EIA 2008 Annual Energy Outlook

The unfortunate thing about the Energy Information Administration's (EIA) Annual Energy Outlooks is that reporters tend not to understand (or at least write about) the assumptions underlying these forecasts. Most articles I've seen on this topic over the past few years tend to highlight the very low levels of growth forecast in future renewable generation capacity. As the EIA is touted as "Official Energy Statistics from the US Government" I've always been troubled by this.

As in previous editions of the Annual Energy Outlook (AEO), the reference case assumes that current policies affecting the energy sector remain unchanged throughout the projection period. Some possible policy changes—notably, the adoption of policies to limit or reduce greenhouse gas emissions—could change the reference case projections significantly.

In addition, the EIA AEOs have been rather...well...volatile in their predictions for renewable energy, as demonstrated by the change in the predicted annual growth rate for non-hydro renewables going back over the past 9 years of the Annual Energy Outlooks.






Again, given the assumptions above, one would certainly expect forecasts for US energy generation and consumption to change considerably in some years with the expiration of old policies and implementation of new ones. Just not every year. Thus, I've don't find AEOs useful in a predictive sense, but more as interesting indicators of the current government perspective on energy.

With this in mind the new 2008 EIA Outlook (an early release is available here) carries a few important changes in its assumptions:

As noted in AEO2007, energy markets are changing in response to readily observable factors such as the higher energy prices experienced since about 2000, the greater influence of developing countries on worldwide energy requirements, recently enacted legislation and regulations in the United States, and changing public perceptions on issues related to the use of alternative fuels, emissions of air pollutants and greenhouse gases, and the acceptability of various energy technologies, among others.

The AEO2008 reference case makes several important changes from earlier AEOs to better reflect trends that are expected to persist in the economy and energy markets. Key energy market changes identified by EIA analysts and reflected in AEO2008 include:

Higher prices for crude oil and natural gas

Higher delivered energy prices, reflecting both higher wellhead and minemouth prices and higher costs to transport, distribute, and refine fuels per unit supplied

Slower projected growth in energy demand (particularly for natural gas but also for liquid fuels and coal)

Faster projected growth in the use of nonhydroelectric renewable energy

Higher domestic oil production, particularly in the near term

Slower projected growth in energy imports, both natural gas and liquid fuels

Slower projected growth in energy-related emissions of carbon dioxide (CO2), which increase by 25 percent in the AEO2008 reference case from 2006 to 2030, as compared with a projected 35-percent increase over the same period in the AEO2007 reference case.

Most of the headlines on this year's report went to the considerable increase in projected oil pricing - as the EIA upped its 2010 oil price forecast by 13% and its 2030 price by 18%. But I did want to point out the stunningly large (relative) predictions for renewable energy capacity:

Excluding hydroelectric power, renewable energy consumption grows from 3.4 quadrillion Btu in 2006 to 6.7 quadrillion Btu in 2030, compared with 5.5 quadrillion Btu in 2030 in the AEO2007 reference case.

As shown above, excluding hydro, renewable energy generation (using kilowatthours instead of Btu) is now projected to grow at 5.5% annually through 2030. Compare this to last year's growth rate in renewable generation of 3.3% through 2030 and 2001's 0.70%. A significant change indeed.