U.S. Energy Information Administration - EIA - Independent Statistics and Analysis
Annual Energy Outlook 2015
Appendix E -
Comparison of AEO2015 and AEO2014 Reference cases and key updates to models and data
This appendix provides a summary comparison of the Reference case for EIA's Annual Energy Outlook 2015 (AEO2015) with the Reference case for the Annual Energy Outlook 2014 (AEO2014), which was released in April 2014, including a list of major model and data updates and discussion of key differences in results between the two projections. Table E1 compares projections from the AEO2014 and AEO2015 reports.
Model and data updates
Key model and data updates made for the AEO2015 Reference case include the following:
- Incorporated the U.S. Bureau of Economic Analysis (BEA) gross domestic product component revision to 2009 dollars and investment definitional changes. The AEO2015 macroeconomic projections are based on November 2014 IHS Global Insight projections.
- Incorporated a new input-output matrix based on a 2007 benchmark year using 2009 dollars. The input-output matrix now continues to change over time, based on historical relationships developed using previous benchmark matrices to 2013.
Residential, commercial, and industrial
- Incorporated new standards for buildings equipment promulgated during the year, including standards affecting commercial refrigeration equipment, metal halide lamp fixtures, residential furnace fans, external power supplies, and set-top boxes (voluntary agreement).
- Updated cost and performance assumptions for end-use equipment in the buildings sector, based on a report by Navigant Consulting, Inc. and Leidos, reflecting recent and expected technological progress.
- Incorporated more rapid adoption of commercial building codes related to building shell efficiency, based on a Pacific Northwest National Laboratory report.
- Revised and refined market niches used in developing residential distributed generation projections to more accurately reflect solar insolation and marginal prices at the sub-Census division level, based on data from EIA's 2009 Residential Energy Consumption Survey and solar insolation data from the National Renewable Energy Laboratory. ,
- Incorporated 2012 State Energy Data System (SEDS) data for regional benchmarking in the industrial sector.
- Updated and implemented historical natural gas feedstock data in the industrial sector through 2013, based on data from GlobalData.
- Introduced a new Bayesian Dynamic Linear Model (DLM) for ethane and propane price projections in the industrial sector. In the DLM regression, parameters are allowed to vary over time to allow for a dynamic representation of various drivers of ethane and propane prices—such as oil price, natural gas price, hydrocarbon gas liquids (HGL) supply and demand, and bulk chemical shipments. The DLM projects base ethane and propane prices only at Mont Belvieu. To compute sectoral propane prices, historical differences between the base and sectoral prices for propane were applied to the DLM projections for propane. The resulting AEO2015 ethane and propane price projections exhibit a dominant natural gas price influence in the near term and a growing oil price influence in the long term.
|Energy and economic factors||2012||2013||AEO2015||AEO2014||AEO2015||AEO2014|
|Primary energy production (quadrillion Btu)|
|Crude oil and natural gas plant liquids||17.0||19.2||27.2||23.0||25.4||20.0|
|Dry natural gas||24.6||25.1||31.3||32.6||36.4||38.4|
|Conventional hydroelectric power||2.6||2.5||2.8||2.8||2.8||2.9|
|Other renewable energy||1.9||2.3||3.4||3.1||4.6||3.9|
|Net imports (quadrillion Btu)|
|Liquid fuels and other petroleumc||16.4||14||7.4||11.4||8.6||13.7|
|Natural gas (- indicates exports)||1.6||1.4||-3.5||-3.4||-5.6||-5.8|
|Coal, coal coke, and electricity (- indicates exports)||-2.8||-2.6||-2.7||-3.2||-3.5||-3.7|
|Total net imports||15.2||12.8||1.1||4.8||-0.5||4.2|
|Energy consumption by fuel (quadrillion Btu)|
|Liquid fuels and other petroleumd||35.2||35.9||36.9||36.3||36.2||35.4|
|Conventional hydroelectric power||2.6||2.5||2.8||2.8||2.8||2.9|
|Other renewable energy||1.9||2.3||3.4||3.1||4.6||3.9|
|Energy consumption by sector (quadrillion Btu)f|
|Liquid fuels (million barrels per day)|
|Domestic crude oil production||6.5||7.4||10.3||9.0||9.4||7.5|
|Other domestic production||4.5||5.2||6.5||5.1||6.5||5.2|
|Natural gas (trillion cubic feet)|
|Dry gas production and supplemental gas||24.1||24.5||30.6||31.9||35.5||37.6|
|Net imports (- indicates exports)||1.5||1.3||-3.5||-3.4||-5.6||-5.8|
|Coal (million short tons)|
|Total capacity, all sectors (gigawatts)||1,063||1,065||1,091||1,110||1,261||1,316|
|Total net generation, all sectors
|Total electricity use (billion kilowatthours)||3,834||3,836||4,282||4,385||4,797||4,954|
|Prices (2013 dollars)|
|Brent spot crude oil (dollars per barrel)||113||109||91||111||141||144|
|West Texas Intermediate spot crude oil
(dollars per barrel)
|Natural gas at Henry Hub (dollars per million Btu)||2.79||3.73||5.46||5.31||7.85||7.77|
|Domestic coal at minemouth (dollars per short ton)||40.5||37.2||40.3||50.4||49.2||60|
|Average electricity (cents per kilowatthour)||10.0||10.1||11.0||10.3||11.8||11.3|
|Real gross domestic product (trillion 2009 dollars)i||15.4||15.7||21.3||--||29.9||--|
|GDP chain-type price index (2009 = 1.00)i||1.05||1.07||1.31||--||1.73||--|
|Real disposable personal income
(trillion 2009 dollars)i
|Value of industrial shipments (trillion 2009 dollars)i||6.82||7||9.21||--||11.46||--|
|Energy-related carbon dioxide emissions
(million metric tons)
|Primary energy intensity
(thousand Btu per 2009 dollar of GDP)
|aIncludes waste coal consumed in the industrial and electric power sectors.
bIncludes non-biogenic municipal waste, liquid hydrogen, methanol, and some inputs to refineries.
cIncludes crude oil, petroleum products, petroleum coke, unfinished oils, alcohols, ethers, blending components, hydrocarbon gas liquids, and non-petroleum-derived fuels such as ethanol and biodiesel.
dIncludes petroleum-derived fuels and non-petroleum-derived fuels, such as ethanol and biodiesel, and coal-based synthetic liquids. Petroleum coke, which is a solid, is included. Also included are hydrocarbon gas liquids and crude oil consumed as a fuel.
eNet electricity imports, liquid hydrogen, and non-biogenic municipal waste.
fElectric power sector consumption is distributed to the end-use sectors.
gRepresents consumption unattributed to the sectors above.
hExcludes imports to Puerto Rico and the Virgin Islands.
iGDP, disposable income, value of shipments, and GDP price index were updated in AEO2015 consistent with the U.S. Bureau of Economic Analysis gross domestic product component revision to 2009 dollars and investment definitional changes. AEO2014 data are 2005-based and are not shown since they are not comparable with 2009-based figures.
