The craterous impact of the Covid-19 pandemic on energy demand is likely to ripple out into the next decade, with consumption potentially not returning to pre-pandemic levels until 2029 or later, the U.S. Energy Information Administration (EIA) said in its latest long-term projections.
The agency’s 2021 Annual Energy Outlook (AEO2021), released on Wednesday, projects changes in domestic and global energy trends over the next three decades. The report, the first AEO to account for the impacts of the coronavirus pandemic, lays out a future characterized by slower consumption growth “in an increasingly energy-efficient U.S. economy.”
This slower growth in consumption will stand in contrast to an increasing supply of energy from oil and natural gas, as well as from renewable sources, according to the agency.
Under the AEO2021 reference case, the baseline model EIA used to incorporate various assumptions about technology, policy and the U.S. economy in the decades ahead, U.S. energy consumption won’t recover to 2019 levels until 2029. However, the agency cautioned that this prediction is “highly dependent” on how quickly the economy recovers from the pandemic.
Under a “low economic growth” case, U.S. energy consumption won’t return to pre-pandemic levels until 2050. By contrast, the markedly more sanguine “high economic growth” scenario would see consumption surpass 2019 peak levels by 2024.
“It will take a while for the energy sector to get to its new ‘normal,’” EIA Acting Administrator Stephen Nalley said. “The pandemic triggered a historic energy demand shock that led to lower greenhouse gas emissions, decreases in energy production and sometimes volatile commodity prices in 2020. The pace of economic recovery, advances in technology, changes in trade flows and energy incentives will determine how the United States produces and consumes energy in the future.”
Among the key findings from the AEO2021, EIA said it expects ongoing record domestic energy production to support natural gas exports, but this won’t necessarily mean growth in the U.S. trade balance in petroleum products. Future scenarios involving high oil and natural gas production or high oil prices are likely to lead to increased domestic production and net exports, potentially meaning the United States exports more energy than it imports through 2050, the agency said.
In the domestic power sector, EIA projects a future of “robust competition” between natural gas and renewables, with electricity demand expected to “largely return” to 2019 levels by 2025.
The share of natural gas in the power stack is expected to remain “relatively flat” at 36% in the decades ahead under the AEO2021 baseline projections. This comes as “renewable energy incentives and falling technology costs” are expected to coincide with strong growth in renewable capacity. Renewables are expected to account for 60% of electricity generation capacity additions from 2020 to 2050, according to EIA.
Coal and nuclear shares of electricity generation are both expected to fall by about half over that timeframe under the AEO2021 baseline.
Meanwhile, under most scenarios, U.S. energy-related carbon dioxide emissions are expected to decrease through 2035 before increasing, EIA said.
© 2021 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 | ISSN © 1532-1266 |