U.S. Energy Information Administration U.S. Energy Information Administration #AEO2017 www.eia.gov/aeo 1

• As demand grow modestly, the primary drivers for new generation capacity in the Reference 

case are:

– retirement of older, less efficient fossil fuel units—largely spurred by the Clean Power 

Plan (CPP)—and 

– the near-term availability of renewable tax credits Federal tax credits drive near-term 

growth in renewables, displacing growth in natural gas.

• Even if the CPP is not implemented, low natural gas prices and the tax credits result in 

natural gas and renewables as the primary sources of new generation capacity.

• The future generation mix is sensitive to the price of natural gas and the growth in 

electricity demand

Key takeaways: AEO2017 Electricity Sector Outlook
U.S. Energy Information Administration U.S. Energy Information Administration #AEO2017 www.eia.gov/aeo

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

199020162040199020162040199020162040199020162040

Electricity use by sector 

billion kilowatthours

direct use

electricity 

sales

residential industrial

commercial transportation -2

0

2

4

6

8

10

1960 1980 2000 2020 2040

Electricity use growth rate (Reference case)

percent growth (three-year rolling average)

2016

history projections

2

Electricity use continues to increase—
U.S. Energy Information Administration U.S. Energy Information Administration #AEO2017 www.eia.gov/aeo 3

• In recent history, the growth in electricity demand has slowed as older equipment was 

replaced with newer, more efficient stock, as efficiency standards were implemented and 

technology change occurred, particularly in lighting and other appliances. The demographic 

and economic factors driving this trend included slowing population growth and a shifting 

economy toward less energy-intensive industries.

• While growth in the economy and electricity demand remain linked, historically the linkage 

has continued to shift toward much slower electricity demand growth relative to economic 

growth.

• Growth in electricity demand, while relatively low historically, begins to rise slowly across the 

projection period as demand for electric services is only partially offset by regulatory 

compliance and efficiency gains in electricity-using equipment.

—but the rate of growth remains lower than historic averages in the 

Reference case
U.S. Energy Information Administration U.S. Energy Information Administration #AEO2017 www.eia.gov/aeo 4

• Policy-driven economic incentives accelerate renewable generation. With a continued (but 

reduced) tax credit, solar capacity growth continues throughout the projection period, while 

tax credits provided for plants entering service until, but no later than 2024, provide 

incentives for new wind capacity in the near term.

• With solar energy's declining capital costs and solar electricity output that is highest during 

times of high (on-peak) demand, solar capacity is anticipated to grow throughout the 

projection period.

Changing market conditions
U.S. Energy Information Administration U.S. Energy Information Administration #AEO2017 www.eia.gov/aeo

-30

-20

-10

0

10

20

30

40

2005 2010 2015 2020 2025 2030 2035 2040

Annual electricity generating capacity additions and retirements (Reference case) 

gigawatts

2016

history projections

solar

wind

oil and gas

nuclear

other

coal

additions

retirements

5

Lower capital costs and the availability of tax credits boost near-term 

wind additions and sustain solar additions—
U.S. Energy Information Administration U.S. Energy Information Administration #AEO2017 www.eia.gov/aeo 6

• In the Reference case, nearly 70 gigawatts (GW) of new wind and solar photovoltaic (PV) 

capacity is added over 2017–21, encouraged by declining capital costs and the availability 

of tax credits. 

• Most of the wind capacity used to comply with the Clean Power Plan (CPP) is built prior to 

the scheduled expiration of the production tax credit for wind in 2025, although wind is still 

likely to be competitive without the tax credits.

• Continued coal retirements under the CPP support a consistent market for new generating 

capacity throughout the projection period.

• After 2030, new generation capacity additions are split primarily between solar and natural 

gas, with solar capacity representing more than 50% of new capacity additions in the 

Reference case. 

Coal-fired plant retirements in the Reference case are driven by low 

load growth and the Clean Power Plan
U.S. Energy Information Administration U.S. Energy Information Administration #AEO2017 www.eia.gov/aeo

Fuel prices and regulations drive growing shares of renewables 

and natural gas as coal’s share declines in the Reference case

7

0

500

1000

1500

2000

2500

2000 2010 2020 2030 2040 2050

2016

history projections

natural gas

renewables

coal

nuclear

petroleum

With Clean Power 

Plan (Reference case)

Electricity generation

billion kilowatthours

2020 2030 2040 2050

No Clean Power Plan 
U.S. Energy Information Administration U.S. Energy Information Administration #AEO2017 www.eia.gov/aeo

0

100

200

300

400

500

600

2000 2005 2010 2015 2020 2025 2030 2035 2040

Renewable electricity generation (Reference case)

billion kilowatthours

2016

history projections

wind

utility-scale 

and end-use 

solar

hydroelectric

biomass

geothermal

8

Wind and solar generation become the predominant sources of 

renewable generation in the Reference case—
U.S. Energy Information Administration U.S. Energy Information Administration #AEO2017 www.eia.gov/aeo 9

• The Clean Power Plan (CPP) and state-defined Renewable Portfolio Standards (RPS) 

increase demand for wind and solar electricity generation throughout the projection period. 