Source: AEO2015 National Energy Modeling System, run REF2015.D021915A; and AEO2014 National Energy Modeling System, run REF2014.D102413A
Notes: Quantities reported in quadrillion Btu are derived from historical volumes and assumed thermal conversion factors.
-- = Not applicable.
- Updated the following by aircraft type and region: sales, stocks, and active and parked aircraft using Jet Inventory Services data; available seat-miles traveled, revenue seat-miles traveled, cargo travel, fuel use, and load factors, using U.S. Department of Transportation, Bureau of Transportation Statistics data; and domestic and international yield using fares and fees published by Airlines for America.
- Updated historical light-duty vehicle and heavy-duty truck vehicle-miles traveled through 2012, using data from U.S. Department of Transportation, Federal Highway Administration, extended through 2014 using the U.S. Department of Transportation, Federal Highway Administration, Traffic Volume Trends report.
- Added historical freight rail ton miles through 2013, using Class 1 Railroad data as reported through the U.S. Department of Transportation, Surface Transportation Board.
- Added historical domestic marine ton miles through 2012, based on U.S. Army Corps of Engineers data.
- Revised heavy-duty vehicle, freight rail, and domestic marine travel demand projection methodologies based on a report from IHS Global Insight. The new methodologies will use the Freight Analysis Framework in the historical Census division and commodity ton-mile data, including derivation of ton mile per dollar of industrial output (a key metric used in the travel demand projection methodology). These data include a Geographic Information System modeling estimation of the share of freight truck travel between origin and destination points through intermediate Census divisions.
- Modified the technology adoption and fuel economy calculation for heavy-duty vehicles and added technology availability.
- Modified the domestic and international marine residual fuel oil and distillate fuel shares to match compliance with MARPOL Annex VI, the International Convention for the Prevention of Pollution from Ships, concerned with preventing marine pollution from ships, as assumed in EIA's Short-Term Energy Outlook.
- Added an unspecified consumption sector to match the levels of travel and efficiency more consistently with implied fuel use in the transportation sector, and to allow total liquid fuels consumption in AEO2015 to be closer to the totals for each fuel that are reported in EIA's statistical publications as being supplied to markets.
Oil and natural gas production
- Incorporated the impact of world oil prices that remain below $80/bbl (in 2013 dollars) through 2020, versus $98/bbl in AEO2014, to reflect market events through the end of 2014 and the growth of U.S. crude oil production. This change in price expectations limits the degree to which near-term U.S. crude oil and associated dry natural gas production increase, and limits the need for natural gas produced for liquefied natural gas (LNG) exports.
- Revised drilling costs in AEO2015 to directly incorporate assumptions regarding average lateral length and number of laterals per well.
- Updated natural gas plant liquid (NGPL) factors at the play and county levels for tight oil and shale gas formations.
- Updated the estimated ultimate recovery of tight and shale formations at the county level. For the Marcellus Shale, each county was further divided into productive tiers based on geologic dependencies.
- Updated the list of offshore discovered, non-producing fields and the expected resource sizes and startup dates of the fields.
- Moved the projection of the composition of NGPL from the Liquid Fuels Market Module (LFMM) to the Oil and Gas Supply Module (OGSM). Added input data in the OGSM for the component (ethane, propane, butane, and pentanes plus) shares of total NGPL at the project level represented in the OGSM. Added capability to account for the volume of ethane that is left in the dry natural gas stream (commonly referred to as ethane rejection).
Natural gas transmission and distribution
- Expanded natural gas distribution in AEO2015 to represent a greater number of pipeline routes that allow for bidirectional flows.
- Allowed LNG projects to be added incrementally by a single train rather than by multiple trains and to phase-in over three years rather than two years.
- In circumstances when the Brent price is above (below) a mid-range value, the model can now set world natural gas prices to disconnect from the Brent price at a faster (slower) rate than it would have previously.
- Updated the pricing algorithm for offshore Atlantic and Pacific production.
- Adjusted the representation of Canadian dry natural gas production.
- Increased base-level production to account for a change in Mexico's constitution allowing for increased foreign investment.
Petroleum product and biofuels markets
- Added 40°-50° American Petroleum Institute (API) and 50°+ API crude oil types to reflect increases in tight oil production and potential constraints on refinery processing.
- Included the option to add new condensate splitter units to process 50°+ API crude.
- Modified the LFMM and International Energy Module to permit crude exports to accommodate analysis of the impact of potential relaxation of the current U.S. crude oil export ban.
- Relaxed export restrictions on processed condensate to better match the U.S. Department of Commerce, Bureau of Industry and Security, interpretation of export regulations that allow the export of processed condensate.
- Updated gasoline specifications to reflect Tier 3 gasoline regulations.
- Revised the renewable fuels standard mandate levels for biomass-based diesel to better match expected production capabilities.
Electric power sector
- Revised the assumption for unannounced nuclear retirements in the Reference case downward, from 5.7 gigawatts (GW) in the AEO2014 Reference case to 2 GW in the AEO2015 Reference case. Unannounced nuclear retirements in the AEO2015 Reference case reflect market uncertainty. Announced nuclear retirements are incorporated as reported to the EIA.
- Updated the online start dates for Virgil C. Summer Nuclear Generating Station Units 2 and 3 to 2019 and 2020, respectively, to reflect company announcements.
- Updated expiration dates of firm contractual arrangements for coal-fired power plants that serve California loads. Adjusted the carbon emissions rate for firm imports in accordance with the expiration of contracts.
- Explicitly represented 4.1 GW of coal-fired units that are being converted to natural gas-fired steam units. Added model capability to convert additional coal-fired plants to natural gas-fired plants based on the relative economics, assuming a capital cost for conversion and connection to natural gas pipelines. Once converted, the oil and natural gas steam plants are assumed to have lower operating and maintenance costs than the original coal-fired plant but also a 5% loss in efficiency.
