Comparison with Other Projections
Only Global Insights, Inc. (GII) produces a comprehensive energy projection with a time horizon similar to that of AEO2008. Other organizations, however, address one or more aspects of the U.S. energy market. The most recent projection from GII, as well as others that concentrate on economic growth, international oil prices, energy consumption, electricity, natural gas, petroleum, and coal, are compared here with the AEO2008 projections.
Economic Growth
Projections of the average annual GDP growth rate for the United States from 2006 through 2010 range from 2.4 percent to 2.8 percent (Table 7). GDP grows at an annual rate of 2.4 percent in the AEO2008 reference case over the period, significantly lower than the projections made by the Office of Management and Budget (OMB), the Congressional Budget Office (CBO), the Interindustry Forecasting Project at the University of Maryland (INFORUM), the Social Security Administration (SSA), and Energy Ventures Analysis, Inc. (EVA). The AEO2008 projection is slightly lower than the projections by the International Energy Agency (IEA) and GII. The consensus Blue Chip projection is for 2.5-percent average annual growth from 2006 to 2010.
The range of GDP growth rates is wider for the period from 2010 to 2015, with projections ranging from 2.3 to 2.9 percent per year. The average annual GDP growth of 2.7 percent in the AEO2008 reference case from 2010 to 2015 is around the middle of the range. The Blue Chip consensus projection is 2.9 percent, CBO projects 2.8 percent, and EVA projects 2.7 percent for the annual rate of GDP growth from 2010 to 2015. The GII, INFORUM, SSA, and IEA projections all are below the AEO2008 reference case projection. There are few public or private projections of GDP growth rates for the United States that extend to 2030. The AEO2008 reference case reflects a GDP growth rate after 2015 that is consistent with the trend in expected labor force and productivity growth.
World Oil Prices
Comparisons of the AEO2008 cases with other oil price projections are shown in Table 8. In the AEO2008 reference case, world oil prices fall from current levels through 2016 and then gradually rise to about $70 in real terms (2006 dollars). Given current prices, this pattern of falling and then rising oil prices is seen in all the long-term projections, with the exception of GII’s, which consistently declines. The world oil price measures are, by and large, comparable across projections. EIA reports the price of imported low-sulfur, light crude oil, approximately the same as the West Texas Intermediate (WTI) prices that are widely cited as a proxy for world oil prices in the trade press. The only series that does not report projections in WTI terms is IEA’s World Energy Outlook 2007, where prices are expressed as the IEA crude oil import price.
Recent volatility in crude oil prices demonstrates the uncertainty inherent in the projections. GII and Deutsche Bank AG (DB) define the range of crude oil price projections for 2030, from a low of about $46 per barrel (GII) to a high of $80 per barrel (DB). The AEO2008 reference case projects a world oil price of about $70 per barrel in 2030.
Total Energy Consumption
The AEO2008 reference case projects growth in end-use consumption of natural gas and coal, in contrast to the decline that occurred from 1980 to 2006 (Table 9). Natural gas consumption increases in the residential, commercial, and industrial sectors, despite relatively high prices. Natural gas is cleaner than other fuels, does not require on-site storage, and has tended to be priced competitively with oil for heating. Coal consumption as a boiler fuel in the commercial and industrial sectors declines slightly, with potential use in new boilers limited by environmental restrictions; however, the projections for industrial coal consumption include its use in CTL plants, a technology that becomes competitive at the level of oil prices in the AEO2008 reference case.
The projected growth in consumption of liquids, including ethanol blends and biodiesel, from 2006 to 2030 is about one-half the average from 1980 to 2006. Transportation is the only sector for which liquids consumption grows significantly, offsetting a moderate decline in the industrial sector. Continued growth in fuel use for transportation is expected despite high prices and newly tightened fuel economy standards. With economic growth, an increasing population, and rising per capita income, demand for personal and freight travel increases. Although the average fuel efficiency of vehicles and airplanes continues to improve, the changes under currently enacted laws and regulations are insufficient to offset the projected increase in transportation demand.
Growth in electricity use continues in the AEO2008 reference case, but the pace slows to one-half the historical rate. Some rapidly growing applications, such as air conditioning and computers, slow as penetration approaches saturation levels. Electrical efficiency also continues to improve, due in large part to efficiency standards, and the impacts tend to accumulate with the gradual turnover of appliance stocks.
