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

January 05, 2011

EIA: U.S. Power Grid to Rely More on Renewable Energy, Natural Gas by 2035

Renewable energy and natural gas will provide a growing share of U.S. electricity over the next quarter century, according to DOE's Energy Information Administration (EIA). The "business as usual" reference case for the EIA's Annual Energy Outlook 2011, released on December 16, finds that non-hydropower renewable energy resources and natural gas are the fastest-growing sources of electricity in the coming decades. This would cause renewable energy's share of U.S. power production to increase from 10% in 2009 to 14% in 2035, while the share for natural gas increases from 23% to 25%. Nuclear power production stays flat as the demand grows, causing its share to drop from 20% to 17%, while coal loses share but continues to dominate U.S. power production, dropping from a 45% share in 2009 to 43% in 2035.

The EIA projection attributes the growth in renewable energy use to federal tax credits in the near term and to state requirements in the long term, while low commodity prices and relatively low capital costs favor a growth in power production from natural gas. Compared to last year's Outlook, the EIA's estimate of technically recoverable but unproved shale gas resources has more than doubled to 827 trillion cubic feet due to the results of recent shale gas drilling. This significant resource ups natural gas production in the Lower 48 by 20% in 2035 while resulting in lower projections for natural gas prices. Meanwhile, the EIA is not anticipating any new central-station coal-fired power plants beyond those already under construction or supported by clean-coal incentives.

In the big view of the U.S. energy future, world oil prices are expected to increase to $125 per barrel (in 2009 dollars) by 2035, helping to contribute to a decline in the U.S. reliance on imported energy. Along with an increase in biofuels production and energy savings from new energy efficiency standards, the higher prices cause the net import share of U.S. energy consumption to drop from 24% in 2009 to 18% in 2035. Even with no changes in policy related to greenhouse gases, energy-related carbon dioxide emissions grow slowly. After falling significantly over the past two years, emissions do not return to their 2005 levels until 2027. They then rise another 5% by 2035, reaching 6.315 million metric tons per year.

The EIA released only its reference case in December. The full Annual Energy Outlook 2011, including projections with differing assumptions on the price of oil, the rate of economic growth, and the characteristics of new technologies, will be released in spring 2011, along with regional projections. See the EIA press release and the preliminary report.