- Updated regional assumptions on transmission and distribution spending as a function of peak load growth, based on historical trends.
- Revised biomass supply model representation of agricultural residues/energy crop feedstocks, by incorporating fully-integrated agricultural model, Policy Analysis System (POLYSYS).
- Reviewed and updated capital cost assumptions for utility-scale solar PV and wind plants based on assessment of costs reported in trade press and data compiled in Lawrence Berkeley National Laboratory publications 2013 Wind Technologies Market Report and Utility-Scale Solar 2013.
- Added model capability to retrofit existing coal-fired generating units to improve their operating efficiency (heat rate), if economic. An analysis of the heat rate improvement potential of the existing coal fleet sorted existing coal-fired units into quartiles, to reflect varying levels of improvement potential, and developed cost estimates to reflect the investment required to achieve the improvement. The analysis then disaggregated the cost and improvement assumptions based on environmental control configurations, consistent with the coal plant types used in the electricity model. Heat rate improvement retrofits can
provide a reduction in fuel use ranging from less than 1% to 10%, depending on the plant type and quartile.
Comparison of AEO2015 and AEO2014 Reference cases
The macroeconomic projections used in AEO2015 are trend projections, with no major shocks anticipated. In long-term projections, the economy's supply capability determines its potential growth. Growth in aggregate supply depends on increases in the labor force, growth of capital stock, and improvements in productivity. Long-term demand growth depends on labor force growth, income growth, and population growth. In the AEO2015 Reference case, U.S. population grows by an average of 0.7%/ year from 2013 to 2040, the same rate as in the AEO2014 Reference case over the same period. In the AEO2015 Reference case, real gross domestic product (GDP), labor force, and productivity grow by 2.4%/year, 0.6%/year, and 2.0%/year, respectively, over the same period. Those rates are similar to the annual growth rates for real GDP, labor force, and productivity of 2.5%, 0.6%, and 1.9%, respectively, from 2013 to 2040 in the AEO2014 Reference case.
The annual rate of growth in total industrial production, which includes manufacturing, construction, agriculture, and mining, in the AEO2015 Reference case is lower than the rate in the AEO2014 Reference case, primarily as a result of slower growth in key manufacturing industries, such as food, paper, non-bulk chemicals, and computers. Updated information on how industries supply other industries and meet the demand for different types of GDP expenditures influences the projections for certain industries.For example, as a result of restructuring in the pulp and paper industry, trade in consumer goods and industrial supplies has a greater impact on the industry's production in AEO2015 than it did in previous AEOs. The annual rate of growth in total industrial production from 2013 to 2040 is 1.8% in AEO2015, compared with 2.1% in AEO2014. The manufacturing share of total gross output in 2040 is 17% in the AEO2015 Reference case, compared with 18% in AEO2014, mostly because of more-rapid growth in service and nonmanufacturing industries, such as wholesale trade, transportation, and warehousing.
Energy pricesCrude oil
In the AEO2015 Reference case, the Brent spot price for crude oil (in 2013 dollars) falls from $109/barrel (bbl) in 2013 to $56/bbl in 2015 and then increases to $76/bbl in 2018. After 2018, the Brent price increases, reaching $141/bbl in 2040 ($229/bbl in nominal dollars), as growing demand leads to the development of more costly resources (Figure E1). In the AEO2014 Reference case, the projected Brent price in 2040 was $144/bbl (2013 dollars).
Among the key assumptions that affect crude oil use in the AEO2015 Reference case are average economic growth of 1.9%/year for major U.S. trading partners; average economic growth for other U.S. trading partners of 3.8%/ year; and declining U.S. consumption of liquid fuels per unit of GDP. As a result, there is a slight decrease in liquids consumption by the Organization for Economic Cooperation and Development (OECD) countries.
The non-OECD consumption level of 75 million barrels per day (bbl/d) in 2040 in the AEO2015 Reference case is about 7% higher than the 2040 level in the AEO2014 Reference case, and the difference more than offsets the impact of lower consumption in the OECD countries. The result is an increase in total world consumption to 121 million bbl/d in 2040 in AEO2015, which is 3% higher than in AEO2014. Non-OPEC (particularly U.S.) liquids production in AEO2015 increases to levels above those in AEO2014, and the OPEC market share in the AEO2015 Reference case rises only slightly, from 40% in 2013 to 41% in 2040, as compared with a 44% market share in 2040 in AEO2014.
The real U.S. price of end-use motor gasoline (2013 dollars) in the AEO2015 Reference case falls from $3.53/gallon in 2013 to a low point of $2.31/gallon in 2015, before rising to $3.90/gallon in 2040, in response to decreasing—and then increasing—crude oil prices. The motor gasoline price in 2040 is 2% lower than the $3.96/gallon price in the AEO2014 Reference case, because of lower crude oil prices. The end-use price of diesel fuel to the transportation sector in the AEO2015 Reference case follows a similar pattern, dropping from $3.86/gallon in 2013 to $2.70/gallon in 2015 and then rising to $4.75/gallon in 2040 (compared with $4.80/gallon in 2040 in the AEO2014 Reference case).
On average, the Henry Hub spot price for natural gas in the AEO2015 Reference case is only 2% (or $0.13/million Btu in 2013 dollars) lower than in the AEO2014 Reference case from 2013 to 2040. The Henry Hub natural gas spot prices in AEO2015 are slightly lower than the AEO2014 spot prices in each year, with the exception of the period from 2020 to 2027 and in 2040. These price levels are consistent with 3% lower cumulative U.S. dry natural gas production through 2040 in the AEO2015 Reference case relative to the AEO2014 Reference case.
Although the average production, consumption, and price levels are similar in the AEO2015 and AEO2014 Reference cases, there are some notable differences in the components. For instance, while natural gas consumption by natural gas vehicles and electricity generators in AEO2015 is lower than in AEO2014, residential and commercial consumption are generally higher. On the supply side, higher dry natural gas production in the AEO2015 Reference case in the East region (which includes the Marcellus and Utica formations) compared with the AEO2014 Reference case is more than offset by lower production levels in the Gulf Coast and Midcontinent regions. The relative location and composition of supply and demand affect regional pricing and national averages. For this and other reasons, average delivered natural gas prices to residential and commercial customers from 2013 to 2040 are 4% lower in the AEO2015 Reference case than in the AEO2014 Reference case.
