Annual Energy Outlook 2011

Reference Case

U.S. Energy Information Administration Spring, 2011 | Washington, DC

U.S. Energy Information Administration

Independent Statistics & Analysis

www.eia.gov

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 productionincluding biofuelsand greater fuel efficiency U.S. carbon dioxide emissions rise slowly, but do not pass 2005 levels again until 2027

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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 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

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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 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 includes Californias 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
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Global energy consumption

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Non-OECD countries account for vast majority of the nearly 50% projected increase in global energy use by 2035
energy consumption quadrillion Btu 800 700 600 500 400 300 200 100
USA OECD 50%

739 687 639 591 544 495

62% NonOECD

50%

38%

0 2007 2015 2020 2025 2030 2035

Source: EIA, International Energy Outlook 2010

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Overview of U.S. energy supply and demand

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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
Nuclear 8.30% Renewable 7.70% Petroleum 35.30% Electricity Commerci al 14.17%

Energy demand
Electricity Industrial 9.45% Industrial 18.80%

Coal 19.70%

Electricity Residential 14.60% Residential and Commerci al 10.60% Transporta tion 27.00%

Natural Gas 23.40%

Source: EIA, Annual Energy Review 2009

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Renewables grow rapidly, but under current policies fossil fuels still provide 78% of U.S. energy use in 2035
U.S. primary energy consumption quadrillion Btu per year History 120 100 80 60 40 20 0 1980 Renewables (excluding liquid biofuels) Coal Natural gas Liquid biofuels Oil and other liquid fuels Nuclear 2010 2015 2020 2025 2030 24% 3% 10% 21% 2009 Shares of total U.S. energy Projections

7% 21%

25% 1% 37%

33%

9% 1985 1990 1995 2000 2005

8% 2035

Source: EIA, Annual Energy Outlook 2011

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Energy efficiency gains reduce consumption 13% from where it would otherwise be; structural change is even larger
quadrillion Btu 250 Constant Intensity 200 Constant Efficiency Reference Case Consumption

150

-33%

Structural change Efficiency change

-13%

100

50

0 2005

2010

2015

2020

2025

2030

2035

Source: EIA, Annual Energy Outlook 2011

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Energy and CO2 per dollar of GDP continue to decline; per-capita energy use also declines
index, 2005=1 1.75 1.50 Per dollar 1.25 1.00 0.75 0.50 0.25 0.00 1980 Per capita CO2 per GDP History 2009 Projections

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

Source: EIA, Annual Energy Outlook 2011

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In the AEO2011 Reference case, energy-related CO2 emissions grow 5% over 2005 levels by 2035
billion metric tons carbon dioxide 7 6 5 Energy-related CO2 emissions 4 3 2 1 0 1990 Energy-related CO2 emissions % change from 2005 2005 6.00 -2020 5.78 -3.7% 2035 6.31 5.2% History 2005 2009 Projections

1995

2000

2005

2010

2015

2020

2025

2030

2035

Source: EIA, Annual Energy Outlook 2011

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Electricity

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In 2009, U.S. electricity generation was 70% fossil fuels, 20% nuclear, and 10% renewable
2009 Total net generation: 3,953 billion kWh Other gases 0.3% Nuclear 20.2% Natural gas 23.3% 2009 Non-hydro renewable net generation: 141 billion kWh Conventional hydroelectric 6.9% Other 0.3% Other renewable 3.6% Wind: 1.8% Solar thermal and PV: <0.1% Wood and woodderived fuels: 0.9% Geothermal: 0.4% Petroleum 1.0% Coal 44.6% Other biomass: 0.5%

Source: EIA, Electric Power Monthly, October 2010 14

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While projected electricity consumption grows by 30%, the rate of growth has slowed
percent growth (3-year rolling average) 14 12 10 8 6 4 2 0 1950 1960 1970 1980 1990 2000 2010 2020 2030 History 2009 Period Annual Growth 1950s 9.8 1960s 7.3 1970s 4.7 1980s 2.9 1990s 2.4 2000-2009 0.5 2009-2035 1.0 Projections

Source: EIA, Annual Energy Outlook 2011

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The Reference case electricity mix in AEO2011 gradually shifts to lower-carbon options, with generation from natural gas rising 40% and renewables rising 75%
electricity net generation trillion kilowatthours per year 6 5 4 Coal 3 2 23% 1 0 1990 10% 20% 1995 2000 2005 1% 2010 2015 Renewable Nuclear Oil and other 2020 2025 2030 14% 17% 1% 2035 45% Natural gas 25% 43% History 2009 Projections

