Rising Food and Energy Prices

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Projections for Energy Markets 2008-18 and Beyond
Rising Food and Energy Prices October 2nd,
2008 Corvallis, Oregon
A. Michael Schaal Director, Oil and Gas
Division Office of Integrated Analysis and
Forecasting Energy Information Administration
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Outline

• EIAs Annual Energy Outlook 2008 Reference Case
• Impacts of Revised CAFE and Renewable Fuel
  Standard
• Alternative Scenarios For AEO 2008

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Energy use per capita and per dollar of GDP
(index, 19701.0)
per capita
per dollar real GDP
History
Projection
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U.S. Primary Energy Consumption by Fuel,
1960-2030 (quadrillion Btu)
History
Projections
Coal
Natural Gas
Liquid Fuels Other Petroleum
Nuclear
Renewables
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U.S. Primary Energy Consumption by Fuel,
1960-2030 (quadrillion Btu)
quadrillion Btu
History
Projections
Liquid Fuels
Coal
Natural Gas
Renewables
Nuclear
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Natural Gas Consumption by End-Use Sector
trillion cubic feet
History
Projections
Industrial
Electric Power
Residential
Commercial
Transportation
Includes lease and plant fuel
Includes pipeline fuel
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U.S. Electricity Demand Growth Trends
History
Projections
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U.S. Electricity Consumption Growth by Sector
billion kilowatthours
Projections
History
Commercial
Residential
Industrial
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Electricity Generation by Fuel Type
billion kilowatthours
History
Projections
Coal
Natural Gas
Nuclear
Renewables
Petroleum
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AEO 2008 Outlook Affected By The Energy
Independence and Security Act of 2007

• Increased Corporate Average Fuel Economy (CAFE).
• Light Duty Vehicle fuel economy standard of 35
  miles per gallon by 2020.
• Increased and Diversified the Renewable Fuels
  Standard (RFS)
• Other End-Use Efficiency Standards.

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New Light-Duty Vehicle Fuel Efficiency (miles
per gallon)
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The Transportation Sector Dominates Liquid Fuels
Consumption.
million barrels per day
Projections
History
Transportation
Industrial
Residential and Commercial
Electric Power
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U.S. Sales of Unconventional Light-Duty
Vehicles, 2015 and 2030 (thousand vehicles sold)
Hybrids
Flex Fuel
Turbo Direct Injection Diesel
Gaseous
Electric
Fuel Cell
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Motor Fuels Demand (million barrels per day)
Motor Gasoline includes E85
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Bringing Liquid Fuels to Market
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EISA 2007 Expands the Renewable Fuel Standard
(RFS) Mandate (billion credits, ethanol
equivalent gallons)
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Advanced Biofuels Mandate
billion credits
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Meeting the Renewable Fuels Standard
billion credits
Legislated RFS
RFS with Paragraph 7 Adjustments
Liquids from Biomass (BTL)
Biodiesel
Net Ethanol Imports
Cellulose Based Ethanol
Ethanol from Other Feedstocks
Corn Based Ethanol
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Distribution of Ethanol Volumes Requires E85
Sales (billion gallons)
2030
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Motor Fuels by Source (billion gallons)
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Gas-to-Liquids, Coal-to-Liquids,
Biomass-to-Liquids, and Oil Shale Production in
the Price Cases, 1990-2030 (million barrels per
day)
History
Projections
Coal to Liquids/ High price
Oil Shale/High price
Gas to Liquids/ High price
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Liquid Fuels Consumption and Domestic Supply
million barrels per day
Consumption
Domestic supply
Projection
History

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Carbon Dioxide Emissions
million metric tons
Total Carbon Dioxide Emissions
AEO2007 2030
AEO2007
AEO2008 2030
AEO2008
2006
Delivered, including losses

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AEO 2008 Scenarios

• Reference
• Early Release Reference
• Low Economic Growth
• High Economic Growth
• Low Price
• High Price
• Residential 2008 Technology
• Residential High Technology
• Residential Best Available Technology
• Commercial 2008 Technology
• Commercial High Technology
• Commercial Best Available Technology
• Industrial 2008 Technology
• Industrial High Technology
• Transportation High Technology
• Electricity Low Nuclear Cost
• Electricity High Nuclear Cost
• Electricity Low Fossil Cost
• Electricity High Fossil Cost

• Renewable Fuels High Renewable Cost
• Renewable Fuels Low Renewable Cost
• Oil and Gas Rapid Technology
• Oil and Gas Slow Technology
• Oil and Gas High LNG Supply
• Oil and Gas Low LNG Supply
• Oil and Gas ANWR
• Coal Low Coal Cost
• Coal High Coal Cost
• Integrated 2008 Technology
• Integrated High Technology
• Integrated Alternative Weather Case
• High Commodity Cost
• Low Commodity Cost
• Restricted Non-Natural Gas Electricity Generation
• Restricted Natural Gas Supply
• Combined High Demand/Low Natural Gas Supply Case

