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For further information . . .

TheAnnual Energy Outlook 2013 (AEO2013) was prepared by the U.S. Energy Inormation Administration (EIA), under the direction o

John J. Conti (john.conti@eia.gov, 202/586-2222), Assistant Administrator o Energy Analysis; Paul D. Holtberg (paul.holtberg@

eia.gov, 202/586-1284), Team Leader, Analysis Integration Team, Oce o Integrated and International Energy Analysis; Joseph A.

Beamon (joseph.beamon@eia.gov, 202/586-2025), Director, Oce o Electricity, Coal, Nuclear, and Renewables Analysis; Sam A

Napolitano (sam.napolitano@eia.gov, 202/586-0687), Director, Oce o Integrated and International Energy Analysis; A. Michae

Schaal (michael.schaal@eia.gov, 202/586-5590), Director, Oce o Petroleum, Natural Gas, and Biouels Analysis; and James T

Turnure (james.turnure@eia.gov, 202/586-1762), Director, Oce o Energy Consumption and Eciency Analysis.

Complimentary copies are available to certain groups, such as public and academic libraries; Federal, State, local, and oreigngovernments; EIA survey respondents; and the media. For urther inormation and answers to questions, contact:

Oce o Communications, EI-40

Forrestal Building, Room 1E-210

1000 Independence Avenue, S.W.

Washington, DC 20585

Telephone: 202/586-8800 Fax: 202/586-0727

(24-hour automated inormation line) Website: www.eia.gov

E-mail:inoctr@eia.gov

Specic questions about the inormation in this report may be directed to:

General questions ........................................ ............. Paul Holtberg (paul.holtberg@eia.gov, 202-586-1284)

National Energy Modeling System ....................... Dan Skelly (daniel.skelly@eia.gov, 202-586-2222)

Executive summary ..................................... ............. Paul Holtberg (paul.holtberg@eia.gov, 202/586-1284)

Economic activity ......................................... ............. Kay Smith (kay.smith@eia.gov, 202/586-1132)

World oil prices ..................................... .................... William Brown (william.brown@eia.gov, 202/586-8181)

International oil production .................................... James OSullivan (james.osullivan@eia.gov, 202/586-2728)

International oil demand ......................................... Linda E. Doman (linda.doman@eia.gov, 202/586-1041)

Residential demand ..................................... ............. Owen Comstock (owen.comstock@eia.gov, 202/586-4752)

Commercial demand .......................................... ...... Kevin Jarzomski (kevin.jarzomski@eia.gov, 202/586-3208)

Industrial demand ........................................ ............. Kelly Perl (eia-oeceaindustrialteam@eia.gov, 202/586-1743)

Transportation demand .......................................... John Maples (john.maples@eia.gov, 202/586-1757)

Electricity generation, capacity ............................. Jef Jones (jefrey.jones@eia.gov, 202/586-2038)Electricity generation, emissions .......................... Michael Lef (michael.lef@eia.gov, 202/586-1297)

Electricity prices ........................................... ............. Lori Aniti (lori.aniti@eia.gov, 202/586-2867)

Nuclear energy ...................................... .................... Laura Martin (laura.martin@eia.gov, 202/586-1494)

Renewable energy ....................................... ............. Chris Namovicz (chris.namovicz@eia.gov, 202/586-7120)

Oil and natural gas production .............................. Philip Budzik (philip.budzik@eia.gov, 202/586-2847)

Wholesale natural gas markets ............................ Katherine Teller (katherine.teller@eia.gov, 202/586-6201)

Oil rening and markets .......................................... Arup Malik (arup.malik@eia.gov, 202/586-7713)

Ethanol and biodiesel ......................................... ...... Mac Statton (mac.statton@eia.gov, 202/586-7105)

Coal supply and prices ...................................... ...... Michael Mellish (michael.mellish@eia.gov, 202/586-2136)

Carbon dioxide emissions ....................................... Perry Lindstrom (perry.lindstrom@eia.gov, 202/586-0934)

The AEO2013 is available on the EIA website at www.eia.gov/orecasts/aeo . Assumptions underlying the projections, tables oregional results, and other detailed results will also be available, at www.eia.gov/orecasts/aeo/assumptions . Model documentation

reports or the National Energy Modeling System are available at website www.eia.gov/analysis/model-documentation.cm and

will be updated or theAEO2013 during 2013.

Other contributors to the report include Michelle Adams, Vipin Arora, Joseph Ayoub, Justine Barden, Bruce Bawks, Joseph

Benneche, Erin Boedecker, Gwendolyn Bredehoet, Nicholas Chase, Michael Cole, Jim Dieenderer, Robert Eynon, Laurie Falter

Mindi Farber-DeAnda, Patrick Farace, Adrian Geagla, Susan Grissom, Peter Gross, James Hewlett, Susan Hicks, Sean Hill, Behjat

Hojjati, Patricia Hutchins, Ayaka Jones, Jim Joosten, Diane Kearney, Paul Kondis, Angelina LaRose, Thomas Lee, Tanc Lidderdale

Vishakh Mantri, Elizabeth May, Carrie Milton, Paul Otis, Steanie Palumbo, David Peterson, Chetha Phang, John Powell, Marie

RinkoskiSpangler, Mark Schipper, Elizabeth Sendich, Nancy Slater-Thompson, Robert Smith, John Staub, Russell Tarver, DanaVan Wagener, and Steven Wade.

mailto:john.conti@eia.govmailto:paul.holtberg@eia.govmailto:paul.holtberg@eia.govmailto:joseph.beamon@eia.govmailto:sam.napolitano@eia.govmailto:michael.schaal@eia.govmailto:james.turnure@eia.govhttp://www.eia.gov/mailto:infoctr@eia.govmailto:infoctr@eia.govmailto:paul.holtberg@eia.govmailto:daniel.skelly@eia.govmailto:paul.holtberg@eia.govmailto:kay.smith@eia.govmailto:william.brown@eia.govmailto:james.osullivan@eia.govmailto:linda.doman@eia.govmailto:owen.comstock@eia.govmailto:kevin.jarzomski@eia.govmailto:eia-oeceaindustrialteam@eia.govmailto:john.maples@eia.govmailto:jeffrey.jones@eia.govmailto:michael.leff@eia.govmailto:lori.aniti@eia.govmailto:laura.martin@eia.govmailto:chris.namovicz@eia.govmailto:philip.budzik@eia.govmailto:arup.malik@eia.govmailto:mac.statton@eia.govmailto:michael.mellish@eia.govmailto:perry.lindstrom@eia.govhttp://www.eia.gov/forecasts/aeohttp://www.eia.gov/forecasts/aeo/assumptionshttp://www.eia.gov/analysis/model-documentation.cfmhttp://www.eia.gov/analysis/model-documentation.cfmhttp://www.eia.gov/forecasts/aeo/assumptionshttp://www.eia.gov/forecasts/aeomailto:perry.lindstrom@eia.govmailto:michael.mellish@eia.govmailto:mac.statton@eia.govmailto:arup.malik@eia.govmailto:philip.budzik@eia.govmailto:chris.namovicz@eia.govmailto:laura.martin@eia.govmailto:lori.aniti@eia.govmailto:michael.leff@eia.govmailto:jeffrey.jones@eia.govmailto:john.maples@eia.govmailto:eia-oeceaindustrialteam@eia.govmailto:kevin.jarzomski@eia.govmailto:owen.comstock@eia.govmailto:linda.doman@eia.govmailto:james.osullivan@eia.govmailto:william.brown@eia.govmailto:kay.smith@eia.govmailto:paul.holtberg@eia.govmailto:daniel.skelly@eia.govmailto:paul.holtberg@eia.govmailto:infoctr@eia.govhttp://www.eia.gov/mailto:james.turnure@eia.govmailto:michael.schaal@eia.govmailto:sam.napolitano@eia.govmailto:joseph.beamon@eia.govmailto:paul.holtberg@eia.govmailto:paul.holtberg@eia.govmailto:john.conti@eia.gov

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Annual Energy Outlook 2013

With Projections to 2040

April 2013

U.S. Energy Information Administration

Ofce o Integrated and International Energy Analysis

U.S. Department o Energy

Washington, DC 20585

This report was prepared by the U.S. Energy Inormation Administration (EIA), the statistical and

analytical agency within the U.S. Department o Energy. By law, EIAs data, analyses, and orecasts

are independent o approval by any other ocer or employee o the United States Government. The

views in this report thereore should not be construed as representing those o the Department o

Energy or other Federal agencies.

