Released April 14, 2023 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The U.S. energy ecosystem is projected to get cleaner and greener through 2050, significantly aided by the provisions of the Inflation Reduction Act of 2022 (IRA), according to the U.S. Energy Information Administration's (EIA) Annual Energy Outlook (AEO 2023), released March 16. The IRA is slated to invest about $369 billion through 2032 in a wide-ranging effort to lower carbon dioxide (CO2) emissions across the economy.
In fact, the very the scope and scale of the IRA limited EIA's ability to fully model the cases contained in this year's AEO, the agency said: "The IRA contains a complex package of incentives, many of which are challenging to model." The AEO 2023 does not include certain IRA provisions for three general reasons:
Given the complexities of modeling certain aspects of the IRA, the agency said it will return to the issue of long-term energy projections in the future, suggesting updates to the AEO 2023 will be forthcoming before next year's report.
But the EIA has assessed the impact of the IRA enough to say the enactment of that law last year will accelerate the reduction of energy-related CO2 emissions. The agency said this year's estimate of CO2 emissions in 2050 from the energy sector will be 17% lower than last year's estimate, which did not include the IRA. Overall, across the three scenarios that it modeled, this year's AEO projected that CO2 emissions will fall between 25% and 38% by 2050 compared to a 2005 baseline.
"With policy changes over the last year and continued technology innovation, we expect to see significant shifts in energy production and use over the next 30 years, EIA Administrator Joe DeCarolis said March 16 in releasing the report. "The resulting projections for energy-related CO2 emissions are most sensitive to our assumptions regarding economic growth and the cost of zero-carbon generation technology."
As it has in years past, the EIA prepared three cases--Reference, High and Low--to provide readers and users with some ideas about how the energy future could unfold through 2050. It did not say any of the three cases was a prediction of what the future will be; instead, the cases provided an outline of how the energy ecosystem could evolve over the next 27 years.
The top-line takeaways in all three scenarios include:
The "Low" case assumes a 1.4% annual growth in GDP through 2050. Brent will sell for $51 per barrel in 2050 in that case. Regarding oil and gas recovery and costs, this scenario posits a 50% lower oil and gas resource recovery and a 50% higher drilling cost relative to the Reference case.
The "High" case assumptions include annual GDP growth of 2.3% over the next 27 years. In 2050, Brent will sell for $190 per barrel. This case assumes there will be a 50% higher oil and gas resource recovery rate and a 50% decline in drilling costs compared to the Reference case.
In the "Low" case, the cost of zero-carbon technology will decline 40% from 2022 levels by 2050. The "High" case assumes costs will not decrease from current levels over the next 27 years.
One of the most dramatic changes projected by the agency is the percentage of new vehicles sold that will be powered by electricity. Currently, about 6% of all new cars and light-duty trucks are powered by electricity. By 2050, that figure will approach 20% in all three scenarios.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
In fact, the very the scope and scale of the IRA limited EIA's ability to fully model the cases contained in this year's AEO, the agency said: "The IRA contains a complex package of incentives, many of which are challenging to model." The AEO 2023 does not include certain IRA provisions for three general reasons:
- Guidance is not yet available on how a provision will be enacted or how agencies will implement it
- Provisions requiring significant model modifications that were not possible to implement this year
- The IRA has provisions that that do not align with EIA's analytic categories, for example, on the definition of "energy communities."
Given the complexities of modeling certain aspects of the IRA, the agency said it will return to the issue of long-term energy projections in the future, suggesting updates to the AEO 2023 will be forthcoming before next year's report.
But the EIA has assessed the impact of the IRA enough to say the enactment of that law last year will accelerate the reduction of energy-related CO2 emissions. The agency said this year's estimate of CO2 emissions in 2050 from the energy sector will be 17% lower than last year's estimate, which did not include the IRA. Overall, across the three scenarios that it modeled, this year's AEO projected that CO2 emissions will fall between 25% and 38% by 2050 compared to a 2005 baseline.
"With policy changes over the last year and continued technology innovation, we expect to see significant shifts in energy production and use over the next 30 years, EIA Administrator Joe DeCarolis said March 16 in releasing the report. "The resulting projections for energy-related CO2 emissions are most sensitive to our assumptions regarding economic growth and the cost of zero-carbon generation technology."
As it has in years past, the EIA prepared three cases--Reference, High and Low--to provide readers and users with some ideas about how the energy future could unfold through 2050. It did not say any of the three cases was a prediction of what the future will be; instead, the cases provided an outline of how the energy ecosystem could evolve over the next 27 years.
The top-line takeaways in all three scenarios include:
- Energy-related CO2 emissions fall between 25% and 38% across all AEO 2023 cases because of increased electrification, higher equipment efficiencies and more zero-carbon electricity generation. Click on the image at right to see EIA's projection of falling CO2 emissions from the energy sector to 2050.
- Renewable generating capacity grows in all regions of the United States in all AEO 2023 cases, supported by growth in installed battery capacity.
- Technological advancements and electrification drive projected decreases in demand-side energy intensity
- U.S. oil and gas and liquids production will rise slowly to about 22 million barrels of oil equivalent per day (boe/d) in 2050 in the Reference case. In the High scenario, production could reach nearly 30 million boe/d by 2050, but in the Low case, production could fall to about 12 million boe/d by that year. The U.S. remains a net exporter of petroleum products and of natural gas through 2050 in all AEO 2023 cases. Click on the image at right to see EIA's projection of U.S. oil and gas production to 2050.
The "Low" case assumes a 1.4% annual growth in GDP through 2050. Brent will sell for $51 per barrel in 2050 in that case. Regarding oil and gas recovery and costs, this scenario posits a 50% lower oil and gas resource recovery and a 50% higher drilling cost relative to the Reference case.
The "High" case assumptions include annual GDP growth of 2.3% over the next 27 years. In 2050, Brent will sell for $190 per barrel. This case assumes there will be a 50% higher oil and gas resource recovery rate and a 50% decline in drilling costs compared to the Reference case.
In the "Low" case, the cost of zero-carbon technology will decline 40% from 2022 levels by 2050. The "High" case assumes costs will not decrease from current levels over the next 27 years.
One of the most dramatic changes projected by the agency is the percentage of new vehicles sold that will be powered by electricity. Currently, about 6% of all new cars and light-duty trucks are powered by electricity. By 2050, that figure will approach 20% in all three scenarios.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
