# Annual Energy Outlook 2011 and an update on EIA activities NGA Center for Best Practices

State Energy Working Group February 8, 2011 Richard Newell, Administrator

## • Increased estimates for U.S. shale gas resources drive increased U.S. production, lower prices, and lower imports of natural gas • Industrial natural gas demand recovers, reversing recent trend • Non - hydro renewables and natural gas are the fastest growing electricity generation sources, but coal remains the dominant fuel because of the large amount of existing capacity • Oil imports fall due to increased domestic production— including biofuels—and greater fuel efficiency • U.S. carbon dioxide emissions rise slowly, but do not pass 2005 levels again until 2027 

## Key results from the **AEO2011** Reference case, which assumes current laws remain unchanged

Richard Newell, February 8, 2011 2

## 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 sunset as specified in law (e.g., renewable tax credits expire) 

## • Includes technologies that are commercial or reasonably expected to become commercial over next decade or so

– includes projected cost and efficiency improvements due to technology improvements, as well as cost reductions linked to cumulative deployment levels.

– does not assume revolutionary or breakthrough technologies 3

Richard Newell, February 8, 2011

### • Natural gas and oil supply

– More than doubled the technically recoverable U.S. shale gas resources assumed in AEO2010 and added new shale oil resources

– Updated offshore data and assumptions, pushing out start dates for several projects as a result of the drilling moratoria and delaying Atlantic and Pacific offshore leasing beyond 2017 

### • Electricity

– Updated costs for new power plants

– Expanded number of electricity regions to 22 from 13, allowing better regional representation of market structure and power flow 

### • Transport

– Increased limit for ethanol blending into gasoline from E10 to E15 for approved vehicles, as a result of the EPA waiver granted in October 2010

– Includes California’s Low Carbon Fuel Standard, which reduces the carbon intensity of gasoline and diesel fuels in that state by 10% from 2012 through 2020

– Revised light duty vehicle miles travelled downward

– Updated electric and plug - in hybrid electric battery cost and size 

## Key updates included in the **AEO2011** Reference case

Richard Newell, February 8, 2011 4Richard Newell, February 8, 2011 

# U.S. Energy Consumption

5

## Current U.S. energy supply is 83% fossil fuels; demand is broadly distributed among the major sectors Energy supply Energy demand

Source: EIA Annual Energy Review 2009 Nuclear 9% Renewable 8% Coal 21% Natural Gas 25% Petroleum 37% Transportation 29% Electricity – Residential 15% Industrial (non -electric) 20% Electricity – Industrial 10% Electricity – Commercial 15% Residential & Commercial (non -electric) 11% Residential & Commercial 42% Industrial 30% 

### 2009 total U.S. energy use = 94.6 quadrillion Btu

Richard Newell, February 8, 2011 6

### 0 25 50 75 100 125

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 

## Renewables grow rapidly, but under current policies fossil fuels still provide 78% of U.S. energy use in 2035 U.S. primary energy consumption quadrillion Btu per year Coal Oil and other liquid fuels Natural gas Projections History

Nuclear Liquid biofuels Renewables (excluding liquid biofuels)

Source: EIA, Annual Energy Outlook 2011 37% 25% 21%
9% 7%
1% 33% 24% 21% 10%

8% 3% Shares of total U.S. energy 2009

Richard Newell, February 8, 2011 70 50 100 150 200

2005 2010 2015 2020 2025 2030 2035 

## Energy efficiency gains reduce consumption 13% from where it would otherwise be; structural change is even larger quadrillion Btu

Source: EIA, Annual Energy Outlook 2011 Constant efficiency Constant intensity Efficiency change Structural

change AEO2011 Reference case -33%

- 13%

Richard Newell, February 8, 2011 8

### 0.00 0.25 0.50 0.75 1.00 1.25 1.50 1.75

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 

## Energy and CO 2 

## per dollar of GDP continue to decline; per-capita energy use also declines index, 2005=1 Projections History

Source: EIA, Annual Energy Outlook 2011 2009 Energy per capita Energy per dollar GDP CO2 per dollar GDP
Richard Newell, February 8, 2011 9

### 0 1 2 3 4 5 6 7

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 

## In the **AEO2011** Reference case, energy- related CO 2 

## emissions grow almost 6% over 2005 levels by 2035 billion metric tons carbon dioxide Energy- related CO2 emissions Projections History

Source: EIA, Annual Energy Outlook 2011 Richard Newell, February 8, 2011 2009
2005 2020 2035 Energy- related CO2 emissions 5.98 5.77 6.31 % change from 2005 - - -3.4% 5.6% 2005

