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Annual Energy Outlook 2010 Reference Case

The Paul H. Nitze School of Advanced International Studies December 14, 2009 Washington, DC Richard Newell, Administrator. Annual Energy Outlook 2010 Reference Case. How does the AEO2010 reference case handle public policy and technology?. Generally assumes current laws and regulations

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Annual Energy Outlook 2010 Reference Case

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  1. The Paul H. Nitze School of Advanced International StudiesDecember 14, 2009Washington, DCRichard Newell, Administrator Annual Energy Outlook 2010 Reference Case Richard Newell, SAIS, December 14, 2009

  2. How does the AEO2010 reference case handlepublic policy and technology? • Generally assumes current laws and regulations • provisions sunset if specified (e.g., renewable tax credits expire) • excludes potential future laws and regulations (e.g., proposed greenhouse gas legislation is not included) • some grey areas • adopts proposed regulations that are not yet final, in order to inform the likely implementation of a statute • 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 building new energy infrastructure and resource extraction • Includes technologies that are commercial or reasonably expected to become commercial in the next decade or so • includes cost and efficiency improvements from learning, but not revolutionary or breakthrough technologies Richard Newell, SAIS, December 14, 2009

  3. Key updates included in the AEO2010 reference case • Extended projection period to 2035 • Changes in Federal and State laws and regulations • revised handling of fuel economy standards to reflect the proposal for light-duty vehicles in model years 2012-2016 • assumes permission will be granted to extend nuclear power unit operating licenses beyond 60 years; no retirements through 2035 • Revised capital costs for capital-intensive projects • overnight costs for nuclear and coal power up 10-20% • Changes to assumptions about oil and gas resource base • updated characterization of natural gas shales, reflecting evolution of shale gas resources and technology • new lower-48 onshore oil and gas supply submodule Richard Newell, SAIS, December 14, 2009

  4. Oil prices in the reference case rise steadily; the full AEO2010 will include a wide range of prices 2008 dollars per barrel History Projections High oil price AEO2009 reference AEO2010 reference Low oil price Richard Newell, SAIS, December 14, 2009 Source: Annual Energy Outlook 2010

  5. Oil to natural gas price ratio remains high over the projection Oil and natural gas prices 2008 dollars per million Btu Ratio of oil price to natural gas price Crude oil U.S. natural gas wellhead History Projections Richard Newell, SAIS, December 14, 2009 Source: Annual Energy Outlook 2010

  6. Non-fossil energy use grows rapidly, but fossil fuels still provide 78 percent of total energy use in 2035 quadrillion Btu History Projections Renewables (excluding liquid biofuels) Liquid biofuels Liquid fuels Coal Natural gas Nuclear Richard Newell, SAIS, December 14, 2009 Source: Annual Energy Outlook 2010

  7. Energy and CO2 per dollar GDP continue to decline;per capita energy use also declines index, 2005=1 History Projections Energy per capita Energy per dollar GDP CO2 per dollar GDP Richard Newell, SAIS, December 14, 2009 Source: Annual Energy Outlook 2010

  8. Energy efficiency gains reduce consumption 15% from where it would otherwise be; structural change is even larger quadrillion Btu 192 Constant intensity Structural change 133 Constant efficiency Efficiency change 115 AEO2010 reference case Richard Newell, SAIS, December 14, 2009 Source: Annual Energy Outlook 2010

  9. U.S. reliance on imported liquid fuels is reduced by increased domestic production and greater fuel efficiency million barrels per day History Projections Consumption 40% 45% Net imports 60% 57% Production AEO2010 reference case Updated AEO2009 reference case Richard Newell, SAIS, December 14, 2009 Source: Annual Energy Outlook 2010

  10. Biofuels meet most of the growth in liquid fuels supply million barrels per day History Projections Biofuels including imports Petroleum supply Natural gas plant liquids Net petroleum imports Richard Newell, SAIS, December 14, 2009 Source: Annual Energy Outlook 2010

  11. Biofuels grow, but fall short of the 36 billion gallon RFS target in 2022, exceed it in 2035 billion gallon-equivalents Renewable diesel Legislated RFS in 2022 Biomass-to-liquids RFS with adjustments under CAA Sec.211(o)(7) Biodiesel Net ethanol imports Other feedstocks Cellulosic ethanol Corn ethanol Richard Newell, SAIS, December 14, 2009 Source: Annual Energy Outlook 2010

