‹ Analysis & Projections

Annual Energy Outlook 2014

Release Dates: April 7 - 30, 2014   |  Next Early Release Date: December 2014   |  See schedule

Energy Demand from Market Trends

In the United States, average energy use per person declines from 2011 to 2040

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Population growth affects energy use through increases in housing, commercial floorspace, transportation, and economic activity. The effects can be mitigated, however, as the structure and efficiency of the U.S. economy change. In the AEO2013 Reference case, U.S. population increases by 0.9 percent per year from 2011 to 2040; the economy, as measured by GDP, increases at an average annual rate of 2.5 percent; and total energy consumption increases by 0.3 percent per year. As a result, energy intensity, measured both as energy use per person and as energy use per dollar of GDP, declines through the projection period (Figure 52).

The decline in energy use per capita is brought about largely by gains in appliance efficiency and an increase in vehicle efficiency standards by 2025. From 1970 through 2008, energy use dipped below 320 million Btu per person for only a few years in the early 1980s. In 2011, energy use per capita was about 312 million Btu. In the Reference case, it declines to less than 270 million Btu per person in 2034—a level not seen since 1963.

After some recovery through 2020, the economy continues to shift away from manufacturing (particularly, energy-intensive industries such as iron and steel, aluminum, bulk chemicals, and refineries) toward service industries. The energy-intensive industries, which represented about 5.9 percent of total shipments in 2011, represent 4.4 percent in 2040 in the Reference case. Efficiency gains in the electric power sector also reduce overall energy intensity, as older, less efficient generators are retired as a result of slower growth in electricity demand, changing dispatch economics related to fuel prices and stricter environmental regulations.

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

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Total primary energy consumption, including fuels used for electricity generation, grows by 0.3 percent per year from 2011 to 2040, to 107.6 quadrillion Btu in 2040 in the AEO2013 Reference case (Figure 53). The largest growth, 5.1 quadrillion Btu from 2011 to 2040, is in the industrial sector, attributable to increased use of natural gas in some industries (bulk chemicals, for example) as a result of an extended period of relatively low prices coinciding with rising shipments in those industries. The industrial sector was more severely affected than the other end-use sectors by the 2007-2009 economic downturn; the increase in industrial energy consumption from 2008 through 2040 is 3.9 quadrillion Btu.

The second-largest increase in total primary energy use, at 3.1 quadrillion Btu from 2011 to 2040, is in the commercial sector, which currently accounts for the smallest share of end-use energy demand. Even as standards for building shells and energy efficiency are being tightened in the commercial sector, the growth rate for commercial energy use, at 0.5 percent per year, is the highest among the end-use sectors, propelled by 1.0-percent average annual growth in commercial floorspace.

Primary energy use in the residential sector grows by 0.2 percent per year, or about 1.6 quadrillion Btu from 2011 to 2040, but it does not increase above the 2011 level until 2029. Increased efficiency reduces energy use for space heating, lighting, and clothes washers.

In the transportation sector, light-duty vehicle (LDV) energy consumption declines as a result of the impact of fuel economy standards through 2025. Total transportation sector energy use is essentially flat from 2011 through 2040, increasing by about 140 trillion Btu.

Renewables and natural gas lead rise in primary energy consumption

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The aggregate fossil fuel share of total energy use falls from 82 percent in 2011 to 78 percent in 2040 in the Reference case, while renewable use grows rapidly (Figure 54). The renewable share of total energy use (including biofuels) grows from 9 percent in 2011 to 13 percent in 2040 in response to the federal renewable fuels standard; availability of federal tax credits for renewable electricity generation and capacity during the early years of the projection; and state renewable portfolio standard (RPS) programs.

Natural gas consumption grows by about 0.6 percent per year from 2011 to 2040, led by the increased use of natural gas in electricity generation and, at least through 2020, the industrial sector. Growing production from tight shale keeps natural gas prices below their 2005-2008 levels through 2036. In the AEO2013 Reference case, the amount of liquid fuels made from natural gas (360 trillion Btu) is about three times the amount made from coal.

