Comparison With Other Projections
Only IHS Global Insights, Inc. (IHSGI) produces a comprehensive energy
projection with a time horizon similar to that of AEO2010. Other organizations,
however, address one or more aspects of the U.S. energy market. The most
recent projection from IHSGI, 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 AEO2010 projections.
Economic growth
Projections of the average annual growth rate of real GDP in the United
States from 2008 to 2018 range from 2.1 percent to 2.8 percent (Table 9).
In the AEO2010 Reference case, real GDP grows by an average of 2.2 percent
per year over the period, lower than projected by the Office of Management
and Budget (OMB), the Congressional Budget Office (CBO), the Social Security
Administration (SSA), and the Bureau of Labor Statistics (BLS)although
none of those projections has been updated since August 2009. The AEO2010 projection is similar to the IHSGI projection and slightly higher than
projections by the Interindustry Forecasting Project at the University
of Maryland (INFORUM). In March 2009, the consensus Blue Chip projection
was for 2.2-percent average annual growth from 2008 to 2018.
The range of GDP growth rates is wider for the recovery period from 2018
to 2030, with projections ranging from 2.2 to 2.7 percent per year. Uncertainty
about the timing and speed of recovery from the current recession contributes
to the wide range of projections over the 2018-2030 period. The 2.7-percent
average annual GDP growth rate in the AEO2010 Reference case from 2018
to 2030 is on the higher side of the estimates but similar to the IHSGI
projection. SSA, the International Energy Agency (IEA), and INFORUM project
lower growth, as a result of their lower projections for labor productivity. AEO2010 projects productivity increases averaging 2.1 percent per year
from 2018 to 2030, as compared with the SSA and INFORUM projections of
1.7 and 1.6 percent per year, respectively, over the same period.
There are few public or private projections of GDP growth for the United
States that extend to 2035. The AEO2010 Reference case projects 2.4-percent
average annual GDP growth, consistent with the trends in labor force and
productivity growth. IHSGI projects GDP growth averaging 2.5 percent per
year from 2008 to 2035, and INFORUM projects an average of 2.3 percent
from 2008 to 2030 (the last year of the INFORUM projection). Both AEO2010 and IHSGI project higher growth rates for productivity and labor force
growth than does INFORUM.
World oil prices
In the AEO2010 Reference case, world oil prices rise from current levels
to approximately $95 per barrel in 2015 and $108 per barrel in 2020 (Table
10). After 2020, prices increase slowly to $133 per barrel in 2035. The
price trend is slightly lower than in last years (AEO2009) Reference case.
Market volatility and different assumptions about the future of the world
economy are reflected in the range of price projections for both the short
and long term. Most of the projections show prices rising throughout the
entire period. The projections for world oil prices in 2030 range from
$65 per barrel to $124 per barrel. The range of the other projections is
encompassed in the range of the AEO2010 Low and High Oil Price cases: from
$52 per barrel to $204 per barrel in 2030 and from $51 per barrel to $210
per barrel in 2035.
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. Deutsche Bank (DB),
IHSGI, Energy Ventures Analysis, Inc. (EVA), and Strategic Energy & Economic
Research, Inc. (SEER) report prices in WTI terms. IEAs World Energy Outlook
2009 expresses prices as the IEA crude oil import price; INFORUM expresses
prices as the average U.S. imported refiner acquisition cost of crude oil.
Total energy consumption
Two of the projections, IHSGI and INFORUM, feature energy consumption by
sector (although the INFORUM projection does not include data for 2008
and does not extend to 2035). Energy prices in the IHSGI projection are
lower than those in the AEO2010 Reference case. Prices in the INFORUM projections
for crude oil, natural gas, and coal also are higher than in AEO2010, but
electricity prices in the end-use sectors are at the same level (industrial
and commercial) or lower (residential) than in the AEO2010 Reference case.
Both IHSGI and INFORUM project slower growth in energy consumption than
in the AEO2010 Reference case (Table 11).