The average minemouth price of coal increases by 1.0%/year, from $1.84/million Btu in 2013 to $2.44/million Btu in 2040 (2013 dollars) in the AEO2015 Reference case. In comparison, the price in the AEO2014 Reference case increases by 1.5%/year, from $2.02/million Btu in 2013 to $3.00/million Btu in 2040. The average minemouth price of coal is about 19% lower, on average, across the projection timeframe in AEO2015 when compared with AEO2014, reflecting lower volumes and prices for high-priced coking coal exports, the shutdown of some high-cost mining operations, and a less pessimistic outlook for productivity. Similarly, with a few exceptions, the regional minemouth prices of coal in AEO2015 are lower than those in AEO2014.
The slower rate of increase in the minemouth price of coal in the AEO2015 Reference case reflects recent year-over-year improvements in labor productivity in 9 of the 14 coal supply regions, many of which have not seen productivity gains since 2000, and a slowing of productivity declines in 4 of the other regions. However, both the AEO2015 and AEO2014 Reference cases assume that cost savings from improvements in coal mining technology will continue to be outweighed by increases in production costs associated with moving into reserves that are more costly to mine. Thus, both projections show the average minemouth price of coal rising steadily after 2015.
In the AEO2015 Reference case, end-use electricity prices are higher than in the AEO2014 Reference case throughout most of the projection. The higher price outlook reflects market dynamics, as well as revised assumptions for transmission and distribution costs in AEO2015.
The end-use price of electricity is defined by generation, transmission, and distribution cost components. Natural gas prices are a significant determinant of generation costs. In the AEO2015 Reference case, delivered natural gas prices to electricity generators are lower than in the AEO2014 Reference case in the first few years of the projection but higher throughout most of the 2020s. From 2020 to 2030, the generation cost component of end-use electricity prices is, on average, 4% higher in AEO2015 than in AEO2014.
The AEO2015 Reference case includes higher transmission and distribution cost components relative to the AEO2014 Reference case, reflecting an updated representation of trends in transmission and distribution costs. In 2040, the transmission cost component in the AEO2015 Reference case is 14% higher than it was in the AEO2014 Reference case—1.29 cents/kilowatthour (kWh), compared with 1.13 cents/kWh—while the distribution cost component is 15% higher (3.01 cents/kWh compared with 2.61 cents/kWh). The faster growth in the transmission and distribution cost components of end-use electricity prices in AEO2015 reflects recent historical trends and an expectation that transmission and distribution costs will continue to increase as new transmission and distribution facilities and smart grid components (e.g., advanced meters, sensors, controls, etc.) are added, existing infrastructure is upgraded to enhance the reliability and resiliency of the grid, and new resources connect to the grid.
Average end-use electricity price in 2030 is 11.1 cents/kWh (2013 dollars) in the AEO2015 Reference case, compared to 10.6 cents/kWh in the AEO2014 Reference case. Prices continue rising to 11.8 cents/kWh in 2040 in the AEO2015 Reference case, compared to 11.3 cents/kWh in 2040 in the AEO2014 Reference case.
Energy consumption by sector
Delivered energy consumption in the transportation sector in the AEO2015 Reference case is higher than in AEO2014 (26.5 quadrillion Btu in 2040 compared with 25.5 quadrillion Btu), with energy consumption for nearly all transportation modes higher in AEO2015 throughout most of the projection, because of higher macroeconomic indicators and lower fuel prices (Figure E2).
Light-duty vehicle (LDV) energy consumption declines in the AEO2015 Reference case from 15.7 quadrillion Btu in 2013 to 12.6 quadrillion Btu in 2040, compared with 12.1 quadrillion Btu in 2040 in AEO2014. Greenhouse gas emission standards and corporate average fuel economy (CAFE) standards increase new LDV fuel economy through model year 2025 and beyond in the AEO2015 Reference case, with new, more fuel-efficient vehicles gradually replacing older vehicles on the road. The increase in fuel economy raises the LDV vehicle stock average miles per gallon by 2.0%/year, from 21.9 in 2013 to 37.0 in 2040. The increase in LDV fuel economy more than offsets modest growth in vehicle-miles traveled (VMT), which averages 1.1%/year from 2013 to 2040 as a result of changes in driving behavior related to demographics. Stock fuel economy is lower, and LDV VMT is higher, in the AEO2015 Reference case than in AEO2014.
LDVs powered exclusively by motor gasoline remain the predominant vehicle type in the AEO2015 Reference case, retaining a 78% share of new vehicle sales in 2040, down only somewhat from 83% in 2013. The fuel economy of LDVs fueled by motor gasoline continues to increase, and advanced technologies for fuel efficiency subsystems are added, such as micro hybridization, which is installed in 42% of new motor gasoline LDVs in 2040. Sales of new LDVs powered by fuels other than gasoline (such as diesel, electricity, or E85) and LDVs using hybrid drivetrains (such as plug-in hybrid or gasoline hybrid-electric vehicles) increase modestly in the AEO2015 Reference case, from 17% of new sales in 2013 to 22% in 2040. Ethanol-flex-fuel vehicles account for 10% of new LDV sales in 2040 followed by hybrid electric vehicles at 5%, up from 3% in 2013, diesel vehicles at 4% in 2040, up from 2% in 2013, and plug-in hybrid vehicles and electric vehicles at about 1% each, both up from negligible shares in 2013. In AEO2015, new vehicle sales shares in 2015 are generally similar to those in AEO2014. In AEO2014, the motor gasoline share of new LDVs sales was 78% in 2040 (with 42% including micro hybridization), followed by 11% ethanol-flex-fuel, 5% hybrid electric, 4% diesel, and 1% each for plug-in hybrid and electric vehicles.
In the AEO2015 Reference case, delivered energy use by heavy-duty vehicles (HDVs) increases from 5.8 quadrillion Btu in 2013 to 7.3 quadrillion Btu in 2040 (compared with 7.5 quadrillion Btu in 2040 in AEO2014). Industrial output growth in AEO2015 leads to solid growth in HDV VMT, averaging 1.5%/year from 2013 to 2040. Competitive natural gas prices significantly increase demand for LNG and compressed natural gas in AEO2015, from an insignificant share in 2013 to 7% of total HDV energy consumption in 2040 (which is less than the 9% share in AEO2014, as a result of differences in fuel price projections).
