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The Paul H. Nitze School of Advanced International Studies December 14, 2009 Washington, DC Richard Newell, Administrator. Annual Energy Outlook 2010 Reference Case. How does the AEO2010 reference case handle public policy and technology?. Generally assumes current laws and regulations

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slide1
The Paul H. Nitze School of Advanced International StudiesDecember 14, 2009Washington, DCRichard Newell, Administrator

Annual Energy Outlook 2010

Reference Case

Richard Newell, SAIS, December 14, 2009

slide2

How does the AEO2010 reference case handlepublic policy and technology?

  • Generally assumes current laws and regulations
    • provisions sunset if specified (e.g., renewable tax credits expire)
    • excludes potential future laws and regulations (e.g., proposed greenhouse gas legislation is not included)
    • some grey areas
      • adopts proposed regulations that are not yet final, in order to inform the likely implementation of a statute
      • 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 building new energy infrastructure and resource extraction
  • Includes technologies that are commercial or reasonably expected to become commercial in the next decade or so
    • includes cost and efficiency improvements from learning, but not revolutionary or breakthrough technologies

Richard Newell, SAIS, December 14, 2009

slide3

Key updates included in the AEO2010 reference case

  • Extended projection period to 2035
  • Changes in Federal and State laws and regulations
    • revised handling of fuel economy standards to reflect the proposal for light-duty vehicles in model years 2012-2016
    • assumes permission will be granted to extend nuclear power unit operating licenses beyond 60 years; no retirements through 2035
  • Revised capital costs for capital-intensive projects
    • overnight costs for nuclear and coal power up 10-20%
  • Changes to assumptions about oil and gas resource base
    • updated characterization of natural gas shales, reflecting evolution of shale gas resources and technology
    • new lower-48 onshore oil and gas supply submodule

Richard Newell, SAIS, December 14, 2009

oil prices in the reference case rise steadily the full aeo2010 will include a wide range of prices
Oil prices in the reference case rise steadily; the full AEO2010 will include a wide range of prices

2008 dollars per barrel

History

Projections

High oil price

AEO2009 reference

AEO2010 reference

Low oil price

Richard Newell, SAIS, December 14, 2009

Source: Annual Energy Outlook 2010

oil to natural gas price ratio remains high over the projection
Oil to natural gas price ratio remains high over the projection

Oil and natural gas prices

2008 dollars per million Btu

Ratio of oil price to natural gas price

Crude oil

U.S. natural gas wellhead

History

Projections

Richard Newell, SAIS, December 14, 2009

Source: Annual Energy Outlook 2010

slide6
Non-fossil energy use grows rapidly, but fossil fuels still provide 78 percent of total energy use in 2035

quadrillion Btu

History

Projections

Renewables (excluding liquid biofuels)

Liquid biofuels

Liquid fuels

Coal

Natural gas

Nuclear

Richard Newell, SAIS, December 14, 2009

Source: Annual Energy Outlook 2010

energy and co 2 per dollar gdp continue to decline per capita energy use also declines
Energy and CO2 per dollar GDP continue to decline;per capita energy use also declines

index, 2005=1

History

Projections

Energy per capita

Energy per dollar GDP

CO2 per dollar GDP

Richard Newell, SAIS, December 14, 2009

Source: Annual Energy Outlook 2010

slide8

Energy efficiency gains reduce consumption 15% from where it would otherwise be; structural change is even larger

quadrillion Btu

192

Constant intensity

Structural change

133

Constant efficiency

Efficiency change

115

AEO2010 reference case

Richard Newell, SAIS, December 14, 2009

Source: Annual Energy Outlook 2010

slide9
U.S. reliance on imported liquid fuels is reduced by increased domestic production and greater fuel efficiency

million barrels per day

History

Projections

Consumption

40%

45%

Net imports

60%

57%

Production

AEO2010 reference case

Updated AEO2009 reference case

Richard Newell, SAIS, December 14, 2009

Source: Annual Energy Outlook 2010

biofuels meet most of the growth in liquid fuels supply
Biofuels meet most of the growth in liquid fuels supply

million barrels per day

History

Projections

Biofuels including imports

Petroleum supply

Natural gas plant liquids

Net petroleum imports

Richard Newell, SAIS, December 14, 2009

Source: Annual Energy Outlook 2010

biofuels grow but fall short of the 36 billion gallon rfs target in 2022 exceed it in 2035
Biofuels grow, but fall short of the 36 billion gallon RFS target in 2022, exceed it in 2035

billion gallon-equivalents

Renewable diesel

Legislated RFS in 2022

Biomass-to-liquids

RFS with adjustments under CAA Sec.211(o)(7)

Biodiesel

Net ethanol imports

Other feedstocks

Cellulosic ethanol

Corn ethanol

Richard Newell, SAIS, December 14, 2009

Source: Annual Energy Outlook 2010

slide12

New light duty vehicle efficiency reaches 40 mpg by 2035

miles per gallon

AEO2009 reference case

Richard Newell, SAIS, December 14, 2009

Source: Annual Energy Outlook 2010

mild and full hybrid systems dominate new light duty vehicle sales by 2035
Mild and full hybrid systems dominate new light-duty vehicle sales by 2035

millions

History

Projections

Richard Newell, SAIS, December 14, 2009

Source: Annual Energy Outlook 2010

slide14
Natural gas wellhead price is projected to rise from low levels experienced during 2008-2009 recession

