Background

The purpose of the methodology proposed here is to develop a way to assess the accuracy of National Energy Modeling System (NEMS) projections.  The methodology is designed to partition the differences between actual and forecast values with respect to important sources of error. These include:

Transitory Influences, e.g., weather, strikes, accidents, embargoes not accounted for in the projections.

Institutional Influences, e.g., changes in laws and regulations and changes in data series definitions compared to model assumptions.

Structural Influences, e.g., changes in resource availability or energy use technology compared to model assumptions.

Errors in Projecting Conditional Variables, e.g., differences in the eventual values of activity drivers and other exogenous factors such as GDP and population.

Errors in Behavioral Parameters, e.g., changes in consumer price sensitivities compared to those assumed by the forecasting methodology.

Uncertainty, e.g., the residual error of the projection method.

Once the methodology is developed, it will be used to support an annual EIA product: The Annual Quality Review