# Presentation: 796968

## Annual Energy Outlook 2009Early Release

- Energy Information Administration
- December 17, 2008
- www.eia.doe.gov

**Notes:**
Welcome to the presentation of the Annual Energy Outlook 2009 reference case projections.    I’d like to thank Bo Kong, director of the Global Energy and Environment Initiative at the Johns Hopkins School for Advanced International Studies for inviting us to be here today.
The reference case that is the focus of today’s talk is just one of many alternative cases completed as part of the complete Annual Energy Outlook 2009, which will be released early next year. 
Unlike most other long-term outlooks, which usually incorporate at least the expected value of policy changes that can significantly influence energy outcomes, the AEO2009 is based on existing laws and regulations.   The AEO approach is adopted to facilitate the use of its scenarios as the basis for evaluating the impact of policy proposals.
As is the case with all data and analyses from EIA, the views presented are ours alone and do not represent those of the Department of Energy or the Administration.
Finally, I’d like to recognize the dedicated staff who put this together, led by John Conti, who directs EIA’s long-term modeling office, and Paul Holtberg, Alan Beamon, Michael Schaal, and Glen Sweetnam who serve as his division directors.   

## The economy, oil prices, resources, policies, and behavior drive the AEO2009 reference case

***The economy, oil prices, resources, policies, and behavior drive the AEO2009 reference case***

- Long-term economic growth averages about 2.5 percent per year between 2007 and 2030
- World crude oil prices recover from a near-term decline and reach $130 per barrel (in 2007 dollars) by 2030
- A robust domestic natural gas resource base allows for a steady expansion of production given projected growth in demand and prices
- Recently-enacted policies and concerns over greenhouse gas (GHG) emissions, combined with high energy prices,  moderate projected growth in energy consumption and emissions

- EIA Annual Energy Outlook 2009 Reference Case Presentation -- December 17, 2008

**Notes:**
Despite near term economic weakness, long term GDP growth averages about 2.5 percent per year between 2007 and 2030
World crude oil prices recover from their near-term decline and reach $130 per barrel in 2007 dollars by 2030
For many years, EIA has been a leader in recognizing the potential of unconventional gas.  For this AEO, we have increased EIA’s estimate of the gas shale resource base by over 70 percent consistent with recent success in the Haynesville and Marcellus shales.  The U.S. total resource base available for development, including reserves, is estimated to be about 1,500 TCF.  
Public policies that encourage efficiency and the adoption of new technologies, together with the impact of concerns over greenhouse gas emissions on behavior of investors in   expectations of GHG legislation moderate growth in energy consumption

## Oil prices in the reference case rise steadily; the full AEO includes a wide range of price cases

**Reference**

**High Price**

**Low Price**

**Projections**

**History**

***Oil prices in the reference case rise steadily; the full AEO includes a wide range of price cases***

**2007 dollars per barrel**

- EIA Annual Energy Outlook 2009 Reference Case Presentation -- December 17, 2008

**Notes:**
Recent experience demonstrates that world oil prices can be extremely volatile – prices have fallen from a peak of $147 per barrel in July of 2008 to the $50 range in under half a year.  EIA’s short-term energy outlook, updated each month, contains our forecasts of energy markets over the next 12 to 24 months – the AEO we are discussing today should NOT be used for this purpose. 
The AEO2009 reference case reflects an assumption of higher world oil prices throughout the projection period following the recovery of the world economy from its near-term problems.  The reference case is premised on a view that  forces driving growth in long-term liquids demand in non-OECD countries remain as strong as previously expected, but that constraints on access to low cost oil supplies are tighter than previously assumed.  
In recognition of just how uncertain future oil prices are, the oil price cases in the AEO2009 span a very broad range.  Even that broad range does not encompass all possibilities.
The relationship between growth in global liquids demand and growth in non-OPEC liquids supply is a key touchstone of the AEO price cases.  Reference case prices begin to rise in 2010 as the economy rebounds and global demand once again grows more rapidly than non-OPEC liquids supply. 
In 2030, the average real price of crude oil is $130 per barrel in 2007 dollars in the reference case, and global liquids use, including liquid biofuels, is about 105 million barrels per day.  Excluding biofuels, projected 2030 consumption is about 100 million barrels per day, somewhat below the projection in IEA’s recent world Energy Outlook.  

