Annual Energy Outlook 2013 Reference Case

U.S. Association for Energy Economics Louisville Chapter Southern Baptist Theological Seminary March 27, 2013 | Louisville, KY by Paul Holtberg, Team Leader, Analysis Integration Team U.S. Energy Information Administration
Independent Statistics & Analysis www.eia.gov

What is included (and excluded) in developing EIAs Reference case projections?

Generally assumes current laws and regulations
excludes potential future laws and regulations (e.g., proposed greenhouse gas legislation is not included) Sunset provisions as specified in law (e.g., renewable production tax credits expire at the end of 2012)

Some grey regulatory areas

adds a premium to the cost of financing CO2-intensive technologies to reflect current market behavior regarding possible future policies to mitigate greenhouse gas emissions assumes implementation of existing regulations that enable the building of new energy infrastructure and resource extraction

Includes technologies that are commercial or reasonably expected to become commercial over next decade or so
includes projected technology cost and efficiency improvements, as well as cost reductions linked to cumulative deployment levels does not assume revolutionary or breakthrough technologies
Paul Holtberg AEO2013, March 27, 2013 2

Growth in energy production outstrips growth in consumption leading to reduction in net imports
U.S. energy production and consumption quadrillion Btu History 125 Consumption 100 Net imports 75 Production 50 19% 10% 2011 Projections 2035

9%

25

0 1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

Source: EIA, Annual Energy Outlook 2013 Early Release Paul Holtberg AEO2013, March 27, 2013

Domestic production grows rapidly over projection period, particularly natural gas and renewables, and liquids in the near term
U.S. energy production quadrillion Btu 120 History 2011 Shares of total U.S. production Projections

100

80 30%

Natural gas

35%

60

Renewables 12% 19% 28% Crude oil and natural gas plant liquids

14% 17%

40

20

Coal Nuclear 2015 2020 2025 2030 2035

24% 10% 2040

0 1980

11%
1985 1990 1995 2000 2005 2010

Source: EIA, Annual Energy Outlook 2013 Early Release Paul Holtberg AEO2013, March 27, 2013

U.S. energy use grows slowly over the projection reflecting improving energy efficiency and a slow and extended economic recovery
U.S. primary energy consumption quadrillion Btu History 120 2000 2011 Shares of total U.S. energy Projections

100 24% 80

28%

26%
8% 8% 1% 20%

Natural gas Renewables (excluding liquid biofuels) 11% Nuclear Liquid biofuels Coal 9% 2% 19%

60

6% 8%
23%

40 39%

20

36%

Oil and other liquids

32%

0 1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

Source: EIA, Annual Energy Outlook 2013 Early Release Paul Holtberg AEO2013, March 27, 2013

Energy and CO2 per dollar of GDP continue to decline; per-capita energy use also declines
Energy and emission intensity index, 2005=1 History 2.0 2005 2011 Projections

1.5

1.0

Energy use per capita Energy use per 2005 dollar of GDP

0.5 Carbon dioxide emissions per 2005 dollar of GDP

0.0 1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

Source: EIA, Annual Energy Outlook 2013 Early Release Paul Holtberg AEO2013, March 27, 2013

In the AEO2013 Reference case, energy-related CO2 emissions never get back to their 2005 level
Carbon dioxide emissions billion metric tons History 7 6 5 4 3 2 1 0 1990 2005 6.00 2020 (billion metric tons) 5.45 5.69 2040 2005 2011 Projections

AEO2013

--

-9.0%

-5.1%

(percent change from 2005) 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

Source: EIA, Annual Energy Outlook 2013 Early Release Paul Holtberg AEO2013, March 27, 2013

Petroleum and other liquid supply

Paul Holtberg AEO2013, March 27, 2013

Reference case oil price initially drops and then rises steadily, but there is uncertainty about the future trajectory
Annual average spot price of Brent crude oil 2011 dollars per barrel History 250 High Oil Price 200 Reference 150 2011 Projections

100 Low Oil Price 50

0 1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

Source: EIA, Annual Energy Outlook 2013 Early Release Paul Holtberg AEO2013, March 27, 2013

Global liquids supply increases 26 percent with regional market shares relatively stable
Global liquids supply million barrels per day History 120 2011 Projections

100 44% 80 40% 60 Other non-OECD 34% 31% OPEC

40

20 26% OECD 25%

0 1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

Source: EIA, Annual Energy Outlook 2013 Early Release Paul Holtberg AEO2013, March 27, 2013

10

U.S. dependence on imported liquids declines

U.S. liquid fuel supply million barrels per day 25 History 2005 2011 Projections 2035

20

Consumption
15 Net imports 10 37% 37%

60%

45%

Domestic supply

0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040
Source: EIA, Annual Energy Outlook 2013 Early Release Paul Holtberg AEO2013, March 27, 2013

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U.S. import share of liquid fuels declines due to increased production of tight oil and gas liquids, and greater fuel efficiency
U.S. liquid fuels supply million barrels per day 25 History 2011 Projections

