US energy agency raises commercial energy demand forecast

By the OGJ Online Staff

HOUSTON, Nov. 14, 2001 — Commercial energy demand in the next 15 years is expected to grow faster than previously forecast and fewer nuclear plants will be retired, government forecasters predicted in an annual energy outlook.

The Energy Information Administration said total US energy demand is expected to grow by almost one-third between 2002 and 2020. Demand is projected to increase to 131 quadrillion btu from 99 quadrillion btu, 4 quadrillion higher than EIA predicted last year. The agency is expecting the economy to begin growing again in mid-2002 and increase at 3%/year on average through 2020.

Commercial floor space is forecast to grow 1.7%/year between 2002 and 2020, compared to the 1.2% growth rate projected last year. EIA attributed the higher growth rate to continuing rapid increases in use of computers, office equipment, telecommunications, and other equipment.

Nuclear generating capacity is projected to decline from 2002 but not at the rate forecast last year. Of the 98 Gw of nuclear capacity available in 2000, 10 Gw are projected to retire by 2020, compared to 26 Gw of retirements in last year’s forecast.

As a result, nuclear generation would be 22% higher in 2020 than in last year’s forecast. Nuclear plant retirements are based upon the costs of maintaining operation, compared with the cost of building new capacity, which is largely fired by natural gas.

However, EIA isn’t expecting any new nuclear plants to be built by 2020, despite a push by the Bush administration and the nuclear industry to begin a new round of construction.

The average wellhead price of natural gas is expected to reach $3.26/Mcf in 2020, or slightly higher than last year’s projection. EIA cut its forecast for natural gas demand by 1 tcf in 2020, because of a less optimistic assessment of natural gas reserves discovered through exploratory drilling.

Other forecast highlights include:

— Average electricity prices are projected to decline from 6.9 to 6.3-/kw-hr between 2000 and 2015 because of increasing competition in the electricity industry and falling coal prices. Projected electricity prices increase to 6.5-/kw-hr by 2020 as a result of rising natural gas prices. The projections reflect the delay in plans for industry restructuring that have been recently announced by several states, including the termination of retail competition in California in 2002.

— Coal remains the primary fuel for electricity generation, although its share is projected to decline from 52% in 2000 to 46% by 2020 as the increasingly competitive electricity industry invests in less capital-intensive natural gas technologies. Compared to last year’s forecast, generation from coal, nuclear, and renewable sources is higher in 2020 and natural gas generation is lower, due in part to higher natural gas prices to electricity generators.

— Total natural gas demand is projected to increase nearly 50% by 2020, largely for electricity generation. Most (87%) of the generation capacity, including cogenerators, built over the next two decades is expected to be natural gas-fired capacity.

— Domestic crude oil production is projected to decline slightly by 2020, reaching 5.6 million b/d, compared to 5.1 million b/d projected last year, resulting from the expectation of additional new fields in the National Petroleum Reserve-Alaska. Net petroleum imports are projected to provide 62% of US demand in 2020, up from 53% in 2000, but lower than the 64% share projected last year because of the higher domestic production.

— US carbon dioxide emissions from fuel combustion are projected to reach 2,088 million metric tons carbon equivalent in 2020, 54% higher than the level of 1,352 million metric tons carbon equivalent in 1990. Carbon dioxide emissions in 2020 are expected to be 2% higher than in last year’s projection, due to higher energy demand, particularly for transportation, and higher coal-fired electricity generation.

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