Neither IHSGI nor INFORUM projects the introduction of Fischer-Tropsch
fuels, nor do they include an accounting for the difference between the
energy contained in biofuels and the energy contained in the biomass feedstock
used in their production. When the AEO2010 projections are adjusted for
those two items (about 2.3 quadrillion Btu in 2030 and 3.1 quadrillion
Btu in 2035), energy consumption in 2030 in the AEO2010 Reference case
is similar to that in the INFORUM projection, with differences of about
0.7 quadrillion Btu (lower) in the residential sector and about 0.7 quadrillion
Btu (higher) in the electric power sector. For the residential sector,
about one-half of the difference between the INFORUM and AEO2010 Reference
case projections is related to electricity consumption: INFORUM shows lower
residential electricity prices but similar electricity prices in the industrial
and commercial sectors. Total natural gas demand in the INFORUM projection
is similar to that in the AEO2010 Reference case, despite natural gas prices
that are 50 to 80 cents per thousand cubic feet higher than in the AEO2010 Reference case in 2020, 2025, and 2030.
Energy prices in the IHSGI projection generally are lower than those in
the AEO2010 Reference case. In the IHSGI projection for 2035, average natural
gas wellhead prices are $2.20 per thousand cubic feet lower, average delivered
electricity prices are 7 mills per kilowatthour lower, coal prices to the
electric power sector are about $0.20 per million Btu lower,
and light sweet crude oil prices are more than $50 per barrel lower than
in the AEO2010 projection. When the energy contained in biofuels and biomass
feedstocks (which is not included in the IHSGI projection) is subtracted
from the AEO2010 Reference case projections, overall demand is about 3
quadrillion Btu lower in the IHSGI projection, transportation sector demand
is about 2 quadrillion Btu lower, commercial sector demand (mostly for
natural gas) is about 1 quadrillion Btu lower, and there are smaller differences
in the industrial and residential sectors that more than offset the difference
of about 1 quadrillion Btu between the higher IHSGI projection and the AEO2010 Reference case projection for energy consumption in the electric
power sector.
Electricity
Table 12 provides a summary of results from the AEO2010 Reference case
and compares them with other projections. For 2015, electricity sales range
from a low of 3,870 billion kilowatthours in AEO2010 to a high of 3,998
billion kilowatthours in the IHSGI projection. IHSGI shows higher sales
in the residential and commercial sectors and slightly lower sales in the
industrial sector. For 2035, electricity sales in the IHSGI projection
are 4,734 billion kilowatthours, somewhat higher than the 4,660 billion
kilowatthours in AEO2010. IHSGI projects higher residential and industrial
sales and lower commercial sales of electricity in 2035.
The AEO2010 Reference case shows declining real electricity prices after
2008, with rising prices near the end of the period, based on projected
increases in fuel costs for generation and capital expenditures for construction
of new capacity. The higher fossil fuel prices and capital expenditures
in the AEO2010 projection result in an increase in the average electricity
price, from 8.9 cents per kilowatthour in 2015 to 10.2 cents per kilowatthour
in 2035. IHSGI shows electricity prices declining from 2015 to 2035.
Total generation and imports of electricity in 2015 are higher in the IHSGI
projection than in the AEO2010 Reference case. 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 various reasons.
Consistent with its projections of electricity sales, IHSGI shows higher
growth in generation and imports through 2015 in comparison with the AEO2010 Reference case. For 2035, total generation and imports are slightly lower
in the IHSGI projection than in AEO2010. The two projections for nuclear
power are similar, but those for generation from coal, oil, hydroelectric/other,
and electricity imports all are lower, and the projection for natural gas
is higher in the IHSGI projections than in the AEO2010 Reference case.
The projections for generating capability in 2015 range from 1,032 gigawatts
for IHSGI to 1,124 gigawatts for EVA, which shows more oil-fired and natural-gas-fired
capacity than in the other projections. The IHSGI projections for hydroelectric/other
capacity are lower than those from EVA and the AEO2010 Reference case.
