that within
process
cesses
be defined
the input-output
not be represented.
for a particular
table itself
The reason
is to allow one to calculate
in a reasonable
technology
It is not necessary
level of detail be carried
over into the entire
This methodology
can be looked
in computational
pro-
coefficients
that this
input-output
upon almost as a sub-
routine for generating industrial coefficients.
result in vast savings
that each
for representing
industry.
table.
manner
This will
time.
This general coefficient approach also assumes that the
dollar flow of goods is proportional
material
cases.
flow of goods.
If one compares
to the product
This is definitely
the actual
flow or
not true in some
Btu flow of coal to various
sectors of the economy with the corresponding dollar flows,
one immediately discovers that there are significant differences
in the implicit
variation
prices
paid for coal.
is due to the economies
of large-scale
Part of it is also due to differential
production
where
costs.
Part of this
This is especially
purchasing.
transportation
or
true for coal shipment,
the value of the coal FOB the mine is about $4.54, while
the average
rail charge
destination
is about
to transport
the coal to its final
$3.01 or two-thirds
of the coal itself.
of the actual value
Since the input-output
table is con-
structed in purchaser prices, theoretically the different transportation charges should not enter into this problem, but in
fact because of the way the input-output tables are constructed
by the Commerce
Department
type of problem
can be handled with some extra work if it is
true that within
industry
such differences
each block
to another
industry)
all changes
cell are proportional
material
Of course
is not true.
This
(that is for each sale from one
that particular
flow.
do remain.
in dollar flows in
to changes
in the actual
there are many cases in which this
For example,
the steel industry's
sales to the
boiler manufacturers can change dramatically merely because
of a change
because
However,
in the grade of steel beinq purchased
of any change
for energy
in the quantity
rather
than
of steel being purchased.
flows this is typically
not the case.
(Unless the electric utility industry switches from burning #6
distillate to burning gasoline or from bituminous to lignite).
All in all, the input-output
suitable
for tracing energy
table can be made quite
flows in the economy
if the problem
of secondary products and transfers are handled judiciously.
A transfer
transfer
or secondary
of goods.
move all secondary
product
does not represent
Instead it is an accounting
production
of a particular
an actual
convention
to
good to the proper
primary sector for distribution. Since the Commerce Department
does publish both primary and secondary matrices, this problem
can be dealt with.
The consumption
particularly
side of the input-output
well represented
one used for this report.
that tie final demand
added
coefficients
aqqreqate
in a static
fynamic models
scheme
consumption
such as the
have been develoned
to the income produced
of the model.
table is not
via the other
But even this tying of
to agqreqate
income is not really
adequate representation of the consumption function.
an
t!hat
are needed are better behavioral models of why peonle huy
certain commodities: what function is fulfilled hvbythe service
rendered
by these goods.
This is particularly
important
for
purposes of projection of energy consumption because the nro-
duction of an air-conditioner
or the production o an autoro-
bile
does not require
nearlyv as much enerqv as the use by the
consumer of either
of these noods. F1uchmore sophisticated
relationships will be needed than simple multiple regressions
of automobile
usaqe or air-conditioner
usane versus nast data.
At the very least one must look at market
isms and the income elasticities
It is also extremely
of life index.
ditioners,
them almost
users,
it mav he that
as necessities
rather
In makinn nolicy statements about how enerqy
concerned
performing such reductions at minimum damage to the
of life in the nation.
annot he increased
must be very careful
of the carpital costs associated
in efficiency.
_·_
_·
_·_11__··1_
__
·I·__I·
uality
sinnificantlv:
It will also he imnortant
whether people respond more to channes in the
_
about
This is not to say that the eficiencv
of air-conditioners
or to changes
uality
even thourh air-con-
demands can be reduced one must be especially
increases
to tie
to an overall
because
are heavy energy
people have come to reqard
than luxuries.
in such endeavors
or comfort
This is important
for example,
of such demands.
important
the concept of transportation
echan-
saturation
in the capital
cost of enerny-lJsinq
one
with such
to learn
ricP of enerqy
equipment.
R4
The methodology
discussed
to regio nal modeling
of adaptation
capable
when such research
large computational
in this report
is quite
can be done , and there are extremely
and data g athering problems involved in
such models, the payoffs could be quite
flows,
model
region
trade
that can be used for predicting
Merely having state
reg ions.
for example,between
tables will enabl e one to answer many significant
input-output
questions.
It is
significant.
not completely necessary that one have a multiple
input-output
If and
efforts.
For example,
the impact of the 1975 air quality
standards on electrical utilit:ies will vary qui te a bit from
to region because
region
of low sulfur
fuels
of the availability
or lack
and the patrticular fuel mix within
the
region.
To assess
input-output
the overall
usefulness
must be able to relate
methodologyone
ness of the outputs
to the accuracy
involved in getting that accuracy.
of input-output
going
analysis
to such lengths
of the generalized
thereof and the effort
The data gathering aspects
are very difficult.
to gather
the useful-
The advantage
of
the data is that one immediately
has the ability to perform integrated forecasts.
For example,
one will not have to predict electric energy usage, steel usage,
The United
the number of colored television sets separately.
States
is one economy.
has a bearing
Information
on all segments
about one segment
by studying
Therefore,
of it.
of it
the interrelationships between industries,one can automatically
achieve simultaneously better relationships and forecasts for
all industries involved. In-depth industry analysis should
enable
one to predict
technical
coefficients
five, ten and
perhaps fifteen years into the future. This, of course, ignores
sudden changes in taste or consumer preferences, as that which
bottle
led to the decline of the returnable
ers and to the spectacular
----i-----------------··II
for soda manufacturbottle
rise of the throwaway
-
C-
I
--
--
and can.
--
Ih
P5
This is not really a technology
but must be represented
Carter
[6] refers
change within
the industry,
table.
as such in the input-output
to all such changes as structural
Such changes in fact reflect not only changes
changes.
in technology
but changes in product mix and in such preference
items as
Barring such small perversities, however,
the prospect is quite good of doing relatively detailed
throwaway bottles.
forecasts
of the future.
both policy planners
the conclusion
This should be of immense
and industrial
is that such models
help to
Thus
leaders combined.
and data gathering
efforts
are indeed worthwhile.
2.6.2
Recommendations
If the following recommendations were implemented, the
interpretation attached to any particular entry in the inputoutput
table would
be much more accurate
and the use of the
input-output framework for forecasting purposes would be much
simpler.
1.
We therefore recommend that:
The treatment
table should
ly is.
within
of services
be detailed
on the basis
of distributing
is to allocate
of number
than it current-
much more
The current method
chases of services
the input-output
them to sectors
of employees
icular industrial sector.
pur-
within
a part-
This process could be
significantly improved with more work.
Perhaps
the institution
would be
worthwhile.
of a census of services
Certainly this sector of the economy
is not dealt with very well
at all and, since
services now make up 50% of private GNP, further
documentation of service industries is definitely
in order.
2.
The Commerce Department, which publishes both
the censuses
and the national
input-output
tables
every five years, should begin to make changes in
their procedures such that the published inputoutput tables are designed with forecasting in mind.
The original efforts of publishing the inputoutput tables were more designed for representing
"the actual
formation
within the economy."
where
values
of Gross National
Product
There are many instances
are imputed
to services
such as
owner-occupied dwellings or consumer credit agencies and no such transactions
To the extent
documented,
actually
that such imputations
occur there.
are well-
then they are quite usable, but the
current lack of documentation leaves many people
in the dark as to the exact interpretation
numbers within the table.
be focused
of
More attention should
on actual material
or dollar flows
between sectors, than on such artificial transactions
as imputations
of values or transfers
of
secondary products.
3.
It would
be extremely
of the matrix,
useful
in particular
if for certain
energy
rows
rows and major
material rows such as steel, separate material
flow rows corresponding
the input-output
to the dollar
table were published
Department of Commerce.
flows in
by the
The census generates
much data along these lines, both in terms of
dollar flows and material
flows,
very good if these flows were
4.
and it would be
integrated
with one
another.
More in-depth industry analyses should be made in
the sense of defining technology coefficient vectors for each of the various processes
the industry
and then forming
used by
the actual set of
technology coefficients used in the input-output
P7
table by some weighted
process vectors.
combinations
of these
The Interagency Growth Project
does sponsor many such in-depth industry analyses,
but these studies are rarely if ever published
and are typically for internal consumption only.
Such publications
would be invaluable
in the up-
dating of forecasts using the input-output table.
5.
Many more studies of consumption behavior must be
made using new and different
problem.
6.
to the
For example, opinion polls to determine
the uses to which people
would
approaches
put energy
rank various possible
and how they
uses of energy,
e.g.
air-conditioning versus toasters.
More documentation must be put out by the Commerce
Department on the entire process of deriving the
national input-output tables.
7.
The Commerce Department could improve its representation of activities or functions within the consumer
sector by the use of more dummy industries similar
to the real estate
sector
in the present
table.
Such dummy industries could for example provide a
better representation of personal automobile
transportation and space conditioning.
2.7
New Technology Coefficients
2.7.1
Problem
Areas
The problems faced in deriving capital and operating
coefficients for new technologies are distinctly different
from those of constructing
data.
With census data,
goods and services
approximates
an input-output
table from census
one has to allocate
between
various
that of a control
sectors
total.
the usage of
until the total
The interlocking
arrange-
ments
of rows and columns
for each industry
make
this task
somewhat easier, although practitioners may say more difficult.
When dealing with
control
totals.
a new technology,
The situation is no better for operating costs.
Kwhr, can be remarkably illusory.
as pounds of coal per
Probably the most notable
of this in the current study occurred
of cost estimates for an MHD power cycle.
still
and
total but in no sense is this cost
Estimated engineering efficiencies, such
example
there are no
The cost of a new plant can be estimated
that cost used as a control
a hard number.
however,
does not exist
This technology
and could not be bought
for any amount of money.
Another example
in the IGT use
at the moment
was a cost study
for the Kellogg molten carbonate high BTU gasification system.
Costs were generated
work at the present
for a process
time because
that cannot be made to
no material
exists
that can
withstand the corrosion of the pressurized hot carbonate.
How can such mistakes happen?
When an engineer
is forced
for a new plant,
he immediately
to come up with a cost estimate
constructed "similar" plant.
new technology,
Ignorance, pure ignorance'
looks around
for a recently
If the plant happens to involve
there will be no similar plants
in existence.
Then he must resort to some of the standard estimation schemes
that work fairly well for old technology
number of these procedures.
plants.
There are a
The more accurate ones (used
for competitive bidding on plant construction) are very expensive to use and require much information.
actual
construction
type of estimate
The very detailed
is never used in the
first stages of contemplating a new technology.
desired
scale
fitted
volume of product
of the project.
to the basic
is used to determine
Appropriate
process
Instead the
the physical
sizes of equipment
are
steps and the costs are estimated
from the size of these individual
equipment
pieces.
From this
basic equipment cost, total installed costs are estimated by
allowing certain percentages of equipment costs for piping,
structures,
contingencies,
etc.
This is an extremely
crude
estimating method but it is adequate for routine process
plants.
Since
the engineer
doing the costing
does not know
of any problems
that can arise with the new technology,
he
usually assumes
there will be none or, at most, increases
his contingency factor somewhat.
The engineer
is not being d iabolical
in this procedure,
but does the best he can with the very limited knowledge that
he has.
There may be an element
costs of the resulting
product
funding will be forthcoming
involved
if the
de termine whether additional
from the government
or private
No construction company in the world would contract
sources.
to build
of duplicity
this new plant at the ab ove price, of course.
for example,
there there were an unforeseen corrosion problem
and, hence, all vessels must be c onstructed
alloy that was twice as expensive
an unheard-of
of the price
Suppose,
occurance).
out of a special
at the standard grade (not
Factors like this are the cause
rises that occur over the research
life of a product.
Changes in interest
and development
rates and inflation
(of construction wages in particular) exacerbate the situation.
The fact that there is a working
help the estimation schemes.
types of problems
model
of a process
They provide information about
that do occur and a small amount
tion about problems that do not occur.
are usually made for full size plants
problem.
up there
For example,
on the basis of labora-
is the possibility
fluidized
of informa-
However, estimations
tory models, pilot plants, or demonstration plants.
a plant is scaled
does
Whenever
of an emergent
beds which work fine on a
small scale tend to develop bubbles when scaled up. These
bubbles substantially reduce the yields from such a process.
Of course,
nology
once a full-scale
plant is developed,the
is no longer so new and cost estimates
much more accurately.
new tech-
can be made
What are the implications
to
of all this for attempts
incorporate new technology into future-oriented input-output
The practical
tables?
situation
in the previous
indicated
this is that before
The major reason
paragraphs.
a new technology
and hence enter
influence
is really not as grim as
for
can have any economic
the input-output
flow matrix,
the
Businessmen like
technology must be proven commercially.
uncertainty even less than input-output economists, because
they have money
riding on the betting wheel of technology.
Hence by the time there might be a significant
will be proven
technology
ing coefficients
enough
to the required
of course,
information.
There is
about costs of new technologies,
deal of sensitivity
a great
This assumes,
the
and operat-
that good capital
can be derived.
that one has access
impact
especially if a private organization is involved. For example,
the IGT Hygas demonstration plant preliminary engineering design
report is completed and contains detailed cost data, but it is
confidential material. We were fortunately allowed to examine
a copy of the report,
from which all cost information
had been
expunged, but were not allowed to reference or quote from the
The IGT process
report.
is 10 years away from commercial
reality but enough information exists now and more will-become
available in the next few years to predict fairly accurately
(± 25%) what the capital
in terms of current
and operating
coefficients
will be,
dollars.
What may happen, of course, is that another coal gasification process may prove to be cheaper. Already the Hygas
oxygen
process
process.
require
seems
to be cheaper
To do accurate
seen properly.
the capital
of the future
then may
the various processes
be fore-
predictions
that the mix between
than the electrothermal
This is a more difficult
and operating
coefficients
job than assessing
of each process.
On
l1
this problem
commercial
there
is little
feasibility
that, by the time
to say except
is proven,
the economics
will have
sorted themselves out enough to allow better prediction of
this process
mix.
does not exist now although
Such information
To predict which,
some processes are dropping by the wayside.
will be the big winner
if any, of the survivors
to ask at this point.
coefficients
much,
Fortunately
the technical
the technologies
and capital
may not differ by that
for the various processes
even though
is too much
are quite
This
different.
depends on particular circumstances.
2.7.2
Recommendations
The following recommendations would enable engineering
data
to be
1.
incorporated
to I/O tabl es more easily:
More documentation
Department
should be provided
of Commerce
of their official
In particular,
on the actual construction
national
input-output
of inputs
the prorating
of control
table.
of ser-
of employees
vices on the basis of number
the construction
by the
and
totals for each
industry should be documented.
2.
A standard
methodology
should
be developed
to
handle confusing classification items like piping
or instrumentation or confusing situations like
the construction component of installing a boiler.
Is this component
value
added?
assigned
Some research
to construction
or
needs to be done on
what the process industry terminology and costing
procedures mean by certain words or concepts,
e.g.
"bare cost,"
design,
"contingency
and construction
cost."
cost,"
"engineering,
92
3.
A more satisfactory method of handling secondary
products
should
be developed
than that of trans-
ferring the product to its primary industry.
These transfers distort the input structure of
indus trie s un less the I/O table is fir st
various
or o nly the primary matrix is used.
purified
For certain
p urpoises
it would be better not to
any prodlucts at all, rather
transfer
tort actual i ndus tria 1
4.
The treatment
than dis-
behavior.
of spec:ial items like computer
photocopying leas ing or the imputation
of valu es
c redit should be explicitly explained.
to consumer
revis ion of the Standard
A major
a nd
Industrial
Classification Manual would be a great boon to
such research
is
Production)
5.
BEA Industry
37 (Iron and Steel
particularly bad.
Certain stand ard "modules"
for construction
of
piping systems or insulation for the operation
of typical co nsumer billing departments should
be published.
What is needed is detailed percent-
age breakdown s (by input-output
sector)
of many
trivial construction or operating items. This
is much more useful than total construction
vectors
for typical electrical utilities.
The fo llowing recommendations should make new technology
studies much more meaningful and useful:
1.
Research on dynamic input-output models should
be initiated and these models should concentrate on state-space
types of dynamic models,
as
well as the simpler Leontief dynamic inverse
approach.
actual
The focus here should be on developing
simulation
models of flows of goods and
9q
services through the economy and on detailed
representations of industries within the economy.
2.
Regional input-output models should be developed
with energy
of materials
the focus.
as their prima ry focus and the flow
as a major component of
in general
A complete
mul ti-regional input-
output model is not completely necessary in this
context, since the purpose of the work is not so
much to predict inter-regional flows of goods and
services but more to predi ct impacts within
pollution, etc.
region of new technology,
3.
a
Water pollution coefficients should be developed
to go into the input-output
framework
same lines as the air poll
ion coefficients
This could be implemented
with
a cru
de set of coeffi
along the
do.
a two-stage process
ents such as that
developed by the Harvard Eco nomic Research Project
or by In ternational Research and Technology
the repo rt to the Population
second
s tage in which
Commission
for
and a
indivi dual industries were
studied in detail to determi ne the pollution
dollar
i mpacts
of that indus try.
per
Theoretical
engineer ing work also needs to be done to define
the limi ts of applicability
assumptions of pollution
parti cul ar industry.
be included
within
of the linearity
and total output of
More c omplica ted models
Research
is needed
can
the inp ut-output framework if
more complicated models are justified
accuracy.
4.
a
by increased
on the projection of input-
output tables in constant dollars.
It is known,
for example, that the so-c alled double deflation
scheme that involves simultaneous deflation of the
inputs and outputs
of an i ndustry
nonsense in certain cases.
It is
can lead to
important
to
94
know what impact
5.
this has, if any, on projections
in constant dollars.
Much more engineering data should be integrated
into the input-output
tables.
This is very
analogous to the in-depth industry studies recommended previously.
6.
An explicit
study of the use of input-output
analysis for forecasting of energy demand should
be made
using the most
that is available.
is in the process
flow table
flow data
Oak Ridge National Laboratory
of preparing
for 1963.
it should enable
recent energy
a 365-order
energy
When this study is published
one to do much better energy
use
forecasting.
7.
The time structure
of investments
for the energy
industries, e.g. the investment profile over time
of a typical nuclear generation plant, should be
studied.
This corresponds to the economic concept
of a lag structure.
important
Such a study is quite
if dynamic models
are going to be used.
95
Chapter 3
Impacts of Capital Expenditures for New Energy
Technologies
3.1
Summary
3.1.1
of the Impacts
GNP and Investment
Perspective
The energy-producing industries are extremely capital
intensive.
Attempts
have been made to estimate
the total
capital value associated with these and other industries,
but this is an extremely
difficult
task and people
have
generally had more success in calculating the incremental
investments necessary to produce some change in the capacity
of an industry.
To the extent
that such numbers
are meaning-
ful electric utilities, for example, have a capital to output
ratio of 5.3 (the highest
average
is .8.
When,
of any sector)
for example,
while
the industrial
a major investor
such as
the electric utility industry switches from a less capital
intensive technology to a more capital intensive technology
as in the switch
from fossil
to nuclear
steam generation
plants, the economy receives an extra added amount of investment over and above what would normally be predicted for a
particular increase in demand.
In order
pective,
to put the remarks
it is necessary
the GNP figutes
of this chapter
to look at how investment
and how investment
in persfits into
by the various energy-
producing industries fits into the national investment figures.
A breakdown of Gross National Product by major compenents is
given
in Figure 3.1.
As can be seen from this figure,
personal
consumption figures make up approximately 63% of GNP while
government expenditures eat up another 22% of GNP.
investment
makes
The importance
misjudged
up slightly
$135 billion.
less than 14% of GNP in 1970.
of this investment
by the size of it:
Thus,
component
14 percent
of GNP is easily
of GNP is still over
Not only are entire industries completely
96F I G U R E
3.1
1970 GROSS NATIONAL PRODUCT OR EXPENDITURES1
X of
Personal Consumption Expenditures
Services
Transportation
Housing
Household operation
TOTAL
Non-durable goods
Gasoline and oil
Food and beverages
Clothing and shoes
TOTAL
Durable
Dollars
Subaccount
17.9
91.2
36.1
6.8
34.7
13.7
263.5
100.0
2.9
14.8
5.8
42.6
1.8
9.3
3.7
26.9
22.9
131.8
52.6
264.7
8.6
49.7
19.8
100.0
3.7
21.4
8.5
42.9
2.3
13.5
5.3
27.1
37.4
37.1
42.2
88.6
6.0
6.0
14.3
3.8
3.8
9.0
615.8
100.0
63.2
122.2
97.2
55.6
44.3
100.0
12.5
9.9
22.5
goods
Furniture and household
equipment
Automobiles
and parts
TOTAL
TOTAL goods and services
Government purchases
and services
State and local
Federal
41.8
of goods
TOTAL
219.4
Net exports
3.6
Gross private domestic investment
Change in business inventories
Fixed investment
Residential structures
Nonfarm
TOTAL
0.3
2.8
21.9
22.4
3.0
3.1
65.4
48.3
27.1
75.4
97.9
6.7
3.7
10.4
13.6
100.0
13.8
49.3
27.7
77.0
TOTAL fixed investment
1 32.5
00 .0
TOTAL
135.3
974.1
Subaccounts
100.0
do not add to totals because "miscellaneous"
categories are missing.
Source:
0.2
22.4
22.9
36.8
102.1
TOTAL gross private domestic
investment
2.0
29.7
30.4
Nonresidential
Producers' durable
equipment
Structures
TOTAL nonresidential
1
% of
Total
% of
Account
Economic
Report of the President
1971,
[10]
07
dependent
on the investment
component
of GNP, but also it is
investment that enables the economy to grow in the future.
It is primarily
investment
because
of the growth properties
that this component
of business
of GNP is so important.
Excludinq home insurance from the investment fiqure
the remaining non-residential investment amounts to 10.5
percent of GNP.
Two-thirds of this amount comprises business
purchases of durable equipment, the remaining one-third is
made
up of purchases
of structures.
Figure 3.2 provides us with a more detailed picture of
purchases
of new plants
and equipment.
In 1970, total pur-
chases of new plant and equipment were almost $80 billion.
Separating
out the sectors
that produce
energy
such as
petroleum, electricity, gas utilities, and the mining industries (of which
coal is a significant
part),
it is apparent
that over 25 percent of the new plant and equipment purchases
are made by energy-producing
sectors
of the economy.
Capital investment can be shown in even more detail.
Figure
3.3 provides
type and by year
a breakdown
of capital expenditures
for the electric
utility industry.
by
This
exponential increase in construction expenditures coincides
with
the acceleration
in the rate of growth
The electric utility industry
massive
power stations
of electricity.
s comprised of more than just
and tie lines.
In 1971, generation
accounted for only 56% of all investment, while transmission
accounted
for 15%, distribution
for 23% and administrative
building approximately 5% of all electric utility investment
expenditures.
Figure 3.4 provides a similar breakdown for
the gas utility
industry.
To further
transient
problem
illustrate
that we are not experiencing
that will go away shortly,
Figure
a
3.5
reproduces the latest capital expenditure survey of McGrawHill for the period
1972 through
1975.
It is obvious
from
qR
F
I
1970 NEW PLANT
G
I! R
E
3.2
A!D EQUTIP'FNT
(current
XPE NDIT lRES
ollars)
°
Dollars
Manufacturin
Stone,
°/
of
ccount Total
In dustries
industries
Primary Metals
Electrical mac hinery &
equipment
Machinery except electrical
Transportation equipment
Durable
Subaccount
of
goods
clay &
lass
Other durables
TOTAL
oods industries
Food, including beverage
Textile
Paper
Nondurable
Chemi cal
Petroleum
Rubber
Other nondurables
3.24
20.5
10.1
4.0
2.27
3.47
14.3
21.9
7.1
10 . P
2.8
15.3
3.0
.99
6.2
7.6
3.41
?1.5
3.0
10.6
1.2
4.2
15.80
100.0
49.4
40.0
2.84
17.5
8.8
1.7
3.5
10.2
5.1
19.7
17.5
2.9
3.4
2.43
3.4
.56
1.65
3.44
5.62
.94
1.11
21.3
34.7
5.8
6.8
_
100.0
31.95
TOTAL
4.3
2.0
4.3
7.0
1.1
1.3
4 _
-.
Public Utilities
Electric
10.65
1.0
22.2
Gas and other
2 .49
18.9
5.2
.1
TOTAL
13.14
100.0
77.5
16.4
5.4
5.1
3.9
2.3
Other
1 .89
9 ini no
Rai 1 road
Air Transportation
Other Transportation
Communi
cati on
Commercial and other
TOTAL
TOTAL
TOTAL All industries
Source:
Economic
eport of
1.78
3.03
1.23
10.10
3.7
8.7
. 3
2.5
21.1
34.7
29 . 1
16.59
47.9
34.62
100.0
47.76
79.71
the Pres dent,
13.3
2.2
3.
P
1.5
72.
20.8
43.4
100.0
59.9
100.0
19
1
10 1 .
F
ELECTRIC
I
G U
P
E
CONSTRUCTION
3.3
EXPENDITURES
INVESTOR-OWNED ELECTRIC UTILITIES
(including Hawaii since 1960)
By Type of Utility Plant - 1945-1970
Bh.
ofD...s
-6
OTL
-3
164008600mg
.Ol0STh
SUT 0#
t-roucon
2
194
*4
.ed on Tb
Source:
'47
SOS.
'4
'
50
'51
A'2
3
'55
7
'5
"
'0
'61
'62
63.
4
'65
'66
'67
"
'69
1970
59
Edison Electric Institute Statistical Year
ook 197n, [141
F
I
G
!rn
U
R
E
3.4
GAS UTILITY INDUSTRY
CONSTRUCTION EXPENDITURES
MILLIONS OF DOLLARS
3200
GENERAL
UNDERGROUND
STORAGE
2800
---
DISTRIBUTION
,
I
2400
2000
1600
1200
800
400
1946
59
69
70
71
72
73
FORECAST
NOTE:UND
)ERGROUND
STORAGE
INCLUDEDWITH PRODUCTION
& STORAGE
DATA
PRIORTO 1950.
Source:
Gas Facts
V1t,7i,
11,
n.
