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  Report #: SR-OIAF/2009-03  Released Date: April 2009  Next Release Date: One-Time

### An Updated Annual Energy Outlook 2009 Reference Case Reflecting Provisions of the            American Recovery and Reinvestment Act and Recent Changes in the Economic Outlook

| 2.  Summary of Impacts 

The primary  factors driving the differences between the published AEO2009 reference case and the no-stimulus case are the updated  macroeconomic forecast and the adjustments to the near-term world oil  prices.  However, other factors including  the updated CAFE standards and the reintroduction of CAIR have impacts in  specific sectors. 
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Relative to the  published AEO2009 reference case: 
- Gross domestic product (GDP) growth rates are       substantially lower in the short term;  although the long-run growth rate is  only lower by 0.1 percentage points over the 23 years from 2007 to 2030.  Both investment and exports show the largest  downward revisions due to higher projected inflation and interest rates and  lower expected foreign growth.  Most of  the differences between the revised reference with ARRA and the no-stimulus  case occur within the first 6 years of the projection period, during which the  ARRA provisions dampen the depth of the economic downturn.  However, by 2030 real GDP is higher in the  no-stimulus case as a result of higher investment, lower interest rates, and  lower inflation at the end of the period in the no-stimulus case. 
- Industrial output growth is lower, as exports and       investment show slower projected  growth.  Machinery and primary metals industrial  growth slows as these sectors are impacted by exports and investment  demand. The reduction in industrial  output is due to revisions in forecasted final demands rather than any update  in recent historical output.  Most of the  differences in industrial output growth occur between the original and revised  baselines rather than between the updated reference case with ARRA and the  no-stimulus case. 

When comparing  the no-stimulus case to the updated  reference case with ARRA, the largest  impacts are seen in the renewable electricity and buildings sectors.  The key differences include: 

Renewable Electricity 
- A significant expansion in the use of renewable       fuels for electricity generation,  particularly in the near-term.  The extension of key Federal tax credits and  the new loan guarantee program in ARRA both stimulate increased renewable  generation relative to the published AEO2009  reference case and the no-stimulus case (Figure 1). 
- By 2012, wind generation with the ARRA is expected       to be more than twice that  projected in the no-stimulus case,  201 billion kilowatthours compared to 86 billion kilowatthours and estimated  generation of 53 billion kilowatthours in 2008.   Although wind capacity growth is projected to slow significantly after  the expiration of the Federal tax credits in 2012, by 2030 total installed wind  capacity is projected to be 67 percent greater because of the ARRA-stimulated  growth than in the no-stimulus case. 
- Geothermal capacity is also projected to grow significantly       more than in the no stimulus case.  Installed geothermal capacity in 2013 is 16  percent greater in the updated reference case with ARRA than in the no-stimulus  case, 3.0 gigawatts, compared with 2.6 gigawatts. 
- Projected additions of       new biomass capacity are also accelerated by the renewable  electricity provisions of the ARRA,  and by 2030, projected installed capacity is 18 percent higher compared to the  no-stimulus case. 

Buildings 
- Weatherization and efficiency improvements       spurred by ARRA funding affect  household heating and cooling energy  use the most, reducing heating consumption by 1.7 percent in 2030 and cooling  consumption by 3.4 percent in 2030. 
- The provisions of ARRA lead to lower household       energy bills.  Over the 2009 to  2030 period, annual  non-transportation household energy expenditures average $64 (real 2007  dollars) lower with ARRA, with a peak year difference of $98 (4.5 percent)  lower in 2028. 
- ARRA funding for Federal buildings and the State       Energy Program funds efficiency  improvements for public buildings,  reducing commercial fuel oil consumption by 3.0 percent in 2030. 
- The ARRA funding and emphasis on renewable energy       projects foster an increase in  commercial sector photovoltaic  capacity of 121 megawatts (15 percent) by 2011.   The removal of the $4,000 cap on the investment tax credit for  distributed wind turbines also provides an added boost, leading to a 120  megawatts (527 percent) increase in commercial sector wind capacity by 2016 in  the updated reference case with ARRA. 
- ARRA reduces commercial sector energy       expenditures by an average of $5.7 billion  (2.7 percent) annually (real 2007  dollars) between 2010 and 2030. 
- Excluding transportation-related expenditures,       total residential and commercial energy bills are $13 billion (2.6  percent) and $21 billion (3.8 percent) lower respectively in 2020 and 2030  (Figure 2). 

Carbon Dioxide  Emissions 
- Energy-related carbon dioxide emissions in the       updated reference case with ARRA  are 1.3 percent lower than in the  no-stimulus case in 2013 because of ARRA’s impacts on renewable electricity  generation and overall energy consumption (Figure 3).  By 2030, they continue to be below the level  in the no-stimulus case, but only by 0.6 percent.  Again, the emission changes largely result  from ARRA’s energy-efficiency and renewable incentives that lead to reduced use  of fossil fuels. |
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