The IHSGI and AEO2010 projections of generating capability in 2035 are
similar, except that IHSGI expects much less oil- and natural-gas-fired
capacity than is projected in AEO2010. The AEO2010 projection includes
4.0 gigawatts of uprates for nuclear capacity and expects all existing
nuclear units to continue operating through 2035, based on the assumption
that they will apply for and receive operating license renewals, including,
in some cases, a second 20-year extension after they reach 60 years of
operation. AEO2010 also includes a second unit in 2014 at the Watts Bar
site, where construction of a partially completed reactor was halted in
1988.
Environmental regulations are important determinants in the selection of
electricity generation technologies. The AEO2009 Reference case did not
include the SO2 and NOx cap-and-trade programs for power plants called
for in the EPAs CAIR, because the Circuit Court for the District of Columbia
had vacated CAIR in a July 2008 ruling. On December 23, 2008, the Court
temporarily reinstated the rule, however, and it is represented in the AEO2010 Reference case. AEO2010 does not include the CAMR regulations, which were
voided by the U.S. Court of Appeals in February 2008. Also, because AEO2010 includes only current laws and regulations, it does not assume any cap
or tax on CO2 emissions. Restrictions on CO2 emissions could change the
mix of technologies used to generate electricity.
Natural gas
The variation among projections of natural gas consumption, production,
imports, and prices (Table 13) can be significant. This variation results
from differences among the assumptions that underlie the different projection.
For example, the AEO2010 Reference case generally assumes that current
laws and regulations will continue through the projection period as enacted,
whereas some of the other projections assume the enactment of new public
policy over the next 25 years. For example, the results of the Altos projection
reflect the inclusion of carbon mitigation legislation.
All but two of the projections (Altos and EVA) show an initial decline
and subsequent increase in natural gas consumption from 2008 levels, but
they differ in terms of when, between 2015 and 2025, 2008 levels are regained.
The INFORUM projection for 2015 is 1.2 to 2.1 trillion cubic feet lower
than the others but recovers quickly by 2025. With the exception of the
SEER projection, which shows a decline in natural gas consumption from
2025 to 2030, total natural gas consumption grows in spite of increasing
prices in the later years of all the projections. Altos and EVA show natural
gas consumption exceeding 2008 levels by 2010 and continuing to increase
at much more rapid rates than in the other projections.
For the residential and commercial sectors, natural gas consumption patterns
are similar across the projections, with the exception of IHSGI, which
shows a decline in residential consumption and commercial consumption that
remains below the 2008 level through 2035. Excluding IHSGI, the average
annual rate of growth in residential natural gas consumption from 2008
to 2025 ranges from almost no growth to 0.5 percent, and the average for
commercial natural gas consumption varies from 0.2 percent (INFORUM) to
0.6 percent (AEO2010).
Three of the six projections (EVA, INFORUM, and the AEO2010 Reference case)
show industrial natural gas consumption returning to 2008 levels or higher
by 2015. In the AEO2010 projection, industrial natural gas consumption
exceeds 2008 levels in 2015, because industrial natural gas prices are
relatively low, and there is a significant increase in the use of natural
gas at refineries for biofuel production. The AEO2010 Reference case and
EVA projections show the strongest short-term growth in industrial natural
gas consumption, averaging 0.5 percent per year from 2008 to 2015.
The differences among the projections for natural gas consumption in the
electric power sector can be attributed to two primary factors: assumptions
about carbon mitigation legislation and assumptions about the costs and
availability of hydroelectric and other renewable energy resources. The AEO2010 Reference case and INFORUM projections are the lowest, and they
are the only ones in which the sectors consumption of natural gas in 2015
is lower than in 2008 (in the AEO2010 Reference case, as a result of slow
growth in electricity demand, completion of planned new coal-fired capacity,
and construction of new renewable capacity in response to incentives and
RFS programs at the State level). The highest level of natural gas consumption
in the electric power sector is in the Altos projection, ranging from 29
percent to 114 percent above the other projections for 2015 and 38 percent
to 108 percent above the others for 2025.
The natural gas supply projections from Altos and EVA differ significantly
from the other projections, in part because of higher consumption levels.
In addition, however, Altos also has a very different outlook for net pipeline
imports of natural gas. Whereas the other projections show declines in
pipeline imports, Altos has a more aggressive outlook, projecting that
the United States will become a net exporter by 2020, and that U.S. pipeline
exports will total 4.5 trillion cubic feet in 2035. As a result, the requirements
for additional supply from domestic production and LNG imports in the Altos
projection are significantly greater than those in the other projections.
