‹ Analysis & Projections

Annual Energy Outlook 2011

Release Date: April 26, 2011   |  Next Early Release Date: January 23, 2012  |   Report Number: DOE/EIA-0383(2011)

Industrial sector energy demand

Heat and power energy consumption increases in manufacturing industries

Despite a 54-percent increase in industrial shipments, industrial energy consumption increases by only 19 percent from 2009 to 2035 in the AEO2011 Reference case. Energy consumption growth is moderated by a shift in the mix of output, as growth in energy-intensive manufacturing output (aluminum, steel, bulk chemicals, paper, and refining) slows and growth in high-value (but less energy-intensive) industries, such as computers and transportation equipment, accelerates.

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There is also a relative shift in industrial energy use to manufacturing from nonmanufacturing industries. Manufacturing heat and power as a percentage of total industrial delivered energy consumption grows from 65 percent in 2009 to 71 percent in 2035 (Figure 66). Nonmanufacturing (agriculture, mining, and construction) heat and power energy consumption as a percentage of total energy drops by 2 percent over the projection. The remaining fuel consumption, consisting of nonfuel uses of energy (primarily as feedstocks in chemical manufacturing and asphalt for construction), also declines by about 4 percent.

The rise in manufacturing heat and power consumption in the AEO2011 Reference case is due primarily to an increase of 1.7 quadrillion Btu in total energy use for production of liquid fuels—both petroleum and nonpetroleum liquids—in the refining industry. From 2009 to 2035, CTL, coal- and biomass-to-liquids (CBTL), and biofuels production accounts for the bulk of the increase, which corresponds to a 48-percent increase in energy consumption for liquid fuels production, although total refinery shipments increase by only 16 percent.

Industrial fuel mix changes as demand increases from low levels in 2009

Demand for all fuels in the industrial sector increases from 2009 levels in the Reference case. As consumption increases, the mix of fuels and their relative shares change slowly, reflecting modest capital spending and limited capability for fuel switching (Figure 67).

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Industrial use of liquid fuels grows by 13 percent from 2009 to 2035, but its share of total liquid fuel consumption declines. Nearly one-half of industrial liquid fuel consumption is for feedstocks in the production of chemicals, and another 20 percent consists of still gas generated and consumed by refineries. Natural gas use in the industrial sector grows by 27 percent from 2009 to 2035, reflecting the recovery in industrial output and relatively low natural gas prices, which spur a large increase in natural gas consumption for CHP generation that offsets a decline in natural gas use for feedstock.

After 2025, increased use of coal for CTL and CBTL production offsets a decline in traditional industrial uses of coal (including steam generation and coke production) as a result of efficiency improvements that reduce the need for process steam. Metallurgical coal use drops, based on an expected decline in smelting and increased use of electric arc furnaces in steel-making.

A decline in the electricity share of industrial energy consumption reflects growth in on-site CHP and efficiency improvements across industries, mostly based on motor efficiency standards. The renewable fuel share expands with growth in lumber, paper, and other industries that consume biomass-based byproducts.

Iron and steel and non-energy-intensive industries show fastest output growth

Industrial production recovers from the recent economic downturn and continues to grow over the long term in the AEO2011 Reference case. The recovery and long-term growth are uneven, however, with the strongest growth in iron and steel and non-energy-intensive manufacturing industries. The remaining industries also recover from the recession, but their production begins to decline after 2025. Over the entire projection, total industrial shipments increase by 54 percent in the Reference case, 35 percent in the Low Economic Growth case, and 75 percent in the High Economic Growth case.

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A few energy-intensive manufacturing industries account for the majority of total industrial energy consumption. Ranked by their total energy use, the top five energy-consuming industries—bulk chemicals, refining, paper, steel, and food—accounted for 61 percent of industrial energy consumption and 25 percent of total value of shipments in 2009. With the exception of bulk chemicals, most industries experience overall growth from 2009 to 2035 (Figure 68). Chemical industry output recovers to pre-recession levels by 2015 but then declines by 16 percent from 2015 to 2035.

A rebound in industrial output is being seen already in selected industries, driven by increasing demand based on relative weakness of the U.S. dollar against foreign currencies, which promotes exports of basic commodities [87]. Long-term growth in the energy-intensive manufacturing industries is slower, however, as a result of reduced growth in demand for the goods they produce, increased foreign competition, and movement of investment capital to more profitable areas of the economy after the short-term economic rebound from the recession.

