Market Trends: Industrial sector energy demand
Industrial shipments grow more rapidly than energy consumption
In the AEO2016 Reference case, manufacturing shipments increase by more than 60% from 2015–40, while delivered energy consumption for heat and power in the manufacturing sector increases by 16%. The continued decline in energy intensity of manufacturing results in part from continued improvement in the efficiency of industrial equipment, as well as a shift in the share of shipments from energy-intensive manufacturing industries to nonenergy-intensive industries. With lower fuel prices, shipments and energy use in many energy-intensive industries (bulk chemicals, petroleum refineries, iron and steel, and aluminum) continue to increase throughout the projection, but shipments in less energy-intensive manufacturing industries (plastics, metal-based durables) grow more rapidly.
With lower prices for natural gas and hydrocarbon gas liquids, shipments in the bulk chemical industry expand faster than those in other energy-intensive industries. Shipments in the bulk chemical industry increase by 4.8%/year from 2015–25, then slow to 1.4%/year growth from 2025–40. Energy use increases by 4.3%/year from 2015–25 and 1.1%/year from 2025–40, when energy use for bulk chemicals exceeds 10 quadrillion Btu and accounts for more than 31% of total industrial sector energy consumption. In the nonmanufacturing industries (agriculture, mining, and construction), energy intensity declines from 2015–40, as shipments increase by 53% and total delivered energy consumption increases by 30%. The overall decline in energy intensity is limited by the mining industry, where energy intensity increases as resource extraction moves into lessproductive areas.
In the manufacturing sector, energy consumption for heat and power grows steadily in the Reference case, averaging 0.5%/ year growth from 2015–40 (Figure MT-18). Nonmanufacturing energy consumption grows by an average of 2.2%/year from 2015–25, then slows to 0.8%/year from 2025–40. Nonfuel energy use (principally used for bulk chemical feedstocks and asphalt) grows by 4.7%/year from 2015–25, largely as a result of an increase in shipments of bulk chemicals. After 2025, nonfuel energy use grows by 1.5%/year in parallel with bulk chemical shipments.
Reliance on natural gas, natural gas liquids, and renewables rises as industrial energy use grows
Total delivered energy consumption in the industrial sector increases in the Reference case by 35%—8.6 quadrillion British thermal units (Btu)—from 2015–40 (Figure MT-19). As a result of relatively low prices, natural gas use accounts for 41% of the total increase. The mix of industrial energy sources stays relatively constant, however, reflecting limited capability for switching from other fuels to natural gas in most industries.
Consumption of renewable fuels (including biofuels heat and coproducts) increases by 16% from 2015–40 and accounts for a 5% share of total delivered energy consumption in 2040. The paper industry continues to be the predominant user of renewable energy, at 41% of the industrial sector total in 2040.
Industrial consumption of liquefied petroleum gases (LPG) increases by 47% from 2015–25 and by 21% from 2025–40. LPG are consumed predominantly as feedstocks in the bulk chemicals industry, with smaller amounts (mostly propane) consumed for process heat in other industries. Coal is the only industrial fuel whose share declines consistently over the projection, from 6% of the total in 2015 to 4% in 2040 as coal consumption remains relatively constant while total industrial energy use grows.
Low natural gas prices contribute to increasing use of combined heat and power (CHP) generation in the industrial sector, which grows by 48%, from 139 billion kilowatthours (kWh) in 2015 to 206 billion kWh in 2040. CHP is used primarily in the bulk chemicals, paper, and refining industries. Smaller amounts are used in the iron and steel industry and the food industry.
Petroleum share of industrial sector energy use increases in all oil price cases
Because there are few substitutes for petroleum in construction, mining, agriculture, and manufacturing applications, industrial petroleum use varies only modestly across alternative oil price cases. In the Reference case, the petroleum share of total industrial energy use grows from 33% in 2015 to 36% in 2040. Industrial petroleum consumption increases by 46%, from 8.1 quadrillion British thermal units (Btu) in 2015 to 11.8 quadrillion Btu in 2040, compared with a 30% increase for all other energy sources.
While petroleum consumption in the industrial sector in 2040 is similar in the AEO2016 Reference and Low Oil Price cases, consumption of other fuels grows by 30% in the Reference case and 21% in the Low Oil Price case from 2015–40. The petroleum share of total consumption in 2040 in the Low Oil Price case is slightly higher than in the Reference case as a result of increased shipments from petroleum refineries. Lower oil prices create less incentive for improving the efficiency of petroleum consumption.
In the High Oil Price case, petroleum consumption in the industrial sector increases by 40% over 2015–40, reaching 11.3 quadrillion Btu in 2040. With a lower petroleum-intensive manufacturing share of shipments, including bulk chemicals and refining, petroleum intensity is slightly lower than in the Reference case. Consumption of other fuels, particularly natural gas, increases by 48% from 2015–40 in the High Oil Price case. The increase in natural gas consumption in the High Oil Price case is a result of higher levels of gas-to-liquids (GTL) production and more exports of liquefied natural gas, which consumes natural gas in liquefaction, than in the Reference case. GTL production is economical only in the High Oil Price case.
Energy use in the pulp and paper industry depends on technology choices
Energy use in the pulp and paper industry, which is closely related to shipment volumes, differs significantly in the AEO2016 Reference, Low Economic Growth, and High Economic Growth cases (Figure MT-21). Most of the energy consumed in the industry is from renewable sources. In the Reference case, the renewable share of total energy consumption in the pulp and paper industry grows from 55% in 2015 to 58% in 2040. The amount of energy used in the industry also depends on the technologies chosen for each process step, with the choices generally based on capital costs, operation and maintenance costs, fuel costs, and emissions. Some technologies use recycled products and waste, including recycled paper for pulp, wood waste for fuel, and chemical recovery (such as black liquor from the Kraft pulping process) for combined heat and power.
In the AEO2016 Reference and Low Economic Growth cases, slow growth in shipments and the adoption of more-energyefficient technologies result in declines in energy consumption over the first 10 years of the projection. In the Reference case, pulp and paper industry shipments increase by 3%, while energy consumption declines by 1% from 2015–25. From 2025–40, with an 8% increase in pulp and paper industry shipments, energy consumption increases by 4%. In the Low Economic Growth case, with a 4% decline in pulp and paper industry shipments, energy consumption declines by 9% from 2015–25. From 2025–40, with a 2% increase in pulpand paper industry shipments, energy consumption declines by a smaller 3%. In the High Economic Growth case, with more rapid 13% growth in pulp and paper industry shipments from 2015–25, energy consumption increases by 10%, and from 2025–40 both pulp and paper industry shipments and energy consumption increase by about 37%. Although energy efficiency improves in the 2025–40 period, more rapid growth in combined heat and power generation results in a higher rate of increase in energy consumption.
