Monthly Archives: July 2012

U.S. Commercial Energy Consumption Through 2035

Here we continue our look at the DOE EIA’s projections of U.S. energy consumption through 2035. In this post we look at what they foresee happening in the commercial sector (essentially composed of offices and stores).

Almost immediately we encounter issues that can leave us scratching our collective heads, especially when we compare what is written about this sector with what we have discussed earlier regarding residential energy consumption.

According to the Department of Energy, energy consumption in the commercial sector will increase from 18.3 quads in 2011 to 21.5 quads in 2035, a CAGR percentage of 0.67.

The DOE estimates growth of 26.9% (0.93% annually) in commercial floor space over the period covered by this report, very similar to what they project for new household formation (25%). And they estimate even greater gains in energy efficiency in offices than in residences (7% per square foot, compared to 6% overall in residences). And yet, where they anticipate residential energy consumption to decline slightly, they predict commercial energy consumption to increase 18% over all by 2035. I’m not sure both estimates can be accurate…

They identify the core components of energy consumption in the commercial sector as space heating, ventilation, air conditioning, water heating, lighting, cooking, and refrigeration, which are pretty much the same as residential, and they attribute 60% of commercial energy consumption to these items. And they predict that that will fall to 53% over the next 25 years thanks to improvements in energy efficiency. In a case study (one of several focus issues that leads off their report) they identify the sources of the improvements they hope to see in energy efficiency as high-efficiency variable air volume ventilation systems, LED lighting, ground-source heat pumps, high-efficiency rooftop heat pumps, centrifugal chillers, and solar water heaters. However, they caveat this list by saying the obvious, that “those technologies are relatively costly, however, and thus unlikely to gain wide adoption in commercial applications without improved economics.”

Just as an example, they predict space cooling to decrease from 1.83 quads in 2011 to 1.60 quads in 2011. This, after space cooling just increased from 1.5 quads to that 1.83 number in 2 years. Once again, we ponder the dilemma–they believe that population shifts to warmer climes. But space cooling decreases…

The bottom line for their report seems to be that the 26.9% increase in new commercial buildings will consist of highly energy efficient structures taking thorough advantage of all available methods for reducing energy consumption. And maybe that will happen. Maybe builders across the country will ignore the economic difficulties facing it and use more expensive technology in a sector that faces far fewer regulatory constraints than industrial construction. Maybe the demographic trend that is sending more people back to the city will somehow lead to less expensive (????) commercial buildings. Maybe the demographic trend they postulate regarding residential energy use, the large scale movement of people to warmer climates, will lead somehow to lower energy consumption, although air conditioning would seem to negate whatever gains are made due to lower space heating…

Certainly I hope they’re right–that a 25% increase in population, a doubling of GDP and a 26.9% in new commercial floor space will only result in an 18% increase in energy consumption. But as with residential and transportation, it means everything has to go right–that we will double the rate by which we improved energy efficiency over the past two decades.

Here’s hoping.

Transportation Fuel Consumption Through 2035

More than a quarter (26 of 98 quads) of our energy consumption in 2011 was for transportation. The vast majority (64%) was for light duty vehicles–the family cars. This was followed by heavy duty vehicles (19%), air travel (10%), marine (5%) and rail (2%).

The U.S. Department of Energy’s Energy Information Administration predicts that energy consumption for transportation will grow at an annual rate of 0.1%, from 27.6 quads to 28.6 quads. This is revised downward from their 2011 estimate of growth at 0.5% to 32 quads in 2035.

In my previous post I charted their assumptions for macro-economic drivers (population increase at 1% annually, GDP growth at 2.5% annually, 25% growth in household formation), all of which made me skeptical that the EIA could be ultimately correct about residential energy use. All of those factors apply to transportation as well.

But there are other factors at play in the transportation sector. Legislation mandates improvements in gas mileage for light duty vehicles (LDV), which the EIA duly notes. They forecast energy consumption for LDVs to drop 3.2% overall between now and 2035. But the better mileage is only one of the reasons they cite. The other is that they believe personal travel demand will rise more slowly than in recent decades.