179
74
Inl
F I
G U R E
3.5
PLANS FOR CAPITAL SPENDING
(Billions of Dollars)
-----Prelimianry---% Change
1973
1974
1975
$1.98
1.35
2.38
3.68
1.71
S2.46
1.51
2.50
3,76
1.97
S2.66
1.39
2.55
3.72
1.85
.39
.37
.36
INDUSTRY
Actual
Planned
Iron & Steel
Nonferrous Metals
$ 1.70
1.08
2.14
2.80
1.51
$ 1.58
1.24
2.20
3.37
1.69
.38
.32
.24
.33
1.61
37
.42
.37
.36
29
1.48
17
45
24
1.23
1.74
1.52
.88
1.25
1.53
.78
1.23
1.89
1.40
.78
1.21
1.76
14.15
16.24
15
17.06
18.23
18.34
3.44
1.25
.84
5.85
2.69
3.65
1.66
1.06
6.61
3.05
3.80
1.48
1.10
7.34
3.32
3.99
1.60
1.20
7.78
3.36
.64
3.91
1.35
1 .40
1.25
7.70
3.33
.64
1.43
Electrical Machinery
Machinery
Autos, Trucks & Parts
Aerospace
-
7
15
3
20
12
-16
Other Transportation
Equipment
Fabricated Metals
Instruments
Stone, Clay & Glass
Other Durables
TOTAL DURABLES
Chemicals
Paper & Pulp
Rubber
1.25
.67
.85
.84
1 .80
.61
.71
1.15
1.52
6
33
26
13
13
16
32
TOTAL NONDURABLES
15.83
18.26
15
19.01
19.97
19.81
ALL MANUFACTURING
29.98
34.50
15
36.07
38.20
38.15
Mining
Railroads
Airlines
Other Transportation
Communications
Electric Utilities
Gas Utilities
2.84
2.76
1 .94
11.63
14.27
2.81
20.40
31
7
47
41
8
11
15
13
2.94
1.95
2.01
1.78
Commercial1
2.16
1.67
1.88
1.38
10.77
12.86
2.44
18.05
15.70
2.67
20.60
2.96
2.09
2.03
1.94
13.94
16.01
2.83
21.01
2.91
2.07
1.75
2.06
15.19
16.97
2.55
21.01
ALL BUSINESS
81.19
92.94
14
96.51
101.01
102.66
Petroleum
Food & Beverages
Textiles
Other Nondurables
I
1. 79
.62
12. 79
'
Figures based on large chain, mail order and department
insurance companies, banks and other commercial businesses.
Source:
[33].
1.55
stores,
102
looking
at this table
that the trends, especially
in the
energy-producing sectors of the economy, are continuing.
notice
that all capital
economy,
with
expenditures
the possible
in all sectors
exception
Also
of the
of iron and steel are
increasing more rapidly than GNP is expected to increase.
3.1.2
Comparison of the Energy Technology Investment
The word "impacts" as used in this and following chapters will mean
the total sales
(both direct
and indirect)
of
each sector required to support some level of specified activity.
E.g.
sales
(Xm) required
the impacts
to meet
The comparisons
private
domestic
composed
of capital
purchases
these purchases
M are the total
or X
= (I-A)- 1
that are made in this chapter
investment
use gross
(GPDI) as the reference.
of both residential
and non-residential
M.
GPDI is
building
con-
struction and equipment purchases and comprises about 16% of GNP
in total
value.
On a sector
variation is much greater.
of new construction
final
by sector
basis,
the
For example, GPDI represents 70%
and 0% of mineral
mining
purchases
by
demand.
Appendix
I contains
comparisons
for each sector
and also comparisons
output for each
sector.1 8
The costs
and plant
marized in Figure 3.6.
based
purchase
on these costs
summarizes
of GPDI and total output
of GPDI impacts
and total
sizes used in this chapter are sum-
Three very detailed comparison tables
are presented
in this section.
what each of these comparisons
first table (Fiqure 3.8a) compares
ment in each of the new technologies
Figure
will illustrate.
yI
The
10 billion worth of investto the total projected
18
GPDI impacts are the total sales by each sector (X I)
required to meet the GPDI component of final demand (YI) or
XI = (I-A)-1
3.7
103
F
I
G
U
R
E
3.6
NEW TECHNOLOGY PLANT SIZES AND COSTS
(millions of current dollars )
Technology
Nominal
Plant Size
Nominal
Plant Cost
High BTU Coal
500 Billion BTU/day
Base Cost
$304.8
Pollution Equipment
50.0
Total Cost
354.8
(274.2 in 1958 dollars)
842 million SCF/
Total Cost $27 .5
($21.3 in 1958 dollars)
Gasification
(IGT Hygas
Process)
Low BTU Coal
Gasification
(1980 Texaco
process)
Gas Turbine
day
(147 Billion BTU/
day)
1000 MW
Topping Cycle
(1980 Combined
Cycle)
Nuclear
(Pressurized
Water
Reactor)
Total Cost $94.0
($72.6 in 1958 dollars)
1000 MW
Total Cost
$240
( $205 .8 in 1958 dollars)
F
I G
U R E
104n
3.7
SUMMARY OF DETAILED COMPARISONS
Exhibit 1 (Figure 3.8a): Iso-Dollar Comparison
1980 Gross Private Domestic Investment (GPDI)
VS.
$10
Billion
Exhibit
2
in Each New Technology
Investment
1
(Figure 3.9b): Iso-Dollar Impact
~ ~ ~ ~ ~ ~Comparison
~ ~~ ~~
-
.
Impactl of 1980 GPDI
V
.
Impact I of $10 Billion
Investment
Exhibit 3 (Figure 3.10):
Impact 1
in Each New Technology
Iso-BTU Impact1 Comparison
of 1980 GPDI
vs.
Impactl
of Five Trillion BTU/Day Capacity Addition
new Technology
of Each
1
Impacts refer to total sales (direct plus indirect)
by each sector required to support purchase of given
investment.
2
5 Trillion BTU/day equals 10 Hygas plants, or 43 Low
or 41,000 MW of electric generation.
BTU gas plants,
105
1980 GPDI.
Th e second table compares the impacts of these
$10 billion
pu rchases with that of the total GPDI
(impacts
include direct plus indirect purchases of goods and services).
The third table compares the impacts o f equal energy capacity
nstead of equal dollar investments)
in each of
the new techno logies to that of total 1980 GPDI.
Investment
investments
(i
to provide 500 trillion BTU/day capacity of
is calculated
high or low BT U gas and to provide
output.1 9
41, 000 MW of electrical
The 41,000 MW of electrical generation
fueled by 500 trillion
gas turbine
topping
BTU/day
of low BTU gas (assuming
cycle is used).
is also calculated at
Nuclear investment impact
the actual investments made for the
new technologies at $10 billion each and compares
components
GPDI.
in theI details of equipment provided
estimates
derived by multiplying
are. obvious.
These purchases were
the capit:al coefficients
so that it should be obvious
varies
it to the
Here the ddifferences between Value Added
and variations
in the engineering
by $10 billion
thaIt the Value Added coefficients
from .35182 to .099 1 1 20 v ll of the equipment
Equal
total yearly
the
41,000 MW capacity.
Figure 3.8a describes
1980 projected
can be
lists for
capacities are calculated on the basis of equal
outputs, which take
into account the load
factors associated with each technology. Hyqas plants (at 90%
load factor and 500 billion BTU/day/plant) processes about 160
trillion
BTU/year.
The low BTU gas plants
(at 70% load factor
and 100 million BTU/minute/plant) process about 37 trillion BTU/
year.
Thus approximately 4.3 low BTU gas plants or the equivalent in terms of yearly energy output to a Hygas plant.
Since
this given size low BTU gas plant can power a 945 MW second
generation COGAS plant [39, p. 1011, 4100 MW of COGAS plants
are the equivalent of one Hygas plant.
20
The percentage capital coefficients were actually used.
See section
2.3.2
for a description
of the
ifference.
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the new technologies were very good on major items, like boilers
and turbines,
and adding
equipment
like lunch room
and very poor on small items,
about drawing
one must be very careful
of this is that
The conclusion
machines.
inferences
from small
The standard engin-
differences in coefficients or dollar flows.
eering estimation schemes that were used in costing these plants
cover the cost of many small items, like telephones, by increasof the big items like turbines
ing the cost estimates
or by some
simple percentage add-on figure for miscellaneous equipment.
Since, by definition, major impacts are not made by minor items,
there
is
loss if these items "fall through the cracks."
no great
Figure 3.8b compares the effects of equal capital expenditures
($10 billion)
for each of the three new technologies
and, in addition,
that we have discussed
for nuclear
steam
electric generation (a conventional pressurized water reactor
is used).
are in millions
All comparisons
of 1958 dollars
and
represent direct plus indirect effects of capital expenditures.
There are several things to notice about these figures.
the zero under New
C onstruction
(s ecti on 11) for Low BTU Gas
Occu rs because of th e
way
for
In essen C4e, all expenditures that
this techn ology.
norm ally would have gone
the
First
c api tal
coefficients were derived
Construction were disaggregated
into concrete, steel , etc. and assigned directly to the sector
The zero
that supplies such c ommodi ties to New Construction.
is o f little s ignifi cance. Second, the total output resulting
from each of these
$20. 3 billion
to New
t:echnol
for an ini ti al expenditure
of this variation
14.1 bi llion to
ogies varies f rom
of $10 bill ion.
is true and part is spurious.
Part
Low BTU Gas
Plants represent the low of $14.1 billion. Because construction
items were assigned directly to the supplying industry, rather
than going through sector 11, the value-added component of New
Construction (about 36% of total construction) is missing from
the total.
This would
add perhaps
For High BTU Gas Plants
too high because
costs
to the total.
the total of $20.3 billion
of the convention
to New Construction
$1 billion
rather
followed
is probably
of assigning
than to Value-Added.
labor
This
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111
difference
could subtract
$1.5 billion
from the total.
The
conventions followed in deriving the capital coefficients are
described much more fully in the Appendices.
It is more meaningful to compare capital expenditures for equal energy capacity investments in the new technologies.
Figure 3.9 summarizes the total capital expenditures
required for equal capacity expansions of five trillion BTU/
day (the size of 10 Hygas plants).
itures
are described
in Figure
The impacts
of these expend-
3.10.
The most obvious point about these figures is the difference in size of the total
range of over a factor
This
a little
is
impacts.
there is a
of ten ($1.278 billion to $13.973 billion).
bit like c omparing
For a true comparison with nuclear
of the low BTU gas plant
should be added.
On the surface,
a pples
and oranges though.
ge neration the capital costs
an d the gas turbine topping cycle
The resul ting
$6 bi llion
cost
reduces
the
two, wh ich is still considerably above
price rang e to a factor
of
the ratio of 1.25 which
cur'rently exi sts between conventional
fossil
and nuclear plants.
reasons.
(1)
The pressure
more than the corresponding
(2)
Because
Nuclea r
vessel
p lants
an d
cost so much
for two
reactor core cost much
boiler fo r a fossil fired plant.
of- the radioactivity inv olved, everything must
be of very high quality, which means inspected, x-rayed, etc.
All of this costs much money,
nuclear
and typically
a valve for a
plant will cost 2-3 times as much as one for a fossil
steam plant.
The high BTU gas plant cannot be compared directly
to the electric plants since different forms of energy are
involved.
What is striking about such a comparison though is
the difference in capital involved for energy in gaseous
versus electric form. Note that this has only slight bearing
on the actual
cost differences
the energy
forms because
transportation, etc., are ignored.
di fference appears between the capital
the price of raw fuel
even more striking
between
,
An
112
F
I
U
G
R
E
3.9
EXPENDITURES FOR 5 TRILLION BTU/DAY CAPACITY OF EACH
NEW TECHNOLOGY
Hygas
Low Gas
Gas Turbine
Nuclear
I
1970
1970
1968
500 BB/
day 2
147 BB/
1000 MW
1000 MW
P1 ant Cost
(millions of dollars)
$?54.8
$27.5
$94.0
$24.0
Equivalent Numberl
10
43
41
41
Total Investment
(milli ons of current dollars)
$3548
$1182
$3854
$9840
Total Investment 3
(1958 Dollars)
$2741
$913
$2978
$8374
Year of Estimate
1970
Nominal Plant Size
Hay
Nominal
1See footnote 19
2 BB/day
=
3 Deflated
Billions
of BTU/day
by total non-residential GPDI deflator
for appropriate year
113
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115
involved
in low BTU gas production
and that for high BTU gas
that even
Here it must also be remembered
production.
fuels,
both are gaseous
they are vastly
Also the differences
in capital
BTU gas will cost more, perhaps
Impacts
3.2
costs are softened
It is definitely
a lower fuel cost.
of Capital
very far.
somewhat
so that the high BTU plant has
in efficiencies
by differences
in properties
different
to transport
and that low BTU gas is not economical
though
true though
that the high
twice as much.
Expenditures
for High BTU Coal
Gasification
are three parameters
There
of the economic
tion.
impact
of capital
that determine the magnitude
spending for coal gasifica-
factors are (1) how much is spent per plant,
These
how many plants must be built,
must be bu llt
an d (3) how rapidly
Of cour se, a fourth factor w Iould
(2)
these plants
bEe the regional
density of s uch plants that would determine the lo(cal impacts
of such capi tal expendi tures. A fifth facto r whichh could be
is that of the fee dback effect of growthi in a parti-
considered
cular sector of the economy.
is best illustrated with two examples.
Firs t, the
of electric generation facili ties typically
requi
s
comitant expansion of transmi ssion facilitie.
tion and administrative
facil ities.
east
of this
The impact
if
expansion
rees
the con-
niot
distribu-
Second, indus tries which
supply products to the growing industry (for examp le,
mining
in the case of electri c generation)
capacity
in order
the growing
of capital
to be able to supply
sector.
spending
technologies
In this chapter
factor
coal
exipand their
must
the increaseed needs of
the impacts
o'f the rate
in coal g asifica tion or in the other new
will not be disc ussed.
acceleration effects and
Because so-ca lled economic
the feedback
effects
of growth
are
being ignored, the numbers which follow must be regarded as the
To properly
minimum economic impacts of these expenditures.
116
deal with
model.
these impacts,
one needs a dynamic
input-output
The next chapter will discuss dynamic model simulations
and results.
Because
local and regional
to indicate
by looking
a national
aggregate
effects were washed
what some of the regional
at the probable
location
model was used,
out.
We will attempt
impacts
will be
of many of these plants
utilizing new energy technology.
The cost of a high BTU coal gasification
the time the technology
very difficult
dollars,
becomes
to predict.
inflation
commercially
Because
is not a problem
plant by
available
the figures
is
are in constant
but there are still many
technological uncertainties involved in the processes.
For this report
D will be used.
Thus,
the capital
costs derived
in Appendix
a new high BTU coal gasification
plant
utilizing the IGT electrothermal hydrogasification process is
expected to cost $354.8 billion dollars in 1970.
expected
beyond
to escalate
1971.
prices.
This price
If one allows
some people
deflates
for each year of delay
to $274.2
for a 20 percent
at IGT have recommended,
in 1958 dollars
lower
by 5 to 10 percent
is $329.0 billion.
This cost is
million
contingency
in 1958
factor as
then the cost of the plant
The more optimistic
and
figure will be used here.
To find the number
of plants
required per year, it was
assumed that commercialization of high BTU coal gasification
would
not take place
the Hygas
process.
until 1980.
This is certainly
The gasificatio n plant
to have in production
true for
that El Paso plans
for 1976 may start a snowballing
of new
plants but presumably most of the industry will wait to see
how El Paso fares before
FPC estimates
jumping
that 1.4 trillion
will be supplied
in to plant construction.
cub ic feet of synthetic
The
gas
in 1985 and that 1 3.7 trillion cubic feet must
be obtained from presently unknown sources.
[ip, p. 5]. These
estimates form the basis for the two high BTU coal gasi fication
scenarios summarized in Figure 3.11. The low estimate implies
F I
G U
R E
117
3.11
HIGH BTU COAL GASIFICATION SCENARIOS
Low Capacity:
Enough investment in Hygas process to meet
FPC estimate
synthetic
of 1.4 trillion
cu. ft of
gas from coal in 1985
Total Investment1 : $2,340 million (8.5 plants)
Yearly Investment: $468 million (1.7 plants)
High Capacity:
Enough
investment
estimate
in Hygas process
of 13.7 trillion
to meet FPC
cu. ft. of unfilled
demand for gas in 1985
Total
I nvestment:
$22,889million (83.5 plants)
Yearly Investment: $4.578 million
1 All
figures in 1958 dollars
(16.7 plants)
118
that almost nine 500,000 MCF/day
high BTU gas plants must be
constructed between 1980 and 1985.
Assuminq
that these come
on line at the rate of 1 .75 per year and that the time distirbution
of the plant i nvestment is uniform, Figure
describes
the economic
i mpacts
3.12
(the Low Capaci ty column)
this to the imp act of the total 1980 GPDI.
compares
and
The
most significant impact is in sector 51, plumb ing and structural metal
where
products
1.6% of the total investment
represents
is for hiqh BTU gas plants.
less than $600 million
a total GPDI of $184 billion
3 presents
Column
and press ure vessels)
a signifi cant result, but then 1.75 plants per
This is hardly
year
(prod uces boilers
(1958 dollars)
out of
and a total GNP of $1.155
data for the high capacity
trillion.
future.
In this future, it becomes national policy not to depend on
overseas
sources
for natural
gas.
If high BTU coal gasifica-
tion is to make up the gap between
domestic
production
and
consumption, over 85 of the standard 500,000 MCF plants must
be constructed
between
1980 and 1985.
over 17 plants per year.
This amounts
to
Under this crash program, sector 51
(Plumbing and Structural Metal) again gets the most impact
(16%).
In fact the crunch
is somewhat
worse
than appears
here because most of the impact occurs among boiler makers
and pressure vessel manufacturers, which amount to about 15%
of the total sector.
to expand
by almost
Thus these sub-industries
might have
100% if such a crash program were under-
taken.
The other way,
of course,
is if all of the new energy
fast.
Since
for this difficulty
technologies
all of these technologies
to arise
expand moderately
require
large inputs
from sector 51, the combined impact could be quite significant.
To get some idea of the regional impacts, estimated
reserves by state are provided in Figure
Wyoming,
3.13.
It can
be
read-
and many of the
ily seen North
Dakota, Montana,
Rocky Mountain
States have subs tantial coal deposits.
Much
119
F I
G U R E
3.12
MAJOR1 IMPACTS 2 OF LOW AND HIGH CAPACITY SCENARIOS
FOR
HIGH
BTU
COAL GASIFICATION
(millions of 1958 dollars)
1980 GPDI
--
5
Ferrous Metal Mining
6 Non Ferrous Metal Mining
Coal Mining
New Construction
44
Stone & Clay Products
45
Primary Steel
48
54
55
Primary Non-Ferrous
Metals
Misc. Non-ferrous
Metals
Plumbing & Structural
Metals
Other Fabricated Metals
Engines & Turbines
61
64
66
General Ind. Machinery
Service Ind. Machinery
Electrical Ind. Machinery
81
89
Water Transportation
Wholesale Trade
90
Retail
91
Finance
94
Business Services
49
51
101
Imports
defined
GPDI im pact for
Impacts
support
Yl
7045
12092
$ 3.4
2.9
4.6
164.5
17.0
51.0
High
rnare
~ 4v
$ 34
(3.7%)
29 (3.5%)
45 (8.0%)
1609 (2.2%)
166 (2.4%)
500 (4.1%)
2679
10.4
102 (3.8%)
9161
30.5
299 (3.3%)
8247
138.2
5417
1844
6040
1786
8900
524
20424
14033
and Insurance
2
829
74246
Trade
Major i s
908
558
7
11
Low
tv
Canari
---- 'J'Y
Sector
4295
14151
10506
24.9
16.2
54.3
8.5
24.8
4.5
44.1
20.5
16.0
37.4
22.1
1353 (16.4%)
244 (4.5%)
158 (8.6%)
531 (8.8%)
83 (4.6%)
243 (2.7%)
44 (8.4%)
431 (2.1%)
200 (1.4%)
157 (3.7%)
366
(2.66%)
216 (2.1%)
or over
as over $160 million
High Capacity Scenario.
3%
defined as total sales (XI) requi red to
given level of investment Y or X = (I-A)
of
1
120
I
F
r
U
COAL RESERVES OF THE UNITED
R
E
3.13
STATES
Y STATES (MILLIONS OF TONS)
Fst. total
Peiai ni nq
sources in
the around
0-3,000 ft.
Di tuminous
Coal
Alaska
Arkansas
Colorado
Georgia
Illinois
Indiana
13,538
2,420
80,715
1 ,640
Kansas
Kentucky
Maryland
Michigan
Mi ssouri
Montana
New Mexico
Carolina
Dakota
1.
Vi
Other State s
6,420
371,715
1,172
205
1,172
205
1,572
705
23,359
2,299
10,760
23,359
221,701
61,479
110
23,359
23,359
378,701
8 ,479
130
378,701
109,479
135
530,6 ,
1P,686
110
350 ,680
0
41,864
3,299
332
59,650
6,048
32,100
9,710
1,867
618
TOTAL
671,049
Source:
1970 Keystone
530,60
73
239,756
56,779
20,519
22,686
117,952
1,572
705
43,864
23,299
43,864
33,299
432
432
7q,650
3,031
4,652
79 ,650
2,031
2,652
3,031
12,926
32,250
10,045
6,183
26,926
80,250
13,045
36,183
102,034
1C2 ,034
12,699
Wy om i ng
39,538
265,08,9
65,952
34,779
6,519
2,652
rgini a
overburden
13
Dakota
Utah
Virgi nia
Washi nqton
the qround
0-6,000 ft
139,756
48
Tennessee
Texas
6,420
in
18
Pennsyl vani a 57,533
S.
33,538
260,089
sources
139,756
34,779
6,519
18,686
65,952
3,299
Oklahoma
Oregon
overburden
Est. total
Pemaininq re-
226,715
78
239,756
56,779
20,519
22,686
117,952
41,864
Ohio
1
130 ,089
62,389
Iowa
N.
N.
Tota
13,518
19,415
Al abama
re-
4,652
102,03P
26,926
115,250
13,145
51,183
102,034
545,71n
120,710
4-45,710
4,721
5,721
5,721
7
_
2,872,955
3,210,060
1,559,875
Cal
Industry
Manual f 301 p , 3
121
of this is low-sulfur
coal and readily strip mineable.
Illinois, Iowa, Missouri,
also have significant
the old s trip mining
and parts of Kansas and Oklahoma
coal de P osits. And of course there are
states o f Pennsyl vani a, Ohio, West
Virginia, and Kentucky.
Much of the c urrent activity
for coal
gasification pilot plants is centered
i n North Dakota and
Illinois. Because of the inc reasingly strict sulfur regulations on power plant emissions, eastern coals which are relatively high sulfur
The eastern
content
are in dange r of losing their market.
coal companies
are deparate ly looking
markets and new desulfurization methods
be a prime
use centers,
Because
of the proximity
low BTU coal gasification
in the East than in the West where
longer.
The only economical
reserves
of low-sulfur
coal
tion method.
Transportation
I
.
heating value
coals
less.
may be more economical
tran smission distances are
way to ope n up the vast western
may
be a h igh BTU coal gasifica-
-----
costs for these high-volume
low
transportation
cost for pipeline
gas
Thus, not only will high BTU goal gasification
be used to supplement
it may also prove
porting
to significant energy
(70% of F.O.B. mine value for bituminous)
be very high while
are much
The East then will
target for both high BTU and low BTU coal gasifica-
tion methods.
would
for new
our dwindling
natural
to be the most economical
the low-sulfur
western
gas supplies,
method
but
of trans-
coal to the east and midwest
load centers.
The problems
of constructing
and operating
the three
hundred and fifty million dollar plant in relatively unpopulated
North Dakota, for example, can easily be imagined. Construction
labor would
is going
undoubtedly
to significantly
the importation
have to be imported
for this task which
raise the cost of such a plant.
of construction
labor was
indeed
required,
If
the
local economic effects would be lessened since much of the laborer's money would
be channeled
out of the area to his home.
Since
122
area,
the combined
of money
are already made outside
purchases
equipment
injected
to one quarter
ment cost.
effect
is to significantly
into the local economy.
of total cost of the plants
of the local
reduce
Roughly
the amount
one third
represents
equip-
Another 10-14% consists of interest charges.
if construction
used a local labor pool, 50-60%
Thus
of the total
plant cost would be circulated in the community.
Because of
the distribution effect, every billion dollars of construction
activity employs about 46,700 workers in the construction
industry
which
but about
would
102,700 in all industries
be located in the proximity
(about 3/4 of
of the construction
The average trade margin for personal consumption
site).
expenditures
is 21.6%
trade is .733.
and the value added fraction
Thus in current
dollars
for retail
every Hygas Plant
constructed at $354.8 million could result in ($354.8 x .5
x .75 x 1.216 x .733)
vicinity
$118.6 million
of GNP generation
in the
of the plant.
The local effects
discussed
3.3
in Chapter
of the operation
of the plant will be
4.
Low BTU Coal Gasification
Low BTU coal gasification
cannot be used to supply
etic gas over very long distances.
synth-
Because of its low heat
content (typically 150 to 200 BTU/ SCF as compared to natural
gas at 1000 BTU/SCF , the effective diameter or carrying capacity
of
the
pipeline
is diminished
by a factor of between
seven.
This is jus t not an econom ical way
because
of the ease of cleaning
five and
to ship gas.
However,
up hydrogen sulfide from rela-
tively concentrated gas volumes as compared with cleaning SO2
from stack gases in relatively dil ute volumes, low BTU coal
gasification defini tely has a plac e. A very natural place for
it is in the electric
utility
industry where the low
BTU, high-
123
volume gas will mesh very nicely with new gas turbine
electric generation techniques.
To illustrate
the two scenarios
of
the
share on the coal-using
util ity unit.
two
di
in
impacts
more detail,
3.14 concentra te the projected
of figure
low BTU gas mIarket
electric
the economic
Figure
sector
of the
3.15 illust .rates the impact
fferent market shares for the low BTU gas.
second column of Figure
3.15 represents
a 5% market
the coal-usin g electric generation plants in 1985.
The
share of
Such
a
market share corresponds to the addition o f 3.6 plants every
year. Column three represents a 20% marke t share for the low
BTU gas.
Thi s market
share corresponds
to the addition
slightly
over 14 plants
sidering
the 1975 emission standards for electric generation
plants,
this
coal-using
per year between
of
may be a very conservative
1 980 and 1985.
projection
el ectric utility market share.
Con-
of the
For example,
Commonwealth Edison is currently installing a first-generation low effi ciency Lurgi gasification plant on an experimental
basis
ards.
Growth
to help it to meet the 1975 SO2 emission
stand-
in coal-fi red pla nts alone could require
12
plants per year but beca use of the low cost of these pl ants
(only $27.5 million
high capacity
3.4
scenario
plant
in
current dollars), even the
h as almo st no economic
The Gas Turbine
Assuming
expected
per
Topping
that the gas turbine
and at somewhat
impact.
Cycle (COGAS Cycle)
technology
close to the predicted
develops
prices,
as
the
combined gas-steam cycle for electric power generation look
extremely
attractive.
This is especially
true when used in
conjunction with a low BTU coal gasification plant because
the gas turbines
heat contained
energy.
allow one to extract much of the sensible
in the low BTU gas as well
as the chemical
124
F
I
G
U
R
E
3.14
LOW BTU COAL GASIFICATION
Low Capacity:
SCENARIOS
Enough investment
to have 5% share of
1985 c oal-burning electric utility market
(which FPC estimates
is 13.86 quad rill ion
BTU or 370 low BTU gas plants)
Total Investment 1 :
$393 million
(18.5 plants)2
Yearly Investment1 : $78.6 million (3.65 plants)
High Capacity:
Enough
investment
to have 20% share of
1985coal-burning electric uti lity market
Total
Investment
:
1572 milli on (74 plants)
Yearly Investment1 : $314.4 mil lion (14.6 plants)
1 All
investments in 1958 dollars.
