Annual Energy Outlook 2011

Annual Energy Outlook 2011
Reference Case

The Paul H. Nitze School of Advanced International Studies
December 16, 2010
Washington, DC

Richard Newell, Administrator

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

• 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

Richard Newell, December 16, 2010 2

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


Key updates included in the AEO2011 Reference case
• 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


Global energy consumption


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

800 739
Non-OECD 687
OECD w/o U.S.
639
U.S.
590
600 543
495 62%

400
50%

200
50% 38%

20% 16%
0
2007 2015 2020 2025 2030 2035

Richard Newell, December 16, 2010 Source: EIA, International Energy Outlook 2010 6

Overview of U.S. energy
supply and demand


Current U.S. energy supply is 83% fossil fuels;
demand is broadly distributed among the major sectors
2009 total U.S. energy use = 94.6 quadrillion Btu

Energy supply Energy demand

Industrial
Nuclear 30%
Industrial
9%
(non-electric)
Renewable 20%
8% Petroleum Transportation
37% Electricity –
29%
Industrial
10%
Coal
21% Electricity –
Commercial
15% Residential &
Commercial
Natural Gas Electricity – (non-electric)
25% Residential 11%
15%

Residential & Commercial
42%
Richard Newell, December 16, 2010 Source: EIA Annual Energy Review 2009 8

Renewables grow rapidly, but under current policies
fossil fuels still provide 78% of U.S. energy use in 2035
U.S. primary energy consumption Shares of total U.S. energy
quadrillion Btu per year
History 2009 Projections
125
Renewables (excluding liquid biofuels)
7% 10%
100
21%
Coal
21%
75
24%
Natural gas
25%
50 3%
1% Liquid biofuels

25 37% Oil and other liquid fuels 33%

9%
Nuclear 8%
0
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

Richard Newell, December 16, 2010 Source: EIA, Annual Energy Outlook 2011 9

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

quadrillion Btu
200
Constant intensity
Structural
-33%
150 change
Constant efficiency
-13% Efficiency
change
100
AEO2011 Reference case

50

0
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=1
1.75

1.50

1.25

1.00 Energy per capita
0.75 Energy per dollar GDP

0.50 CO2 per dollar GDP

0.25

0.00
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035


In the AEO2011 Reference case, energy-related CO2
emissions grow almost 6% over 2005 levels by 2035

billion metric tons carbon dioxide
History 2005 2009 Projections
7

6
Energy-related CO2 emissions
5

4

3 2005 2020 2035
Energy-related CO2
2 emissions 5.98 5.77 6.31
% change from 2005 -- -3.4% 5.6%
1

0
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035


Electricity


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

2009 Total net generation: 2009 Non-hydro renewable
3,953 billion kWh net generation:
141 billion kWh
Other gases
0.3%
Conventional
Nuclear hydroelectric
20.2% 6.9%

Natural gas Other Wind: 1.8%
23.3% 0.3%
Solar thermal
Other and PV: <0.1%
renewable
3.6% Wood and wood-
derived fuels: 0.9%
Petroleum
1.0% Coal Geothermal: 0.4%
44.6%
Other biomass: 0.5%

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

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

percent growth (3-year rolling average) Period Annual Growth
History 2009 1950s 9.8
14 1960s 7.3
1970s 4.7
12 1980s 2.9
1990s 2.4
10 2000-2009 0.5
2009-2035 1.0
8
Projections
6

4

2

0

-2
1950 1960 1970 1980 1990 2000 2015 2025 2035


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

electricity net generation
trillion kilowatthours per year
6

5

4 43%
Coal
45%
3
25%
2 Natural gas
23%
Renewable 14%
1 10%
20% Nuclear 17%
0 1%
1%
Oil and other
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035


Updated electric power plant capital costs show increases
for nuclear, coal, and wind, while solar costs decline
overnight capital cost
2009 dollars per kilowatt

7000 AEO 2010 AEO 2011
-25%
6000
+39% +37% -10%
5000
-2%
4000
+25%
3000
+21%
2000
+1%
1000

0
Natural Gas Pulverized IGCC Nuclear Wind Biomass Solar Photovoltaic
CC Coal CCS Thermal


Non-hydro renewable sources grow nearly three-fold,
meeting 23% of projected electricity generation growth
non-hydropower renewable generation
billion kilowatthours per year
450
400
350
300 Biomass
250
200
Wind
150
Geothermal
100
Solar
50
0 Waste

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035


Natural gas, wind and other renewables account for the vast
majority of capacity additions from 2009 to 2035
2009 capacity Capacity additions
Nuclear 2009 to 2035
101 (10%) Coal
313 (30%) Hydropower* Nuclear
Hydropower* 3 (1%) 6 (3%) Coal
99 (10%) Other 14 (6%)
Other renewables End-use coal
renewables 27 (12%) 7 (3%)
15 (1%) 220
1,033 gigawatts Other
Wind gigawatts Wind fossil
32 (3%) 27 (12%) 1 (0.4%)

End-use coal Natural gas
4 (0.3%) 135 (62%)

Natural gas Other fossil
351 (34%) 118 (11%)
* Includes pumped storage


Natural gas


U.S. shale gas production increased 14-fold over the last
decade; reserves tripled over the last few years
annual shale gas production
trillion cubic feet per year
5.0

Eagle Ford (TX)
4.0 Marcellus (PA and other Eastern states)
Haynesville (LA and TX)
Woodford (OK)
3.0 Fayetteville (AR)
Barnett (TX)
Antrim (MI, IN, and OH)
2.0

