EIA’s Annual Energy Outlook 2012 A comprehensive assessment of the U.S. energy picture For National Governors Association May 30, 2012 |Washington, DC By Howard Gruenspecht, Acting Administrator U.S. Energy Information Administration Independent Statistics & Analysis www.eia.gov U.S. Energy Breakdown by Fuel and Sector Source: EIA Annual Energy Review 2010 Howard Gruenspecht May 30, 2012 2 Key results from the AEO2012 Reference case, which assumes current laws remain unchanged • Projected growth of energy use slows over the projection period reflecting an extended economic recovery and increasing energy efficiency in end-use applications • Domestic crude oil production increases, reaching levels not experienced since 1994 by 2020 • With modest economic growth, increased efficiency, growing domestic production, and continued adoption of nonpetroleum liquids, net petroleum imports make up a smaller share of total liquids consumption • Natural gas production increases throughout the projection period and exceeds consumption early in the next decade • Renewables and natural gas fuel a growing share of electric power generation • Total U.S. energy-related carbon dioxide emissions remain below their 2005 level through 2035 Howard Gruenspecht May 30, 2012 3 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 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 Howard Gruenspecht May 30, 2012 4 Energy use grows slowly over the projection in response to a slow and extended economic recovery and improving energy efficiency U.S. primary energy consumption quadrillion Btu per year Shares of total U.S. energy History 2010 120 Projections Renewables (excluding liquid biofuels) 7% 100 11% 4% 1% Liquid biofuels Natural gas 80 25% 60 9% Nuclear 9% 21% Coal 20% 37% Oil and other liquids 32% 40 20 0 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 25% 2035 Source: EIA, Annual Energy Outlook 2012 Early Release Howard Gruenspecht May 30, 2012 5 Energy and CO2 per dollar of GDP continue to decline; per-capita energy use also declines index, 2005=1 History 1.75 2010 Projections 1.50 Per dollar Per capita 1.25 CO2 per GDP 1.00 0.75 0.50 0.25 0.00 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 Source: EIA, Annual Energy Outlook 2012 Early Release Howard Gruenspecht May 30, 2012 6 In the AEO2012 Reference case, energy-related CO2 emissions never get back to pre-recession levels by 2035 billion metric tons carbon dioxide History 7 2005 2010 Projections 6 5 Energy-related CO2 emissions 4 3 Energy-related CO2 emissions 2 % change from 2005 2005 2020 2035 6.00 5.55 5.81 -- -7.5% -3.2% 1 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 Source: EIA, Annual Energy Outlook 2012 Early Release Howard Gruenspecht May 30, 2012 7 Electricity Howard Gruenspecht May 30, 2012 8 In 2010, U.S. electricity generation was 70% fossil fuels, 20% nuclear, and 10% renewable 2010 Total net generation: 4,120 billion kWh Other gases 0.3% Nuclear 19.6% 2010 Non-hydro renewable net generation: 168 billion kWh Conventional hydroelectric 6.2% Other 0.3% Natural gas 23.8% Other renewable 4.1% Wind: 2.3% Solar thermal and PV: <0.1% Wood and woodderived fuels: 0.9% Petroleum 0.9% Coal 44.9% Geothermal: 0.4% Other biomass: 0.5% Source: EIA, Annual Energy Review, October 2011 Howard Gruenspecht May 30, 2012 9 The fuel mix for electricity generation varies widely across U.S. regions (2010) Share of Generation by Fuel, 2010 National Average Minimum Maximum Coal 45% 0% 80% Natural Gas 24% 3% 85% Nuclear 20% 0% 40% Renewables 10% 0% 50% Oil / Other 1% 0% 8% Source: EIA AEO2012 (Early Release), based on Form EIA-923 Howard Gruenspecht May 30, 2012 10 While electricity consumption grows by 23% over the projection, the annual rate of growth slows percent growth (3-year rolling average) History 2010 14 12 10 Period Annual Growth 1950s 9.8 1960s 7.3 1970s 4.7 1980s 2.9 1990s 2.4 