2 Plant
sizes are
described
in Figure
3.6
125
F
MAJOR
1
IMPACTS
2
0F
I
LOW
LOW
l BTU
G
U
R
E
3.15
AN
IHIG14 CAPACITY
COAL
GASI FI CATION
S CENARI OS
FOR
(mi llions of 1958 dollars)
Low
Sector
1980
GPDI
45
Primary Steel
12092
7.5
51
Plumbing &
8247
13.2
6041
7.5
30.0 (0.50')
14151
7.7
30.7 (0.22%)
Capaci ty
Hi q h
Capaci ty
29.9 (0.25%)
52.8
(0.649)
Structural
Metal
61
Prods.
General
Industrial
Mlachi nery
94
Business
Services
1Major means any impact over 30 million or over
of the GPDI impact for each sector by the Hiqh
0 .5,
Capacity scenario.
2Impacts refers to total
sales of each sector required
to sustain the indicated level of investment.
3For definitions
of scenarios see Fiqure 3.14.
4 Gross
Private
Domestic Investment
126
The two scenarios
3.16 while
Figure
for COGAS are summarized
3.17 illustrates
the capita 1 expenditures
topping
topping
for these numbers
The figures
cycle plants.
gas turbine
the economic
impact of
of gas turbine
in column
cycle power stations
in Figure
2 assume
that
capture 6% of all
electric generation capacity growth between 1980 and 1985.
The FPC estimates
that 184,000 MW of fossil
and 140,000 MW
of nuclear generation will be added between these years.
This amounts
to approximately
of one thousand
4 COGAS plants
megawatt capacity coming on line per year.
Column 3 presents
similar figures under the assumption that 25% of all growth
between
'80 and '85 will be captured
ping cycle
topping
turbine
attractive
of the
and it has the
of being very low in thermal pollution,
advantage
of the increased
efficiency
and because
the gas
part of the power cycle is air cooled).
The major
Turbines
may be quite
at this point in time, the economics
cycle look extremely
additional
(because
This later fraction
type of station.
high, however
by the gas turbine top-
impact
(sector 55).
the nature
for this case occurs
in Engi nes and
This is to be expected
of the gas turbine
consi dering
t opping cycle plant.
The small
impact on the boiler makers reflects the fa ct that m uch of
the power is generated in the topping cy cle and the waste heat
han a typica
boiler is of much simpler construction tl
supercritical, water-wall, once-through boiler.
1
modern
If the gas-
turbine in this plant had been assigned to Aircraft
and Parts
(sector 73, because it may be a modified aircraft engine)
instead of to Engines and Turbines, the impact would have been
even less significant
percentage-wise
be cause of the larger
for electric generation base load are a new product for the Aircraft industry,
size of sector
the significance
73.
Even though
is lost because
of the input-output
table.
turbines
of the aggregation
Even at 110
level
order this problem
127
F
I
G
U
R
E
3.16
GAS TURBINE TOPPING CYCLE (COGAS) SCENARIOS
Enough
Low Capacity:
investment
to make up 6% of expected
(FPC estimated) growth in electric generation capacity
between
1980 and 1985.
Total
expected growth of 324,000 MW of which
140,000 MW will be nuclear.
Total Investment1 : $1489 million (20.5 plants) 2
Yearly Investment: $298 million (4.1 plants)
Enough
High Capacity:
investment
to make
up 25% of expected
growth in electric generation capacity between
1980 and 1985.
Total
Investment:
$5957 million (82 plants)
Yearly Investment: $1191 million
1 All
investments
2 Plant
(16.4 plants)
in 1958 dollars.
sizes are described
in Fiqure 3.6.
F
MAJOR
1
IMPACTS 2
I
G
U
R
E
3.17
OF THE LOW AND HIGH CAPACITY SCENARIOS FOR
COGAS (GAS TURBINE TOPPING CYCLE)
19803
Sector
GP D(I
Low
Capacity
High
Capacity
(mi1Tions of 1958 dollars)
11
44
45
49
New Construction
Stone & Clay Products
Primary Steel
Misc. Non-Ferrous
51
Metals
Plumbing & Structural
54
Other Fabricated
55
61
Engines & Turbines
General Industrial
Machinery
62
Machine
66
Electrical Industry
81
Water Transportation
89
90
91
94
Wholesale Trade
Retail Trade
Finance and Insurance
Metal
Metal
Products
Products
Shop Prods
Equip.
101
Business Services
Imports
74246
7046
12092
59.6
7.3
18.0
239 (0.32%)
29 (0.42%)
72 (0.60%)
9161
14.9
59 (0.65%)
8247
30.5
122 (1.48%)
5417
1844
12.7
63.9
256 (13.86 %)
6041
1454
8.9
4.1
36
8900
524
39.3
1.8
21.2
9.9
7.2
24.6
11.8
157
7.3
85.0
39.8
28.7
98.4
47.0
20424
14033
4295
14151
10506
51
(0.94%)
(0.59%)
16 (1.12%)
(1.77%)
(1.39%)
(0.42%)
(0.28%)
(0.67%)
(0.70%)
(0.45%)
Major refers to impacts over 24 million or over 1%
of GPDI impact on each sector
Ky Hiqh r'apacitv
scenario.
2
Impacts
refer to the total sales of each sector
required to sustain the indicated level of investment.
3 Gross
Private Domestic Investment.
129
of lack of detail exists
impacts
of the construction
topping cycle generation
plants
of the various
the construction
The differences
are that while
coal gasification
to those for
plants.
topping
the gas turbine
cycle
with the low BTU gasifica-
they are very natural
tion plants,
of gas turbine
are very similar
tend to be associated
plants will
of
Thus the impact gets "averaged down."
a larger sector.
Regional
impacts of the
subindustry
on one particular
occurs
new technologies
the major
because
candidates
for construction
anywhere in the country because of the increased efficiency
of these plants.
3.5
Nuclear Steam Generation
3.18 describes
Figure
the scenarios
for the addition
of nuclear capacity, while Figure 3.19 illustrates the results
The
of these scenarios.
nuclear
generation
refer
expenditures
projected),
while
of projected).
FPC estimates
that 140,000 MW of
1980 and 1985.
will be added between
Low
to 7,000 MW per year being added (25% of
high refers
to 28,000 MW being added (100%
As the chart indicates,
there are likely
to
be capacity constraints in several industries such as Plumbing
and Structural Metal Products (sector 51 which manufactures
pressure vessels), and Engines and Turbines (sector 55 which
manufactures turbogenerators).
pronounced
discussed
because
that we have
all of the new technologies
impact on these two industries.
effect will be quite
It must be remembered
generation
This could be especially
The combined
large if the industries
grow as expected.
that part of the reason that nuclear
plants are so expensive
is that assemblies
(especially the pressure vessel) must be tested quite extensively
for leaks.
This particular
by many manufacturers
capability
so the resulting
is not possessed
"crunch"
could be
130
F
I
G
U
R
E
3.18
NUCLEAR GENERATION SCENARIOS
Enough investment to yield
Low Capacity:
FPC estimate
of
the
of 140,000 MW of nuclear capa-
city addition s between
Total
25%
Investment1:
1980 and 1985.
$7149 million (35 plants) 2
Yearly Investment: $1430 million (7 plants)
Enough investment to yield 100% of the
High Capacity:
estimated 140,000 MW
tions between
Total
of nuclear capacity
1980 and 1985
Investment:
$28596 million (140 plants)
Yearly Investment: $5719 million
1
Al
2 Pl
1
figures in 1958 dollars.
an
t
sizes
addi -
are described
in
(28 plants)
Figure 3.6
131
F
MAJOR 1
I
G
U
R
E
3.19
IMPACTS 2 OF LOW AND HtIGH CAPACITY
SCE NARIOS
FOR
NUCLEAR GENERATION
19803
Sector
(mi 1 i ons
5
Ferrous Metal
Mininq
908
6
28
Nonferrous Metal Mininq
Printing , Publishing
45
46
47
48
Primary Steel
Iron & Steel Foundries
Iron & Steel Forginqs
Primary Nlon-ferrous
49
51
12092
2197
17.5
809
2679
25.7
9161
75 . 1
8247
295.5
Metal
Misc. non-ferrous
Me tals
Plumbina & Structural
Metals
5416
54
Other
55
60
Engines & Turbines
Special Industry Mach.
61
62
General
Machine
68
81
91
94
Elec. Lighting Equip.
Water Transportation
Finance
Insurance
Business Services
Fab Metal
Prods
1844
4296
6041
1454
2489
Industry Mach.
Shop Prods.
Mlajor refers
2Impacts
Capacity
doll ars
)
31 (3.49 )
29
(3 .50 )
107 (3.25 )
456 (3.77%)
70 (3.19%)
29 (3.59 c/)
7.3
103 (3.84%)
300 (3.28%)
1182 (14.33%)
47.9
192 (3 .54 )
(53 . 82 )
144 (3 .35 )
24 8.1
993
55.9
224
(3.70%)
68
(4 . 720 )
35.9
17.1
22.9
91 (3.69%)
36 (6.950/)
181 (4 .21 )
52 4
4295
45 . 1
14152
137.0
54?
to impacts over 24 million
1% of GPDI impact
Scenario.
of 1958
7.7
7.3
26.8
114.0
829
3304
Hi q h
Low
Capacity
CP DI
on each sector
( 3. e7%)
or over
by Hi qh Capacity
refer to the total salesof each sector
required to sustain the indicated level of invest-
ment.
Gross Private Domestic Investment.
132
very severe
unless plans
private
industry
expected
demand
are made to avert it.
is willing
to expand
Hopefully
to take care of this
but the risks are quite large.
133
Chapter
4
Impacts of New Technology
Plant Operations
and
Energy Price Rises
4.1
Overview
of Chapter
This chapter consists of two major sections.
The first
describes the major economic impacts of operating the new energy
Three new technologies are discussed in
technology plants.21
this chapter:
(Hygas process)
1.
High BTU coal gasification
2.
Low BTU coal gasification
3.
Gas turbine topping cycle electri city aeneration
fueled by low BTU gasified
bination
coal ( this
of the two processes
is
a com-
des cribed in Chapter
3).
Conventional nuclear steam electric generation is again
used as a reference.
cycle and low BTU coal
The topping
asif-
icati on were combined because this combination represents the
most likely utilization of both processes.
It will be shown
cantly affected
that only a few industries
by the operation
the fewer comparisons
of such plants
will be made.
tions of High and Low utilization
gies as there were in Chapter
Any discussion
are signifi-
and consequently
There will be no calcula-
impacts
of the new technolo-
3.
of non-economic
impacts
(such as SO 2
emissions or employment) that result from operating the plants
will be put off until the 1985 projections
Chapter
2i
Chapter
are presented
5.
For definitions
3
of "impacts"
and other terms, see
in
134
The second section of this chapter describes the major
price chanqes
that can be expected
if the prices
of various
substitution
occurs.
energy sources
energy
process).
one cannot
rise, assuming
that no
A firm conclusion
the price of most non-energy
very significantly
to occur over the long run
that aries
is that
22
goods
will not change
consumer
(typically
1
price rise for 50% jump in
The major deficiency
tell how the various
of the results is that
fuel's market
shares will
change or how competition between basic materials like steel
and aluminum
will be affected.
It is the assumption
of no
substitution that weakens the results.
4.2
Impacts of New Technology
4.2.1
Operations
Perspective
Before discussing the impacts of operating new technology plants, the current operations of the energy industries
should
Figure 4. 1 presents
be put into perspective.
capital
and operating
ratios of the energy
various
industries.
Their
large capital/output ratios were discussed in Chanter 3. The
size of the value-added coefficient which reflects labor and
capital
contributions
to the value of the product are quite
high in general, with the possible excepti on- of petroleum
refining
which
has a very high throughput
of material.
The
employee/output ratio indicates that most of the value-added
coefficient
as a whole
is made up of capital
make up only 4.5
costs.
of GNrPwhen measured by value-
added and only 3.5% of GNP when measured
demand.
2 3
The ene-rqy industries
Des-pi te the fact that
by sales to final
the value-added coefficients
22
Consumer goods are things like cars and lamnshades that
primarily are purchased by Households as opposed to steel innots
or raw plastic that are primarily purchased by industry.
23
GNP can be found by summing either total incomes (value
added) or total sales to final consumers (final demand).
Hence
the size of industries in comparison to GNP can be measured
in these two ways
tC
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136
are so high,
cessing
fuel inputs
industries
remainder
to these energy
make up a very significant
of the cost.
allocate
industries,
Figure 4.2.
coefficient
less than 25% is usually
on the electrical
In this breakdown
is made
and taxes.
of the
vectors
left to
up of fixed costs,
Figure
intensiveness
utilities
primarily
Fuel costs make up another
ing accounts.
industry.
industry
4.3 presents
16% of the total costs
the same graphic picture
and fuel intensiveness
of
for the qas utility
expenses
is made up of the costs of natural
expenses
capital charges
among the rest of the operat-
Over 75% of total operating
and total operating
can be found in
over 58% of the cost of elec-
leaving a mere 26% to be divided
capital
portion
among all of the rest of the industries.
More detail
tricity
and pro-
In fact, when value added and fuel
inputs are removed from technological
of the energy
producing
for the gas
gas purchases
make up almost 750 of the cost
of gas to the consumer.
4.2.2
Economic Impacts of New Technology Plant Operation
The economicimpacts of operating a coal qasification
plant are quite
different
from those of constructing the plant.
No capital producinq sectors are affected
by plant operation.
And only the fuel supplying sectors are significantly
impacted.
The economic impacts of new technology operations will
illustrated
in two ways, similar to those employed in the
Chapter 3:
1.
Iso - dollar impacts - the outputs of each sector
required to support the production of S10 billion
worth
of energy
by each new technoloqy
nuclear steam electricity
generation.
and by
be
137
F I
G
U R
E
4.2
COST OF ELECTRICITY
1968 Actual
Mills/Kwhr
% of
Category
% of
Total Cost
Power Production Costs
Fuel
2.47
33
Other Operatinq & Maintenance
1.34
18
9
Fixed Charges
3.71
49
24
7.52
100%
49%
.25
1.66
13
87
1
11
1.91
100%
12%
Total Production
Cost
16
Transmission Costs
Operating & Maintenance
Fixed Charges
Total Transmission
Distribution
Costs
Operating & Maintenance
1.64
32
11
Fixed
3.56
68
23
Charges
Total Distribution
Administrati
5.20
on
.79
Total Cost of Power
Source:
Breakdown
=
100%
100%
15.42
5%
100%
[17], p. I-19-10
of Fixed Costs
(14.2% of Investment
or 8.93 mills/Kwhr
58%)
Cost of Money
Depreciation
Source:
34%
and Replacements
8.2%
1.2%
Insurance
Income Taxes
.2%
2.2%
Other Taxes
2.4%
117], p. I-19-6
13
I
F
CLASSI FICATION
GAS
OF
G
Includes
F
4.3
a
EXPENSES
OPERATING
ALL NATURAL
Note:
R
U
GAS COMPANIES,
both straioht
AS PERCENIT
OF TOTAL,
1970
and combination
as companies
1970
Type of Expense
Purchased
Maintenance
gas cost
Total Operation
Tota
Oeration
R Maintenance
0.0
75.9
Other Production & purch.
exp.
0.3
1.6
Production & Purchases,
0.3
77.5
Storage
0.2
0.9
Transmission
0.9
4.3
Distribution
2
6 .3
Total
.2
Customer accounts
- 0.1
2.9
1.8
6.3
3.8
100.0
1
Sales
Administrative & General
Total Operatina Expense
1
Less than 005
Source:
percent.
[1], p. 194
. .......
.
"
..,,,,,,.,,,,,,....
.I·... ..I.-.....P
139
FIGURE
4.3
b
COMPOSITE INCOME ACCOUNTS, TOTAL INVESTOR-OWNED GAS UTILITY
INDUSTRY, INTERIM BASIS, 1970
(Mi li ons)
Amount
$16,380
Total Operating Revenues
431
Operating expenses-maintenance
11,205
Operating expenses-operation
11 ,636
Total Operatinq Expenses
Total Operating
639
930
1 ,569
3.9
5.6
9.5
14,306
87.3
2 ,074
310
2,384
12.6
1.8
14.5
867
5.2
Operating income
Other income (non-operating)
Gross income
Interest on long-term debt
Other income deductions
Total
income deductions
Net income
1
Source:
Includes
[1],
p.
provi si on
172
71.0
6.7
1
Expenses
2.6
68.4
1,101
Depreciation, retirements,
depletion, amortization, etc.
Federal Income Taxes
All Other Taxes
Total taxes
100.0%
90
.5
957
5.8
1 ,427
for deferred
federal
8.7
income
taxes.
14n
2.
Iso-energy
required
BTU/day
impacts
- the outputs
to support
of each sector
the production
(or 25 billion
Kwhr/year)
of 5 trillion
by each new
technology and by nuclear steam electricity
generation.
Before
$10 billion
average
proceeding,
it is important
of energy were assumed
consumer
price
to state that the
to be purchased
levels for the different
at the
fuels that
include transportation, distribution, and administration
costs.
The impacts
by that portion
The
eneration
that will be presented
of this
10 billion
are caused
only
that is used for generation.
cost of each new energy
source
is compared
in
Figure 4.4 with the average customer cost (average revenue per
MMBTU)
for fuel.
The total energy
from each source
is indicated
The actual impacts
are depicted
projected
in Figure
1980 total output
The most obvious
requirements
impact
10 billion energy
The first column
of each sector
processes
purchases
contains
the
for comparison.
occurs in coal mining where
for the various
the total projected
by $10 billion
in Fiqure 4.5.
of the
4.6.
purchased
represent
the coal
50-75
of
1980 coal usage.
This impact on coal mining will not mean reopenino
many old mines and greatly expanded business for other miners
Si nce
however.
scheme
e so great
a4
fields
in
.
Chapter
require
P ossib e locations
3 but
impacts
of these fields were discussed
the gasification plants will most likely
Thus the coal minin
but i t
will
be
24
not the expansion
industry
a very localized
are not near ly as significant
exception
hiqh
of the qasi fi cation
:, they must be sited near large coal
the deve 1opm ent of new mines,
old mines.
expand
the coal requirements
wil T he forced
expans i on.
as
coal
to
Other
with the
of limestone purchase (for SO2 scrubbing)
BTJ gas olan ts.
Because of the difference
of
ossible
by the
in costs between strip and
underground mininq, these coal fields must most likely be
strip mineable.
141
F
I
G
U
R
E
4.4
GENERATION COST vs. AVERAGE CUSTOMER COST
FOR
EACH
NEW TECHNOLOGY
Average
Generation Cost
Technology
Customer Revenue
1970 Dollars
1970 Dollars
72.6¢/MMBTU
HiQh BTU Coal
Gasification
Low BTU Coal
Gasification
5.5 mills/kwhr
Calculated
by
(84. 8¢/MMRTU)
15.4 mills/kwhr
(16.1 mills/kwhr)
Topping Cycle
1
2
2
66.3¢/MMBTU
(55.3¢/MMBTU)
37. 1¢/MMBTU
Gas Turbine
101.7¢/MMBTU
assumina any additional g eneration costs
eneration costs for gas or electricity)
(over the average 1970
were passed
on to the
2
in parentheses
Numbers
F
customers
I
G
on
a dollar
are deflated
U
R
E
for dollar basis.
to 1958 dollars.
4.5
$10 BILLION ENERGY PURCHASES (AT AVERAGE CUSTOMER
COST)
Generation Portion 1
of Money
( Ri 1 lions)
Technology
High BTU Coal
$7.1
Energy Purchased
15.0 (1015 BTU)
Gasification
Low BTU Coal
Gasi fi cation
Gas Turbine
5 .6
$3.6
18.1 (1015
6.2
RTU)
(1014 kwhr)
Toppinq Cycle
-
I
Impacts are assumed to be caused only by that portion
of the $10 bill ion actually used to generate nas or electri ci ty
with new techno logy. 'lo transportation, dis tribution, admi nistration changes or profits are included.
V)
142
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Next,
the impacts of purchases
(16.4 x 1014 BTU/yr.
of 5 trillion
at 90% load factor)
BTU!/dav
of gas or 25 billion
kwhr. of electricity (which requires 16.4 x 1014 BTU/yr. input)
Figure
4.7.
problems
This comparison
with
an input-output
tion using dollars
but, since
a good example
of some
table at this level of aggrega-
to measure
amounts of coal purchases
equal
provides
product
flow.
The dollar
for high and low BTU
the high BTU gas plant
as are about
is purchasing
lignite
at approximately 12¢/106 BTU while the low BTU plant is using
bituminous
are quite
at 20t/106
different.
BTU, the coal purchases
in terms of BTU's
This can be a problem whenever
products
are not homogeneous.
An example
(indeed even
caused by the aqggreqation level
the 365 order table is not fine enough
this problem)
Crude
of a problem
is that the $58 million
Oil and Natural
Gas
worth
to solve
of purchases
(sector 8) by the nuclear
of
generating
plants is caused largely by purchases of fuel reprocessing
services from Industrial Chemicals (sector 29). Since many
industrial chemicals require a petroleum feedstock, the technical coefficients for the aggregate Industrial Chemicals
sector show a significant input from Petroleum Refinina (sector
35) which
causes
the demand
on Crude Oil.
Fuel reprocessing
cannot be purchased alone because it is not a senarate sector.
Perhaps
one.
in 10 to 15 years when
This growth
it grows in size, it may become
of new industries
within
old sectors
is a
natural result of standard industrial classification schemes.
Such schemes cannot be expected to foresee all new industries.
Carter has noted both of these problems previously in Reference
6,
p. 8 and
p.
12.
Because of the limited economic impacts of operating the
new technology plants, further discussion of the operations
will be put off until
Chap ter 5.
the 1985 projections
Non-economic
impacts will
are presented
also be described
in
there.
145
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147
4.3
Price Changes
Price
changes
caused by a rise in the real cost of energy,
for example, are quite simple to calculate within the inputoutput
basic
framework,
assumption
given the assumptions
that are made.
made is that price changes
the buyer of each industry's
goods.
are passed
The
on to
Since the input-output
table already embodies the interactions between all the
sectors
price
of the economy,
the effects
tracing
to the steel industry
of electricity
of both these price
changes on automobile
of a rise in the
and the effects
manufacturers
is
quite simple.
The basic formula that relates prices to value-added
(the labor and capital
derived.
components
to the value added for that good plus
the costs of all purchased
goods and services
that make
up
or
Pi
=
Vi
but the cost of materials,
price
is easily
Using the previously defined symbols, the price of
each good i is equal
that good,
of each price)
of each material
+
c
(4.1)
ci , equals
the sum of the unit
used times the quantity
used or
N
ci
aji P.
j=1
where
a.. = the amount
(the technological
i
(4.2)
j
of good j used per unit of good i
coefficients).
Substitutinq
this in the
above equation
N
Pi
=
vi
+
j=1
a ji
(4.3)
14P
Rewriting in matrix notation yields
P =
Solving
for P results
ATP
(4.4)
in the familiar
P =
This equation
V +
(I
- AT)
equation
V
can be used to calculate
(4.5)
price changes. Once
these price changes are calculated, it is possible
the effect
of these price
changes
to measure
on pe rsonal consumption
expenditures for that good. This effect is calculated usina
the price elasticity
for that good.
Price elasticity has a deceptively simple definition,
i.e.,
change in the quantity
the percentage
response
things
to a one percent
being equal.
The problem
time is not mentioned,
change
in quantity
chanqe
in price of that good, other
with such a definition
i.e., over what
occur.
of a good sold in
time period does the
Once time is introduced
the "other-
things-being-equal" assumption goes out the window.
world
just does not cooperate
is that
in changing
The
only one variable
at
a time.
Economists have traditionally resorted to multiple regression analysis to sort out the various factors.
has resulted
in quite
This technique
a bit of success when the data contains
enough variation to allow identification of the various parameters
of the demand
equation.
This is very analogous
to the
system identification problem in electrical enqineerina except
that in the case of economic
problems,
one is not allowed
apply any external excitations to the system.
situation,
the concept
of its clarity
because
of price elasticity
Also, in a dynamic
begins
now one has to specify
to
to lose some
the time behavior
1
of the change
in sales.
At the very least one can distinguish
two forms of price elastic
behavior,
and the very long run changes.
the very short run chanqes
The medium
term effects
ably are some blend of the short and lone run effects.
course,
49
for the purposes
presumOf
of a true dynamic model of this chang-
ing situation one must specify how rapidly the price change
effects
take hold, i.e.,
the time constants
involved
in chanq-
ing behavior.
In addition,
the
there are many other parameters that affect
elasticity of the
ood.
of the good will p robably
use d (as
a
For example,
change with
the price elasticity
the quantity
of the
ood
good becomes a "necessity"), with the price
luxury
of any substitutes
for that good, with the foibles
con scious public, etc.
A sophisticated
analysis
of a fashion
of the demand
for a product will include as many of the quantifiable variables
as
are
to e xplain
needed
the past behavior.
thes e difficulties, many people have estimated
Despite
price elasticities for various components of personal consumption expenditures.
Unfortunately while consumers make up
about 65 percent Df final demand for most goods, they purchase
less than 31% of total energy.
represents
Industrial and commercial usage
Since
are av ailable for other fin al demand components
a very high percentage
no elasticities
or for any industrial
of total energy use.
uses of energy,
the r esulting price
effects calculated for final demand reDresent the minimum
possible effect that w ould result from a prnice change. Without
elasticities
for the i ndustrial and commerc:ial sectors one can
draw very few conclusi ons about total price effects.
The actual
pricing calculations and energy use decisic ins that go on in the
economy and especially in the industrial
an d commercial sector
are quite subtle.
For example, an electric utility contemplating whether
or not it can switch
from coal to oil as its primary
150
fuel must consider
involved
such
in getting
things as the transportation
the fuel to the electric
cost
utility,
the
price of possible fuel substitutes, the capital costs associated with changing
ities, etc.),
run, whether
Price
chases
were
fuels (for new burners
how stable
facil-
such prices will be over the long
there are any availability
rises and long-term
constraints,
declines
(PCE), caused by the effects
calculated
and storage
for six separate
etc.
in Household
pur-
of price elasticities,
cases.
Five of the cases
were generated by doubling the value-added component of each
of the five energy
case involved
supplying
doubling
sectors
separately.
the value-added
The sixth
components
energy supplying sectors simultaneously.
of all
All material
inputs were assumed to remain constant.
Doub ling value-added corresponds to doubling
the labor,
depreciation, and profits of a sector.
This form of price
change was used because both pollution abatement
a nd scarcer
resources tend to have their greatest impacts on the capital
(depreciation)
sector.
and labor costs (value-added) of a particular
A 1964 estimate
Technology
by Inte rnational
Research and
([25], p. V-6) stated that these two items accounted
for over 67% of the annua
1
costs
associated with air pollution
control. Whether limestone scrub binq will c:hanqe this estimate
appreciably is not clear, but our· assumption of chances only
in the value-added
compon ent of e nergy priceas
reasonable approximation.
as much capital
to produce
ca 1 culations
be
a
assume that twice
and labor must be used by the energy
industries
the same output as presently.
The results
in Figures 4. 8
drawn
The
should
from these
of the
rice change calculations are presented
through 4.13.
fionures are:
Some conclusions
that can be
r.-
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157
1.
Price rises
in almost
all cases for non-energy
supplying sectors are quite small, typically less
than
2.
1%.
Price
rises for electricity
cause larger price
changes in more sectors than any other sinqle
fuel source.
3.
Doubling
the value-added
component
of all energy
sectors will cause less than a 5% price rise in
most other sectors.