## Non-fossil energy use grows rapidly, but fossil fuels still provide 79 percent of total energy use in 2030

**Nuclear**

**Natural Gas**

**Liquid Fuels**

**Coal**

**Renewables (excl liquid biofuels)**

***Non-fossil energy use grows rapidly, but fossil fuels still provide 79 percent of total energy use in 2030***

**History**

**Projection**

**Liquid Biofuels**

**quadrillion Btu**

- EIA Annual Energy Outlook 2009 Reference Case Presentation -- December 17, 2008

**Notes:**
Total primary energy consumption in AEO2009 increases at an average rate of 0.5 percent per year, from nearly 102 quadrillion Btu in 2007 to over 113 quadrillion Btu in 2030—4.7 quadrillion Btu less than in AEO2008. In 2030, consumption of liquid fuels and coal are lower in AEO2009. Among the most important factors leading to lower total energy demand in the AEO2009 reference case are significantly higher energy prices and greater use of more efficient appliances and vehicles due to EIEA2008 and EISA2007.
Coal, oil, and natural gas continue meet the largest share of total primary energy consumption, although their share declines from 85 percent in 2007 to 79 percent in 2030.
Coal consumption for electricity generation grows slowly as existing plants are used more intensively and new plants currently under construction enter service.  Higher capital costs and investor concerns about the potential impact of future GHG policies limit additions of new coal-fired capacity even though future policy changes are not directly considered.  The projections do reflect the impact of GHG concerns on behavior.
Natural gas consumption for electricity generation grows in later years, along with growth in coal, nuclear, and renewable generation to meet electricity demand growth.
Rapid growth in renewables consumption is driven mainly by implementation of Federal RFS for transportation fuels and State renewable portfolio standard (RPS) programs for electricity generation.

## Energy use per dollar of GDP continues to decline; per capita energy use also declines

**History**

**Projections**

***Energy use per dollar of GDP continues to decline; per capita energy use also declines***

**index, 1990=1.0**

- Per capita

- Per dollar

- EIA Annual Energy Outlook 2009 Reference Case Presentation -- December 17, 2008

**Notes:**
Energy intensity, measured as thousand Btus of energy use per dollar of GDP, declines by more than one-third from 2007 to 2030 in the AEO2009 reference case. Although energy use generally increases as the economy grows, higher energy prices, continuing improvement in the energy efficiency of the U.S. economy, and a shift to less energy-intensive activities keep the rate of energy consumption growth lower than the rate of GDP growth.
Energy use per person declines at an annual rate of 0.5 percent, faster than the 0.2-percent yearly drop in the AEO2008 reference case.  The faster decline in energy consumption per capita results from the higher energy prices in the AEO2009 reference case, revisions to how the CAFE standards were implements when compared to the AEO2008 reference case, and changes in the handling of the impact of GHG regulatory uncertainty. 
As energy prices have risen, the potential for more energy conservation has received increased attention. Although additional energy conservation is induced by higher energy prices in the AEO2009 reference case, no further policy-induced conservation measures are assumed beyond those in existing legislation and regulation and observed behavior.

## Net dependence on imported liquids declines dramatically over the next 20 years

**Consumption**

**Domestic supply**

**Net Imports **

**History**

**Projections**

**AEO2009 reference case**

**AEO2008 reference case**

**58%**

**41%**

**54%**

**60%**

**million barrels per day**

- EIA Annual Energy Outlook 2009 Reference Case Presentation -- December 17, 2008

**Notes:**
Reliance on imported oil, which grew steadily between the mid-1980s and 2006, declines dramatically over the next 20 years, although imports continue to meet a major part of total U.S. liquids demand. tighter CAFE standards, the increased use of biofuels, much of which is domestically produced, and higher energy prices act together to moderate demand growth, while a combination of higher prices and mandates spurs increased domestic production of oil and biofuels. 
Total domestic liquids supply, including crude oil, natural gas plant liquids, refinery processing gain, ethanol, biodiesel, BTL, and liquids from coal, grow from 8.7 million barrels per day in 2007 to 12.8 million barrels per day in 2030. 
The net import share of total liquids supplied, including crude oil and refined products, including biofuels, drops from 58 percent in 2007 to less than 40 percent in 2025 before increasing to 41 percent in 2030.