I can easily believe that fuel efficiency will climb to comply with the law. There’s plenty of room for improvements and the government’s attempt to shift to measuring greenhouse gas emissions as opposed to fuel consumption may accelerate that trend. But the EIA offers absolutely no evidence to indicate why they think personal travel will grow more slowly. Population change doesn’t slow down. GDP grows at 2.5% per year. In fact, in their section on residential energy consumption they postulate something like a mass migration to warmer and drier climates as a reason why space heating will decline. But such a migration in the past has entailed vigorous personal travel as people return to visit the families they left behind.

Perhaps more significantly, with more domestic oil being brought to the surface, with growing numbers of cars converting to natural gas or hybrid- and all-electric  status, someone is going to have to explain to me why prices at the pump will not become less of a factor in determining the utilization of vehicles. This is in sharp contrast to the EIA’s forecasts, which see a real increase in prices of 48% for gas between now and 2035. And even though they predict personal incomes will rise by 81% during the same time frame, $5 a gallon gas would probably moderate driving just a bit. But is that realistic?

The EIA provides the following estimates for light duty vehicles for now and 2035:

  • The number of licensed drivers increases from 210 to 269 million
  • The miles driven per driver per year increases from 12,700 to 13,300
  • But total fuel consumption drops from 16.7 quads to 16.1 quads because…
  • Vehicle efficiency in miles per gallon improves 38%, from 20.4 mpg to 28.2

The EIA’s figures strongly suggest that Americans will drive their light vehicles almost 1 trillion more miles in 2035 and use 3% less gas.

I don’t see it happening that way. I think they were thinking more clearly in their 2011 estimates.

What Doesn’t Add up in the DOE’s Energy Consumption Estimates?

On April 26, 2012, the acting administrator of the DOE’s Energy Information Administration, Howard Gruenspecht, gave a presentation to the Institute of Clean Air Companies.

Working from reference case for the U.S. Annual Energy Outlook for 2012, Mr. Gruenspecht highlighted some of the very issues that have me asking questions about the feasibility of achieving the Reference Case’s forecasts, which show American energy consumption rising at a very low rate of 0.3% CAGR through 2035–from 98 quads last year to 107 quads in 2035.

Both the slides from his presentation and the AEO2012 report rely heavily on increases in energy efficiency to overcome other trends that would seem to drive energy consumption higher.

In particular, as I noted previously, the DOE forecasts growth in residential consumption of electricity at 0.2% annually, despite steady growth in population, the number of households and income. Specifically,

  • The EIA expects the number of households to grow at 1% annually, from 117 million households today to 145.6 million households in 2035 (and each of those households will have a refrigerator, TV, washing machine…)
  • The average square footage of these households will rise by 100 square feet, from 1660 to 1760 (with all the air in those larger houses to heat and cool each winter and summer…)
  • In the AEO2012 Reference case, residential sector energy intensity, defined as average energy use per household per year, declines by 19.8 percent, to 81.9 million Btu per year in 2035 (in 2011, elivered energy consumption was 101 million Btu’s per household)

In regards to the last bullet point, U.S. residential energy intensity declined only 9% from 1980 to 2005–and the easy wins for energy efficiency come first. It gets tougher after the low hanging fruit have been picked.

What drives their calculation of more efficient energy usage is first,  space heating, the largest factor in residential energy consumption, which they postulate will decline by 0.4% annually and second, higher prices–they forecast a 1% annual increase in real prices for energy…

Aside from energy efficiency, they cite one other factor contributing to lower use of energy in the residential sector: “Population shifts to warmer and drier climates also contribute to a reduction in demand for space heating.” (What will they do if global warming means more air conditioning… and everybody makes enough money to be able to afford it?)

From their report: “Real GDP grows by an average of 2.6 percent per year from 2010 to 2035 in the AEO2012 Reference case, 0.1 percent per year lower than in the AEO2011 Reference case. The nation’s population, labor force, and productivity grow at annual rates of 0.9 percent, 0.7 percent, and 1.9 percent, respectively, from 2010 to 2035.”

The population will grow by 25% over the period covered by this report, from 311 million to 389 million. The country’s GDP will almost double, to $24 trillion in 2005 dollars.

More houses. More people. Larger houses. More income to spend on energy bills. It’s going to take a heckuvalot of energy efficiency to counter that.

I don’t see it. Next we’ll look at transportation.


Well, that’s not cool

The Energy Information Administration of the Department of Energy has this announcement on its website:

No International Energy Outlook will be released in 2012. The next edition of the report is scheduled for release in April 2013

Guess I’ll have to do my own.

