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The growth rate for US power generation capacity through 2050 is
expected to be double that of electricity demand, as wind and solar
facilities' intermittency dictates requirements, according to the
latest US Energy Information Administration (EIA) projections.
The coronavirus pandemic is not expected to lead to long-term
structural changes in US electricity demand, according to the
projections, but officials foresee more radical alterations than
before coming to their forecasts for the power sector and its clean
technology segments.
Demand is set to return to 2019 levels by 2025, however,
long-term projections are "always uncertain and this year
especially so," Stephen Nalley, Acting Administrator, said during a
briefing unveiling the findings in the agency's Annual Energy Outlook 2021 report.
The annual average US electricity growth rate is forecast to be
less than 1% from 2020 to 2050 in the report's reference case. In
the short term, demand for electricity may fluctuate as a result of
year-to-year weather changes, but over the long-term EIA projects
that efficiency improvements will somewhat offset increases in
demand driven by economic growth.
In the agency's reference case, electricity demand won't return
to 2019 levels until 2022, and then the average annual growth rate
will surpass 1% only toward the end of the projection period.
Meantime, EIA projects that US energy-related carbon dioxide
emissions will decrease through 2035 before reversing that
trend.
Source: EIA
Wind is expected to be responsible for most of the growth in
renewable generation from 2020 through 2024, accounting for more
than two-thirds of the increases in electricity generation during
that period, according to the reference case outlook.
After the production tax credit (PTC) for wind phases out at the
end of 2024, solar generation assumes responsibility for almost
three-quarters of the increase in renewables generation. EIA
assumes solar receives a 30% investment tax credit (ITC) through
2023, which is then reduced to a permanent value of 10% in 2024 and
forward, it said.
Keeping to what's on the books, but change is a coming
While EIA's projections are based on what regulations and
policies were on the books when it was crunching the numbers, the
factors that affect those figures are changing more rapidly than
once was the case, according to agency officials.
In the past, it was very rare for a new technology to make a
significant impact on the outlook's modeling, said Senior Advisor
for Energy Analysis Jim Turnure, but "now we've seen a few," citing
shale gas plays, as well as rooftop solar installations and the
move from incandescent to LED lightbulbs as past examples.
Technological innovation is moving "a little bit quicker than we've
ever seen before."
Next on the agency's plate will be increased modeling of the
impact of battery storage, both on a standalone basis and in
combination with solar photovoltaic generation, said Jim
Diefenderfer, director of the EIA's Office of Long-Term Energy
Modeling.
Hydrogen and its potential for changing the playing field in
many an energy arena only figures in calculations related to oil
refineries and natural gas presently, according to EIA Senior
Advisor for Energy Analysis John Staub, but that could change
too.
In addition, the outlook also doesn't currently include any
breakthroughs in battery technology in the transportation sector,
said Staub. "We work with what's on the books at the moment … we
don't speculate," said Turnure.
Because EIA doesn't model "possible announcements," the 2021
outlook doesn't account for President Joe Biden's promise to build
500,000 electric vehicle charging stations
New announcements would also be needed for wind generation to
match growth in the solar power sector from 2025 onwards, over 83%
of the period covered by the outlook, according to the EIA, citing
cost as the reason.
Wind additions are largely tied to policy, the agency said. The
projections assume the PTC for wind runs for an extra year, or
through 2024, following a one-year extension.
"Although capital costs for both wind and solar continue to
decline throughout the projection period, without additional policy
intervention, wind is not as cost-competitive as solar. More than
two-thirds of cumulative wind capacity additions from 2020 to 2050
occur before the PTC expires at the end of 2024. The steadier pace
of solar additions in part reflects the continued availability of a
10% [ITC], which continues in perpetuity after 2023 when the
current 30% phases out," EIA analysts wrote in the outlook.
The expected electrification of the transportation sector also
fails to make the cut. Although the greatest potential for
increased electricity demand is within the transportation sector,
the agency said, electricity demand from this sector remains less
than 3% of economy-wide electricity demand throughout the
projection period. Those projections currently come down to cost,
said Diefenderfer.
Current laws and regulations are not projected to induce much
market growth, despite continuing improvements in electric vehicles
through evolutionary market developments, the outlook said. Both
vehicle sales and utilization (miles driven) would need to increase
substantially for electric vehicles to raise power demand growth
rates by more than a fraction of a percentage point per year, it
added.
Posted 04 February 2021 by Keiron Greenhalgh, Editor, Energy and Natural Resources Group, IHS Markit
