- Key takeaways from the Reference case and side cases
- The Annual Energy Outlook 2022 explores long-term energy trends in the United States
- What is the AEO2022 Reference case?
- What are the side cases?
- Motor gasoline remains the most prevalent transportation fuel despite electric vehicles gaining market share
- Energy-related carbon dioxide (CO2) emissions dip through 2035 before climbing later in the projection years
- Energy consumption increases through 2050 as population and economic growth outweighs efficiency gains
- Electricity continues to be the fastest-growing energy source in buildings, with renewables and natural gas providing most of the incremental electricity supply
- Electricity demand grows slowly across the projection period, which increases competition among fuels
- Renewable electricity generation increases more rapidly than overall electricity demand through 2050
- Battery storage complements growth in renewables generation and reduces natural gas-fired and oil-fired generation during peak hours
- As coal and nuclear generating capacity retire, new capacity additions come largely from wind and solar technologies
- U.S. production of natural gas and petroleum and other liquids rises amid growing demand for exports and industrial uses
- Driven by rising prices, U.S. crude oil production in the Reference case returns to pre-pandemic levels in 2023 and stabilizes over the long term
- Refinery closures lower domestic crude oil distillation operating capacity, but refinery utilization rates remain flat over the long term
- Consumption of renewable diesel increases as a share of the domestic fuel mix
The cost-competiveness of solar photovoltaic and natural gas combined-cycle units leads to capacity additions
Declining costs of intermittent renewable technologies, particularly solar photovoltaic, make solar cost-competitive with natural gas combined cycle
In the AEO2021 Reference case, natural gas-fired combined-cycle and solar photovoltaic generators are the most economically attractive generating technologies when considering the overall cost to build and operate, as well as the value of the plant to the grid.
The levelized cost of electricity (LCOE) reflects the cost to build and operate a power plant per unit of generation, annualized over a cost-recovery period. The levelized avoided cost of electricity (LACE) represents a power plant’s value to the grid, which is a proxy for a plant’s potential revenues from the sales of electricity generated from displacing another marginal asset.
Both the levelized cost and levelized avoided cost of electricity, when used together, simplify the factors contributing to the capacity expansion decisions modeled. The value-cost-ratio (the ratio of LACE-to-LCOE) shows combined cycle and solar photovoltaic are the most economically competitive generating technologies.
In the AEO2021 Reference case, expected revenues from electricity generated from both natural gas-fired combined-cycle units and solar photovoltaic with single axis tracking units are generally greater than or equal to their respective projected costs across most of the electricity market regions in 2026. Correspondingly, these two technologies show the greatest projected growth throughout the projection period. The value of wind approaches its cost in several regions. These regions see new wind capacity builds in the AEO2021 Reference case, primarily in advance of the phaseout of the production tax credit (PTC).
LACE accounts for both the variation in daily and seasonal electricity demand in the region where a new project is under consideration and the characteristics of the existing generation fleet where the new generating capacity will be added. The prospective new generation resource is compared with the mix of new and existing generation and capacity that it would displace. For example, a wind resource that would primarily displace existing natural gas-fired generation will usually have a different value than one that would displace existing coal-fired generation.
Expected revenues from electricity generated from both natural gas-fired combined-cycle units and solar photovoltaic with single axis tracking units are generally greater than or equal to their respective projected costs across most of the electricity market regions in 2026.
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Previous Editions of the AEO
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Documentation and Assumptions