Those sectors that do experience significant
4.
price
rises, other than energy
sectors,
sell only
a small percentage
of their total output
to
Households
These are the sectors
for
(PCE).
which long-term residential (PCE) price elasticities provide little information.
These calculations also indicate which fuels are most
to labor and capital charges.
sensitive
clear
leader
ith almost
doubling
of value added.
followed
at a distance
Electricity
is the
from a
a 79% price rise resulting
Coal is not far behind with 71%,
by natural
gas with 61%, and crude
petroleum and natural gas mining with 57%.
Refined netroleum
is the lowest of the group with a 29% price rise.
This is
slightly higher than the price rise associated with refined
petroleum
caused by doubling
On the assumption
used to supplement
the value added of crude oil.
that high BTl qasified
other sources
initially
of average pricing will be followed,
cost gas can be found by examining
prices
to doubling
gas mining
corresponds
and that some sort
the impact
the response
of this high
of natural
gas
the value added of crude oil and natural
(whose price
rises by 60.7,).
A 60% price rise
to about 20% use of 72¢/MCF hinh PTU
use of 17t/MCF gas
for gas).
coal will be
(19t/MCF
This results
is the current
as and 80%
averane
in a price rise to consumers
rice paid
of 13.'
158
The price changes required of most industrial products
to compensate
because energy
for energy
is
are quite low, simply
price increases
still quite cheap relative to other commod-
ities.
Even a 1umi num wo uld need only a 6 ' price
pensate
for do ublinq
the real price of e lectricity.
really matters is how relative
itive
prices
in crease
me tals (including aluminum) are
non-ferrous
than the ferrous
is the primary
price changes.
rise to com-
metals
usefulness
Government
IThat
and he re the
c learly
more se ns-
to the pri ce of energy.
of the input-o utput approach
This
to
leaders and b usine ssmen in the
affected indus tries are quite concerned about the price of U.S.
goods relative to foreign competition an d rel ative to each
other.
The tables presented
not pro vi
de
in this chapter,
much information on the magnitude
eles tic effe cts of energy
cost increases,
clearly the relative p rice sensitivities
products to energy
indus tries of price
p rice
changes.
data to calculate
of the price
do lay out quite
of various
industrial
pri ce increases.
To be able to assess
ing
while they do
the impact on the energy
rises is much more difficult
At the present
supplying
than calculat-
time there is not enough
more than the minimum
effect.
159
Chapter 5
1985 Projections
5.1 Scope
This chapter describes a series of 1985 projections
that illustrate various economic impacts of different energy
use growth
rates and the additional
from the introduction
impacts
of coal gasification
that might
result
or the gas turbine
topping cycle.
These projections must be considered illustra-
tive only since
they were made using relatively
tions.
However,
the conclusions
crude assump-
that are drawn from these
projections are based on a differential analysis that is quite
insensitive to the exact assumptions employed. Hence the
conclusions are fairly reliable.
5.2
Procedure
Three basic projections were made corresponding to
high, medium,
and low energy
Medium
use growth
energy
the projected
growth
rates from 1980 to 1985.
rate refers to a continuation
1970-80 growth
rates.
of
High and low are defined
accordingly.
The starting
technical
basis for the projections
coefficient
matrix
the modifications
and low projections.
the 1980
of the BLS (as modified
order) and their 1980 final demand vector.
describes
was
to 104
Figure 5.1
to each for the high, medium
In all cases,
the Istvan
[27] electric
utility technical coefficient vector was substituted for that
of the BLS.
This was done so that the relative
weights
of
different generation processes (e.g. fossil vs. nuclear)
could be varied. The BLS vector does not allow this variation. Figure 5.2 summarizes Istvan's electric utility process information.
This
is
the only modification
technical coefficients of the medium projection.
to the
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161
F
I
G
U
R
E
5.2
ISTVAN'S ELECTRIC UTILITY
TECHNICAL AND CAPITAL COEFFICIENT INFORMATION
Seven Technological Processes
Fossil Steam Generation
Nuclear Steam Generation
Hydro Generation
Other Generation
Transmission
Distribution
Administration
1980 Technical
Coefficients
1980 Capital Coefficients
for Each Process
for Each Process
1980 Suggested Relative Process Weights
1
Taken from [27]
1F2
The high projection
of electricity,
natural
modities
the industrial
gas, plastics,
half the rate of increase
was done by increasing
increases
and rubber
usage
at one
that BLS used for 1970-80.
the input coefficients
for all industries.
Mathematically
This
of these comthe rows cor-
responding to these supply industries in the tech nical
coefficient matrix were multiplied by the growth factor.
The low projection involved merely increasing the conversion
efficiency
of electric
and of car and bus engines.
generation
The increased electric conversion efficiency corresponds
the introduction
of more efficient
plants
to
(such as gas tur-
bine topping cycles, HTGR's and other mod ern baseload plants)
and the retirement
ation
of historical
engines,
etc.,
It represents a continu-
of older plants.
trends.
represents
The increase d efficiency
a break with pa st trends.
of auto
This
would require either a spontaneous taxi f leet owner shift
toward smaller, less gas-consuming
cars
o r a government
regu-
certain minimum mileage performance on
lation requiring
cars and buses.
The initial medium final demand projection was achieved
by allowing
each non-investment
to grow by its projected
1970-80
item of the 1980 final demand
growth
rate.
Figure 5.3 sum-
marizes the final demand projection process.
The investment
component
to the actual
1980-85
was
then recalculated
growth
to correspond
rates in total output.
This was done as fol-
lows:
Let
= t otal output
in 1985
Xo = t otal output
in 1980
X1
YF
YI
B
=
C
=
=
Y
=
1
- YI = 1985 final demand
less investment
985 investment
- A) 1 = 1985 inverse coefficient matrix
19 80-85 capital/output matrix
(I
1 A
80
F
Y80
=
-
YF
80NE
+
yF
-80
F
80
I
80
E
1980
1980
NON-INVESTMENT
NON-INVESTMENT
ENERGY-RELATED
NON-ENERGY
FINAL DEMAND
F
Y80 E
FINAL DEMAND
F
Y8 0 NE
INITIAL 1985
INITIAL 1985
NON-INVESTMENT
NON-INVESTMENT
ENERGY-RELATED
NON-ENERGY
FINAL DEMAND
F
-Y85E
FINAL DEMAND
F
Y85NE
1985
NON-INVESTMENT
INITIAL
FINAL DEMAND
PROJECTION
yF8 5
E
1985 INITIAL FINAL DEMAND PROJECTION
FIGURE 5.3
.)
164
Then
X1
=
(I - A)
- 1
Y = B Y = B(YF
+ YI)
(5.1)
= B [YF + C (X1 - Xo)]
Solving
for X1 and YI
- C]_
X1 = [I y
was
for all of the
The capital
the projected
by the substitution
electric utility vector.
of the BLS final
(5.3)
-
(5.4)
was followed
final demand projections.
the calculations
1
C (X 1 - X o )
This procedure
modified
(5.2)
matrix
C used In
1975 Battelle
of the Istvan
985
matrix [21]
[27] 1980
Since the investment component
demand contains
items other than pro-
ducers durable equipment (PDE) and since the Battelle
matrix
C represents
only PDE purchases,
all other items
(such as residential housing and inventory change) of
investment were transferred to YF for the calculation
procedure. See Figure 5.4 for the overall model.
The low energy
same as the medium
growth
demand
and oil consumption
was
final demand was projected
case except
reduced by 6%.
the
that electricity,
gas
This represents
the
effect of such changes as more efficient air conditioners
and automobile
engines
the use of heat pumps,
(or smaller
and better
cars and mass transit),
thermal
insulation.
The
high energy growth case was similarly projected except that
electricity,
oil, and gas consumption
are increased
by 4% over
the medium case.
The first new technology
demand
case involved
total BTU production
modification
substituting
of natural
gasified
of the high
coal for 5% of the
gas (approximately
10% in
dollar terms) and summing the weighted capital/output vectors
for natural
convention
gas utilities
is equivalent
tiunl experndiLures
and coal gasification.
to the assumption
This latter
that coal gasifica-
re ovei aiid above any expendi'tures for
165
_
I
_
c
o_
o
nI
.
_
~0
-
0I
o
xl
I
'0
ii
t
0
rl
_
C
)
CI
xl
xl
I
I
a)
o
-
xl
I
xl
0
1_
0
0
0kn
cr
0.v,
c
M
/I.
/
U
L.-
_
C
0a-
E
a)
I
'
lcl
U-
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0
0
UI I
>-I
-C >
-
E
c-.I
Lb
a_
z
Z o
-
c
> a)
4E
E
n
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-
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a)-,~--
-
a)
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00
i
o
.°
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I
-
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-J,
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u
pipelines, pumps, and other equipment associated with gas
transmission.
involved
There
is also a small amount
but this is not expected
of duplication
to result
in serious
bias
because gas wells themselves are included in a different
sector.
It also assumes
that 25% of future
gas production
will come from coal gasification.
The second new technology modification involved both
the above
coal gasification
gas turbine
Approximately
substitution
topping cycle
(with low BTU coal gasification).
38% of the 1985 fossil
generation
total generation)
was assumed
and approximately
50% of the new fossil
(or 15% of total
and the use of the
capacity
(23
of
to be the gas turbine
additions).
capacity
Figure
cycle
additions
5.5 summarizes
these modifications.
When new capital investment requirements were calculated
for each of the alternative
projections
and substituted
the final demand
components,
the resulting
investment
did not in general
correct
equal
this and develop
that had the proper
and consumption,
procedure
1.
the desired
a balanced
$1.34 trillion.
a three part procedure
in Figure
between
was
demand
to the right GNP.
by a constant
This
5.6 and summarized
done by multiplying
To
investment
was used.
The initial set of final demand
was scaled
GNP
set of 1985 projections
GNP and relationship
is described
for
projections
This scaling
all components
factor.
below:
of final
There was no
allowance made for differing income elasticities of various
sectors
of PCE, such as
between food and recreation. Purchases from
all sectors were treated alike.
167
F
1985
I
G
U
R
E
5.5
NEW TECHNOLOGY MODIFICATIONS
Operatinq
Capi tal
Hygas
(Coal
1
Gasification)
25% of new capacity
(gas) will be in
form of coal gasifi-
5% of natural gas demand
supplied by coal gasification
cation
Gas Turbine
Topping Cycle
(combined with
Low BTU coal
gasification)2
1
-High + Hygas
by the indicated
2
High + Hygas
50% of fossil generation (15% of total
generation) capacity
will be added in form
of gas turbine topping cycle.
Future:
38% of fossil generation
(23% of total generation)
will be added by gas turbine topping cycle.
High energy growth future is modified
addi ti on of high
BTU coal gasification.
+ GT (Gas Turbine)
Future:
High energy
rowth
future is modified by the a ddition of both new technologies
indicated above. Note that low TU coal gasification is used
in conjunction with th e gas turbine (COGAS) plant.
168
BALANCED 1985 PROJECTION PROCEDURE
FIGURE 5.6
169
2.
New capital investment requirements were calculated for the scaled final demand projections
of step one and substituted
for its investment
component. These scaled projections now had
GNP's that were not equal to $1.34 trillion 2 5
3.
A linear
combination
of the initial
and the
scaled projections of final demands was chosen
so that, when
the required
capital
investment
was recalculated and substituted, the resulting
GNP would equal $1.34 trillion. This third step
can be viewed as performing interactions around
the loop of the projection
Figure
model indicated
5.4 until convergence
is obtained.
in
An
analytical procedure accomplishes the same
result with much less computer time. This procedure is discussed
5.3
in the Appendices.
Issues
There are a number of issues involving capital matrices
raised by the above projection procedures, other than questions
of accuracy and data reliability. This section will not give
definitive answers to these problems but merely indicate how
they were handled
in this model.
The Battelle capital matrix [21] is derived under the
assumption of balanced expansion, i.e., if capacity of a particular industry must be doubled, then the expansion occurs by
increasing the number of buildings, machines, parking lots,
etc., uniformly, rather than just buying more machines. There
are many problems associated with defining and measuring capital stocks or capital flows. These issues are avoided in the
Battelle matrix by using, essentially, an engineering approach
and computing what purchases are necessary to double an
25- $1.34 trillion represents 4.4"'per year growth from 1950.
170
industry's capacity using the newest technology and ignoring
what year
the purchases
occur in.
Thus in our model,
all
purchases for new capacity are assumed to occur in one year.
Given that the model assumes a continuation of past growth
rates, such that new capacity must be added each year in
larger amounts, the assumption may result in understanding
actual capital investment in any one year.
The model assumes that industry always operates at
100% of capacity so that if output increases, new capacity must
be added.
There is no provision for reserve capacity except
as it is treated
there
in the Battelle
is no provision
for changes
distance of pipelines, etc.
capital/output
in the average
ratios and
transmission
Because this assumption is con-
stant over all projections and because the conclusions are
based
on differential
effects,
this is not expected
to bias
the answers.
Another problem which is inadequately handled by the
capital matrix is depreciation and equipment replacement.
Depreciation
average
is related
age, the useful
to the size of the capital stock,
lifetime
its
of the capital items, etc.
Since most of this data was unavailable,
the outputs of the
new capacity calculations were scaled upward by "two-thirds"
to represent depreciation and replacement purchases.
new technology purchases were not scaled upward.
the typical
industry
grows 4% per year,
However,
Thus, if
an additional
8/3%
were added to its total capital purchases to represent replacement purchases.
approximately
The percentage was selected because it gave
the same gross investment
as a percentage
of
GNP that has occurred over the years.
A major issue that the projections deal with very crudely involves the determination of the split between consumption, investment, and government spending. The model projects
consumption and government spending and then calculates the
171
investment
required
final demand
to meet this demand
GNP.
to some constant
dure unless total investment
and scales
the total
This is not a bad proce-
is too large a percentage
of GNP.
When investment becomes large, consumers or government must
forego spending in order to direct resources to satisfying
investment demand. But the very act of foregoing spending
reduces demand
for goods which was the major reason
increased investment in the first place.
for
The projections
ignore changes in interest rates, fiscal policy, and the income
They also ignore price increases
elasticity of consumer goods.
or rationing
as a means of limiting
to a given supply.
demand
With much more work than was justified for our purposes,
better estimates
hoped
detail
could be made of these effects.
the economists
will
look at this problem
t is
in more
in the future.
5.4
Projections
The major
results
ized in three figures in this section.
the basic
unscaled
projections
1985 final demand with
modified.
to differences
from the same
three energy
differences
in the investment
energy growth rates.
Figure 5.7 describes
that started
only the
The resulting
will be summar-
of these projections
components
in GNP are due entirely
required
to meet
the various
The introduction of coal gasification
worsens the investment situation while the introduction of
the gas turbine
topping cycle helps slightly.
Figure 5.8 describes the scaled projections before
investment was recalculated.
now result in a constant
Also the differences
now.
The differences
large variations
All five alternative futures
GNP of $1.34 trillion
in energy
use are much
(1958 dollars).
less significant
have been reduced so much that the
in investment
are no longer justified.
172
5.7
F I G U R E
1985 FUTURES
SUMMARY OF ALTERNATIVE
Basic Unscaled Projection
Low
_
.
GNP (109 $ 1958)
Hiah
Medium
High
Plus
Hvqas
""
Hiqh+
Hyqas +
Gas Turbine
.
$1296.3
51321.1
$1404.8
$1421.4
$1394.9
67.3%
20.2
21.5
13.9
13.2
13.0
66.8%
20.5
13.1
4.8
5.0
5.4
6.8
6.8
16.5
7.0
17.7
21.5
8.5
23.2
8.8
22.3
8.7
7.7
9.8
16.9
19.2
17.6
96.0
97.6
103.1
104.8
103.6
Coal
Oil
Gas
20.3
28.8
20.9
22.9
27.3
Electricity
21.7
27.6
31.6
51.2
24.5
PCE (% of GNP)
72.5%
Investment(%)
14.3
15.7
Government (%) 9
Total Output (10 $
1958)
Coal Mining
Plumbing, Structural
Metals
Engines & Turbines
Construction Equipment
14.2
$
Private Employment
(106)
15
Energy Use (10
71.1%
7.3
66.1%
BTU)
31.1
50.3
24.1
29.4
46.0
44.7
22.3
--
.-
F I G U
5.8
F
1985 FUTURES
OF ALTERNATIVE
SUMMARY
Scaled Projection
inw
_ ,"
GNP (109 $ 1958)
-PCE (% of GNP)
Investment (%)
(%)
Government
$1340.0
72. 5%
14.3
31.2
50.3
22.3
Highs +
Hihas+
ygas+
Gas Turbine
Hyqas
" ,..
Hiah
MPdium
S1340.0
$1340.0
$1340.0
71.1%
15.7
67.3%
20.2
13.9
13.2
21.5
13.0
5.2
6 6.5
21.9
21.2
7.5
20.6
8.1
8.3
8.3
9.9
16.2
18.1
I
14.2
$1340.0
66.1%
66.8%
20.5
13.1
Total Output (109 $
s1958)
-
$ 5.0
Coal Mining
Plumbing, Structural
17.1
Metals
7.2
Engines & Turbines
Construction Equip7.9
ment
17.9
5
6.5
0
99.3
99.0
99.0
98.8
98.8
15
Energy Use (10 BTU)
Coal
21.0
21.2
22.0
29.9
24.4
29.8
48.2
24.4
29.8
29.8
I2-
11
I
41
Electricity
__
S
5.1
Private Equipment
(10 6 )
Oil
_
$
.._..
-..-.I.--.^.---·
46.2
22.4
29.8
46.6
7 . 5
77
I-I-.
hJ
1
-------·----- -----
48.3~ ~
I /
^" "
'_
I
I
/
"'
_
48.0
I
I
.-
.) . I
I
173
Figure 5.9 summarizes the result of recalculating the investment for the high BTU scaled
future.
investment drops considerably.
As can be seen total
This process of scaling and
recalculating investment would converge to a balanced final
demand eventually in which investment would have the proper
relationship
to energy
demand
and a given GNP
natively it could be calculated analytically.
tions are not necessary
is very sensitive
because
to energy
the capital-output
Alter-
These itera-
it is clear that investment
demand growth
and to changes
ratios that may he caused
ogy such as coal gasification.
However
ing to see how a slight
of overall
scaling
level.
in
by new technol-
it may be enlightenPCE with its
attendant small change in energy consumption can result in
a balanced
GNP of $1.34
trillion.
Figure
5.10 summarizes
these balanced projections.
The actual
total outputs
and final demands by sector
for all five alternative
futures
and balanced
are included
5.5
projection)
Sensitivity
(both the initial projection
in the Appendices.
of Investment
To give some idea of the sensitivity
to changes
in final
demand,
sums of (I - A - C) -1 .
Fiaure
5.11 pres ents the column
These column sums in dicate
much aggregate total output
is affecte d by a given
of total output
by how
(i.e. the sum of all total outputs)
dollar chance
in any final demand
component.
Figure 5.12 weights
high energy
demand
growth
these column
final demand
sums to 100).
values
These numbers
sums by the projected
(scaled so that final
then represent
the rela-
tive effects on aggregate total output of equal percentage
changes
in each final demand
change in the growth
_III1LYYIYyyll__YIIIIL-LWI·IYL-rml··
component
or alternatively
rate of any component.
--···II_---...···-Y^I-YYWYIIII^I-··_·
of a
174
F
I
G
U R E
5.9
REQUIRED INVESTMENT
1985 HIGH ENERGY USE GROWTH ALTERNATIVE
PROJECTION TYPE
-
-
TOTAL INVESTMENT (GPDI)
(Billions of 1958$ )
1
Initial
281.7 (20.2%)
Scaled
270.5 (20.2%)
Recalculated Scaled
45.8 ( 4.1%)
234.5 (17.5%)
Balanced
1Number in parentheses indicate total investment
as a percentage
'"crrml·-·----··---
of total GNP
---·- ------·-- ·-------· 11--·1
·
-·-
··--·
· I-I·-·I-·----·--·-c.
.IYI----
-
1*I.
L*s
-·-·-·rty(pl·
175
F I G U R E
5.10
SUMMARY OF ALTERNATIVE
1985 FUTURES
Balanced 1985 Projections
Low
GNP (109 $ 1958)
-T-'E (% of GNP)
$1340.8
70.2%
Investment (%)
16.6
Government(%)
13.8
Total Output (107$
1958)
Coal Mining
$ 5.0
Plumbing, Structural
Metals
18.2
Engines & Turbines
7.5
Construction Equipment
11.1
Private Employment
(o10)
99.2
£
Air Polluti on (10Utons)
Particulat es
48.6
Hydrocarbo ns
91.7
S02
CO
NO
Steel Usage (106tons)
High
Medium
$1340.0
70.0%
16.8
13.8
$1339.0
69.6%
$
$
5.1
High +
Hygas
17.5
13.5
5.2
High +
Hygas +
Gas Turbine
$1340.9
69.3%
17.7
13.6
$1341.0
69.4%
17.5
13.6
$
$
6.5
6.6
18.5
19.3
20.0
19.7
7.6
7.9
8.0
8.0
11.5
12.5
12.9
12.6
99.2
99.2
99.2
99.2
49.0
92.2
50,2
50.1
92.1
78.2
124.2
75.2
76.1
122.7
30.4
123.9
31.8
50.0
92.3
78.2
124.8
32.6
32.6
32.5
194.0
195.0
198.1
199.6
198.6
280.6
128.3
286.7
134.3
290.2
137.8
266.5
117.8
25.3
43.9
46.7
33.8
26.0
44.5
48.5
28.5
44.4
48.5
34.8
28.5
44.4
48.2
34.8
Water Usage (10l2 gals)
Gross
278.1
Cooling
126.0
Energy Use (101 5 BTU)
Total
Coal
24.9
Oil
43.0
Gas
46.1
Electricit
33.0
-----
.---
34.9
92.3
78.2
124.8
.
F
I
G
U
R
E
5.11
176
SENSITIVITY OF TOTAL OUTPUTS TO UNIT CHANGES IN FINAL DEMAND
Column Sums of(I-A-S)-l
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
Livestock and products
Other Farm Products
Forestry & Fishery Prod.
Farm, Forest, Fish Services
Ferrous Metal Mining
Nonferrous Metal Mining
Coal Mining
Crude Oil and Natural
Stone and Clay Mining
Gas
Mineral Mining
New Construction
Maint & Repair Construction
Ordnance, Accessories
Food & Kindred Products
Grain Milling
Tobacco Manufactures
Fabric, Yarn, Thread Mills
Misc. Textile Goods
Apparel
Misc. Fab Textile Products
Lumber and Wood Products
Wooden Containers
Household Furniture
Other Furn and Fixtures
Pulp Mills
Paper and Allied Products
Paper Containers, Boxes
Printing and Publishing
Industrial Chemicals
Fertii zers
Agr. & Misc. Chemicals
Plastics and Synthetic Material
Drugs, Clng, Toilet Preps.
Paints and Products
Petroleum Refining
Paving Mixtures
Asphalt Felts, Coatings
38
Rubber and Plastic
39
40
Footwear & Leather Prod.
41
42
43
44
45
Prods.
Leather Tanning Prod.
Glas-s & Glass Prods.
Cement, Hydraulic
Lime
Sto-ne and Clay Prods.
Primary Steel
18.65840
14.85533
12.19288
13.51105
15.70643
18.20599
11.47688
14.00945
13.96455
12.67214
17.72350
9.13693
13.46187
15.93798
16.74574
8.81227
23. 81117
19.64737
14.26675
19.74478
13.52460
13.43886
13.22536
12.90964
16.0-3960
21.87537
16.00166
14.58542
17.44373
18.56674
23.41426
24.00975
12.16224
17.9 3840
16.91321
18.78841
19.01521
19.41870
7.98675
10.65441
12.09027
13.24632
11.80795
14.94532
18.23187
FIGURE
SENSITIVITY
OF TOTAL
OUTPUTS
TO
5.11
177
UNIT CHANGES IN FINAL DEMAND
Column Sums of (I-A-S)-1
46
47
Iron and Steel
Iron and Steel
48
49
Primary Non-ferrous Metals
Misc. Non-ferrous Metals
50
Metal
51
52
Plumbing & Structural Metals
Heating Equipment Exc. Elec.
53
54
55
Screws & Metal Stampings
Other Fab. Metal Prods.
Engines and Turbines
56
57
58
59
Farm Machinery & Equipment
Construction & Mining Equipment
Material Handling Machinery
Metalworking Machinery
Special
Ii
ndustry Machinery
General
Iindustry Mach.
60
61
62
Foundries
Forgings
Containers
63
64
65
66
67
68
69
SIhop Products
Office Coimp Mach.
Service Industry Mach.
Refrig. M achinery
Electrica 1 Industry
Household Appliances
Elec. Lig hting Equip,
Radio, TV and Comm. Equipment
70
Elec.
71
72
73
Elec. Mac h. EQP & Supplies
Motor Veh icles & Equipment
Aircraft and Parts
74
75
Other Transport Equipment
Scientific & Control Ins.
Machine
Comrp
& Access.
76
Optical and Photo Equipment
77
78
79
80
81
Misc. Manufacturing
Railroad Transportation
Local Passenger Transportation
Truck Transportation
Water Transportation
82
Air Transportation
83
84
85
86
Misc. Transportation
Communications Exc. RAD&T
Radio and TV Broadcasting
Electric Utilities
87
Gas
88
89
90
Utilities
Water & Sanitary Serv.
Wholesale Trade
Retail Trade
16.56320
21.54393
19.99780
12.20046
13.80157
12.19877
13.03160
11.92606
12.54787
10.71254
11.99155
11.66178
13.11768
12.45534
13.14226
12.50017
11.33579
13.19545
12.38284
11.50376
14.08364
12.92294
10.83581
12.57507
13.67235
12.12055
12.51066
9.49392
13.04907
11.57233
11.45626
13.18522
22.62575
9.87313
10.06053
14.17960
10.94290
34,23575
24,65044
15.04803
15.99566
32.72917
18.08472
13.07471
11.48821
178
F
I G
U
R E
5.11
SENSITIVITY OF TOTAL OUTPUTS TO UNIT CHANGES IN FINAL DEMAND
Column
91
92
Finance and Insurance
Real Estate
Hotel, Pers & Repair Serv.
Business Services
95
96
Auto Repair and Service
97
98
Medical and Education Serv.
100
101
102
103
104
9.24389
4.80630
16.45775
13.45441
and Rental
93
94
99
"
Sums of (I-A-S)-l
Research and Development
2 ,72724
Amusements
Fed. Government Enterprises
State & Local Govt. Enterprises
Imports
Business Travel, Gifts
Office Supplies
Scrap, Secondhand Goods
I
-- --
r--------r--
-·-----.
27,04779
14.15501
16.22133
9.59608
7.54229
1.00000
13.99725
16.64554
1.00000
-*···P-CIIIII__II--III
-ICICII
- -I-
179
F
I G
U R E
5.12
SENSITIVITY OF TOTAL OUTPUTS TO PERCENTAGE CHANGES IN FINAL
DEMANDS-WEIGHTED
COLUMN
1
Livestock
2
3
4
5
6
Other Farm Products
Forestry & Fishery Prod.
Farm, Forest, Fish Serv.
Ferrous Metal Mining
Nonferrous Metal Mining
7
8
9
Coal Mining
Crude Oil and Natural Gas
Stone and Clay Mining
and Products
10
Mineral Mining
11
New Construction
12
13
14
15
16
17
18
Maint. & Repair Const.