This publication is on the WEB at:

www.eia.gov/orecasts/aeo

http://www.eia.gov/forecasts/aeohttp://www.eia.gov/forecasts/aeo

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U.S. Energy Information Administration | Annual Energy Outlook 2013ii

Projections by the U.S. Energy Inormation Administration (EIA) are not statements o what will happen but o what

might happen, given the assumptions and methodologies used or any particular scenario. TheAnnual Energy Outlook 2013

(AEO2013) Reerence case projection is a business-as-usual trend estimate, given known technology and technological and

demographic trends. EIA explores the impacts o alternative assumptions in other scenarios with dierent macroeconomic

growth rates, world oil prices, and rates o technology progress. The main cases inAEO2013 generally assume that current

laws and regulations are maintained throughout the projections. Thus, the projections provide policy-neutral baselines

that can be used to analyze policy initiatives.

While energy markets are complex, energy models are simplied representations o energy production and consumption,

regulations, and producer and consumer behavior. Projections are highly dependent on the data, methodologies, model

structures, and assumptions used in their development. Behavioral characteristics are indicative o real-world tendenciesrather than representations o specic outcomes.

Energy market projections are subject to much uncertainty. Many o the events that shape energy markets are random and

cannot be anticipated. In addition, uture developments in technologies, demographics, and resources cannot be oreseen

with certainty. Many key uncertainties in theAEO2013 projections are addressed through alternative cases.

EIA has endeavored to make these projections as objective, reliable, and useul as possible; however, they should serve as

an adjunct to, not a substitute or, a complete and ocused analysis o public policy initiatives.

Preface

The Annual Energy Outlook 2013 (AEO2013), prepared by the U.S. Energy Inormation Administration (EIA), presents long-term

projections o energy supply, demand, and prices through 2040, based on results rom EIAs National Energy Modeling System. EIA

published an early release version o theAEO2013 Reerence case in December 2012.

The report begins with an Executive summary that highlights key aspects o the projections. It is ollowed by a Legislation and

regulations section that discusses evolving legislative and regulatory issues, including a summary o recently enacted legislation

and regulations, such as: Updated handling o the U.S. Environmental Protection Agencys (EPA) National Emissions Standards o

Hazardous Air Pollutants or industrial boilers and process heaters [1]; New light-duty vehicle (LDV) greenhouse gas (GHG) and

corporate average uel economy (CAFE) standards or model years 2017 to 2025 [ 2]; Reinstatement o the Clean Air InterstateRule (CAIR) [3] ater the courts announcement o intent to vacate the Cross-State Air Pollution Rule (CSAPR) [4]; and Modeling

o Caliornias Assembly Bill 32, the Global Warming Solutions Act (AB 32) [5], which allows or representation o a cap-and-trade

program developed as part o Caliornias GHG reduction goals or 2020.

The Issues in ocus section contains discussions o selected energy topics, including a discussion o the results in two cases

that adopt dierent assumptions about the uture course o existing policies, with one case assuming the elimination o sunset

provisions in existing policies and the other case assuming the elimination o the sunset provisions and the extension o a selected

group o existing public policiesCAFE standards, appliance standards, and production tax credits. Other discussions include: oi

price and production trends in AEO2013; U.S. reliance on imported liquids under a range o cases; competition between coal and

natural gas in electric power generation; high and low nuclear scenarios through 2040; and the impact o growth in natural gas

liquids production.

The Market trends section summarizes the projections or energy markets. The analysis in AEO2013 ocuses primarily on a

Reerence case, Low and High Economic Growth cases, and Low and High Oil Price cases. Results rom a number o other alternativecases also are presented, illustrating uncertainties associated with the Reerence case projections or energy demand, supply

and prices. Complete tables or the ve primary cases are provided in Appendixes A through C. Major results rom many o the

alternative cases are provided in Appendix D. Complete tables or all the alternative cases are available on EIAs website in a table

browser at http://www.eia.gov/oia/aeo/tablebrowser.

AEO2013 projections are based generally on ederal, state, and local laws and regulations in eect as o the end o September

2012. The potential impacts o pending or proposed legislation, regulations, and standards (and sections o existing legislation tha

require implementing regulations or unds that have not been appropriated) are not reected in the projections. In certain situations

however, where it is clear that a law or regulation will take eect shortly ater theAnnual Energy Outlook (AEO) is completed, it may

be considered in the projection.

AEO2013 is published in accordance with Section 205c o the U.S. Department o Energy (DOE) Organization Act o 1977 (Public

Law 95-91), which requires the EIA Administrator to prepare annual reports on trends and projections or energy use and supply.

http://www.eia.gov/oiaf/aeo/tablebrowserhttp://www.eia.gov/oiaf/aeo/tablebrowser

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iiiU.S. Energy Information Administration | Annual Energy Outlook 2013

UpdatedAnnual Energy Outlook 2013 Reference case (April 2013)

The AEO2013 Reerence case included as part o this complete report, released in April 2013, was updated rom the AEO2012

Reerence case released in June 2012. The Reerence case was updated to reect new legislation or regulation enacted since that

time or to incorporate modeling changes. Major changes made in the Reerence case include:

Extension o the projection period through 2040, an additional ve years beyondAEO2012.

Adoption o a new Liquid Fuels Market Module (LFMM) in place o the Petroleum Market Module used in earlierAEOs provides

or more granular and integrated modeling o petroleum reneries and all other types o current and potential uture liquid uels

production technologies. This allows more direct analysis and modeling o the regional supply and demand eects involving

crude oil and other eedstocks, current and uture processes, and marketing to consumers.

A shit to the use o Brent spot price as the reerence oil price.AEO2013 also presents the average West Texas Intermediate spot

price o light, low-sulur crude oil delivered in Cushing, Oklahoma, and includes the U.S. annual average reners acquisition cos

o imported crude oil, which is more representative o the average cost o all crude oils used by domestic reners.

A shit rom using regional natural gas wellhead prices to using representative regional natural gas spot prices as the basis o the

natural gas supply price. Due to this change, the methodology or estimating the Henry Hub price was revised.

Updated handling o data on ex-uel vehicles (FFVs) to better reect consumer preerences and industry response. FFVs are

necessary to meet the renewable uels standard, but the phasing out o CAFE credits or their sale and limited demand rom

consumers reduce their market penetration.

A revised outlook or industrial production to reect the impacts o increased shale gas production and lower natural gas prices

which result in aster growth or industrial production and energy consumption. The industries aected include, in particular

bulk chemicals and primary metals. Incorporation o a new aluminum process ow model in the industrial sector, which allows or diusion o technologies through

choices made among known commercial and emerging technologies based on relative capital costs and uel expenditures and

provides or a more realistic representation o the evolution o energy consumption than in previousAEOs.

An enhanced industrial chemical model, in several respects: the baseline liqueed petroleum gas (LPG) eedstock data have

been aligned with 2006 survey data; use o an updated propane-pricing mechanism that reects natural gas price inuences in

order to allow or price competition between LPG eedstock and petroleum-based (naphtha) eedstock; and specic accounting

in the Industrial Demand Model or propylene supplied by the LFMM.

Updated handling o the EPAs National Emissions Standards or Hazardous Air Pollutants or industrial boilers and process

heaters to address the maximum degree o emissions reduction using maximum achievable control technology. An industria

capital expenditure and uel price adjustment or coal and residual uel has been applied to reect risk perception about the use

o those uels relative to natural gas.

Augmentation o the construction and mining models in the Industrial Demand Model to better reect AEO2013 assumptions

regarding energy eciencies in o-road vehicles and buildings, as well as the productivity o coal, oil, and natural gas extraction

Adoption o nal model year 2017 to 2025 GHG emissions and CAFE standards or LDVs, which increases the projected ue

economy o new LDVs to 47.3 mpg in 2025.

Updated handling o the representation o purchase decisions or alternative uels or heavy-duty vehicles. Market actors used

to calculate the relative cost o alternative-uel vehicles, specically natural gas, now represent rst buyer-user behavior and

slightly longer breakeven payback periods, signicantly increasing the demand or natural gas uel in heavy trucks.

Updated modeling o LNG export potential, which includes a rudimentary assessment o pricing o natural gas in internationa

markets.

Updated power generation unit costs that capture recent cost declines or some renewable technologies, which tend to lead to

greater use o renewable generation, particularly solar technologies.

