U.S. Energy Market Outlook

Transcription

1 U.S. Energy Market Outlook for Energy Policy Institute National Governor's Association Washington, DC by Howard Gruenspecht, Deputy Administrator U.S. Energy Information Administration Independent Statistics & Analysis

2 Takeaways Short-term oil, natural gas, and coal outlook: prices for oil and natural gas and coal market conditions likely to be a drag on production Renewables outlook to early 2020s: recent tax credit extensions and cost reductions favor strong growth into the early 2020s; with slow growth in overall electricity use, near-term renewables growth combined with slow/no electricity demand growth may depress natural gas generation from 2017 through the early 2020s Clean Power Plan: as always, the devil is in the details; generally speaking, the CPP adds to coal displacement and increases generation share from both natural gas and renewables. The implications of alternative compliance strategies for the generation mix and emissions are explored as an Issues in Focus topic in AEO2016 2

3 Short-term Outlook 3

4 Global supply has consistently exceeded demand since the start of 2014; EIA forecasts a return to market balance in the second half of 2017 world supply and demand million barrels per day implied stock change million barrels per day Implied stock change and balance (right axis) Forecast 96 World production (left axis) 94 World consumption (left axis) Q Q Q Q Q Q Q Source: EIA, Short-Term Energy Outlook, June

5 EIA expects WTI oil prices to remain low compared to recent history, but the market-implied confidence band is very wide WTI price dollars per barrel Historical Spot Price STEO Forecast NYMEX Futures Price 20 0 Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Source: EIA, Short-Term Energy Outlook, June

6 Until very recently, U.S. production of natural gas and oil production from shale and other tight resources has increased rapidly U.S. tight oil production million barrels of oil per day Eagle Ford (TX) Bakken (MT & ND) Spraberry (TX & NM Permian) Bonespring (TX & NM Permian) Wolfcamp (TX & NM Permian) Delaware (TX & NM Permian) Yeso-Glorieta (TX & NM Permian) Niobrara-Codell (CO, WY) Haynesville Utica (OH, PA & WV) Marcellus (PA,WV,OH & NY) Woodford (OK) Granite Wash (OK & TX) Austin Chalk (LA & TX) Monterey (CA) Marcellus (PA,WV,OH & NY) Haynesville (LA & TX) Eagle Ford (TX) Fayetteville (AR) Barnett (TX) Woodford (OK) Bakken (ND) Antrim (MI, IN, & OH) Utica (OH, PA & WV) Rest of US 'shale' U.S. dry shale gas production billion cubic feet per day Sources: EIA derived from state administrative data collected by DrillingInfo Inc. Data are through May 2016 and represent EIA s official tight oil & shale gas estimates, but are not survey data. State abbreviations indicate primary state(s). Note: Scales are presented at approximate barrel of oil equivalent

7 Long lead times and past investment are contributing to growth from the Gulf of Mexico as Lower 48 production declines U.S. crude oil production growth by area change from fourth quarter, 2014 (million barrels per day) Total U.S. Production Lower 48 Alaska Federal Gulf of Mexico Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Source: EIA, Short-Term Energy Outlook, June

8 Crude supply trends outside the United States (red areas below) are key to future oil market balance: geopolitical developments, exporter decisions, and the timing and magnitude of supply effects stemming from reduced investment all matter 2016 oil production, million barrels per day Shale Regions 5.65 Other Lower GOM 1.66 AK oil production, million barrels per day Shale Regions 5.12 Other Lower GOM 1.85 AK 0.45 REST OF WORLD = REST OF WORLD = Source: EIA, Short-Term Energy Outlook and Drilling Productivity Report, June 2016; International Energy Agency 8

9 EIA forecasts global liquids consumption growth at 1.5 million b/d in both 2016 and 2017 world liquid fuels consumption million barrels per day annual change million barrels per day Change in U.S. consumption (right axis) Forecast Change in China consumption (right axis) Change in other consumption (right axis) Total world consumption (left axis) Source: EIA, Short-Term Energy Outlook, June

10 Shale gas production growth is forecast to slow in compared to ; net imports and federal GOM production both decline U.S. natural gas production and imports billion cubic feet per day (Bcf/d) Federal Gulf of Mexico production (right axis) U.S. non-gulf of Mexico production (right axis) U.S. net imports (right axis) annual change Bcf/d Total marketed production (left axis) Marketed production forecast (left axis) Source: Short-Term Energy Outlook, June

11 Natural gas prices to rise from their early 2016 lows to the $3/MMBtu range by 2017 in EIA s forecast; markets suggest high uncertainty Henry Hub price dollars per million Btu Historical Spot Price STEO Forecast 0 Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Source: EIA, Short-Term Energy Outlook, June