## Petroleum-based liquids consumption is projected to be flat as biofuels use grows

**Industrial**

**Transportation**

**Residential and Commercial**

**Electric Power**

***Petroleum-based liquids consumption is projected to be flat as biofuels use grows***

**Biofuels**

**million barrels per day**

**History**

**Projections**

- EIA Annual Energy Outlook 2009 Reference Case Presentation -- December 17, 2008

**Notes:**
U.S. oil consumption has grown steadily since the mid-1980s, and AEO reference cases issued over the past 20 years have projected a continuing trend of growing U.S. oil use.  AEO2009 projects a break in this trend, with no appreciable growth in oil consumption between now and 2030.  Biofuels meet all projected growth in liquids fuels use. 
Total consumption of liquid fuels grows from 20.6 million barrels per day in 2007 to 21.6 million barrels per day in 2030 in the AEO2009 reference case, about 1.2 million barrels per day less in the AEO2008 reference case projection. Liquid fuels consumption is lower in all sectors in AEO2009 than in the AEO2008 reference case, as a result of revisions made in the light duty vehicle CAFE standard and sharply higher delivered prices for liquid fuels. 
The transportation sector dominates liquids fuel demand, accounting for 69 percent of total consumption in 2007.  That share is projected to increase to 75 percent by 2030.

## New light-duty vehicle sales shift from light trucks back to cars

***New light-duty vehicle sales shift from light trucks back to cars***

**percent of total sales**

- EIA Annual Energy Outlook 2009 Reference Case Presentation -- December 17, 2008

**Notes:**
The slow growth in liquid fuels results from the impact of CAFE standards included is EISA (requiring 35 mpg by 2020) and higher world oil prices in the AEO2009 reference case.  The CAFÉ standard is exceeded by 2030 as consumer/industry acceptance of hybrids and diesel light duty vehicles grows.
The ability of manufacturers to meet the proposed standards is aided in part by a sales shift from light trucks back to cars
During the last 30 years car shares of total new sales have declined.
In 1990 cars accounted for 70 percent of new light vehicle sales
Truck sales (including SUV, vans, and pickups) peaked in 2004 accounting for approximately 54 percent of new LDV sales
Currently light trucks account for approximately 48 percent
Projected car share will continue to increase - 63 percent by 2030. 
New CAFE standards drive shift to larger cars – due to light truck cost of compliance/consumer preference and fuel economy improvements
Light truck cost of CAFE compliance drives additional consumers to cars markets
Pickup and van sales continue historic decline, SUV sales hit hardest losing 7 percentage points from 2007 to 2030.  
By 2030 new car fuel economy 41.4 mpg, light truck 32.9 mpg and average 37.9 

## Mild and full hybrid systems dominate new  light-duty vehicle sales by 2030

***Mild and full hybrid systems dominate new  light-duty vehicle sales by 2030***

**millions of sales**

**History**

**Projection**

- EIA Annual Energy Outlook 2009 Reference Case Presentation -- December 17, 2008

**Notes:**
Alternative light vehicle sales increase from 10 percent in 2007 to 63 percent by 2030. With largest share going to hybrids, representing over 95 percent of electric drive vehicles.
Flex fuel market penetration peaks in 2015 at 18 percent, loses share to 14 percent by 2030, currently 6 percent (2007)
After 2015, hybrid and diesel vehicles continue to gain market share due to CAFE standards
Hybrid gains throughout the projection reaching 39 percent by 2030, currently (2007) 2.4 percent
Diesel increases from 1.7 percent (2007) to 10 percent (2030)
Mild/micro hybrid systems projected to account for the majority of hybrid sales through 2020 accounting for 60 percent of hybrid sales in 2020.
As costs for batteries and systems decreases, standard hybrids dominate accounting for 50 percent of hybrid sales in 2030.
PHEVs still most costly hybrid option, but cost reductions increase penetration to 500,000 vehicles per year by 2030 – includes both PHEV10 and PHEV40.
Electric and fuel cell vehicles are in the market and sales do increase over the projection, but sales volumes are less than 10,000 vehicles per year.  

## Biofuels use falls short of the 36 billion gallon RFS target in 2022, but exceeds it by 2030 

**Corn**
**Ethanol**

**Legislated RFS**

**Cellulose Ethanol**

***Biofuels use falls short of the 36 billion gallon RFS target in 2022, but exceeds it by 2030****** ***

**Net Ethanol Imports**

**Biodiesel**

**Biomass to Liquids (BTL)**

**RFS with Paragraph 7 Adjustments**

**Ethanol**
**from Other**
**Feedstocks**

**Renewable Diesel**

**billion credits**

- EIA Annual Energy Outlook 2009 Reference Case Presentation -- December 17, 2008

**Notes:**
Just under 30 billion RFS credits are used in 2022 if biodiesel, renewable diesel, and BTL get 1.5 credits per gallon. 
After 2022, continued growth in biofuels beyond the RFS mandate results in 38.6 billion gallons of consumption as measured by ‘credits’ by 2030 due to higher world oil price relative to biofuel technology and feedstock costs.
The key risk factor is the rate of development of cellulosic biofuels technology and capacity. Continued slow progress towards meeting the targets for second generation biofuels may result in the RFS being met at substantially lower levels.