Reinstatement o CAIR ater the courts announcement o intent to vacate CSAPR.

Modeling o Caliornias AB 32, that allows or representation o a cap-and-trade program developed as part o Caliornias GHG

reduction goals or 2020. The coordinated regulations include an enorceable GHG cap that will decline over time. AEO2013

reects all covered sectors, including emissions osets and allowance allocations.

Incorporation o the Caliornia Low Carbon Fuel Standard, which requires uel producers and importers who sell motor gasoline

or diesel uel in Caliornia to reduce the carbon intensity o those uels by 10 percent between 2012 and 2020 through the

increased sale o alternative low-carbon uels.

Future analyses using theAEO2013 Reerence case will start rom the version o the Reerence case released with this complete report

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U.S. Energy Information Administration | Annual Energy Outlook 2013iv

1. U.S. Government Printing Oce, Clean Air Act, 42 U.S.C. 7412 (Washington, DC: 2011), http://www.gpo.gov/dsys/pkg/

USCODE-2011-title42/pd/USCODE-2011-title42-chap85-subchapI-partA.pd.

2. U.S. Environmental Protection Agency and Department o Transportation, National Highway Trac Saety Administration

2017 and Later Model Year Light-Duty Vehicle Greenhouse Gas Emissions and Corporate Average Fuel Economy Standards

Final Rule, Federal Register, Vol. 77, No. 199 (Washington, DC: October 15, 2012), https://www.ederalregister.gov/

articles/2012/10/15/2012-21972/2017-and-later-model-year-light-duty-vehicle-greenhouse-gas-emissions-and-corporate-

average-uel.

3. U.S. Environmental Protection Agency, Clean Air Interstate Rule (CAIR) (Washington, DC: December 19, 2012), http://www

epa.gov/cair/index.html#older.

4. U.S. Environmental Protection Agency, Fact Sheet: The Cross-State Air Pollution Rule: Reducing the Transport o Fine Particulate

Matter and Ozone (Washington, DC: July 2011), http://www.epa.gov/airtransport/pds/CSAPRFactsheet.pd .

5. Caliornia Legislative Inormation, Assembly Bill No. 32: Caliornia Global Warming Solutions Act o 2006 (Sacramento, CA

September 27, 2006), http://www.legino.ca.gov/pub/05-06/bill/asm/ab_0001-0050/ab_32_bill_20060927_chaptered.pd.

Endnotes for Preface

Links current as o March 2013

http://www.gpo.gov/fdsys/pkg/USCODE-2011-title42/pdf/USCODE-2011-title42-chap85-subchapI-partA.pdfhttp://www.gpo.gov/fdsys/pkg/USCODE-2011-title42/pdf/USCODE-2011-title42-chap85-subchapI-partA.pdfhttps://www.federalregister.gov/articles/2012/10/15/2012-21972/2017-and-later-model-year-light-duty-vehicle-greenhouse-gas-emissions-and-corporate-average-fuelhttps://www.federalregister.gov/articles/2012/10/15/2012-21972/2017-and-later-model-year-light-duty-vehicle-greenhouse-gas-emissions-and-corporate-average-fuelhttps://www.federalregister.gov/articles/2012/10/15/2012-21972/2017-and-later-model-year-light-duty-vehicle-greenhouse-gas-emissions-and-corporate-average-fuelhttp://www.epa.gov/cair/index.html#olderhttp://www.epa.gov/cair/index.html#olderhttp://www.epa.gov/airtransport/pdfs/CSAPRFactsheet.pdfhttp://www.leginfo.ca.gov/pub/05-06/bill/asm/ab_0001-0050/ab_32_bill_20060927_chaptered.pdf.http://www.leginfo.ca.gov/pub/05-06/bill/asm/ab_0001-0050/ab_32_bill_20060927_chaptered.pdf.http://www.leginfo.ca.gov/pub/05-06/bill/asm/ab_0001-0050/ab_32_bill_20060927_chaptered.pdf.http://www.epa.gov/airtransport/pdfs/CSAPRFactsheet.pdfhttp://www.epa.gov/cair/index.html#olderhttp://www.epa.gov/cair/index.html#olderhttps://www.federalregister.gov/articles/2012/10/15/2012-21972/2017-and-later-model-year-light-duty-vehicle-greenhouse-gas-emissions-and-corporate-average-fuelhttps://www.federalregister.gov/articles/2012/10/15/2012-21972/2017-and-later-model-year-light-duty-vehicle-greenhouse-gas-emissions-and-corporate-average-fuelhttps://www.federalregister.gov/articles/2012/10/15/2012-21972/2017-and-later-model-year-light-duty-vehicle-greenhouse-gas-emissions-and-corporate-average-fuelhttp://www.gpo.gov/fdsys/pkg/USCODE-2011-title42/pdf/USCODE-2011-title42-chap85-subchapI-partA.pdfhttp://www.gpo.gov/fdsys/pkg/USCODE-2011-title42/pdf/USCODE-2011-title42-chap85-subchapI-partA.pdf

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vU.S. Energy Information Administration | Annual Energy Outlook 2013

Contents

Preace ............................................................................................................................................................................................................... i

UpdatedAnnual Energy Outlook 2013 Reerence case (April 2013).......................................................................................................... ii

Executive summary.......................................................................................................................................................................................... 1

Legislation and regulations............................................................................................................................................................................. 7Introduction ............................................................................................................................................................................................. 8

1. Greenhouse gas emissions and corporate average fuel economy standards for 2017 and later model year

light-duty vehicles............................................................................................................................................................................ 8 2. Recent rulings on the Cross-State Air Pollution Rule and the Clean Air Interstate Rule ................................................... 10

3.NuclearwastedisposalandtheWasteCondenceRule ........................................................................................................ 10 4. Maximum Achievable Control Technology for industrial boilers ............................................................................................. 12

5. State renewable energy requirements and goals: Update through 2012 .............................................................................. 13

6. California Assembly Bill 32: Emissions cap-and-trade as part of the Global Warming Solutions Act of 2006 .............. 18

7. California low carbon fuel standard ............................................................................................................................................. 18

Issues in ocus .................................................................................................................................................................................................. 23

Introduction ............................................................................................................................................................................................. 24

1. No Sunset and Extended Policies cases .................................................................................................................................... 24

2. Oil price and production trends inAEO2013.............................................................................................................................. 30

3. U.S. reliance on imported liquid fuels in alternative scenarios ............................................................................................... 32

4. Competition between coal and natural gas in the electric power sector............................................................................... 39

5. Nuclear power inAEO2013 ........................................................................................................................................................... 44 6. Effect of natural gas liquids growth .............................................................................................................................................. 48

Market trends ................................................................................................................................................................................................... 55Trends in economic activity.................................................................................................................................................................. 56

Energy trends in the economy............................................................................................................................................................. 57

International energy............................................................................................................................................................................... 58

U.S. energy demand ............................................................................................................................................................................. 59

Residential sector energy demand ..................................................................................................................................................... 61

Commercial sector energy demand ................................................................................................................................................... 63

Industrial sector energy demand ........................................................................................................................................................ 65

Transportation sector energy demand............................................................................................................................................... 68

Electricity demand ................................................................................................................................................................................. 71

Electricity generation ............................................................................................................................................................................ 72

Electricity sales ...................................................................................................................................................................................... 73Electricity capacity................................................................................................................................................................................. 74

Renewable generation.......................................................................................................................................................................... 75

Natural gas consumption...................................................................................................................................................................... 76

Natural gas prices.................................................................................................................................................................................. 77

Natural gas production.......................................................................................................................................................................... 78

Natural gas supply ................................................................................................................................................................................. 79

Petroleum and other liquids consumption ......................................................................................................................................... 80

Petroleum and other liquids supply .................................................................................................................................................... 81

Coal production ...................................................................................................................................................................................... 85

Emissions from energy use ................................................................................................................................................................. 87

Comparison with other projections .............................................................................................................................................................. 91

1. Economic growth............................................................................................................................................................................. 92

2. Oil prices ........................................................................................................................................................................................... 93 3. Total energy consumption.............................................................................................................................................................. 93

4. Electricity .......................................................................................................................................................................................... 95

5. Natural gas ....................................................................................................................................................................................... 100

6. Liquid fuels ....................................................................................................................................................................................... 103

7. Coal.................................................................................................................................................................................................... 103

List o acronyms ............................................................................................................................................................................................... 111

Notes and sources ........................................................................................................................................................................................... 112