2008 dollars per thousand cubic feet

History

Projections

AEO2010 reference case

Updated AEO2009 reference case

Richard Newell, SAIS, December 14, 2009

Source: Annual Energy Outlook 2010

import share of natural gas supply declines as domestic supply grows
Import share of natural gas supply declines as domestic supply grows

trillion cubic feet

History

Projections

6%

Consumption

2%

13%

Net imports

Domestic supply

AEO2010 reference case

Updated AEO2009 reference case

Richard Newell, SAIS, December 14, 2009

Source: Annual Energy Outlook 2010

slide16
Shale gas has been the primary source of recent growth in U.S. technically recoverable natural gas resources

trillion cubic feet

Unproved shale gas &

other unconventional

Unproved

conventional

(including Alaska*)

Proved reserves

(all types & locations)

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

Source: U.S. Geological Service, Mineral Management Service, private data, and EIA.

Richard Newell, SAIS, December 14, 2009

slide17
Shale gas and Alaska production offset declines in supply to meet consumption growth and lower import needs

trillion cubic feet

History

Projections

Alaska

Shale gas

Coalbed methane

Non-associated onshore

Non-associated offshore

Associated with oil

Net imports

Richard Newell, SAIS, December 14, 2009

Source: Annual Energy Outlook 2010

growth in electricity use continues to slow
Growth in electricity use continues to slow

3-year rolling average percent growth

Period Annual Growth

1950s 9.8

1960s 7.3

1970s 4.7

1980s 2.9

1990s 2.4

2000-2008 0.9

2008-2035 1.0

History

Structural Change in Economy - Higher prices - Standards - Improved efficiency

Projections

Richard Newell, SAIS, December 14, 2009

Source: Annual Energy Outlook 2010

natural gas and renewables account for the majority of capacity additions from 2008 to 2035
Natural gas and renewables account for the majority of capacity additions from 2008 to 2035

2008 capacity

Capacity additions 2008 to 2035

Hydropower*

99 (10%)

Hydropower*

1 (0.4%)

Nuclear

8 (3%)

Coal

312 (31%)

Coal

31 (12%)

Nuclear

101 (10%)

Other renewables

92 (37%)

Other renewables

40 (4%)

250

gigawatts

1,008

gigawatts

Other

119 (12%)

Other

2 (1%)

Natural gas

116 (46%)

Natural gas

338 (33%)

* Includes pumped storage

Richard Newell, SAIS, December 14, 2009

Source: Annual Energy Outlook 2010

renewables gain electricity market share coal share declines
Renewables gain electricity market share; coal share declines

billion kilowatthours and percent shares

History

Projections

17.0

Renewable

9.1

20.8

Natural gas

21.4

Coal

43.8

48.5

Oil and other

1.4

1.5

Nuclear

19.6

17.1

Richard Newell, SAIS, December 14, 2009

Source: Annual Energy Outlook 2010

nonhydropower renewable sources meet 41 of total electricity generation growth from 2008 to 2035
Nonhydropower renewable sources meet 41% of total electricity generation growth from 2008 to 2035

billion kilowatthours

History

Projections

Biomass

Wind

Solar

Geothermal

Waste

Richard Newell, SAIS, December 14, 2009

Source: Annual Energy Outlook 2010

slide22
Assuming no new policies, growth in energy-related CO2 is driven by electricity and transportation fuel use

2008

2035

Buildings and Industrial

1,571 (25%)

Electric Power

2,634 (42%)

Electric Power

2,359 (41%)

Buildings and Industrial

1,530 (26%)

6,320

million metric

tons

5,814

million metric

tons

8.7% growth

0.3% per year

Transportation

1,925 (33%)

Transportation

2,115 (33%)

Richard Newell, SAIS, December 14, 2009

Source: Annual Energy Outlook 2010

slide23

Key results from the AEO2010 reference case

  • Recent Federal and State policies, and rising energy prices, moderate growth in energy consumption and shift it to renewable fuels
  • U.S. oil use remains near its present level through 2035
    • growth in overall liquids demand is met by biofuels, and ethanol accounts for >17% of gasoline consumption by 2035
    • U.S. reliance on imported oil as a share of U.S. liquids use, declines to 45% over the next 25 years
  • Shale gas provides the majority of growth in gas supply
  • Energy-related CO2 emissions grow 0.3% per year, absent any new policies to limit emissions

Richard Newell, SAIS, December 14, 2009

for more information
For more information

U.S. Energy Information Administration home page www.eia.gov

Short-Term Energy Outlook www.eia.gov/emeu/steo/pub/contents.html

Annual Energy Outlook www.eia.gov/oiaf/aeo/index.html

International Energy Outlook www.eia.gov/oiaf/ieo/index.html

Monthly Energy Review www.eia.gov/emeu/mer/contents.html

U.S. Energy Information Administration

www.eia.gov

Richard Newell, SAIS, December 14, 2009