Biofuels excluding imports 20 12% Natural gas plant liquids 5% 38% 10 Liquids from natural gas and coal 17% 7% 1%

15

Petroleum production

38%

45%

Net petroleum and biofuel imports

37%

0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040
Source: EIA, Annual Energy Outlook 2013 Early Release Paul Holtberg AEO2013, March 27, 2013

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U.S. tight oil production leads a growth in domestic production of 2.6 million barrels per day between 2008 and 2019
U.S. crude oil production million barrels per day 8 History 2011 Projections

Tight oil

4 Other lower 48 onshore 2 Lower 48 offshore Alaska 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

Source: EIA, Annual Energy Outlook 2013 Early Release Paul Holtberg AEO2013, March 27, 2013

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Light-duty vehicle liquids consumption is lower primarily due to more stringent CAFE standards
Light-duty vehicle liquids consumption million barrels per day 10 AEO2012 8 AEO2013 6

0 2010

2015

2020

2025

2030

2035

2040

Source: EIA, Annual Energy Outlook 2013 Early Release Adam Sieminski AEO2013, December 5, 2012

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Transportation sector motor gasoline demand declines

Transportation energy consumption by fuel quadrillion Btu History 30 25 20 15 10 60% 5 0 1990 Motor gasoline 47% 2011 Projections

22% 11% 4% 2%

Diesel

CNG/LNG

29% 4% 13% 1% 4% 3%

Jet fuel Other Pipeline fuel

E85

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

Source: EIA, Annual Energy Outlook 2013 Early Release Paul Holtberg AEO2013, March 27, 2013

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Biofuels grow at a slower rate due to lower crude oil prices and slower growth in E85 sales
Renewable fuel standard credits billions ethanol-equivalent gallons 40 Legislated RFS in 2022 35 30 25 20 15 10 Corn ethanol 5 0
2011 AEO2012 AEO2013 2022 AEO2012 AEO2013 2035 AEO2013 2040

RFS with adjustments under CAA Sec.211(o)(7)

Biodiesel Net imports Other Advanced Cellulosic biofuels

Sources: EIA, Annual Energy Outlook 2013 Early Release and EIA, Annual Energy Outlook 2012 Paul Holtberg AEO2013, March 27, 2013

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Natural gas

Paul Holtberg AEO2013, March 27, 2013

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Coal regains some competitive advantage relative to natural gas over time on a national average basis
ratio of natural gas price to steam coal price 2011 8 Energy prices to the electric power sector
2011 dollars per Btu 10 8 Natural gas 6
History 2011 Projections

6
4 2 Coal

0 1990

2000

2010

2020

2030

2040

2 Competitive parity

0 1990

History 1995 2000 2005 2010 2015 2020

Projections 2025 2030 2035 2040

Source: EIA, Annual Energy Outlook 2013 Early Release Paul Holtberg AEO2013, March 27, 2013

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Domestic natural gas production grows faster than consumption and the U.S. becomes a net exporter of natural gas around 2020
U.S. dry gas trillion cubic feet History 35 30 25 20 Domestic supply 15 10 5 Consumption 2011 Projections

0
-5 1990

Net imports

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

Source: EIA, Annual Energy Outlook 2013 Early Release Paul Holtberg AEO2013, March 27, 2013

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Shale gas production leads growth in production through 2040

U.S. dry natural gas production trillion cubic feet 35 30 25 20 15 Non-associated offshore 10 5 0 1990 Coalbed methane Associated with oil Non-associated onshore 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 Tight gas Alaska Shale gas History 2011 Projections

Source: EIA, Annual Energy Outlook 2013 Early Release Paul Holtberg AEO2013, March 27, 2013

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Total natural gas exports nearly quadruple by 2040 in the AEO2013 Reference case
U.S. natural gas exports trillion cubic feet 6 5 4 3 2 1 Alaska LNG exports 0 2010 2015 2020 2025 2030 2035 2040 Exports to Canada Lower 48 LNG exports

Exports to Mexico

Source: EIA, Annual Energy Outlook 2013 Early Release Paul Holtberg AEO2013, March 27, 2013

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Natural gas consumption is quite dispersed with electric power, industrial, and transportation use driving future demand growth
U.S. dry gas consumption trillion cubic feet 35 30 25 20 15 33% 10 5 0 2005 2011 2020 2025 2030 2035 2040
Source: EIA, Annual Energy Outlook 2013 Early Release Paul Holtberg AEO2013, March 27, 2013

History

Projections *Includes combined heat-and-power and lease and plant fuel. **Includes pipeline fuel. Electric 32% power 31% 33% 2% 6% Industrial*

3% 13% 19%

Gas to liquids Transportation**

12% Commercial 14% Residential

22

Industrial natural gas usage grows, especially before 2025

Industrial natural gas consumption quadrillion Btu 10 Manufacturing heat and power Nonmanufacturing Manufacturing feedstock and miscellaneous