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U.S. Energy Information Administration | Annual Energy Outlook 2013vi

Contents

Tables

Legislation and regulations 1.NHTSAprojectedaverageeet-wideCAFEcompliancelevelsforpassengercarsandlight-dutytrucks,

modelyears2017-2025,basedonthemodelyear2010baselineeet............................................................................... 9 2.AEO2013 projectedaverageeet-wideCAFEcompliancelevelsforpassengercarsandlight-dutytrucks,

model years 2017-2025 ................................................................................................................................................................. 10

3. Renewable portfolio standards in the 30 states and District of Columbia with current mandates ................................... 14

Issues in ocus 4. Key analyses from Issues in focusin recentAEOs................................................................................................................ 24 5. Differences in crude oil and natural gas assumptions across three cases .......................................................................... 34

6. Differences in transportation demand assumptions across three cases .............................................................................. 37

7.ProposedadditionsofU.S.ethyleneproductioncapacity,2013-2020 .................................................................................. 50

Comparison with other projections 8.Comparisonsofaverageannualeconomicgrowthprojections,2011-2040 ......................................................................... 92 9.Comparisonsofoilpriceprojections,2025,2035,and2040 .................................................................................................. 93 10.Comparisonsofenergyconsumptionbysectorprojections,2025,2035,and2040 .......................................................... 94 11.Comparisonsofelectricityprojections,2025,2035,and2040 ............................................................................................... 96 12.Comparisonsofnaturalgasprojections,2025,2035,and2040 ............................................................................................ 100 13.Comparisonsofliquidsprojections,2025,2035,and2040 .................................................................................................... 104 14.Comparisonsofcoalprojections,2025,2035,and2040 ........................................................................................................ 106

Appendix E E1. Summary of theAEO2013 cases ................................................................................................................................................. 215

Appendixes

A. Reference case................................................................................................................................................................................ 121

B. Economic growth case comparisons ........................................................................................................................................... 161

C. Price case comparisons................................................................................................................................................................. 171

D. Results from side cases ................................................................................................................................................................. 186

E. NEMS overview and brief description of cases ......................................................................................................................... 209

F.Regional Maps ................................................................................................................................................................................. 225G. Conversion factors .......................................................................................................................................................................... 233

Figures

Executive summary

1.NetimportshareofU.S.liquidssupplyintwocases,1970-2040.......................................................................................... 2 2.TotalU.S.naturalgasproduction,consumption,andnetimportsintheReferencecase,1990-2040 ........................... 3 3.Electricitygenerationfromcoalandnaturalgasintwocases,2008-2040......................................................................... 4 4.Coalandnaturalgasuseintheelectricpowersectorinthreecases,2011,2025,and2040 .......................................... 4 5.Energy-relatedcarbondioxideemissionsinfourcases,2000-2040 .................................................................................... 4 6.Transportationenergyconsumptionbyfuel,1990-2040 ......................................................................................................... 5 7.U.S.drynaturalgasconsumptionbysector,2005-2040......................................................................................................... 5 8.RenewableenergyshareofU.S.electricitygenerationinvecases,2000-2040.............................................................. 6

Legislation and regulations 9.ProjectedaveragepassengercarCAFEcompliancetargetsbyvehiclefootprint,modelyears2017-2025 .................. 9 10.Projectedaveragelight-dutytruckCAFEcompliancetargetsbyvehiclefootprint,modelyears2017-2025 ................. 9

11. States covered by CAIR limits on emissions of sulfur dioxide and nitrogen oxides ............................................................ 11

12. Total renewable generation required for combined state renewable portfolio standards and projected

totalachieved,2012-2040.............................................................................................................................................................. 13

Issues in ocus 13.Totalenergyconsumptioninthreecases,2005-2040 ............................................................................................................. 26 14.Consumptionofpetroleumandotherliquidsfortransportationinthreecases,2005-2040 ............................................. 27 15.Renewableelectricitygenerationinthreecases,2005-2040................................................................................................. 27 16.Renewableelectricitygenerationintwocases,2012-2040 .................................................................................................... 28 17.Electricitygenerationfromnaturalgasinthreecases,2005-2040 ....................................................................................... 29

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Contents

18.Energy-relatedcarbondioxideemissionsinthreecases,2005-2040 .................................................................................. 29 19.Averagedeliveredpricesfornaturalgasinthreecases,2005-2040 .................................................................................... 30 20.Averageelectricitypricesinthreecases,2005-2040 .............................................................................................................. 30 21.AnnualaveragespotpriceforBrentcrudeoilinthreecases,1990-2040 ........................................................................... 31 22.Worldpetroleumandotherliquidssupplyinthreecases,1990-2040 .................................................................................. 31 23.WorldpetroleumandotherliquidssupplybysourceintheReferencecase,1990-2040.................................................. 31 24.Netimportshareofliquidfuelsinvecases,2005-2040........................................................................................................ 37 25.U.S.carbondioxideemissionsinvecases,2005-2040 ........................................................................................................ 39 26.AveragedeliveredfuelpricestoelectricpowerplantsintheReferencecase,2008-2040............................................... 40

27.Ratioofaveragepermegawatthourfuelcostsfornaturalgascombined-cycleplantstocoal-red steamturbinesinvecases,2008-2040 .................................................................................................................................... 41

28.Powersectorelectricitygenerationcapacitybyfuelinvecases,2011and2025 ............................................................ 41 29.Powersectorelectricitygenerationcapacitybyfuelinvecases,2011and2040 ............................................................ 41 30.Powersectorelectricitygenerationbyfuelinvecases,2011and2025............................................................................. 42 31.Powersectorelectricitygenerationbyfuelinvecases,2011and2040 ............................................................................ 42 32.Powersectorelectricitygenerationfromcoalandnaturalgasintwocases,2008-2040 ................................................. 43 33.Ratioofaveragepermegawatthourfuelcostsfornaturalgascombined-cycleplantstocoal-red

steamturbinesintheSERCsoutheastsubregioninvecases,2008-2040 ....................................................................... 43 34.Ratioofaveragepermegawatthourfuelcostsfornaturalgascombined-cycleplantstocoal-red

steamturbinesintheRFCwestsubregioninvecases,2008-2040 ................................................................................... 44 35.Nuclearcapacityadditionsinvecases,2011-2040 ................................................................................................................ 47 36.Electricitygenerationfromnaturalgasinthreecases,2005-2040 ....................................................................................... 47

37.Carbondioxideemissionsfromelectricitygenerationinthreecases,2005-2040 ............................................................. 48 38.Levelizedcostsofnuclearelectricitygenerationintwocases,2025.................................................................................... 48 39.U.S.productionofnaturalgasliquidsbytype,2005-2012 ...................................................................................................... 49 40.U.S.importsandexportsofpropane/propylene,2005-2012 .................................................................................................. 49 41.U.S.BrentcrudeoilandHenryHubnaturalgasspotmarketpricesinthreecases,2005-2040..................................... 50 42.U.S.productionofdrynaturalgasandnaturalgasplantliquidsinthreecases,2005-2040............................................ 50 43.U.S.netexportsofliqueedpetroleumgasesinthreecases,2011-2040............................................................................ 51

Market trends

44.AverageannualgrowthratesofrealGDP,laborforce,andproductivityinthreecases,2011-2040............................... 56 45.Averageannualgrowthratesforrealoutputanditsmajorcomponentsinthreecases,2011-2040............................... 56 46.Sectoralcompositionofindustrialshipments,annualgrowthratesinthreecases,2011-2040 ....................................... 57 47.Energyend-useexpendituresasashareofgrossdomesticproduct,1970-2040.............................................................. 57 48.Energyend-useexpendituresasashareofgrossoutput,1987-2040.................................................................................. 57

