Energy Outlook Global and Domestic Trends and Challenges Dr. John Caldwell Director of Economics, EEI 1
World GDP Growth Other Economies are Outpacing the U.S. Other, 7996.16, 11% Africa, 3962.51, 6% Latin America, 6590.67, 9% Europe, 14617.75, 21% Africa, 15348.12, 7% Latin America, 17833.09, 9% Other, 20393.12, 10% Europe, 25080.37, 12% U.S., 27276.74, 13% Other Asia, 7491.98, 11% India, 3660.64, 5% Japan, 3948.36, 6% China, 9166.5, 13% U.S., 13062.97, 18% Other Asia, 23995.74, 12% India, 21731.33, 11% China, 48404.35, 24% Japan, 4715.84, 2% 2010 2040 Source: Energy Information Administration, International Energy Outlook (GDP reported in billions of 2005 $)
Tectonic Shifts Between Now and 2030 Growth of the Global Middle Class Wider Access to Lethal and Disruptive Technologies Shift of Economic Power to the East and the South Unprecedented and Widespread Aging Urbanization Food and Water Pressures U.S. Energy Independence Source: Global Trends 2030: Alternative Worlds, National Intelligence Council, December 2012
Potential Extreme Disruptive Events Severe Pandemic Much More Rapid Climate Change Euro/EU Collapse A Democratic or Economically Collapsed China A Reformed Iran Nuclear War or WMD/Cyber Attack Solar Geomagnetic Storms U.S. Global Disengagement Source: Global Trends 2030: Alternative Worlds, National Intelligence Council, December 2012
U.S. Dollars (Billions) U.S. Dollars (Billions) U.S. Dollars (Billions) U.S. Dollars (Billions) U.S. Dollars (Billions) U.S. Dollars (Billions) Net Exports by Industry U.S., China, and Japan: 1992, 2002, and 2012 Iron and Steel Automotive Office Equipment 40 30 20 10 0-10 -20-30 1992 2002 2012 200 150 100 50 0-50 -100-150 1992 2002 2012 300 200 100 0-100 -200 1992 2002 2012 Clothing Food Electronic Components 200 40 50 150 100 50 20 0-20 1992 2002 2012 0-50 1992 2002 2012 0-50 1992 2002 2012-40 -60-100 -100-80 -150 Source: U.S. International Trade Commission 5
1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Industrial Output (2005$) Industrial Electricity Consumption (Gwh) U.S. Industrial Electricity Usage 3000 Peaked In 2000 U.S. Industrial Output and Electricity Consumption 1972-2012 1,200,000 2500 1,000,000 2000 800,000 1500 600,000 1000 400,000 500 0 Source: U.S. Federal Reserve and Energy Information Administration 200,000 0
Billions of 2005 Dollars U.S. Recession and Recovery at a Glance 13,800 13,600 13,400 13,200 13,000 12,800 12,600 12,400 12,200 Gross Domestic Product 2007 2008 2009 2010 2011 2012 Unemployment 4.6% 5.8% 9.3% 9.6% 8.9% 8.1% S&P 500 1,477 1,220 948 1,140 1,268 1,379 New Home Sales Electricity Sales (bkwh) 776,000 485,000 375,000 323,000 306,000 367,000 3,765 3,733 3,597 3,754 3,750 3,692
1949 1952 1955 1958 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 GDP (2005$) Unemployment Rate (%) The Economic Recovery: A Large, Lingering Gap Remains U.S. GDP and Unemployment 16,000 24.0 14,000 Actual Unemployment Rate Potential GDP 21.0 12,000 10,000 8,000 Actual GDP Natural Unemployment Rate 6% gap in economic output 18.0 15.0 12.0 6,000 9.0 4,000 6.0 2,000 3.0 0 0.0 Source: U.S. Federal Reserve, Bureau of Labor Statistics, and Congressional Budget Office
Energy Sales Growth and the Economy 20% 15% 10% Change in Electricity Usage Electricity Growth and Change in GDP: 1950-2012 Change in GDP 5% 0% -5% 20% 15% 10% 5% 0% -5% -10% Change in Natural Gas Usage Natural Gas Growth and Change in GDP: 1950-2012 Change in GDP Source: Energy Information Administration and U.S. Bureau of Economic Analysis