Ordnance, Accessories
Food & Kindred Products
Grain Milling
Tobacco Manufacturers
Fabric, Yarn, Thread Mills
Misc. Textile Goods
19
Apparel
20
Misc. Fab. Textile Products
21
Lumber and Wood Prods.
22
23
24
Wooden Containers
Household Furniture
Other Furn & Fixtures
25
Pulp Mills
26
27
28
29
Paper & Allied Prods.
Paper Containers, Boxes
Printing & Publishing
Industrial Chemicals
30
Fertilizers
31
32
Agr. & Misc. Chemicals
Plastics & Synthetic Material
33
34
Drugs, Clng, Toilet
Paints and Products
35
36
37
38
39
40
41
42
Petroleum Refining
Paving Mixtures
Asphalt Felts, Coatings
Rubber & Plastic Prods.
Leather Tanning Prods.
Footwear & Leather Prods.
Glass & Glass Prods.
Cement, Hydraulic
43
44
Lime
Stone & Clay Prods.
Prep.
SUMS OF (I-A-C)'
4.24016
14.44524
0.23320
-0.56441
0.56301
0.64827
0.80682
0.08703
0.26611
0.25417
68.52844
8.81534
9.39001
112.24187
6.48835
5.27951
4.38415
5.06492
32.42346
5.79106
1.20031
0.05730
8.42636
1.77864
1.42266
8.47561
0.46497
10.69535
7.59621
1.08858
3.77434
5.27936
18.38039
0.25631
27.57567
0.01059
0.01584
9.49042
0.04246
3.04775
0.78309
0.01018
0.00298
1.40699
1R0
F
I
G
U
R
E
5.12
SENSITIVITY OF TOTAL OUTPUTS TO PERCENTAGE CHANGES IN FINAL
DEMANDS-WEIGHTED COLUMN SUMS OF (I-A-C)
45
46
47
48
49
50
Primary Steel
Iron and Steel
Iron and Steel
Foundries
Forgings
89
Primary Non-ferrous Metal
Misc. Non-ferrous Metals
Metal Containers
Plumbing & Structural Metal
Heating Equipment Fxc. Elec.
Screws & Metal Stampings
Other Fab Metal Prods
Engines & Turbines
Farm Machinery & Equipment
Construction & Mining Equipment
Material Handling Machinery
Metalworking Mach.
Special Industry Mach.
General Industry Mach.
Machine Shop Products
Office Comp Mach.
Service Industry Mach.
Refrig. Machinery
Electrical Industry
Household Appliances
Electric Lighting Equipment
Radio, TV & Comm. Equipment
Electric. Comp & Access.
Elec. Mach Equip. & Supplies
Motor Vehicles & Equip
Aircraft & Parts
Other Transport Equip.
Scientific & Control Ins.
Optical & Photo Equip.
Misc. Manufacturing
Railroad Transportation
Local Passenger Transportation
Truck Transportation
Water Transportation
Air Transportation
Misc. Transportation
Communications Exc. RAD&T
Radio & TV Broadcasting
Electric Utilities
Gas Utilities
Water & Sanitary Serv.
Wholesale Trade
90
Retail
91
Finance and Insurance
51
52
53
54
55
56.
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
Trade
1.78862
0.14493
0.06218
1.13659
0.58775
0.04848
0.70032
0.28390
1.73025
2.51447
2.53056
1.37445
2.43193
0.72524
1.07645
1.17531
1 .19933
0.34495
5.72519
0.47415
1.28910
2.35941
10.23641
1.31911
22.13908
3.82029
2.09359
40.81441
8.59172
5.32102
4.23872
3.54419
14.45973
14.37457
5.87717
7.55813
7.09230
5.11922
2.88323
45.59076
0.21022
22.63258
22.95432
4.18774
58.75487
112.48943
26.96211
181
FIGURE
5-12
SENSITIVITY OF TOTAL OUTPUTS TO PERCENTAGE CHANGES IN FINAL
DEMANDS-WEIGHTED COLUMN SUMS OF (I-A-C)-1
92
Real Estate and Rental
93
94
Hotel, Pers & Repair Ser.
Business Services
Research and Development
Auto Repair and Service
Amusements
Medical & Education Serv.
Federal Govt. Enterprises
State and Local Govt. Enterprises
Imports
Business Travel, Gifts
Office Supplies
Scrap, Secondhand Goods
95
96
97
98
99
100
101
102
103
104
61.56100
37.64803
10.67370
0.18202
23.53889
8.80626
102.43959
2.43741
1.40059
-5.26911
0.0
2.00924
-0.00215
182
The unweighted
vary from a low of 4.8 for
components
Real Estate (ignoring summary industries) to a high of 34.2
for Miscellaneous Transportation (primarily pipelines).
utilities
have about
twice the impact
Gas
of pet roleum refining
or electric utility on a dollar per dollar g rowth basis.
variation
of weighted
unweighted
Products
sells
tivity
on a weighted
of investment
of construction
ing large change
sum for Fores try and Fishery
by the fact tha t the government
and hence the final dem and entry is
New Construction
Capital purchases
effect
explained
these products
t han that of the
sums is much greater
The negative
is simply
negative.
value
sums.
basis.
is seen to have the fourth highest
This is the key to the high sensi-
to changes
in capital i ntensive industries.
by such industries
have a high percentage
in them and a high dollar value.
in construction
on aggregate
The
total output.
activity
The result-
has a very large
This in turn requi res
more expansion and more construction etc.
Figure 5.13 summarizes the investment sensitivity of
the Medium
consumption
computed
different
BTU projection
to 4% changes
of the three energy sources.
separately.
in the final demand
Each change was
Note that a 4% change
dollar amounts
corresponds
for the three cases.
to
183
F
I G U
R E
5.13
INVESTMENT SENSITIVITY TO CHANGES IN FINAL ENERGY DEMAND1
(1985 Medium Projection)
A
A Total Output
Investment
A Energy Demand2
Electrici ty4
(4%)
Natural
Gas
A
3
Energy Demand
6.7
16.6
11.5
28.2
6.7
17.8
(4%)
Petroleum
A
Total
A
Investment
=
Output
=
IX
= [1 I
I Y
=
IC
-
A
A
-
C]
-1
X
1See text for explanation.
2 Change
in final demand
component
of indicated
energy sector
3 Change
(A z
4
in the sum of total outputs
xi
=
of all sectors
I X I )
i
Calculated by using a 4% increase
of each fuel separately.
in final demand
184
Chapter 6:
Conclusions and Recommendation;
6.1
Conclusions
expenditures for new energy technology are
going to have their greatest effect on the makers of boilers
Capital
and pressure
vessels
(BEA sector
40.06)
since all of the
technologies that have been discussed require either high
pressure vessels or boilers or both. Engines and Turbines
(BEA sector
43.0) will also get a significant
the increasing
installed.
number
Depending
the topping cycle
sector
of turbo-oenerator
upon whether
are purchased
of the economy
boast from
units that must be
the gas turbines
from the Engines
or from the Aircraft
both of these sectors will receive
used in
and Turbine
Parts, either
or
an extra spurt of invest-
ment from the combined cycle plants that may be built.
All of the new technologies
of steel,
but the major
require significant
crunch will
amounts
occur in the manufacturing
sectors that must transform the steel into other components
such as pressure vessles.
Pollution effects and employment
changes caused by these capital expenditures are comparatively
minor although the regional impact of the construction of
these plants may be significant.
The major
operating
impacts of these plants are on the
coal mining
industry
tion plants
that burn char, on the limestone
industries
and, in the case of the electric
(if this form of SO 2
qenera-
and lime producing
control is chosen).
These
particular effects are likely to be much more pronounced on
the regional
level because
both the coals and the limestone
are comparatively high-volume, low-value materials and hence
cannot be shipped long distances. Water usage for the various
coal gasification processes represents very heavy consumptive
__ ______1_1_1__·_111
·
185
use of this-water.
This again could have some regional
but not a significant national impact.
here of course is that coal gasification
impact
The major problem
represents
an actual
consumptive use of water; it is not merely heated and returned
to the stream--the water is actually changed chemically and
becomes part of the methane output of the gas plants. Energy
usage will increase a bit more rapidly as the conversion losses
of coal gasification
come into play.
as a result of the operation
decrease
Air pollution
will increase
of the coal gasification
as a result of the use of coal gasification
plants,
to feed
electric generation plants instead of coal and will increase
relative to the emissions of natural gas wells themselves.
The procedure illustrated in Chapter 2 to derive capital
and operating coefficients for new technologies is perhaps
deceptively simple. Appendices C through H hopefully dispell
the notion
of simplicity
it is quite
from this derivation.
Conceptually
clear what needs to be done, but the practical
implementation of the scheme is much more difficult.
Perhaps the most important results of this study are:
1.
Total
capital investment
in the energy
is very sensitive
use growth
to changes
rate and to the introduction
of new energy technology:
2.
It is also sensitive
to very slight
changes
in the
growth rate of total personal consumption expenditures
3.
and government
spending;
and
Another feedback mechanism between the demand for
investment
funds
and the interest
rate has been
identified.
The traditional mechanism views an
increase in interest rate as causing marginally
profitable projects to become unprofitable and hence
total investment
an increase
falls.
in interest
The new mechanism
notes that
rate will induce people
to
186
save more money with the result that consumption
cannot grow as rapidly.
have to expand
The introduction
Hence capacity does not
as fast and total investment
of high BTU coal gasification
slackens.
will
aggravate the demand for investment funds over what it would
be if natural gas were available domestically. However it
may not require more investment than other available processes
such as liquified natural gas or pipelines to Alaska.
These
processes were not investigated nor was the possibility of oil
or electricity taking over part of the natural gas market.
Thus the absolute
numbers
for the size of the impacts may
not be correct, but the sensitivity statements are true.
The introduction
part of a combined
tion will lessen
be true whether
it.
However
iencies
problem
costs
for investment
funds.
or not low BTU coal gasification
this conclusion
is sensitive
that can be obtained
and gas production
of integrating
cycle as
process,
are unlikely
to recognize
genera-
This will
is used with
to the actual effic-
on the second generation
and to any unforeseen
the gas and steam cycles.
(in real dollars)
it is important
topping
gas and steam cycle for electricity
the demand
and costs
turbines
of the gas turbine
Since these
to go down and may qo up,
that rising
costs may actually
reverse this conclusion.
To summarize
the three major points
of this study, we
have demonstrated:
a.
that new technology can be explicitly included within
the input-output
framework
and this framework
used
for projection of future impacts
b.
that input-output
analysis
can be used to study
energy use, air pollution, employment and other
variables in which we may be interested, and
187
c.
that the major
new technology
be on investment
6.2
coal gasification
spending.
that the major impacts
and combined
be on Boiler Makers
expand
impacts will
Implications for Energy Policy
It has been shown
Mining.
economic
of introducing
gas and steam cycle plants will
and Turboqenerator
Manufacturers
and Coal
All of these sectors will have to significantly
their capacities
able to meet
expected.
over the projected
the 1985 demands
Only very slight
1980 levels to be
if new technology
reductions
grows as
in the rate of
rowth
of Household purchases (PCE) and/or government spending is
needed
to satisfy
nologies.
There
the huge investment
are many possible
rates and taxes, that can achieve
demands of these tech-
mechanisms,
the balance
such as interest
between
consump-
tion, investment, and government spending.
It is therefore
recommended
that to insure
that the
expansion of manufacturing and mining capacity and the siting
of the new technology
non-damaging
plants
takes place in an orderly
(to the environment
Such incentives
and regulations
or the economy)
and
manner.
can range from manpower
training proqrsms to ensure a sufficient supply of skilled
heavy construction labor to requiring minimum standards of
strip mine restoration to providing separate money markets
for home construction financing which might be hurt by high
interest rates.
6.3
Further Research Suggestions
The limitations of the present generalized input-output
model have been discussed
in Chapter
2.
For example,
the model
188
does not include
regional
representations, industrial price
elasticities or consumer demand functions.
The suggestions
for further research are designed to overcome these limitations.
Figure 6.1 summarizes
should
be undertaken.
become
available
a small energy
of the U.S.
Regional
and state
multiregional
In addition,
that
I/O tables have
These can be used to construct
[35, 36].
oriented
lar state might
the types of development
(e.g. 9 regions)
more detailed
models
be useful for certain energy
model
of a particu-
and environmental
impact studies. The problem with regional models is that
either the number of regions or the number of sectors must
be severely
restricted
to keep the model manageable
of both costs of computation
(in terms
and understanding).
Better representation of consumer (PCE) behavior is badly
needed.
If I/O is to be useful,
one must be able to predict
the response of consumer spending to changes in air-conditioner
efficiencies, to higher interest rates, and to other policy
variables
(i.e. variables
that can be changed by
government regulations or action).
industrv
or
Capital Stock models of
energy demand may be very fruitful here.
At the national level, more disaggregation of-energyrelated
cases,
industries
(like Boiler-Ilakers) is needed.
this may require
cal and capital
coefficients
Fuel Reprocessing.
such as other
a study to determine
In some
the technologi-
of new industries
like Nuclear
More new technologies should be studied
high BTU coal gasification
processes,
the high
temperature gas-cooled reactor (HTGR), or shale oil extraction
schemes. It should also be easy to incorporate more noneconomic variables, such as water pollution, into the database.
189
o~~~~~o
z
0
U Z
E:
I-
Z <
O z
W UJ
Qoce
: E0
0
ar
0
LU
uI
4A
w
ee
aLUJo
--
z
0
/f
-
Uu- z
zt3e .
w
z
0-
u
.
:E
0-j
0-
w
LG
>L.
z
-j
0
J
-Z UzaZ<
IU Z
II
LU
(
e Z
_
u0 <
:
IA
E a
D
Ln
1
/
0 z
0
U
Z 0< 0D
;=
LU
LU
Z
v,
<
91-
ceceLQL
6
-4
UL
W
W
w
CY
190
It is also extremely
important
to begin introducing
industrial price elasticities into the I/O framework.
fuel prices
icients
not only will
for these fuels change
materials
prices
change,
like steel
are expected
the technological
If
coeff-
but also those for competing
and aluminum
will
to rise and since
chanre.
Since fuel
gas supplies
are not
meeting demand, some mechanism for modifying the technological
coefficients
must be used.
This can be done either with
price elasticities or with engineering studies.
Certainly
engineering studies will be needed to predict the impacts
of various pollution control technologies. Figure 6.2
illustrates
model.
one possible
Pure changes
form of such a dynamic
must be able to affect
input-output
both industrial
and personal consumption and there must be explicit policy
variables, besides government spending.
To summarize, econometric and engineering techniques
must be brought
to bear on the input-output
framework
to
enable it to cope with price changes, new technologies, and
policy regulation.
aged and educated
analysis.
Above all, policy-makers must be encourin the use of generalized
input-output
Toward this end, the next section describes several
important studies that could be undertaken now.
6.4
Suggestions for Policy Studies
Generalized input-output analysis can be used as either
a forecasting
tool or an assessment
tool it can predict
S0 2
emissions,
the economic
etc.
detailed
tool.
electricity-usage,
As an assessment
and environmental
various new technologies,
policy decisions, etc.
As a forecasting
impacts
total sales,
tool, it can predict
(on a large scale)
government spending programs,
of
191
-J
uI
LU
0©
0
--
0
z
Lo
N
0::-
z
0
U
z
0
LLIN
192
Three
areas have been identified
specific
are important
from a policy decision
that both
point of view and are
areas where input-output analysis can contribute uniquely.
Obviously
more techniques than just input-output would be
needed to answer the whole question, but input-output will
play
areas
the central
role in these studies.
integratino
These
are:
(1)
Expenditures for Environmental
Impacts of Capital
Quality.
There is a question
of whether
the 1975
air quality standards could be met (especially by
the electric
utilities)
even if the technology
were now available because of capacity constraints
on the production
of such equipment.
best that can be done environmentally
cost?
at reasonable
This study would require knowledge of the
capacity
production
economy,
of the many sectors
and the various
or SO, control) available
of emissions standards.
at the
What is the
national
more useful.
options
of the
(like fuel switching
to meet the different levels
This study could be performed
level but regional studies would be
This
would entail obtaining all of the
above information in regional form and the use of
regional
(2)
I/O tables which are now avail able [36].
Impacts of MuTtiple Investment Programs (e.g. Energy
and Pollution
Controls).
Both the government
and
industry have goals which entail large investment
programs
as in the industries
attempts
to meet
energy demand and the government attempts to control
pollution. Generalized input-output analysis is
valuable for examining the combined impacts of
these various programs on different sectors of
the economy.
This is another
form of bottleneck
analysis and requires information similar to that
described above.
193
(3)
Impacts of
lternative
Methods
of Meetina
Oil and
Gas Demand.
Two extreme cases are possible:
the
rely
U.S.
program
can
on
a ma ssive
oil and gas import
to meet its growi na energy
the U.S. can stimulate
(a)
needs or (b)
oi 1 and gas development
internally.
The economy, in terms of employment
and sizes of various indu stries, will be quite different in these two cases .
to answering
ignoring
these questi ons could be obtained
the effects
or gas products
demands
A first approximation
of a ny price
changes
in
and focus ing on the different
by
oil
final
st ructures that might result.
and industrial
These are important questions and the techniques developed
in this study
can help to answer
parts of them.
More research
is needed to expand the applications of generalized inputoutput analysis, but hopefully this report has shown that
there is a value
to such research.
194
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Executive Office of the President, Offi ce of Science
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in the Flectric
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Cronsump-
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Strout, Alam M. Technological Chance and IUn
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Energy Consumption, 1939-1954. Unpublished PhD dissertati on, University of Chicago, 1 967.
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Tsaros,
C. L. et. al., Cost Estimate
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BTU/Day Pipeline Gas Plant Via ydroqasification and
Electrothermal Gasification of Liqnite, Institute of
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Tsaros,
C. L., and Subramanian,
T.
K.
Electrothermal
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Escalated Costs , Tnstitute of Gas
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U. S. Department
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Consumed
MC
Subject S-tatistics:
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U.S. Department of Commerce, Bureau of the Census,
Census of Manufactu rers , 1963 Subject Statistics:
Fuels and Electric Energy Consumed in Manufacturinq
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46.
iureau of the Census
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U.S. Denartment
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-
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_
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199
APPENDICES
200
Appendix
A
Data Sources
The estimated
1980 input-output
coefficients
and final
demands were obtained from the Bureau of Labor Statistics (see
[51]).
These numbers were published at 86 order.
manipulations
on this data, which
29, were performed
are described
Various
in Reference
the data to 104 order.
to disaggregate
Reference 51 describes the exact procedure used to perform
the 1980 projections.
labor force and labor
input-output
Basically
GNP was projected
Then the 1958
force productivity.
table was projected
intermediate reference year.
by using
to 1980 using 1965 as an
Readers are referred to [51]
for more information.
The air pollution
for 1967 and the improved
coefficients
1980 coefficients were obtained from International Research
and Technology (see Reference 25).
These coefficients were
derived as part of a two-step process.
The first step estimated
air pollution coefficients from heat and power generation within
the particular industry. The second stage estimated pollution
coefficients from industrial processes within each particular
These coefficients were usually derived by looking
at the major process used within the industry and assuming
sector.
that all sectors
that process.
or all sub-industries
of that industry
used
Therefore these coefficients may not be complete-
ly representative
of the actual
pollution
however, they should be reasonably close.
of each sector:
Unless an extremely
detailed industry by industry method is used, it is unlikely
that any of these
factor
coefficients
of 2 of the real number.
will be closer
In addition,
than perhaps
a
the study mentioned
did not consider any air pollution from mining sectors other
than that of coal refuse fires, nor any pollution resulting
from service sectors. These were not judged to be serious
deficiencies.
201
Energy use coefficients were derived in a multi-step
process.
First,
1963 actual energy
crude oil, refined petroleum,
flows in BTU's for coal,
natural
gas and electricity
were obtained from a Battelle Memorial Institute report
(see Reference
37).
Next,
dual sector were compared
input-output
each indivi-
the BTU flows within
to the dollar flows in the 1963
table to yield a BTU per dollar
coefficient.
These coefficients were then applied to the projected constant
dollar 1980 input-output table. By applying these conversion coefficients
matrix
directly
to the 1980 technical
one was able to obtain
coefficient.
a BTU per dollar
In the near future
do an even better
it should
job of projecting
energy
coefficient
of output
be possible
to
flows because
Oak Ridge National Laboratories is preparing 365 order energy
flows for the 1963 matrix.
Battelle's
work was done at 40
order.
An analagous
coefficients.
was obtained
Mining
procedure
First,
the steel usage by the various sectors
from the Census
for 1963.
of Manufacturers
This was supplemented
the Annual Statistical
Institute.
was used to derive steel use
Report
and Census of
by information
of the American
from
Iron and Steel
Reference 29 describes in more detail the deriva-
tion of these coefficients and provides similar information
for the derivation
of gross water
usage coefficients.
Gross water usage is in this case
defined as the total water
were used.
ures.
percent
usage and cooling water
required
if no re-circulation
Thus it does not correspond
The consumptive
of the gross
to water intake
use of this water is usually
fig-
a few
figure.
Employment coefficients were derived from the Bureau
of Labor Statistics projections that went along with their
1980 input-output projections. Reference 51 provides more
information on these coefficients.
202
The price elasticities of consumer demand for various
products was obtained from the University of Maryland InterIndustry Forecasting Project.
References
1, 2 and
3.
This work is documented
in
203
Technologies2 6
Some New Energy
Appendix B
Gas from Coal
B-1
fuels have many desirable properties and the
Gaseous
market for such fuels seems qu ite larg e in the future, even
at prices
gas
s ignificantly above their cu rrent costs (natural
the wellhead
at
for about 26 t/MMBTU average trans
sells
port costs, and to customers
n atrual
liquified
MMBTU
$1.00/MMBUT while
to
f or 36
of $1.0 0/
gas will cos t in the neighborhood
at th e ports).
However
natural
gas
is
in short
suppl,Y
Even the vast reserves of the North Slope of
at the mome nt.
Alaska will probably amount to less than two year's total
domestic consumption of nat ural gas ([18], p. 3). While some
asso ciated with the lack of discoveries
of the problems
can
gas
natural
be
ained low price,
1 aid at the foot
the re are many who doubt that much more
geological evidence indicates
quantities
to
ultimately
yield
available
be
a
t en
to twenty
for some time.
East, where
source
or Mexico
the
additional
or by LNG tanker
gas
to
come
the world's
by rank.
[23].
or even
production
the location
To what extent
for this chapter
two excellent publications, Energy Research
New Energy Technology
from the Middle
It also indicates
giant gas fields
Much of the material
by pipe-
for lack of a market,
Figure B.1 summarizes
in map-format.
of the world's
is
that will not be
is to import it, whether
it is just flared
from the U.S.S.R.
and reserves
Where
su pply, but
Alaska may
term.
One obvious
line from Canada
However,
that there are still substantial
fou nd in the conti guous U.S.
from in the short
26
of its artificially maint-
gas will be found even at h igher prices.
natural
of
it
is drawn from
Needs [38] and
204F
Z
z
z
I
p
r-4
X:
I
I
C,
:
cl,
-4
LL0
I
r:
U
f
S
f
P
3
tW
P
:a
t ·1
'F
-rhi :
su a
Y
i :
f,8 q
.i X % i ;n- t
: H I· 1
5ii
Y :iIII I 1 I
I
II
AK~
z
:5
. 7
p
205
will be national policy to depend on overseas sources for
much of our energy
supplies
Much of Europe
is uncertain.
and certainly Japan does already depend on foreign supplies
almost completely. There is an economic choice to be made.
How much is the U.S. willing
self-sufficient
for natural
izes the FPC's estimates
to pay to remain
gas or oil?
of natural
domes tically
Figure
B.2 summar-
gas imports.
The alternative strategy is to gasify other fossil
fuels,
in particular
coal or oil.
Coal gasification
seems
most likely to arrive first although naptha is being gasified now.
BTU/ft3 )
Technology
exists now.
for producing
a low-BTU gas
(about 450
By catalytically methanating it (not
commercially proven yet), one can achieve a pipeline quality
gas.
On August
its plans
to construct
900 million
First
19, 1971 El Paso Natural Gas Company
such a facility
tons of recoverable
deliveries
announced
in New Mexico,
near
coal that El Paso acquired.
from this plant are expected
cost of $0.85 to $1.10 per thousand
in 1976 at a
cubic feet.
(Mcf)
There are many technologies being developed for the
production
of both low BTU and high BTU gas from coal.
of these technologies
B.2
will be discussed
ing a process
is illustrated
known
of Gas Technology
(IGT) has been develop-
as the Hygas Electrothermal
in Figure
B.3.
bed hydrogasifier
bed synthesis
next.
Hygas-Electrothermal
The Institute
fluidized
Two
gas generator.
p rocess.
This
The main units are a two stage,
and an electrothermal
Caking
, fluidized
coal is pret reated by
partial devolatilization in another fluidized bed reactor
solve the caking problem (if lignite is used, thi s step
needed).
to
is not
This coal is then mixed with a liaht oi 1 (e.g. ben-
zene) and pumped
as a slurry
to the drying
bed,
(also fluidized).
FIGURE
ATURAL
FPC
206
B,2
GAS ESTIMATES
UNITEDSTATESGAS SUPPLY-DEMAND
BALANCE
- Actual
1966-1970; Projected 1971-1990
(All Volumesin Trillions of Cubir Feet@14.73 Psia ad 600Fahrenheit)
Net
Year
Annual
Pipeline
Demand_! Imports
19b6
1967
1968
1909
1970
1971
1972
1973
1974
1975
17.9
18.8
19.9
21.3
22.6
24.6
26.1
27.7
28.8
29.8
0.4
0.5
0.6
Gas
LNG
Imports
*
0.7
0.8
*
*
0.9
1.0
*
*
1.1
1.1
1.2
*
*
0.3
From
Coal
Gas
Gas From
Un-
From Liquid Hy- Domestic
Alaska drocarbons Production
-
-
-
-
-
17.5
18.4
19.3
-
-
-
-
-
-
-
Annual
Satisfied
Consumptio.l Demand
Reserve
Additions
Year-end
Reserves
RP
Ratio
20.6
21.8
17.9
18.8
19.9
21.3
22.6
0.0
0.0
0.0
19.2
21.1
12.0
286.4
289.3
282.1
16.4
15.8
14.6
**
22.8
23.8
23.7
24.8
0.9
1.3
12.0
13.0
248.8
238.0
10.9
10.0
-
-
-
-
-
**
**
*
24.7
24.8
24.7
25.8
25.9
26.2
0.0
0.0
1.9
2.9
3.6
8.3
11.1
14.0
15.0
16.0
269.9
259.6
227.3
217.4
208.7
13.1
11.9
9.2
8.8
8.4
1980
34.
1.6
2.0
0.3
0.7
**
20.4
25.0
9.5
17.0
186.1
9.1
1985
39.8
1.9
3.0
1.4
1.3
**
18.5
2b.1
13.7
17.0
175.4
9.5
46.4
1.9
4.0
3.3
2.3
**
17.8
29.3
17.1
17.0
170.4
9.6
38.0
17.3
20.6
;*
186.4
325.0
1990
1971-1990
Totals
*
707.6
31.1
414.2
521.2
Very small volumes
;* Insufficient data for qoantitati
ve projection: unsatisfied deelandwill he reduced )'the ancunt of SC octu? ly - roduced.