Delivered energy use in industry sectors trends upward after recession ends

Starting from the low levels of 2009, industrial delivered energy use grows sharply in nearly all the AEO2011 cases. From 2009 to 2035, industrial energy consumption grows by 7 percent in the Low Economic Growth case, 19 percent in the Reference case, and 31 percent in the High Economic Growth case (Figure 69).

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The most significant changes in energy use are in the refining, bulk chemicals, and iron and steel industries. The refining industry (both petroleum and nonpetroleum liquids refineries) shows the strongest growth in the Reference, Low Economic Growth, and High Economic Growth cases. Although total refinery output grows by less than 1 percent per year, the industry’s energy use increases modestly in all cases, with continued efforts to remove sulfur from oil inputs, energy-intensive coal liquefaction beginning in 2025, and strong growth in the production of other nonpetroleum liquids. In the Low Economic Growth case, energy use in the bulk chemical industry declines from 2009 to 2035 as its output declines in the face of rising costs for domestic inputs in a globally competitive market. Similarly, energy consumption in the iron and steel industry declines in the Low Economic Growth case as penetration of energy-saving production technologies completely offsets output growth from 2009 to 2035.

Overall energy intensity in the industrial sector declines by 21 percent in the Low Economic Growth case, 23 percent in the Reference case, and 25 percent in the High Economic Growth case. The projections are consistent with the expectation that energy intensity will decline as the economic recovery facilitates investments in more efficient equipment.

Chemical industry use of fuels as feedstocks recovers before declining

Industrial feedstock consumption includes the use of asphalt and road oil in the construction industry, as well as use of liquid petroleum gas, naphtha, petroleum gas oil, and natural gas as raw materials for the production of various chemicals. The largest share of feedstock energy consumption occurs in the chemical industry, primarily for the production of ethylene and propylene, which are used to make plastics, fertilizers, and a variety of inorganic chemicals.

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Industrial energy consumption trends in the AEO2011 Reference case reflect growth in consumption of all feedstocks after the 2008-2009 economic downturn, followed by a long-term decline as production of basic chemicals falls. Increased use of ethane and propane as alternatives to naphtha and gas oil reflects a recent switch to lighter feedstocks with the rise in crude oil prices relative to natural gas prices. With increasing production of natural gas and natural gas liquids (NGLs), lighter feedstocks become readily available on a continuing basis (Figure 70).

Consumption of all feedstocks is higher in 2035 than in 2009, except for natural gas use, which drops by 14 percent from 2009 to 2035. The use of natural gas as a feedstock falls after 2014, when domestic production of hydrogen, methanol, and ammonia begins a decline that continues through 2035. Ammonia production declines as a result of modest growth in agricultural production and increased foreign competition. Consumption of asphalt and road oil increases through 2016, then declines with slower growth in the construction industry.

Output growth for energy-intensive industries slows

Industrial sector output has grown more slowly than the overall economy in recent decades, as imports have met a growing share of demand for industrial goods, whereas the service sector has grown more rapidly [87]. In the AEO2011 Reference case, real GDP grows at an average annual rate of 2.7 percent from 2009 to 2035, while the industrial sector and its manufacturing component grow by 1.7 percent per year and 1.9 percent per year, respectively (Figure 47). As the economy recovers from the recent recession, growth in U.S. manufacturing output in the Reference case accelerates from 2011 through 2020. After 2020, growth in both GDP and manufacturing output return to rates closer to the historical trend. Increased foreign competition, slow expansion of domestic production capacity, and higher energy prices increase competitive pressure on most manufacturing industries after 2020. These factors weigh particularly heavy on the energy-intensive manufacturing sectors, which taken together grow at a slower rate of about 1.0 percent per year, which reflects projections ranging from a 0.1-percent annual decline for bulk chemicals to a 1.5-percent annual increase for food processing.


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A decline in U.S. dollar exchange rates, combined with modest growth in unit labor costs, stimulates U.S. exports, eventually improving the U.S. current account balance. From 2009 to 2035, real exports of goods and services grow at an average annual rate of 6.3 percent, and real imports of goods and services grow by an average of 4.6 percent per year. Strong growth in exports is an important driver for growth projections in the transportation equipment, electronics, and machinery industries.