1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 The Recovery Challenge: Electricity Growth Continues to Slow... Electricity sales growth has been declining long before the recent recession. 20% 15% 10% 5% 0% Period Sales Growth 50's 9.3% 60's 7.4% 70's 4.4% 80's 2.8% 90's 2.4% 00-10 1.0% -5% Source: Energy Information Administration 10
1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010... While the Future Trend for Natural Gas is Less Clear Natural gas consumption growth actually rebounded after deregulation in the late 1970s and 1980s. 20% 15% 10% 5% 0% Period Sales Growth 50's 7.0% 60's 5.8% 70's -1.4% 80's -0.7% 90's 1.9% 00-10 0.3% -5% Source: Energy Information Administration 11
Distribution of proved gas reserves in 1992, 2002 and 2012 Percentage BP Statistical Review of World Energy 2013 BP 2013
The Shale Gas Revolution What Does It Mean for the U.S. Energy Industry? 13
Jan-2000 Jul-2000 Jan-2001 Jul-2001 Jan-2002 Jul-2002 Jan-2003 Jul-2003 Jan-2004 Jul-2004 Jan-2005 Jul-2005 Jan-2006 Jul-2006 Jan-2007 Jul-2007 Jan-2008 Jul-2008 Jan-2009 Jul-2009 Jan-2010 Jul-2010 Jan-2011 Jul-2011 Jan-2012 Jul-2012 $/mmbtu A New Era for Natural Gas Prices 12 U.S. Wellhead Natural Gas Price 10 8 6 4 2 0 Source: Energy Information Administration 14
Price ($/mmbtu) America s New Abundant, Low Cost Natural Gas Supply Should We Be Exporting It? 18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 Comparative Annual Natural Gas Prices U.S. (Henry Hub) European Union (Germany) Japan (LNG) Source: 2013 BP Statistical Review of World Energy 2005 2006 2007 2008 2009 2010 2011 2012 DOE has already granted authorization to one LNG exporter (Sabine Pass). NERA Study indicates that exports will create net economic benefits. NG prices would rise, but NG producers and the coal sector would welcome this.
Tcf Real NG Price ($/Mcf) A Natural Gas Manufacturing Renaissance? 8.5 8.0 7.5 7.0 6.5 6.0 U.S. Industrial Natural Gas Sales $15.00 $10.00 $5.00 $0.00 Low, stable U.S. natural gas prices, competitive on a global scale, are bringing back gasfired manufacturing Positive Economic Impacts: First Wave: Fracking $87.5 billion in annual capital investment, doubling by end of decade 1.7 million jobs supported (direct and indirect) growing to 3 million by end of decade Second Wave: Return of gas-fired manufacturing lost in early 2000s (Dow Chemical predicts 55% gas sales growth by 2035) Third Wave: Lower chemicals and metals prices spur growth in manufacturing and consumer demand
Primary energy world consumption Million tonnes oil equivalent Coal Other Nuclear Natural Gas Liquids 0.9%/year BP Statistical Review of World Energy 2012 BP 2012 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 EIA 2013 International Energy Outlook
Global Nuclear Power Growth Source: U.S. Energy Information Administration / International Energy Outlook 2013
Source: U.S. Energy Information Administration / International Energy Outlook 2013
The U.S. Flight from Coal Generation from coal has declined 25% in the past 5 years Coal-fired generation in 2012 was less than in 1988 (but total electricity output has grown 50% during that timeframe) 9,300 MW of coal-fired generation was retired in 2012 This is the highest ever recorded in a single year Equivalent to previous five years of coal retirements combined Over 27,000 MW of coal-fired units scheduled for retirement during next three years
Renewable energy consumption/share of power by region Other renewables consumption by region Million tonnes oil equivalent Other renewables share of power generation by region Percentage BP Statistical Review of World Energy 2013 BP 2013