10Richard Newell, February 8, 2011 

# Electricity

11

## In 2009, electricity generation was 70% fossil fuels, 20% nuclear, and 10% renewable
Nuclear

20.2% Natural gas 23.3% 

### 2009 Total net generation: 3,953 billion kWh

Coal 44.6% 

### 2009 Non - hydro renewable net generation: 141 billion kWh

Geothermal: 0.4% Other biomass: 0.5% Wood and wood derived fuels: 0.9% Other renewable 3.6% Conventional hydroelectric 6.9% Other 0.3% Wind: 1.8% Solar thermal and PV: <0.1% Petroleum 1.0% Other gases 0.3%

Source: EIA Electric Power Monthly, October 2010 Richard Newell, February 8, 2011 12Richard Newell, February 8, 2011 

### -2

0 2 4 6 8 10 12 14

1950 1960 1970 1980 1990 2000 2015 2025 2035 

## While projected electricity consumption grows by 30%, the rate of growth has slowed percent growth (3-year rolling average) Projections History Period Annual Growth 1950s 9.8 1960s 7.3 1970s 4.7 1980s 2.9 1990s 2.4 2000-2009 0.5 2009-2035 1.0

Source: EIA, Annual Energy Outlook 2011 2009

13

### 0 1 2 3 4 5 6

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 electricity net generation trillion kilowatthours per year
Natural gas Renewable Projections History

Nuclear Oil and other Coal
20% 23% 25% 1% 1% 45% 43% 14% 10% 17% 

### The projected electricity mix gradually shifts to lower-carbon options, with generation from natural gas rising 37% and renewables rising 73%

Source: EIA, Annual Energy Outlook 2011 2009

Richard Newell, February 8, 2011 14Richard Newell, February 8, 2011 

### 0 50 100 150 200 250 300 350 400 450

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035



## Non - hydro renewable sources grow nearly three-fold, meeting 23% of projected electricity generation growth non - hydropower renewable generation billion kilowatthours per year

Wind Projections History

Solar Biomass Geothermal Waste Source: EIA, Annual Energy Outlook 2011 2009

15

## Natural gas, wind and other renewables account for the vast majority of capacity additions from 2009 to 2035 Coal 313 (30%)

Natural gas 351 (34%) Hydropower* 99 (10%) Nuclear 101 (10%) Other renewables 15 (1%) Other fossil 118 (11%) * Includes pumped storage Coal 14 (6%) Natural gas 135 (62%) Hydropower* 3 (1%) Nuclear 6 (3%) Other renewables

27 (12%) Other fossil 1 (0.4%) 

### 2009 capacity Capacity additions 2009 to 2035 1,033 gigawatts 220 gigawatts

Source: EIA, Annual Energy Outlook 2011 Richard Newell, February 8, 2011 Wind 27 (12%) Wind 32 (3%)

16 End - use coal 4 (0.3%) End - use coal 7 (3%)Richard Newell, February 8, 2011 

# Natural gas

17

## Success in the Barnett prompted companies to look at other shale formations in the United States

18 Richard Newell, February 8, 2011

## U.S. shale gas production increased 14-fold over the last decade; reserves tripled over the last few years

0 1 2 3 4 5

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Eagle Ford (TX) Marcellus (PA and other Eastern states) Haynesville (LA and TX) Woodford (OK) Fayetteville (AR) Barnett (TX) Antrim (MI, IN, and OH)

Source: Lippman Consulting (2010 estimated) annual shale gas production trillion cubic feet per year

Richard Newell, February 8, 2011 1920 

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

0 500 1,000 1,500 2,000 2,500 3,000

2000 2005 2006 2007 2008 2009 2010 2011 AEO edition U.S. dry gas resources trillion cubic feet Unproved shale gas Unproved other gas (including Alaska* and offshore) 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: EIA, Annual Energy Outlook 2011 827 1,481 2,552

245 Richard Newell, February 8, 2011

### 0 5 10 15 20 25 30

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 

### Four-fold increase in shale gas production offsets declines in other U.S. supply, meeting consumption growth and lowering import needs U.S. dry gas trillion cubic feet per year

Alaska Non -associated offshore Projections History

Associated with oil Coalbed methane Net imports Non -associated onshore Shale gas

Source: EIA, Annual Energy Outlook 2011 2009 11% 1%

9% 7% 9% 8% 20% 14%

8% 2% 8% 7% 46%
1% Tight gas 28% 22%

21 Richard Newell, February 8, 2011Source: EIA, Annual Energy Outlook 2011 

### Natural gas consumption is quite dispersed; a number of key economic and market drivers underpin natural gas consumption growth Sector TCF gas consumption Growth (2009 -2035) 

