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EIA reference case with and without CPP Energy Information Administration finds growth in electricity from wind, solar, even if EPA’s Clean Power Plan rule not promulgated KRISTEN NELSON Petroleum News
The U.S. Energy Information Administration’s Annual Energy Outlook 2016 won’t be out until July, but in mid-May the agency posted an early release with a summary of the reference case, including the Clean Power Plan and a no-CCP case.
The agency said both of the cases released “show substantially more growth in electricity generation from wind and solar energy than EIA’s previous projections,” with those capacity additions “particularly robust through the early 2020s, reflecting the extensions of tax credits for those technologies enacted in December and lower estimates of their capital costs than in previous projections.”
The Environmental Protection Agency’s Clean Power Plan would cut carbon dioxide emissions from power plants.
The EIA’s reference case is a business-as-usual trend estimate which “assumes CPP compliance through mass-based standards that establish caps on CO2 emissions from fossil-fired generates covered by the CPP,” while the no-CPP case, also a business-as-usual trend estimate, assumes CPP is not implemented.
The reference case incorporates existing laws and policies, but “is not intended to be a most likely prediction of the future,” EIA said.
EIA Administrator Adam Sieminski said in a statement that “EIA’s approach to addressing the inherent uncertainty surrounding the country’s energy future is to develop multiple cases that reflect different sets of internally consistent assumptions about key sources of uncertainty such as future world oil prices, macroeconomic growth, energy resources, technology costs, and policies. The energy sector has always been dynamic and undoubtedly will continue to change in the future. In creating the AEO, EIA has tried to make its projections as objective, reliable and useful as possible.”
Key updates EIA said key updates in its 2016 AEO include incorporation of EPA’s final rules for the Clean Power Plan; undated renewable capital costs; latest California zero-emission vehicle sales mandates; extension of the production tax credit for wind and a 30 percent investment tax credit for solar; and lower near-term crude oil prices.
If the Clean Power Plan is implemented, EIA said, coal’s share of total electricity generation, which was 50 percent in 2005 and 33 percent last year, would fall to 21 percent in 2030 and 18 percent in 2040.
But with low load growth and generation mix changes electricity related CO2 emissions remain well below the 2005 level even without CPP, EIA said. The change is driven by extension of key renewable tax credits, reduced solar photovoltaic capital costs and low natural gas prices.
A strong growth in wind and solar generation spurred by tax credits is projected to lead to a short-term decline in natural gas fired generation between 2015 and 2021, but natural gas generation “then grows significantly under a mass-based CPP implementation,” and is projected to grow by more than 67 percent from 2021 through 2040, “when it is by far the largest generation source.”
Natural gas, crude projections EIA’s reference case shows natural gas production growing more than 50 percent between 2015 and 2040, with average natural gas prices rising from $2.62 per million British thermal units at Henry Hub in 2015 to $5 per million Btu in the mid-2020s and remaining at around that level through 2040.
“Technology improvements allow natural gas production to rise even as prices stabilize,” EIA said, noting that both natural gas prices and production “are slightly lower without the Clean Power Plan.”
In the reference case U.S. crude oil production remains below 9.5 million barrels per day through 2025 due to lower oil prices, with production growing to 11.3 million bpd by 2040, “reflecting higher recovery rates driven by technology advances and higher prices.” The reference case has a 4 percent rise in petroleum use, including natural gas liquids, from 2015 to 2040, but a 10 percent drop in transportation use mainly due to improved light duty vehicle fuel efficiency. EIA said the reference case does not include proposed Phase 2 standards for heavy-duty trucks or tighter light duty vehicle standards beyond 2025. Those would further reduce projected petroleum use in transportation.
Alternative cases EIA said there will be alternative resource and oil price cases with different production implications in the full AEO.
The AEO will include a full range of CPP and other alternative cases, the agency said, including:
•Alternative CPP cases, with rate-based implementation; other mass-based implementation options; hybrid case; and extended case;
•High and low oil price;
•High and low macroeconomic growth;
•High and low oil and natural gas resources and technology;
•Industrial technology efficiency, high and low technology innovation;
•Phase 2 heavy-duty truck requirements; and
•Extension of current tax credits, follow-on efficiency standards,
EIA said it would release several “Issues in Focus” discussions of topics beginning in mid-June, with full modeling results posted for each case as it is released. The full AEO is scheduled for release in July.
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