The Energy Information Administration of the Department of Energy compiles and analyzes energy-related statistics. One of their key reports is the Annual Energy Outlook. On December 14, EIA released its look at the next 25 years, the Annual Energy Outlook 2010 (AEO2010). This Early Release details only the Outlook's "Reference Case" (assumptions here and here); the full report, due out in March, will cover a broader range of scenarios. EIA's conclusions based on the Reference Case:
- Recent Federal and State policies, and rising energy prices, moderate growth in energy consumption and shift it to renewable fuels
- U.S. oil use remains near its present level through 2035
- Growth in overall liquids demand is met by biofuels, and ethanol accounts for >17% of gasoline consumption by 2035
- U.S. reliance on imported oil as a share of U.S. liquids use, declines to 45% over the next 25 years
- Shale gas provides the majority of growth in gas supply
- Energy-related CO2 emissions grow 0.3% per year, absent any new policies to limit emissions
The following post is quite long. Here's the Executive Summary of Vladimir's conclusions:
- The U.S. economy uses enormous quantities of energy. Even small changes in the fuel mix are difficult to make. Absent costly policy changes (like Cap and Trade), our fuel mix 25 years from now will be much as it is today.
- EIA's assumptions give renewable energy sources every advantage, leading to a very optimistic projection of the market share of renewable fuels. See Slide 21 for the best example of the grossly optimistic treatment of renewables in this Outlook.
- Even in EIA's Reference Case, the growth in renewables doesn't make up for the projected growth in energy consumption from population and productivity growth
- Even EIA thinks the U.S. will fall short of the mandated Renewable Fuel Standard (35 billion gallons of ethanol by 2022) that was imposed by the Congress in 2007.
- EIA projects declining future reliance on liquids imports due to biofuels and production growth in the deepwater Gulf of Mexico. These projections seem overly optimistic to me and would suddenly reverse a 40+ year trend of ever-increasing reliance on oil imports. I don't buy it.
- Natural gas is still being undervalued as an energy source.
- The base case assumption is that the 40 year certifications for nuclear power plants will be increased across the board by 20 years. Given the continued unpopularity of nukes with the green crowd, this assumption seems suspect.
Slide 6 illustrates the difficulty of dramatically changing the energy use picture. Just as an aircraft carrier can't be turned on a dime, neither can the enormous energy-consuming engine that is our economy. For the last several years, the U.S. has consumed 100 quadrillion Btus of energy in various forms. That's a lot of energy. Every year, the population grows (about 0.9% a year) and we get a little bit more efficient and productive with our energy consumption (see Slide 7, below), roughly to offset the increased energy needs of those 3 million or so warm bodies. Out of 100 "quads", 85 are "fossil fuels" - petroleum, natural gas and coal. Nuclear energy accounts for about 8 quads, so currently 7 quads is made up of "renewables" - hydropower, geothermal energy, biomass, wind and solar. For practical (and political and environmental) reasons, nobody expects much growth in hydro or geothermal (less and except Al Gore, who somehow got the idea that the temperature of the earth's core is "several million degrees" - but I digress). Thus, the conclusion of this Outlook, at least in the Reference Case, is that reliance on fossil fuels declines from 85% to 78% over the next 25 years. And the size of the overall pie is growing in that time frame, to 115 quads, so that all of the conventional sources of energy actually grow. A few extra quads of renewables actually get us to 115 quads total. More on renewables in the coming slides. This slide presents a very important concept. The Obama Administration, and the Left in general, see the prosperity of the U.S. as a problem to be remedied. Some would suggest, as RedState diarist Bernard Chumm has pointed out, deliberately crippling our economy to the tune of 25% in order to "fix" the "disparity". Bullcrap. The U.S. economy is a very efficient engine for creating wealth, and it has improved steadily over the last 40 years (at least). It is less energy-intensive, and less carbon-intensive, if that yardstick has any meaning to you. Hobbling our economy will have the effect of reversing this trend. And our slack will be taken up by competing world economies that are nowhere near as efficient, or "green" if you will. Fixing a nonexistent "problem" will not only make the U.S. less prosperous, it will make the world dirtier and less prosperous. Beware the V-shaped forecast, when the bottom of the V is "today". Consider the red curve, production. The EIA's forecast has us reversing 40 years of declining production, returning to the 1970 levels in just 25 years. The combination allows the EIA to be able to forecast a reduction of liquids imports. How is this possible? you might ask. To the EIA, it's a combination of deepwater Gulf of Mexico oil, along with growth in biofuels. More about that