Total industrial delivered energy consumption grows by 22% in the AEO2015 Reference case, to about 30 quadrillion Btu in 2040, which is about 0.4 quadrillion Btu lower than the 2040 projection in the AEO2014 Reference case. The lower level of total industrial energy consumption in AEO2015 results from lower annual growth in the total value of industrial shipments (1.8%/year) compared with AEO2014 (2.1%/year).
Although total energy consumption levels are similar in the AEO2015 and AEO2014 Reference cases, there are some notable changes in consumption of individual fuels. In AEO2015, the liquid feedstock slate for the bulk chemical industry includes relatively more HGL (ethane and liquefied petroleum gases (LPG)) and less heavy feedstock (naphtha and gasoil) compared with AEO2014. The higher level of HGL feedstock use results from relatively low ethane and LPG prices relative to the prices of oil-based naphtha/gasoil feedstock, as a result of more HGL supply in the AEO2015 Reference case than in AEO2014 and the implementation of a new ethane pricing model that links ethane prices more closely with natural gas prices.
Another notable change from AEO2014 in the AEO2015 Reference case is that total consumption of renewable fuels is more than 0.5 quadrillion Btu lower in AEO2015 as a result of lower shipments from the paper and pulp industry. Industrial electricity consumption is also lower in AEO2015, in part as a result of lower shipments of metal-based durables, especially computers. Through 2022, natural gas consumption is higher in the AEO2015 Reference case than in AEO2014, as a result of higher lease and plant fuel use and an increase in feedstock use, reflecting more optimistic assumptions for ammonia and methanol plant operations based on recent trends. However, after 2022 natural gas consumption is lower in the AEO2015 Reference case, because of lower lease and plant fuel use stemming from lower dry natural gas production, and because of lower shipments in the natural gas-intensive paper and pulp industry.
Residential delivered energy consumption decreases slightly in the AEO2015 Reference case from 2013 to 2040, with growth in electricity consumption offset by declining use of fossil fuels. Consumption levels are lower than those in the AEO2014 Reference case for most fuels, although natural gas use is slightly higher because of lower projected prices. Delivered electricity consumption is 5.4 quadrillion Btu and natural gas consumption is 4.3 quadrillion Btu in 2040 in AEO2015, compared with 5.7 quadrillion Btu and 4.2 quadrillion Btu, respectively, in AEO2014. The lower consumption levels in AEO2015 are explained in part by slower nearterm growth in the number of households.
Commercial sector delivered energy consumption grows from 8.7 quadrillion Btu in 2013 to 10.1 quadrillion Btu in 2040 in the AEO2015 Reference case, similar to the AEO2014 Reference case, despite higher consumption in the near term. Commercial electricity consumption increases by 0.8%/year from 2013 to 2040 in AEO2015, lower than the 1.0% average annual growth in commercial floorspace, in part, because of lower demand for lighting and refrigeration than projected in AEO2014.
Energy consumption by primary fuel
Total primary energy consumption grows by 8.8% in the AEO2015 Reference case, from 97.1 quadrillion Btu in 2013 to 105.7 quadrillion Btu in 2040—600 trillion Btu less than in AEO2014, where total primary energy consumption grew by 10.2% to 106.3 quadrillion Btu in 2040 (Figure E3).
Total liquid fuels consumption increases slightly (300 trillion Btu) in the AEO2015 Reference case (the AEO2014 Reference case showed a decline of 600 trillion Btu), as declining consumption of motor gasoline offsets most of the growth in other liquids uses from 2013 to 2040. However, total liquid fuel consumption is 0.9 quadrillion Btu higher in 2040 in the AEO2015 Reference case than in the AEO2014 Reference case. Jet fuel, motor gasoline, and industrial propane use are each about 500 trillion Btu higher in 2040 in AEO2015 than in AEO2014, as a result of updates and revisions made in the air transportation model and lower petroleum fuel prices, as well as upward revisions in output projections for the chemical industry. Liquids consumption in the transportation sector also increases in AEO2015 as the result of the addition of an unspecified consumption sector, which was added to improve the consistency of matching travel and efficiency levels with implied fuel use in the transportation sector, so that total consumption of liquid fuels in AEO2015 agrees more closely with the combined total for all fuels reported as being supplied to markets in EIA statistical publications.
In the AEO2015 Reference case, domestic natural gas consumption increases from 26.2 trillion cubic feet (Tcf) in 2013 to 29.7 Tcf in 2040, 1.9 Tcf lower than in the AEO2014 Reference case. The lower level of total natural gas consumption results from a 1.9 Tcf lower level of natural gas use in the electric power sector in 2040 in AEO2015. Natural gas consumption in the residential and commercial sectors is up slightly.
In the electric power sector, natural gas faces increased competition from nuclear power and renewables, particularly wind. Also, demand for electricity in the buildings sector in 2040 is about 0.3 quadrillion Btu lower than in AEO2014, as a result of increases in building efficiency standards and updates to lighting parameters in AEO2015. Electricity demand is also lower in some industrial sectors where output does not increase as rapidly in AEO2015 as was projected in AEO2014.
Total coal consumption in the AEO2015 Reference case is 19.0 quadrillion Btu (988 million short tons) in 2040—similar to the AEO2014 Reference case projection of 18.7 quadrillion 0 Btu (979 million short tons) in 2040.
Total consumption of marketed renewable fuels grows by 1.3%/year in the AEO2015 Reference case, the same rate of growth as in the AEO2014 Reference case. However, the mix of renewable fuels is different in AEO2015, with more use of wind in the electric power sector, and less use of biomass in the industrial sector as a result of lower overall shipments in the paper industry. AEO2015 includes 3.0 quadrillion Btu of wind energy consumption in the electric power sector in 2040, compared with 2.4 quadrillion Btu in AEO2014, and the paper industry uses 1.2 quadrillion Btu of wood and pulping liquor in 2040 compared with 1.9 quadrillion Btu in 2040 in the AEO2014 Reference case.
