US Electricity
Figure 3: Regulated Local, Regional & Diversified vs Competitive Merchant & Merchant Competitive
Underpinning this decrease is the shift from energy- intensive manufacturing to less energy-intensives services. This shift is expected to continue. The impact of CAFE, ARRA, EIEA 2008, EISA
2007, and State energy efficiency and renewable portfolio standards (RPS) programs will cause the fossil fuel share of energy consumption to fall from 84% of total US energy demand in 2008 to 78% in 2035. As discussed later, renewable energy is forecast to account for 41% of the growth in electricity generation from 2008 to 2035 in the AEO 2010 reference case. Even with the rapid growth of renewable fuels, the price of oil will continue to rise gradually as the global economy rebounds and demand grows. By 2035, AEO 2010 forecasts the average price of crude oil to be US$133 per barrel in 2008 dollars, or about US$224 per barrel in nominal dollars. Natural gas consumption increases to 24.9 trillion cubic
Source: SNL Financial
feet in 2035. In the near-term, natural gas prices rise from the current low prices driven by the combination of economic downturn and increased supply. Longer-term prices continue a slow rise, moderated by additional resources being brought into production in response to growth in demand. The AEO 2010 reference case forecasts natural gas wellhead prices will reach US$8.06 per thousand cubic feet in 2008 dollars, or about US$13.50 per thousand cubic feet in 2035. Coal is forecast to retain its throne as ‘king of the hill’ with
regard to being the dominant fuel for electricity generation, even after taking carbon regulations and renewable energy incentives into account. Even though natural gas increases its share of the generation fuel mix, existing coal plants will be used more intensively, and new coal plants currently under construction will enter the market to account for a part of this increase in coal use. In addition coal to liquids production is projected to increase. In the AEO 2010 reference case, total coal consumption increases from current (2008) 1,122 million short tons to 1,319 million short tons in 2035. Average real mine-to- mouth coal prices fall slightly from US$31.26 per short ton in 2008 dollars to US$28.10 per short ton in 2008 dollars, or about US$47.21 in nominal dollars in 2035. Non-hydroelectric renewable energy consumption in the AEO 2010 reference case increases sharply to about 10% of total energy demand. The largest sources of supply to meet this growth will be biomass followed by wind. Expansion of Federal tax credits for renewable generation and capacity, as well as State RPS programs are the primary market
worldPower 2010
drivers for this surge in the use of renewable fuels. Total US electricity consumption increases at an average annual rate of 1% from 2008 to 2035 in the AEO 2010 reference case. Despite this growth, continued low natural gas prices drive electricity prices down from 9.8 cents per kilowatt hour in 2008 to below 9.0 cents per kilowatt hour through 2020 in 2008 dollars or approximately 15.1 cents in nominal dollars. After 2020, natural gas prices rise and electricity prices increase to reaching an average price of 10.2 cents per kilowatt hour in 2008 dollars or approximately 17.1 cents in nominal dollars. Figures 4 and 5 depict AEO 2010 forecasted energy consumption by fuel and energy prices respectively.
How Will Changes in the Global Energy Picture Impact Electricity? Coal remains the dominant energy source for electricity
Total US electricity consumption increases at an average annual rate of 1% from 2008 to 2035
generation because of continued reliance on existing, modernised coal-fired plants, the addition of some new plants and coal generation’s low cost as compared with alternatives. Increases in natural gas supply and concerns about carbon regulations do cause natural gas to fuel a larger percentage of electricity production. This increase in electricity production market share for natural gas is also driven by lower construction costs than renewable and nuclear plants. Lastly, Federal tax credits, ARRA loan guarantees, and State RPS programs account for the large number of renewable generation additions.
Despite a pull back in newly announced projects, 24
gigawatts of new coal-fired generating capacity are forecast to be added by 2030. Total coal-fired generating capacity grows to 337 gigawatts in 2035 in the AEO 2010 reference case. Natural gas plays a larger role in the AEO 2010 reference case than
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