Wellhead natural gas prices in the Altos projection are higher than those
in the other projections, with the exception of DB, but the differences
are not proportional to the differences in domestic production. Three of
the seven projections (AEO2010 Reference case, IHSGI, and SEER) present
relatively similar outlooks for supply sources, with domestic production
providing a growing percentage of total natural gas supply over the projection
period (with very similar percentages). The AEO2010 Reference case, IHSGI,
and SEER also show a decline in net pipeline imports of natural gas, but
net imports remain positive over the entire projection period, with growth
in LNG imports to about 1 trillion cubic feet. The same three projections
also show generally lower natural gas prices than the others, indicating
a generally more optimistic view of domestic natural gas supply potential.
In contrast, EVA, DB, and Altos project greater reliance on net LNG imports,
at 2.2 trillion cubic feet per year and above. The DB wellhead natural
gas prices are the highest among the projections shown in Table 13, reflecting
a more pessimistic view of the potential for future domestic natural gas
production.
Price margins for delivered natural gas (defined as the difference between
delivered and wellhead natural gas prices) reflect average transportation
and delivery charges, as well as differences in what each sector pays for
natural gas at the supply point. Only the AEO2010 Reference case, IHSGI,
and SEER include projections for delivered natural gas prices. For the residential
and commercial sectors, IHSGI projects an increase in margins over their
2008 levels, followed by a decline. The AEO2010 Reference case and SEER
project continued increases in residential and commercial margins over
the projection period. In the AEO2010 Reference case, the increases result
largely from a decline in natural gas consumption per customer, which increases
the per-unit-equivalent charge for the fixed component of customers gas
bills.
End-use natural gas prices in the industrial sector are difficult to compare
because of apparent definitional differences between the projections, which
are obvious from a comparison of 2008 prices in the different projections.
In the IHSGI and SEER projections, industrial natural gas prices in 2008
are, respectively, $0.93 and $0.43 (2008 dollars) per thousand cubic feet
higher than in the AEO2010 Reference case, implying some difference in
the definition of industrial natural gas prices (the definitions were not
available to EIA). The projected industrial margins remain relatively stable
in the IHSGI, SEER, and AEO2010 projections, but they differ significantly:
the average industrial margins for IHSGI and SEER are $1.32 and $0.87 per
thousand cubic feet higher, respectively, than the average industrial margin
in the AEO2010 Reference case.
The AEO2010 Reference case and IHSGI margins for the electric power sector
are more similar, with IHSGI showing slightly higher average margins consistent
with the difference in the margins for 2008. In the SEER projections, natural
gas margins for the electric power sector decline in the near term from
their 2008 level of $1.60 per thousand cubic feet (2008 dollars), then
increase rapidly after 2013, exceeding SEERs industrial margin after 2018
and climbing to $4.05 per thousand cubic feet in 2030. In the AEO2010 Reference
case and IHSGI projections, margins in the electric power sector also decline
quickly after 2008, but they remain considerably lower than their 2008
levels, reaching a maximum of $0.64 per thousand cubic feet (2008 dollars)
in 2029 in the AEO2010 Reference case and $0.72 per thousand cubic feet
(2008 dollars) in 2015 in the IHSGI projection.
Liquid fuels
In the AEO2010 Reference case, the world oil price is assumed to be $95
per barrel in 2015, $115 in 2025, and $133 in 2035 (see Table 10). This
price projection is similar to DBs price projection for WTI ($93 per barrel
in 2015, $115 in 2025, and $125 in 2035). EVA, IHSGI, and Purvin and Gertz,
Inc. (P&G) project much lower crude oil prices.
A major difference between the AEO2010 Reference case and all but the EVA
projection is that the AEO2010 projects much higher domestic crude oil
production throughout the projection (Table 14). In addition, domestic
production of crude oil increases gradually over time in the AEO2010 projection,
whereas all the other projections show rapid decreases in domestic production.