Energy production and imports
In the AEO2015 Reference case, U.S. imports and exports of energy come into balance around 2028 as net energy imports decline both in absolute terms and as a share of total U.S. energy consumption (Figure E4). The United States is a net energy exporter in selected years—for example, from 2029 through 2032, and from 2037 through 2040. Over the projection period, the United States shifts from being a net importer of about 12.8 quadrillion Btu of energy in 2013 (about 13% of total U.S. energy demand) to a net exporter of about 0.5 quadrillion Btu in 2040. In the AEO2014 Reference case, the United States remained a net importer of energy, with net imports of about 4.2 quadrillion Btu in 2040.
U.S. crude oil production in the AEO2015 Reference case increases from 7.4 million bbl/d in 2013 to 9.4 million bbl/d in 2040— 26% higher than in the AEO2014 Reference case, despite lower prices. Production in AEO2015 reaches 10.6 million bbl/d in 2020, compared with a high of 9.6 million bbl/d in 2019 in AEO2014. Higher production volumes result mainly from increased onshore oil production, predominantly from tight (very low permeability) formations. Lower 48 onshore tight oil production reaches 5.6 million bbl/d in 2020 in the AEO2015 Reference case before declining to 4.3 million bbl/d in 2040, 34% higher than in AEO2014. The pace of oil-directed drilling in the near term is faster in AEO2015 than in AEO2014, as producers continue to locate and target the sweet spots of plays currently under development.
Lower 48 offshore crude oil supply grows from 1.4 million bbl/d in 2013 to 2.2 million bbl/d in 2019 in the AEO2015 Reference case, before fluctuating in accordance with the development of projects in the deepwater and ultra-deepwater portions of the Gulf of Mexico. In 2040, Lower 48 offshore production totals 2.2 million bbl/d in AEO2015, 9% more than in the AEO2014 Reference case.
U.S. net imports of liquid fuels as a share of total domestic consumption continue to decline in the AEO2015 Reference case, primarily as a result of increased domestic oil production. Net imports of liquid fuels as a share of total U.S. liquid fuel use reached 60% in 2005 before dipping below 50% in 2010 and falling to an estimated 33% in 2013 (Figure E5). The net import share of domestic liquid fuels consumption declines to 14% in 2020 in the AEO2015 Reference case—compared with 26% in the AEO2014 Reference case—as a result of faster growth of domestic liquid fuels supply compared with growth in consumption. Domestic liquid fuels supply begins to decline after 2023 in the AEO2015 Reference case, and as a result, the net import share of domestic liquid fuels consumption rises from 14% in 2022 to 17% in 2040. However, domestic liquid fuels supply in the AEO2015 Reference case is 25% higher in 2040 than in the AEO2014 Reference case, while domestic consumption is only 3% higher. As a result, despite increasing after 2020, the percentage of U.S. liquid fuel supply from net imports in the AEO2015 Reference case remains just over half that in the AEO2014 Reference case through 2040.
In the AEO2015 Reference case, U.S. production of dry natural gas after 2019 is lower than in the AEO2014 Reference case projection, and in 2040 it is lower by more than 2 trillion cubic feet (Tcf). Lower production levels are a result of lower natural gas prices and a decrease in demand for natural gas by electricity generators because of fewer nuclear plant retirements and more renewable generation capacity in AEO2015. However, dry natural gas production from shale gas and tight oil plays is generally higher in AEO2015, offsetting some of the decreases in other areas. Increases in shale gas production are made possible by the dual application of horizontal drilling and hydraulic fracturing. Another contributing factor is ongoing drilling in shale plays and other resources with high concentrations of natural gas liquids and crude oil, which, in energy-equivalent terms, have a higher value than dry natural gas, even with lower crude oil prices.
In the AEO2015 Reference case, the United States becomes an overall net exporter of natural gas in 2017, one year earlier than in AEO2014, and a net pipeline exporter of natural gas in 2018, three years earlier than in AEO2014. In the AEO2015 Reference case, imports from Canada, which largely enter the western United States, and exports into Canada, which generally exit out of the East, are generally lower than in the AEO2014 Reference case. Imports from Canada remain lower in the AEO2015 Reference case than in the AEO2014 Reference case through 2040, while exports to Canada are higher in the AEO2015 Reference case from 2021 to 2028, before decreasing below AEO2014 levels through 2040. Net pipeline imports from Canada fall steadily until 2030 in AEO2015, then increase modestly through 2040, when growth in shale production stabilizes in the United States but continues to increase in Canada.
Net pipeline exports to Mexico increase almost twofold in the AEO2015 Reference case from 2017 to 2040, with additional pipeline infrastructure added to enable the Mexican market to receive more natural gas via pipeline from the United States. However, pipeline exports to Mexico in the later years of the AEO2015 Reference case are lower than projected in the AEO2014 Reference case, because Mexico is assumed to increase domestic production as a result of constitutional reforms that permit more foreign investment in its oil and natural gas industry.
Beginning in 2024, exports of liquefied natural gas (LNG) are slightly lower in the AEO2015 Reference case than in AEO2014, driven by lower crude oil prices. However, the impact of crude oil prices on the projection is dampened by changes in assumptions about how rapidly new LNG export terminals will be built.
Total U.S. coal production in the AEO2015 Reference case grows at an average rate of 0.5%/year, from 985 million short tons (19.9 quadrillion Btu) in 2013 to 1,117 million short tons (22.5 quadrillion Btu) in 2040. In comparison, U.S. production in the AEO2014 Reference case was projected to increase by 0.3%/year, from 1,022 million short tons (20.7 quadrillion Btu) in 2013 to 1,121 million short tons (22.4 quadrillion Btu) in 2040. Actual coal production in 2013 was 4% lower than projected in AEO2014, as a result of a large drawdown of coal inventories at coal-fired power plants.
From 2013 through 2020, coal production in the AEO2015 Reference case is lower than projected in the AEO2014 Reference case, as lower natural gas prices result in the substitution of natural gas for coal in power generation. After 2020, total coal production in the AEO2014 and AEO2015 projections are nearly identical, with both hovering around 1.1 billion short tons through 2040, because of similar patterns of capacity additions and retirements at coal-fired power plants and similar coal-fired capacity utilization rates in the two projections. The outlook for U.S. coal exports is lower in AEO2015 than in AEO2014 throughout the projection period. Between 2013 and 2015, U.S. coal exports decline sharply in the AEO2015 Reference case as a result of strong international competition and lower international coal prices; but from 2015 through 2040 they increase gradually. Compared with AEO2014, coal exports in AEO2015 are 27% lower in 2015 and 13% lower in 2040.