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Policy Change Possibilities
Appliance Efficiency Standards Standards
Renewable Fuels Standards
Production Tax Credits
Greenhouse Gas Legislation
Investment Tax Credits
Renewable Portfolio Standards
Corporate Average Fuel Economy Standards
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Recent EIA Policy Analysis

• Energy and Economic Analysis of S. 2191,
  Americas Climate Security Act of 2007 April
  2008
• Energy and Economic Analysis of S. 1766, the Low
  Carbon Economy Act of 2007
• Proposal requiring 25 percent renewable fuels in
  the motor vehicle transportation and electricity
  markets by 2025

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Recent EIA Policy Analysis (Continued)

• Analysis of S. 280, the Climate Stewardship and
  Innovation Act of 2007
• Impacts of a 15-Percent Renewable Portfolio
  Standard, June 2007
• All available at
• http//www.eia.doe.gov/oiaf/service_rpts.htm
• http//www.eia.doe.gov/oiaf/analysis.htm

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Key GHG Policy Analysis Factors

• Stringency of emission limits
• Coverage
• What gases? What sectors?
• Timing / Banking
• Treatment of offsets
• Foreign and domestic -- Agricultural and
  forestry
• Safety Valve / Technology Accelerator Payment
• Allowance allocation methodology
• Use of allowance revenue and other supporting
  programs

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Climate Stewardship and Innovation Act of 2007
(S. 280)

• Caps GHG emissions on covered entities in the
  electric generation, commercial, and industrial
  sectors, together with producers and importers of
  hydrofluorocarbons, perfluorocarbons, and sulfur
  hexafluoride, and petroleum refiners and product
  importers.
• Covered entities include all entities in covered
  sectors that own or control a single facility
  with emissions of 10,000 metric tons or more.
• Emissions of covered entities accounted for an
  estimated 78 percent of total U.S. GHG emissions
  in 2004.
• As emissions by covered entities are subject to
  limits that tighten over time under S.280, their
  share in total U.S. GHG emissions falls.

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Climate Stewardship and Innovation Act of 2007
(S. 280)

• Covered Entity Emission Limits
• Time Period Limit Description
• 2012 through 2019 2004 level
• 2020 through 2029 1990 level
• 2030 through 2049 18 percent below 1990 level
• 2050 and beyond 60 percent below 1990
  level
• Offsets (domestic or international) can be used
  in an amount equivalent to up to 30 percent of
  the allowance obligation

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Energy-Related CO2 Emissions S.280(million
metric tons)
2005
2020
2030
2005 Actual
Reference S.280
Reference S.280
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Electricity Generation by Fuel S.280 (billion
kilowatthours)
Reference Case
S. 280 Core Case
Coal w/o CCS
Nuclear
Renewables
Natural Gas
Oil/Other

• Nuclear and renewable generation grows ,
  displacing coal-fired generation. Nuclear and
  renewables are generally less expensive than
  coal with carbon capture and sequestration (CCS)
  without any special incentives.
• S.280 is also projected to reduce electricity
  demand growth, reflecting both higher electricity
  prices and targeted support of high-efficiency
  equipment

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Summary

• In the AEO 2008 Reference Case traditional fossil
  fuels are expected to continue to meet the bulk
  of energy requirements over the projection period
• U.S. energy demand is projected to grow at an
  average annual rate of 0.7 percent
• The energy efficiency of the economy is projected
  to increase at an average annual rate of 1.7
  percent
• EISA 2007 will have a significant impact on
  liquid fuels production and use.
• Lower petroleum imports
• Lower CO2 Emissions
• Shift towards diesel

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Summary (continued)

• The RFS, made up of four mandates, met by a
  combination of ethanol, diesel production and
  imports.
• Achieves 32 billion gallons by 2022
• RFS implementation is in its early phases and
  significant uncertainties remain.
• The impacts of GHG policies depend on the
  specifics of the proposal but the likely impacts
  include
• Lower coal generation
• Greater nuclear, renewable, and natural gas
  (under some circumstances) generation
• Reduced energy demand
• Higher energy prices
• Key uncertainties include
• Cost, performance and feasibility of rapidly
  commercializing and deploying key low-carbon
  generating technologies
• Cost and availability of domestic and foreign
  offsets
• If these technologies can not be deployed in a
  timeframe consistent with the emission reduction
  requirements, allowance prices, energy prices and
  the use of other low-carbon fuels, particularly
  natural gas, will be higher

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Annual Energy Outlook 2008, June 2008
Short Term Energy Outlook, Monthly AEO 2008
Assumptions, June 2008
A. Michael Schaal Energy Information
Administration Michael.Schaal_at_eia.doe.gov
www.eia.doe.gov