2000-2010 1.0 2010-2035 0.8 8 Projections 6 4 2 0 1950 1960 1970 1980 1990 2000 2010 2020 2030 Source: EIA, Annual Energy Outlook 2012 Early Release Howard Gruenspecht May 30, 2012 11 Electricity mix gradually shifts to lower-carbon options, led by growth in renewables and natural gas electricity net generation trillion kilowatthours per year History 6 Projections 2010 5 27% Natural gas 4 24% 3 10% Renewables 16% Coal 39% Nuclear 18% 2 45% 1 Oil and other liquids 0 1990 1995 2000 2005 20% 1% 2010 2015 2020 2025 2030 1% 2035 Source: EIA, Annual Energy Outlook 2012 Early Release Howard Gruenspecht May 30, 2012 12 Non-hydro renewable sources more than double between 2010 and 2035 non-hydropower renewable generation billion kilowatthours per year History 500 2010 Projections 400 Advanced biofuels cogeneration Biomass 300 Power sector Industrial CHP 200 Wind 100 0 1990 Solar Geothermal Waste 1995 2000 2005 2010 2015 2020 2025 2030 2035 Source: EIA, Annual Energy Outlook 2012 Early Release Howard Gruenspecht May 30, 2012 13 The average delivered price of coal to electricity generators varies widely across U.S. regions – transport costs are a key reason 2010 Delivered coal prices, $ per million Btu $3.41 $2.02 $2.96 $2.01 N/A $1.51 $1.49 N/A $2.48 $1.57 $1.46 $2.91 $1.75 1.77 $2.45 $1.93 $1.83 National Average Minimum Maximum $2.25 $1.46 $4.46 $3.65 $1.83 $3.40 $1.91 $4.46 Source: EIA, Annual Energy Outlook 2012 Early Release Howard Gruenspecht May 30, 2012 14 Operating costs: existing plants with and without a value on carbon Fuel Cost for Existing Coal and Combined Cycle Natural Gas Units with a Value Placed on Carbon Dioxide Emissions • The “crossover point” for least-cost dispatch of coal and natural gas capacity depends on both fuel prices and the carbon value. At lower natural gas prices, the “crossover” occurs at a lower carbon value. • Environmental operating costs and retrofit costs for pollution controls at existing coal-fired plants can “raise the bar” for their continued operation. – For retrofit decisions, the unit’s perceived “useful life,” which plays a critical role, can be affected by views regarding future climate policies 2010 dollars per megawatthour 160 Coal at $3 140 Coal at $2 120 100 80 Natural Gas CC at $7 60 Natural Gas CC at $4 40 Natural Gas CC at $3 20 0 0 10 20 30 40 50 60 70 80 90 100 110 120 Carbon Dioxide Value (dollars per ton CO2) Howard Gruenspecht May 30, 2012 15 Examples of updated environmental retrofit costs Flue Gas Desulfurization (2010$/kW) Selective Catalytic Reduction (2010 $/kW) Capital Costs ($/kW) $602 $521 $474 Capital Costs ($/kW) $203 $185 $177 300 MW 500 MW 700 MW VOM ($/MWh) 300 MW 500 MW 700 MW $1.72 VOM ($/MWh) $1.30 Dry Sorbent Injection + Full Fabric Filter (Baghouse) (2010$/kW) Size (MW) 300 500 700 Capital Cost ($/kW) 197 180 171 VOM ($/MWh) 6.72 Source: EPA IPM v4.1 Documentation http://www.epa.gov/airmarkets/progsregs/epa-ipm/docs/suppdoc.pdf http://www.epa.gov/airmarkt/progsregs/epa-ipm/docs/v410/Chapter5.pdf Howard Gruenspecht May 30, 2012 16 Natural Gas Howard Gruenspecht May 30, 2012 17 Underground sources of natural gas Source: modified from U.S. Geological Survey Fact Sheet 0113-01 Howard Gruenspecht May 30, 2012 18 Shale gas plays, Lower 48 States Source: Energy Information Administration based on data from various published studies. Howard Gruenspecht May 30, 2012 19 Since January 2007, U.S. shale gas production has increased over 7-fold and in 2011 comprised over 30 percent of total U.S. dry production monthly shale gas production (dry) billion cubic feet per day 30 Rest of US 25 Bakken (ND) Eagle Ford (TX) 20 Marcellus (PA and WV) Haynesville (LA and TX) 15 10 Woodford (OK) Fayetteville (AR) Barnett (TX) Antrim (MI, IN, and OH) 5 0 1/1/2007 1/1/2008 1/1/2009 1/1/2010 1/1/2011 1/1/2012 Sources: Lippman Consulting, Inc. gross withdrawal estimates as of March 2012 and converted