1/ Contiguous48 states.
UNITED STATES GAS SUPPLY-DEMANDBALANCE
(Contiguous 48 States)
50
i
n
5U
40
40
30
30;e
u
U
u
u
LL
U
a
20
o2
10
10
1966
1975
1970
'U.S. NaturaolGas Reserve Additions (1971-19901)Total325 Trillion CubicFeet.
Source: [18]
p, 3.
1980
1985
1990
207
F
I
G
U
R
E
B.3
ine
Ilygas-Electrothermal Process for Making Pipeline Gas from Coal
Source:
[23] p. 111.
208
The problem of feeding solids into a high pressure vessel is
usually solved with a slurry o r with pressurized lock hoppers.
The slurry method is preferred but there are durability
lems with
the slurry
prob-
pumps.
"Hydrogasification
is carried
out in two stages, with
gases and solids passing countercurrent to each other between
stages. In the first stage, a low-temperature reactor acts
as a concurrent transport reactor in which fresh lignite reacts
with the hot effluent from the second-stage hydro-gasifier.
The latter is a fluidized bed in which char from the first
stage reacts with steam and 19000 F raw synthesis gas, which
is produced in the electrogasifier fueled by spent hydrogasifier char.
is also a fluidized-bed
The electrogasifier
reactor,
with steam as the gasifying medium for the spent char. Resistance heating is supplied by electric current passing through
The hot, spent char is transferred into
the fluidized bed.
this vessel, and the synthesis gas goes directly to the hydroThe use of synthesis instead of hydrogen for hydrogasifier.
gasification of lignite has been successfully demonstrated in
the pilot plant.
In the hydrogasifier 53% of the carbon in the lignite
18.3% is converted
In the electrogasifier
feed is gasified.
to synthesis gas.
The electrogasifier residue, containing
82.7% of the feed carbon, together with all the ash, is used
as fuel for power and high-pressure process steam in the MHD-
steam power section."
It should
be
([42], p. 2)
t hat
added
the electrogasifier residue
will contain about 25 - 50% of the sulfur in the original
coal
(essentially
the organic
all of the non-organic
sulfur).
sulfur
The re sidue will be burned
and none of
at the power
Low sulfur lignite will not present much of an emissions problem, but high sulf ur bituminous coals may require
extensive stack gas cleaning equipment at the power station.
station.
In fact the major
problem
wi th the published
Hygas reports
is that little or no provisi on is made for stack gas cleaning
equipment, waste water treatment, or even sulfur recovery.
The report contains the somewhat glib statement that revenues
from the sale of sulfur will
cover the cost of equipment
needed for sulfur recovery.
The other problems are not
209
addressed
at all.
Since the Hygas process
for use in this report,
oversight.
some correction
This correction
is the one selected
had to be made for this
is discussed
in Appendices
C and D.
It basically consisted of adding SO2 scrubbers, cooling towers,
and water pollution control facilities.
To give some idea of the size of the proposed
million
cubic
feet per day plant,
as four 1000 MW electric
much
nergy
it consumes
generation
plants.
per day as a very large 120,000
refinery.
500
as much coal
It processes
barrel
as
per day
(The largest oil refinery in the U.S., Humble Oil's
Baytown, Texas refinery, has a 345,000 barrel per day capacity
and consists of four crackers.)
needed
to heat the gasifier
The electric generation plant
produces
750 M,
90% of which
is
consumed by the gasifier above.
The Hygas
cesses.
process
is the most advanced
of all the pro-
A 1.5 million cubic feet/day pilot plant is operating
in Chicago.
This project,
Coal Research
which
and the American
is supported
Gas Association
by the Office
of
(AGA) uses both
Montana lignite and Illinois high volatility bituminous coal.
In addition,
ing study
the AGA is supporting
for a one-third
tion plant
and a study
both a preliminary
to one-sixth
to identify
commercial
potential
engineer-
size demonstra-
coal gasification
sites in the U.S.
A variant
of the Hygas-Flectrothermal
as the Hygas-Oxygen
process.
It replaces
process
is known
the electrothermal
hydrogen source with a fluidized-bed synthesis gas generator.
The synthesis
gas is then passed
tion system.
This process
is quite
interested
through
is illustrated
in this process
a hydrogen
in Figure
as the economics
purificaB.4.
IGT
look
slightly better than those for the Hygas-Electrothermal process.
The possible
difficulties
ation plant
is well with
techniques,
but an oxygen
include
the fact that a 750 MW gener-
the state of the art of construction
plant of the proper
size may not be.
21 )
F
I
G
U
R
E
B.4
HYGAS-OXYGEN PROCESS FOR MAKING PIPELINE
GAS FROM COAL
I Steam
Pipeline
Gas
C¥a
i
~
t
HYDROGASIFIER
ETC. SAME AS It
HIYGASELECTROTHERUIAL
Raw
SHIFT AND CO,
I
I
Ir
REMOVAL
I
T
Rich Gas
r
T/
SUSPENSION10
Steam
GASIFIER
Oxygen
and
Steam
I
Char
L
v
{11
----r
,rn
1
Ash
Source:
[23J,
p. 115
I
I
211
In this case the Hygas-Oxygen
some of the other
it adds oxygen
B.3
process
gasification
in a separate
is not as bad off as
processes
reactor
(e.g. Bigas)
because
and hence requires
less.
Low BTU Coal Gasification
The first question to be answered is why anyone would
be interested
in a low BTU gas anyway.
The answer
lies in the
combined economics of production, transportation, and utiliza?
tion technology
for gas.
Low BTU gas can be produced
more
cheaply per BTU than high BTU gas, but it costs more per BTU
to transport.
In addition, extensive modifications must be
made to burners
content)
that are designed
if they are to burn
for natural
gas (high BTU
low BTU gas efficiently.
Thus
if the gas can be used at or near the point of gasification
(e.g., in large industrial
economic advantage.
tances to small
plants),
low BTU gas may have an
However, if it must be shipped long dis-
consumers,
then high BTU gas is a necessity.
Note that if the large user happens
utility,
then the cost of electrical
to be an electric
transmission
to the load
centers must be weighted against the costs of shipping a higher
cost high BTU gas to the load center.
very heavily
on the economics
of large scale electric
use of low BTU gas at minemouth.
1975 air quality
standards.
Two other factors weigh
utility
The first of these is the
The Federal government
set up sul-
fur emission standards for new generation plants and required
the states to devise implementation plans (including emission
standards for old generation plants) to achieve certain specified ambient air quality standards.
Many states responded by
setting the same emission standards for old generation plants
as the Federal
Since
from gasified
government
had specified
it is much easier
for new ones.
to remove
concentrated
H2 S
coal (either with high or low BTU gas) than to
212
remove dilute S2
from stack gases, the coal gasification
In fact, desperate
had a foot in the door.
industry
it upon themselves
have taken
executives
gasification.
utility
to push low BTU coal
Commonwealth Edison is reported to be building
plant now for such a process.
a pilot
The second factor giving impetus to low BTU coal gasification is the possibility of using a gas turbine topping
cycle before the conventional steam cycle. This combined
cycle
is capable
technology,
of 47% [39] using current
of an efficiency
as opposed
to the current
best figures
of 39%.
is that the gas
Part of the reason for these high efficiencies
turbine topping cycle benefits greatly from having a large
volume
of hot, high pressure
gas as a fuel and that is exactly
what a low BTU coal gasification
Since
the dominant
low BTU gasification
of which
are required
plant puts out.
costs in the first generation
process
because
are the gasifiers
(a large number
rates),
of low reaction
Lurgi
the
second generation plant reduces the gasifier cost by using
high temperature, high pressure, entrained flow, slagging
gasifiers that yield higher reaction rates per unit volume.
The major savings results from the higher temperatures.
25000
F. is above
the ash-fusion
temperature
Since
of the coal, a
fluidized bed scheme is necessary.
The United Aircraft report [39] states that the costs
of second generation equipment for most processes is almost
identical and they choose for illustration the Texaco partial
oxidation process with a moving pebble bed heat recovery system and hot carbonate sulfur scrubbing system.
cess used in the calculations
isons
between
this second
in this report.
generation
process
process are given in Appendices E and F.
This is the proInvestment
compar-
and the Lurgi
Figure B5
illustrates
213
F I G U
CLEAN
R E
B.5
FUEL GAS FROM COAL USING TEXACO PARTIAL
OXIDATION
GASIFIER, HOT-GAS HEAT EXCHANGER, AND GAS PURIFICATION
SYSTEM (ROBSON, GIRAMONTI, LEWIS AND GRUBER, 1970)
Air
Source:
[23], p. 154
214
pictorially
compares
what
the Texaco process
will be like.
Figure B.6
BTU of the two processes.
the cost per million
The Texaco process operates by preparing a coal-water
slurry and using pressure and heat to form a steam-coal mixThis mixture
heated
air into the gasifier.
is gasified
during
residence,
the ash trapped as slag on the walls.
under
and about 85% of
Because
of the high
the slag will flow out of the bottom of the
temperatures,
reactor
95% of the coal
Approximately
the 3-second
along with pre-
and injected
is preheated
ture.
Satisfactory
into a pool of water.
these harsh
has yet
conditions
refractory
life
to be demonstrated.
Another technical hurdle is the use of pebble bed heat exchangers with an ash bearing
a pebble
metal
However,
fuse the ash and cause problems
in 10 years
tion schemes
alloy
the high temperatures
in the pebble
bed.
will
Perhaps
this problem will be overcome.
many other possible
are, of course,
There
processes.
for using
at these high temperatures)
be required
for the heat exchanger.
reason
is to avoid using a special
bed heat exchanger
(which would
The principle
gas.
In particular,
low BTU gas
most of the high BTU coal gasificato such use by eliminating
could be adapted
the
catalytic methanation, using air for oxygen, operating at
lower pressures, or making other modification. Some thought
has been given
to modifications
of both the Bigas and Hygas
processes for this purpose.
B.4
The Gas Turbine
Topping
Cycle
The United Aircraft report [39] discusses five variations of combined gas steam cycle electricity generation.
These
are:
215
F I
G U R E
8.6
COST OF ONE MILLION BTU OF CLEAN SYNTHESIS GAS
(Cents/Million BTU)
Lurgi
First
Generation
Process
Texaco
Partial
Oxi dation
Process 2
Coal cost
26.01
23.0 3
Gasification & cleaning cost
31.7
17.6
57.7
40.6
3.0
3.0
54.7
37.6
Total cost without sulfur credit
Credit
Total
for sulfur
at $25 long ton
cost with sulfur
credit
Only 1.0 x
Represents 1.30 x 106 BTU coal input.
16
10 Btu of the input energy in the oal is contained in the
final product.
The other 0.30 x 10 ° Btu represents the heat
The cost of this loss is 6.0 cents/ million
loss of the system.
(The
Btu at the assumed coal cost of 20 cents/million Bt.
above figures are based on gasification efficiency of 77 percent).
process, perhaps ten
2
Since this is a second-generation
years in the future, costs will undoubtedly have changed by the
time it is in operation.
Coal costs are likely to be higher
and sulfur value less.
Costs are presented here on a basis
consistent with those shown for the first-generation process
for comparative purposes.
3
Source:
Represents
1.149
[39], p. V-37,
x 106 Btu coal input.
V-42.
216
1)
exhaust fired, where the turbine exhaust is
funneled into a steam boiler to burn more
fuel.
2)
waste heat recovery, in which the steam boiler
runs off the turbine exhaust alone,
3)
conventional supercharged,
4)
gas generator
5)
two-pressure supercharged.
supercharged,
and
These five were examined in differing degrees of detail,
but enough to establish superiority of the waste heat recovery
scheme as technology improves (in particular, as allowable
turbine inlet temperatures increase). The waste heat recovery
system is diagrammed in Figure B.7. The major characteristics
of the three generations
of combined
cycle systems
is illustrated
in Figure B.8.
The astounding
efficiencies
volume of hot high-pressure
plant.
The pressurization
but the advantage
natural
shows
low BTU gas delivered
by the gas
cost shows up in the fuel price
up in the generator
efficiency.
gas, or other high BTU fuel, were substituted
low BTU, the efficiency
the fuel temperature
almost
are due in part to the high
1%.
would
1000 F. would
increase
for the
But raising
the efficiency
by
([38], p. V-66.)
Part load operation
estimates
drop 2.0 to 2.5%.
If
was not studied,
the drop in efficiency
for half load operation.
but Hottel
[231
at 80% of its full load value
This is becoming increasingly import-
ant, since
the more efficient
it usually
becomes
a plant becomes,
for part-load
operation.
the less useful
In trying
for the
utmost in performance, more and more parameters must be kept
constant. Unfortunately, some utilities are discovering that
lots of cheap
to meet
baseload
the peak load.
capacity
is fine, but they still have
In the future,
of course,
this may
217
F
I
WASTE HEAT
TO
G U R E
RECOVERY
STACK
L - .....
Source:
[39] p. 333
B.7
COGAS SYSTEM
218
F
I
G
U
R
E
B.8
PROPOSED COGAS POWER SYSTEMS
Generation
of gas turbines .............
Number
Turbine inlet temperature ..........
Compressor pressure ratio ..........
Precent
airflow
bled for cooling...
Turbine exhaust temperature ........
overall
Compressor-turbine
Single
steam
turbine,
length..
of size ......
Stack temperature ..................
1
System efficiency .................
Total
capital
(1970)
(1980)
I
II
III
3
2
2
2,2000F
8
4.7%
2,800°F
12
20
[23],
P. 281
9.0%
8.5%
1,5140F
1,485°F
33 ft.
27
26
431 mw
381 mw
312 mw
314°F
219°F
241°F
54.5
57.7
$94.0
$89.3
47.0
ft.
Electric generator losses and auxiliary power
requirements not included. Multiply by 0.96
Source:
3,1000°F
1,297°F
cost (millions) ...... $109.3
for net efficiency.
(1990)
ft.
219
especially since the
be done with pumpedstorage facilities,
"discovery" of underground pumpedstorage possibilities.
Figure B.9 summarizes the capital
of an integrated gas plant-electric
and operating
costs
generation station and
compares these with conventional first
and second generation
steam plants.
Costs for a base-load gas turbine plant are
also included for comparison. The major savings result from
a smaller boiler, less accessory electric equipment and shorter
construction time (less escalation and interest).
220
U)<
0
I-
4
DC v-
LA
03
C
m
C
-
.
qs CO
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N'-¢
(\
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. .e . C.
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rDCC
c L-O~
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C Co
CJO ° C
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VP
0 C 00
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LD
CL
....
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CD
oora
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LO
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-ce
L-
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U-
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221
Appendix C
Derivation of HIGAS Capital Investment Coefficients
The primary
of data for this derivation
sources
the
Cost Estimate of a 500 Billion BTU/Day Pipeline Gas Plant
Via Hydrogasification and Electrothermal Gasification of
Lignite [42] and Electrothermal Hygas Process Escalated Costs
[43].
These books contain detailed equipment lists and costs
estimates
for an actual Hygas plant.
ly crude engineering
studies
in that many equipment
left out and only rouqh plant layouts
are also calculated
assuming
They are still relative-
are given.
that the process
items are
The costs
is actually
feasible as planned.
The IGT Hygas process
furthest
along
of any of the high BTU processes
at a pilot plant
more
was chosen because
stage.
than one week
it is the
and is actually
The pilot plant has not run for
continuously
at the present
time (July 1972).
There are still many engineering problems to be solved.
How-
ever a one-sixth scale demonstration plant is currently undergoing preliminary engineering design by Procon Inc. for IGT.
The results of this study are not publicly available now.
It is not certain when,
sequently
factors
or if, it will be available.
some estimation
Con-
had to be used on the unknown
in the construction
of this plant.
The two major unknowns involved the electrical generation part of the Hygas plant a nd the air and water pollution
control sections
unknown
of the plant.
is that the original
The reason
the former
r'eport [42] proposed
is an
to use an
MHD power system that will jus t not be available for many
years. The second report 43] updated the costs from 1968
to 1971 prices
and replaced
th e MHD system with a conventional
steam electric system, fired by the spent char from the
gasification part of the plant . However, it did not give a
detailed
equipment
list for the new electrical generation
222
section
of the plant.
A report by Bechtel
[5] for coal
fired steam electric generation plants was used to correct
this.
The second major uncertainty, pollu tion control,
exists
because
there
is no provision
either of the two reports.
for i t, at all,
in
Informal communications with the
IGT staff and some rough rules of thumb we re used to close
this gap somewhat.
Figure
C.1 illustrates
the original
IGT estimate.
Figure C.2 shows the new estimates.
These new estimates were
arrived at by multiplying the original gas-pla nt equipment
investment
by 1.09 and adding
power system.
the Nelson
to that the cost of the new
The inflation factor of 1.09 is derived from
"true
cost" index and Chemical
magazine's monthly plant cost index.
tion factors
take into account
Engi neering
Poth of these infla-
increases
in pr oductivity,
otherwise the inflation factors would be much higher (6.9%
inflation per year instead of 4.4% per year). The problem
was now to get all estimates in the same 1970 dollars.
Figure C.3 illustrates the on-site conventiona 1 steam generation
plan.
First
the actual
1968 equipment
lists for all sections
of the plant except the MHD generator were used to derive
dollar
amounts
for each I/O category
for this part of the
plant. Figures C.4 through C.11 describe this equipment
and show what standard BEA 86 order category it was assigned
to.
Note that the sector
in sector
report.
numbers
numbers
that correspond
are in BEA categories,
not
to the model used in the
Catalyst and packing costs were subtracted from
the total equipment costs and allocated separately.
223
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225
GAS PLANT
WITH ONSITE POWER
1,597,130 Ib/hr,
PROCESS STEAM 1025 'F
1200
(CTOAfITItl
J
PIPELINE GAS
LP STEAM
KU_
20,000 Ib/hr BOILER
500 x 109 Btu/DAY
IOO' F
l
Tlolc
65.000 kW
1200 p , 720 F
PROCESS STEAM
832,844 Ib/hr
QONOENSINGTURBINE
HEATER! ---3500 psi
SUPER-
BFW
LOW-PRESSURE
------
20,000 Ib/hr
I -ti~L
HIGH-PRESS.BFW
FROM GAS PLANT
LIGNITE (WITH 35% H2 0)
425 *F 1700 nin
2,429,970 Ib/hr
4,537,300 lb/hr
54,448 TONS/DAY
2 in. Hg
E;
__
-A1
FEEDWATER
PREHEAT
P
ELECTROGASIFIERCHAR
777.840
. . . , _. _Ib/hr
. _. .
POWER
FnuiN
fllUTF
,I
I
690,000 kW
2FhIIA
,-UNIT1
--
LIGNITE (35% MOISTURE)
305,350 Ib/hr
UNIT
PLANT UTILITY SUPPLY FOR 500 BILLION Btu/DAY PIPELINE
GAS FROM LIGNITE BY ELECTROTHERMAL HYGAS PROCESS
Source: [43], p. 6.
F
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GJ-U
R E
C.7
SECTION 400 - HYDROGASIFICATIONINCLUDINGELECTROTHERMAL GASIFIER, QUENCH TOWER, AND LIGHT OIL RECOVERY
EQUIPMENT SUMMARY
Equipment
Equipment
No.
LightOil Vaporizer
A-401
Hydrogasifier
(Low-Temperature
Reactor)
A-402
Hydrogasifier
(High-Temperature
Reactor)
A-403
Electrogasifier
A-404
Quench Tower
A-405
Tar-Oil -Water
Separator
A-406
Oil SettlingTank
B-401
Recycle Water
SettlingTank
B-402
Quench Water
D-401
Cost/
Unit, S
Total
Equipment
Cost. S
4.4,200,00
2,840.000
17.680.000
11,360.000
No
Description
Reouired
Fluidized bed contactor, 22.17 ft shell ID x
BEA
Sector
Number
4
24 t ODx 54 ft tan to tan, 3-in lightweight
insulationplus4-in. hardfac refractory lining,
21 ft refractory ID, 1500- 62S'F, 1100pasi
Cocurrentlift reactor; 10ft shell IDx 11
It
4
ODoverall dimensionswith 4-ft lift line,
internalpathsplus fill insulation,1500'- 1700'F,
1105paig.
Fluidizedbed zone, 25.5-ft shell ID x 27.5-ft OD 4
x 45It tnton,tan. -in. lightweightinsulationplus
4-in. hardfacerefractory lining, 23.5 ft refractory
psig
ID, 1700'- 1900F, 1110
Combinedcost of vesselsA-401,A-402, A-403
4
4
Free fall section,24ft shell ID x 26-ft ODx
50-ft n to tan, 8 in. light weightinsulation
plus4 in. hardfacerefractory lining, 22 ft
refractory ID, 1900'F,1115paig, coatincludes
electrodes immersedin fluidisedbed for heat
inputat SI50,000
14-t 4-in. ID x 77-ft tan to tan x 7-in thick
4
wall containing63-ft packedbedof 3-1/2-in.
lb/hr water flow
plasticpall rings, 2,985,000
3,660,000-
227,000
908,000
40
36
CoolingTower
LightOil Cooler
E-401
H-401
High-PressureBoiler
Feedwater MakeupPump
H-402
High-PressureBoiler
Feedwater Pump
4
fIt-OD x 154t tan to tan wide x 3/8-in. wall
thickness.IS-min residencetime, 115F,0 psig
15 ft ODx 48 ft tan to tan widex 3/4-in.
thick, 10-minresidencetime, S20'F,15psig
Cools23,882Spmof quenchtowerwater from
250' to 90'F, wetbulb temp 75'F
Light
oil 250' to 115'F,50 psi, coolingwater
r
Btu /hr
85 to 115'F 50 psig, total duty71.188X 106
I
4
6.000
40
33.000
13,000
I
500.000
500.000
I
25.300
25 300
40
40
40
I 1 I spare
2.500
5.000
1150 pm deasrated high-preasure boiler feed
4 1 spre
53.000
265.000
49
49
12.400
49
centrifugalpump
motorwater 0 to 1300psig.,215'F.1200-hp
driven centrifugalpump
463-gpmmethnationknockout.100'F,1000to
motor-drivencentrifugalpump
1300psig, 150-hp
H-403
Low-emperatureReactor
H-404
0 to 1110psigto I
235-gpm
quenchwter at 100°F,
motorlowtemp reactors of hydrogasifier,275-hp
driven centrifugalpump
Light OilRecyclePump
H-405
QuenchWater
Cooling
TowerRecyclePump
H1-406
QuenchTower Cooling
Water Feed Pump
H-407
QuenchWaterFeed Pump
6.000
area/unit = 7000 q ft
3125-gpm0 to Z5 psi&60°F, 60-hp motor-driven
High-PressureBooster
Pump
40'
887,000
(vessel)
rate, 1090psil, gas cooled down from 625' to
100'F,water heatedfrom 90' to 2SO0'F.
30-ft ODx 52-ft tIn to tan wide x I-in. wall
thickness,25-ft liquid space,S-ft gasdome,
1/2-hr. residencetime, 2S0'F,1085paig
40
40
53
I +I spare 6.,200
I pre
20,500
41,000
49
990gpmof light oil at IISlF, 40 to 100psi8 ,
50-hp motor-drivencentrifual pump
4 + I spare
2,Z00
11,000
49
10,000 gpm wter, 0 to d0 psig, 900F 920 hp.,
4
17,200
86.000
49
29801pm quench water 0 to 1100 psig, 90°F
8 + 2 spares73.500 735,.000
49
quenchwaterto
recycle mixeswith ZSP°F
give 150F coolingtowerfeed.motor-driven
centrifugal punp
multistagecentrifugalpump,2500hp, driven
by hydraulicturbine generating1420hp at full load
pluselectric motorsized for full pumpingload-
+
I spare
2600 hp.
Quenchwater cooling
towerfeed pump
H-408
b000 gpm of water, 15 to 50 psig., 00F, 175 hp.
Quenchtowermake-up
water pump
H-409
910 gpm water,0 to 1150 psig,90F', 850-hp, motor- 4 -1 spre
motor-drivencentrifugalpump
Total
Sector 53 includes 850,000
for Electrodes
[42]
1 spare
driven centrifugalpump
* Includes S112.000for packing.
Source:
4
, p. 25
10,500
52. 500
49
40.500
202.500
49
5,.681,700
230
C.8
G U R E
I
F
I EQUIPMENT SUMMARY
SECTION 500 - PREPURIFICATION
Equipment
Nio.
Equipment
Description
No.
Absorber
A-50l
I11. St
Regenerator
A-502
9. ft-lD X 46-ft tan X 114in. , 25 psi&.
Hot Carbonate
H-0oI
4470 gpm.30 KCOs solution. 10 to 1100 10
psig.-40'F. multistagecentrifugalpump.
stainless teel. 3700hp; drivenby hydraulic turbinegenerating2010hp at full
electric motor sited for full
load phlus
pumpingload.3700hp
CirculationPumpI
RegeneratorCondenser
S-Sot
tn
ID X 4-ft
Cost
Unit.
Required
(Ve....l)
wall cotaininl 36-ft packedbedof -l :in. plastic poll rings.I1115pi. 240'F
packedbedwith 3-1/2-in.
240'F 36-ft
pall rings
f
Stripped
acid
gas 22d to 100I
.
10
2
14. 900
(Vessel)
pares
119.000
psil.
unit
total duty d6? X
7600 sq ft
19. 100
40
Cost.
S
1. 428000
Knmckout Drum
B- SOZ
9-ft D X 27-ft tn X 1/4 in.. 25psis. '10'
KnockoutDrum
(After Condenser)
1-503
S. -ft ID X 16. 5 t tn
IOO-F
RegeneratorReboiler
E-502
30%KCO, solution. 40'F. Z5psia
saturated team. 115psis, total duty
area/unit
in..
2S psis.
7,400
74. 000
40
3. d00
31.000
d. 900
40
40
d40 sq ft
AbsorberKnockout
Drum
a1-501
4 ft-ID X 12-ft tn
Steam
Regeneration
H- 502
300 gpm. 0 to 200 psig. 2ldF, 60 hp
Steam
Regeneration
MakeupWaterPump
H-S03
d96 pm. 0 to 25 pi. 60'F.25hp.
motor-drivencentrifugal
Steam
Regeneration
H--504
Regeneration Steam
E-503
X
49
40
(efore Condenser)
137. ZSX 106Btu/hr.
36
rea/
0 Bltu/hr.
X 1/4 in..
36
64s. 000
32.400
15
psia. coolingwaterdS' to I 1SF. SO
141. 00
Sector
Numbe r
40
Total
Equipment
I Sd.000
thirl-
X 5-31/din.
