The Energy Information Administration (EIA) Annual Energy Outlook 2014 (AEO), released on May 7, projects slow growth in electricity demand through 2040, with natural gas and renewables taking an increasing share of the generation mix while coal and nuclear continue to decline.
The 2014 AEO sees the current weak growth in electricity demand continuing through the next several decades, as rising demand for electricity service is offset by gains in energy efficiency. Total demand is projected to grow 29% from 2012 to 2040, an average of 0.9% per year. Per capita and per dollar GDP energy use are expected to continue the long decline that begin in the 1990s. Retail electricity prices (in constant 2012 dollars) are projected to rise slightly, from 9.8 cents/kWh in 2012 to 11.1 cents/kWh in 2040, while natural gas prices rise from $3.44/MMBtu in 2012 to $8.16/MMBtu in 2040.
Coal is projected to lose its place as the leading generation source by 2035, as 73% of new generation through 2040 is accounted for by gas, with wind and solar taking up nearly all the rest (24%). New nuclear capacity (about 3%) is largely offset by expected retirements. Cumulative coal plant retirements since 2012 peak at around 50 GW before 2020, after which newer, more efficient plants are expected to continue supplying the bulk of generation through 2035, but virtually no new capacity is projected to come online during this period.
The EIA considered an alternate case under assumptions of increased operations and maintenance costs for coal plants, potentially as a result of more stringent emissions controls. In this case, cumulative retirements could hit 110 GW by 2040. Almost all of this would be replaced by natural gas and renewables. However, the result of this lost capacity would be an 11% increase in natural gas prices and a 12% increase in electricity prices over the reference case. Carbon dioxide emissions over the same period would be 20% below those of the reference case.
Similar assumptions that could lead to accelerated nuclear plant retirements were found to result in more than 30 GW of additional lost capacity by 2040. Though the effect on retail prices was modest, it also resulted in higher CO2 emissions, as this lost capacity is mostly replaced by gas.
One interesting possibility the AEO explores is the potential for much greater oil and gas production than is projected by the reference case. This is perhaps a recognition that past AEOs—which are by nature conservative—have significantly underestimated growth in production from shale. The alternate projection assumes continued improvements in technology that allow for greater recovery from existing wells and increased productivity from new wells. (This is, in fact, the trend that has been seen in the shale industry over the past decade.) Under these assumptions, the U.S. becomes a net exporter of petroleum liquids by 2036, while exports of natural gas are about 45% higher than in the reference case. Though the effect on world crude oil prices is modest, domestic gas prices remain largely flat though 2040.
—Thomas W. Overton, associate editor (@thomas_overton, @POWERmagazine)
This post has been updated to correct an error in 2040 electricity price data.