Increased vehicle fuel economy offsets growth in transportation activity, resulting in a decline in the petroleum and other liquids share of fuel use even as consumption of liquid biofuels increases. Biofuels, including biodiesel blended into diesel, E85, and ethanol blended into motor gasoline (up to 15 percent), account for 6 percent of all petroleum and other liquids consumption by energy content in 2040.

Coal consumption increases at an average rate of 0.1 percent per year from 2011 to 2040, remaining below 2011 levels until 2030. By the end of 2015, a total of 6.1 gigawatts of coal-fired power plant capacity currently under construction comes on line, and another 1.5 gigawatts is added after 2016 in the Reference case, including 0.9 gigawatts with carbon sequestration capability. Additional coal is consumed in the CTL process and to produce heat and power (including electricity generation at CTL plants).

Growth in electricity use slows but still increases by 28 percent from 2011 to 2040

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The growth of electricity demand (including retail sales and direct use) has slowed in each decade since the 1950s, from a 9.8-percent annual rate of growth from 1949 to 1959 to only 0.7 percent per year in the first decade of the 21st century. In the AEO2013 Reference case, electricity demand growth remains relatively slow, as increasing demand for electricity services is offset by efficiency gains from new appliance standards and investments in energy-efficient equipment (Figure 75). Total electricity demand grows by 28 percent in the projection (0.9 percent per year), from 3,839 billion kilowatthours in 2011 to 4,930 billion kilowatthours in 2040.

Retail electricity sales grow by 24 percent (0.7 percent per year) in the Reference case, from 3,725 billion kilowatthours in 2011 to 4,608 billion kilowatthours in 2040. Residential electricity sales also grow by 24 percent, to 1,767 billion kilowatthours in 2040, spurred by population growth and continued population shifts to warmer regions with greater cooling requirements. Led by demand in the service industries, sales of electricity to the commercial sector increase by 27 percent, to 1,677 billion kilowatthours in 2040. Sales to the industrial sector grow by 17 percent, to 1,145 billion kilowatthours in 2040. Electricity sales to the transportation sector, although relatively small, triple from 6 billion kilowatthours in 2011 to 19 billion kilowatthours in 2040 with increasing sales of electric plug-in LDVs.

Electricity demand can vary with different assumptions about economic growth, electricity prices, and advances in energy-efficient technologies. In the High Economic Growth case, demand grows by 42 percent from 2011 to 2040, compared with 18 percent in the Low Economic Growth case and only 7 percent in the Best Available Technology case. Average electricity prices (in 2011 dollars) increase by 5 percent from 2011 to 2040 in the Low Economic Growth case and 13 percent in the High Economic Growth case, to 10.4 and 11.2 cents per kilowatthour, respectively, in 2040.

Energy Demand from Comparison with other projections

3. Total energy consumption

Four projections by other organizations—INFORUM, IHSGI, ExxonMobil, and IEA—include energy consumption by sector (Table 10). To allow comparison with the IHSGI projection, the AEO2013 Reference case was adjusted to remove coal-to-liquids (CTL) heat and power, natural gas-to-liquids heat and power, biofuels heat and co-products, and natural gas feedstock use. To allow comparison with the ExxonMobil projection, electricity consumption in each sector was removed from the AEO2013 Reference case. To allow comparison with the IEA projections, the AEO2013 Reference case projections for the residential and commercial sectors were combined to produce a buildings sector projection. The IEA projections have a base year of 2010, as opposed to 2011 in the other projections. The INFORUM and IEA projections extend only through 2035.