## The import share of natural gas supply declines sharply as domestic supply grows

**Consumption**

**Domestic supply**

**Net Imports **

**History**

**Projections**

**AEO2008 reference case**

**16%**

**3%**

**14%**

**trillion cubic feet**

**AEO2009 reference case**

- EIA Annual Energy Outlook 2009 Reference Case Presentation -- December 17, 2008

**Notes:**
Total domestic production of natural gas is significantly higher in the AEO2009 reference case compared to the AEO2008 reference case.  Total domestic production reaches 23.7 trillion cubic feet by 2030, 4.2 trillion cubic feet higher than in the AEO2008 reference case. While exploration and production costs are higher, the higher prices in the AEO2009 reference case support the higher level of production.  The growth in domestic production is more rapid then the rate of growth in consumption over the same period.  As a result, net imports decline from 3.8 trillion cubic feet in 2007 to 0.7 trillion cubic feet in 2030.
The United States moves from being a net importer of pipeline natural gas from Canada and Mexico, 3.1 trillion cubic feet in 2007, to a net exporter in 2030, 0.2 trillion cubic feet, in the AEO2009 reference case (compared with net imports of 0.3 trillion cubic feet in the AEO2008 reference case). This is due in large part to a decline in liquefied natural gas imports into Canada and Mexico, resulting in both less natural gas available for export to the U.S. and increased requirements for supply to meet domestic Canadian and Mexican demand. 
Total net imports of LNG to the United States in the AEO2009 reference case are significantly lower than the AEO2008 reference case due to a reevaluation of U.S. competitiveness for supplies on the world market.  While LNG imports to the U.S. increase as world liquefactions capacity expands, peaking at 1.5 trillion cubic feet in 2018, U.S. LNG imports decline thereafter to 0.8 trillion cubic feet in 2030 as growth in world demand outpaces growth in liquefaction capacity.   
The net import share of total U.S. natural gas supply falls from 16 percent in 2007 to 3 percent in 2030.

## Unconventional production meets most growth in natural gas demand and offsets the decline in conventional production and imports

**Unconventional**

**Alaska**

**Net imports**

**Associated-dissolved**

**Non-associated offshore**

**Non-associated conventional**

**History**

**Projections**

**trillion cubic feet**

- EIA Annual Energy Outlook 2009 Reference Case Presentation -- December 17, 2008

**Notes:**
A substantial portion of the increased domestic production results from improved prospects for unconventional resources, in particular, shale gas. Unconventional natural gas supply continues to increase as higher prices and improved technology boost gas shales and tight gas production.
The Alaskan natural gas pipeline is projected to be completed by 2020, which is a risk factor in this projection.

## Growth in electricity use continues to slow

**Period            Annual Growth**
**1950s                         9.0**
**1960s                         7.3**
**1970s                         4.2**
**1980s                         3.1**
**1990s                         2.4**
**2000-2007                  1.1**
**2007-2030                  1.0**

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

***Growth in electricity use continues to slow***

**3-year rolling average percent growth**

**History**

**Projections**

- EIA Annual Energy Outlook 2009 Reference Case Presentation -- December 17, 2008

**Notes:**
While the annual change in electricity usage has had its ups and downs over the years, following business cycles and reacting to weather variations, the long-term trend has been one of slowing growth.  
After growing at 9 percent per year in the 1950s, the rate of growth slowed to just under 2.5 per cent in the 1990s, and has so far averaged 1.1 percent per year in this decade.
Over the next 22 years we expect the slowdown in growth to continue.  The combination of higher electricity prices and recently enacted standards for lighting, air conditioning, clothes washers, and several other appliances used in buildings are expected to dampen electricity demand growth.
Of course there are uncertainties.  Chief among these is whether new electricity-intensive technologies might enter the market to reverse this trend.  The one most discussed today is plug-in hybrid electric vehicles.  While we do see plug-in hybrids entering the market over the next two decades, we do not expect their penetration to be large enough by 2030 to reverse the slowing demand growth trend.