49.Brentcrudeoilspotpricesinthreecases,1990-2040............................................................................................................. 58 50.Worldpetroleumandotherliquidsconsumptionbyregioninthreecases,2011and2040 .............................................. 58 51.Worldproductionofliquidsfrombiomass,coal,andnaturalgasinthreecases,2011and2040.................................... 59 52.Energyusepercapitaandperdollarofgrossdomesticproduct,1980-2040 ..................................................................... 59 53.Primaryenergyusebyend-usesector,2011-2040 .................................................................................................................. 60 54.Primaryenergyusebyfuel,1980-2040...................................................................................................................................... 60 55.Residentialdeliveredenergyintensityinfourcases,2005-2040........................................................................................... 61 56.ChangeinresidentialelectricityconsumptionforselectedendusesintheReferencecase,2011-2040 ...................... 61 57.Changeinresidentialdeliveredenergyconsumptionforselectedendusesinfourcases,2011-2040.......................... 62 58.Residentialsectoradoptionofrenewableenergytechnologiesintwocases,2005-2040................................................ 62 59.Commercialdeliveredenergyintensityinfourcases,2005-2040 ......................................................................................... 63 60.Energyintensityofselectedcommercialelectricenduses,2011and2040........................................................................ 63 61.Efciencygainsforselectedcommercialequipmentinthreecases,2040 .......................................................................... 64 62.Additionstoelectricitygenerationcapacityinthecommercialsectorintwocases,2011-2040 ...................................... 64 63.Industrialdeliveredenergyconsumptionbyapplication,2011-2040 ..................................................................................... 65 64.Industrialenergyconsumptionbyfuel,2011,2025,and2040................................................................................................ 65 65.Cumulativegrowthinvalueofshipmentsfromenergy-intensiveindustriesinthreecases,2011-2040 ......................... 66 66.Changeindeliveredenergyconsumptionforenergy-intensiveindustriesinthreecases,2011-2040............................ 66 67.Cumulativegrowthinvalueofshipmentsfromenergy-intensiveindustries,2011-2040,2011-2025,

and 2025-2040................................................................................................................................................................................. 67

68.Cumulativegrowthinvalueofshipmentsfromnon-energy-intensiveindustriesinthreecases,2011-2040................. 67 69.Changeindeliveredenergyconsumptionfornon-energy-intensiveindustriesinthreecases,2011-2040 ................... 68 70.Deliveredenergyconsumptionfortransportationbymode,2011and2040....................................................................... 68 71.Averagefueleconomyofnewlight-dutyvehicles,1980-2040 ............................................................................................... 69 72.Vehiclemilestraveledperlicenseddriver,1970-2040 ............................................................................................................. 69 73.Salesoflight-dutyvehiclesusingnon-gasolinetechnologiesbytype,2011,2025,and2040 ......................................... 70

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Contents

74.Naturalgasconsumptioninthetransportationsector,1995-2040 ........................................................................................ 70 75.U.S.electricitydemandgrowth,1950-2040 ............................................................................................................................... 71 76.Electricitygenerationbyfuel,2011,2025,and2040................................................................................................................ 71 77.Electricitygenerationcapacityadditionsbyfueltype,includingcombinedheatandpower,2012-2040........................ 72 78.Additionstoelectricitygeneratingcapacity,1985-2040 .......................................................................................................... 72 79.Electricitysalesandpowersectorgeneratingcapacity,1949-2040...................................................................................... 73 80.Levelizedelectricitycostsfornewpowerplants,excludingsubsidies,2020and2040 ..................................................... 73 81.ElectricitygeneratingcapacityatU.S.nuclearpowerplantsinthreecases,2011,2025,and2040............................... 74 82.Renewableelectricitygenerationcapacitybyenergysource,includingend-usecapacity,2011-2040.......................... 74

83.Renewableelectricitygenerationbytype,includingend-usegeneration,2008-2040 ..................................................... 75 84.Regionalnonhydropowerrenewableelectricitygeneration,includingend-usegeneration,2011and2040 ................. 75 85.Naturalgasconsumptionbysector,1990-2040........................................................................................................................ 76 86.AnnualaverageHenryHubspotnaturalgasprices,1990-2040 ........................................................................................... 76 87.RatioofBrentcrudeoilpricetoHenryHubspotnaturalgaspriceinenergy-equivalentterms,1990-2040................. 77 88.AnnualaverageHenryHubspotpricesfornaturalgasinvecases,1990-2040.............................................................. 77 89.TotalU.S.naturalgasproduction,consumption,andnetimports,1990-2040.................................................................... 78 90.TotalU.S.naturalgasproductioninthreeoilpricecases,1990-2040.................................................................................. 78 91.Naturalgasproductionbysource,1990-2040........................................................................................................................... 79 92.U.S.netimportsofnaturalgasbysource,1990-2040............................................................................................................. 79 93.Consumptionofpetroleumandotherliquidsbysector,1990-2040 ...................................................................................... 80 94.U.S.productionofpetroleumandotherliquidsbysource,2011-2040.................................................................................. 80 95.TotalU.S.crudeoilproductioninthreeresourcecases,1990-2040 .................................................................................... 81

96.Domesticcrudeoilproductionbysource,2000-2040.............................................................................................................. 81 97.TotalU.S.tightoilproductionbygeologicformation,2008-2040........................................................................................... 82 98.APIgravityofU.S.domesticandimportedcrudeoilsupplies,1990-2040 .......................................................................... 82 99.NetimportshareofU.S.petroleumandotherliquidsconsumptioninthreeoilpricecases,1990-2040....................... 83 100.EISA2007RFScreditsearnedinselectedyears,2011-2040................................................................................................. 83 101.Consumptionofadvancedrenewablefuels,2011-2040 .......................................................................................................... 84 102.U.S.motorgasolineanddieselfuelconsumption,2000-2040 ............................................................................................... 84 103.U.S.renerygasoline-to-dieselproductionratioandcrackspread,2008-2040................................................................. 85 104.Coalproductionbyregion,1970-2040 ........................................................................................................................................ 85 105.U.S.totalcoalproductioninsixcases,2011,2020,and2040 ............................................................................................... 86 106.Averageannualminemouthcoalpricesbyregion,1990-2040 .............................................................................................. 86 107.Cumulativecoal-redgeneratingcapacityadditionsandenvironmentalretrotsintwocases,2012-2040.................. 87 108.U.S.energy-relatedcarbondioxideemissionsbysectorandfuel,2005and2040............................................................ 87 109.Sulfurdioxideemissionsfromelectricitygeneration,1990-2040 .......................................................................................... 88 110.Nitrogenoxidesemissionsfromelectricitygeneration,1990-2040....................................................................................... 88 111.Energy-relatedcarbondioxideemissionsintwocaseswiththreelevelsofemissionsfees,2000-2040....................... 89 112.Naturalgas-redelectricitygenerationinsixCO2feecases,2000-2040............................................................................ 89

Comparison with other projections F1.UnitedStatesCensusDivisions ................................................................................................................................................... 225 F2.Electricitymarketmoduleregions ................................................................................................................................................ 227 F3.Liquidfuelsmarketmoduleregions ............................................................................................................................................. 228 F4.Oilandgassupplymodelregions ................................................................................................................................................ 229 F5.Naturalgastransmissionanddistributionmodelregions ........................................................................................................ 230 F6.Coalsupplyregions ........................................................................................................................................................................ 231 F7.Coaldemandregions ..................................................................................................................................................................... 232

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U.S. Energy Information Administration | Annual Energy Outlook 20132

Executive summary

The projections in the U.S. Energy Inormation AdministrationsAnnual Energy Outlook 2013 (AEO2013) ocus on the actors that

shape the U.S. energy system over the long term. Under the assumption that current laws and regulations remain unchanged

throughout the projections, the AEO2013 Reerence case provides a basis or examination and discussion o energy production,

consumption, technology, and market trends and the direction they may take in the uture. AEO2013 also includes alternative

cases (see Appendix E, Table E1), which explore important areas o uncertainty or markets, technologies, and policies in the U.S.

energy economy. Many o the implications o the alternative cases are discussed in the Issues in ocus section oAEO2013.

Key results highlighted in theAEO2013 Reerence and alternative cases include:

Continued strong growth in domestic crude oil production over the next decadelargely as a result o rising production rom

tight ormationsand increased domestic production o natural gas;

The potential or even stronger growth in domestic crude oil production under alternative conditions;

Evolving natural gas markets that spur increased use o natural gas or electric power generation and transportation and an

expanding natural gas export market;

A decline in motor gasoline consumption over the projection period, reecting the eects o more stringent corporate average

uel economy (CAFE) standards, as well as growth in diesel uel consumption and increased use o natural gas to power heavy-

duty vehicles; and

Low electricity demand growth, and continued increases in electricity generation capacity ueled by natural gas and renewable

energy, which when combined with environmental regulations put pressure on coal use in the electric power sector. In some

cases, coals share o total electricity generation alls below the natural gas share through the end o the projection period.