The AEO2008 reference case includes higher growth in primary and delivered energy from 2006 to 2030 than is shown in the outlook from GII. GII projects little growth in end-use natural gas consumption, whereas the AEO2008 reference case projects continued growth in the industrial and buildings sectors (see Table 11). GII’s projected growth rates for liquids consumption are somewhat higher than those in the AEO2008 reference case, which includes the impacts of EISA2007 on vehicle fuel economy (see Table 12). Differences between the AEO2008 reference case and the GII projections for end-use coal consumption result from a projected increase in coal use for CTL in the AEO2008 reference case (see Table 13).
Electricity
Table 10 provides a summary of the results from the AEO2008 cases and compares them with other projections. Electricity sales in 2015 range from a low of 4,059 billion kilowatthours in the AEO2008 reference case to a high of 4,319 billion kilowatthours in the EVA projection. EVA shows higher sales in the commercial and residential sectors and somewhat less growth in industrial sales than do the AEO2008 reference case and GII. The projections for total electricity sales in 2030 are about the same (4,705 billion kilowatthours) in the AEO2008 reference case and GII, which are the only projections available that include 2030. The annual rate of demand growth in both projections is about 1.1 percent per year from 2006 to 2030. In 2030, GII includes lower growth in the commercial sector and higher growth in the residential and industrial sectors compared with the AEO2008 reference case.
The AEO2008 reference case shows a decline in real electricity prices early in the projection period and then rising prices at the end of the period because of increases in the cost of fuels used for generation and increases in capital expenditures for construction of new capacity. The higher fossil fuel prices and capital expenditures in the AEO2008 reference case result in an increase in the average electricity price, from 8.5 cents per kilowatthour in 2015 to 8.8 cents per kilowatthour in 2030. GII shows slightly declining prices over the projection period.
Total generation and imports of electricity in 2015 are similar in the AEO2008 reference case, EVA, and GII. In contrast, the IEA projection for electricity generation in its World Energy Outlook 2007 is higher than the other projections. Generation in the IEA projection for the United States (which exclude imports of electricity) are higher than in any of the AEO2008 cases. Consistent with higher total electricity generation, the IEA projection includes higher levels of generation from fossil and renewable technologies in 2030 than do the AEO2008 cases. The requirements for generating capacity are driven by growth in electricity sales and the need to replace existing units that are uneconomical or are being retired for other reasons. Consistent with its projections of electricity sales, EVA shows higher growth in fossil-based generating capacity through 2015 compared with the AEO2008 reference case and GII; however, EVA projects considerably less renewable capacity in 2015 than do AEO2008 and GII.
Renewable generating capacity in 2030 is higher in the GII projection than in the AEO2008 reference case. Nuclear capacity in 2030 is 115 gigawatts in both AEO2008 and GII, as a result of the incentives included in EPACT2005. The AEO2008 reference case includes 2.7 gigawatts of uprates for nuclear capacity and 4.5 gigawatts of nuclear plant retirements by 2030 as their operating licenses expire. Environmental regulations are important determinants in the selection of the technologies used for electricity generation. In addition to existing environmental program requirements for electric utilities, EVA assumes that new, stricter national emissions limits will be adopted for emissions of SO2 and NOx by 2015. EVA also includes an escalating penalty on CO2 emissions, starting at $6 per ton in 2013.
The AEO2008 cases include the impact of the EPA’s CAIR regulation [90]. Because AEO2008 includes only current laws and regulations, however, it does not assume any tax on CO2 emissions. Restrictions on CO2 emissions could change the mix of technologies used to generate electricity.
Natural Gas
In the AEO2008 reference case, total natural gas consumption increases through 2016 and then declines through 2030 as higher natural gas prices cause natural gas to lose market share to coal for electricity generation. With the exception of the Altos and Strategic Energy and Economic Research, Inc. (SEER) projections, all the other projections show total natural gas consumption increasing throughout the projection period (Table 11). Altos shows a slight decline in natural gas consumption after 2025, and SEER shows almost the same level of natural gas consumption in 2025 and 2030.