## Electricity prices rise with higher capital and fuel costs and growing demand

**Nominal**

**Real 2007**

***Electricity prices rise with higher capital and fuel costs and growing demand***

**cents per kilowatthour**

**Projections**

**History**

- EIA Annual Energy Outlook 2009 Reference Case Presentation -- December 17, 2008

**Notes:**
As anyone who pays an electricity bill knows, electricity prices have shot up dramatically over the last few years.  After about 20 years of flat nominal prices and falling real prices, between 2000 and 2007 nominal electricity prices increased by 34 percent while real electricity prices increased by 12 percent.
The primary driver in the increases has been rising prices for fuel – natural gas, coal and oil.  For example, the price of natural gas to power plants grew 64 percent in nominal terms and 36 percent in real terms between 2000 and 2007.
Again, as everyone probably knows, those fuel price increases have already begun to moderate – to put it mildly – and we expect over the next couple of years the same will happen to electricity prices.  However, we do not expect them to fall back to the levels seen in 2000. 
Both fuel prices and new power plant costs are expected to remain higher than they were before the price run ups that occurred over the last 6 or 7 years.
Between 2007 and 2030, we project that real electricity prices will increase by 15 percent while nominal electricity prices increase by 66 percent.

## Generation mix gradually shifts to lower carbon options

**Coal**

**Natural Gas**

**Nuclear**

**Renewable**

**Oil & Other**

***Generation mix gradually shifts to lower carbon options***

**billion kilowatthours**

**Projections**

**History**

- EIA Annual Energy Outlook 2009 Reference Case Presentation -- December 17, 2008

**Notes:**
After 5 decades of fairly steady growth, increases in coal generation are expected to slow over the next two decades.   Between 1988 and 2007 coal’s share of generation has fallen from 57 % to 49 % as existing plants are approaching full utilization and few new plants have been added.  
Over the next two decades,  coal’s generation share is projected to fall as low as 45 % before rebounding slightly in the last few years of the projections.  The combination of higher plant costs, higher coal prices and concerns about GHG regulations that might be enacted have dampened interest in building new coal plants.
Recently, natural gas has been the fuel of choice for new power plants.  Between 2000 and 2007, natural gas’s share of total generation grew from 16 % to 21 % and it is expected to maintain a share of between 19 % and 22 % throughout the projections.   New natural gas plants are much less expensive than most other generating options and their relatively low GHG emissions make them a fairly low risk bet when uncertainty exists about the nature, stringency and timing of possible GHG regulations.
Renewable generation is projected to show the strongest growth between now and 2030.  Spurred by incentive programs in more than half the states, the renewable share of generation is projected grow from 8 % of generation in 2007 to 14 % of generation in 2030.  Excluding hydro, the share of generation from renewables grows from 2.5 percent in 2007 to 8.3 percent in 2030.
While nearly 13,000 megawatts (roughly 9 plants) of new nuclear capacity is projected its share of generation declines slightly over the projections.

## Nonhydropower renewable power meets 33% of total generation growth between 2007 and 2030 

**Biomass**

**Wind**

**Solar**

**Waste**

**Geothermal**

***Nonhydropower renewable power meets 33% of total generation growth between 2007 and 2030 ***

**billion kilowatthours**

**History**

**Projections**

- EIA Annual Energy Outlook 2009 Reference Case Presentation -- December 17, 2008

**Notes:**
While the generation from all non-hydro renewable is expected to grow, biomass and wind are projected to be the largest contributors to the growth.  Between 2007 and 2030, wind generation increases by more than 300 percent while biomass generation increases by more than 500 percent.
Even though the tax credits for wind currently expire at the end of 2009, State renewable portfolio standard programs are expected to continue to make new wind plants attractive.
These RPS programs are also expected to make biomass generation attractive, particularly when co-fired in coal power plants.
In percentage terms the strongest growth in non-hydro renewable generation occurs with solar generation which increases by almost 1700 percent between 2007 and 2030.  The tax credit for new solar facilities currently runs through 2016, a significant period to spur its growth.  However, even with this strong growth, solar only accounts for 0.4 percent of total generation in 2030.
A key uncertainty in these projections is whether States will strictly enforce their RPS requirements if the tax credits that are now scheduled to expire are not renewed.  If they do not, the growth in non-hydro renewable generation would not be as strong as is shown here.

## Natural gas and renewables provide most of the generating capacity added between 2007 and 2030

**gigawatts**

***Natural gas and renewables provide most of the generating capacity added between 2007 and 2030***

- EIA Annual Energy Outlook 2009 Reference Case Presentation -- December 17, 2008

**Notes:**
The combination of growing concerns about potential greenhouse gas regulations, higher construction costs, particularly for coal and nuclear plants, and State programs supporting renewables, causes new gas and renewable plants to dominate power plant additions.
For renewables, State RPS programs are key, but if States do not enforce these programs if the Federal tax credits are not extended their growth could be smaller.
Among the renewables the strongest is in new wind plants, where over 27 gigawatts are added.