2006

2011

2015

2020

2025

2030

2035

2040

Source: EIA, Annual Energy Outlook 2013 Early Release Paul Holtberg AEO2013, March 27, 2013

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Electricity

Paul Holtberg AEO2013, March 27, 2013

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Growth in electricity use slows, but still increases by 28% from 2012 to 2040
U.S. electricity use percent growth (3-year rolling average)

History
14 12 10 8

2011

Period Annual Growth 1950s 9.8 1960s 7.3 1970s 4.7 1980s 2.9 1990s 2.4 2000-2011 0.9 2012-2040 0.9 Projections

6
4 2 0 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040

Source: EIA, Annual Energy Outlook 2013 Early Release Paul Holtberg AEO2013, March 27, 2013

25

U. S. electricity use and economic growth, 1950-2040

Percent growth, 3-year rolling average 14% History 12% 10% 8% 6% 4% GDP 2% 0% 1950 -2%
Source: EIA, Annual Energy Outlook 2013 Early Release Paul Holtberg AEO2013, March 27, 2013

2011 Projections

Electricity Use

2011 2040 average

2.4% 0.9% 1960 1970 1980 1990 2000 2010 2020 2030 2040

26

Annual energy use of a new refrigerator, 1950-2008

Kilowatthours per year 2,000 1,800 1,600 1978 CA Standard

1,400
1980 CA Standard 1,200 1,000 800 600 400 200 0 1950 1955 1960 1965 1970 1978 1984 1989 1994 2000 2005 2010
Note: The standards are expressed as the maximum annual energy consumption for a product as a function of the product's adjusted volume. Source: DOE / EERE Building Technologies Office Paul Holtberg AEO2013, March 27, 2013

1987 CA Standard 1990 NAECA Standard

1993 DOE Standard

2001 DOE Standard 2014 DOE Standard - estimated use

27

Over time the electricity mix gradually shifts to lower-carbon options, led by growth in natural gas and renewable generation
U.S. electricity net generation trillion kilowatthours 6 5 30% 4 25% 3 2 1 13% 11% 19% 53% Oil and other liquids 4% 0 1990 1995 2000 2005 1% 2010 2015 2020 2025 2030 2035 1% 2040 13% 19% Renewables Nuclear 16% 17% Natural gas History Projections

1993

2011

42%

Coal

35%

Source: EIA, Annual Energy Outlook 2013 Early Release Paul Holtberg AEO2013, March 27, 2013

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Non-hydro renewable generation more than doubles between 2011 and 2040
Non-hydropower renewable generation billion kilowatthours per year 600 500 400 Wind 300 200 100 0 1990 Biomass
Power sector Industrial CHP

History

2011

Projections
Advanced biofuels cogeneration (not visible)

Solar Geothermal Waste

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

Source: EIA, Annual Energy Outlook 2013 Early Release Paul Holtberg AEO2013, March 27, 2013

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AEO 2012 Slides

Paul Holtberg AEO2013, March 27, 2013

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Key sensitivities in the 2012 Annual Energy Outlook

Natural Gas Price Sensitivities
(Henry Hub Natural Gas Prices in 2010 dollars per mmBtu)

Coal Price Sensitivities

(Coal Prices to Power Plants in 2010 dollars per mmBtu)

2025 Lowest Reference Highest 3.45 5.63 6.93

2035 4.25 7.37 8.26 Lowest Reference Highest

2025 1.94 2.54 3.39

2035 1.77 2.80 4.79

Electricity Use Billion Kilowatthours Annual Growth 2010 to 2035 %

CO2 Fee Cases
$15 Starting in 2013 $25 Starting in 2013

Lowest Reference Highest

2025 4,104 4,311 4,508

2035 4,393 4,716 5,082

0.5% 0.8% 1.1%

Paul Holtberg AEO2013, March 27, 2013

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Coal plant retirements

gigawatts

300 250 200

Higher / Lower Electricity Demand

Higher / Lower Coal Prices

Higher / Lower Natural Gas Prices

CO2 Fee Cases

150 100
50 0

Source: EIA, Annual Energy Outlook 2012 Paul Holtberg AEO2013, March 27, 2013

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Nuclear Capacity Additions Through 2035

gigawatts
Higher / Lower Electricity Demand Higher / Lower Coal Prices Higher / Lower Natural Gas Prices CO2 Fee Cases

140 120 100 80 60

40
20 0

Source: EIA, Annual Energy Outlook 2012 Paul Holtberg AEO2013, March 27, 2013

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For more information

U.S. Energy Information Administration home page | www.eia.gov Annual Energy Outlook | www.eia.gov/forecasts/aeo Short-Term Energy Outlook | www.eia.gov/forecasts/steo International Energy Outlook | www.eia.gov/forecasts/ieo

Today In Energy | www.eia.gov/todayinenergy

Monthly Energy Review | www.eia.gov/totalenergy/data/monthly Annual Energy Review | www.eia.gov/totalenergy/data/annual

Paul Holtberg AEO2013, March 27, 2013

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