Annual Energy Outlook 2011

Reference Case

The Paul H. Nitze School of Advanced International Studies

December 16, 2010

Washington, DC

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, December 16, 2010 2
• 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 market behavior regarding possible CO2 regulation

– 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

Richard Newell, December 16, 2010

What is included (and excluded) in developing EIA’s 

“Reference case” projections?

3
• 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, December 16, 2010 4
Richard Newell, December 16, 2010

Global energy consumption

5
Richard Newell, December 16, 2010

Non-OECD countries account for vast majority of the nearly 

50% projected increase in global energy use by 2035

0

200

400

600

800

2007 2015 2020 2025 2030 2035

Non-OECD

OECD w/o U.S.

U.S.

495

543

590

639

687 739

50%

62%

50% 38%

20% 16%

energy consumption

quadrillion Btu

Source: EIA, International Energy Outlook 2010 6
Richard Newell, December 16, 2010

Overview of U.S. energy 

supply and demand

7
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, December 16, 2010 8
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

History Projections

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, December 16, 2010 9
0

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, December 16, 2010 10
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 CO2 per dollar of GDP continue to decline;

per-capita energy use also declines

index, 2005=1

History Projections

Source: EIA, Annual Energy Outlook 2011

2009

Energy per capita

Energy per dollar GDP

CO2 per dollar GDP

Richard Newell, December 16, 2010 11
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 CO2

emissions grow almost 6% over 2005 levels by 2035

billion metric tons carbon dioxide

Energy-related CO2 emissions

History Projections

Richard Newell, December 16, 2010 Source: EIA, Annual Energy Outlook 2011

2009

2005 2020 2035

Energy-related CO2

emissions

 

5.98

 

5.77

 

6.31

% change from 2005 - - -3.4% 5.6%

2005

12
Richard Newell, December 16, 2010

Electricity

13
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 woodderived 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%

Richard Newell, December 16, 2010 Source: EIA Electric Power Monthly, October 2010 14
Richard Newell, December 16, 2010

-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

15
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

History Projections

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, December 16, 2010 16
Updated electric power plant capital costs show increases 

for nuclear, coal, and wind, while solar costs decline

0

1000

2000

3000

4000

5000

6000

7000

Natural Gas

CC

Pulverized

Coal

 IGCC 

CCS

Nuclear Wind Biomass Solar

Thermal

Photovoltaic

AEO 2010 AEO 2011

Source: EIA, Annual Energy Outlook 2011

overnight capital cost

2009 dollars per kilowatt

Richard Newell, December 16, 2010

+39%

+25%

+37%

+1%

+21%

-2%

-10%

-25%

17
Richard Newell, December 16, 2010

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

History Projections

Solar

Biomass

Geothermal

Waste

Source: EIA, Annual Energy Outlook 2011

2009

18
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

Richard Newell, December 16, 2010 Source: EIA, Annual Energy Outlook 2011

Wind

27 (12%)

Wind

32 (3%)

19

End-use coal

4 (0.3%)

End-use coal

7 (3%)
Richard Newell, December 16, 2010

Natural gas

20
U.S. shale gas production increased 14-fold over the last 

decade; reserves tripled over the last few years

0.0

1.0

2.0

3.0

4.0

5.0

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, December 16, 2010 21
Shale gas has been the primary source of recent growth in 

U.S. technically recoverable natural gas resources

0

250

500

750

1000

1250

1500

1750

2000

2250

2500

2750

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

1481

2552

245

Richard Newell, December 16, 2010 22
10

15

20

25

30

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

30% domestic gas production growth outpaces 16% 

consumption growth, leading to declining imports

Consumption

Domestic supply

Net imports

History Projections

AEO2011 Reference case

AEO2010 Reference case

1%

6%

11%

Richard Newell, December 16, 2010 Source: EIA, Annual Energy Outlook 2011

2009

U.S. dry gas

trillion cubic feet per year

23
Richard Newell, December 16, 2010

0

5

10

15

20

25

30

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

Shale gas offsets declines in other U.S. supply to meet 

consumption growth and lower import needs

U.S. dry gas

trillion cubic feet per year

Alaska

Non-associated offshore

History Projections

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%

45%

1%

28% Tight gas 22%

24
0

5

10

15

20

25

30

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

U.S. dry gas consumption

trillion cubic feet per year

Commercial

Transportation** Residential

Central electric power

Industrial*

* Includes combined heat-and-power and lease and plant fuel. ** Includes pipeline fuel.

Source: EIA, Annual Energy Outlook 2011

2009

3%

14%

35%

18%

29%

3%

14%

32%

21%

30%

History Projections

Richard Newell, December 16, 2010

Natural gas consumption is quite dispersed; industrial and 

electric power use drives future demand growth

25
Source: EIA, Annual Energy Outlook 2011

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, December 16, 2010 26
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

History Projections

Source: EIA, Annual Energy Outlook 2011

2009

Richard Newell, December 16, 2010

0

1

2

3

4

5

6

7

8

9

10

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

AEO2010

Updated AEO2009

AEO2011

27
Richard Newell, December 16, 2010

Oil and other liquid fuels

28
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

History Projections

Source: EIA, Annual Energy Outlook 2011

2009

High oil price

Low oil price

AEO2011 Reference

Richard Newell, December 16, 2010 29

annual average price of low sulfur crude oil

real 2009 dollars per barrel
Unconventional sources more than triple globally, but conventional 

petroleum continues to comprise the vast majority of liquids supply

0

20

40

60

80

100

120

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

Source: EIA, Annual Energy Outlook 2011

global liquids production

million barrels per day

History 2009 Projections

12%

47%

40%

39%

5%

56%

OPEC conventional

Non-OPEC conventional

Unconventional

Richard Newell, December 16, 2010 30
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

History Projections

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%

Richard Newell, December 16, 2010

Liquids from coal

2%

31
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

Richard Newell, December 16, 2010

Total consumption

32
billions 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

Richard Newell, December 16, 2010 Source: EIA, Annual Energy Outlook 2011 33
0

5

10

15

20

25

30

35

40

45

2000 2005 2010 2015 2020 2025 2030 2035

New light duty vehicle fuel economy achieves almost 38 mpg 

by 2035 in the Reference case

miles per gallon

Source: EIA, Annual Energy Outlook 2011

History 2009 Projections

Richard Newell, December 16, 2010 34

Summary of standards

2012-2016: 34.1 mpg CAFE average (based on NHTSA 

vehicle footprint sales distribution)

2020: 35 mpg by statute

2017-2025: Reference case does not include proposal 

planned for September 2011
0

4

8

12

16

1995 2000 2005 2010 2015 2020 2025 2030 2035

Most transport fuel growth is in light and heavy duty vehicles

U.S. transportation energy consumption

million barrels per day oil equivalent

Rail

Air

History Projections

Heavy-duty vehicles

Light-duty vehicles

Marine

Source: EIA, Annual Energy Outlook 2011

2009

4%

67%

2%

10%

16%

64%

20%

9%

4%

2%

Richard Newell, December 16, 2010 35
Source: 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, December 16, 2010

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

36
Richard Newell, December 16, 2010

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

History Projections

37
• 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, December 16, 2010 38
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Richard Newell, December 16, 2010 39

2011 EIA Energy Conference — April 26 - 27, 2011 

For information and email updates: 

www.eia.gov/conference/2011 
Richard Newell, December 16, 2010

Some supply sources and demand sectors are strongly 

linked, while others are more dispersed

Source: EIA Annual Energy Review 2009 40

2009