Report projects modest need for electric generation capacity growth

The U.S. Energy Information Administration has projected that 351 gigawatts of new electric generating capacity will be added to the U.S. grid between 2013 and 2040.  This projected new capacity, most of which EIA expects to be fueled by natural gas, will replace older power plants as they retire, as well as modestly increasing the country's net installed capacity.

EIA's forecast implies a growth rate well below recent annual levels observed.  Under EIA's projection, capacity additions through 2016 will average 16 GW per year.  But from 2017 through 2022, EIA expects additions of less than 9 GW per year as the existing generating fleet will be sufficient to meet expected demand growth in most regions.  From 2025 to 2040, annual additions increase to an average 14 GW per year, but remain below recent levels.

EIA expects that natural gas will be the primary fuel source for the projected added capacity, accounting for 73% of capacity additions in the reference case (or 255 GW).

Renewables will account for 24% of the new capacity (or 83 MW).  Of renewable capacity additions, 39 GW are solar photovoltaic (PV) systems (60% of which are rooftop installations).  Another 28 GW are wind, most of which will occur by 2015 to qualify for federal renewable energy production tax credits).

New nuclear capacity will total about 3% (or 10 GW), including 6 GW of plants currently under construction and 4 GW projected after 2027.

EIA also projects that 1% of capacity additions (or less than 3 GW) will come from coal, with more than 80% of that total currently under construction.  EIA notes that federal and state environmental regulations and uncertainty about future limits on greenhouse gas emissions reduce the attractiveness and economic merits of coal-fired plants.

Like any forecast, EIA's projections rest upon a series of assumptions.  Under alternative cases, we might experience actual capacity additions that differ from EIA's forecasts.  Nevertheless, the EIA Annual Energy Outlook 2014 offers a glimpse of changes to the portfolio composing our energy mix may come in the next decades.

EIA releases 2014 Annual Energy Outlook

The U.S. Energy Information Administration has released its annual report projecting long-term trends in energy markets.

The Energy Information Administration, or EIA, is the statistical and analytical agency within the U.S. Department of Energy.  Its 2014 Annual Energy Outlook (269-page PDF) presents long-term annual projections of energy supply, demand, and prices focused on the U.S. through 2040. Based on data-driven models, the report considers a reference case under which it assumes current laws and regulations remain unchanged, as well as alternative cases that explore important areas of uncertainty for markets, technologies, and policies in the U.S. energy economy.

The report's biggest findings include projections that:

• Growing domestic production of natural gas and oil continues to reshape the U.S. energy economy, largely as a result of rising production from tight formations, but the effect could vary substantially depending on expectations about resources and technology.

• Industrial production expands over the next 10 to 15 years as the competitive advantage of low natural gas prices provides a boost to the industrial sector with increasing natural gas use.

• There is greater upside uncertainty than downside uncertainty in oil and natural gas production; higher production could spur even more industrial growth and lower the use of imported petroleum.

• Improvement in light-duty vehicle (LDV) efficiency more than offsets modest growth in vehicle miles traveled (VMT) that reflects changing driving patterns, leading to a sharp decline in LDV energy use.

• Evolving natural gas markets spur increased use of natural gas for electricity generation and transportation, as well as expanded export opportunities.

• Improved efficiency of energy use in the residential and transportation sectors and a shift away from more carbon-intensive fuels such as coal for electricity generation help to stabilize U.S. energy-related carbon dioxide (CO₂) emissions.

The full report includes a series of specific projections -- for example that most new electricity generation capacity added will use natural gas or renewable energy, that solar photovoltaic and wind will dominate new renewable capacity.  The report also projects that through 2040, energy use per capita decreases, largely due to gains in appliance efficiency, a shift in production from cooler to warmer regions, and an increase in vehicle efficiency standards.

How will EIA's projections fare over the coming years?

EIA data on electricity generator costs

What does it cost to build a new power plant?  The answer depends on the technology used and other factors - but the U.S. Energy Information Administration publishes a useful reference presenting its analysis of the so-called "overnight cost" of building new centralized electricity generation stations using a variety of technologies.

Each year, the EIA publishes an Annual Energy Outlook containing projections for the upcoming year.  This outlook considers a variety of potential future outcomes based on factors like changes in the demand for electricity or variations in fuel pricing.

Underlying the outlook is a series of assumptions about factors including the demand for electricity.  A document released last week by EIA looks at a variety of new central station electricity generating technologies, and provides cost and performance characteristics for each.

One section of the data focuses on the total overnight cost of new projects initiated in 2011, defined as the overnight capital cost including contingency factors, excluding regional multipliers, learning effects, and interest.  According to EIA, advanced combustion turbines have the lowest overnight cost: $666 per kilowatt (in 2010 dollars).  By contrast, municipal solid waste - landfill gas facilities have the highest overnight cost: $8,233 per kW.  Other technologies fall between these two extremes.

Capital cost is only one piece of the puzzle; variable and fixed operations and maintenance costs also play a major role in the economics of electric generation.  According to EIA, variable O&M costs range from zero per megawatt-hour (for onshore and offshore wind, and solar thermal and photovoltaic) to $14.70 per MWh for a conventional combustion turbine.  Fixed O&M costs range from as low as $6.70 per kilowatt for advanced combustion turbines to as high as $378.76 per kW for MSW - landfill gas facilities.

Not every technology is appropriate for any given site, and economic considerations must be matched with environmental, siting, and other factors in choosing power plant technologies needed to meet consumer demand.  EIA's data is also aggregated and analytically-derived, meaning individual projects will likely have capital or O&M costs that deviate from these averages.  Nevertheless the EIA data illustrates some of the dynamics underlying our future energy mix - will we build facilities with low capital costs but higher O&M costs, more expensive facilities with lower O&M costs -- or can we find technologies that perform well in all categories?