Navigant Research Blog

Old McDonald Had a Grid, EIA AEO

Brett Feldman — February 15, 2018

The US Energy Information Administration (EIA) released its 2018 Annual Energy Outlook (AEO) on February 6. Several short- and long-term trends warrant highlighting as follows:

  • US net energy exports occur over the projection period to 2050 in most scenarios that are modeled.
  • The US becomes a net energy exporter by 2022 in reference case, due to strong domestic production and relatively flat demand.
  • The fuel mix of energy consumption changes significantly over time, with natural gas and renewables growing while coal, nuclear, and oil decrease.

Energy Consumption by Source (Reference Case) – Quadrillion British Thermal Units

(Source: US Energy Information Administration, Annual Energy Outlook)

GDP Outpaces Energy Consumption

Residential and commercial sectors will likely have increased energy efficiency offsets growth in energy demand in residential and commercial sectors. Energy consumption grows about 0.4% per year on average, while GDP is expected to average 2.0% annual growth to 2050 in the reference case, showing a decoupling between economic expansion and energy use. Lighting displays the largest drop in both sectors due to the increasing penetration of LEDs.

On the residential side, all types of appliances are expected to become more efficient, water heating shows a sizable decrease due to heat pumps, among other reasons, while cooling actually has an increase resulting from a continued population shift to warmer parts of the US, lower heating demand, and increase cooling demand. However, increased adoption of electronic devices contributes to growth in residential use of electricity.

Electricity used for commercial HVAC equipment is likely to drop by more than one-third from 2017 to 2050 in the reference case because of increases in energy efficiency and a continued population shift toward warmer parts of the country in the South and West. Although the US has no federally-mandated commercial building energy code, state and local-level building codes reduce energy used for heating and cooling.

Use of Purchased Electricity per Household (Reference Case) – Thousand Kilowatt-Hour per Household

(Source: US Energy Information Administration, Annual Energy Outlook)

Use of Purchased Electricity per Square Foot of Commercial Floor Space (Reference Case) – Thousand Kilowatt-Hour per Square Foot

(Source: US Energy Information Administration, Annual Energy Outlook)

Natural Gas or Renewables Take the Lead

Most new electricity generation capacity will likely be natural gas or renewables after 2022 (per the reference case), as a result of low natural gas prices, declining renewables technology costs, and supportive policies, mostly at the state level. These findings lineup with Navigant Research’s recent forecasts in its Global DER Deployment Forecast Database report, which expects distributed energy resources capacity additions to outpace centralized generation going forward.

Annual Electricity Generating Capacity Additions and Retirements (Reference Case) – Gigawatts

(Source: US Energy Information Administration, Annual Energy Outlook)

Light duty vehicle fuel economy will likely improve as sales of more fuel-efficient cars grow and as electrified powertrains gain market share, but gasoline vehicles remain the dominant vehicle type through 2050 in the reference case. Combined sales of new EVs, plug-in hybrid EVs, and hybrid vehicles are likely grow in market share from 4% in 2017 to 19% in 2050.

Light Duty Vehicle Sales by Fuel Type – Millions

(Source: US Energy Information Administration, Annual Energy Outlook)

During the press conference where these results were reported, there were audience questions that challenged some of the AEO’s assumptions about renewable energy and energy efficiency growth. Such concerns have also been raised after reading the report as well. The AEO does include a number of high and low cases to try to represent the range of potential outcomes. It is important to consider the AEO as a point of reference, but not take it as gospel. As a professional market research analyst, my goal is for my analysis and forecasts to reflect the general trends in the industry and spark intelligent debate.

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