annual energy outlook 2011

Annual Energy Outlook 2011Reference Case

The Paul H. Nitze School of Advanced International StudiesDecember 16, 2010

Washington, DC

Richard Newell, Administrator

• Increased estimates for U.S. shale gas resources drive increased U.S. production, lower prices, and lower imports of natural gas

• Industrial natural gas demand recovers, reversing recent trend

• Non-hydro renewables and natural gas are the fastest growing electricity generation sources, but coal remains the dominant fuel because of the large amount of existing capacity

• Oil imports fall due to increased domestic production—including biofuels—and greater fuel efficiency

• U.S. carbon dioxide emissions rise slowly, but do not pass 2005 levels again until 2027

Key results from the AEO2011 Reference case,which assumes current laws remain unchanged

Richard Newell, December 16, 2010 2

• Generally assumes current laws and regulations– excludes potential future laws and regulations (e.g., proposed greenhouse

gas legislation and proposed fuel economy standards are not included)– provisions generally sunset as specified in law (e.g., renewable tax credits

expire)

• Some grey areas– adds a premium to the capital cost of CO2-intensive technologies to

reflect market behavior regarding possible CO2 regulation– 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

Richard Newell, December 16, 2010

What is included (and excluded) in developing EIA’s “Reference case” projections?

3

• Natural gas and oil supply– More than doubled the technically recoverable U.S. shale gas resources assumed

in AEO2010 and added new shale oil resources– Updated offshore data and assumptions, pushing out start dates for several

projects as a result of the drilling moratoria and delaying Atlantic and Pacific offshore leasing beyond 2017

• Electricity– Updated costs for new power plants– Expanded number of electricity regions to 22 from 13, allowing better regional

representation of market structure and power flow

• Transport– Increased limit for ethanol blending into gasoline from E10 to E15 for approved

vehicles, as a result of the EPA waiver granted in October 2010– Includes California’s Low Carbon Fuel Standard, which reduces the carbon

intensity of gasoline and diesel fuels in that state by 10% from 2012 through 2020 – Revised light duty vehicle miles travelled downward– Updated electric and plug-in hybrid electric battery cost and size

Key updates included in the AEO2011 Reference case



Global energy consumption

5


Non-OECD countries account for vast majority of the nearly 50% projected increase in global energy use by 2035

0

200

400

600

800

2007 2015 2020 2025 2030 2035

Non-OECDOECD w/o U.S.U.S.

495543

590639

687739

50%

62%

50% 38%

16%20%

energy consumptionquadrillion Btu

Source: EIA, International Energy Outlook 2010 6


Overview of U.S. energy supply and demand

7

Current U.S. energy supply is 83% fossil fuels;demand is broadly distributed among the major sectors

Energy supply Energy demand

Source: EIA Annual Energy Review 2009

Nuclear9%

Renewable8%

Coal21%

Natural Gas25%

Petroleum37%

Transportation29%

Electricity –Residential

15%

Industrial(non-electric)

20%

Electricity –Industrial

10%

Electricity –Commercial

15% Residential &Commercial

(non-electric)11%

Residential & Commercial42%

Industrial30%

2009 total U.S. energy use = 94.6 quadrillion Btu


0

25

50

75

100

125

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

Renewables grow rapidly, but under current policies fossil fuels still provide 78% of U.S. energy use in 2035

U.S. primary energy consumptionquadrillion Btu per year

Coal

Oil and other liquid fuels

Natural gas

ProjectionsHistory

Nuclear

Liquid biofuels

Renewables (excluding liquid biofuels)

