This is an excerpt from EERE Network News, a weekly electronic newsletter.

January 07, 2009

EIA Projects a Clean Energy Shift that Stifles Oil Growth

The latest look into the future of U.S. energy use from DOE's Energy Information Administration (EIA) projects a steady growth in renewable energy use, a dramatic shift toward cleaner vehicles, and a rapid growth of biofuels, resulting in virtually no growth in U.S. oil consumption through 2030. The reference case for the EIA's Annual Energy Outlook 2009, released on December 17, projects renewable energy use to increase steadily at 3.3% per year, with renewable energy power plants competing mainly with natural gas for new additions to the nation's power generating capacity. The EIA's crystal ball also reveals a significant decline in light truck sales and a sharp increase in the sale of unconventional vehicle technologies, as hybrid vehicles account for 38% of all new vehicle sales by 2030. That includes sales of plug-in hybrids, which account for 2% of all new vehicle sales by 2030.

Meanwhile, ethanol fuel use grows to 29.5 billion gallons in 2030, with nearly 60% of the fuel used in ethanol-rich blends for flex-fuel vehicles. The EIA expects more than 40% of the ethanol to come from cellulosic biomass by 2030. In addition, biodiesel and other renewable diesel fuels will provide another 7 billion gallons of fuel. Unfortunately, the EIA projects that biofuel production levels will fall short of the federal Renewable Fuels Standard target of 36 billion gallons in 2022, landing closer to 30 billion gallons. By 2030, the EIA expects continued biofuel growth to push total biofuel production well above the target. According to the EIA, the key risk factor is the rate of development of cellulosic biofuels, and the subsequent growth in cellulosic biofuel production.

The EIA reference case is built on a projected economic growth of about 2.5% per year, a steady growth in domestic natural gas production, and an assumed long-term increase in oil prices to $130 per barrel by 2030. Combined with energy efficiency and renewable energy, these trends shrink the U.S. dependence on imported liquid fuels from roughly 58% of our liquid fuel supply today to about 41% of our fuel supply in 2030. Unlike past EIA projections, the new report also expects natural gas imports to decline sharply by 2030. The reference case also accounts for recently enacted state and regional policies to address greenhouse gas emissions, and anticipates a reluctance to invest in carbon-emitting technologies, but it does not assume that a national or international policy caps the total U.S. greenhouse gas emissions. The full report, which examines other scenarios, will be released in the near future. See the EIA press release and the tables and presentations relating to the EIA's reference case.