Oil production, particularly from tight oil plays, rises over the next decade, leading to a reduction in

net import dependence

Crude oil production has increased since 2008, reversing a decline that began in 1986. From 5.0 million barrels per day in

2008, U.S. crude oil production increased to 6.5 million barrels per day in 2012. Improvements in advanced crude oil production

technologies continues to lit domestic supply, with domestic production o crude oil increasing in the Reerence case beore

declining gradually beginning in 2020 or the remainder o the projection period. The projected growth results largely rom a

signicant increase in onshore crude oil production, particularly rom shale and other tight ormations, which has been spurred

by technological advances and relatively high oil prices. Tight oil development is still at an early stage, and the outlook is highly

uncertain. In some o theAEO2013 alternative cases, tight oil production and total U.S. crude oil production are signicantly above

their levels in the Reerence case.

The net import share o U.S. petroleum and other liquids consumption (including crude oil, petroleum liquids, and liquids derived

rom nonpetroleum sources) grew steadily rom the mid-1980s to 2005 but has allen in every year since then (Figure 1). In

the Reerence case, U.S. net imports o petroleum and other liquids decline through 2019, while still providing approximately

one-third o total U.S. supply. The net import share o U.S. petroleum and other liquids consumption continues to decline in theReerence case, alling to 34 percent in 2019 beore increasing to 37 percent in 2040.

The U.S. could become a net exporter o liquid uels under

certain conditions. An article in the Issues in ocus section

considers our cases that examine the impacts o various

assumptions about U.S. dependence on imported liquids.

Two cases (Low Oil and Gas Resource and High Oil and Gas

Resource) vary only the supply assumptions, and two cases

(Low/No Net Imports and High Net Imports) vary both the

supply and demand assumptions. The dierent assumptions

in the our cases generate wide variation rom the liquid uels

import dependence values in the AEO2013 Reerence case.

In the Low/No Net Imports case, the United States endsits reliance on net imports o liquid uels in the mid-2030s,

with net exports rising to 8 percent o total U.S. liquid uel

production in 2040. In contrast, in the High Net Imports

case, net petroleum import dependence is above 44 percent

in 2040, which is higher than the Reerence case level o 37

percent but still well below the 2005 level o 60 percent.

While other combinations o assumptions or unoreseen

technology breakthroughs might produce a comparable

outcome, the assumptions in the Low/No Imports case

illustrate the magnitude and type o changes that would be

0

5

10

15

20

25

1970 1980 1990 2000 2010 2020 2030 2040

History 2011 Projections2005

60% 45% 37%

Net exports

(8% in 2040)

Reference

Low/No Net Imports

Consumption

Domestic supply

Net imports

Figure 1. Net import share of U.S. liquids supply in

two cases, 1970-2040 (million barrels per day)

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3U.S. Energy Information Administration | Annual Energy Outlook 2013

Executive summary

required or the United States to end its reliance on net imports o liquid uels, which began ater World War II and has continued to

the present day. Some o the assumptions in the Low/No Net Imports case, such as increased uel economy or light-duty vehicles

(LDVs) ater 2025 and wider access to oshore resources, could be inuenced by possible uture energy policies. However, other

assumptions in this case, such as the greater availability o onshore technically recoverable oil and natural gas resources, depend

on geological outcomes that cannot be inuenced by policy measures. In addition, economic trends, consumer preerences and

behaviors, and technological actors also may be unaected, or only modestly aected, by policy measures.

In the High Oil and Gas Resource case, changes due to the supply assumptions alone cause net import dependence to decline

to 7 percent in 2040, with U.S. crude oil production rising to 10.2 million barrels per day in 2040, or 4.1 million barrels per day

above the Reerence case level. Tight oil production accounts or more than 77 percent (or 3.2 million barrels per day) o thedierence in production between the two cases. Production o natural gas plant liquids in the United States also exceeds the

Reerence case level.

One o the most uncertain aspects o this analysis is the potential eect o dierent scenarios on the global market or liquid uels,

which is highly integrated. Strategic choices made by leading oil-exporting countries could result in U.S. price and quantity changes

that dier signicantly rom those presented here. Moreover, regardless o how much the United States reduces its reliance on

imported liquids, consumer prices will not be insulated rom global oil prices i current policies and regulations remain in eect and

world markets or delivery continue to be competitive.

The United States becomes a net exporter of natural gas

U.S. dry natural gas production increases 1.3 percent per year throughout the Reerence case projection, outpacing domestic

consumption by 2019 and spurring net exports o natural gas (Figure 2). Higher volumes o shale gas production are central to

higher total production volumes and a transition to net exports. As domestic supply has increased in recent years, natural gas

prices have declined, making the United States a less attractive market or imported natural gas and more attractive or export.

U.S. net exports o natural gas grow to 3.6 trillion cubic eet in 2040 in the Reerence case. Most o the projected growth in U.S.

exports consists o pipeline exports to Mexico, which increase steadily as growing volumes o imported natural gas rom the

United States ll the widening gap between Mexicos production and consumption. Declining natural gas imports rom Canada

also contribute to the growth in U.S. net exports. Net U.S. imports o natural gas rom Canada decline sharply rom 2016 to 2022,

then stabilize somewhat beore dropping o again in the nal years o the projection, as continued growth in domestic production

mitigates the need or imports.

Continued low levels o liqueed natural gas (LNG) imports in the projection period, combined with increased U.S. exports o

domestically sourced LNG, position the United States as a net exporter o LNG by 2016. U.S. exports o domestically sourced LNG

(excluding exports rom the existing Kenai acility in Alaska) begin in 2016 and rise to a level o 1.6 trillion cubic eet per year in

2027. One-hal o the U.S. exports o LNG originate rom the Lower 48 states and the other hal rom Alaska. The prospects or

exports are highly uncertain, however, depending on many actors that are dicult to gauge, such as the development o new

production capacity in oreign countries, particularly rom deepwater reservoirs, shale gas deposits, and the Arctic. In addition,uture U.S. exports o LNG depend on a number o other actors, including the speed and extent o price convergence in global

natural gas markets and the extent to which natural gas competes with liquids in domestic and international markets.

In the High Oil and Gas Resource case, with more optimistic

resource assumptions, U.S. LNG exports grow to more than

4 trillion cubic eet in 2040. Most o the additional exports

originate rom the Lower 48 states.

Coals share of electric power generation falls over

the projection period

Although coal is expected to continue its important role in U.S.

electricity generation, there are many uncertainties that could

aect uture outcomes. Chie among them are the relationshipbetween coal and natural gas prices and the potential or

policies aimed at reducing greenhouse gas (GHG) emissions.

In 2012, natural gas prices were low enough or a ew months

or power companies to run natural gas-red generation

plants more economically than coal plants in many areas.

During those months, coal and natural gas were nearly tied

in providing the largest share o total electricity generation,

something that had never happened beore. In the Reerence

case, existing coal plants recapture some o the market they

recently lost to natural gas plants because natural gas prices

History 2011 Projections

-10

0

10

20

30

40

1990 2000 2010 2020 2030 2040

Total production

Total consumption

Netexports,2040(12%)

Netimports,2011(8%)

Net imports

Figure 2. Total U.S. natural gas production,

consumption, and net imports in the Reference case,

1990-2040 (trillion cubic feet)

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Executive summary

rise more rapidly than coal prices. However, the rise in coal-red generation is not sucient or coal to maintain its generation

share, which alls to 35 percent by 2040 as the share o generation rom natural gas rises to 30 percent.

In the alternative High Oil and Natural Gas Resource case, with much lower natural gas prices, natural gas supplants coal as the

top source o electricity generation (Figure 3). In this case, coal accounts or only 27 percent o total generation in 2040, while

natural gas accounts or 43 percent. However, while natural gas generation in the power sector surpasses coal generation in 2016

in this case, more coal energy than natural gas energy is used or power generation until 2035 because o the higher average

thermal eciency o the natural gas-red generating units. Coal use or electric power generation alls to 14.7 quadrillion Btu in

2040 in the High Oil and Natural Gas Resource case (compared with 18.7 quadrillion Btu in the Reerence case), while natural

gas use rises to 15.1 quadrillion Btu in the same year (Figure 4). Natural gas use or electricity generation is 9.7 quadrillion Btu in2040 in the Reerence case.