Source: EIA, Annual Energy Outlook 2011

37%

25%

21%

9%

7%

1%

33%

24%

21%

10%

8%

3%

Shares of total U.S. energy

2009


0

50

100

150

200

2005 2010 2015 2020 2025 2030 2035

Energy efficiency gains reduce consumption 13% from where it would otherwise be; structural change is even larger

quadrillion Btu


Constant efficiency

Constant intensity

Efficiency change

Structural change

AEO2011 Reference case

-33%

-13%


0.00

0.25

0.50

0.75

1.00

1.25

1.50

1.75

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

Energy and CO2 per dollar of GDP continue to decline;per-capita energy use also declines

index, 2005=1ProjectionsHistory


2009

Energy per capitaEnergy per dollar GDP

CO2 per dollar GDP


0

1

2

3

4

5

6

7

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

In the AEO2011 Reference case, energy-related CO2emissions grow almost 6% over 2005 levels by 2035

billion metric tons carbon dioxide

Energy-related CO2 emissions

ProjectionsHistory

Source: EIA, Annual Energy Outlook 2011Richard Newell, December 16, 2010

2009

2005 2020 2035Energy-related CO2emissions 5.98 5.77 6.31% change from 2005 - - -3.4% 5.6%

2005

12


Electricity

13

In 2009, electricity generation was 70% fossil fuels, 20% nuclear, and 10% renewable

Nuclear20.2%

Natural gas23.3%

2009 Total net generation:3,953 billion kWh

Coal44.6%

2009 Non-hydro renewablenet generation:141 billion kWh

Geothermal: 0.4%

Other biomass: 0.5%

Wood and wood-derived fuels: 0.9%

Other renewable

3.6%

Conventionalhydroelectric

6.9%

Other0.3%

Wind: 1.8%

Solar thermal and PV: <0.1%

Petroleum1.0%

Other gases0.3%

Source: EIA Electric Power Monthly, October 2010Richard Newell, December 16, 2010 14


-2

0

2

4

6

8

10

12

14

1950 1960 1970 1980 1990 2000 2015 2025 2035

While projected electricity consumption grows by 30%, the rate of growth has slowed

percent growth (3-year rolling average)

Projections

HistoryPeriod Annual Growth1950s 9.81960s 7.31970s 4.71980s 2.91990s 2.42000-2009 0.52009-2035 1.0


2009

15

0

1

2

3

4

5

6

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

electricity net generationtrillion kilowatthours per year

Natural gas

Renewable

ProjectionsHistory

Nuclear

Oil and other

Coal

20%

23%

25%

1% 1%

45%

43%

14%10%

17%

The projected electricity mix gradually shifts to lower-carbon options, with generation from natural gas rising 37% and renewables rising 73%


2009


Updated electric power plant capital costs show increases for nuclear, coal, and wind, while solar costs decline

0

1000

2000

3000

4000

5000

6000

7000

Natural GasCC

PulverizedCoal

IGCC CCS

Nuclear Wind Biomass SolarThermal

Photovoltaic

AEO 2010 AEO 2011


overnight capital cost2009 dollars per kilowatt


+39%

+25%

+37%

+1%

+21%

-2%

-10%

-25%

17


0

50

100

150

200

250

300

350

400

450

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

Non-hydro renewable sources grow nearly three-fold, meeting 23% of projected electricity generation growth

non-hydropower renewable generationbillion kilowatthours per year

Wind

ProjectionsHistory

Solar

Biomass

Geothermal

Waste


2009

18

Natural gas, wind and other renewables account for the vast majority of capacity additions from 2009 to 2035

Coal313 (30%)

Natural gas351 (34%)

Hydropower*99 (10%)

Nuclear101 (10%)

Other renewables

15 (1%)

Other fossil118 (11%) * Includes pumped storage

Coal14 (6%)

Natural gas135 (62%)

Hydropower*3 (1%)

Nuclear6 (3%)

Other renewables27 (12%)

Other fossil

1 (0.4%)

2009 capacity Capacity additions 2009 to 2035

1,033gigawatts

220gigawatts


Wind27 (12%)

Wind32 (3%)

19

End-use coal4 (0.3%)

End-use coal7 (3%)


Natural gas

20

U.S. shale gas production increased 14-fold over the last decade; reserves tripled over the last few years

0.0

1.0

2.0

3.0

4.0

5.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Eagle Ford (TX)Marcellus (PA and other Eastern states)Haynesville (LA and TX)Woodford (OK)Fayetteville (AR)Barnett (TX)Antrim (MI, IN, and OH)

Source: Lippman Consulting (2010 estimated)

annual shale gas production trillion cubic feet per year


Shale gas has been the primary source of recent growth in U.S. technically recoverable natural gas resources

0

250

500

750

1000

1250

1500

1750

2000

2250

2500

2750

2000 2005 2006 2007 2008 2009 2010 2011

AEO edition

U.S. dry gas resourcestrillion cubic feet

Unproved shale gas

Unproved other gas(including Alaska* and offshore)

Proved reserves(all types & locations)

* Alaska resource estimates prior to AEO2009 reflect resources from the North Slope that were not included in previously published documentation.


