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The Future Electricity Fuels Mix: Key Drivers

The Future Electricity Fuels Mix: Key Drivers. for Electric Power Conference & Exhibition May 15 th , 2012 | Baltimore, Maryland by Howard Gruenspecht, Acting Administrator. Key results from the AEO2012 Reference case, which assumes current laws remain unchanged.

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The Future Electricity Fuels Mix: Key Drivers

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  1. The Future Electricity Fuels Mix: Key Drivers for Electric Power Conference & Exhibition May 15th, 2012 | Baltimore, Maryland by Howard Gruenspecht, Acting Administrator

  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 Electric Power, May 15, 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 Electric Power, May 15, 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 Source: EIA, Annual Energy Outlook 2012 Early Release Shares of total U.S. energy History 2010 Projections Renewables (excluding liquid biofuels) 7% 11% 4% 1% Liquid biofuels 25% 25% Natural gas 9% 9% Nuclear 21% 20% Coal 37% 32% Oil and other liquids Howard Gruenspecht Electric Power, May 15, 2012

  5. In 2010, U.S. electricity generation was 70% fossil fuels, 20% nuclear, and 10% renewable 2010 Total net generation: 4,120 billion kWh 2010 Non-hydro renewable net generation: 168 billion kWh Other gases 0.3% Conventional hydroelectric 6.2% Nuclear 19.6% Other 0.3% Wind: 2.3% Natural gas 23.8% Solar thermal and PV: <0.1% Other renewable 4.1% Wood and wood-derived fuels: 0.9% Geothermal: 0.4% Coal 44.9% Other biomass: 0.5% Petroleum 0.9% Source: EIA, Annual Energy Review, October 2011 Howard Gruenspecht Electric Power, May 15, 2012

  6. The fuel mix for electricity generation varies widely across U.S. regions (2010) Share of Generation by Fuel, 2010 Source: EIA AEO2012 (Early Release), based on Form EIA-923 Howard Gruenspecht Electric Power, May 15, 2012

  7. While electricity consumption grows by 23% over the projection, the annual rate of growth slows percent growth (3-year rolling average) Source: EIA, Annual Energy Outlook 2012 Early Release 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 History 2010 Structural Change in Economy - Higher prices - Standards - Improved efficiency Projections Howard Gruenspecht Electric Power, May 15, 2012

  8. Electricity mix gradually shifts to lower-carbon options, led by growth in renewables and natural gas electricity net generation trillion kilowatthours per year Source: EIA, Annual Energy Outlook 2012 Early Release 2010 27% Natural gas 24% 16% Renewables 10% 39% Coal 45% 20% 18% Oil and other liquids Nuclear 1% 1% Howard Gruenspecht Electric Power, May 15, 2012

  9. Non-hydro renewable sources more than double between 2010 and 2035 non-hydropower renewable generation billion kilowatthours per year Source: EIA, Annual Energy Outlook 2012 Early Release 2010 Advanced biofuels cogeneration Biomass Power sector Industrial CHP Wind Solar Geothermal Waste Howard Gruenspecht Electric Power, May 15, 2012

  10. Examples of updated environmental retrofit costs 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 Electric Power, May 15, 2012

  11. Global spot natural gas and crude oil prices vary widely Global spot natural gas and crude oil prices U.S. dollars per million British thermal unit 482 1,460 273 Source: EIA based on Bloomberg as of 5/4/2012 Howard Gruenspecht Electric Power, May 15, 2012

  12. Technically recoverable natural gas resources reflect updated assessments U.S. dry gas resources trillion cubic feet *Alaska resource estimates prior to AEO2009 reflect resources from the North Slope that were not included in previously published documentation. Source: EIA, Annual Energy Outlook Unproved shale gas Unproved other gas (including Alaska* and offshore) Proved reserves (all types and locations) 2,214 482 1,460 273 AEO Edition Howard Gruenspecht Electric Power, May 15, 2012

  13. Shale gas offsets declines in other U.S. natural gas production sources U.S. dry gas production trillion cubic feet per year Source: EIA, Annual Energy Outlook 2012 Early Release History Projections 2010 49% Shale gas 23% 26% Tight gas 21% 9% Non-associated offshore 9% 7% Coalbed methane 10% 7% Associated with oil 7% 21% Non-associated onshore 1% 2% 9% Alaska Howard Gruenspecht Electric Power, May 15, 2012

  14. Domestic natural gas production grows faster than consumption U.S. dry gas trillion cubic feet per year Source: EIA, Annual Energy Outlook 2012 Early Release History Projections 2010 Consumption Domestic supply Net imports Howard Gruenspecht Electric Power, May 15, 2012

  15. EIA’s natural gas price projections for AEO 2012 Early Release natural gas spot price (Henry Hub) 2010 dollars per million Btu Sources: EIA, Annual Energy Outlook 2012 Early Release History Projections 2010 Howard Gruenspecht Electric Power, May 15, 2012

  16. 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 $2.91 $1.75 $1.57 $1.46 1.77 $2.45 $3.65 $1.83 $1.93 $1.83 $3.40 $1.91 $4.46 Source: EIA, Annual Energy Outlook 2012 Early Release Howard Gruenspecht Electric Power, May 15, 2012

  17. 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 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 2010 dollars per megawatthour Coal at $3 Coal at $2 Natural Gas CC at $7 Natural Gas CC at $4 Natural Gas CC at $3 Howard Gruenspecht Electric Power, May 15, 2012

  18. For more information U.S. Energy Information Administration home page | www.eia.gov Annual Energy Outlook | www.eia.gov/forecasts/aeo Short-Term Energy Outlook | www.eia.gov/forecasts/steo International Energy Outlook | www.eia.gov/forecasts/ieo Monthly Energy Review | www.eia.gov/totalenergy/data/monthly Annual Energy Review | www.eia.gov/totalenergy/data/annual Howard Gruenspecht Electric Power, May 15, 2012

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