Optimal Global Energy Mix in Terms of Productivity for the World Economy

Bank of America Merrill Lynch's Energy and Power group tasked the Capstone team to determine an optimal energy mix for the United States, and which policies it required. In response, the team developed a model to understand the impact of three energy policy trends on the American energy portfolio. The team first constructed a “Business As Usual” (BAU) model of American energy usage in the power and transportation sectors through 2030, based on data supplied by the U.S. Energy Information Administration. The BAU includes annual figures for energy usage and cost, assuming current policies continue indefinitely. Following a comprehensive review of current energy policies and new technologies, the team chose to focus on the following initiatives: 1) electric vehicle usage; 2) the development of wind as a power source; and 3) the construction of natural gas-fueled power plants. Holding all other variables constant and testing each initiative in isolation, the students altered specific assumptions in the BAU to maximize each initiative over a twenty-year horizon.

With the BAU acting as a baseline, the team evaluated each initiative by its impact on: overall required investment; total levelized cost; carbon emissions; and petroleum use. The project aims to develop an accurate picture of each initiative’s effects, were they to be implemented at an ambitious, yet realistic level.