## Growth in energy-related CO2 emissions slows with slowing growth in energy use and a shift to less carbon-intensive fuels

***Growth in energy-related CO******2****** emissions slows with slowing growth in energy use and a shift to less carbon-intensive fuels***

**History**

**Projections**

**million metric tons**

**AEO2008 reference case**

**AEO2009 reference case**

- EIA Annual Energy Outlook 2009 Reference Case Presentation -- December 17, 2008

**Notes:**
Total energy-related CO2 emissions are lower in the AEO2009 reference case when compared with the AEO2008 reference case as the changes made in the projection reduce total energy consumption and shift consumption to fuels that are less carbon-intensive or carbon neutral. 
Total energy-related CO2 emissions in 2030 are 6,410 million metric tons in the AEO2009 reference case, 441 million metric tons or 6.4 percent less then the 6,851 million metric tons in the AEO2008 reference case. Energy related CO2 emissions grow at 0.3 percent per year from 2007 to 2030 in the AEO2009 reference case and per capita emissions fall by 0.6 percent per year.

## Electricity generation is the dominant source of  CO2 emissions growth

**AEO2009**
**2030**

**AEO2008**
**2030**

**2007**

***Electricity generation is the dominant source of  CO******2 ******emissions growth***

**Delivered, including losses in electricity generation**

**million metric tons**

- EIA Annual Energy Outlook 2009 Reference Case Presentation -- December 17, 2008

**Notes:**
The level of energy-related CO2 emissions in the AEO2009 reference case is lower than in the AEO2008 reference case due to higher energy prices and changes in the mix of energy demand by sector, particularly in the electric power sector.  
Energy-related CO2 emissions reflect the quantities of fossil fuels consumed, and because of their varying carbon content, the mix of coal, petroleum, and natural gas.  Given the high carbon content of coal and its use to generate over half of electricity currently, prospects for CO2 emissions depend partly on the growth in electricity.  Electricity sales in the AEO2009 reference case grow by 0.8 percent a year between 2007 and 2030, or about half the growth rate over the last 23 years.  Electricity growth slows as a result of a variety regulatory and socio-economic factors, including appliance and building efficiency standards, higher energy prices, housing patterns, and economic activity.  With slower electricity growth and an increased use of renewables for electricity generation influenced by RPS laws in many states, electricity-related CO2 emissions grow by just 0.5 percent per year from 2007 to 2030.   
CO2 emissions from transportation activity also slow compared to the recent past, as Federal CAFE standards increase the efficiency of the vehicle fleet while higher fuel prices moderate the growth in travel.   

## Key results from AEO2009 reference case

***Key results from AEO2009 reference case***

- World oil prices rise to higher levels due to growth in world demand and more limited access to resources
- U.S. oil use remains near its present level through 2030 as modest growth in overall liquids demand is met by biofuels
- U.S. dependence on imported oil, measured as a share of U.S. liquids use, is expected to decline sharply over the next 25 years
- Natural gas import share of total supply also declines sharply due to increased domestic production with higher prices
- Unconventional natural gas production, lead by gas shales, is expected to provide the majority of growth in gas supply
- Energy-related CO2 emissions grow at 0.3 percent per year, absent any new policy to control emissions

- EIA Annual Energy Outlook 2009 Reference Case Presentation -- December 17, 2008

**Notes:**
High energy prices and changing energy policies, which stress energy efficiency and alternative fuels, are moderating energy consumption growth, reducing dependence on energy imports, and lowering growth in GHG emissions.
Despite recent weakness, world oil prices are expected to rise substantially over the next 20+ years as world demand grows and access to resources is more restricted.
Even without enactment of GHG legislation, uncertainty about potential provisions is impacting energy investment decisions.  The AEO2009 reflects the impact of that uncertainty in a shift to less carbon intensive energy investments.
U.S. liquids import dependence, measured as a share of U.S. liquids use, declines over the next 25 years from 58 percent in 2007 to less than 40 percent in 2025 before increasing to 41 percent in 2030.
Total domestic production of natural gas is significantly higher in the AEO2009 reference case compared to the AEO2008 reference case.  The growth in domestic production is more rapid then the rate of growth in consumption over the same period.  As a result, net imports decline and the share of U.S. natural gas supply met by imports falls from 16 percent in 2007 to 3 percent in 2030.
Most of the growth in domestic natural gas supply is in nonconventional production.  In particular, gas shale production grows at a 5.7 percent per year rate to over 4 TCF.
Carbon dioxide emissions from energy grow at only 0.3 percent per year, independent of any new policy