ExxonMobil includes a cost for carbon dioxide (CO2) emissions in their projection, which helps to explain the lower level of consumption in their outlook. Although the IEA's central case also includes a cost for CO2 emissions, its Current Policies Scenario (which assumes that no new policies are added to those in place in mid-2012) is used for comparison in this analysis, because it corresponds better with the assumptions in the AEO2013 Reference case. ExxonMobil and IEA show lower total energy consumption across all years in comparison with the AEO2013 Reference case. Total energy consumption is higher in all years of the IHSGI projection than in the AEO2013 Reference case but starts from a lower level in 2011.

The INFORUM projection of total energy consumption in 2035 is 2.4 quadrillion British thermal units (Btu) higher than the AEO2013 Reference case projection, with the transportation sector 2.4 quadrillion Btu higher, the buildings sector 1 quadrillion Btu higher, and the industrial sector 1 quadrillion Btu lower. For the transportation sector, the difference could be related to vehicle efficiency, as the INFORUM projection for motor gasoline consumption (2 quadrillion Btu lower than AEO2013) is comparable with the EIA projection in AEO2012, which did not include the efficiency standard for vehicle model years 2017 through 2025. Energy consumption growth in the INFORUM projection is weaker than projected in AEO2013 through 2020 but stronger after 2020.

IHSGI projects significantly higher electricity consumption for all sectors than in the AEO2013 Reference case, which helps to explain much of the difference in total energy consumption between the two projections. In the IHSGI projection, the electric power sector consumes 10.0 quadrillion Btu more energy in 2040 than in the AEO2013 Reference case. The greater use of electricity in the IHSGI projection, including 150 trillion Btu used in the transportation sector (more than double the amount in AEO2013), also results in higher electricity prices than in the AEO2013 Reference case.

Total energy consumption declines in the ExxonMobil projection, primarily as a result of the inclusion of a tax on CO2 emissions, which is not considered in the AEO2013 Reference case. Energy consumption in the transportation and industrial sectors declines from 2011 levels in the ExxonMobil projection, based on expected policy changes and technology improvements.

Total energy consumption in the IEA projection is higher in 2035 than in 2010 because of increased consumption in the buildings sector, where an increase of 3.7 quadrillion Btu includes 3.1 quadrillion Btu of additional electricity demand. Energy consumption in the transportation and industrial sectors declines from 2020 to 2030 in the IEA projection, by less than 1 quadrillion Btu in each sector. IEA projects little change in energy use for those two sectors from 2030 to 2035, with industrial energy consumption declining very slowly and transportation energy consumption increasing slightly. IEA projects total energy consumption that is higher than ExxonMobil’s projection in 2035, but considerably lower than in the AEO2013 Reference case for both 2030 and 2035.

Market Trends

Comparison with other projections

Reference Case Tables
Table 1. Total Energy Supply, Disposition, and Price Summary XLS
Table 2. Energy Consumption by Sector and Source - United States XLS
Table 3. Energy Prices by Sector and Source - United States XLS
Table 4. Residential Sector Key Indicators and Consumption XLS
Table 5. Commercial Sector Key Indicators and Consumption XLS
Table 6. Industrial Sector Key Indicators and Consumption XLS
Table 7. Transportation Sector Key Indicators and Delivered Energy Consumption XLS
Table 8. Electricity Supply, Disposition, Prices, and Emissions XLS
Table 9. Electricity Generating Capacity XLS
Table 10. Electricity Trade XLS
Table 11. Liquid Fuels Supply and Disposition XLS
Table 12. Petroleum Product Prices XLS
Table 13. Natural Gas Supply, Disposition, and Prices XLS
Table 14. Oil and Gas Supply XLS
Table 15. Coal Supply, Disposition, and Prices XLS
Table 16. Renewable Energy Generating Capacity and Generation XLS
Table 17. Renewable Energy Consumption by Sector and Source XLS
Table 18. Energy-Related Carbon Dioxide Emissions by Sector and Source - United States XLS
Table 19. Energy-Related Carbon Dioxide Emissions by End Use XLS
Table 20. Macroeconomic Indicators XLS
Table 21. International Liquids Supply and Disposition XLS