1.0

0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Richard Newell, December 16, 2010 Source: Lippman Consulting (2010 estimated) 21

Shale gas has been the primary source of recent growth in
U.S. technically recoverable natural gas resources
U.S. dry gas resources
trillion cubic feet
2750
2552
2500
2250 827 Unproved
shale gas
2000
1750
1500 Unproved
1250 other gas
1481 (including
1000 Alaska* and
offshore)
750
500
250 Proved
245 reserves
0 (all types &
2000 2005 2006 2007 2008 2009 2010 2011 locations)

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

30% domestic gas production growth outpaces 16%
consumption growth, leading to declining imports
U.S. dry gas
30

1%
25 6%
Consumption

Net imports 11%
20
Domestic supply

15
10
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 gas
30
1%
25
Net imports
11%
20 45%
14% Shale gas

15 20%
Non-associated onshore 8%
9%
Non-associated offshore 8%
10
28% Tight gas 22%
5
8% Coalbed methane 7%
2% 9% Associated with oil Alaska 1% 7%
0
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035


Natural gas consumption is quite dispersed; industrial and
electric power use drives future demand growth
U.S. dry gas consumption
30

25

35%
20 Industrial*
32%

15
29%
30% Central electric power
10
14% Commercial 14%
5
Transportation** 21% Residential 18%
3% 3%
0
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

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

A number of key economic and market drivers underpin
natural gas consumption growth
TCF gas
Sector consumption Growth Key drivers
(2009-2035)
2009 2035
Industrial, 7.3 9.3 26% +187% combined heat-and-power
including generation; +30% output of gas-
combined heat-
and-power
intensive industry; lower natural gas
prices
Central 6.9 7.8 13% +30% electricity consumption; lower
electric power 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
2009
10
History Projections
9
Updated AEO2009
8

7
AEO2010
6
AEO2011
5

4

3

2

1

0
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035


Oil and other liquid fuels


Oil prices in the Reference case rise steadily;
the full AEO2011 will include a wide range of oil prices
annual average price of low sulfur crude oil
real 2009 dollars per barrel
225
High oil price
200
175
150
125
AEO2011 Reference
100
75
50
Low oil price
25
0
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035


Unconventional sources more than triple globally, but conventional
petroleum continues to comprise the vast majority of liquids supply
global liquids production
million barrels per day

120 History 2009 Projections

100

40%
80
OPEC conventional
39%
60 12%
5% Unconventional
40

56% Non-OPEC conventional 47%
20

0
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035


U.S. imports of liquid fuels fall due to increased domestic
production—including biofuels—and greater fuel efficiency
U.S. liquid fuels consumption
25
4% Biofuels including imports
20 12%
Natural gas plant liquids 13%
10%
2%
15 34% Liquids from coal
Petroleum supply 31%
10

5 52% Net petroleum imports 42%

0
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035


Biofuels, natural gas liquids, and crude oil production are key
sources of increased domestic liquids supply
U.S. liquid fuels
Total consumption

Net crude oil imports

Net product imports

Crude oil production
Gulf of Mexico
Liquids from coal
2009
Natural gas plant liquids
2035
Biofuels (including net imports)

Refinery processing gain

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


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

billions ethanol-equivalent gallons

45 Legislated RFS in 2022
40
Biodiesel
35 Net imports
RFS with Other
30
adjustments under Advanced
25 CAA Sec.211(o)(7)
Cellulosic biofuels
20
15
10 Corn ethanol
5
0
2009 2022 2035


New light duty vehicle fuel economy achieves almost 38 mpg
by 2035 in the Reference case
miles per gallon
45
40
35
30
25 Summary of standards

20 2012-2016: 34.1 mpg CAFE average (based on NHTSA
vehicle footprint sales distribution)
15 2020: 35 mpg by statute

10 2017-2025: Reference case does not include proposal
planned for September 2011
5
0
2000 2005 2010 2015 2020 2025 2030 2035


Most transport fuel growth is in light and heavy duty vehicles

U.S. transportation energy consumption
million barrels per day oil equivalent
16

12
64%
Light-duty vehicles
67%
8

4 Heavy-duty vehicles 20%
16%
10% Air 9%
4% Marine 4%
0 2%
1995 2000 2005 2% 2010 2015 2020 Rail 2025 2030 2035


Efficiency improvements partially offset underlying drivers of
growth in transportation services

Growth
2009 2035 (2009-2035)
Light duty vehicles
Fuel 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.

Unconventional vehicles meet over 40% of U.S. light-duty
vehicle sales in 2035
U.S. light car and truck sales
millions
History Projections
20

15
Conventional gasoline
Diesel
10 Gaseous and fuel cell
Mild hybrid electric
Hybrid electric
5 Plug-in hybrid and all-electric
E85 flex fuel

0
2000 2009 2015 2020 2025 2030 2035


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

• 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


For more information
U.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
2011 EIA Energy Conference — April 26 - 27, 2011
International Energy Outlook www.eia.gov/oiaf/ieo/index.html
For information and email updates:
www.eia.gov/conference/2011
Monthly Energy Review www.eia.gov/emeu/mer/contents.html

EIA Information Center (202) 586-8800
Live expert from 9:00 AM – 5:00 p.m. EST
Monday – Friday (excluding Federal holidays)
email: InfoCtr@eia.gov

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

Some supply sources and demand sectors are strongly
linked, while others are more dispersed
2009

Richard Newell, December 16, 2010 Source: EIA Annual Energy Review 2009 40

Annual Energy Outlook 2011

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