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Annual Energy Outlook 2016

Full Release Date: September 15, 2016   |  Next Early Release Date:  January 2017   |  full report

Market Trends: U.S. energy demand

Industrial and commercial sectors lead U.S. growth in primary energy use

Total energy consumption increases by an average of 0.4%/ year, reaching 107.1 quadrillion British thermal units (Btu) in 2040 in the AEO2016 Reference case, and at a somewhat faster 0.5%/year in the No CPP case, to 109.9 quadrillion Btu in 2040 (Figure MT-8). Energy consumption declines over the 2015– 40 period in the transportation and residential sectors and increases in the commercial and industrial sectors. The decline in transportation sector energy consumption would be even
greater with the Phase 2 standards for medium- and heavy-duty vehicles proposed jointly by the National Highway Traffic Safety Administration and the U.S. Environmental Protection Agency, which are not considered in the Reference case. Feedstock use in the chemical industry accounts for approximately 40% of the 9.6 quadrillion Btu increase in total industrial sector energy consumption in the Reference case and almost 40% of the 10.4 quadrillion Btu increase in the No CPP case. Increases in nonfeedstock industrial natural gas use account for slightly more than 25% of the sector’s increase in the Reference case, more than half of which results from the use of natural gas as lease and plant fuel and to liquefy natural gas for export.

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Energy use in the commercial sector increases by about 2.2 quadrillion Btu from 2015 to 2040 in the Reference case, with most of the increase attributable to electricity consumption despite increases in efficiency that reduce energy use for space heating, lighting, refrigeration, and personal computers. In the No CPP case, energy use in the commercial sector increases by 3.3 quadrillion Btu from 2015 to 2040.

In both the residential and transportation sectors, energy use in the AEO2016 Reference case declines from 2015 through the early 2030s before it begins to increase again. Energy use in the transportation sector is affected less by the CPP than the other end-use sectors, as the CPP has no direct effect on transportation sector energy consumption. In the Phase 2 Standards case, transportation sector energy consumption is more than 1.5 quadrillion Btu lower in 2040 compared with the Reference case. In the Reference case, energy use in the residential sector declines despite population growth, as the efficiency of space heating and lighting improves. For the residential and transportation sectors combined, energy use declines by 1.6 quadrillion Btu from 2015 to 2040 in the Reference case, as compared with a decline of 0.7 quadrillion Btu in the No CPP case.

Renewables and natural gas lead rise in primary energy consumption

The fossil fuel share of total energy use declines in the Reference case from 82% in 2015 to 77% in 2040, while renewable energy use grows (Figure MT-9). The renewable share of total energy use (including liquid biofuels) increases from 9% in 2015 to 15% in 2040 in response to the Clean Power Plan (CPP), availability of federal tax credits for renewable electricity generation and capacity during the early years of the projection, and state renewable portfolio standard programs.

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Natural gas consumption grows by about 0.9%/year from 2015–40, led by increases in natural gas use for electricity generation and in the industrial sector. Growing production from tight shale keeps the price of natural gas to end users below 2009–10 levels through 2040. Increases in vehicle fuel economy offset growth in transportation and industrial fuel use, resulting in a decline in total consumption of petroleum and other liquids from 2020–30. After 2030, petroleum and other liquids consumption rises through 2040 but does not return to the 2020 peak level. With the proposed medium- and heavy-duty vehicle Phase 2 standards for fuel consumption and greenhouse gas emissions in effect, consumption of petroleum and other liquids would be 1.5 quadrillion British thermal units (Btu) lower in 2040 than in the Reference case, or about equal to 2014 levels.

Coal consumption declines by an average of 1.4%/year from 2015–40, with most of the reduction occurring from 2015–30. A small amount of coal-fired power plant capacity is added through 2040, including a total of 0.3 gigawatts (GW) currently under construction and another 0.2 GW (with carbon sequestration capability) added after 2016. Consumption of renewable energy surpasses the use of energy from coal-fired generation in 2026. Energy consumption—both the total and the mix—in the No CPP case is different from that in the Reference. Total energy consumption in 2040 is about 2.7 quadrillion Btu higher in the No CPP case, with about 4.7 quadrillion Btu more coal consumption, 1.6 quadrillion Btu less renewable energy consumption, and 0.6 quadrillion Btu less natural gas consumption than in the Reference case.

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