- 73 - 



price rises or declines. If the price falls below a breakthrough 

 price level, then production ceases. These relationships are 

 encompassed in the following general expression: 



P = a [exp(g/b)C] 



Where: P is the price of the backstop fuel; a is the break- 

 through price; b is a parameter which determines the 

 "normal" backstop price; c is a price-elasticity con- 

 trol parameter; and g is the ratio of output in year t 

 to the base level associated with the backstop price. 



Production levels of synthetic oil and gas are driven by the 

 cost of solids, the cost of producing the synthetic fuel, and 

 associated nonenergy costs. The share of coal or biomass 

 allocated to the production of synfuels is specified by a logit 

 share equation, with the relative cost of synfuels versus other 

 sources of gas and oil and the price elasticity of production as 

 key terms. 



Resource-constrained renewable fuels are considered constant- 

 flow sources. That is, the rates of energy production are limited 

 by the availability of the resource. 



For the high scenario the price of supplying each energy 

 source was the "best guess" of the experts familiar with the 

 respective sources. For the low scenario the cost of nuclear 

 energy was halved starting in 1980. 

 Energy Balance 



The supply and demand modules each generate energy supply 

 and demand estimates based on exogenous input assumptions and 



