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Technology improvement a key factor in projected energy demand

December 21, 2001 à‚– As the economy grows, U.S. energy demand is projected to increase 32 percent from 2000 to 2020, reaching 131 quadrillion Btu, assuming no changes in federal laws and regulations.

The forecast could differ with faster or slower penetration of energy-efficient and renewable energy technologies and faster or slower penetration of oil and gas technology, according to alternative forecasts released today by the Energy Information Administration (EIA) in its “Annual Energy Outlook 2002.”

The Reference Case forecast was released on the EIA Internet site and at a Press Conference on November 14.

In the Reference Case, the energy intensity of the U.S. economy, measured as energy used per dollar of gross domestic product (GDP), is projected to decline at an average annual rate of 1.5 percent through 2020 as more efficient energy-using technologies become available and penetrate the market.

A high consumption-side technology case assumes more rapid improvement in the cost, efficiencies, and adoption of advanced, energy-using technologies than in the Reference Case, for example, residential and commercial buildings equipment, transportation vehicles, and advanced fossil-fired and renewable generating technologies. In this case, energy demand is projected to be 6 percent lower in 2020 relative to the Reference Case .

However, technology could also develop at a slower rate than in the Reference Case. Assuming that the efficiencies of energy-using technologies do not change from those available today increases projected energy demand by 5 percent in 2020 compared to the Reference Case.

The Reference Case forecast assumes technology improvements in oil and natural gas exploration and production that lower costs and improve finding and success rates, including three-dimensional seismology and horizontal drilling and completion. Alternative cases that assume more rapid and slower technology improvements than in the Reference Case show the impact on projected natural gas prices.

In 2020, natural gas wellhead prices are projected to range from $4.06 per thousand cubic feet in the slow oil and gas technology progress case to $2.73 per thousand cubic feet in the rapid oil and gas technology progress case, compared to $3.26 per thousand cubic feet in the Reference Case.

In the rapid oil and gas technology progress case, projected natural gas production is 4 percent higher than in the Reference Case in 2020; in the slow oil and gas technology progress case, natural gas production is projected to be 9 percent lower.

EIA analyzed a number of other cases, including:

+ In accordance with the overall assumption concerning current laws and regulations, the Reference Case projections assume that the current production tax credit for electricity generated from wind and closed-loop biomass sources will expire on December 31, 2001, as currently mandated. (Closed-loop biomass plants use dedicated energy crops.) This tax credit is indexed to inflation and is currently worth 1.7 cents per kilowatthour for the first ten years of electricity production from a qualifying facility. In an alternative case, it is assumed that the tax credit would be extended to facilities brought into service by December 31, 2006, including open-loop biomass and landfill gas facilities, as provided in H.R. 4, the Securing America’s Future Energy Act of 2001. This extension would be expected to raise total wind, biomass, and landfill gas capacity in 2020 by an additional 7 gigawatts above the Reference Case level of 15 gigawatts.

+ In the Reference Case, approximately 10 percent of the current nuclear generation capacity is projected to be retired by 2020, based upon the costs of maintaining the operation of existing plants compared to the cost of building replacement capacity.

No new plants are expected to be constructed due to the economics involved. As a result, nuclear capacity declines from 98 to 88 gigawatts between 2000 and 2020. In an alternative case, it is assumed that no aging-related capital expenditures will be required to maintain the operation of existing nuclear plants.

As a result, there are fewer retirements, and nuclear capacity is projected to be 92 gigawatts in 2020.

+ In alternative world oil price cases, projected crude oil prices, measured as the imported refiner acquisition cost of imported crude oil, range from $30.58 per barrel in 2020 in the high world oil price case to $17.64 per barrel in the low world oil price case. As a result, projected gasoline prices in 2020 are 13 percent higher in the high world oil price case than in the Reference case and 15 percent lower in the low world oil price case. U.S. crude oil production is projected to range from 6.4 million barrels per day in 2020 in the high world oil price case to 4.9 million barrels per day in the low world oil price case, compared to 5.6 million barrels per day in the Reference Case.

In the high world oil price case, higher domestic oil production and lower demand reduces U.S. dependence on oil imports, with 57 percent of domestic consumption coming from net oil imports in 2020, compared to 62 percent in the Reference Case and 67 percent in the low world oil price case.

The “Annual Energy Outlook 2002” also includes the impacts of higher and lower economic growth than in the Reference Case, an analysis of recent California electricity markets and the status of electricity restructuring, a summary of recent analyses conducted by EIA on the potential impacts of reducing emissions from electricity generators, a discussion of energy intensity indicators, recent and proposed regulatory changes in energy markets, and other current energy issues. The report can be accessed on EIA’s Internet site at https://eia.doe.gov. More detailed, regional projections are also available at https://eia.doe.gov/oiaf/aeo/supplement/, and the assumptions underlying the projections are available at https://eia.doe.gov/oiaf/aeo/assumption/pdf/0554(2002).pdf. The figures referenced above may be viewed along with this press release on EIA’s Web Site or can be requested from EIA’s Press Contact.

The report described above was prepared by the Energy Information Administration, the independent statistical and analytical agency within the U.S. Department of Energy. The information contained in the report and the press release should be attributed to the Energy Information Administration and should not be construed as advocating or reflecting any policy position of the Department of Energy or any other organization.

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