Date: December 16, 2010
Source: Energy Information Administration
Good news for the renewable energy industry: gas-fired energy will be the fastest growing energy segment, driven by rising oil prices, says the latest report from the Energy Information Administration (EIA). EIA's preliminary Annual Energy Outlook 2011 (AEO2011) projects estimated domestic energy resources and consumption through 2035. The final report is to be issued early next year.
Renewable resources are expected to climb to 14% of the U.S. generation market by 2035 in response to federal tax credits in the near-term and state requirements in the long-term. It will be spurred by rising industrial gas demand as a result of rising oil prices. Global demand for oil will rise from 84 million barrels per day in 2009 to nearly 111 million barrels per day in 2035, much of it coming from harder to reach places using exotic technologies. That is likely to cause prices to climb to between $125 per barrel and could go as high as $200 per barrel.
As a consequence, U.S. natural gas production is expected to increase by 16 percent over the quarter century. Ironically, wholesale natural gas prices are expected to stay under $5 per 1,000 cubic feet through 2022 thanks to abundant existing reserves. Natural gas power plants, which now generate 23 percent of the electricity, will generate about 25 percent in 2035 as utilities convert to natural gas only when they build new plants.
Coal-fired power plants, which now account for 45 percent of all power generated (88 percent in Ohio) will fall just two percentage points to 43 percent. Nuclear power generation will fall to about 17% from 20% in 2009.
FROM WEBSITE
AEO2011 Early Release Overview
Release Date: December 16, 2010
Full Report Release Date: March 2011
Report Number: DOE/EIA-0383ER(2011)
Introduction
In preparing the AEO2011, EIA evaluated a wide range of trends and issues that could have major implications for U.S. energy markets. This overview focuses primarily on one case, the AEO2011 Reference case, which is presented and compared with the AEO2010 Reference case released in December 2009 (see Table 1). Because of the uncertainties inherent in any energy market projection, the Reference case results should not be viewed in isolation. Readers are encouraged to review the alternative cases when the complete AEO2011 publication is released in order to gain perspective on how variations in key assumptions can lead to diff erent outlooks for energy markets.
To provide a basis against which alternative cases and policies can be compared, the AEO2011 Reference case generally assumes that current laws and regulations affecting the energy sector remain unchanged throughout the projection (including the implication that laws which include sunset dates do, in fact, become ineff ective at the time of those sunset dates). EIA considers this practice to be a prudent approach. Currently, there are many pieces of legislation and regulation that appear to have some probability of being enacted in the not too distant future, and some laws include sunset provisions that may be extended. However, it is difficult to discern the exact forms that the fi nal provisions of pending legislation or regulations will take, and sunset provisions may or may not be extended. Even in situations where existing legislation contains provisions to allow revision of implementing regulations, those provisions may not be exercised consistently. In certain situations, however, whereit is clear that a law or regulation will take eff ect shortly after the AEO Reference case is completed, it may be considered in the projection.
As in past Annual Energy Outlook (AEO) editions, the complete AEO2011 will include many additional cases. The standard set of cases in the complete AEO will include cases that refl ect the impacts of extending a variety of current energy programs beyond their current expiration dates, or the permanent retention of a broad set of current programs that are currently subject to sunset provisions, among others. In addition to the alternative cases prepared for AEO2011, EIA has examined proposed policies at the request of Congress over the past year. Reports describing the results of those analyses are available on EIA's website.