to dry production estimates with EIA-calculated average gross-to-dry shrinkage factors by state and/or shale play. Howard Gruenspecht May 30, 2012 20 Howard Gruenspecht May 30, 2012 21 Natural gas consumption is quite dispersed; electric power and industrial use drives much of the future demand growth U.S. dry gas consumption trillion cubic feet per year History 30 Projections 25 34% Electric power 32% Industrial* 13% 3% 13% 3% Commercial Transportation** 21% 18% Residential 31% 20 15 33% 10 5 0 2005 2010 2020 2030 2035 *Includes combined heat-and-power and lease and plant fuel. **Includes pipeline fuel. Source: EIA, Annual Energy Outlook 2012 Early Release Howard Gruenspecht May 30, 2012 22 Shale gas offsets declines in other U.S. natural gas production sources U.S. dry gas production trillion cubic feet per year History 30 Projections 2010 25 20 23% 15 26% 9% 10 2% 5 0 1990 1995 2000 2005 49% Shale gas Tight gas 21% 9% 10% Non-associated offshore Coalbed methane Associated with oil 21% Non-associated onshore 2010 2015 2020 Alaska 2025 2030 1% 7% 7% 7% 9% 2035 Source: EIA, Annual Energy Outlook 2012 Early Release Howard Gruenspecht May 30, 2012 23 Petroleum Howard Gruenspecht May 30, 2012 24 U.S. dependence on imported petroleum continues to decline U.S. liquid fuel supply million barrels per day History Projections 2010 25 2005 20 Consumption 36% 15 Net petroleum imports 10 60% 49% Domestic supply 5 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 Source: EIA, Annual Energy Outlook 2012 Early Release Howard Gruenspecht May 30, 2012 25 U.S. imports of liquid fuels continue to decline due to increased production of gas liquids and biofuels and greater fuel efficiency U.S. liquid fuels supply million barrels per day 25 History 2010 5% Projections Biofuels including imports 20 12% 10% 15 36% Natural gas plant liquids 1% Liquids from coal Petroleum production 36% Net petroleum imports 36% 10 5 49% 14% 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 Source: EIA, Annual Energy Outlook 2012 Early Release Howard Gruenspecht May 30, 2012 26 Efficiency improvements mostly offset underlying drivers of growth in transportation services Growth 2010 2035 (2010-2035) Light duty vehicles Fuel consumption (million barrels per day oil equivalent) 8.6 8.8 2% Number of licensed drivers (millions) 209 265 27% 12,700 13,600 7% Efficiency of vehicle stock (mpg) Heavy duty vehicles Fuel consumption (million barrels per day oil equivalent) 20.4 27.8 36%* 2.4 2.8 18% Manufacturing output (billion 2005 dollars) 4,260 6,270 47% 9.3 13.4 44% 25,300 25,700 1.3% 6.7 8.2 23%** Miles per licensed driver Number of freight trucks (millions) Miles per vehicle Efficiency of vehicle stock (mpg) * Equal to a 27% reduction in fuel use per mile. ** Equal to an 19% reduction in fuel use per mile. Source: EIA, Annual Energy Outlook 2012 Early Release Howard Gruenspecht May 30, 2012 27 Probability of WTI crude oil exceeding different price levels by September 2012 100% 90% 5/18/2012 80% 4/18/2012 70% 60% 50% 40% 30% 20% 10% 0% $60 $70 $80 $90 $100 $110 $120 $130 $140 $150 Price (dollars per barrel) Note: All prices represent rolling 5-day averages. Source: U.S. Energy Information Administration, Chicago Mercantile Exchange (CME) Howard Gruenspecht May 30, 2012 28 What makes up the price at the pump? Source: U.S. Energy Information Administration Howard Gruenspecht May 30, 2012 29 Gasoline prices vary regionally Source: U.S. Energy Information Administration Howard Gruenspecht May 30, 2012 30 Probability of U.S. retail gasoline exceeding different price levels by September 2012 100% 90% 5/18/2012 80% 4/18/2012 70% 60% 50% 40% 30% 20% 10% 0% $2.50 $3.00 $3.50 $4.00 $4.50 $5.00 Price (dollars per gallon) Note: All prices represent rolling 5-day averages. Source: U.S. Energy Information Administration, Chicago Mercantile Exchange (CME) Howard Gruenspecht May 30, 2012 31