Higher prices, increasing supply demands from developing nations, recently enacted U.S. regulations and changing public attitudes toward greenhouse gas (GHG) emissions and alternative fuels are all forcing changes in worldwide energy markets, the Energy Information Administration (EIA) said in its Annual Energy Outlook 2008 (AEO).
Foremost among those trends is the increase in energy prices since 2000. When combined with slower U.S. economic growth — the AEO forecasts gross domestic product growing at 2.6% annually through 2030, down from EIA’s 2007 forecast of 2.9% — those higher prices will result in total primary energy consumption increasing at an average rate of just 0.9% per year, to 123.8 quadrillion Btus (quads) in 2030 from 100.0 quads in 2006 — 7.4 quads less than EIA predicted last year.
EIA forecasted that the real wellhead price of natural gas in 2006 dollars will decline through 2017 as new supplies enter the market before rebounding to $6.60/Mcf ($10.40/Mcf in nominal dollars) by 2030, reflecting an increase in production costs and supported by higher oil prices.
The report projects natural gas production increasing to 20.2 Tcf in 2021 from 18.6 Tcf last year before declining to 19.9 Tcf in 2030. Lower 48 offshore natural gas production is expected to grow to a peak of 4.5 Tcf in 2019 from 3.0 Tcf in 2006 as new resources come online in the Gulf of Mexico, then decline to 3.5 Tcf by 2030. Working under the assumption that the Alaska natural gas pipeline will be completed in 2020, EIA forecast total Alaskan natural gas production increasing to 2.0 Tcf in 2021 from 0.4 Tcf in 2006 and hitting 2.4 Tcf in 2030 as the result of subsequent expansion.
Electricity prices will follow trends in the delivered prices of fuels to power plants, rising through 2009 and then declining for the next decade before, again, rising slowly, EIA said. From a peak of 9.3 cents/kWh (2006 dollars) in 2009, average delivered electricity prices will decline to 8.5 cents/kWh in 2019 and then increase to 8.8 cents/kWh in 2030, it predicted. In nominal dollars, the average delivered electricity price was projected to reach 13.9 cents/kWh in 2030.
Total electricity consumption, including both purchases from electric power producers and on-site generation, was forecast to grow to 5,149 billion kWh in 2030 from 3,821 billion kWh in 2006, increasing at an average annual rate of 1.3%. EIA said the natural gas share of electricity generation, including generation in the end-use sectors, will remain between 20% and 21% through 2018 before falling to 14% in 2030. The coal share, which was 49% in 2006, will decline slightly over the next decade to 48% in 2017 before increasing to 55% in 2030.
EIA’s projections for minemouth coal prices were virtually unchanged from last year’s report with one notable exception: Wyoming’s Powder River Basin, where the average price in 2030 was forecast to be 70 cents/MMBtu, 18% above the previous EIA projection. That change reflects a less optimistic outlook for improvements in coal mining productivity, EIA said. Average real minemouth coal prices (in 2006 dollars) will fall to $1.15/MMBtu in 2020 from $1.21/MMBtu in 2006, EIA said. After 2020, the construction of new coal-fired power plants will increase total coal demand and prices will rise to $1.21/MMBtu in 2030, it added.
Nuclear generating capacity, which stood at 100.2 GW in 2006, will increase to 118.8 GW in 2030, based on 20 GW of capacity at newly built nuclear power plants and 2.7 GW from uprates of existing plants and partially offset by 4.5 GW of retirements, according to the government agency.
EIA also recalculated the renewable energy consumption in the report, saying it will grow to 12.2 quads in 2030 from 6.8 quads in 2006, a 23% increase from its previous prediction.
“The higher level of renewable energy consumption is partially a result of higher energy prices…but it also reflects a revised representation of state renewable portfolio standards,” EIA said. “The updated representation of these programs results in significant additional growth of renewable generation from wind, biomass and geothermal resources.”
Without changes in current carbon emissions policies that were not assumed in the AEO, carbon dioxide (CO2) emissions will grow sharply, but to lower levels than EIA previously predicted because of lower primary energy consumption. EIA now forecasts energy-related CO2 emissions to grow by 25% between 2006 and 2030, down from EIA’s 2006 projection of 35%.
The report indicates ethanol consumption growing to 13.5 billion gallons in 2012 from 5.6 billion gallons last year, far exceeding the 7.5 billion gallons required by the the Energy Policy Act of 2005. Ehthanol consumption, based almost entirely on gasoline blending, will balloon to 17 billion gallons in 2030, EIA said.
The AEO presents a midterm projection and analysis of U.S. energy supply, demand, and prices through 2030 based on results from the EIA’s National Energy Modeling System, using existing policies and a given set of assumptions regarding economic, energy market and technology conditions. A final version of the AEO will be released early next year.
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