As a consequence, the AEO2010 Reference case shows lower net imports of
crude oil.
Overall petroleum product demand in the AEO2010 Reference case is similar
to that in the IHSGI projection but higher than those in the EVA, DB, P&G,
and IEA projections. The IHSGI projection shows a higher ratio of distillate
to motor gasoline consumption than in the AEO2010 Reference case, however,
especially in 2035, implying more distillate use than in the AEO2010 projection.
AEO2010, IHSGI, DB, and P&G all show motor gasoline demand decreasing in
absolute terms. For AEO2010, the decline in motor gasoline demand is the
result of increased efficiency, tighter CAFE standards, and increased use
of ethanol. All four projections also show increasing ratios of distillate
fuel to motor gasoline consumption.
In the AEO2010 Reference case, demand for jet fuel increases at a gradual
pace, averaging 0.8 percent per year from 2015 to 2035. In the IHSGI projection,
jet fuel demand is at the same level as in the AEO2010 in 2015 but increases
at a faster pace, averaging just under 1.9 percent per year from 2015 to
2035. In the DB projection, jet fuel demand gradually decreases over time,
by 0.4 percent per year on average from 2015 to 2035.
Coal
The outlook for coal markets varies considerably across the projections
compared in Table 15. Differences in assumptions about expectations for
and implementation of legislation aimed at reducing GHG emissions can lead
to significantly different projections for coal production, consumption,
and prices. In addition, different assumptions about world oil prices, natural
gas prices, and economic growth can contribute to variation across the
projections.
In the AEO2010 Reference case, total U.S. coal consumption increases from
1,122 million tons (22.4 quadrillion Btu) in 2008 to 1,235 million tons (23.6 quadrillion Btu) in
2025 and 1,319 million tons (25.1 quadrillion Btu) in 2035. Total coal
consumption also increases in the IEA projection, to 22.7 quadrillion Btu
in 2025. Total coal consumption decreases in both the IHSGI and DB projections
to 1,095 million tons and 21.9 quadrillion Btu, respectively, in 2025 and
to 1,086 million tons and 20.8 quadrillion Btu, respectively, in 2035.
In the AEO2010 projection, coal production increases from 1,172 million
tons (23.9 quadrillion Btu) to 1,234 million tons (24.4 quadrillion Btu)
in 2025 and to 1,285 million tons (25.2 quadrillion Btu) in 2035. INFORUM
projects a larger increase in coal production, to 1,465 million tons in
2025. In the Wood Mackenzie Company (WM) projection, production (excluding
coking coal) remains relatively constant, increasing to 1,180 million tons
in 2025. In the IHSGI projection, coal production falls to 1,109 million
tons in 2025 and 1,098 million tons in 2035.
U.S. coal exports decline from 82 million tons in 2008 to 48 million tons
in 2025 in the AEO2010 Reference case, and coal imports increase slightly
from 32 million tons in 2008 to 34 million tons in 2025. In contrast to
the other projections, AEO2010 projects that the United States eventually
will become a net importer of coal. U.S. coal exports fall to 33 million
tons in 2035 in the AEO2010 Reference case, and coal imports increase to
53 million tons. INFORUM projects an increase in exports to 161 million
tons, as well as an increase in imports to 43 million tons, in 2025. In
the WM projection, both exports and imports (excluding coking coal) fall
to 26 million tons in 2025. IHSGI projects a decrease in exports to 49
million tons in 2025 and to 45 million tons in 2035, with little change
in coal imports, which total 35 million tons in 2025 and 33 million tons
in 2035.
Minemouth coal prices in the AEO2010 Reference case decline from $31.26
per ton ($1.55 per million Btu) in 2008 to $28.19 per ton ($1.44 per million
Btu) in 2025 and remain relatively constant thereafter, with a price of
$28.10 per ton ($1.44 per million Btu) projected for 2035. In the IHSGI
projection, the average minemouth coal price falls to $26.08 per ton in
2025 and $25.81 per ton in 2035. Both WM and INFORUM project slight decreases
in minemouth coal prices, to $31.14 per ton and $30.91 per ton in 2025,
respectively. |