Industrial and commercial sectors lead growth in primary energy use

Total primary energy consumption, including fuels used for electricity generation, grows by 0.7 percent per year from 2009 to 2035, to 114.2 quadrillion Btu in 2035 in the AEO2011 Reference case (Figure 56). The largest increase, 7.2 quadrillion Btu from 2009 to 2035, is in the industrial sector, which was the end-use sector most severely affected by the economic downturn in 2009. When 2008 is used as the base year, the total increase in industrial energy consumption is only about one-half the increase from 2009 to 2035, at 3.3 quadrillion Btu from 2008 to 2035. Factors contributing to the growth in industrial energy consumption include increased use of natural gas for combined heat and power (CHP) generation and increased production of biofuels to meet the renewable fuels standard (RFS) standard required by EISA2007.

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The second-largest increase in total primary energy consumption from 2009 to 2035 (5.8 quadrillion Btu) is in the commercial sector, which currently accounts for the smallest sectoral share of primary energy use. Even as standards for building shells and energy efficiency are being tightened in the commercial sector, the growth rate for commercial energy use, at 1.1 percent per year, is the fastest rate among the end-use sectors, propelled by 1.2-percent average annual projected growth in commercial floorspace.

Primary energy use in the transportation sector grows by 4.7 quadrillion Btu from 2009 to 2035. Light-duty vehicles (LDVs) have accounted for more than 16 percent of total U.S. energy consumption since 2002, and their share declines slightly to 15.5 percent in 2020 as fuel economy standards increase to meet the statutory requirements of EISA2007. Growth in energy consumption by LDVs averages 0.3 percent per year from 2009 to 2035.

Reference Case Tables
Table 2. Energy Consumption by Sector and Source - United States XLS
Table 2.1. Energy Consumption by Sector and Source - New England XLS
Table 2.2. Energy Consumption by Sector and Source - Middle Atlantic XLS
Table 2.3. Energy Consumption by Sector and Source - East North Central XLS
Table 2.4. Energy Consumption by Sector and Source - West North Central XLS
Table 2.5. Energy Consumption by Sector and Source - South Atlantic XLS
Table 2.6. Energy Consumption by Sector and Source - East South Central XLS
Table 2.7. Energy Consumption by Sector and Source - West South Central XLS
Table 2.8. Energy Consumption by Sector and Source - Mountain XLS
Table 2.9. Energy Consumption by Sector and Source - Pacific XLS
Table 6. Industrial Sector Key Indicators and Consumption XLS
Table 17. Renewable Energy Consumption by Sector and Source XLS
Table 18. Carbon Dioxide Emissions by Sector and Source - United States XLS
Table 18.1. Carbon Dioxide Emissions by Sector and Source - New England XLS
Table 18.2. Carbon Dioxide Emissions by Sector and Source - Middle Atlantic XLS
Table 18.3. Carbon Dioxide Emissions by Sector and Source - East North Central XLS
Table 18.4. Carbon Dioxide Emissions by Sector and Source - West North Central XLS
Table 18.5. Carbon Dioxide Emissions by Sector and Source - South Atlantic XLS
Table 18.6. Carbon Dioxide Emissions by Sector and Source - East South Central XLS
Table 18.7. Carbon Dioxide Emissions by Sector and Source - West South Central XLS
Table 18.8. Carbon Dioxide Emissions by Sector and Source - Mountain XLS
Table 18.9. Carbon Dioxide Emissions by Sector and Source - Pacific XLS
Table 19. Energy-Related Carbon Dioxide Emissions by End Use XLS
Table 24. Industrial Sector Macroeconomic Indicators XLS
Table 25. Refining Industry Energy Consumption XLS
Table 26. Food Industry Energy Consumption XLS
Table 27. Paper Industry Energy Consumption XLS
Table 28. Bulk Chemical Industry Energy Consumption XLS
Table 29. Glass Industry Energy Consumption XLS
Table 30. Cement Industry Energy Consumption XLS
Table 31. Iron and Steel Industries Energy Consumption XLS
Table 32. Aluminum Industry Energy Consumption XLS
Table 33. Metal Based Durables Energy Consumption XLS
Table 34. Other Manufacturing Sector Energy Consumption XLS
Table 35. Nonmanufacturing Sector Energy Consumption XLS
Table 74. Employment and Shipments by Industry, and Income and Employment by Region XLS