The AEO2008 reference case projects the lowest level of natural gas consumption in 2030, followed by GII (about 1.0 trillion cubic feet more than in the AEO2008 reference case). The Altos projection includes the highest growth rate for natural gas consumption, reaching 31.4 trillion cubic feet in 2030 (8.7 trillion cubic feet more than in the AEO2008 reference case). The DB and SEER projections show natural gas consumption in 2030 exceeding the AEO2008 reference case projection by 1.8 and 2.6 trillion cubic feet, respectively. Although GII projects lower natural gas consumption in 2030 in the residential and commercial sectors than is projected in the AEO2008 reference case, natural gas consumption for electricity generation in the GII projection is much greater, resulting in higher aggregate natural gas demand than in the AEO2008 reference case, highlighting a fundamental difference between the AEO2008 reference case and GII projections. This difference can also be seen in a comparison of the AEO2008 reference case with the Altos and SEER projections.
Natural gas consumption in the electricity generation sector grows from 2006 to 2015 in all the projections. (DB does not include projections by sector.) Growth in natural gas consumption in the electricity generation sector is projected to continue through 2025 in the EVA and Altos projections. The AEO2008 reference case shows the lowest level of natural gas consumption for electric power in 2025, at 5.3 trillion cubic feet, followed by GII at 6.9 trillion cubic feet.
All the projections show a decline in natural gas consumption in the electric power sector between 2025 and 2030, with the largest decline in the Altos projection (0.8 trillion cubic feet). Despite the large decline in natural gas consumption in the power sector in the Altos projection, it remains the most optimistic, with 2030 consumption projected to be 13.6 trillion cubic feet—almost three times higher than that in the AEO2008 reference case. The SEER and GII projections for natural gas consumption in the electric power sector in 2030 are higher than the AEO2008 reference case projection by 2.0 trillion cubic feet and 1.8 trillion cubic feet, respectively.
Each of the projections—with the exception of GII, which expects a slight decline between 2015 and 2030—shows steady growth in natural gas consumption in the combined residential and commercial sectors. Altos projects the highest level of natural gas consumption in the residential and commercial sectors in 2030 (9.3 trillion cubic feet), followed by SEER (9.0 trillion cubic feet) and the AEO2008 reference case (8.8 trillion cubic feet). Each of the projections shows an increase in natural gas consumption in the industrial sector between 2006 and 2015. That growth is projected to continue through 2025 in each of the projections except for the AEO2008 reference case. The AEO2008 projection shows a decline in industrial sector natural gas consumption between 2025 and 2030, whereas the other projections show increases.
Domestic natural gas production increases through 2015 in each of the projections, with Altos showing the highest production level in 2015, at 21.9 trillion cubic feet. The AEO2008 reference case and GII show domestic natural gas production continuing to increase through 2025, whereas DB, SEER, and Altos show production declines over the same period. For example, DB shows domestic natural gas production declining by 3.0 trillion cubic feet from 2015 to 2025. All the projections show a decline in production from 2025 to 2030, with DB projecting the lowest level of production in 2030 (3.0 trillion cubic feet lower than in the AEO2008 reference case). The AEO2008 reference case shows domestic natural gas production of 19.4 trillion cubic feet in 2030—the highest of all the projections.
Net imports of natural gas are projected to increase between 2006 and 2015 in each of the projections. EVA projects the highest level of net imports at 7.8 trillion cubic feet, followed by Altos at 6.8 trillion cubic feet. The AEO2008 reference case shows a drop in net imports between 2015 and 2030. Each of the other projections shows net imports increasing steadily from 2006 to 2030 (Altos expects an increase of 12.1 trillion cubic feet over the period). In addition, all the projections show the increases in net imports coming primarily from LNG. Altos projects LNG net import levels in 2030 that are more than four times higher than in the AEO2008 reference case, at 12.6 trillion cubic feet. The projections have LNG imports accounting for between 13 and 40 percent of consumption in 2030.