## www.eia.doe.gov

**howard.gruenspecht@eia.doe.gov**

**   ****Periodic Reports**
***   ******Petroleum Status and Natural Gas Storage Reports*****, weekly*****  ***
***   ******Short-Term Energy Outlook*****, monthly**
***   ******Annual Energy Outlook 2009*****, December 2008/ February 2009**
***   ******International Energy Outlook 2008*****,  August 2008**
***  ******U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves 2007, *****October ****	****2008 (Advance Summary), January 2009 (Full Report)**
**   ****Examples of Special Analyses**
***   ******Analysis of Crude Oil Production in the Arctic National Wildlife Refuge*****,                 ****	****May 2008**
***   ******Energy Market and Economic Impacts of S.2191, the Lieberman-Warner Climate ******	******Security Act of 2007*****,  April 2008**
**   “****Impacts of Increased Access to Oil and Natural Gas Resources in the Lower 48               ****	****Federal Outer Continental Shelf,” *****Annual Energy Outlook 2007***
***   *** ***The Global Liquefied Natural Gas Market: Status and Outlook, *****December 2003***** ***

**www.eia.doe.gov**

- EIA Annual Energy Outlook 2009 Reference Case Presentation -- December 17, 2008

## GHG regulatory uncertainty in the AEO2009

***GHG regulatory uncertainty in the AEO2009***

- Although no Federal legislation has been passed, regional groups and State regulators are enacting regulations and the financial community is behaving as if they anticipate regulations
- Energy companies are being encouraged to shift investments towards less GHG-intensive technologies
- To represent this behavior in the *AEO2009* reference case, a 3-percentage-point cost of capital penalty has been added when evaluating investments in GHG-intensive technologies
- This penalty is meant to represent the implicit cost being added to GHG-intensive projects to account for the risk that they may have to purchase allowances or make other investments in the future to offset GHG emissions

- EIA Annual Energy Outlook 2009 Reference Case Presentation -- December 17, 2008

**Notes:**
Even without enactment of legislation, regulators and investment community are beginning to push energy companies to shift their investments towards less GHG intensive technologies.
Key questions are
Is the ongoing debate already impacting energy market planning and operating decisions?
How should these actions be represented? 
Could add explicit GHG fee to the operating costs for all plants that emit CO2.  Would impact utilization decisions for all plants as well as planning decisions about new capacity  
Costs of building and financing new GHG intensive capacity could be adjusted to reflect the cost of the perceived risk being added by power companies, regulators, and the financial community 
AEO2009 reference case adds 3 percent increase in the cost of capital when evaluating investments in GHG intensive technologies 
Similar to a $15 per ton CO2 emissions fee when investing in a new coal plant without CCS  
Complete AEO will include 2 additional cases  
A case including no adjustment for expectations about potential GHG regulations
A case incorporating an explicit limit on U.S.GHG emissions using a cap and trade approach

## U.S. Gross Domestic Product(billion 2000 chain-weighted dollars)

**Economic growth returns to trend after near term slow down**

- EIA Annual Energy Outlook 2009 Reference Case Presentation -- December 17, 2008

**Notes:**
For both the AEO2009 and AEO2008, the real GDP growth rate, measured from 2007 to 2030, is 2.5 percent, with differences in the growth of the first part of the projection.

Population estimates come from Census long-term projections.  These projections were updated in mid-August 2008.  As a result, population growth in AEO2009 is slightly higher, showing 0.9 percent growth from 2007 to 2030, compared to AEO2008’s forecast of 0.8 percent.  Upward revisions to population growth later in the forecast allows GDP growth to reach 2.6 percent from 2015-2030.

## Peak to Trough Change in Real GDP(Percent)

**Reference Case Assumes Current Recession is Worse than Past Two Recessions**

- EIA Annual Energy Outlook 2009 Reference Case Presentation -- December 17, 2008

**Notes:**
On a quarterly basis, real GDP projections will decline for four consecutive quarters, starting in 2008Q3; however the growth rate won’t be above trend until the middle of 2010.
Quarterly Real GDP growth (annualized)
2008Q3:  -0.3%
2008Q4:  -3.6%
2009Q1:  -2.7%
2009Q2:  -1.1%
2009Q3:  0.2%
2009Q4:  1.7%
Yearly growth 2008 is at 1.3%; 2009 is -1.3%; 2010 is 2.3%

## Growth In Liquids Supply And Price (Average Percent Per Year)

**Demand for Liquid Fuels Grew More Rapidly than Non-OPEC Supply over the Last Four Years**

**Price**

**Volume**

- EIA Annual Energy Outlook 2009 Reference Case Presentation -- December 17, 2008

