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AEO2014 Early Release Overview

Release Date: December 16, 2013   |  Full Report Release Date: Early Spring 2014   |  correction   |   Report Number: DOE/EIA-0383ER(2014)

Electricity Generation

Total electricity consumption in the AEO2014 Reference case, including both purchases from electric power producers and on-site generation, grows from 3,826 billion kWh in 2012 to 4,954 billion kWh in 2040, an average annual rate of 0.9% that is about the same as in the AEO2013 Reference case. While growth in electricity consumption is similar overall, growth in the industrial sector is much stronger than in AEO2013, while growth in the residential sector is weaker.

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. The AEO2014 Reference case continues to assume implementation of the Clean Air Interstate Rule (CAIR)30 as a result of an August 2012 federal court move to vacate the Cross-State Air Pollution Rule.31 In addition, AEO2014 continues to assume the implementation of MATS in 2016. Once MATS is in place, sulfur dioxide levels are reduced to well below the levels required by CAIR, and mercury emissions drop to 6.1 tons in 2016 from 30.8 tons in 2011 when the rule was finalized.

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Coal-fired power generation over the next few years is slightly higher in AEO2014 than in the AEO2013 Reference case because of higher natural gas prices during that period, as well as pending nuclear retirements that necessitate additional baseload generation. After 2020, generation from coal flattens out and remains lower than projected in AEO2013, because more coal-fired capacity is retired and fewer new coal plants are built (Figure 13).

Coal-fired electricity generation has traditionally been the largest component of electricity generation, representing 37% of total generation in 2012. By 2035, however, natural gas generation is projected to surpass coal generation. Coal and natural gas each represent 34% of total generation in 2035, but by 2040 the coal share drops to 32%, and the natural gas share increases to 35%. Market concerns about GHG emissions continue to dampen the expansion of coal-fired capacity in the AEO2014 Reference case, even with the assumption of current laws and policies. Low fuel prices for new natural gas-fired plants also affect the relative economics of coal-fired capacity, as does the continued rise in construction costs for new coal-fired power plants. As retirements far outpace new additions, total coal-fired generating capacity falls from 310 gigawatts (GW) in 2012 to 262 GW in 2040 in the AEO2014 Reference case. As with all projections, projected generation shares are highly sensitive to both fuel prices and changes in policies and regulations. Alternative cases in the full AEO2014 will quantify these sensitivities.

In the first few years of the projection, electricity generation using natural gas is slightly lower in the AEO2014 Reference case than in the AEO2013 Reference case because of higher natural gas prices in AEO2014. By 2017, however, natural gas-fired generation is higher in AEO2014 than in the AEO2013 Reference case, and the difference continues to grow. Additional retirements of coal and nuclear plants result in the need for new capacity, and new natural gas-fired plants are much cheaper to build than coal, nuclear, or renewable plants. In 2020, natural gas-fired generation in AEO2014 is 7% higher than in AEO2013, and in 2040 it is 16% higher.

Electricity generation from nuclear power plants grows by 5% in the AEO2014 Reference case, from 769 billion kWh in 2012 to 811 billion kWh in 2040, accounting for about 16% of total generation in 2040 (compared with 19% in 2012). Nuclear generating capacity decreases from 102 GW in 2012 to 98 GW in 2020 as new construction (5.5 GW) and uprates at existing plants (0.7 GW) are more than offset by retirements in several regions where existing nuclear units are facing challenging economic conditions. After 2025, a small amount of new nuclear capacity comes on line as natural gas prices rise. In 2040, overall nuclear capacity is back up to 102 GW. AEO2014 incorporates updated information from EIA data collections regarding planned nuclear plant construction and capacity uprates at existing units.

Increased generation with renewable energy, excluding hydropower, accounts for 28% of the overall growth in electricity generation from 2012 to 2040 in the AEO2014 Reference case. Generation from renewable resources grows in response to federal tax credits, state-level policies, and federal requirements to use more biomass-based transportation fuels, some of which can produce electricity as a byproduct of their production processes. In the final decade of the projection, however, renewable generation growth is driven by increasing cost competiveness with other nonrenewable technologies. Compared to the AEO2013 Reference case, renewable generation is higher throughout most of the projection period, particularly in the near term, because of the inclusion of the energy provisions of the ATRA. This law, among other things, extends several tax credits for utility-scale renewables and redefines the qualification criteria, resulting in more construction of wind-powered generating capacity in the near term.

Reported renewable capacity already under construction has increased in recent years and is represented in AEO2014. Growth in renewable generation is supported by many state requirements, as well as regulations on CO2 emissions in California. The share of U.S. electricity generation coming from renewable fuels (including conventional hydropower) grows from 12% in 2012 to 16% in 2040 in the AEO2014 Reference case, even with federal subsidies for renewable generation assumed to expire as enacted. Extensions of such subsidies could have a large impact on renewable generation. The long-run projections for renewable capacity are also sensitive to natural gas prices and the relative costs of alternative generation sources.


30U.S. Environmental Protection Agency, "Clean Air Interstate Rule (CAIR)" (Washington, DC: December 19, 2012), http://www.epa.gov/cair/.

31U.S. Environmental Protection Agency, "Fact Sheet: The Cross-State Air Pollution Rule: Reducing the Interstate Transport of Fine Particulate Matter and Ozone" (Washington, DC: July 2011), http://www.epa.gov/airtransport/pdfs/CSAPRFactsheet.pdf.