827

1481

2552

245


10

15

20

25

30

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

30% domestic gas production growth outpaces 16% consumption growth, leading to declining imports

Consumption

Domestic supply

Net imports

ProjectionsHistory

AEO2011 Reference caseAEO2010 Reference case

1%

6%

11%


2009

U.S. dry gastrillion cubic feet per year

23


0

5

10

15

20

25

30

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

Shale gas offsets declines in other U.S. supply to meet consumption growth and lower import needs

U.S. dry gastrillion cubic feet per year

Alaska

Non-associated offshore

ProjectionsHistory

Associated with oilCoalbed methane

Net imports

Non-associated onshore

Shale gas


2009

11%

1%

9% 7%

9% 8%

20%

14%

8%2%

8%

7%

45%

1%

Tight gas28% 22%

24

0

5

10

15

20

25

30

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

U.S. dry gas consumptiontrillion cubic feet per year

Commercial

Transportation** Residential

Central electric power

Industrial*

* Includes combined heat-and-power and lease and plant fuel. ** Includes pipeline fuel.


2009

3%

14%

35%

18%

29%

3%

14%

32%

21%

30%

ProjectionsHistory


Natural gas consumption is quite dispersed; industrial and electric power use drives future demand growth

25


A number of key economic and market drivers underpin natural gas consumption growth

SectorTCF gas

consumption Growth(2009-2035) Key drivers

2009 2035

Industrial, including combined heat-and-power

7.3 9.3 26% +187% combined heat-and-power generation; +30% output of gas-intensive industry; lower natural gas prices

Central electric power

6.9 7.8 13% +30% electricity consumption; lower natural gas prices; offset by +72% renewable generation and +24% coal generation

Commercial 3.1 3.8 22% +37% commercial floorspace; -3% energy intensity

Residential 4.7 4.8 <1% +30% number of households; +19% total square footage; -16% energy intensity


Natural gas price projections are significantly lower than past years due to an expanded shale gas resource base

natural gas spot price (Henry Hub)2009 dollars per million Btu

ProjectionsHistory


2009


0

1

2

3

4

5

6

7

8

9

10

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

AEO2010

Updated AEO2009

AEO2011

27


Oil and other liquid fuels

28

0

25

50

75

100

125

150

175

200

225

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

Oil prices in the Reference case rise steadily;the full AEO2011 will include a wide range of oil prices

ProjectionsHistory


2009

High oil price

Low oil price

AEO2011 Reference


annual average price of low sulfur crude oilreal 2009 dollars per barrel

Unconventional sources more than triple globally, but conventional petroleum continues to comprise the vast majority of liquids supply

0

20

40

60

80

100

120

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035


global liquids productionmillion barrels per day

ProjectionsHistory 2009

12%

47%

40%

39%

5%

56%

OPEC conventional

Non-OPEC conventional

Unconventional


0

5

10

15

20

25

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

U.S. liquid fuels consumptionmillion barrels per day

ProjectionsHistory

Natural gas plant liquids

Biofuels including imports

Petroleum supply

Net petroleum imports

U.S. imports of liquid fuels fall due to increased domestic production—including biofuels—and greater fuel efficiency

2009


13%12%

42%

31%

10%

4%

52%

34%


Liquids from coal2%

31

0 2 4 6 8 10 12 14 16 18 20 22

20092035

U.S. liquid fuelsmillion barrels per day

Net product imports

Net crude oil imports

Natural gas plant liquids

Liquids from coal

Biofuels, natural gas liquids, and crude oil production are key sources of increased domestic liquids supply


Gulf of Mexico

Crude oil production

Biofuels (including net imports)

