Stock levels:  ENERGY 2020 tracks vintaging (new, middle, and old) of three types of capital stock: 1) production capacity, 2) process energy, and 3) device energy. The production capacity represents by the sector’s economic driver. For example, production capacity within the residential and commercial sectors is floor space, and within the industrial sector production capacity is gross output. The other two types of capital stock - process energy and device energy – were defined in the sections above.

Each year a portion of the capital stock is retired and replaced with new stock (based on the level of economic expansion). New capital stock is brought in at the most current efficiency levels (typically higher) and potentially with a different fuel choice. The remaining is aged by moving a portion into middle age and a portion into old age. With this vintaging process, new improved capital stock gradually replaces older capital stock over time, and the average efficiency of total stock takes multiple years to reflect newer higher levels of efficiency brought into the system. The rate at which capital stock is retired and replaced is determined primarily by the physical lifetimes of the capital stock.

Policies that impact the rate of retirement or addition of new capital stock fall into this stock level category. These policies typically are simulated by changing the lifetime of the capital stock (production capacity, process energy, or device energy). If the lifetime is reduced, then the old stock will be replaced more quickly with new capital stock. Policies may include incentives which promote a faster turnover of the existing stock in the model resulting in quicker program benefits.

Retrofit programs are examples of programs which could be thought of as retirement and replacement of capital stock. Alternatively, retrofit programs can be simulated in a more complex way using consumer choice theory to simulate consumers’ decisions about retrofitting. Either of these methods is able to be used to simulate retrofit programs within ENERGY 2020.

The following section links these four categories of demand sector policies (fuel choice, process energy efficiency, device energy efficiency, and stock levels) to the demand sector structural relationships built into ENERGY 2020.