Given that the average wellhead price for natural gas in 2006 was $6.42 per thousand cubic feet, each of the projections shows a decline in natural gas prices between 2006 and 2015, except GII, DB, and SEER. The AEO2008 reference case projects the lowest average wellhead prices in 2015, at $5.36 per thousand cubic feet. EVA’s natural gas price projection for 2025 is lower than that in the AEO2008 reference case, by about $0.46 per thousand cubic feet. DB consistently projects relatively high average wellhead prices between 2006 and 2030. Among the other projections, only GII and SEER project an average natural gas wellhead price below that in the AEO2008 reference case in 2030. In the GII and SEER projections, natural gas wellhead prices in 2030 are below the AEO2008 reference case projection by $0.15 and $0.13 per thousand cubic feet, respectively, and wellhead prices in the DB and Altos projections exceed the AEO2008 reference case projection by $1.12 and $0.82 per thousand cubic feet, respectively.
The price margins for delivered natural gas can vary significantly from year to year. In 2006, margins in the residential, commercial, industrial, and transportation sectors were notably higher than the historical average, and margins in the electricity generation sector were somewhat lower than the historical average. Starting from a level more representative of the historical average, margins in the electricity generation and industrial sectors generally decline in the AEO2008 reference case. In contrast, margins in the residential and commercial sectors increase, because the fixed costs are spread over lower per-customer volumes as consumption is reduced by efficiency improvements.
End-use prices in the GII and SEER projections imply declining margins in all sectors, with the exception of the residential and electricity generation sectors in the SEER projection, which increase from 2025 to 2030. As a result, the GII and SEER margins in the residential and commercial sectors are lower than those in the AEO2008 reference case projection by between $1.20 and $2.20 per thousand cubic feet in 2030. The industrial margin in the GII projection remains appreciably higher throughout the projection period, whereas the industrial margin in the SEER projection is between $0.83 and $0.90 per thousand cubic feet lower than the margins in the AEO2008 reference case projection from 2015 to 2030. In fact, the SEER industrial margins appear to be only a few pennies in all years.
Petroleum
In the DB projection, real crude oil prices increase from $57 per barrel in 2010 to $80 per barrel in 2030. In the AEO2008 reference case, real prices decline from current levels to a low of $57 per barrel in 2016 before recovering to $70 per barrel in 2030 (Table 8).
Despite the higher crude oil prices in 2030, the import share of product supplied is much higher in the DB projection than in the AEO2008 reference case (74 percent and 54 percent, respectively). Although this may seem counterintuitive given the relative price projections, it makes sense in terms of the projections for domestic crude oil production. In the DB projection, U.S. crude oil production declines sharply after 2015, to 4.8 million barrels per day in 2030 (as compared with 7.2 million barrels per day in 2030 in the AEO2008 reference case) (Table 12). In fact, U.S. crude oil production is lower in all the other projections than in the AEO2008 reference case.
It is clear that expectations about U.S. crude oil production potential are among the main factors accounting for the differences between the AEO2008 reference case and the other projections. In addition, unlike the DB analysis, the AEO2008 reference case incorporates the effects of the new RFS mandate under EISA2007, which was signed into law in December 2007. With the new RFS mandate, biofuel consumption is projected to increase significantly through 2022, with more than 23 billion gallons of ethanol and almost 4 billion gallons of biomass-based diesel consumed in 2030, which would displace a significant amount of fossil fuel use in the transportation sector and, thereby, further reduce imports.
GII’s long-term projections for the crude oil price in 2025 ($48 per barrel) and 2030 ($46 per barrel) are much lower than those in the AEO2008 reference case (see Table 8). The GII projection for import share of product supplied is therefore higher than the AEO2008 reference case projection.
In contrast with crude oil production, projections for NGL production are similar (remaining relatively constant) in the EVA, GII, and AEO2008 reference case projections through 2030. The exception is DB, which projects a 26-percent decrease in domestic NGL production from 2015 to 2030.
Based on expectations of continued economic growth, all the petroleum projections show continued growth in product demand; however, growth in demand for individual petroleum products varies considerably. In particular, motor gasoline demand, which in the DB projections increases to 11.2 million barrels per day in 2030, is much lower in the GII and AEO2008 reference case projections. Motor gasoline demand declines over time in the GII and AEO2008 reference case projections (although it increases slightly from 2025 to 2030 in the AEO2008 reference case). The GII projection includes a substantial increase in ethanol use (not shown in the Table 12) stemming from new, unspecified motor fuel policies, with ethanol making up more than 30 percent of total U.S. motor gasoline sales in 2030. A 30-percent share is in excess of even the new RFS mandate incorporated in AEO2008.
