Market Trends: Commercial sector energy demand
Commercial sector energy intensity continues to decline
In the AEO2016 Reference case, commercial sector energy intensity, defined as delivered energy consumption per square foot of commercial floorspace, declines by an average 0.5%/year from 2015–40 (Figure MT-14). While commercial buildings energy intensity decreases, delivered energy consumption grows by 0.6%/year, and commercial floorspace grows by 1.1%/year.
Improvements in major end-use equipment and distributed generation technologies help to slow the growth of delivered energy consumption in the commercial sector. Varying the rate of improvement in the 2013 Demand Technology, High Demand Technology, and Best Available Demand Technology cases shows a range in which equipment and building shell efficiency improvement, or lack thereof, could affect commercial energy consumption.
In the commercial sector, delivered electricity consumption grows faster than natural gas consumption in the Reference case. As a result, natural gas intensity declines by an average of 0.5%/year from 2015–40, compared with an average decline of 0.3%/year in commercial sector electricity intensity. The natural gas share of total delivered energy use in the commercial sector declines from 38% in 2015 to 37% in 2040 in the Reference case, while the electricity share of total delivered energy use increases from 53% in 2015 to 55% in 2040.
The continued decline in energy intensity of commercial buildings is explained in part by improvements in the energy efficiency of lighting, heating, cooling, and ventilation systems, as well as more stringent building codes. Improvements in the efficiency of major end-use equipment help to slow the growth of delivered energy consumption in the commercial sector. In the Extended Policies case, which assumes the issuance of more stringent efficiency standards for end-use equipment in the future, overall energy intensity is lower than in the AEO2016 Reference case. In 2040, total commercial sector energy per square foot in the Extended Policies case is more than 2% lower than in the Reference case.
Federal efficiency standards reduce commercial sector energy intensity
While commercial floorspace grows by an average of 1.1%/year from 2015–40 in the AEO2016 Reference case, delivered energy consumption for many commercial end uses decreases or grows more slowly than floorspace, resulting in declines in commercial sector energy intensity (the ratio of energy consumption to commercial floorspace) (Figure MT-15). Virtually every major use of energy in commercial buildings, including space heating and cooling, water heating, lighting, and refrigeration, is covered by some sort of federal energy efficiency standard. The U.S. Department of Energy is required by law to investigate whether updated standards are technologically feasible and economically justified and to work with stakeholders to develop updated standards as appropriate. As a result, energy intensity decreases in the Reference case by 1.7%/year from 2015–40 for lighting and refrigeration and by 1.2%/year for space heating, cooling, and ventilation.
The energy intensity of miscellaneous electric loads in commercial buildings—equipment ranging from large medical imaging equipment to video displays and other electric devices—increases by a total of 11.5% from 2015–40. While voluntary efficiency programs such as ENERGY STAR may help to reduce energy use for some devices and appliances, many other devices and appliances are not covered by federal efficiency standards. In large part, the growth of energy use for commercial non-PC office equipment results from new data centers for web- and network-based services and connectivity, with energy intensity increasing by 1.1%/year in the AEO2016 Reference case. For commercial PC office equipment, energy intensity decreases by 5.9%/year as users shift from desktop computers to more efficient laptops and mobile computing devices. Although no national standard exists, a growing number of states and municipalities continue to adopt more stringent building energy codes, often aligning with newer versions of the American Society of Heating, Refrigerating, and Air-Conditioning Engineers Standard 90.1. Improvements in building shells, including tighter air sealing, more efficient windows, and more insulation, also reduce energy use for heating and cooling of buildings.
Efficiency gains for advanced technologies reduce commercial energy consumption growth
In the commercial sector, the largest efficiency gains in the AEO2016 Reference case are for lighting. Lighting efficiency, or efficacy (light output per unit of energy consumed, measured in lumens per watt), increases by 70% from 2015–40 in the Reference case with continued improvements as a result of federal standards and the increasing penetration of light-emitting diode lighting technologies. Refrigeration and electric space cooling also show significant efficiency gains (Figure MT-16).
The largest impacts of the Clean Power Plan (CPP) on efficiency in the commercial sector are on lighting and ventilation. Efficiency gains from 2015–40 in the Reference case are about twice those in the No CPP case for both end uses. Rebates offered in support of the CPP in the Reference case make efficient technology purchases more attractive to consumers. Total commercial energy demand increases by an average of 0.5%/year from 2015–40 in the Reference case. However, energy use for office equipment other than personal computers increases by 1.9%/year as local servers are replaced by central data storage and network computing. Energy use for nonbuilding services and miscellaneous electric loads (such as portable and plug-in devices) increases by an average of 1.4%/year. The AEO2016 Reference case reflects the efficiency effects of federal equipment standards, technology advances, and efficiency rebates and incentives offered in support of the CPP.
Extended investment tax credits result in more additions to renewable distributed generation capacity
Solar photovoltaic (PV) capacity for electricity generation accounts for nearly 78% of the 33.3 gigawatts (GW) of commercial sector distributed generation (DG) capacity in 2040 in the Reference case. The costs of PV inverters, solar panels, and equipment installation continue to decline, while state and utility rebates and extensions of federal investment tax credits contribute to the growth of installed PV capacity. In the Reference case, solar PV capacity increases by more than 6%/year on average, from 5.6 GW in 2015 to 25.8 GW in 2040.
Federal business investment tax credits for solar technologies, including PV, which were set to expire after 2016, have been extended. The 30% credit will continue through 2019, then decrease to 26% in 2020, 22% in 2021, and 10% in 2022 and after. Tax credits for combined heat and power (CHP) and small wind generators will expire after 2016. The Extended Policies case assumes that the CHP and wind tax credits do not expire. As a result, in the Extended Policies case, commercial wind capacity increases by 16%/year from 2015–40, compared with more than 8%/year in the Reference case (Figure MT-17), and accounts for 10% of the 42.8 GW of total commercial distributed generation capacity in 2040, compared with 72% for PV.
Use of natural gas-fired CHP continues to grow in the commercial sector, with conventional natural gas-fired CHP capacity—including reciprocating engines and turbines—growing by more than 4%/year and accounting for 14% of commercial DG capacity in 2040 in the Reference case. The total capacity of natural gas microturbines grows by almost 8%/year and accounts for more than 3% of commercial DG capacity in 2040, while the total capacity of fuel cells grows by 7%/year and accounts for almost 1% of commercial DG capacity in 2040. Higher commercial electricity prices as a result of the CPP also contribute to the increased use of DG technologies.