/
S
BEA
10. 300
5II00
SI. oo
spare
2. 500
.000
.pare
1. 700
3. 400
.p&re
2.000
4.000
psi&. 240'
I O1105
40
49
Feed Water Pump
Condensate Pump I
Waste Heat Boiler
143d gpm. d to 25 psig. 100F.
motor-drivencentrifugal
25 hp.
feedwaterat'338'F
stean
· Io-pressure
to teamat 100psil 330'F. methanation
effluentd40' to 363'F.1030psig, total
duty 304 KiCO0
61. 700
740 400
49
49
40
67. 000
536. 000
40
solution. 719. IS X 106
Btu/hr. arealunit- 6500 q ft
Regeneration Steam
-5S04
Waste HeatBoiler
LP team eedwater at 33d'Fto team
at 33d'F. 100 psig. light oil vaporizer
effluent from 625' to 42S'F. 1095pSil,
total duty 54d. 543 X 10' Btu/hr.
unit - 6600 q ft
Deaerator
Steam Drum
B-S04
-505O
areal
Deacratesa11plant low pressuresteam
feedwater
Costincludedwith
a11feedwater treatment
29.00d
9. Sft ID X 28. S ft X 3/4 in.. 100 psigl
d9,400
338'
°Price includesS 51.400for 1d. 700cuit of 3-1/2-in. ceramic pll rings.l
+Price includesS 70.100 for ZS.500cultof 3-112-in. ceramicpll ring;S
Source: 42] ., p. 29.
Sector
Total
36
4.767.200
40
231
O
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F
I
G
U
R
E
C.10
SECTION 700 - PREPURIFICATION II EQUIPMENT SUMMARY
Total
Equipment
Equipment
Absorber
A-701
No.
Description
No.
Required
5
12-ft ID X 47. S-ft tan X S-1/2-in.
thickwall containing
39. S-ft packed bed of
Cot/
Eq
iCost, S
Unit. S
934.900
174,800
(Vessel)
3-1/2-in. plastic pall rings, 1075psi.
BEA
Sector
N umber
40 l
36.
240'F
Regenerator
A-702
Hot Carbonate
H-701
RegeneratorCondenser
E-701
Stripped
acid gas 229 to 100 F. 25 psia.
cooling water
OS' to II SF, 50 psig,
total duty 5d7. 2 X 10 Btul/hr.
area/unit
=
6250 sq ft
Knockout Drum
(Before Condenser)
B-702
8. S-ft ID X
230'F
2S. 5-ft tan X 1/4 in.,
Knockout Drum
(After Condenser)
B-703
5. 5 ft-ID
Absorber Knockout
Drum
B-701
4-ft ID X 12-ft X 2 in..
10. 5-ft ID X 3d-ft
tan X 1/4 in..,
CirculationPump
401
14, 400
107, 300b
S1. 500
978, 000
49
IS
26.600
399,000
40
5
6, d00
34,000
40
25 psi,.
5
3,d00
19,000
40
240'F
S
10,300
51.500
40
5
25 psia,
(Vessel)
240F 30-ft packed bed with 3-1/2-in. pall
rings
2392gpm, 304 KC0 1 solution, 10 to 1070 10 .' spares
361
psig, 240'F, multistagecentrifugalpump.
stainless steel, 1900hp; driven by hydraulic turbinegenerating990hp at full
loadplus electric motor sizedfor full
load-2000 hp
Zinc Oxide Touer
'
X 16. 5-ft tan X 1/4 in..
100'F
I I.S-ft
A-704
psi.
25 psia.
1070 psia,
ID X 16. 25-ft X S-1/4-in..
1065
79. 500
c
2
100*F
260.600
(Vessel)
Regeneration Steam
Condensate Pump 11
H-70
100F.
S55 gpm. d to 2 pig,
motor-driven
centrifugal
Regenerator Reflux Pump
H-703
100F.
439 gpm. d to S5psig.
motor-driven
centrifugal
Hot Carbonate 11
Effluent Cooler
E-702
Gas stream
from 240' to 100'F.
1055
'
psig, cooling
water from dS to 115'F
10 hp,
7.5 hp.
1 +1
spare
I 1+
spre
3
2,500
1,2S0
2,000
,00no0
.25,200
75,.600
404
27)
49
49
40
50 pig, total duty IS0 11 X 10'Btu/hr,
* 7000
rea/unit
Activated Carbon Towers
A-703
sq ft
10-ft ID X 34-ft tan X 4-3/4-in., 1065
psia,
mesh
100'F.
30-ft
packed
bed.
6
Condenser
E-702
Benzene-rich stripping steam, 2dS' to
IO0'F. 50psig, cooling water dSF to
IlS'F. 50 pig, total duty 132.696 X 10
Btu/hr. area/unit = 7, 750 sq ft
2
RenzeneSeparator
B-705
6-ft ID X Id-ft tan X
2
Knockout Drum for
15-704
4-ft ID X I1-ft X 2 in.. 1070 paia. 100'F
AbsorberCondenser
/8 in..
1OO'F. 10-minsettling time
S0 psig.
RenzenePump
H-704
67 gpm.
SteamDesuperheating
H-70S
201 gpm.
BoilerFeedwater
If-706
41 gpm 0 to 100 psig. 100F. 6 hp
Activald CarbonRecycle
H- 707
Water Pump
Pump
Gas Compreessor
Surle Drum
hPrie
includes
Price
includes
Pri e includes
dPri
e inc-ludes
B-,06
0 to ZS psig.
100'F.
0 to 1300 psig.
I00'F.
2. S hp
270 hp
5
d
I
10.300
40
5.400
40
51,500
600
1.200
14,200
28.400
spare
600
220.000
664t IDX 3/8 in.. spherical.0 pig,
sized to take contents of activated carbon
.t ,I.r...e...,tnn
I
63.000
1.600
220,000
63.000
Sectoi rir - 36
Sector 27
40}
27
66.000
pare
I + spare
I *
2,700
I
, p. 36
82d,600
33.000
103lb/min. 0 to 1050pig, three stages.
cvithc9oles after each stage. 2055 hp.
c ntrtiular
S 60.900
for 22, 150 cuft of 3-1/2-in.
cernmic
pall rings.
5 53, 300 for 1I , 80 cuft of 3-1/2-in.
eramic pll rings.
S 101, 600 for 2. 50 cuft of ,inc oxide pcking.
S 174.000 for 141 3Ocuft of activated
carbon packing.
Source. [42}
109.100
4 X 10
4.130.100
40
49
49
49
49
40
233
F
I
G
U
R
E
C.ll
.SECTION 8800- METHANATION AND DRYING EQUIPMENT SUMMARY
Eq, ipment
No.
Equi
No.
Reui red
Description
Cost /
Unt. S
in R4ctors
MethNti
A-101
Stage
.3S-ft ID X ZS ft tn X 4 in.,
104S psig, 9OO, 3-in. intersal
insuatien, two 11-ft catalyst beds
S9.000
194,000
e
(Vessel)
A-O02
11II.2ft ID X S-ft taUnX
114 in.,
1040 psi.i 09S'F, 3-in. internal
insulation. two 11-ft catalyst beds
I
104,700
36,.700
Stage 3
A-0I
I1l-ft ID X 254t tan X S 1/4 in.,
1035 psig., 95F.,
-in. interal
insulation, two II -ft catalyst beds
Z
100.600
(V..essel)
691,200
Stage 4
A-804
10.7-ft ID X 3-ft tan X S in..
1030 psig, 95F., 3-in internl
insulation. two IC-ft catlyst beds
4
C-801
O1ISpsi., l00F,
,780 CF/min,
compressed to 1065 psia, iLS0 hp.
motor driv
Z + spar
1-801
114't ID X 3Jit tn X
100S psig, l00F
letha nti
C.ompressor
on Knockout
Drum
79,600
103,000
1
49,500
12
30,400
364.800
40
55,900
40
steam feedwater from
Low-pressure
2180 to 33'F.
100 psil, methdntion
effluent from 363' to Z0SF, 1020
psig, duty 177.0 X 10 Btul/hr. are/
umit 6000 sq ft
Low-Pressure Steam
Water Preheater
E-803
team feedwater from
Low-pressure
87' to i1'8F, methantion effluent rom
Z80 to Z00'F. 0OIS Dpi, duty 189.053
X i0 Btu/hr, arealunit
31000 sq ft
2
27,940
Methanation Effluent
Cooler
E-804
Methanation
effluent 200 to 100'F.
1010 p ig, cooling water 85 to IIS
F, 0 psig., total duty 213.311 X 10I
Btu/hr,
rea/unit -9400
q It
4
31.500
D-O01
Dries gas to 7 lb/
packalge unit
Co.sts
Source:
ncludd
in Abov
[42]
S.
5.000,SSt2. $
, p. 41
I
Total
.000
.000
tage ., S490,000 nd Stg. 4. S9.
27J
- 49
49.,00
E-B02
Cat.kyt
40}
101.000
Low-Pressure Steam
Wter Preheater
' CF, 1000 psi3
274
I
Meth ntion firststage
to SSOF, 1030
psig, 4th
=
effluent 90
to MOF.
duty 100. X i0' Btuhr.
S200 sq ft
l
40
27)
40'
474,000
E-g01
feed 100'
stage
1030 pait,
a re/unit
40l
I ,8000
Feed Preb heater
Dryer
1,Z46,400
(Vessel)
1/4 in.,
Number
274
Ste
Reycle
·
Total Equipment
Cost, S
BEA
Sector
40
40
126.000
40
4 0.000
40
$4,117.
00
Sec r 2
See
27
See
Sector
234
1.09
to be
were
thus generated
The dol lar flows
by
inflated
a comparable basis with the electric gener-
on
ation part of the plant.
costs
Next the construction
associated with building the gas part of the plant (essentially
the sum of the differences
costs
and the base installed
between
costs in Figure
by 1.09 and allocated
was multiplied
C.1 ($55,667,600))
to Sector
Because
11.
comes out to less than their
cost of equipment
the escalated
the equipment
stated total for gas plant equipment the amount allocated
utility
to the electric
portion
accordingly to $127.68 million.
of the plant was
increased
From this was deducted
the estimated $15.93 million additional for a larger boiler
to provide
process
steam
for the gas plant.
This figure
($15.93) was obtained by subtracting the purchased electric
gas plant cost from the on-site gas plant cost, since the
additional amount represents the cost of a process steam
boiler.
The result
to the electric
was allocated
since
of this subtracti on
the gas plant
required
plant.
755 MW.
($ 111.75
million)
This is a mere
This number
$155/Kw
may be on
the low side.
Figure C.12 aggregates the coal fired electric generation
plant
capital
cost breakdown
from the Bechtel
report,
(Bechtel-I) prepared for the Harvard Economic Research
Project,
into a single,
capital
vector.
portation margins are included yet.
when
the final
This capital
capital
vector
dollar
No trade or trans-
These will be removed
flows for Hygas are obtained.
for coal fired plants was used to dis-
aggregate the $111.75 million into sectual flows. The
$15.93 million for additional boiler facilities was disaggregated according to the breakdown of account 312 - Boiler
Plant Equipment in the Bechtel report. These two dollar
flows
then were
added
to the previously
calculated
flows.
235
F
I G
U R E
C.12
COAL-FIRED STEAM ELECTRIC GENERATION
PLANT CAPITAL VECTOR
(BEFORE REMOVAL OF MARGINS)
BEA
Sector Number
Fraction 1
Industry
11
New Construction
.39139
40
Heating, Plumbing & Structural
Metal Products
.26730
42
Other Fabricated Metal Products
.07107
43
Engines and Turbines
.09474
46
Materials Handling Machinery
.00741
47
Metal Working Machinery
.00200
49
General Industrial Machinery
.07030
53
Electric Industrial Equipment
.08607
55
Electric Lighting Equipment
.00572
71
Real Estate
.00050
73
Business Services
Total
1
Source:
and Rental
.00350
1.00000
Fraction calculated with labor margins assigned to 11.
[51.
236
Pollution control costs were a major uncertainty.
Informal conversations with IGT personnel indicated the
for pollution
total costs
control
could be as high as $25 million.
BTU/day
number,
some rules
of thumb applicable
wet cooling towers.
yet
that the plant
burns
p otential
a
the electric
scrubbers.
This leaves
for natural
draft
high sulfur
char (or worse
bituminous
coal) con-
air emission problem when burned in
generation
Estimates
in the lignite
plant,
then one is forced
of limestone
scrubbing
high as $40/ KW for capital equipment,
but
to install
costs go as
25/KW was used.
$21.6 million to handle the water pollution
associated w ith the gas process plant itself.
that this is a reasonable
capital
utilities
to electric
that the small amount of
If one assumes
sul fur contained
stitutes
To check out this
costs and $11/Kw
for precipitator
residual
this for a 500
For example, Reference 26 quotes figures of
were used.
$1759/MW
Doubling
gives $50 million.
plant
billion
BTU/day
on a 250 billion
number,
Figure
To illustrate
C.13 lists the
expe nditures for air and water pollution for different
Electric utilities are predominantly air polluters,
while refineries are predominantly water polluters. From
industries.
these
figures,
it is clear that $21.6 million
for water pol-
lution abatement equipment is quite reasonable.
To disaggregate these dollars amount, Figure C.14
lists the air and water pollution equipment purchase breakdowns found in the most recent Bureau of Labor Statistics
bulletin [53].
These fractions were used to disaggregate
the air and water pollution dollar figures.
mentioned
that there is still no provision
for the removal
coal.
of sulfur
recovery
in these figures
of H 2 S from the raw gasified
and recovery
The IGT report makes
It should be
the glib statement
is covered
that the cost
by the funds received
from
237
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Y··II···IIILCSI·OII*ln--PYII·I·
239
sulfur sales.
This is a highly dubious statement on many
grounds:
sulfur prices are quite volatile to begin
with,
(1)
(2) if sulfur were
recovered
from all stack gas, it
would more than satisfy the current U.S. sulfur requirements,
(3) if low sulfur
concentrations
are low enough
process,
recovery
lignite
is converted,
to present
(4) if a high sulfur
the H 2 S
difficulty
to a
coal is used, the
residual sulfur in the char will be costly to remove from
the stack gases
of the electric
these are conservative
figures.
plant.
Figure
All of which says,
C.15 provides
the
disaggregation scheme for precipitator and cooling towers.
Contractors overhead and profit was recalculated on
the basis of the new capital
scaling
the old profit
The difference
was allocated
etc.
Interest
between
cost of the gas plant by
to the new total.
and overhead
figure
a 10% profit
and the actual
to 73 for consultants
was then assessed
fees, design,
figure
supervision,
at 7.5% (this assumes
a two
year construction time with an average of half the money
outstanding).
Working
capital was then recalculated
lignite rather than the original 8/lb.,
materials
by using 12¢/lb.
inflating other
by the average price change of 13.6%
(6.6% com-
pounded), and accounts receivable by the roughly doubled
price
of gas.
Figure
C.16 lists these changes
and their
sectoral allocations.
The final
IGT high BTU coal gasification
vector was
calculated by summing all the previously described flows
removing trade and transportation margins and dividing by
the total cost of the plant
we have is a capital
output
vector.
the plant
($354.8 million).
cost per plant breakdown,
For our purposes
and selling
where
Thus what
not a capital/
the actual
cost of
price of the gas are not determined,
240
F
I
G
U
R
E
C.15
COST ALLOCATION FOR VARIOUS EQUIPMENT
Item
BEA
Sector No.
Sector Name
Fraction
49
General Industrial
Equipment
Natural Draft
11
Wet Cool ing
42
49
.81818
New Construction
Other Fab Met Prods .090911
.090911
Gen Ind. Equip.
Precipi tators
Towers
Source: [271,
Appendix
D
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242
Figure
cost per plant is a more useful vector.
C.17 lists the non-zero
components
of the final percentage
capital vector.2 7
-
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The percentage capital vector must be multiplied by
27
the cap ital/output ratio before it becomes the standard capital
vector. However, it is easier to manipulate before such
multiplication.
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244
Appendix D
Derivation of Hygas Technical Coefficients
The same sources were
coefficients
the capital
as in deriving
the technical
used in deriving
Figure D.1 lists the escalated
[42,43].
coefficients
costs for the 500
operating
billion BTU/day plant, together with my modifications to it.
Most of these modifications
changes in capital
costs were added
costs described
in Appendix
on the basis of scaled
Limestone
C.
up demonstration
$350,000 was added to labor costs to reflect
plant costs.
limestone
came about as a result of the
handling
costs.
was used as for coal.
to raw material
of labor
Here the same proportion
D.2 lists the
Figure
estimated labor requirements.
By-product credits were not subtracted from the total
revenue requirement because, by definition, a technical coefis calculated
ficient
by using the total outp ut for an
industry, which includes the sale of by-produ cts.
lists
these by-products.
further broken
down.
req uirements
Annual material
down in [43].
Figure
factor
D.3
are
D.4 repr 0 duces this breakare not escalated
Note that the costs of these materials
by any inflation
Figure
from the original
196 8 study.
This is
probably an error, however the additional $130 ,000 does not
Figure
make a very large difference.
t
D.5 lis s the process
feedwater requirements for the plant.
Figure
and
D.6 lists the
cooling water requiremen ts. Only process and feedwater is
The original study, [42] includes
assumed to be purchased.
$2.3 million
off-site
for a water
costs
purification
purification plant as part of the
that incl udes the MHD plant.
plant
is in cluded
W hether
this
in the new cost s was not certain
but since process water typically costs 304/th ousand gallons
and since the plant uses 7.3 billion gallons per year, the
estimated $2.2 million water cost could scarcely be served
by a $2.3 million water
expected
plant.
to use considerably
The demonstration
less water
plant is
than is projected
but since the demonstration plant study was not available,
the figures
in [42] were
used.
here,
245
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249
F I G U R
D.5
PROCESS AND FEEDWATER
REQUIREMENTS
Total process and boiler
total
feed rate requirements give a
plant makeup of 15,562 gpm. This is summarized
as follows:
gpm
Reaction Steam Feedwater
Hot Carbonate Regeneration
Hydrogasifier
CTR Quench
Quench Tower Makeup
Cooling Water Makeup
Total
Source:
[42],
p. 61
3,117
Steam
890
235
3,640
7,680
15,562
= 7361 106
gal/yr.
250
F
I
G
U
R
E
D.6
COOLING WATER SUMMARY
Process Cooling Water 850 - 115°F
Service
Cooling
gpm
Recycle Light Oil from 2500°-1150°F
4 ,746
Condenser
for Hot Carbonate
I
57 ,800
Condenser
for Hot Carbonate
II
39,146
Cooling Methanation Feed From 240°-100°F
Cooling Methanation Effluent from 200°-1000°F
Cooling CO Shift Effluent
2 5 6 °-2 4 0
0°F
Condenser for Activated Carbon Regeneration
Cooling Activated Carbon Recycle Compressor
Total
Gas Plant
MHD Turbine Steam Condensation
Total Combined Requirements
Source:
[42],
p. 59
7,162
14,220
3,152
4 ,420
335
130,981
88,400
219, 381
251
With these data sources, all well defined numbers were
as illustrated
assigned
to BEA categories
residual
9.5% was distributed
The
in Figure D.1.
on the basis of comparison
with
the electrical utility, chemicals, and petroleum refining
industries.
sectors
In general
27,28,31,
an average of coefficients
and 68 was used, supplemented
for BEA
by the author's
judgements. Figure D.7 summarizes the non-zero technical
coefficients for Hygas process.
Trade and transportation were removed from all commodities except
mouth.
coal, since
This is contrary
ing a uniform margin
more correct.
the plant was assumed
to the standard
for all commodities
to be at mine-
BEA practice
of remov-
but it is probably
252
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253
Appendix E
Derivation of Capital Coefficients for Second
Generation Texaco Low BTU Coal Gasification
Process
The United Aircraft report [39] which served as the
reference work
gas turbine
for both low BTU coal gasification
topping
the IGT report
cycle, was not nearly
[42,43].
as well
and the
done as
This may be caused by the fact that
the United Aircraft report was a joint production of three
different organizations: United Aircraft, (gas-turbines):
FMC (fuel desulfurization
processes);
and Burns and Roe
(steam systems and power systems economics).
FMC, who
prepared the gasification parts of the report, did not appear
to do as detailed
a job as United
Aircraft
did on the gas
turbine section of the report.
Figure E.1 illustrates the add-on procedure used to
go from purchased equipment cost to total installed cost.
Sector assignments are also provided there.
Figure E.2
reproduces the purchased equipment list for the second generSector
ation Texaco process using hot carbonate scrubbing.
numbers
(at 83 order)
are also included
here.
Figure
E.3
compares the Texaco process to the first generation Lurgi
technology.
The costs of general process equipment (e.g. pumps
or heat exchangers) were taken from standard lists. Costs
of towers and other cylindrical vessels were estimated at
45¢/lb.
for fabricated
steel.
The costs of any linings were
added to derive the final estimated cost.
Because of the unusual way of presenting this cost
information,
we resorted
capital coefficients.
(@ 7.5% per year),
to an unusual method
All items of equipment plus interest
engineering
(one half of the figure
of deriving
(6% of plant cost),
shown in Figure
instruments
E.1). insurance
254
F
I
G
U
R
E
E.1
"ADD-ON" ESTIMATION TECHNIQUE ILLUSTRATION
Item
Amount
Equipment Purchased (Initial Estimate)
$1000
Commodi ties
Excavation
Concrete
6.4% equipment
$ 64
@ 14.5% equipment
Structural
Buildings
Steel
145
13.1% equip.
131
@ 5% equipment
50
Piping @ 40% equipment
400
Electrical
320
@ 32% equipment
Instruments
Insulation
Painting
25% equipment
250
6% equipment
@ 2%
60
20
equipment
Subtotal
1440
Total Direct Cost
Indirect
Costs
1440
35% of Total
Engineering,
Interest
Insurance
Direct C ost
supervision
= 6%
o f total
= 7.5% of total
= 1% of total
Subtotal
Contingency
3294
10% of Total Direct-plus
Indirect Costs
Total
Source:
854
Installed
[39], p. 458
m
329
Costs
(Final E stimates) $3623
255
F
I
G
U
PA-E
E.2
SECOND-GENERATION
PARTIAL-OXIDATION
HOT-CARBONATE
PROCESS
EquipmentList
BEA
Equipment
Purchased
Cost-Dollars Number
Sector
No.
Reg'd.
2
1
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
2
Description
35,000
UnderfeedConveyors115 TPH, w SS Hopperand VibratingFeeders
Raw Coal Conveyor-Belt,
30 in. x 2000 ft long - 400 ft/min,
175,000
310 TPH
20,000
Belt Conveyor,80 TPH, 220 ft long CS-24 in.
20,000
PrimaryCoal Crusher,180 TPH, 70 hp
105,000
HammerMill, 80 TPH, 150 hp
130,000
CrushedCoal Elevators,80 TPH
Surge Hopper, 100 T, 20 ft x 20 ft x 10 ft
50,000
DistributingConveyor- Piggy Back Belt Type, 18 in. x 50 ft,
30,000
'TOTPH
98,oo000
SlurryTank, 14,000gal, SS clad, 2/agitation
35,000
SlurryPump, centrifugal,450 gph, 85 hp
171,000
Vaporizer,117 million Btu/hr,SS/CS, 7600 ft2
14,ooo
Coal-SteamSeparator,47,000acfm
TexacoPartialOxidationGasifiers,14.75 ft D x 35.5
700,000
ft H, 18 in. refractorylining
310,000
Steam Coal Preheater,64 million Btu/hr,SS/SS 21,000 ft2
PebbleElevator,140 TPH, 80 ft H
51,000
Air Preheater,17.75 ft D x 55 ft H, 13 in. refractorlining,
140 million Btu/hrpebblebed
1,300,000
Waste Heat Boiler, CS/CS,60 million Btu/hr,7300 ft2
165,000
Air Compressor,3-stage,intercooled,280,000 scfm
1,800,000
256 psia, 34,000hp
MulticloneBanks,20,000acfm
130,000
VenturiScrubbers,14,000acfm
36,000
Water ScrubbingTowers, 12.3 ft D x 24 ft H, 1450 ft3
drip-grindpacking
228,000
Ash SeparatorTanks,CS, 13,000gal
11,000
Water CirculationPumps
40,000
Hot-Carbonate
AbsorptionTowers,67 ft D x 27 ft H,
CS, 15 turbogridtrays
90,000
Hot-Carbonate
StrippingTowers,6.7 ft D x 52 ft H, CS 28
turbogridtrays
160,000
Condensers,air cooled,22,000ft2 of fin tube
58,000
25,000
Separators6 ft D x 20 ft L, CS Horizontal
10,000
Demisters6 ft D, CS
200,000
LiquorPumps,2000 gph, 200 psi head, SS internals
WasteWater StrippingTower, 10.5 ft D x 30 ft H, 20 trays
54,ooo
Air Blowerfor Waste Water Stripping,200,000cfm 5 ft H20
75,000
CoolingTower System,forceddraft,500,000gph, 25 F range,
10 F approach
150,000*
ProcessWaterTreatmentPlant,60,000gph
200.000*
e
4
4
4
4
8
4
4
4
;L
4
4
1
1
1
6 ,6 76 ,000
*
Total installedcost includingcommodities,indirectcosts,and contingency.
Source:
[39],
p. 485
45
46
46
46
40
46
40
49
40
40
36+40
40
46
40+36
40
49
40
40
40+ 36
40
49
40
40
40
0
0
49
40
49
1
*
11*
256
F
I
G
U
R
E
E.3
COMPARISON OF FIRST AND SECOND GENERATION
LOW BTU COAL GASIFICATION PROCESSES
1000-Mw Nominal Size
Second Generation First Generation
Texaco Process
Lurgi Dry Ash
(Thousand Dol I ars)
4,700
Coal Handling
2 ,000
Coal Feeding
1 ,200
Gasification
1 ,800
Air Compression
6 ,900
8 ,900
Heat Recovery
6,300
2 ,500
Dust Removal
1,200
Acid Gas Removal
3,300
2 ,500
Sulfur Recovery
1 ,800
1 ,900
General Facilities
Total Fixed Capital
$/kw
Working Capital
Total Investment
$/kw
Source:
[39], p. 87, 118
20 ,000
14 ,500
40 ,500
1 ,900
4,000
26,400
28.3
44,500
46.1
1 100
1 ,800
27 ,500
46 ,300
29.5
48.0
257
(1% of total direct cost) were allocated directly to
These allocations amounted to 1778 of the plant cost
15133294
tingencies. The remaining 3294 of the plant cost was
to 11.03. The 11.03 coefficient vector was modified
exclude all boiler purchases (40.06), all 43.01, all
sectors.
before conallocated
to
49.01,
and all 73.03.
These sectors had been allocated under the
direct equipment purchases. The 11.03 vector was then rescaled
to sum to 1.0 and used to allocate
component
of the plant
The capital
the construction
cost.
equipment
purchases
had trade and transport-
ation margins removed before they were combined with the
construction components. To disaggregate the total transportation margin
into rail,
truck, water,
etc. components,
the
breakdown for the electrical utility capital purchases was
used.
The source
for this information
Ex Ante Capital Matrix
[21]. Figure
was Battelle
F.4 reproduces
Institute's
the actual
transportation margins and the relative percentages for each.
Trade and transportation margins themselves were obtained from
the Survey of Current Business November 1969 article "The
Input Output
Structure
The result
of the U.S. Economy
of this tortuous
1963."
procedure
481.-
is an estimated
second generation low BTU coal gasification capital vector.
It is set up like the Hygas capital
(when value
added is included).
of the gas plant
purchases
When
it will disaggregate
from individual
sectors
vector
to sum to 1.0
multiplied
the investment
of the economy.
contains the final percentage capital vector.
