Room for improvement: increasing the value of energy modeling for policy analysis

Abstract There are expanding national discussions on a critical number of energy-related issues ranging from the importance of reducing air pollution and greenhouse gas emissions to enhancing the nation’s energy security and moving towards a competitive electric utility industry. The complex interactions surrounding all of these issues have motivated the development of a relatively large number of energy-economic models to assist policy makers in the framing of appropriate policy directions. But how much do these models really inform the debate? The record of US model-based energy forecasting yields evidence that such models provide biased estimates that tend to reinforce the status quo, inadequately inform policy-makers about new market potential, and serve to constrain the development of innovative policies. This paper reviews some of the reasons for this conclusion and then explores the extent to which energy-economic models may reflect a more dynamic technological diffusion process that encourages new policy development.