• The scheduled expiration of production tax credits encourage an increase in wind capacity 

additions ahead of CPP implementation. While many wind projects would be economic 

without the tax credits, most of the profitable wind capacity will be added to take advantage 

of the tax credits prior to their expiration.

• Substantial cost reductions, performance improvements, and a permanent 10% investment 

tax credit support solar generation growth throughout the projection period.

• Some geothermal resources are also competitive sources of new generation, but these 

lowest-cost resources are geographically limited and are only expected to be exploited 

slowly.

—each surpassing hydroelectric generation
U.S. Energy Information Administration U.S. Energy Information Administration #AEO2017 www.eia.gov/aeo

0

20

40

60

80

100

120

2010 2020 2030 2040

Nuclear electricity generating capacity

gigawatts

2016

history projections

Reference

case

-4

-3

-2

-1

0

1

2

3

2015 2020 2025 2030 2035 2040

Year-over-year nuclear capacity changes 

gigawatts

additions

retirements

assumed uprates

new reactors

actual/announced

retirements

projected

retirements

Reference

case

10

Assumptions about license renewals in AEO2017 increase nuclear 

retirements—
U.S. Energy Information Administration U.S. Energy Information Administration #AEO2017 www.eia.gov/aeo 11

• No new, unannounced nuclear capacity is added in the Reference case over the projection 

period because of the combination of low natural gas prices, higher renewables penetration, 

low electricity load growth, and relatively high capital costs. 

• New capacity additions are limited to reactors under construction from 2017 onward and to 

projected uprates at existing reactors. From 2018 through 2040, 4.7 gigawatts (GW) of 

capacity is projected to come online, based on an assessment of the remaining uprate 

potential at existing reactors.

—leading to net nuclear capacity decreases 
U.S. Energy Information Administration U.S. Energy Information Administration #AEO2017 www.eia.gov/aeo 12

• A significant reduction in nuclear capacity occurs because of 6.4 GW of total announced 

retirements; 3.0 GW of projected retirements in 2019–20 to address near-term, market 

uncertainty; and approximately 10.6 GW of long-term retirements through 2040 to address 

the uncertainty of reactors achieving a subsequent license renewal. As many nuclear plants 

reach the 60-year subsequent license renewal decision after 2040, retirements continue, 

with another 11.7 GW of nuclear capacity projected to retire by 2050.

• All nuclear plant retirements other than those already announced were modeled as capacity 

reductions for the regional nuclear fleets (i.e., as generic derates), rather than as 

retirements of specific plants.

—leading to net nuclear capacity decreases (cont’.)
U.S. Energy Information Administration U.S. Energy Information Administration #AEO2017 www.eia.gov/aeo 13

• Fuel prices drive near-term natural gas and coal shares. As natural gas prices rebound 

from their 20-year lows which occurred in 2016, coal regains a larger generation share over 

natural gas through 2020.

• Federal tax credits drive near-term growth in renewables, displacing growth in natural gas.

• In the longer term, policy (Clean Power Plan, renewables tax credits, and California’s SB32) 

and unfavorable economic conditions compared with natural gas and renewables result in 

declining coal generation and growing natural gas and renewables generation in the 

Reference case. 

Coal’s generation mix share declines over time
U.S. Energy Information Administration U.S. Energy Information Administration #AEO2017 www.eia.gov/aeo 14

• Energy storage: Improve the representation of energy storage to accommodate multiple 

grid services including spinning reserve and renewables integration.

• Renewable generation: Include improved representation of intermittent generation 

resources such as wind and solar. Examine the potential for transmission enhancements to 

mitigate regional effects of high levels of wind and solar generation. Develop higher 

resolution time-of-day and seasonal value and operational impact of wind.

EIA will continue to update and refine the market dynamics and 

technologies in future AEOs, especially with the projection extended 

to 2050. Ongoing work aims to: 
U.S. Energy Information Administration U.S. Energy Information Administration #AEO2017 www.eia.gov/aeo 15

• Utility rate structure: Estimate the impact of high levels of distributed photovoltaic 

generation on utility rate structure. 

• Generator retirement: Assess the vintage of the electric generation fleet and potential for 

future retirements and life extension for all technologies, including existing nuclear, coal, 

natural gas, and renewable fleets. 

Ongoing work aims to: (cont’.)