12 The generation mix is sensitive to relative prices of coal and natural gas, as well as state and federal policies to promote renewables U.S. electricity generation by fuel, all sectors thousand megawatthours per day 14,000 12,000 Forecast 10,000 8,000 6,000 4, % 44.8% 42.3% 37.4% 38.9% 38.6% 44.4% 21.4% 23.3% 23.9% 24.7% 30.3% 27.7% 27.5% 33.2% 29.9% 30.9% 32.7% 34.4% 33.3% Coal Natural gas Petroleum Nuclear Hydropower Non-hydro renewables Other sources 2, Note: Labels show percentage share of total generation provided by coal and natural gas. Source: Short-Term Energy Outlook, June

13 Coal production forecast calls for major slide in 2016 and small recovery in 2017; high coal stocks and reduced generation share drive the outlook U.S. coal production million short tons (MMst) per month annual change (MMst) Western region (right axis) Appalachian region (right axis) Interior region (right axis) Total production (left axis) Production forecast (left axis) Source: Short-Term Energy Outlook, June

14 Electric generators expected to reduce coal stocks through 2017 U.S. electric power coal stocks million short tons Jan 2008 Jan 2010 Jan 2012 Jan 2014 Jan 2016 Note: Colored band around stock levels represents the range between the minimum and maximum from Jan Dec Source: Short-Term Energy Outlook, June Forecast 14

15 Renewables 15

16 Key takeaways EIA has a great interest in both data and analysis issues surrounding renewable electricity generation and has recently extended its work in these areas Policies at both the state and federal levels have been the main drivers of growth in non-hydro renewable capacity and generation since 2009 Looking forward, support from recently extended tax credits as well as reductions in renewable technology costs (especially solar) are important to the growth of renewable generation through the early 2020s; the Clean Power Plan is an important driver beyond the early 2020s. Slow/no electricity load growth and low natural gas prices are factors that tend to limit the opportunity for cost-effective renewable generation growth, although low natural gas prices may create headroom for regulators to choose renewables even when they engender higher costs The levelized cost of electricity (LCOE) is not a good metric for choosing generation technologies to minimize system cost; avoided cost is a more useful concept 16

17 New wind costs yield a capacity-weighted average of approximately $1770/kW (in 2015$), when compared to 2014 capacity additions LBNL reports $1743/kW capacity-weighted average for 2014 (2015$, reported as $1710/KW in 2014$) Region Net Cost (2015$/KW) 1,654 2,444 2,256 1,861 2,301 2,301 2,301 2,301 2,301 2,256 2,256 2,444 2,256 2,444 2,444 2,444 1,555 1,555 2,021 2,021 2,021 1, New Cap. (MW) , ,

18 Initial lower solar costs results in increased PV uptake, faster and deeper cost reductions over time PV cost trajectory 2015$/kWAC 3000 By 2020, costs drop by over 20% with new assumptions For 2014, LBNL reports $3,800/kW capacity-weighted average (all tech), with $2,800/kW median for fixed-tilt c-si Source: EIA, Annual Energy Outlook

19 EIA PV learning using updated initial costs is more optimistic than fleet average, but similar to the more limited data from fixed tilt systems 10 ~5% reduction in cost per doubling of capacity $/Wac LBNL, Fixed Tilt c-si LBNL, all PV ~10% reduction in cost per doubling of capacity Current EIA Thinking ,000 10, ,000 1,000,000 Cumulative Installed Capacity (MW) Note: Current EIA thinking shows gross cost reduction from learning and macro cost adjustments, which are implicitly embedded in reported costs from LBNL and other public sources 19

20 The average delivered price of coal to electricity generators varies widely across U.S. regions transport costs are a key reason 2014 delivered coal prices, nominal $ per million Btu $2.78 $2.27 $2.27 $2.66 $1.66 $1.81 N/A N/A 1.96 $2.28 $1.74 $1.94 $2.19 $2.12 $2.21 $2.41 $2.44 $3.31 $2.64 $2.64 National Average Minimum Maximum $2.35 $1.66 $3.31 $2.22 $2.82 Source: EIA, Annual Energy Outlook

21 Updated residential and commercial installed solar PV cost projections residential installed cost $/kwdc $8,000 $8,000 commercial installed cost $/kwdc $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $ $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $ Source: EIA, Annual Energy Outlook

22 Changing tax and cost assumptions contribute to stronger solar growth, with the Clean Power Plan providing a boost to renewables renewable electricity generation by fuel type billion kilowatthours History 2015 AEO2016 Reference 1,400 1, No CPP 1,000 Wind Municipal waste/ landfill gas 200 Conventional 0 hydroelectric power Solar Geothermal Biomass Source: EIA, Annual Energy Outlook

23 Analysis of the Clean Power Plan 23

24 Clean Power Plan accelerates shift to lower-carbon options for generation, led by growth in renewables and gas-fired generation; results are likely sensitive to CPP implementation approach electricity net generation trillion kilowatthours History AEO2016 Reference No CPP % 3 13% Renewables 23% 11% 13% 27% 2 33% Coal 53% 26% 18% 1 19% 20% Petroleum and other liquids 1% Nuclear 15% 4% 1% 16% Source: EIA, Annual Energy Outlook % 38% Natural gas 34% 1% 24