Overall, regional patterns of U.S. coal production are similar in the AEO2015 and AEO2014 Reference cases. Production in the Eastern Interior region increases in both projections by about 100 million short tons from 2013 to 2040. The AEO2015 outlook for Central Appalachian coal production is similar to the AEO2014, but is about 7 million short tons (7%) higher, on average, than the AEO2014 from 2015 through 2040. Northern Appalachian coal production in 2040 is 20 million short tons lower in AEO2015 than projected in the AEO2014 Reference case. Production from Wyoming's Powder River Basin, currently the lead coal-producing region in the United States, is lower from 2013 through 2018 in AEO2015 than projected in AEO2014, but then increases at a more rapid pace through 2026 before declining slightly and eventually moving to levels consistent with the AEO2014 projection from 2032 through 2040.
Total electricity consumption in the AEO2015 Reference case, including both purchases from electric power producers and onsite generation, grows from 3,836 billion kWh in 2013 to 4,797 billion kWh in 2040. The average annual increase of 0.8% from 2013 to 2040 is slightly below the 1.0% annual rate in the AEO2014 Reference case. In all the end-use sectors, electricity demand growth is slower than projected in AEO2014, with the largest difference in growth in the residential sector.
Coal has traditionally been the largest energy source for electricity generation. However, the combination of slow growth in electricity demand, competitively priced natural gas, programs encouraging renewable fuel use, and the implementation of environmental rules dampens future coal use in both the AEO2015 and AEO2014 Reference cases. Beginning in 2019, coal-fired electricity generation is between 2% and 4% percent higher in the AEO2015 Reference case than in AEO2014 through 2025, as a result of higher natural gas prices. After 2025, coal-fired generation remains between one and two percent higher in AEO2015 than in AEO2014 (Figure E6). The AEO2015 Reference case does not include the proposed Clean Power Plan for existing fossilfuel- fired electric generating units, which, if implemented, could substantially change the generation mix.
Coal accounted for 39% of total generation in 2013, and its share falls to 34% in 2040 in the AEO2015 Reference case. The coal share of total generation was lower at 32% in 2040 in the AEO2014 Reference case. With retirements of coal-fired generating capacity far outpacing new additions, total coal-fired generating capacity falls in the AEO2015 Reference case from 304 GW in 2013 to 260 GW in 2040, which is similar to the 2040 capacity projection in the AEO2014 Reference case.
Electricity generation from natural gas grows at a slower rate in the AEO2015 Reference case than in the AEO2014 Reference case because of lower growth in overall electricity demand, higher natural gas prices in the midterm, fewer nuclear retirements, and more renewable capacity additions leading to less need for new natural gas-fired capacity. In the AEO2015 Reference case, natural gas-fired generation in 2040 is 15% lower than projected in the AEO2014 Reference case. Natural gas capacity additions still make up most (58%) of total capacity additions from 2014 to 2040 but represent a smaller share of new builds than the 74% of total additions projected in AEO2014. As a share of total generation, natural gas does not surpass the coal-fired generation share in the AEO2015 Reference case over the projection period as it did in the AEO2014 Reference case.
Increased generation from renewable energy accounts for 38% of the overall growth in electricity generation from 2013 to 2040 in the AEO2015 Reference case. Generation from renewable resources grows in the near term as new capacity under construction comes online in response to federal tax credits, state-level policies, and declining capital costs for wind and solar projects. In the final decade of the projection, renewable generation growth is almost exclusively the result of the increasing cost-competiveness of renewable generation with other, nonrenewable technologies.
Renewable generation is higher throughout most of the projection period in AEO2015 than was projected in AEO2014, and it is about 7% higher in 2040. Combined generation from solar and wind power in AEO2015 is about 28% higher in 2040 than projected in AEO2014, as a result of more planned renewable capacity additions and recent declines in the construction costs for new wind plants. Renewable generation accounts for 18% of total generation in 2040 in the AEO2015 Reference case, compared with 16% in AEO2014.
In the AEO2015 Reference case, electricity generation from nuclear power plants increases by 6%, from 789 billion kWh in 2013 to 833 billion kWh in 2040, and accounts for about 16% of total generation in 2040, slightly above the share in AEO2014. Over the projection period, nuclear generation in AEO2015 is on average 3% higher than projected in AEO2014, with about 4 GW less nuclear capacity retired from 2013 to 2020 in the AEO2015 Reference case, compared to the AEO2014 Reference case.
Energy-related CO2 emissions
Total U.S. energy-related CO2 emissions remain well below their 2005 level of 5,993 million metric tons (mt) through the end of the projection period in the AEO2015 Reference case. Energy-related CO2 emissions in 2040 are 5,549 million mt, or 50 million mt (0.9%) below the AEO2014 Reference case projection. This decrease may appear counterintuitive, since coal consumption is 1.4% higher, petroleum and other liquids consumption is 2.4% higher, and total renewable energy consumption is lower, all putting upward pressure on emissions. However, natural gas consumption is 5.6% lower, and while it has a lower carbon factor than the other fossil fuels, it does emit CO2. Nuclear energy consumption in 2040 is 2.8% higher in AEO2015 than in AEO2014, and total energy demand is 0.5% lower. The net result is somewhat lower energy-related CO2 emissions in the AEO2015 Reference case than in the AEO2014 Reference case.
- U.S. Energy Information Administration, Annual Energy Outlook 2014, DOE/EIA-0383(2014) (Washington, DC, April 2014), www.eia.gov/forecasts/archive/aeo14.
- S.H. McCulla, A.E. Holdren, and S. Smith, "Improved Estimates of the National Income and Product Accounts: Results of the 2013 Comprehensive Revision" (U.S. Department of Commerce, Bureau of Economic Analysis, Washington, DC, September 2013), http://www.bea.gov/scb/pdf/2013/09%20September/0913_comprehensive_nipa_revision.pdf.
- The AEO2015 Reference case uses IHS Global Insight's November 2014 T301114 workfile. The AEO2015 High Economic Growth case uses the optimistic projection, and the AEO2015 Low Economic Growth case uses the pessimistic projection. In all cases, IHSGI's energy prices and quantities are replaced with EIA's projections.
- U.S. Energy Information Administration, EIA—Technology Forecast Updates—Residential and Commercial Building Technologies—Reference case (Navigant Consulting, Inc. with Leidos, May 2014).