Source: EIA, Annual Energy Outlook 2011

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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 6000
+ 39% + 37% - 10%

AEO 2011

- 25%

5000
- 2%

4000
+ 25%

3000 2000
+ 1%

+ 21%

1000 0
Natural Gas Pulverized CC Coal IGCC CCS Nuclear Wind Biomass Solar Thermal Photovoltaic

Source: EIA, Annual Energy Outlook 2011

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Non-hydro renewable sources grow nearly three-fold, meeting 22% of projected electricity generation growth
non-hydropower renewable generation billion kilowatthours per year 450 400 350 300 250 200 150 100 50 0 1990 Waste 1995 2000 2005 2010 2015 2020 2025 2030 2035 Solar Wind Geothermal Biomass
Advanced biofuels cogeneration Power sector Industrial CHP

History

2009

Projections

Source: EIA, Annual Energy Outlook 2011

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Natural gas, wind and other renewables account for the vast majority of capacity additions from 2009 to 2035
2009 capacity Nuclear 101 (10%) Hydropower* 99 (10%) Other renewables 15 (1%) Wind 32 (3%) 1,033 gigawatts Coal 313 (30%) Capacity additions 2009 to 2035 Hydropower* 3 (1%) Other renewables 28 (12%) Wind 25 (11%) 223 gigawatts Nuclear 6 (3%) Coal 14 (6%) End-use coal 12 (5%) Other fossil 1 (0.4%)

End-use coal 4 (0.3%) Natural gas 351 (34%)

Source: EIA, Annual Energy Outlook 2011

Natural gas 135 (60%)

Other fossil 118 (11%)

* Includes pumped storage

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Natural Gas

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Over the last decade, U.S. shale gas production has increased 14fold and now comprises about 22 percent of total U.S. production
annual shale gas production trillion cubic feet 6 Eagle Ford (TX) Marcellus (PA and Other Eastern states) Haynesville (LA and TX) Woodford (OK) Fayetteville (AR) Barnett (TX) Antrim (MI, IN, and OH)

0 2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Sources: EIA, Lippman Consulting

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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 3000
Unproved shale gas

2500 2000 1500 1000 500 0 2000

Unproved other gas (including Alaska* and offshore) Proved reserves (all types and locations)

2543

827

1472

245

2005

2006

2007

2008

2009

2010

2011

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

Source: EIA, Annual Energy Outlook 2011

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30% domestic gas production growth outpaces 16% consumption growth, leading to declining imports
U.S. dry gas trillion cubic feet per year History 30
1%

2009

Projections

25 20 15 10 5 0 1990

Consumption Net imports Domestic supply AEO2011 Reference case AEO2010 Reference case
11%

6%

1995

2000

2005

2010

2015

2020

2025

2030

2035

Source: EIA, Annual Energy Outlook 2011

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Shale gas offsets declines in other U.S. supply to meet consumption growth and lower import needs
U.S. dry gas trillion cubic feet per year 30 25 11% 20 14% 15 10 28% 5 0 1990 2% 1995 2000 2005 8% 9% 2010 Coalbed methane Associated with oil 2015 2020 2025 6% Alaska 1% 2030 7% 20% 9% Non-associated onshore Non-associated offshore Tight gas 8% 9% 22% Shale gas 46% History 2009 Projections 1% Net imports

2035

Source: EIA, Annual Energy Outlook 2011

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Natural gas consumption is quite dispersed; industrial and electric power use drives future demand growth
U.S. dry gas consumption trillion cubic feet per year History 30 25 35% 20 15 30% 10 14% 5 0 1990 21% 3% 1995 2000 2005 2010 2015 Residential Transportation** 2020 2025 2030 Commercial 14% 18% 3% 2035 Central electric power 32% Industrial* 2009 Projections

30%

*Includes combined heat-and-power and lease and plant fuel. **Includes pipeline fuel. Source: EIA, Annual Energy Outlook 2011

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A number of key economic and market drivers underpin natural gas consumption growth
Sector TCF Gas Consumption 2009 Industrial, including combined heatand-power Central electric power 7.4 2035 9.3 25% +215% combined heat-and power generation; +30% output of gas intensive industry; lower natural gas prices +30% electricity consumption; lower natural gas prices; offset by +75% renewable generation and +26% coal generation +37% commercial floorspace; -4% energy intensity +30% number of households; +19% total square footage; -17% energy intensity Growth (2009 2035) Key Drivers