later. In the meantime, the Obama Administration plans to do just about everything it can to discourage and punish domestic oil and gas exploration. Interior Secretary Salazar has yet to proceed with the Five-Year Outer Continental Shelf Leasing Program and has imposed stricter permitting requirements for onshore Federal leases. ANWR and the Eastern Gulf of Mexico will remain off limits to drilling. Proposed tax law changes will make capital formation harder than ever for the independent energy companies who drill 90% of domestic wells. But at least we have ... switchgrass! Biofuels grow, huh? Funny thing: without constant infusion of Federal dollars to make an inefficient and inferior fuel marketable, biofuel refiners can't compete. It's supposedly a matter of scale, but we already have 2.9 billion gallons per year of biodiesel refining capacity, about the amount of biodiesel production forecast for 2022 and beyond on Slide 11, below. Now this graph is remarkable. It's pretty much an admission by EIA that the Congressionally-mandated 2007 Renewable Fuel Standard (RFS) goal of 35 billion gallons of ethanol usage per year by 2022 will not be met. Not only that, EIA arrived at that conclusion in last year's outlook, AEO2009. Consider the makeup of the ethanol blend. Large portions of it are projected to be made up of "biomass to liquids" and "cellulosic ethanol", two sources which don't even exist at present. And the EIA is giving ethanol and ethanol blends a significant price advantage in their assumptions, to make it more price competitive with gasoline:
Retail prices for E85 (a blend of 70 to 85 percent ethanol and 30 to 15 percent gasoline by volume)are projected to shift from a volumetric basis to an energy-equivalent basis relative to motor gasoline, in order to meet the renewable fuels standard (RFS) ... . In 2022, the retail price of gasoline is $3.41 per gallon while the price of E85 is $2.63 per gallon, reflecting the higher energy content of gasoline versus E85 and delivering a similar cost for the two fuels per mile traveled.
This interesting bar chart illustrates a point I wrote about recently at RedState: The Big Energy Lie. "Resources" and "reserves" are not interchangeable terms. Reserves are quantities known with relative certainty that can be recovered or are directly indicated by wells that have already been drilled. They are a small subset of the total resource base. In the chart, natural gas reserves are represented by the dark blue portion at the base of each bar. And the growth in the resource base in the last few years is particularly notable. Activity and new technology directly led to the growth of the resource estimate, mostly in the shales. There are several interesting things to note here. EIA takes the AGA Potential Gas Committee estimate of resources seriously. There is a large growth projected in shale gas, which they expect will keep prices low and actually depress exploration and development of conventional gas reserves onshore and in the Gulf of Mexico. Secondly, they project completion of an gas pipeline to serve the Alaska North Slope in 2023. But with all of that, natural gas, the cleanest, most abundant, most domestic and most greenhouse-friendly of our conventional energy sources (except maybe for nukes) grows only modestly (from 23 to less than 25 trillion cubic feet) over 25 years. (1 TCF roughly equals 1 quad.) Look again at Slide 17. Natural gas is our most underutilized resource. Active natural gas development means instant jobs. If we wanted to, we could use it as a transportation fuel to reduce the dependence on foreign sources of crude oil (and, increasingly, refined gasoline and other products). I could even fulfill the role that this Outlook expects for biofuels, without the infusion of tax credits. Note that the figures on the graph show the percentages of each fuel used to generate electricity. The slide title is true, but misleading; coal's share declines, but actual coal usage is forecast to increase by over 15% from 2008 to 2035. Natural gas increases by almost 25%. Nukes only increase by 11%, and that assumes a 20-year extension (to 60 years) on the certification of existing plants. Slide 21 shows the detail of the "Renewable" slice. Read the graph title carefully. This is actually a detail of just the top green slice of the area chart on Slide 20, above. This graph depicts how the EIA thinks we'll be ramping up our use of renewable energy for electrical generation only over the next 25 years. Notice how the use of windmills grows explosively over the first four years, then abruptly stops - presumably due to the expiration of tax credits currently on the books. Biomass takes up the slack. Biomass?!
Biomass has generated energy from the time it created the first fire, and wood is still the largest bioenergy resource available today. Other sources include food crops, grasses, agricultural residues, manure and methane from landfills.
What they're talking about is cofiring, using these sources to burn, along with coal or gas, as a conventional boiler fuel. Kind of like the Native Americans' primary source of fuel was buffalo chips. This is our New Green Economy? Most of this material has been cross-posted at Vladimir's Energy Blog.