Looking at other petroleum products, the GII projections for jet fuel and distillate demand are higher than those in the DB and AEO2008 reference case projections. The most likely explanation is that, although long-term GDP growth rates are similar in the GII and AEO2008 projections, the long-term cost of crude oil, as noted above, is much lower in the GII projection, leading to cheaper refined products and therefore higher demand. Finally, among the outside projections, IEA projects the lowest level of U.S. petroleum demand in 2030—probably as a result of IEA’s assumption of slower U.S. economic growth. Further, although IEA’s projection for U.S. petroleum demand in 2030 (23.9 million barrels per day) is higher than in the AEO2008 reference case (22.8 million barrels per day), it would in fact be about 1 million barrels per day lower if AEO2008 had not included the EISA2007 RFS mandate.
Coal
Coal production, trade, and price projections vary considerably across the three projections shown in Table 13. The coal projection in the AEO2008 reference case reflects existing environmental laws that regulate SO2, NOx, and mercury emissions. The AEO2008 reference case projections for coal consumption, production, and imports are generally higher than the projections from other sources. All the projections show increases in total coal consumption over their projection periods. In the AEO2008 reference case, total coal consumption grows by an average of 1.1 percent annually from 2006 to 2015, to 1,225 million tons in 2015. Although the reference case projection is 82 million tons higher than the corresponding projection from GII, it is similar to the EVA projection for total coal consumption in 2015. For 2025, both EVA and GII project lower levels of total coal consumption than the AEO2008 reference case (8 percent and 20 percent lower, respectively). For 2030, GII projects total coal consumption of 1,175 million tons, 370 million tons less than in the AEO2008 reference case.
Coal use in the electricity sector accounts for a large percentage of total coal consumption in all years across all the projections. Relative to the AEO2008 reference case, both EVA and GII project slower growth in coal consumption for the electric power sector over the entire projection period. EVA projects total coal consumption in the electricity sector of 1,224 million tons in 2025, 79 million tons less than in the AEO2008 reference case. The GII projection for coal consumption in the electric power sector is 1,088 million tons in 2030, 313 million tons less than in the AEO2008 reference case.
The AEO2008 reference case includes the introduction of CTL production before 2015, with coal use at CTL plants increasing to 64 million tons (4 percent of total coal consumption) in 2030. Projections for CTL production from the other organizations are not available for comparison [91]. The AEO2008 reference case, GII, and EVA projections show relatively constant coal consumption levels both at coke plants and in the other industrial/ buildings sector. The EVA projections do not extend to 2030. GII shows 21 million tons of coal consumption at coke plants and 66 million tons in the other industrial/buildings sector in 2030, both somewhat higher than in the AEO2008 reference case (18 and 62 million tons, respectively).
In the AEO2008 reference case, minemouth coal prices are generally flat over the projection period. EVA projects an increase to $26.49 in 2025, the highest among the projections compared, whereas the AEO2008 reference case projection for 2025 is $22.75 per ton. In GII’s projection, the minemouth coal price falls to $18.42 per ton in 2030. GII also projects a decline in delivered coal prices to the electric power sector through 2030, from $31.92 per ton in 2015 to $30.42 per ton in 2030—$4.61 per ton less than in the AEO2008 reference case.
In the AEO2008 and EVA projections, domestic coal production increases to meet rising demand. Production grows most rapidly in the AEO2008 reference case, averaging 0.9 percent per year from 2006 to 2030. The EVA projection through 2025 closely resembles that in the AEO2008 reference case, and the GII projection is significantly lower. In the GII projection, coal production totals 1,168 million tons in 2030, 20 percent less than in the AEO2008 reference case (1,455 million tons).
U.S. coal exports represent a small percentage of domestic coal production in all the projections. Coal exports decline to less than 35 million tons in 2030 in the AEO2008 reference case and GII projections, and the United States is represented as a net importer of coal after 2015 in all the projections. In the EVA projection, U.S. coal imports increase to 45 million tons in 2025, and exports are 43 million tons in 2025. In the AEO2008 reference case, U.S. coal imports in 2015, 2025, and 2030 are higher than in the other projections.
Comparison with Other Projections Notes |
