1. The Future Electricity Fuels Mix: Key Drivers
for
Electric Power Conference & Exhibition
May 15th, 2012 | Baltimore, Maryland by
Howard Gruenspecht, Acting Administrator

2. Key results from the AEO2012 Reference case, which assumes current laws remain unchanged
Projected growth of energy use slows over the projection period reflecting an extended economic recovery and increasing energy efficiency in end-use applications
Domestic crude oil production increases, reaching levels not experienced since 1994 by 2020
With modest economic growth, increased efficiency, growing domestic production, and continued adoption of nonpetroleum liquids, net petroleum imports make up a smaller share of total liquids consumption
Natural gas production increases throughout the projection period and exceeds consumption early in the next decade
Renewables and natural gas fuel a growing share of electric power generation
Total U.S. energy-related carbon dioxide emissions remain below their level through 2035
Growth of energy use slows over the projection period, reflecting an extended economic recovery and increasing energy efficiency in end-use applications
Domestic crude oil production increased from 5.1 million barrels per day in 2007 to 5.5 million barrels per day in Over the next 10 years, continued development of tight oil combined with the development of offshore Gulf of Mexico resources are projected to push domestic crude oil production to 6.7 million barrels per day in 2020, a level not seen since 1994.
U.S. dependence on imported petroleum as a share of total liquid fuels consumption declines from 49 percent in 2010 to 36 percent in This outcome reflects increased vehicle efficiency, growth in domestic crude oil production of over 1 million barrels per day by 2020, an increase in biofuels use by over 1 million barrels per day crude oil equivalent by the middle of the next decade and modest economic and demographic drivers of demand. Note that this occurs in a reference case that does not include recently proposed fuel economy standards for model year 2017 to 2025 light duty vehicles, which, if included, would significantly reduce projected liquid fuel consumption and petroleum imports in the 2025 to 2035 period
Natural gas production is expected to exceed consumption by early in the next decade. The outlook reflects increased use of LNG in markets outside of North America, strong domestic natural gas production, reduced pipeline imports and increased pipeline exports, and relatively low natural gas prices in the United States compared to other global markets.
 The natural gas share of electric power generation increases from 24 percent in 2010 to 27 percent in and the renewables share grows from 10 percent to 16 percent over the same period. The projected coal share of overall electricity generation falls to 39 percent in 2035, well below the 48- to 50-percent share seen as recently as 2007, because of slow growth in electricity demand, continued competition from natural gas and renewables, and the need to comply with new environmental regulations.
Energy-related CO2 emissions, which have in recent yearrs remained below their pre-recession peak level in the middle of the past decade, grow very slowly in the Reference case -- they are more than 7 percent below their 2005 level in 2020 and do not return to their 2005 level by the end of the projection period.
Howard Gruenspecht Electric Power, May 15, 2012

3. What is included (and excluded) in developing EIA’s “Reference case” projections?
Generally assumes current laws and regulations
excludes potential future laws and regulations (e.g., proposed greenhouse gas legislation and proposed fuel economy standards are not included)
provisions generally sunset as specified in law (e.g., renewable tax credits expire)
Some grey areas
adds a premium to the capital cost of CO2-intensive technologies to reflect current market behavior regarding possible future policies to mitigate greenhouse gas emissions
assumes implementation of existing regulations that enable the building of new energy infrastructure and resource extraction
Includes technologies that are commercial or reasonably expected to become commercial over next decade or so
includes projected technology cost and efficiency improvements, as well as cost reductions linked to cumulative deployment levels
does not assume revolutionary or breakthrough technologies
Howard Gruenspecht Electric Power, May 15, 2012

4. Energy use grows slowly over the projection in response to a slow and extended economic recovery and improving energy efficiency
U.S. primary energy consumption
quadrillion Btu per year
Shares of total U.S. energy
History
2010
Projections
Renewables
(excluding liquid biofuels) 7%
11% 4% 1%
Liquid biofuels
25%
25%
Natural gas 9%
Nuclear 9%
21%
Coal
20%
37%
Oil and other liquids
32%
Source: EIA, Annual Energy Outlook 2012 Early Release
Howard Gruenspecht Electric Power, May 15, 2012

5. In 2010, U.S. electricity generation was 70% fossil fuels, 20% nuclear, and 10% renewable
2010 Total net generation:
4,120 billion kWh
2010 Non-hydro renewable
net generation:
168 billion kWh
Other gases
0.3%
Conventional
hydroelectric
6.2%
Nuclear
19.6%
Natural gas
23.8%
Other
0.3%
Wind: 2.3%
Solar thermal and PV: <0.1%
Other
renewable
4.1%
Wood and wood-derived fuels: 0.9%
Geothermal: 0.4%
Coal
44.9%
Petroleum
0.9%
Other biomass: 0.5%
Source: EIA, Annual Energy Review, October 2011
Howard Gruenspecht Electric Power, May 15, 2012 5

6. The fuel mix for electricity generation varies widely across U. S
The fuel mix for electricity generation varies widely across U.S. regions (2010)
Share of Generation by Fuel, 2010
National Average
Minimum
Maximum
Coal
45% 0%
80%
Natural Gas
24% 3%
85%
Nuclear
20%
40%
Renewables
10%
50%
Oil / Other 1% 8%
Source: EIA AEO2012 (Early Release), based on Form EIA-923
Howard Gruenspecht Electric Power, May 15, 2012