- O.V. Livingston, P.C. Cole, D.B. Elliott, and R. Bartlett, Building Energy Codes Program: National Benefits Assessment, 1992-2040 (Richland, WA, March 2014), prepared by Pacific Northwest National Laboratory for the U.S. Department of Energy, Building Energy Codes Program, http://www.energycodes.gov/building-energy-codes-program-national-benefits-assessment-1992-2040-0.
- U.S. Energy Information Administration, "Residential Energy Consumption Survey (RECS): 2009 RECS Survey Data" (Washington, DC, January 2013), http://www.eia.gov/consumption/residential/data/2009/index.cfm?view=microdata.
- National Renewable Energy Laboratory (NREL) "Zip Code Solar Insolation Data Source," http://www.nrel.gov/gis/docs/SolarSummaries.xlsx.
- U.S. Energy Information Administration, "State Energy Data System (SEDS)" (Washington, DC, June 27, 2014), http://www.eia.gov/state/seds/seds-data-complete.cfm?sid=US.
- GlobalData (New York, NY, 2014) http://www.globaldata.com (subscription site).
- Jet Information Services, Inc., "World Jet Inventory" (Utica, NY, December 2013), http://www.jetinventory.com (subscription site).
- U.S. Department of Transportation, Bureau of Transportation Statistics, Form 41, Schedule T-2 (T-100), "Quarterly Traffic and Capacity Data of U.S. Air Carriers, Summarized by Aircraft Type" (Washington, DC, December 2013).
- Yield is defined as airline revenue divided by revenue passenger miles traveled.
- Airlines for America, "Annual Round Trip Fares and Fees" (Washington, DC, August 2014), http://airlines.org/data/annual-round-trip-fares-andfees- domestic/ and http://airlines.org/data/annual-round-trip-fares-and-fees-international/.
- U.S. Department of Transportation, Federal Highway Administration, "Highway Statistics 2012: Table VM-1, Annual Vehicle Distance Traveled in Miles and Related Data—2012 by Highway Category and Vehicle Type" (Washington, DC, January 2014), http://www.fhwa.dot.gov/policyinformation/ statistics/2012/vm1.cfm.
- U.S. Department of Transportation, Federal Highway Administration, "June 2014 Traffic Volume Trends" (Washington, DC, June 2014), https:// www.fhwa.dot.gov/policyinformation/travel_monitoring/14juntvt/.
- U.S. Department of Transportation, Surface Transportation Board, "Annual Report Financial Data" (Washington, DC, 2013), http://www.stb.dot.gov/stb/industry/econ_reports.html.
- U.S. Department of Defense, U.S. Army Corps of Engineers, "Waterborne Commerce of the United States, Calendar Year 2012, Part 5—National Summaries, Table 1.4: Total Waterborne Commerce, 1993-2012" (Washington, DC, 2014), http://www.navigationdatacenter.us/wcsc/pdf/wcusnatl12.pdf.
- IHS Global, Inc., "NEMS Freight Transportation Module Improvement Study" (June 20, 2014).
- U.S. Department of Transportation, Federal Highway Administration, "Freight Analysis Framework," http://www.ops.fhwa.dot.gov/freight/freight_analysis/faf/.
- U.S. Environmental Protection Agency, "MARPOL Annex VI" (Washington, DC: January 14, 2015), http://www2.epa.gov/enforcement/marpolannex-vi.
- Liquid fuels (or petroleum and other liquids) include crude oil and products of petroleum refining, natural gas liquids, biofuels, and liquids derived from other hydrocarbon sources (including coal-to-liquids and gas-to-liquids).
- U.S. Energy Information Administration, Monthly Biodiesel Production Report (Washington, DC: July 31, 2014), http://www.eia.gov/biofuels/biodiesel/production/.
- SCANA Corporation, "SCANA Corporation Management to Discuss New Nuclear Construction Schedule on August 11, 2014" (Cayce, SC: August 2014), https://www.scana.com/docs/librariesprovider15/pdfs/press-releases/8-11-2014-scana-dicuss-new-nuclear-schedule.pdf?sfvrsn=0.
- California Energy Commission, "Actual and Expected Energy from Coal for California" (Sacramento, CA: November 6, 2014), http://www.energy. ca.gov/renewables/tracking_progress/documents/current_expected_energy_from_coal.pdf. Changes in coal contract deliveries are largely related to the California Public Utilities Commission's adopted Greenhouse Gas Emissions Performance Standard (Decision 07-01-039, January 25, 2007, Interim Opinion on Phase 1 Issues: Greenhouse Gas Emissions Performance Standard, http://docs.cpuc.ca.gov/PublishedDocs/PUBLISHED/FINAL_DECISION/64072.htm), which implemented Senate Bill 1368 (Perata, Chapter 598, Statutes of 2006, http://www.energy.ca.gov/emission_standards/documents/sb_1368_bill_20060929_chaptered.pdf).
- R. Wiser and M. Bolinger, 2013 Wind Technologies Market Report, DOE/GO-102014-4459 (Washington, DC: August 2014), http://emp.lbl.gov/sites/all/files/2013_Wind_Technologies_Market_Report_Final3.pdf.
- M. Bolinger and S. Weaver, Utility-Scale Solar 2013 (Washington, DC: September 2014), http://emp.lbl.gov/sites/all/files/LBNL_Utility-Scale_Solar_2013_report.pdf.
- The industrial output model of the NEMS Macroeconomic Activity Module now uses the Bureau of Economic Analysis (BEA) detailed input-output matrices for 2007 rather than for 2002 (http://bea.gov/industry/io_annual.htm) and now incorporates information from the aggregate input-output matrices (http://bea.gov/industry/gdpbyind_data.htm).
- Major trading partners include Australia, Canada, Switzerland, United Kingdom, Japan, Sweden, and the Eurozone.
- Total domestic liquid fuels minus net imports, plus domestic HGL production.
- U.S. Environmental Protection Agency, "Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units," Federal Register, pp. 34829-34958 (Washington, DC: June 18, 2014) https://www.federalregister.gov/articles/2014/06/18/2014-13726/carbonpollution-emission-guidelines-for-existing-stationary-sources-electric-utility-generating.
- The year 2005 is the base year for the Obama Administration's goal for emission reductions of 17% by 2020. In the AEO2015 Reference case, energy-related CO2 emissions in 2020 are 8% below the 2005 level.