How The DOE Thinks We’ll Save Energy Through 2035

In my last post I noted that the DOE thinks growth in energy consumption will average 0.3%  per year, despite a 25% growth in population and an almost doubling of GDP over the same period. I’m referring, of course, to the DOE’s Annual Energy Outlook 2012 With Projections to 2035.

It would take heroic performance and restraint–I called it winning the Green Trifecta previously. Let’s look at how the DOE thinks we’re going to get there.

In the Executive Summary of the report, they speak broadly–”The U.S. does not return to the levels of energy demand growth experienced in the 20 years prior to the 2008-2009 recession, because of more moderate projected economic growth and population growth, coupled with increasing levels of energy efficiency. For some end uses, current Federal and State energy equirements and incentives play a continuing role in requiring more efficient technologies.”

Later I imagine I will have a bone to pick with them regarding both their estimates of GDP growth and the impact of population growth. But let’s park those for the moment and look at more specific mechanisms for moderating energy consumption.

Among them:

  • New greenhouse gas (GHG) emissions and fuel consumption standards for medium- and heavy-duty engines and vehicles, published by the U.S. Environmental Protection Agency (EPA) and the National Highway Transportation Safety Administration (NHTSA) in September 2011.
  • California Assembly Bill 32 (AB 32), the Global Warming Solutions Act of 2006, authorized the CARB to set California’s GHG reduction goals for 2020 and establish a comprehensive, multi-year program to reduce GHG emissions in California. As one of the major initiatives for AB 32, CARB designed a cap-and-trade program that started on January 1, 2012, with the enforceable compliance obligations beginning in 2013.
  • After 2020, growth in manufacturing output slows due to increased foreign competition, slower expansion of domestic production capacity, and higher energy prices.
  • Even as standards for building shells and energy efficiency are being tightened in the commercial sector, the growth rate for commercial energy use, at 0.7 percent per year, is the highest among the end-use sectors, propelled by 1.0 percent average annual growth in commercial floorspace.
  • In the residential sector, increased efficiency reduces energy use for space heating, lighting, and clothes washers and dryers.
  • In the transportation sector, light-duty vehicle (LDV) energy consumption declines after 2012 to 14.7 quadrillion Btu in 2023 (the lowest point since 1998) before increasing through 2035, when it is still 4 percent below the 2010 level.

They have a lot more about residential consumption of energy:

  • Total delivered energy use in the residential sector remains relatively constant from 2010 to 2035, but a 27.5-percent growth in the number of households reduces the average energy intensity of each household. Most residential end-use services become less energy-intensive, with space heating accounting for more than one-half of the decrease. Population shifts to warmer and drier climates also contribute to a reduction in demand for space heating.
  • Portions of the Federal lighting standards outlined in EISA 2007 went into effect on January 1, 2012. Over the next two years, general-service lamps that provide 310 to 2,600 lumens of light are required to consume about 30 percent less energy than typical incandescent bulbs. High-performance incandescent, compact fluorescent, and light-emitting diode (LED) lamps continue to replace low-efficacy incandescent lamps. In 2035, delivered energy for lighting per household in the Reference case is 827 kilowatthours per household lower, or 47 percent below the 2010 level.

We’ll go into all this in detail over the next few posts. There’s more about all of the sectors and I’ll probably spend at least one post on each sector.

My preliminary take-away from all this is that if you postulated any one of these to me I would say it’s well within the realm of possibility. However, if anyone were to tell me that all of these were sure enough bets to make policy decisions on, I would start to shake my head in dismay. That’s more than a Green Trifecta. It would be like winning the lottery on successive days.

One thing that is not explicit in the report but seems to really drive a lot of their thinking–a core assumption seems to be that energy will get more expensive–expensive enough to justify the wholesale changes they are predicting.

They do project a gradual climb in oil prices to $150 per barrel by 2035. (They have a High Oil Price Scenario showing prices reaching $200/bbl and a Low Oil Price Scenario with prices plunging to around $65 and staying there.) But this is odd, as they foresee the coming to market of significant quantities of domestic energy, both oil and gas, as well as the continued successful penetration of some renewables. This would normally put downward pressure on prices. I guess a Republican point of view would suspiciously assert that government will artificially raise energy prices. I wonder if there are other explanations…

U.S. Energy Consumption in 2035: Analyzing the DOE’s Projections

Before we try and do any serious thinking (and while my brain still is recharging after my recent project), let’s look through the Department of Energy’s report, Annual Energy Outlook 2012 with Projections to 2035 and get the numbers racked up.

