Published on April 20th, 2015 | by Sandy Dechert28
EIA 2040 Forecast Understates Renewables, Policy, Contingencies
April 20th, 2015 by Sandy Dechert
Last week the U.S. Energy Information Administration released its Annual Energy Outlook. EIA’s big news: American energy imports and exports will come into balance for the first time in over 50 years. Says EIA Administrator Adam Sieminski:
“EIA’s AEO2015 shows that the advanced technologies are reshaping the U.S. energy economy. With continued growth in oil and natural gas production, growth in the use of renewables, and the application of demand-side efficiencies, the projections show the potential to eliminate net U.S. energy imports in the 2020 to 2030 timeframe.”
Okay, that’s an attention-getter. But before we all start jumping up and down about being a net exporter again, we need to take a closer look at how EIA says we’ll be getting there. In doing so, we find some answers based on “same old, same old” with a wave of the wand of oil and natural gas, a lick of slower growth in energy demand, likely underestimation of the potential of renewables, an uneven eye to policy influences, and little allowance for the role of likely events.
Here’s the quick glance at the report’s findings that EIA supplied for press use.
Let’s address the subject of renewable energy right away. The EIA report projects that all nonhydro renewables will account for only 18% of the country’s electricity generation by 2040, up from 13% in 2013.
For many, this figure disappoints. Taken in context, though, EIA’s previous annual forecasts through 2040 have drawn criticism for lowballing wind and solar power and understating the potential of renewables to cover more than a small fraction of the country’s electricity needs.
As analyst Jeff St. John points out in Greentechmedia.com, inherent problems with the EIA’s numbers include the following:
- EIA fails to keep up with industry data on the rapidly falling costs of renewable technologies.
- EIA historically underestimates continuing performance improvements in terms of increasing capacity factors, or the amount of “nameplate” capacity of renewables.
- EIA’s cost multipliers assume that future renewable power installations will cost more than those already built.
- Data on solar power projects excludes those smaller than 1 megawatt in size (e.g., no data on the meteoric role of rooftop PV).
Says Jeff Deyette, senior energy analyst with the Union of Concerned Scientists:
“Under the Clean Air Act, EPA has to come up with the best system for emissions reductions for power plants. They have cost-achievable thresholds they have to abide by when setting target reductions for states. When they’re using EIA’s assumptions, they’re underestimating the cost-effective reduction potential of renewable energy–and you have targets for the states that are lower than they could be.”
To these objections I would add the rapid evolution of grid structures, not addressed in the EIA analysis and unevenness regarding the role of policy. The result: underperformance of the energy system as a whole, based on “same old, same old” assumptions regarding the extent to which renewables can replace coal-fired and other costly and polluting types of power plants.
Presenting the key findings last December of International Energy Agency’s World Energy Outlook 2014, Dr. Fatih Birol, Chief Economist and Director of Global Energy Economics at the International Energy Agency, offers a related conundrum: “Will change in global energy be led by policies,” he asked, “or driven by events?
In the case of the US, several key policy matters stand out: the role of nuclear power, the future of oil and gas subsidies, and the effects of the Obama administration’s Clean Power Plan. Although nuclear power could enhance energy security and decarbonization, it faces political uncertainty regarding safety, financing concerns, and public opposition. Likewise, subsidies for oil and gas–globally, four times higher than those for renewables, and not insignificant in the US–are yet unresolved.
Finally, and most importantly, EIA does not include in its Annual Energy Outlook an existing policy crucial to balancing conventional fuels and renewable energy: the impacts of the clean power plan set in motion by the present US administration. Although final rules are not yet in effect, large changes related to this outcome (most obviously, disinvestment in coal) have already begun in anticipation.
“We will have a separate report out in May” that does address the influence of renewables, says an EIA official. Why separate the two? “Because it’s complicated” was EIA’s reply. Sounds a lot like Facebook. “We wanted to get the reference case out first.” Oops, weren’t we talking about six different cases comprising the current set of numbers: Reference, Low Economic Growth, High Economic Growth, Low Oil Price, High Oil Price, and High Oil and Gas Resource–definitions here? How many new scenarios can we expect?
By contrast, the International Energy Agency forecasting process–described in World Energy Outlook 2014 and the World Energy Outlook 2015, upcoming in November and widely recognized as the most authoritative strategic analysis of global energy markets–views discussion of all policy matters and signs of stress as essential to the realism of its projections.
As Dr. Birol points out, and this week’s International Monetary Fund spring meeting viewpoint echoes, geopolitical and market uncertainties clearly influence any energy equation. Among these are emergencies like the Fukushima debacle, the short-term and potentially longer-lasting volatility in the Middle East, the expected slowdown of Chinese energy demand growth in the coming decade, and the upcoming roles of India and east Asia as the highest energy demanders, all downplayed or ignored in the EIA report.
The role of internal politics cannot be understated either, as shown Australia’s recent series of policy reversals, rethinking generated by China’s urban air pollution crisis, and the potential for massive promise-breaking such as the default threatened by the newly emboldened Republican Congress of the United States. Nor can the decisive power of climate change (mentioned only briefly in the EIA report), which has mushroomed to the extent that the world’s entire climate budget to 2100 is now on track to be exceeded within the next quarter century.
So far more possibilities exist than those indicated by the narrow range of assumptions that EIA has included in this latest assessment. Respected voices are saying that America can, and should, get 100% of its energy from renewables by 2050, that 80% would be good enough, or 100% by 2100, or that 50% is attainable in the next 35 years, and so on. EIA’s limited focus can support none of these.
The organization claims in Figure 4 to cover “scenarios that encompass a wide range of future crude oil price paths.” Great to have such a diverse oil perspective, but the exploration of renewable and other scenarios seems puny by comparison.