  12. New light duty vehicle efficiency reaches 40 mpg by 2035 miles per gallon AEO2009 reference case Richard Newell, SAIS, December 14, 2009 Source: Annual Energy Outlook 2010

  13. Mild and full hybrid systems dominate new light-duty vehicle sales by 2035 millions History Projections Richard Newell, SAIS, December 14, 2009 Source: Annual Energy Outlook 2010

  14. Natural gas wellhead price is projected to rise from low levels experienced during 2008-2009 recession 2008 dollars per thousand cubic feet History Projections AEO2010 reference case Updated AEO2009 reference case Richard Newell, SAIS, December 14, 2009 Source: Annual Energy Outlook 2010

  15. Import share of natural gas supply declines as domestic supply grows trillion cubic feet History Projections 6% Consumption 2% 13% Net imports Domestic supply AEO2010 reference case Updated AEO2009 reference case Richard Newell, SAIS, December 14, 2009 Source: Annual Energy Outlook 2010

  16. Shale gas has been the primary source of recent growth in U.S. technically recoverable natural gas resources trillion cubic feet Unproved shale gas & other unconventional Unproved conventional (including Alaska*) 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: U.S. Geological Service, Mineral Management Service, private data, and EIA. Richard Newell, SAIS, December 14, 2009

  17. Shale gas and Alaska production offset declines in supply to meet consumption growth and lower import needs trillion cubic feet History Projections Alaska Shale gas Coalbed methane Non-associated onshore Non-associated offshore Associated with oil Net imports Richard Newell, SAIS, December 14, 2009 Source: Annual Energy Outlook 2010

  18. Growth in electricity use continues to slow 3-year rolling average percent growth Period Annual Growth 1950s 9.8 1960s 7.3 1970s 4.7 1980s 2.9 1990s 2.4 2000-2008 0.9 2008-2035 1.0 History Structural Change in Economy - Higher prices - Standards - Improved efficiency Projections Richard Newell, SAIS, December 14, 2009 Source: Annual Energy Outlook 2010

  19. Natural gas and renewables account for the majority of capacity additions from 2008 to 2035 2008 capacity Capacity additions 2008 to 2035 Hydropower* 99 (10%) Hydropower* 1 (0.4%) Nuclear 8 (3%) Coal 312 (31%) Coal 31 (12%) Nuclear 101 (10%) Other renewables 92 (37%) Other renewables 40 (4%) 250 gigawatts 1,008 gigawatts Other 119 (12%) Other 2 (1%) Natural gas 116 (46%) Natural gas 338 (33%) * Includes pumped storage Richard Newell, SAIS, December 14, 2009 Source: Annual Energy Outlook 2010

  20. Renewables gain electricity market share; coal share declines billion kilowatthours and percent shares History Projections 17.0 Renewable 9.1 20.8 Natural gas 21.4 Coal 43.8 48.5 Oil and other 1.4 1.5 Nuclear 19.6 17.1 Richard Newell, SAIS, December 14, 2009 Source: Annual Energy Outlook 2010

  21. Nonhydropower renewable sources meet 41% of total electricity generation growth from 2008 to 2035 billion kilowatthours History Projections Biomass Wind Solar Geothermal Waste Richard Newell, SAIS, December 14, 2009 Source: Annual Energy Outlook 2010

  22. Assuming no new policies, growth in energy-related CO2 is driven by electricity and transportation fuel use 2008 2035 Buildings and Industrial 1,571 (25%) Electric Power 2,634 (42%) Electric Power 2,359 (41%) Buildings and Industrial 1,530 (26%) 6,320 million metric tons 5,814 million metric tons 8.7% growth 0.3% per year Transportation 1,925 (33%) Transportation 2,115 (33%) Richard Newell, SAIS, December 14, 2009 Source: Annual Energy Outlook 2010

  23. Key results from the AEO2010 reference case • Recent Federal and State policies, and rising energy prices, moderate growth in energy consumption and shift it to renewable fuels • U.S. oil use remains near its present level through 2035 • growth in overall liquids demand is met by biofuels, and ethanol accounts for >17% of gasoline consumption by 2035 • U.S. reliance on imported oil as a share of U.S. liquids use, declines to 45% over the next 25 years • Shale gas provides the majority of growth in gas supply • Energy-related CO2 emissions grow 0.3% per year, absent any new policies to limit emissions Richard Newell, SAIS, December 14, 2009

  24. 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 U.S. Energy Information Administration www.eia.gov Richard Newell, SAIS, December 14, 2009

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