Europe Has Led the Way in the Solar Expansion Boom... 70,000 Installed Photovoltaic Power (MW) 60,000 50,000 40,000 30,000 20,000 Rest of World China U.S. Japan Other Europe France Spain Italy Germany Europe (74%) 10,000 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 BP Statistical Review of World Energy 2012 BP 2012
... But China and the U.S. Have Led the Way on Wind Power 300,000 Installed Wind Turbine Capacity (MW) 250,000 200,000 150,000 100,000 50,000 Rest of World U.K. Italy France India Spain Germany U.S. China 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 BP Statistical Review of World Energy 2012 BP 2012
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 Gigawatts U.S. Renewable Generation Will Make Up 17% of Total Electric Power Sector Capacity by 2040 250 200 150 Municipal Waste Wood/Biomass Geothermal Solar Thermal Solar PV 100 Wind Hydropower 50 0 EIA 2013 Annual Energy Outlook
The Changing Resource Mix for U.S. Electricity Generation 100% 80% 60% 40% 20% 0% 2,473 bill kwh 4,110 bill kwh 4,979 bill kwh 295 429 740 384 807 875 292 970 1,519 1,402 1,847 1,807 1985 2010 2035 Other Petroleum Renewables Nuclear Natural Gas Coal Numbers indicate electricity generated from each source in billions of kwh Source: Energy Information Administration (Projections for 2035 are from the EIA 2013 Annual Energy Outlook) 25
1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2023 2026 2029 2032 2035 2009 $/kwh 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2023 2026 2029 2032 2035 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2023 2026 2029 2032 2035 2009 $/mmbtu 2009 $/ton Long-Term U.S. Energy Price Projections 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 Wellhead Natural Gas 60.00 50.00 40.00 30.00 20.00 10.00 0.00 Coal Avg. Forecast Growth: 1.1%/year Electricity 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 Avg. Forecast Growth: 0.4%/year Source: Energy Information Administration
What s Driving Grid Modernization? Aging Infrastructure Duration and frequency of power outages increasing 2% per year (Lawrence Berkeley National Laboratory) ASCE estimates investment gap of $57 billion in electric infrastructure through 2020 Environment National (FERC/DOE) vision of power from cleaner/decentralized sources 29 states have RPS programs; 17 with mandates/programs for solar and other DG Energy Autonomy DOD actively implementing islanding State net metering policies encourage customer self-generation Entrepreneurs are capitalizing on DG 27
Will Energy Efficiency Bring an End to Electricity Sales Growth in the U.S.? Impact of Energy Efficiency on Total U.S. Electricity Consumption Source: The Institute for Energy Efficiency, Factors Affecting Electricity Consumption in the U..S. (2010-2035), December 2012.
Customer Preferences Five Forces of Change in the U.S. Energy Industry
An Industry in Transition Strategic Challenges May Reshape Industry Grid Modernization Who Will Provide Electricity, and How? The Future of Energy Demand More, Less, and From Where? Regulation How Will Federal/State Regulatory Policies Evolve? Environmental Policy How Will It Affect the Way that Energy is Produced, and the Cost of Energy? 30
Future Utility Business Models Will Be Driven by the Network Control Access Bypass Hardened Grid Cost-Based Open Access Subsidized Open Access Post- Modern Grid Central provider paradigm maintained Investments in reliability Minor inroads by 3 rd party providers Full cost recovery limits risk Proliferation of 3 rd party services Must find new earnings platforms Utility relegated to provider of last resort Reinvention required Passive Consumer Active Prosumer Centralized Decentralized Multiple Networks
Thank You! Questions? Contact: John Caldwell 202-508-5175 jcaldwell@eei.org