Models Are Crude Tools for Making Policy

By David Wojick (
Copyright 1998 Electricity Daily (reprinted with permission)
June 1, 1998

Computer models are starting to play an alarming role in electric power policy--one that could inappropriately determine the future of the industry. The problem with modeling mania is that the models are not accurate enough to do what they are being used for, nor could they be. The models are intriguing toys and useful, in a very limited way, for scientists. But policymakers are abdicating their decision-making authority to these big black boxes.

Start with environmental policy. The Environmental Protection Agency is proposing massive NOx cuts on coal-fired power plants in 22 states to reduce ozone in the Northeast. This proposal is based entirely on computer modeling, and people cite the model results to three significant figures. But the model in question is only accurate to plus or minus 30 percent--if that--due to the nonlinear complexities of atmospheric phenomena. At that accuracy level, it is impossible to tell if the billions of dollars of costs in question will have any benefit whatever. Yet these expenditures could change the competitive structure of the industry--who wins and who loses--including determining the relative competitiveness of the coal and gas industries.

Looming far larger on the horizon is climate change and the reduction of carbon dioxide emissions. A climate change regime could knock out coal, oil and gas, as well as some of the companies that burn the stuff. Here, the models, no two of which agree, are known to be faulty.

That's not all. Now the Federal Energy Regulatory Commission wants to use computer models to help decide merger cases. The model is supposed to peer into the future and tell us who will have market power in the days to come. FERC is even considering making a computer model the standard test for merger approvals. In fact, it is sheer nonsense to think anyone could write the equations--for that is what a computer model is--to foretell the future of the industry. Uncertainties in environmental policy alone make the future unknowable, as do a host of other factors.

There's more! The Department of Energy is developing a computer model to determine the "probable behavior" of the nuclear waste repository at Yucca Mountain over the next 100,000 years or so. The viability of nuclear energy may depend on what this model comes up with. Whether our present plants choke on their waste--and whether any new plants are ever built--may depend on an unverifiable set of equations. As if we could possibly know what the earth will be like in 100,000 years, or even 1,000 years. There is simply no such thing as a probable scenario on these scales.

The bottom line is that, in every one of these cases, we don't know what is going to happen. And we will never know, because the phenomena in question are intrinsically unpredictable. Policy should take this unpredictability into account and not look to electronic smoke and mirrors for all the answers.

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