27).
by the cost
into
Fiaure E.5
(See footnote
258
F
I
G
U
R
E
E.4
MODAL ALLOCATION OF TOTAL TRANSPORTATION COSTS FOR ELECTRIC
UTILITIES
Fraction
Mode
Rail (65.01)
0.011
Motor Freight (65.03)
0.401
0.557
Water Transport (65.04)
Air Transport (65.05)
Misc. Transport (65.07)
(Pipeline
and
0.008
Services)
1.000
Total
Source: [21],
0.023
p. 92
259
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260
Appendix
Derivation of Second Generation Low BTU Coal
Gasification Technical Coefficients
F
The data source
for this derivation
was, once again,
Reference 39, the United Aircraft report on advanced power
cycles.
Figure F.1 reproduces
the operating
second generation Texaco process.
data on the
In the calculations to
follow the sulfur credit was ignored, so that the net incremental
use is $2.998 million,
million.
This results
and the total cost is $14,525
in a gas price of
37
.10/MMBTU.
Figure F.1 also compares the second generation process to
the current
process
using Lurgi technology.
Figure F.2
provides a similar comparison with the material requirements.
Both of these plants
are sized to run a 1000 MW gas turbine
topping cycle generator (first generation topping cycle
efficiency = 47%; second generation efficiency = 54%;
overall first generation efficiency = 36.1%, second generation
= 47.6%).
With this small
amount of information
to go on, the
standard procedure was followed of allocating the major
identifiable items first.
column of Figure F.1.
These are listed in the appropriate
The labor component listed there
consists of direct labor, supervision, and overhead.
that the same proportions
hold for these labor figures
held for those of the Hygas process,
labor into its components.
Assuming
Capital
Figure F.3 breaks
related
as
up
items are all
allocated to value added except for 1% of fixed capital which
is given
allocated
to sector
70, (Insurance).
to supplies
13% of maintenance
to be distributed
is
and half of the
remainder (43.5%) is allocated to 12, with the remainder
going to value added. Figure F.4 illustrates this procedure.
This procedure
for supplies
out.
These
assumes
15% of actual maintenance
and that half of all maintenance
are the same proportions
charges
are
is contracted
that were used in the
Oq
C
(.-q
"i
t
cc-
cooc
C; C
O
COCc
5H
CO
261
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5=
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u
csr
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LO to
,
262
F
I
G
U
R
E
F.2
PARTIAL OXIDATION-HOT CARBONATE PROCESS MATERIAL BALANCE
1000-Mw Nominal Size
IN:
Coal 1.772 million tons/yr
9632 lb/min
106.4 million Btu/mi n
OUT:
Gas Temp. - 230 F
Press - 325 psia 3
Flow:
556,643 ft /min
31,497 lb/min
HHV - 173.9 Btu/ft3
Sensible Heat - 3.2 Btu/ft3
Sulfur - 6.5 g/million/Btu
Electricity - 67 Mw
Composition
Vol. %
5.5
H20
H2
25.0
CO
C0 2
27.2
3.8
CH4
0.5
H2 S
N2
0.003
38.0
Sulfur:
46,976 long tons/day
FIRST GENERATI ON LURGI GASIFICATION PROCESS
MATERIAL BALANCE
1000-Mw Nominal Size
IN:
Coal 2.405 mi llion ton/year
13,075
1 b/min
144.5
mi llion
(as
rec.)
Btu/min
OUT:
Gas Temp. - 230 F
Press. - 315 psia
3
Flow rate - 686,622 ft /min
41,943 lb/min
31(1)
HHV - 172.7 Btu/ft 3
Electri city - 82 Mw
Sensible Heat - 3.3 Btu/ft
Sulfur - 221 g/million Btu
Composition, Vol %
H 20
H2
CO
C02
CH 4
H2S
COS
6.6
20.9
14.1
12.5
5.8
0.1
0.0
40.0
52,067
long tons/year
Sulfur
N2
Source:
[39
, p. 86,
117
263
F
I
G
U
R
E
F.3
DI STRI BUTI ON OF LABOR CHARGES
Dollars
Direct Labor
Sector
Number
(100's)
55.1
661
VA
Supervision
5.5
66
VA
Payroll Overhead
6.1
73
General Overhead
33.3
400
Total Labor
D stands
1
100.0%
D
I1200
for distributed
among various sectors, and
described elsewhere.
F
I
G
U
R
E
F.4
BREAKDOWN OF TOTAL MAINTENANCE COSTS
Dollars (100's)
Maintenance
Sector
Number
87.0
1148
Contracted
43.5
574
12
Self-supplied
43.5
574
VA
13.0
172
D
Supplies
Total Maintenance
100.0%
1320
264
Hygas operating cost
calculations.
(5.3% of the total) was
distributed
The residual $768,000
according
to industry
31 (petroleum refining) and the author's judgment.
An
additional 1.2% was removed from value-added and allocated
to real estate
up to a more
and rental
reasonable
(sector 71) to bring this sector
level.
Finally trade and transportation margins were removed
from all purchases except coal.
the plant
operated
displayed
in Figure
at mine-mouth.
F.5.
Again it was assumed that
The final vector
is
265
F
I
G
U
LOW BTU COAL GASIFICATION
R
E
F.5
NON-ZERO TECHNOLOGICAL COEFFICIENTS
104
Order
Sector
Nbumber
Industry
Coefficient
7
8
Coal Mining
Crude Oil & Natural
9
Stone & Clay Mining
Maintenance & Repair Construction
12
19
21
29
31
33
35
49
51
54
58
72
75
84
88
89
90
91
92
94
96
98
as
Apparel
.53913
.00026
.00003
.04543
.00014
Lumber & '!oodProducts
Industrial Chemicals
Agriculture & Miscellaneous Chemicals
Drugs, Cleaning, Toilet Preparations
Petroleum Refininq
Misc. Non-ferrous Metals
Plumbing & Structural Metals
Other Fabricated Metal Products
.0 0024
Material Handling Machinery
Motor Vehicles & Equipment
.O00020
Scientific
& Control Insurance
Communications except
Radio & TV
Water & Sanitary Services
Wholesale Trade
Retail Trade
Finance & Insurance
Real Estate
& Rental
Business Services
Auto Repair & Service
Medical & Education Service
.01090
.00338
.00297
.00100
.00223
.00006
.00029
. 00)03
.00003
.00108
.01349
.01381
.00161
.00964
.01982
.02260
. 00 36
.00063
266
Appendix
G
Derivation
of Capital
Coefficients
for the
Second Generation Gas Turbine Topping Cycle
The data source
for this derivation
was
the United
Aircraft report, [39], United Aircraft and Burns and Roe
collaborated
on the section
of this report
that describes
the costs of the combined gas-turbine steam cycle generating
plant. The particular system chosen for study is a second
generation waste heat boiler combined cycle.
breakdown
of installed
account number.
G.8.
In addition
equipment
A very detailed
costs was provided
by FPC
These lists are reproduced in Figures G.1these lists assign equipment
to 86 order
sectors.
Figure G.9 summarizes
these costs and details
interest, escalation, design fees, etc.
the
Since these numbers
all represent installed costs, labor, transportation, and
trade margins
must be removed
from them.
Figure G.10 lists
the labor margins that were removed from all equipment prices
in each account before they were allocated to I/O sectors.
These labor margins were taken from Reference 5.
Once labor
margins were removed, the equipment was assigned to I/O
categories and the trade and transportation margins were
removed.
In the case of equipment
falling
into two categories,
weights were assigned according to Reference 5.
Because
of the detail provided
in this section
of the
United Aircraft report, the derivation of capital coefficients
was quite straightforward. The major questions that arose
had to deal with
the classification
to sector
42), the classification
(assigned
to 53), the treatments
construction
supervision
of piping
(it was
of instruments
assigned
and controls
of interest,insurance,
fees, and, of course, whether
and
the
267
F
I
G
U
R
E
G.1
SECOND GENERATION COGAS PLANT
BREAKDOWN
OF FPC ACCOUNT
FPC Account
Number
341 - STRUCTURES AND IMPROVEMFNTS
341
Structure & Improvements
Sector
Number
Cost
Site Improvements
Site Grading
Building Excavation
Borings
Landscaping
Fresh Water Supply
Fire Protection
Drainage & Sewage Disposal
Flagpole
Guard House
Railroad
Roads & Parking Lots
11
t7 ,748,50r)
Fencing
Switchyard
Structures
Administration Building
Turbine Generator Building
Tank
Farm
Fuel
Oil
Pump House
Gas Meter Area
Circulating
Water System
Stack
Total Amount
Source:
39],
341
p. 279
e7.714P,500
26P
F
I
G
U
R
E
G.2
SECOND GENERATION COGAS PLANT
BREAKDOWN
OF FPC ACCOUNT
343 -
PRIME MOVERS
FPC Account Number 343
Prime Movers
Sector
Number
(Gas Turbines)
Gas Turbines
43 or 60
Start-up Motors
Torque Converter
Lube Oil Purification & Storage
Lube Oil Fire Protection
Turbine Air Precoolers
Air Compressors, Service & Install ation
Breeching Including Lining, Sil encers
& Insulation
Expansion Joints
Inlet Filer Screens
Turbine Enclosure Air Cooler
Emergency Cooling Water Tank, Pump & Piping
Fuel Oil Heaters
and Pumps
Miscellaneous Pumps and Tanks
Control Boards Instruments & Co ntrols
Computer
Piping
Insulation
Total
Account
343
-
Source:
[39],
p. 280
Cost
$12,700 ,000
53
49
49
49
15 ,000
150 ,000
60 ,o000
60 ,000
40
64 ,000
,000
49
11
100
720
42
42
100 ,000
60 ,000
40 ,000
40
40
49
49
53
51
42
36
,000
8 ,o00
22.000
10 ,000
100 ,000
200,000
800 ,000
120
,o00
t15,329,000
269
F
I
G
U
R
E
G.3
SECOND GENERATION COGAS PLANT
BREAKDOWN OF FPC ACCOUNT 344 - ELECTRIC GENERATORS
FPC Account Number 344
Electric Generators
Sector
Number
Cost
Electric Generators (for Gas Turbines)
53
$5 ,940 ,000
H 2 Seal Oil Coolers
40
20 ,000
Total Account
Source:
[39],
344
p. 281
$5,960,000
270
F
I
G
U
R
F
G.4
SECOND GENERATION COGAS PLANT
BREAKDOWN OF FPC ACCOUNT
FPC Account
Number
312
312
Boiler Plant Equipment
Waste Heat Boiler
Boiler
Boiler
Feed Pumps
Feed Tank and De aerator
BOILER PLANT EQUIPMENT
Sector
Number
40
49
49
40 ,49
40
Cost
$9,800,000
474,000
40,000
240,000
25.700
Water Treatment
Condensate Storage Tank
Stack
(Included in Account 341)
Process Steam Heat Exchanger
Miscellaneous Pumps
49
100 ,000
Piping
42
2 ,900 ,000
Insulation
36
270 ,000
Controls (Boiler & Turbine Generator)
53
300 ,000
Computer (Additive to G as Turbine)
50 ,000
51
Total
Account
Source:
312
[39], p. 282
$14,199 ,700
271
FIG
U R E
G.5
SECOND GENERATION COGAS PLANT
BREAKDOWN
OF FPC ACCOUNT
314 - STEAM TURBINE GENERATOR UNITS
FPC Account Number 314
Steam Turbine Generator Uni ts
Sector
Number
Turbogenerators
Pedastal
Condenser & Tubes
Condenser Vacuum Pumps with Motor
Condensate Pumps with Motors
Cooling Towers
Circulating Water Piping
Circulating Water Valves & Expansion
Joints
Circulating Water Pumps
Make-up structure Screen & Pumps
Chlorination Equipment
43
$8,942,000
(Included in Acct. 341)
40
805 ,000
Lube Oil Purification
(Included in Turbogener-
Cost
49
90 ,000
49
61,200
4,000 ,000
11
(Included in Acct. 341)
90 ,000
42
49
310 ,000
49
250,000
40, 49
20 ,000
ator Pri ce)
Total Account
Source:
314
[39], p. 283
$14,568,200
272
F
I
G
U
R
E
G.6
SECOND GENERATION COGAS PLANT
BREAKDOWN OF FPC ACCOUNT 345 - ACCESSORY ELECTRICAL EQUIPMENT
FPC Account
Number
345
Sector
Number
Accessory Electrical Equipment
Auxiliary Transformers
Start-up Transformers
8000 A Isolated
1200 A Isolated
Phase
Phase
39,000
297 ,300
432 ,600
Bus
Bus
82,800
Potential Transformer
Surge Protection
480 Vole Power
Cost
39 ,000
19 ,200
Switchgear
124,300
58,530
480 Volt Motor Control Centers
Remote Motor Controls
Duplex Relay Switchboard
Annunciator Panel
Control Console
Turbine Control Panel
Temperature Detection Panel
Equipment Connections
Testing
5 ,250
68,000
16 ,500
34,500
53
6 ,000
15 ,000
I.
1,800 ,000
378,300
250 V DC Switchboard
250 DC Panelboard
27 ,500
Station Battery & Rack
Battery Chargers
53,000
3 ,600
56 ,500
82 ,000
117 ,660
Cable Tray
600 V Instrument Cable
600 V Control Cable
Grounding Systems
480 V Valve
Control
2 36 ,900
370 ,500
25 ,600
Center
Conduit-fittings
600 V Power Cable
1000 V Power
150,000
76,355
Cable
39 ,580
16000 A Isolated Phase Bus
2000 A Segregated Phase Bus
5 KV Switchgear
5 KYVPower Cable
I
35,379
Total
Source:
426 ,100
348 ,000
161 ,300
$5 ,626 ,254
[39],
p.
284
273
F
I
G
U
R
E
G.7
SECOND GENERATION COGAS PLANT
BREAKDOWN OF FPC ACCOUNT 346
FPC Account Number
MISCELLANEOUS POWERPLANT EQUIPMENT
346
Miscellaneous Powerplant Equipment
Sector
Number
Cost
Laboratory and Sampl ing Equipment
Tools, Shop, Stores & Work Equipment
Lockers
Emergency Equipment
Miscellaneous Cranes & Hoists
Portable Fire Extinguishers
Communication Equipment
53,62
56
50,000
Lunch
23
23,51
20 ,000
Room Equipment
Office Furniture & Machines
Total Account
Source:
346
[39], p. 285
42,47
23
49
46
64
$ 20,000
125,000
3,000
10 ,000
30 ,000
20 ,000
15,000
$293,000
274
F
I
G
U
R
E
G.8
SECOND GENERATION COGAS PLANT
BREAKDOWN OF FPC ACCOUNT 353 - MISCELLANEOUS STATION EQUIPMENT
FPC Account Number 353
Miscellaneous Station Equipment
Sector
Number
$
346 KV Main Oil C/B
132 KV Outdoor Switchgear
705
370
410
400
450
228
506
MVA
MVA
MVA
MVA
MVA
MVA
MVA
Auto-Transformers
Transformer
Transformer
Transformer
Transformer
Transformer
Transformer
Total Account 353
Source:
[39], p. 285
Cost
53
--
-990,000
619,000
-$1,609,000
275
F
I
G U
R
E
G.9
CAPITAL COST SUMMARY FOR SECOND GENERATION ADVANCED COGAS
POWER SYSTEMS
Federal Power
0.
Commi ssion Acct. N,
340
Sector
Number
VA
Structures & Improvements
Prime Movers (Gas Turbines)
Electric Generators (for Gas
*
Turbines)
Boiler Plant Equipment
Steam Turbine-Generator Units
Accessory Electrical Equipment
Miscellaneous Powerplant Equi P
ment
p/Land & Land Rights
341
343
344
312
314
345
346
$
225 ,000
7,742 ,500
15,329 ,000
5 ,960 ,000
14,199 ,700
14 ,568 ,200
5,626,300
293,000
Miscellaneous Station Equip-
353
ment
1 ,609,000
Sub-total
Other Expenses
Total
[39],
VA
1,250,000
66,802,700
Engineering, Design, Construction, Supervision, and Con70,73
tingency
10,590,300
Sub-total
77,393,000
Escalation
7,449,000
Sub-total
84,842,000
Total Estimated Cost
*See previous
$65,552,700
Direct,'Cost
Interest During Construction
Source:
Cost
tables for breakdown
p. 287
VA
9,163,000
$94,005,000
276
F
I
G
U
R
E
G.10
LABOR MARGINS ON VARIOUS FPC CAPITAL ACCOUNTS
Labor Margins
FPC Account
Name
311, 341
Structures & Improvements
25%
312
Boiler Plant Equipment
25%
343
Prime Movers (Gas Turbines)
7.5%
344
Electric Generators
6.5%
314
Steam Turbine Generator
5.5%
Uni ts
345
346
353
315
Accessory Electr ical Equipment (Turbine plants)
25%
Miscellaneous Power Plant
Equipment (Turbine Plants)
30%
Miscellaneous Station Equipment
25%
Accessory Electric Equipment (Steam plants)
32.5%
Miscellaneous Power Plant
316
Equipment
(Steam Plants)
17.5%
.
1
This amount
of the total cost shown in each
account is typically labor cost, while the rest is material
cost.
Source: [5]
cost data presented
277
was even close to being accurate. This
latter question is impossible to answer, but the installed
capacity
figure
of $100/KW seems amazingly
Figure G.11 lists the non-zero
final percentage
capital
vector
low.
components
(see footnote
of the
27).
278
C,
a
U
Z
I-
w
o00- 4D
0 -4
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x0)
-
,-¢ MPM0',
C
Ln.
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-*0
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r
b
c D -
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00 00
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CM. . . . --C00 00 000 CD
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S.-- U-=O -0
· 'r
o to
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U.,1 C=
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$n
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CD
4-)0
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la
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0)
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=
279
Appendix
Derivation of Technical Coefficients for the
Second Generation Gas Turbine Topping Cycle
H
The data source for this derivation
United Aircraft report [391.
In contrast
was again the
to the other nicely
executed capital cost estimates provided in this report,
there is no detailed
operating
as:
su mmary anywhere
Instead they are estimated simply
and .5 mills/Kwhr for operation and
costs will be
.2 mills/Kwh
maintenance
of the stea m and gas portions
respectively; 0.2 mills for supplies
2.35 mills
in the book of what
for low BTU gas fuel.
of the plant
and materials;
and
Using a 14% capital
charge
and a 70% load factor results in a 5.3 mills/Kwhr busbar
cost for electricity.
This compares
to 7.3 mills/Kwhr
for
a first generation plan t and 6.3 mills for a current steam
plant (with no stack gas cleaning or cooling
Faced with a problem
ital charges
served
to value
is finished,
will be combined with
like this, we allocated
the cap-
added and the fuel costs to 68.02 which
as the temporary
derivation
tower).
home for low BTU gas.
When
the low BTU gas technical
these technical
this
coefficients
coefficients
to form
one set of coefficients for a new coal-using electric generation process
vector
others described
that will be combined
in Reference
with the four
26 to form an augmented
I/O
matrix.
After
This residual
generation
these two allocations,
was allocated
vector
described
the residual
according
was
.11845.
to the gas turbine
in the Istvan reports
[26,27]
after the fuel and value added components were removed.
The
results of this simple scaling procedure was illustrated in
Figure H.1 where non-zero technical coefficients for the
COGAS plant are displayed. These coefficients are based on a
unit Kwhr cost. They must be divided by the average consumers
cost per Kwhr before
model.
they can be used in the input-output
This is explained
more fully in Reference
27.
280
FIGURE
H . 1
TECHNOLOGICAL COEFFICIENTS FOR COGAS CYCLE
(Non-Zero)
104
Order
Sector
Number
8
12
33
54
64
75
78
80
81
82
84
88
89
90
92
102
103
Coefficient'
Industry
Crude Oil & Natural Gas
Maintenance & Repair Service
Drugs, Cleaning, Toilet Preparations
Other Fabricated Metal Products
Service Industry Machinery
Scientific & Control Ins.
Railroad Transportation
Truck Transportation
Water Transportation
Air Transportation
Communications except Radio & TV
Water & Sanitary Services
Wholesale Trade
Retail Trade
.4626592
.072820
Real Estate
.000115
.003265
.000816
Rental
Business Travel & Gifts
Office Supplies
.004074
.001631
.000726
.000408
.007878
.002040
.003632
.016008
.005000
1
Resi dual '(.11845) after removal of fuel and value-added
was prorated on the basis of "Other power" technological
coefficients from [26].
2
This entry represents purchases of
ow BTU gas.
281
Figure H.2 combines
the low BTU
as and COGAS technol-
ogical coefficients into one process vector.
the following
Let
This is done in
way:
Ae
= low
TU gas technological
coefficient
vector
Ac
= COGAS technological
coeffi cient vector
h
= COGAS
coeffi cient represent-
technological
ing low BTU gas purchases
sector
Ac
= Modified
COGAS technologic al coefficient
TU gas pu rchase coefficient
set to zero (sector
A l c = combined
low
I1C =
h Ae
-e
+ Ac
C
of F iGure
H!.1)
TU gas and COGAS technological
coefficient vector.
A
in
8 of Figure H.1)
vector with low
Then
(.462659
282
F
I
G
U
R
E
11.2
NON-ZERO TECHNOLOGICAL COEFFICIENTS FOR COGAS PLANT COMBINED
WITH LOW BTU COAL GASIFICATION
104
Order
Sector
Number
Industry
Coefficient
11
New Construction
.203699
24
44
51
54
55
58
59
61
63
66
69
75
77
78
80
81
82
89
90
91
94
Other Furniture & Fixtures
Stone & Clay Products
Structural MIetals
Plumbing
Other Fabricated Metal Products
Engines and Turbines
Material Handling Machinery
Metal Working Machinery
General Industry Machinery
Office Comp Machinery
Electrical Industry
Radio, TV & Communication Equipment
Scientific & Control Insurance
Misc. Manufacturing
Railroad Transportation
Truck Transportation
Water Transportation
Air Transportation
Wholesale Trade
Retail Trade
Finance and Insurance
Business Services
.000188
.002821
.084038
.027497
.198016
.000199
.000439
.015191
.001989
.111873
.000355
.000064
.000103
.000079
.002890
.004015
.000166
.024417
.008139
.007106
.034487
283
Analytical Convergence Procedure for 1985
Projections
Appendix
I.1
Iso-Income Elastic Case
The problem
in
Chapter
given the system structure defined
is:
2
1
= (I-A-C)
X1
(Y -
the yF of Chapter 2) and
(where Y equals
z =
(where
and given
-
(
( I . 2)
o)
I
Z equals
Y' =
of
Chapter
(1 + 6)
investment
Y.
(Y' + Z') such tha tl
This
components
income elasticity,
final demand
2)
of final d emand (
an initial projection
find a new final demand
and
(I.1)
C Xo )
last
+
GNPo
Z'
all no n-
assumes
constraint
(yi) have the same
of final demand
i.e. as GP
Y'
+ Z),
chanqes,
al 1
nt
non-investme
change by the same percentage.
purchases
This is easily solved.
Let
B = (I
and
M =
- A - C) 1-
(I.3)
(C B C + C) X0
(1.4)
- ~
Then
Z
Also
Y'
=
-
- -1
C(X
=
(1
+
=
C
Y +
Z'
-X)
6)
_
GNP
=
yi
(1
-
Y
=
I
and
B
C
(I .5)
M
B
Y
I
+
+(1+a)~~
)
?
zi
y
+
(1
+ 6)(CP,BY)
1
--
m.
1
2P4
Since
=
CBY
+
Z
M
GNPO = (1+6)
Yi
+
7 zi + 6
(1+6)
I
i
+
= GNP + 6(GNP
mi
i
(1.6)
mi )
i
GNPo - GNP
(1.7)
Thus
GNP +
m.
1
GNfMP
x
or
=
GP +
Thus by calculating
multiple
and
m.
+
(1.8)
(1+6)
mi
the initial projection Y and Z and any
of these, aY and Z we can find M by subtractinq
a
Z
a
Z or
Z a
M
or
aZ = CB (aY)
1
=
(Z
-
B Y +
M -aC
(a-1) M
(1.9)
- Z)
a-1
and
M=
(1.10)
rz
z e)
and
since
Gr!Po is given,
X is
Now if the income elasticities
are different,
Ci
Since
GNP
=
X
=
from the initial
mi
yi
+
i
1.8
Y
1.2
Income Elastic Case
the ith sector,
to the change
Yj
-F. ()
zi
projection
easily calculated from
Then Y' =
o-1
-1
-
-
yi
and if we assume
the change
to GNP, then
= ei
Yi
For our model we take
(AI )
= ei
Yi
(A GNP)
in income
for
is equal
285
Y'
-
=
Y
6
(1.11)
Y
D
D = diag
where
(d i )
and
Thus our actual
assumption
is proportional
(not equal)
Then
Y'=
= C
Z'
Solve
(I + 6 D)
-
B Y'
=
Yi
=
yi
6
Thus
6
=
is that the change
in
(1.13)
Yi
+
i
E (CBY)i +
+ Z
i
. zi = GNP 0
(zi +m
i
)+6
7(CBDY)i -
m.
1
mi
DY]i
GNP0 - GNP
(1.14)
°
DY]
GNP(DY)+
(1.15)
mi
where GNP (DY) is interpreted
The procedure
-
6 (CBDY)
GNP o - GNP (Y)
or
i n come
to the change in GNP.
[(CB+I)
E[(CB+I)
to e i
M
dY
+ GNP + 6
proportional
(1.12)
+ 6 Z diY
+
is
Y
for 6 such that
GNPo
di
as the GNP of the product
is basically
the same as i t was
nY.
for the
iso-elastic case except that these separate final demands
must be calculated. These are Y, aY, and DY. Then
Y' =
(I + 6D)
Y where
6 can
be
calculated
from
1.15.
Appendix J
Detailed Figures
286
This appendix contains detailed fiqures that compare
botn the 1985 unscaled
demand
and total output
Low, Medium,
High,
plus Gas Turbine
and balanced
(Fiqures
.1.1 through
High plus Hygas,
cases.
projections
of final
J.4) for the
and High plus Hyqas
Notice how close the unscaled
and
balanced final demands are.
It also contains
in Fiqures
J.5 and J.6 comparisons
of the 1980 projected gross private domestic investment
(GPDI), GPDI impacts
(i.e. total sales caused by GPDI
purchases), and total outputs.
These'comparisons illustrate
the dependence (both direct and indirect) of various sectors
on capital investment.
287
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299
BIOGRAPHICAL NOTES
James Edward
Pennsylvania.
Just was born April 18, 1946 in Johnstown,
He graduated
from New Castle Senior
1964 and entered
Massachusetts
in the fall of that year.
He received
in June,
High School
Ins titute of Technology
both
the Masters
and
Bachelors degrees in Electrical Engineering in June, 1969,
and the Electrical
Engineer
degree
in June,
1970.
He received financial support from MIT, the Wolves Club
of New Castle,
Pennsylvania,
the NDEA, and the War Orphans
Education Act during his undergraduate years.
1968 to September,
1970, he was supported
ship and the Pennsylvania
Higher
Education
June, 1969, he joined MITRE Corporation
and received
a fellowship
From September,
by an NDEA traineeAct
loans.
as a part-time
from them in September,
In
emnloyee
1970.
A
number of classified publications resulted from this association.
In September,
research
1970, he began work on enerqy-rel ated
with Prof. David
This resulted
C. White and Prof. Fred C. Schweppe.
in an Electrical
Engineering
Ph.D thesi s and
a Masters in Business Administration thesis.
He is a member
Pi.
of Sigma Xi, Eta Kappa Nu, and Tau Beta