6.9

7.9

14%

Commercial Residential

3.1 4.8

3.8 4.8

23% <1%

Source: EIA, Annual Energy Outlook 2011 26

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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 History 10 9 8 7 6 5 4 3 2 1 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 AEO2011 Updated AEO2009 AEO2010 $7/MMBtu 2009 Projections $9/MMBtu

Sources: EIA, Annual Energy Outlook 2011; EIA, Annual Energy Outlook 2010; and EIA, An Updated Annual Energy Outlook 2009 Reference Case

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Oil and other liquid supply

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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 History 225 200 175 150 125 100 75 50 25 0 1980 Low Oil Price AEO2011 Reference High Oil Price 2009 Projections

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

Source: EIA, Annual Energy Outlook 2011

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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 History 120 100 80 39% 60 5% 40 56% 20 0 1990 Non-OPEC conventional 47% 40% OPEC conventional Unconventional 12% 2009 Projections

1995

2000

2005

2010

2015

2020

2025

2030

2035

Source: EIA, Annual Energy Outlook 2011

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U.S. imports of liquid fuels fall due to increased domestic production including biofuels and greater fuel efficiency
U.S. liquid fuels consumption million barrels per day

25

History

2009 4%

Projections Biofuels including imports 11% Natural gas plant liquids 13% 3% 32%

20

10% 34%

15

Liquids from coal Petroleum supply

10 52% 5 Net petroleum imports 41%

0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035
Source: EIA, Annual Energy Outlook 2011

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

Net crude oil imports Net product imports Crude oil production Gulf of Mexico Liquids from coal Natural gas plant liquids Biofuels (including net imports) Refinery processing gain 0 2 4 6 8 10 12 14 16 18 20 22 2009 2035

Source: EIA, Annual Energy Outlook 2011

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Biofuels fall short of the goal in 2022, but exceed the 36 billion gallon RFS target by 2031
billions ethanol-equivalent gallons 45 40 35 30 25 Cellulosic biofuels 20 15 10 Corn ethanol 5 0 2009
Source: EIA, Annual Energy Outlook 2011

Legislated RFS in 2022

Biodiesel RFS with adjustments under CAA Sec.211(o)(7) Net imports Other Advanced

2022

2035

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New light duty vehicle fuel economy achieves almost 38 mpg by 2035 in the Reference case
miles per gallon 45 40 35 30 25 20 15 10 5 0 2000 2012-2016: 2020: 2017-2025: Summary of standards 34.1 mpg CAFE average (based on NHTSA vehicle footprint sales distribution) 35 mpg by statute Reference case does not include proposal planned for September 2011 History 2009 Projections

2005

2010

2015

2020

2025

2030

2035

Source: EIA, Annual Energy Outlook 2011

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Most transport fuel growth is in light and heavy duty vehicles

U.S. transportation energy consumption million barrels per day oil equivalent History 16 2009 Projections

12 Light-duty vehicles 67% 8

64%

4 16% 10% 4% 2000 2005 2% 2010 2015

Heavy-duty vehicles Air Marine 2020 Rail 2025 2030

20% 9% 4% 2% 2035

0 1995

Source: EIA, Annual Energy Outlook 2011

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Efficiency improvements partially offset underlying drivers of growth in transportation services

Growth 2009 2035 10.2 265 15,300 27.9 3.2 6,770 16.6 20,200 6.6
(2009-2035)

Light duty vehicles Fuel consumption (million barrels per day oil equivalent) Number of licensed drivers (millions) Miles per licensed driver Efficiency of vehicle stock (mpg) Heavy duty vehicles Fuel consumption (million barrels per day oil equivalent) Manufacturing output (billion 2005 dollars) Number of freight trucks (millions) Miles per vehicle Efficiency of vehicle stock (mpg)

8.9 207 13,100 20.8 2.2 4,197 8.7 23,700 6.1

14% 28% 17% 34%* 47% 61% 90% -15% 9%**

* Equal to a 25% reduction in fuel use per mile. ** Equal to an 8% reduction in fuel use per mile. Source: EIA, Annual Energy Outlook 2011

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

20

15
Conventional gasoline Diesel

10

Gaseous and fuel cell Mild hybrid electric Hybrid electric

Plug-in hybrid and all-electric E85 flex fuel

0 2000 2009 2015 2020 2025 2030 2035

Source: EIA, Annual Energy Outlook 2011

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For more information

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

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