Coals generation share and the associated carbon dioxide (CO2) emissions could be urther reduced i policies aimed at reducing

GHG emissions were enacted (Figure 5). For example, in the GHG15 case, which assumes a ee on CO2 emissions that starts at

$15 per metric ton in 2014 and increases by 5 percent per year through 2040, coals share o total generation alls to 13 percent in

2040. Energy-related CO2 emissions also all sharply in the GHG15 case, to levels that are 10 percent, 15 percent, and 24 percent

lower than projected in the Reerence case in 2020, 2030, and 2040, respectively. In 2040, energy-related CO2 emissions in the

GHG15 case are 28 percent lower than the 2005 total. In the

GHG15 case, coal use in the electric power sector alls to only

6.1 quadrillion Btu in 2040, a decline o about two-thirds rom

the 2011 level. While natural gas use in the electric power

sector initially displaces coal use in this case, reaching more

than 10 quadrillion Btu in 2016, it alls to 8.8 quadrillion Btu in

2040 as growth in renewable and nuclear generation osetsnatural gas use later in the projection period.

With more efcient light-duty vehicles, motor

gasoline consumption declines while diesel fuel use

grows, even as more natural gas is used in heavy-

duty vehicles

TheAEO2013 Reerence case incorporates the GHG and CAFE

standards or LDVs [6] through the 2025 model year. The

increase in vehicle eciency reduces LDV energy use rom

16.1 quadrillion Btu in 2011 to 14.0 quadrillion Btu in 2025,

predominantly motor gasoline (Figure 6). LDV energy use

continues to decline through 2036, then levels o until 2039as growth in population and vehicle miles traveled osets

more modest improvement in uel eciency.

0 5 10 15 20

2040

2025

2011

2040

2025

2011

2040

2025

2011

Reference

Natural gasCoal

High Oil and Gas Resource

GHG15

Figure 4. Coal and natural gas use in the electric

power sector in three cases, 2011, 2025, and 2040

(quadrillion Btu)

History Projections

0

4,000

4,500

5,000

5,500

6,000

2000 2010 2020 2030 2040

High Oil and Gas Resource

Reference

Reference,$15feeHighResource,$15fee

2011

Figure 5. Energy-related carbon dioxide emissions in

four cases, 2000-2040 (million metric tons)

0

500

1,000

1,500

2,000

2,500

2008 2015 2020 2025 2030 2035 2040

2011 Projections

Coal

Natural gas

Reference

High Oil and Gas Resource

Figure 3. Electricity generation from coal and

natural gas in two cases, 2008-2040

(billion kilowatthours)

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5U.S. Energy Information Administration | Annual Energy Outlook 2013

Executive summary

Furthermore, the improved economics o natural gas as a uel or heavy-duty vehicles result in increased use that osets a portion

o diesel uel consumption. The use o petroleum-based diesel uel is also reduced by growing consumption o diesel produced

with gas-to-liquids (GTL) technology. Natural gas use in vehicles (including natural gas used in the production o GTL) totals 1.4

trillion cubic eet in 2040 in the Reerence case, displacing 0.7 million barrels per day o other motor uels [ 7]. Diesel uel use

nonetheless increases at a relatively strong rate, with reight travel demand supported by increasing industrial production.

Natural gas consumption grows in industrial and electric power sectors as domestic production also serves an

expanding export market

Relatively low natural gas prices, maintained by growing shale gas production, spur increased use in the industrial and electric

power sectors, particularly over the next decade. In the Reerence case, natural gas use in the industrial sector increases by 16

percent, rom 6.8 trillion cubic eet per year in 2011 to 7.8 trillion cubic eet per year in 2025. Ater 2025, the growth o natural

gas consumption in the industrial sector slows, while total U.S. consumption continues to grow (Figure 7). This additional growth

is mostly or use in the electric power sector. Although natural gas continues to capture a growing share o total electricity

generation, natural gas consumption by power plants does not increase as sharply as generation because new plants are very

ecient (needing less uel per unit o power output). The natural gas share o generation rose rom 16 percent o generation in

2000 to 24 percent in 2011 and increases to 27 percent in 2025 and 30 percent in 2040. Natural gas use in the residential and

commercial sectors remains nearly constant, as increasing end-use demand is balanced by increasing end-use eciency.

Natural gas consumption also grows in other markets in the Reerence case, including heavy-duty reight transportation (trucking)

and as a eedstock or GTL production o diesel and other uels. Those uses account or 6 percent o total U.S. natural gas

consumption in 2040, as compared with almost nothing in 2011.

Natural gas use in the electric power sector grows even more sharply in the High Oil and Natural Gas Resource case, as the natural

gas share o electricity generation grows to 39 percent, reaching 14.8 trillion cubic eet in 2040, more than 55 percent greaterthan in the Reerence case. Industrial sector natural gas consumption growth is also stronger in this case, with growth continuing

ater 2025 and reaching 13.0 trillion cubic eet in 2040 (compared to 10.5 trillion cubic eet in 2040 in the Reerence case). Much

o the industrial growth in the High Oil and Natural Gas Resource case is associated with natural gas use or GTL production and

increased lease and plant use in natural gas production.

Renewable fuel use grows at a faster rate than fossil fuel use

The share o U.S. electricity generation rom renewable energy grows rom 13 percent in 2011 to 16 percent in 2040 in the Reerence

case. Electricity generation rom solar and, to a lesser extent, wind energy sources grows as their costs decline, making them more

economical in the later years o the projection. However, the rate o growth in renewable electricity generation is sensitive to several

actors, including natural gas prices and the possible implementation o policies to reduce GHG emissions. I uture natural gas

prices are lower than projected in the Reerence case, as illustrated in the High Oil and Gas Resource case, the share o renewable

generation would grow more slowly, to only 14 percent in 2040. Alternatively, i broad-based policies to reduce GHG emissions

were enacted, renewable generation would be expected to grow more rapidly. In three cases that assume GHG emissions ees

that range rom $10 to $25 per metric ton in 2014 and rise by 5 percent per year through 2040 (GHG10, GHG15, and GHG25), the

0

5

10

15

20

25

30

35

1990 2000 2010 2020 2030 2040

History 2011 Projections

Jet fuel

22%

CNG/LNGDiesel

E85

Other

Pipeline fuel

Motor gasoline

11%4%2%

60%

29%

4%

13%1%4%

47%

3%

Figure 6. Transportation energy consumption by fuel,

1990-2040 (quadrillion Btu)

Electric power32%

33%

2%

6%

12%

14%

History Projections

0

5

10

15

20

25

30

2005 2011 2020 2025 2030 2035 2040

31%

33%

3%

13%

19%

Industrial

Gas-to-liquids

Transportation

Residential

Commercial

Figure 7. U.S. dry natural gas consumption by sector,

2005-2040 (trillion cubic feet)

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U.S. Energy Information Administration | Annual Energy Outlook 20136

Executive summary

renewable share o total U.S. electricity generation in 2040

ranges rom 23 percent to 31 percent (Figure 8).

TheAEO2013 Reerence case reects a less optimistic outlook

or advanced biouels to capture a rapidly growing share o

the liquid uels market than earlier Annual Energy Outlooks.

As a result, biomass use in the Reerence case totals 5.9

quadrillion Btu in 2035 and 7.1 quadrillion Btu in 2040, up

rom 4.0 quadrillion Btu in 2011.

Links current as o March 2013

6. U.S. Environmental Protection Agency and National Highway Trac Saety Administration, 2017 and Later Model Year Light-

Duty Vehicle Greenhouse Gas Emissions and Corporate Average Fuel Economy Standards, Federal Register, Vol. 77, No. 199

(Washington, DC: October 15, 2012), https://www.ederalregister.gov/articles/2012/10/15/2012-21972/2017-and-later-

model-year-light-duty-vehicle-greenhouse-gas-emissions-and-corporate-average-uel.

7. Liquid motor uels include diesel and liquid uels rom gas-to-liquids (GTL) processes. Liquid uel volumes rom GTL or motor

vehicle use are estimated based on the ratio o onroad diesel and gasoline to total diesel and gasoline.

