Introduction
In preparing the AEO2011, EIA evaluated a wide range of trends and issues that could have major implications for U.S. energy markets. This overview focuses primarily on one case, the AEO2011 Reference case, which is presented and compared with the AEO2010 Reference case released in December 2009 (see Table 1). Because of the uncertainties inherent in any energy market projection, the Reference case results should not be viewed in isolation. Readers are encouraged to review the alternative cases when the complete AEO2011 publication is released in order to gain perspective on how variations in key assumptions can lead to diff erent outlooks for energy markets.
To provide a basis against which alternative cases and policies can be compared, the AEO2011 Reference case generally assumes that current laws and regulations affecting the energy sector remain unchanged throughout the projection (including the implication that laws which include sunset dates do, in fact, become ineff ective at the time of those sunset dates). EIA considers this practice to be a prudent approach. Currently, there are many pieces of legislation and regulation that appear to have some probability of being enacted in the not too distant future, and some laws include sunset provisions that may be extended. However, it is difficult to discern the exact forms that the fi nal provisions of pending legislation or regulations will take, and sunset provisions may or may not be extended. Even in situations where existing legislation contains provisions to allow revision of implementing regulations, those provisions may not be exercised consistently. In certain situations, however, where it is clear that a law or regulation will take eff ect shortly after the AEO Reference case is completed, it may be considered in the projection.
As in past Annual Energy Outlook (AEO) editions, the complete AEO2011 will include many additional cases. The standard set of cases in the complete AEO will include cases that refl ect the impacts of extending a variety of current energy programs beyond their current expiration dates, or the permanent retention of a broad set of current programs that are currently subject to sunset provisions, among others. In addition to the alternative cases prepared for AEO2011, EIA has examined proposed policies at the request of Congress over the past year. Reports describing the results of those analyses are available on EIA's website.1
Key updates that were made for the AEO2011 Reference case include:
- Significant update of the technically recoverable U.S. shale gas resources, more than doubling the volume of shale gas resources assumed in AEO2010, and also added new shale oil resources
- Revision of the methodology for determining natural gas prices to better reflect a lessening of the influence of oil prices on natural gas prices, in part because of the increase in shale gas supply and improvements in natural gas extraction technologies
- Update of the data and assumptions for off shore oil and gas production, pushing out the start of production for a number of projects as a result of the six-month drilling moratoria, and delaying Atlantic and Pacific off shore leasing beyond 20172
- Increase of the limit for blending ethanol into gasoline for approved vehicles from 10 percent to 15 percent, as a result of the waiver granted by the U.S. Environmental Protection Agency (EPA) in October 2010
- Expanded the number of electricity regions from 13 to 22, allowing better regional representation of market structure and power flow
- Update of the costs for new power plants
- Update of the costs and sizes of electric and plug-in hybrid electric batteries
- Downward revision of light-duty vehicle travel demand due to the adoption of new estimation technique
- Incorporation of California's Low Carbon Fuel Standard, which reduces the carbon intensity of gasoline and diesel fuels in that State by 10 percent from 2012 through 2020
- Incorporation of changes in environmental rules at the State level. For example, California increased its RPS target from 20 percent to 33 percent by 2020.
Notes
1 See "Responses to Congressional and Other Requests," at www.eia.gov/oiaf/service_rpts.htm.
2 The Eastern Gulf of Mexico is under a Congressional drilling moratorium (Gulf of Mexico Energy Security Act of 2006) until 2022 so, as in the AEO2010 Reference case, no lease sales are assumed in the AEO2011 until after 2022.