**Notes:**
The rapid oil price increases over the past four years have been due in large part to the inability of non-OPEC liquids production to keep pace with demand growth. 
From 2000 to 2003, non-OPEC liquids production grew faster than world demand and prices declined slightly.  
From 2003 to 2007, non-OPEC liquids production compensated for less than half of the growth in world consumption and prices increased at an average annual rate of 20 percent.
From 2010 to 2015, EIA expects that growth in non-OPEC liquids production will again fall short of world liquids demand and that as a result prices will rise to slightly higher than the 2008 annual average (of about $100 per barrel).  
Long-term price projections are largely due to four primary factors; demand, non-OPEC conventional oil supply, unconventional liquids supply, and OPEC investment and production decisions.

## New Light Duty Vehicle Fuel Economy(miles per gallon, based on CAFE test)

**Projection**

**History**

***New Light Duty Vehicle Fuel Economy******(miles per gallon, based on CAFE test)***

- Car

- Combined

- Light Truck

**Newly enacted CAFE standards in EISA will require significant increases in light duty vehicle fuel economy**

- EIA Annual Energy Outlook 2009 Reference Case Presentation -- December 17, 2008

**Notes:**
Newly Proposed CAFE standards will require significant increases in light duty vehicle fuel economy – 35 mpg by 2020
New standards require large fuel economy increases in initial enactment years
Relatively stagnant new light vehicle fuel economy during the last 20 years (approximately 25 mpg).  
Some improvement realized but, shift to trucks kept light vehicle fuel economy flat
There were significant improvements in engine efficiency and increases in technology adoption, but those went to horsepower/vehicle performance improvement not increased fuel economy
AEO2009 projections shows CAFE standards are met and, in fact,  exceeded as consumers/industry acceptance of hybrids and diesel power trains grows
By 2030 new car fuel economy 41.4 mpg, light truck 32.9 mpg and average 37.9 

## New Alternative Light Vehicle Sales(percent of total sales)

**Projection**

**History**

***New Alternative Light Vehicle Sales******(percent of total sales)***

- Electric Drive

- Alternative Fuel Capable

- Diesel

**Alternative light duty vehicle sales increase from 10 percent in 2007 to 63 percent by 2030**

- EIA Annual Energy Outlook 2009 Reference Case Presentation -- December 17, 2008

**Notes:**
Alternative light vehicle sales increase from 10 percent in 2007 to 63 percent by 2030. With largest share going to hybrids, representing over 95 percent of electric drive vehicles.
Significant increases in hybrid and flex fuel vehicles through 2015 driven by CAFE, CAFE credits, and ethanol mandates
Flex fuel market penetration peaks in 2015 at 18 percent, loses share to 14 percent by 2030, currently 6 percent (2007)
After 2015, hybrid and diesel vehicles continue to gain market share due to CAFE standards
Hybrid gains throughout the projection reaching 39 percent by 2030, currently (2007) 2.4 percent
Diesel increases from 1.7 percent (2007) to 10 percent (2030)

## Components of Liquid Fuels (million barrels per day)

**2007**

**2015**

**2030**

**Petroleum Based**

**Biofuels**

- EIA Annual Energy Outlook 2009 Reference Case Presentation -- December 17, 2008

**Notes:**
This chart shows the components of liquid fuels with the petroleum content of motor gasoline, diesel and other fuels shown in the first three categories. The top category is the biofuel component that is blended into products such as motor gasoline (up to E10) and diesel.
Total liquids consumption is projected to decrease 700,000 barrels per day through 2015 before growing back to 21.6 million barrels per day in 2030.
The majority of the increase is met by biofuels on a volumetric basis.
The RFS is expected to be met at a level of 29.8 billion credits in 2022 through the use of waivers. After 2022 the biofuels industry is expected to continue growth under the reference case oil price regime.
The petroleum content of motor gasoline relative to all petroleum-based product output decreases which has and will continue to impact refinery operations.

## Commercial electricity sales drive growth

**Commercial**

**Industrial**

***Commercial electricity sales drive growth***

**billion kilowatthours**

**Residential**

- EIA Annual Energy Outlook 2009 Reference Case Presentation -- December 17, 2008

**Notes:**
Among the end use sectors, electricity sales to the commercial sector – offices, retail space, hospitals, warehouses – are expected to grow most rapidly.  Between 2007 and 2030, commercial sales increase 1.4 percent per year. 
In contrast, growth in the industrially is essential flat while the residential sectors sees growth of 0.8 percent per year.