Endnotes for Executive summary

0

10

20

30

40

2000 2005 2010 2015 2020 2025 2030 2035 2040

History 2011 Projections

GHG25

GHG15

GHG10

Reference

High Oil and Gas Resource

Figure 8. Renewable energy share of U.S. electricity

generation in ve cases, 2000-2040 (percent)

https://www.federalregister.gov/articles/2012/10/15/2012-21972/2017-and-later-model-year-light-duty-vehicle-greenhouse-gas-emissions-and-corporate-average-fuelhttps://www.federalregister.gov/articles/2012/10/15/2012-21972/2017-and-later-model-year-light-duty-vehicle-greenhouse-gas-emissions-and-corporate-average-fuelhttps://www.federalregister.gov/articles/2012/10/15/2012-21972/2017-and-later-model-year-light-duty-vehicle-greenhouse-gas-emissions-and-corporate-average-fuelhttps://www.federalregister.gov/articles/2012/10/15/2012-21972/2017-and-later-model-year-light-duty-vehicle-greenhouse-gas-emissions-and-corporate-average-fuel

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Legislation and regulations

Introduction

The Annual Energy Outlook 2013 (AEO2013) generally represents current ederal and state legislation and nal implementation

regulations as o the end o September 2012. TheAEO2013 Reerence case assumes that current laws and regulations aecting

the energy sector are largely unchanged throughout the projection period (including the implication that laws that include sunset

dates are no longer in eect at the time o those sunset dates) [ 8]. The potential impacts o proposed legislation, regulations,

or standardsor o sections o authorizing legislation that have been enacted but are not unded or where parameters will be

set in a uture regulatory processare not reected in the AEO2013 Reerence case, but some are considered in alternative

cases. TheAEO2013 Reerence case does not reect the provisions o the American Taxpayer Relie Act o 2012 (P.L. 112-240)

enacted on January 1, 2013 [9]. Key energy-related provisions o that legislationincluding extension o the production tax credit

or renewable generation, tax credits or energy-ecient appliances, and tax credits or selected biouelsare reected in an

alternative case completed as part o AEO2013. This section summarizes ederal and state legislation and regulations newly

incorporated or updated inAEO2013 since the completion o theAnnual Energy Outlook 2012 (AEO2012).

Examples o ederal and state legislation and regulations incorporated in theAEO2013 Reerence case or whose handling has been

modied include:

Incorporation o new light-duty vehicle greenhouse gas emissions (GHG) and corporate average uel economy (CAFE)

standards or model years 2017 to 2025 [10]

Continuation o the Clean Air Interstate Rule (CAIR) [11] ater the courts announcement o intent to vacate the Cross-State

Air Pollution Rule (CSAPR) [12]

Updated handling o the U.S. Environmental Protection Agencys (EPA) National Emissions Standards or Hazardous Air

Pollutants (NESHAP) or industrial boilers and process heaters [13]

Modeling o Caliornias Assembly Bill 32, the Global Warming Solutions Act (AB 32) [14], that allows or representation o a

cap-and-trade program developed as part o Caliornias GHG reduction goals or 2020

Incorporation o the Caliornia Low Carbon Fuel Standard (LCFS) [15], which requires uel producers and importers who sell

motor gasoline or diesel uel in Caliornia to reduce the carbon intensity o those uels by an average o 10 percent between

2012 and 2020 through the mixing and increased sale o alternative low-carbon uels.

There are many other pieces o legislation and regulation that appear to have some probability o being enacted in the not-too-

distant uture, and some laws include sunset provisions that may be extended. However, it is dicult to discern the exact orms

that the nal provisions o pending legislation or regulations will take, and sunset provisions may or may not be extended. Even in

situations where existing legislation contains provisions to allow revision o implementing regulations, those provisions may not

be exercised consistently. Many pending provisions are examined in alternative cases included in AEO2013 or in other analyses

completed by the U.S. Energy Inormation Administration (EIA). In addition, at the request o the Administration and Congress,

EIA has regularly examined the potential implications o other possible energy options in Service Reports. Those reports can be

ound on the EIA website at http://www.eia.gov/oia/service_rpts.htm .

1. Greenhouse gas emissions and corporate average fuel economy standards for 2017 and later model year

light-duty vehicles

On October 15, 2012, EPA and the National Highway Trac Saety Administration (NHTSA) jointly issued a nal rule or tailpipe

emissions o carbon dioxide (CO2) and CAFE standards or light-duty vehicles, model years 2017 and beyond [16]. EPA, operating

under powers granted by the Clean Air Act (CAA), issued nal CO2 emissions standards or model years 2017 through 2025 or

passenger cars and light-duty trucks, including medium-duty passenger vehicles. NHTSA, under powers granted by the Energy

Policy and Conservation Act, as amended by the Energy Independence and Security Act, issued CAFE standards or passenger

cars and light-duty trucks, including medium-duty passenger vehicles, or model years 2017 through 2025.

The new CO2 emissions and CAFE standards will rst aect model year 2017 vehicles, with compliance requirements increasing

in stringency each year thereater through model year 2025. EPA has established standards that are expected to require a eet-

wide average o 163 grams CO2 per mile or light-duty vehicles in model year 2025, which is equivalent to a eet-wide averageo 54.5 miles per gallon (mpg) i reached only through uel economy. However, the CO2 emissions standards can be met in

part through reductions in air-conditioning leakage and the use o alternative rerigerants, which reduce CO2-equivalent GHG

emissions but do not aect the estimation o uel economy compliance in the test procedure.

NHTSA has established two phases o CAFE standards or passenger cars and light-duty trucks (Table 1). The rst phase, covering

model years 2017 through 2021, includes nal standards that NHTSA estimates will result in a eet-wide average o 40.3 mpg

or light-duty vehicles in model year 2021 [17]. The second phase, covering model years 2022 through 2025, requires additional

improvements leading to a eet-wide average o 48.7 mpg or light-duty vehicles in model year 2025. Compliance with CO2

emission and CAFE standards is calculated only ater nal model year vehicle production, with eet-wide light-duty vehicle

standards representing averages based on the sales volume o passenger cars and light-duty trucks or a given year. Because sales

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Legislation and regulations

volumes are not known until ater the end o the model year, EPA and NHTSA estimate uture uel economy based on the projected

sales volumes o passenger cars and light-duty trucks.

The new CO2 emissions and CAFE standards or passenger cars and light-duty trucks use an attribute-based standard that is

determined by vehicle ootprintthe same methodology that was used in setting the nal rule or model year 2012 to 2016 light-

duty vehicles. Footprint is dened as wheelbase size (the distance rom the center o the ront axle to the center o the rear axle),

multiplied by average track width (the distance between the center lines o the tires) in square eet. The minimum requirements

or CO2 emissions and CAFE are production-weighted averages based on unique vehicle ootprints in a manuacturers eet and

are calculated separately or passenger cars and light-duty trucks (Figures 9 and 10), reecting their dierent design capabilities.

In general, as vehicle ootprint increases, compliance requirements decline to account or increased vehicle size and load-carryingcapability. Each manuacturer aces a unique combination o CO2 emission and CAFE standards, depending on the number o

vehicles produced and the ootprints o those vehicles, separately or passenger cars and light-duty trucks.

For passenger cars, average eet-wide compliance levels increase in stringency by 3.9 percent annually between model years 2017

and 2021 and by 4.7 percent annually between 2022 and 2025, based on the model year 2010 baseline eet. In recognition o

the challenge o improving the uel economy and reducing CO2 emissions o ull-size pickup trucks while maintaining towing and

payload capabilities, the average annual rate o increase in the stringency o light-duty truck standards is 2.9 percent rom 2017 to

2021, with smaller light-duty trucks acing higher increases and larger light-duty trucks lower increases in compliance stringency.

From 2022 to 2025, the average annual increase in compliance stringency or all light-duty trucks is 4.7 percent.

The CO2 emissions and CAFE standards also include exibility provisions or compliance by individual manuacturers, such as:

(1) credit averaging, which allows credit transers between a manuacturers passenger car and light-duty truck eets; (2) credit

banking, which allows manuacturers to carry orward

credits earned rom exceeding the standards in earlier modelyears and to carry back credits earned in later model years

to oset shortalls in earlier model years; (3) credit trading

between manuacturers who exceed their standards and

those who do not; (4) air conditioning improvement credits

that can be applied toward CO2 emissions standards; (5) o-

cycle credits or measurable improvements in CO2 emissions

and uel economy that are not captured by the two-cycle test

procedure used to measure emissions and uel consumption;

(6) CO2 emissions compliance multipliers or electric,

plug-in hybrid electric, compressed natural gas, and uel cell

vehicles through model year 2021; and (7) incentives or the

use o hybrid electric and other advanced technologies in ull-

size pickup trucks.Finally, exibility provisions do not allow domestic passenger

cars to deviate signicantly rom annual uel economy targets.

NHTSA retains a required minimum uel economy level or

Table 1. NHTSA projected average eet-wide CAFE

compliance levels (miles per gallon) for passengercars and light-duty trucks, model years 2017-2025,

based on the model year 2010 baseline eet

Model year

Passenger

car