7. While electricity consumption grows by 23% over the projection, the annual rate of growth slows
percent growth (3-year rolling average)
Period Annual Growth
1950s
1960s
1970s
1980s
1990s
History
2010
Structural Change in Economy - Higher prices - Standards - Improved efficiency
Projections
Source: EIA, Annual Energy Outlook 2012 Early Release
Howard Gruenspecht Electric Power, May 15, 2012 7

8. Electricity mix gradually shifts to lower-carbon options, led by growth in renewables and natural gas
electricity net generation
trillion kilowatthours per year
2010
27%
Natural gas
24%
16%
Renewables
10%
39%
Coal
45%
20%
Oil and other liquids
Nuclear
18% 1% 1%
Source: EIA, Annual Energy Outlook 2012 Early Release
Howard Gruenspecht Electric Power, May 15, 2012 8 8

9. Non-hydro renewable sources more than double between 2010 and 2035
non-hydropower renewable generation
billion kilowatthours per year
2010
Advanced biofuels cogeneration
Biomass
Power sector
Industrial CHP
Wind
Solar
Geothermal
Waste
Source: EIA, Annual Energy Outlook 2012 Early Release
Howard Gruenspecht Electric Power, May 15, 2012 9

10. Examples of updated environmental retrofit costs
Selective Catalytic Reduction (2010 $/kW)
Capital Costs ($/kW)
VOM ($/MWh)
300 MW
$203
$1.30
500 MW
$185
700 MW
$177
Flue Gas Desulfurization (2010$/kW)
Capital Costs ($/kW)
VOM ($/MWh)
300 MW
$602
$1.72
500 MW
$521
700 MW
$474
Dry Sorbent Injection + Full Fabric Filter (Baghouse) (2010$/kW)
Size (MW)
Capital Cost ($/kW)
VOM ($/MWh)
300
197
6.72
500
180
700
171
Source: EPA IPM v4.1 Documentation
Howard Gruenspecht Electric Power, May 15, 2012

11. Global spot natural gas and crude oil prices vary widely
U.S. dollars per million British thermal unit
482
1,460
273
Source: EIA based on Bloomberg as of 5/4/2012
Howard Gruenspecht Electric Power, May 15, 2012

12. Technically recoverable natural gas resources reflect updated assessments
U.S. dry gas resources
trillion cubic feet
Unproved shale gas
Unproved other gas (including Alaska* and offshore)
Proved reserves (all types and locations)
2,214
482
1,460
273
AEO Edition
*Alaska resource estimates prior to AEO2009 reflect resources from the North Slope that were not included in previously published documentation.
Source: EIA, Annual Energy Outlook
Howard Gruenspecht Electric Power, May 15, 2012

13. Shale gas offsets declines in other U. S
Shale gas offsets declines in other U.S. natural gas production sources
U.S. dry gas production
trillion cubic feet per year
History
2010
Projections
49%
Shale gas
23%
26%
Tight gas
21% 9%
Non-associated offshore 2% 9% 7%
Coalbed methane
10%
Alaska 1%
Associated with oil 7% 7%
21%
Non-associated onshore 9%
Source: EIA, Annual Energy Outlook 2012 Early Release
Howard Gruenspecht Electric Power, May 15, 2012 13 13

14. Domestic natural gas production grows faster than consumption
U.S. dry gas
trillion cubic feet per year
History
2010
Projections
Consumption
Domestic supply
Net imports
Source: EIA, Annual Energy Outlook 2012 Early Release
Howard Gruenspecht Electric Power, May 15, 2012

15. EIA’s natural gas price projections for AEO 2012 Early Release
natural gas spot price (Henry Hub)
2010 dollars per million Btu
History
2010
Projections
Sources: EIA, Annual Energy Outlook 2012 Early Release
Howard Gruenspecht Electric Power, May 15, 2012

16. The average delivered price of coal to electricity generators varies widely across U.S. regions – transport costs are a key reason
2010 Delivered coal prices, $ per million Btu
$1.91
$1.83
$1.46
$1.49
$1.57
$1.93
1.77
$1.51
$2.45
$2.48
$3.65
$4.46
$3.40
$1.75
$2.02
$2.96
$3.41
$2.01
$2.91
N/A
National Average
Minimum
Maximum
$2.25
$1.46
$4.46
Source: EIA, Annual Energy Outlook 2012 Early Release
Howard Gruenspecht Electric Power, May 15, 2012

17. Operating costs: existing plants with and without a value on carbon
Fuel Cost for Existing Coal and Combined Cycle Natural Gas Units with a Value Placed on Carbon Dioxide Emissions
The “crossover point” for least-cost dispatch of coal and natural gas capacity depends on both fuel prices and the carbon value. At lower natural gas prices, the “crossover” occurs at a lower carbon value.
Environmental operating costs and retrofit costs for pollution controls at existing coal-fired plants can “raise the bar” for their continued operation.
For retrofit decisions, the unit’s perceived “useful life,” which plays a critical role, can be affected by views regarding future climate policies
2010 dollars per megawatthour
Coal at $3
Coal at $2
Natural Gas
CC at $7
Natural Gas
CC at $4
Natural Gas CC at $3
Howard Gruenspecht Electric Power, May 15, 2012

18. For more information
U.S. Energy Information Administration home page |
Annual Energy Outlook |
Short-Term Energy Outlook |
International Energy Outlook |
Monthly Energy Review |
Annual Energy Review |
Howard Gruenspecht Electric Power, May 15, 2012