Annual Energy Outlook 2014

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The U.S. Energy Information Administration (EIA) has released its Annual Energy Outlook 2014 (AEO 2014), detailing long-term projections for the U.S. through 2040 with respect to energy supply, demand, and prices. The report lists several key findings, including: increased use of natural gas-fired generation, the growth of oil and natural gas production, industrial production expansion, stabilized levels of carbon dioxide (CO2)emissions, and improved efficiency in light-duty vehicles.

Strong growth is expected in the industrial sector as it benefits from increased natural gas supply and low prices—both because natural gas is used as fuel for electricity generation and as an input for the production of plastics, chemicals, and pharmaceuticals. Further, low natural gas prices are anticipated to spur economic growth, which in turn increases the demand for goods produced by the industrial sector.

The AEO 2014 also highlights continued growth in the production of crude oil from tight oil and shale formations, as the result of technological advances and the discovery of additional resources. This growth is expected to slow beginning in 2021, though the outlook for production is uncertain given its heavy dependency on future technological advances.

The increasing availability of natural gas is also expected to drive increased usage of this commodity to fuel electricity generation. This increase is anticipated to significantly displace coal usage for electricity production. Additionally, slowed growth in electricity demand and downward price pressure on electricity is making nuclear generation sources less competitive. In fact, five nuclear power generators have announced plans to retire nuclear plants in the past two years—since then, four of these units have already ceased nuclear power production. Of the coal generation available in 2012, the AEO 2014 Reference Case projects 16 percent of these plants will be retired by 2020. EIA projects coal-fired generating capacity to be surpassed by natural gas generation capacity as the largest source of energy for electricity generation in 2035. Even prior to 2035, coal’s portion of total generation is projected to remain well below the 49 percent share it maintained in the U.S. in 2007, when coal set its highest annual generation record to date. In addition to low natural gas prices and slower growth in electricity demand, coal plants are also faced with increased environmental standards and the costs associated with meeting them, further impacting the competitiveness of coal-fired generation as compared to other fuel sources.

Another factor important to EIA’s projections is increased electricity produced by renewable resources. Renewable resources are anticipated by EIA to be the fastest growing source of electricity generation during the forecast period. Renewable electricity generation is projected by EIA to expand by 69 percent from 2012 to 2040, with non-hydropower renewable resources growing by over 140 percent. As electricity generation shifts to less carbon-intensive fuel sources, the AEO 2014 projects that energy production-related CO2 emissions levels will stabilize. The Reference Case shows that through 2040, CO2 emissions related to energy production would remain below 2005 levels, with the average per-kilowatt-hour (kWh) emission rate falling over time, primarily stemming from the shift from coal-powered generation to natural gas-fired generation coupled with increased renewable generation. As a result of these factors, electric power sector CO2 emissions are projected to increase by only 11 percent from 2012 to 2040, even as electric generation is projected to increase by 25 percent over that time period.

The AEO 2014 reports that, beginning in 2024 and for the first time in decades, the emissions from the industrial sector are set to exceed those from the transportation sector. While some growth is expected in vehicle miles traveled, transportation energy use is projected to decline, with significant declines in the gasoline consumption by light-duty vehicles. Light-duty vehicle fuel efficiency is expected to increase as the result of stricter emissions regulation standards and a change in use patterns.

For further information on the findings of the AEO 2014, including results from alternate scenarios with a range of varying assumptions, the full document can be found on EIA’s website: