Navigant Research Blog

ExxonMobil’s Energy Outlook Gives Reasons for Hope

Bob Lockhart — January 9, 2014

ExxonMobil released its annual Outlook for Energy on December 12, 2013.  The Outlook is breathtaking in its detail, but one sentence in the press release caught my eye:

“Energy used for power generation will continue to be the largest component of global demand and is expected to grow by more than 50 percent by 2040 as improved living standards that come with urbanization and rising incomes lead to increased household and industrial electricity consumption through wider penetration of electronics, appliances and other modern conveniences.”

First, it caught my eye as one who writes for a living: here at Navigant Research, we avoid really long sentences such as the above 56-word leviathan.

More seriously, ExxonMobil forecasts that electricity usage will increase by 90% between 2010 and 2040, and that power generation will remain the leading component of energy demand.  The Outlook suggests that much of this demand will come from the increasing electrification of developing economies and the resulting surge in energy demand within those economies.  For the quality-of-life improvements these increases portend in developing economies, I am thankful.

Other Factors

ExxonMobil also forecasts that, “In the power generation sector, policies to stem GHG emissions will likely raise electricity costs for consumers, slowing demand growth.  Power producers will also seek to utilize more efficient electricity-generating technologies, and shift from coal toward lower-emission fuel sources like natural gas, nuclear and renewables.”

While ExxonMobil’s Outlook focuses on electricity generation, there are other influences upon energy demand that must be considered:

  • Demand-side management (DSM) programs, such as demand response (DR) and time-of-use (TOU) pricing, can influence consumers to shift consumption to off-peak periods, when renewable energy resources may exceed demand.
  • Then again, some energy demand is nearly inelastic.  We Texans don’t like higher energy bills any more than anyone else, but we like boiling hot homes during the summer even less.  We really wish the winds out in the Panhandle would blow in the middle of the summer afternoon, instead of 3 a.m. on a cold winter’s morning.
  • Conservation voltage reduction – the subject of an upcoming report from Navigant Research– can reduce energy requirements with no customer action.  Automated control of capacitor banks or voltage regulators enables utilities to run their distribution grids at slightly lower voltages, reducing energy consumption by up to 4% with zero effect upon service to customers.
  • Advances in transmission and distribution (as covered in Navigant Research’s report, High-Voltage Direct Current Transmission Systems) can reduce reactive loss for energy transmission, delivering more of the generated energy to consumers.  This becomes critical as renewable energy sources are exploited far from the load centers (i.e., cities).

Reasons for Optimism

These are all topics that we cover at Navigant Research and will continue to cover during 2014.  In one sense, the smart grid is all about getting more out of the same amount of energy.  More power from the same power, if you will.

I am nearly certain that ExxonMobil’s prognosticators will have considered all these issues in their forecasts.  Still, it bears repeating that there are lots of reasons to feel optimistic about our energy future.  To the degree that improved technology makes life better in developing economies, that’s one more reason to be optimistic.

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