Key updates that were made for the AEO2011 Reference case include:
Significant update of the technically recoverable U.S. shale gas resources, more than doubling the volume of shale gas resources assumed in AEO2010, and also added new shale oil resources
Revision of the methodology for determining natural gas prices to better reflect a lessening of the influence of oil prices on natural gas prices, in part because of the increase in shale gas supply and improvements in natural gas extraction technologies
Update of the data and assumptions for off shore oil and gas production, pushing out the start of production for a number of projects as a result of the six-month drilling moratoria, and delaying Atlantic and Pacific off shore leasing beyond 20172
Increase of the limit for blending ethanol into gasoline for approved vehicles from 10 percent to 15 percent, as a result of the waiver granted by the U.S. Environmental Protection Agency (EPA) in October 2010
Expanded the number of electricity regions from 13 to 22, allowing better regional representation of market structure and power flow
Update of the costs for new power plants
Update of the costs and sizes of electric and plug-in hybrid electric batteries
Downward revision of light-duty vehicle travel demand due to the adoption of new estimation technique
Incorporation of California's Low Carbon Fuel Standard, which reduces the carbon intensity of gasoline and diesel fuels in that State by 10 percent from 2012 through 2020
Incorporation of changes in environmental rules at the State level. For example, California increased its RPS target from 20 percent to 33 percent by 2020.
Executive Summary
Projections in the Annual Energy Outlook 2011 (AEO2011) Reference case focus on the factors that shape U.S. energy markets in the long term. Under the assumption that current laws and regulations will remain generally unchanged throughout the projections, the AEO2011 Reference case provides the basis for examination and discussion of energy market trends and the direction they may take in the future. It also serves as a starting point for analysis of potential changes in energy policies, rules, or regulations. Some of the highlights in the AEO2011 Reference case are summarized in this Executive Summary.
A higher updated estimate of domestic shale gas resources supports increased natural gas production at prices below those in last year's Outlook
The technically recoverable unproved shale gas resource is 827 trillion cubic feet (as of January 1, 2009) in the AEO2011 Reference case, 480 trillion cubic feet larger than in the Annual Energy Outlook 2010 (AEO2010) Reference case, refl ecting additional information that has become available with more drilling activity in new and existing shale plays. The larger resource leads to about double the shale gas production and over 20 percent higher total lower 48 natural gas production in 2035, with lower natural gas prices than was projected in the AEO2010 Reference case (Figure 1).
Imports meet a major but declining share of total U.S. energy demand
Projected demand for energy imports is moderated by increased use of domestically produced biofuels, demand reductions resulting from the adoption of new efficiency standards, and rising energy prices. Rising fuel prices also spur domestic energy production across all fuels, which moderates growth in energy imports. The net import share of total U.S. energy consumption in 2035 is 18 percent, compared with 24 percent in 2009.
Non-hydro renewables and natural gas are the fastest growing fuels used to generate electricity, but coal remains the dominant fuel because of the large amount of existing capacity
Coal remains the dominant energy source for electricity generation (Figure 2) because of continued reliance on existing coal-fi red plants. The U.S. Energy Information Administration (EIA) is not projecting any new central station coal-fi red plants, however, beyond those already under construction or supported by clean coal incentives. The generation share from renewable resources increases from 11 percent in 2009 to 14 percent in 2035 in response to Federal tax credits in the near term and State requirements in the long term. Natural gas also plays a growing role due to lower natural gas prices and relatively low capital construction costs that make it more attractive than coal. The share of generation from natural gas increases from 23 percent in 2009 to 25 percent in 2035.
Industrial natural gas demand recovers, reversing recent trend
Industrial natural gas demand grows sharply in the near term, from 7.3 trillion cubic feet in 2009 to 9.4 trillion cubic feet in 2020. This growth reverses the recent downward trend, as a result of a strong recovery in near-term industrial production, growth in combined heat and power, and relatively low natural gas prices.
Assuming no changes in policy related to greenhouse gases, carbon dioxide emissions grow slowly, but do not again reach 2005 levels until 2027
After falling 3 percent in 2008 and nearly 7 percent in 2009, largely driven by the economic downturn, energy-related CO2 emissions do not return to 2005 levels (5,980 million metric tons) until 2027. Assuming no new policies reducing greenhouse gases, CO2 emissions then rise by an additional 5 percent from 2027 to 2035, reaching 6,315 million metric tons in 2035 (Figure 3).
To read more, visit: www.eia.doe.gov/forecasts/aeo/early_introduction.cfm.
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