Let’s start with macroeconomic figures. The DOE’s Reference Case (the center projection on which they base their analyses, by and large) shows the U.S. GDP growing from $13.318 trillion in 2011 to $24.539 trillion in 2035, a growth rate of 2.5% (those are all in 2005 dollars, btw). As they forecast consumption growing at a slower rate–2.3%–they apparently don’t think we’re going to go out and spend all that extra money.

Well, they’re certainly not going overboard with enthusiasm about our future. A 2.5% growth rate is low. It’s not out of line with what others predict about our future, mind you. But for example, 2010 had growth of 3% and I don’t think anybody was thinking we were utilizing all our economic capacity that year. In fact, U.S. GDP was higher than 2.5% in 5 of the last 10 years, according to the U.S. Department of Commerce’s Bureau of Economic Analysis.

And I’m starting to notice some things that bother me. The next thing I want to check is population, which is normally the most significant driver of energy usage. But although they say on page 25 that they project U.S. population to increase by 25% over the period covered by their report, they don’t give a total or the reference number that the 25% is added to. And I see that happening throughout the report–percentages without base numbers. They didn’t do that in prior years. This troubles me.

But okay–the U.S. Census Bureau’s mid-year estimate for 2011 was 311,591,917 and a 25% increase would be 77,897,979 for a total of 389,381,896. That’s a growth rate of 0.93%.

So when I get back into thinking mode, my first question is likely to be, if you think population is going to grow by 0.93% annually and you think that GDP is going to grow by 2.5% annually, is it realistic to project (as the report does) that energy will grow by 0.3% annually?

Look at the above numbers. Income increases from $13 trillion to $24 trillion. Population increases from 311 million to 389 million. And the DOE is telling us that energy consumption will grow from 98 quads to 107 quads.

That’s a whole lot of non-consuming going on.

Well, I’m sure I will see the light after some July rest and relaxation.


The DOE’s Daring Assumptions

Well, I’m out of the analyst’s cave. I have sent off the report I was working on, looked out the window and noticed it was July. How did that happen?

I also noticed that the U.S. Department of Energy has released their Annual Energy Outlook for 2012 with projections for 2035.

And I’m numbered out. I have photovoltaic CAGR percentages on the brain and the DOE’s report looks like a soup of numbers right now.  I need a bit of R&R.

However… I did notice… “Overall U.S. energy consumption grows at an average annual rate of 0.3 percent from 2010 through 2035 in the AEO2012 Reference case.”  And… “Energy consumption per capita declines by an average of 0.6 percent per year from 2010 to 2035.” And…”Energy consumption per capita declines by an average of 0.6 percent per year from 2010 to 2035 (Figure 1). The energy intensity of the U.S. economy, measured as primary energy use in British thermal units (Btu) per dollar of gross domestic product (GDP) in 2005 dollars, declines by an average of 2.1 percent per year from 2010 to 2035.”

When the appropriate part of my brain starts working again I will pick those apart a bit. For now, though, I’ll just note that they are essentially saying that the U.S. of A. will hit the Green Trifecta.

They are saying that the past ten years of energy consumption are a picture of what will happen over the next 25:

They are predicting that the dip in per capita energy use experienced during this recession will be continued no matter what happens to the economy for the next 25 years:

And the same chart shows an acceleration of energy efficiency, as we get more bucks for our bang, almost literally.

We’ll look closely at how they expect to get there, but expect to spend some time evaluating this quote: “In the AEO2012 Reference case, residential sector energy intensity, defined as average energy use per household per year, declines by 19.8 percent, to 81.9 million Btu per year in 2035 (Figure 74). Total delivered energy use in the residential sector remains relatively constant from 2010 to 2035, but a 27.5-percent growth in the number of households reduces the average energy intensity of each household. Most residential end-use services become less energy-intensive, with space heating accounting for more than one-half of the decrease. Population shifts to warmer and drier climates also contribute to a reduction in demand for space heating.”

It’s good to be back! Wow–it’s summer!