### Key drivers 2009 2035 Industrial, including combined heatand - power 

### 7.3 9.3 26% +187% combined heat-and - power generation; +30% output of gasintensive industry; lower natural gas prices Central electric power 6.9 7.8 13% +30% electricity consumption; lower natural gas prices; offset by +72% renewable generation and +24% coal generation Commercial 3.1 3.8 22% +37% commercial floorspace; -3% energy intensity Residential 4.7 4.8 <1% +30% number of households; +19% total square footage; - 16% energy intensity Richard Newell, February 8, 2011 2223 

## Natural gas price projections are significantly lower than

past years due to an expanded shale gas resource base natural gas spot price (Henry Hub) 2009 dollars per million Btu Projections History

Source: EIA, Annual Energy Outlook 2011 2009

0 2 4 6 8 10

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 AEO2010 Updated AEO2009 AEO2011

Richard Newell, February 8, 2011Richard Newell, February 8, 2011 

# Oil and other liquid fuels

24

### 0 5 10 15 20 25

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 U.S. liquid fuels consumption million barrels per day Projections History Natural gas plant liquids Biofuels including imports Petroleum supply Net petroleum imports 

## U.S. imports of liquid fuels fall due to increased domestic production—including biofuels—and greater fuel efficiency 2009

Source: EIA, Annual Energy Outlook 2011 13% 12%
42% 31% 10% 4%

52% 34% Liquids from coal 2%

Richard Newell, February 8, 2011 25

### 0 2 4 6 8 10 12 14 16 18 20 22 2009 2035 U.S. liquid fuels million barrels per day Net product imports Net crude oil imports Natural gas plant liquids Liquids from coal 

## Biofuels, natural gas liquids, and crude oil production are key sources of increased domestic liquids supply

Source: EIA, Annual Energy Outlook 2011 Gulf of Mexico Crude oil production Biofuels (including net imports) Refinery processing gain Total consumption

Richard Newell, February 8, 2011 26billions ethanol -equivalent gallons

0 5 10 15 20 25 30 35 40 45

2009 2022 2035 

## Biofuels fall short of the goal in 2022, but exceed the 36 billion gallon RFS target by 2030 Legislated RFS in 2022 RFS with adjustments under CAA Sec.211(o)(7) Biodiesel Other Advanced Net imports Cellulosic biofuels Corn ethanol Source: EIA, Annual Energy Outlook 2011 Richard Newell, February 8, 2011 27Source: EIA, Annual Energy Outlook 2011 

## Efficiency improvements partially offset underlying drivers of growth in transportation services 2009 2035 Growth (2009 -2035) 

### Light duty vehicles Fuel consumption (million barrels per day oil equivalent) 

### 8.9 10.2 15% Number of licensed drivers (millions) 

### 207 265 28% Miles per licensed driver 13,100 15,300 17% Efficiency of vehicle stock (mpg) 

### 20.8 27.8 34%* 

### Heavy duty vehicles Fuel consumption (million barrels per day oil equivalent) 

### 2.2 3.2 47% Manufacturing output (billion 2005 dollars) 

### 4,197 6,761 61% Number of freight trucks (millions) 

### 8.7 16.6 90% Miles per vehicle 23,700 20,200 - 15% Efficiency of vehicle stock (mpg) 

### 6.1 6.6 9%** Richard Newell, February 8, 2011

* Equal to a 25% reduction in fuel use per mile. ** Equal to an 8% reduction in fuel use per mile. 28

## Unconventional vehicles meet over 40% of U.S. light-duty vehicle sales in 2035

0 5 10 15 20

2000 2009 2015 2020 2025 2030 2035 Conventional gasoline Diesel Gaseous and fuel cell Mild hybrid electric Hybrid electric Plug-in hybrid and all-electric E85 flex fuel U.S. light car and truck sales millions

Source: EIA, Annual Energy Outlook 2011 Projections History

Richard Newell, February 8, 2011 29Richard Newell, February 8, 2011 

### 0 25 50 75 100 125 150 175 200 225

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 

## Oil prices in the Reference case rise steadily; the full **AEO2011** will include a wide range of oil prices Projections History

Source: EIA, Annual Energy Outlook 2011 2009 High oil price
Low oil price AEO2011 Reference annual average price of low sulfur crude oil real 2009 dollars per barrel

30Richard Newell, February 8, 2011 

# Other EIA activities

31

## EIA’s Energy and Financial Markets Initiative • Collection of critical energy information to improve market transparency