Refinery processing gain


Total consumption

32

billions ethanol-equivalent gallons

0

5

10

15

20

25

30

35

40

45

2009 2022 2035

Biofuels fall short of the goal in 2022, but exceed the 36 billion gallon RFS target by 2030

Legislated RFS in 2022

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

Biodiesel

Other Advanced

Net imports

Cellulosic biofuels

Corn ethanol

Source: EIA, Annual Energy Outlook 2011Richard Newell, December 16, 2010 33

0

5

10

15

20

25

30

35

40

45

2000 2005 2010 2015 2020 2025 2030 2035

New light duty vehicle fuel economy achieves almost 38 mpg by 2035 in the Reference case

miles per gallon


2009 ProjectionsHistory


Summary of standards

2012-2016: 34.1 mpg CAFE average (based on NHTSA vehicle footprint sales distribution)

2020: 35 mpg by statute2017-2025: Reference case does not include proposal

planned for September 2011

0

4

8

12

16

1995 2000 2005 2010 2015 2020 2025 2030 2035

Most transport fuel growth is in light and heavy duty vehicles

U.S. transportation energy consumptionmillion barrels per day oil equivalent

Rail

Air

ProjectionsHistory

Heavy-duty vehicles

Light-duty vehicles

Marine


2009

4%

67%

2%

10%

16%

64%

20%

9%4%2%



Efficiency improvements partially offset underlying drivers of growth in transportation services

2009 2035Growth

(2009-2035)

Light duty vehiclesFuel consumption (million barrels per day oil equivalent) 8.9 10.2 15%Number of licensed drivers (millions) 207 265 28%Miles per licensed driver 13,100 15,300 17%

Efficiency of vehicle stock (mpg) 20.8 27.8 34%*Heavy duty vehicles

Fuel consumption (million barrels per day oil equivalent) 2.2 3.2 47%Manufacturing output (billion 2005 dollars) 4,197 6,761 61%

Number of freight trucks (millions) 8.7 16.6 90%

Miles per vehicle 23,700 20,200 -15%

Efficiency of vehicle stock (mpg) 6.1 6.6 9%**


* Equal to a 25% reduction in fuel use per mile. ** Equal to an 8% reduction in fuel use per mile.

36


Unconventional vehicles meet over 40% of U.S. light-duty vehicle sales in 2035

0

5

10

15

20

2000 2009 2015 2020 2025 2030 2035

Conventional gasolineDieselGaseous and fuel cellMild hybrid electricHybrid electricPlug-in hybrid and all-electricE85 flex fuel

U.S. light car and truck salesmillions


ProjectionsHistory

37

• Increased estimates for U.S. shale gas resources drive increased U.S. production, lower prices, and lower imports of natural gas

• Industrial natural gas demand recovers, reversing recent trend

• Non-hydro renewables and natural gas are the fastest growing electricity generation sources, but coal remains the dominant fuel because of the large amount of existing capacity

• Oil imports fall due to increased domestic production—including biofuels—and greater fuel efficiency

• U.S. carbon dioxide emissions rise slowly, but do not pass 2005 levels again until 2027

Key results from the AEO2011 Reference case,which assumes current laws remain unchanged


For more informationU.S. Energy Information Administration home page www.eia.gov

Short-Term Energy Outlook www.eia.gov/emeu/steo/pub/contents.html

Annual Energy Outlook www.eia.gov/oiaf/aeo/index.html

International Energy Outlook www.eia.gov/oiaf/ieo/index.html

Monthly Energy Review www.eia.gov/emeu/mer/contents.html

EIA Information Center (202) 586-8800Live expert from 9:00 AM – 5:00 p.m. EST

Monday – Friday (excluding Federal holidays)email: [email protected]

2011 EIA Energy Conference www.eia.gov/conference/2011April 26 - 27, 2011


2011 EIA Energy Conference — April 26 - 27, 2011

For information and email updates: www.eia.gov/conference/2011


Some supply sources and demand sectors are strongly linked, while others are more dispersed

Source: EIA Annual Energy Review 2009 40

2009

annual energy outlook 2011

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