EIA’s 2016 “Early Release” Long-Term U.S. Energy Outlook Raises a Host of Questions

We’ve been keeping an eye on the U.S. Energy Information Administration’s (EIA’s) long-term projections for wind and solar power, because many supporters of clean energy scaling (ourselves included) have been concerned that EIA’s forecasts have been consistently too-pessimistic on this subject. Back in 2013, for instance, we wrote that EIA Renewable Energy Forecast Isn’t Just Wrong, It’s Wildly, Laughably Too Low. More recently, we commented that EIA’s Response to Criticisms of Its Clean Energy Forecasts Fails to Address Core Concerns.

Today, we turn our attention to EIA’s brand-new “Annual Energy Outlook 2016 Early Release,” which was just posted yesterday, and which looks at U.S. energy picture through 2040 under a “Reference case” and a “No CPP case.” Here are five observations regarding this new report (bolding added for emphasis).

  1. Oil Change International (OCI) raises several excellent points about EIA’s report. On renewable energy, OCI writes: “Renewable energy grows 257%, and that doesn’t take non-grid-connected systems into account. But considering solar energy alone has grown 173% since 2011, this seems very under-ambitious for the sector as whole over the next 24 years.” We agree with OCI; even assuming “current laws and regulations, known technology, and technological and demographic trends,” as EIA does, we believe that clean energy can and likely will grow much faster than EIA projects, just as has happened repeatedly in recent years.
  2. OCI also notes: “Natural gas is the fossil fuel that just keeps giving, to hear EIA tell it. Not only is gas production set to rise over coming years, but each year the EIA keeps raising its projection. This year’s AEO has gas production rising 50% from 2014 levels by 2040; last year’s report had it pegged at 34%.” We find that hard to believe, for several reasons. First, U.S. natural gas production increases depend heavily on the ability to cheaply and freely “frack,” but we’re seeing states like Vermont, New York and Maryland ban the practice, with opposition common in other states as well. Second, fracking releases the potent greenhouse gas methane into the atmosphere, prompting the EPA to start cracking down. Third, there are many other environmental problems associated with fracking, including heavy use of precious water resources. Given all this, plus the continued decline in the price of clean energy, can fracking at the levels EIA projects be sustained through 2040? We have grave doubts.
  3. As you can see from the graphic at the top of this article, EIA is projecting that by 2040, there will be no significant penetration of electric vehicles in the U.S. Clearly, that doesn’t seem realistic at all, especially given more than 400,000 orders for the Tesla Model 3 in just a few weeks this spring. Also note that Bloomberg New Energy Finance (BNEF) recently forecast that “sales of electric vehicles will hit 41 million by 2040, representing 35% of new light duty vehicle sales…almost 90 times the equivalent figure for 2015, when EV sales are estimated to have been 462,000, some 60% up on 2014.” As you can see, EIA’s reference case projection and BNEF’s forecast are not even in the same ballpark. And let’s just say, given their past records, we have a lot more confidence in BNEF than in EIA when it comes to projecting cleantech growth.
  4. Perhaps most jarring is EIA’s projection that, given current laws, regulations, technology assumptions, etc., that after after approximately 2022/2023 (in either “reference” or “no CPP” case), that there will essentially be ZERO wind power capacity additions in the U.S., only natural gas and solar. We contacted EIA for comment on this, and they responded, “what we are seeing is that wind is being built early in the projection period to get access to the PTC, which essentially goes away in the 2022 timeframe,” and that “[t]hose areas where wind is most abundant/lowest cost have, by then, largely built all that they need (or can use) during the PTC eligibility window.” What’s strangest about this EIA projection is that the U.S. Department of Energy, of which EIA is a part, assumes in its Wind Vision report that wind power can achieve 35% penetration in the U.S. by 2050 in an “achievable,” “affordable” and “beneficial” manner. Clearly, DOE and EIA are not on the same page when it comes to U.S. wind power growth. Nor is EIA on the same page as the International Renewable Energy Agency, which sees the potential for “a fivefold increase in onshore wind capacity, from 63 gigawatt-electric (GWe) in 2014 to 314 GWe by 2030,” as well as “an additional 40 GWe of capacity in offshore wind.” Again, given what we’ve seen in terms of clean energy scaling in recent years, combined with the clear trend in that direction for a variety of reasons (economic, environmental, etc.), we’d go with the more optimistic scenarios over EIA’s relative pessimism.
  5. Finally, it’s worth pointing out that there’s a significant disconnect within EIA itself, both between this year’s and previous years’ projections, and also between EIA’s long-term outlook (AEO) and its latest Short-Term Energy Outlook (STEO). For instance, while the AEO says “U.S. crude oil production drops from 9.4 million barrels/day (b/d) in 2015 to 8.6 million b/d in 2017,” the STEO has U.S. crude oil production falling to 8.2 million bbl/d in 2017. That’s a difference of about 400,000 bbl/d in 2017. When it comes to coal, the AEO has U.S. production falling from about 870 million short tons in 2015 to 830 million short tons in 2022,” while the latest STEO has U.S. coal production falling to 745.7 million short tons in 2016. That’s around 85 million short tons LOWER in 2016 than what the AEO says U.S. coal production will fall to by 2022. What’s that all about?

Again, we are well aware that what EIA is doing is making projections based on a set of assumptions, not predictions of what will definitely happen in the future. Still, it seems that EIA continues to greatly underestimate cleantech scaling, whether they’re assuming wind power flatlining after 2022/2023 or no significant electric vehicle penetration through 2040. Even given current policies, laws, technologies, etc., none of that seems at all likely, which makes us wonder what the value of the EIA projections might be.

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