– improved petroleum storage capacity data

– other improvements to data quality and coverage 

## • Analysis of energy and financial market dynamics to improve understanding of what drives energy prices

– internal analysis and sponsorship of external research 

## • Outreach with other Federal agencies, experts, and the public

– expert workshops

– public sessions at EIA’s energy conferences

– solicitation of public comment on EIA’s data collections 32

Richard Newell, February 8, 2011

## On Dec. 1, 2010, EIA started publishing much - improved data on petroleum products storage capacity • Analysis of inventory levels in the context of storage capacity is important for understanding petroleum market activity and price movements, especially at key market centers such as Cushing, OK • EIA’s new storage capacity data will be a major improvement over previous data

– greater coverage : EIA is collecting the new data from terminals and pipelines, in addition to refineries

– more frequent : unlike prior annual refinery-only data collection, the new data will be semi -annual, which is particularly important given opportunities to shift storage capacity across products to meet seasonal needs that vary across products

– market center information : in addition to standard PADD - level reporting, the new data will break out storage capacity at Cushing 33 Richard Newell, February 8, 2011

## Many factors influence the formation of oil prices and other energy prices

Richard Newell, February 8, 2011 34 

### Supply Affected by current conditions and future expectations for: • energy prices • OPEC supply capacity • usable spare capacity • non -OPEC capacity • geopolitics • weather • E&P costs • E&P investments • E&P innovations Physical balancing • Inventories Markets & market behavior • Energy prices

‐ spot

‐ futures

‐ options

‐ spreads

‐ swaps • Other financial markets

‐ other commodity prices

‐ commodity investment

‐ currency exchange rates

‐ stocks and other assets

‐ interest rates Demand Affected by current conditions and future expectations for: • energy prices • economic growth • industrial production • goods transport • personal transport • weather • innovation in energyusing equipment Quick Facts to provide the most important State energy information  Overviews and maps to explain each State’s energy markets  Data tables to provide the most current State- level statistics from EIA surveys 

### State Energy Profiles feature...

 Comprehensive data for analysis  Analytical tool  Common units  All fuels, all sectors 

### State Energy Data System (SEDS) 

## EIA portals provide State energy data in one convenient place

35 Richard Newell, February 8, 2011

## New this year for State Energy Profiles and State Energy Data System • State Energy Profiles

– New maps of selected energy- intensive areas (June 2010)

– New dynamic graphs on State profile pages (in development)

– Website redesign (launching soon) 

## • State Energy Data System

– Improved estimation methodology (June 2010)

– New tables for total end - use consumption (publishing soon)

– Website redesign (launching soon)
36

Richard Newell, February 8, 2011

### • Only comprehensive source of energy- related characteristics and consumption across U.S. households • Only EIA survey that collects household data; conducted every 4 years 

## Residential Energy Consumption Survey (RECS)

0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40

New England Middle Atlantic East North Central West North Central South Atlantic East South Central West South Central Mountain Pacific Census DivisionQuadrillion Btu (quads) Electricity Natural Gas Fuel Oil Other

0.00 0.10 0.20 0.30 0.40 0.50 0.60

Space Heating AirConditioning Water Heating Refrigerators Other Energy End UseQuadrillion Btu (quads) New York Florida Texas California

37 Richard Newell, February 8, 2011 Fuel use varies by region... ...due in part to different end - use needs

# Expanded 2009 RECS RECS 2005  4,382 completed interviews  Low sampling precision for all areas (census regions, divisions, States)  National, census region and division estimates, but state- level estimates for only four states  Sample too small to support complex analyses 

# RECS 2009  12,083 completed interviews  Greater precision assured for key geographies and statistics  End use statistics for 16 states, with more precision (MA, NY, PA, NJ, VA, GA, FL, TN, MI, IL, WI, MO, TX, CO, AZ, CA) 

###  Greater statistical power for multivariate analyses  First release of 2009 RECS Home Energy Characteristics in March 2011 38 Richard Newell, February 8, 2011

## A new EIA.gov goes live this week • New homepage and improved navigation • Updated logo and new visual identity • A new “Today in Energy” education product that:

– Publishes a daily release of timely and topical bites of our information, on the EIA homepage, in plain language.

– Allows us to highlight current issues, topics, and trends. 39 Richard Newell, February 8, 201140 

## 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 EIA Information Center (202) 586-8800 Live expert from 9:00 AM – 5:00 p.m. EST Monday – Friday (excluding Federal holidays) email: InfoCtr@eia.gov Richard Newell, February 8, 2011Richard Newell, February 8, 2011 

## Some supply sources and demand sectors are strongly linked, while others are more dispersed

Source: EIA Annual Energy Review 2009 41 2009