Institute for
Energy Research

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The EIA’s Annual Energy Outlook 2018 looks ahead to 2050 and projects huge increases in natural gas use with flat CO2 emissions and double the economy.

The Energy Information Administration’s (EIA) Annual Energy Outlook (AEO) 2018 projects that fossil fuels will supply 78% of the nation’s energy in 2050, only slightly down from 81% today. Further, CO2 emissions in the agency’s forecast grow only slightly in the ensuing three decades—by just 1.8% between 2016 and 2050, despite the economy almost doubling over the 34-year forecast.

The mix of fuels is projected to change with natural gas and non-hydroelectric renewables garnering a larger share than today. Natural gas consumption grows the most on an absolute basis and non-hydroelectric renewable energy grows the most on a percentage basis. However, non-hydroelectric renewable energy makes only slight in-roads in this 34-year period, increasing from an 8 percent share in 2016 to a 13% share in 2050. The United States becomes a net energy exporter by 2022.

In EIA’s forecast, natural gas increases its share from to 29% in 2016 to 33% in 2050, while petroleum’s share declines from 37% in 2016 to 33% in 2050, and coal’s share declines from 15% in 2016 to 12% in 2050.

EIA projects that the economy will grow at 2.0% per year in its reference case; that energy consumption will grow at 0.4% per year; and that CO2 emissions will grow at 0.1% per year between 2017 and 2050.

The United States has been a net energy importer since 1953, but that changes in the early 2020s as the United States decreases its imports and increases its exports. In natural gas trade, the United States remains a net exporter with pipeline shipments to Mexico and Canada and liquefied natural gas (LNG) shipments to more distant destinations.

Oil and Gas Sector

Natural gas production accounts for nearly 39% of U.S. energy production by 2050 in EIA’s reference case. Production from shale gas and tight oil plays as a share of total U.S. natural gas production is projected to continue to grow because of the large size of the associated resources, which extends over more than 500,000 square miles. To satisfy the growing demand for natural gas, production expands into more expensive-to-produce areas, putting upward pressure on production costs and prices.

Natural gas production is expected to grow 6% per year from 2017 to 2020–greater than the 4% per year average growth rate from 2005 to 2015. However, after 2020, it slows to less than 1% per year for the remainder of the projection. Natural gas growth in the near term is due to growing demand from large capital-intensive chemical projects and from the development of liquefaction export terminals in an environment of low natural gas prices.

U.S. crude oil production in 2018 is projected to surpass the 9.6 million barrels per day record set in 1970 and is expected to plateau between 11.5 million barrels per day and 11.9 million barrels per day as tight oil development moves into less productive areas and as well productivity declines.

Lower 48 onshore tight oil development continues to be the main driver of total U.S. crude oil production, accounting for about 65 percent of cumulative domestic production in the reference case between 2017 and 2050. Continued technological advancements and improvements in industry practices are expected to lower costs and to increase the volume of oil and natural gas recovery per well.

The continued development of tight oil and shale gas resources supports growth in natural gas plant liquids production, which reaches 5.0 million barrels per day in 2023 in the reference case—almost a 35-percent increase from its 2017 level. Natural gas plant liquids production nearly doubles between 2017 and 2050, supported by an increase in global petrochemical industry demand.

Electricity Sector

This year’s AEO does not include the Clean Power Plan in its reference case. In the near term, fuel prices determine the share of natural gas-fired and coal-fired generation. But, in the longer term, the relatively low cost of coal moderates the decline in coal-fired generation. Growth in renewable generation in the near term is due mainly to federal tax credits, but is also influenced by state renewable portfolio standards.

The primary drivers for new capacity in the reference case are the retirements of older, less-efficient fossil fuel units, the near-term availability of renewable energy tax credits, and the assumed continued decline in the capital cost of renewables, especially solar photovoltaic. Low natural gas prices and favorable costs for renewable energy result in natural gas and renewables as the primary sources of new generation capacity.

In EIA’s projection, coal-fired generating capacity decreases by an additional 65 gigawatts between 2017 and 2030 as a result of low cost natural gas and increasing renewable generation and then levels off near 190 gigawatts through 2050.

Conclusion

EIA sees fossil fuels as dominating the U.S. energy sector through 2050, despite significant penetration of wind and solar power for electric generation. EIA’s forecast retires 85 gigawatts of coal and nuclear capacity and replaces them with natural gas, wind, and solar capacity spurred by low natural gas prices, federal tax credits for wind and solar, and state renewable portfolio standards, with solar PV increasing the most.

Editor’s Note: This post is a condensed version of the original found here. Note that natural gas grows economically (that is naturally) while the growth of renewables is a function of government subsidies and mandates. Continued natural gas substitution for coal and oil will also serve to help hold CO2 emissions flat despite a doubling of the economy, just as recent declines in CO2 emissions were brought about by those same factors.