Electricity Generation

Total electricity consumption in the AEO2013 Reference case, including both purchases from electric power producers and on-site generation, grows from 3,841 billion kilowatthours in 2011 to 4,930 billion kilowatthours in 2040, an average annual rate of 0.9 percent—about the same rate as in the AEO2012 Reference case through 2035.

The combination of slow growth in electricity demand, competitively priced natural gas, programs encouraging renewable fuel use, and the implementation of new environmental rules dampens future coal use. The AEO2013 Reference case assumes implementation of the CAIR as a result of an August 2012 federal court decision to vacate the CSAPR. The lower natural gas prices in the early years of the AEO2013 Reference case result in switching from coal to natural gas-fired generation, more than offsetting any increase in coal-fired generation that might have occurred in the absence of CSAPR. AEO2013 continues to model the implementation of the Mercury and Air Toxics Standards (MATS), although the implementation date is assumed to move from 2015 to 2016 due to the large number of plants requesting extensions to comply. Once MATS is in place, SO₂ levels are reduced to well below the levels resulting from either CAIR or CSAPR.

figure dataCoal remains the largest energy source for electricity generation throughout the projection period, but its share of total generation declines from 42 percent in 2011 to 35 percent in 2040 (Figure 12). Market concerns about GHG emissions continue to dampen the expansion of coal-fired capacity in the AEO2013 Reference case, even under current laws and policies. Low projected fuel prices for new natural gas-fired plants also affect the relative economics of coal-fired capacity, as does the continued rise in falls from 318 gigawatts in 2011 to 278 gigawatts in 2040 in the AEO2013 Reference case.

Electricity generation using natural gas is higher in the AEO2013 Reference case than was projected in the AEO2012 Reference case because of lower projected natural gas prices. New natural gas-fired plants also are much cheaper to build than new renewable or nuclear plants. In 2016, the year that MATS is assumed to be implemented and coal-fired generation hits its lowest point, natural gas-fired generation in AEO2013 is 10 percent higher than in AEO2012 (and in 2035 it is still 9 percent higher).

Electricity generation from nuclear power plants grows by 14 percent in the AEO2013 Reference case, from 790 billion kilowatthours in 2011 to 903 billion kilowatthours in 2040, accounting for about 17 percent of total generation in 2040 (compared with 19 percent in 2011). Nuclear generating capacity increases from 101 gigawatts in 2011 to a high of 114 gigawatts in 2025 through a combination of new construction (5.5 gigawatts), uprates at existing plants (8.0 gigawatts), and retirements (0.6 gigawatts). After 2025, retirements outpace additions, resulting in a slight decline to 113 gigawatts in 2040. AEO2013 incorporates the latest information about planned nuclear plant construction and continues to use the updated estimate of the potential for capacity uprates at existing units developed for AEO2012. About 7 gigawatts of existing nuclear capacity is retired, primarily after 2030, because not all owners of existing nuclear capacity are expected to apply for and receive license renewals to operate their plants beyond 60 years.

Increased generation from renewable energy, excluding hydropower, accounts for 32 percent of the overall growth in electricity generation from 2011 to 2040. Generation from renewable resources grows in response to federal tax credits, state-level policies, and federal requirements to use more biomass-based transportation fuels, some of which can produce electricity as a byproduct of their production process. Capital costs for new technologies were updated for AEO2013, resulting in fairly significant initial cost reductions for wind (13 percent) and solar PV (22 percent) relative to AEO2012. Reported renewable capacity already under construction has increased in recent years and is represented in AEO2013. Growth in renewable generation is supported by many state requirements, as well as new regulations on CO₂ emissions in California. The share of U.S. electricity generation coming from renewable fuels (including conventional hydropower) grows from 13 percent in 2011 to 16 percent in 2040. In the AEO2013 Reference case, federal subsidies for renewable generation are assumed to expire as enacted. Extensions of such subsidies could have a large impact on renewable generation. The long-run projections for renewable capacity are also sensitive to natural gas prices and the relative costs of alternative generation sources.