25 Natural gas generation falls through 2021; both gas and renewable generation surpass coal by 2030 in the Reference case, but only natural gas does so in the No CPP case net electricity generation billion kilowatthours 2,500 2,000 History Coal AEO2016 Reference No CPP 1,500 1,000 Nuclear Natural gas 500 Petroleum Renewables Source: EIA, Annual Energy Outlook

26 The CPP and state choices regarding compliance strategies have significant implications for projected CO2 emissions from the electricity sector CO2 emissions from the electric power sector in five cases, million metric tons 2,600 2,400 history projections 2,200 2,000 1,800 1,600 1,400 Clean Power Plan implementation period No Clean Power Plan case Clean Power Plan (CPP) cases CPP Rate-based CPP Interregional Trading Reference case (Mass-based) CPP Extended 1,200 // 1, Source: EIA, Annual Energy Outlook

27 Projected renewable generation is higher with rate-based rather than mass-based compliance; the opposite is true for gas-fired generation Electricity generation by fuel in five cases, 2015, 2030, and 2040 billion kilowatthours Source: EIA, Annual Energy Outlook

28 Projected capacity changes vary across the alternative CPP cases; coal retirements are highest in the reference and extended CPP cases Cumulative additions and retirements of generating capacity in five cases, gigawatts Source: EIA, Annual Energy Outlook

29 Allocation choices under a mass-based regime and increased stringency beyond 2030 have significant implications for projected electricity prices Average retail electricity prices in five cases, cents per kilowatthour 11.5 history projections Clean Power Plan (CPP) cases CPP Extended CPP Allocation to Generators Reference case (Mass-based) CPP Rate-based No Clean Power Plan case Clean Power Plan implementation period // Source: EIA, Annual Energy Outlook

30 Electricity price impact of CPP is likely to vary across regions generation mix changes are NOT the sole driver of price impacts Differences in average electricity prices in the Reference case from the No CPP case by region, 2025, 2030, 2035, and 2040 percent Region Northeast 4% 7% 4% 3% Midwest/Mid-Atlantic 0% 6% 3% 2% Southeast 4% 6% 4% 3% Southern Plains 0% 4% 3% 3% Texas -7% 4% 2% 0% Southwest/Rockies 4% 5% 3% 3% California 1% 2% 2% 2% Northwest 2% 2% 2% 2% Northern Plains 3% 4% 4% 4% U.S. 1% 5% 3% 2% Source: EIA, Annual Energy Outlook

31 Lower costs and extension of renewable tax credits boost projected additions of wind and solar capacity prior to the 2022 effective date of the Clean Power Plan (CPP) annual capacity additions gigawatts AEO2016 Reference 60 Coal Other Nuclear Natural Gas / Oil Wind Solar 50 History Projections No CPP Source: EIA, Annual Energy Outlook

32 For more information U.S. Energy Information Administration home page State Energy Profiles Electric Power Monthly Annual Energy Outlook Short-Term Energy Outlook Today in Energy Monthly Energy Review 32

33 When the PTC assumption is properly aligned with realized policy, EIA s wind projections have proven to be reasonably accurate Total wind capacity projections in various Reference cases gigawatts (GW) assumed expiration of the PTC* AEO 2015 Reference Case AEO 2009 Post-ARRA 40 AEO 2009 Pre-ARRA 30 In 2009 [EIA] made a forecast for the next two decades: U.S. wind power would grow modestly, 20 reaching 44 [GW] of generating capacity in 2030, while solar power would remain scarce, inching 10 up to 12 GW. Just six years later, U.S. wind capacity is already up to 66 GW, and solar has shot up History to 21 GW. Politico, June 2015 article Why are the government s energy forecasts so bad? Source: EIA, Form EIA-860, AEO 2009 [Pre- and Post-American Recovery and Reinvestment Act (ARRA)], and AEO 2015 Note: In 2013 the American Tax Payer Relief Act changed the Production Tax Credit (PTC) expiration from a placed-in-service deadline to a construction start date deadline for all qualifying technologies 33

34 Electricity use (including direct use) is expected to continue to grow, but the rate of growth slows over time as it has almost continuously over the past 60 years U.S. electricity use and GDP percent growth (rolling average of 3-year periods) History 2015 Projections Period Average Growth Electricity use GDP 1950s s s s s

35 World oil prices move together due to arbitrage global crude oil prices nominal dollars per barrel, monthly average WTI Brent Dubai Tapis Mars Sources: Bloomberg, Thomson Reuters 35

36 North American natural gas prices are low compared to prices in the rest of the world, although spreads have narrowed recently select global natural gas and crude oil prices with average monthly LNG prices in Japan U.S. dollars per million British thermal unit Source: EIA, Bloomberg L.P. 36