DOE’s Energy Information Administration Releases 2021 Energy Outlook

February 8, 2021 by Kate Michael

WASHINGTON — Each year the Energy Information Administration, a statistical and analytical agency within the Department of Energy, releases its annual Energy Outlook which provides updated projections of U.S. energy markets. Releasing its 2021 report with a virtual discussion at the non-profit Bipartisan Policy Center last week, EIA offered modeled projections of domestic energy markets through 2050, including cases with different assumptions about macroeconomic growth, world oil prices, and technological progress.

“This is the culmination of a yearlong effort by many EIA professionals,” said EIA Acting Administrator Stephen Nalley, reminding that the report was not a prediction of what may happen. “We never advocate for any particular policy, [but simply] provide model projections for what could happen… to illustrate important factors in energy production and use in the United States and inform a healthy national dialogue.”

EIA’s 2021 Energy Outlook provides independent impartial energy information that looks at consumption and demand. In general, EIA expects U.S. energy consumption to return to pre-pandemic (2019) levels by 2029, though this will depend on the pace and level of economic recovery. Poor economic recovery could keep consumption low, causing recovery there to take until 2050. Demand, on the other hand, may return to normal levels as soon as 2025. 

“A return to 2019 levels of energy consumption will take years — between 5 and 30 years — and long-term projections just feel even more uncertain this year,” admitted Angelina LaRose, assistant administrator for Energy Analysis at EIA. She said the majority of energy consumption growth comes from the industrial and electric power sectors. 

“Small changes in the economy can significantly affect consumption,” said Nalley. “The pace of economic recovery, advances in technology, changes in trade flows, and energy incentives will determine how the United States produces and consumes energy in the future.”

He suggested that the COVID pandemic will have a lasting impact both on U.S. energy consumption and carbon dioxide emissions.

Carbon dioxide emissions are expected to decrease through 2035 as the nation transitions away from coal and toward natural gas. After that, they are projected to begin increasing again from the effects of economic growth, though remaining at a level less than their 2007 peak.

And energy demand is on an interesting path as well. Global electricity demand dropped when life patterns and trade were fundamentally transformed during the pandemic. Now, EIA projects that electricity demand will largely return to 2019 levels by as soon as 2025.

“We’re in the midst of a demand-side market shock,” said Nalley. “Despite COVID, long-term world energy demand is increasing… though it will take a while for the energy sector to get to its new ‘normal.’”

Just a year ago, wind and solar were the cheapest sources of new energy. “[Now], renewable energy incentives and falling tech costs support robust competition…” said Nalley. He offered that this will create both opportunities for synergy and challenges for the U.S.

Renewable electric generating technologies are projected to account for almost 60% of the capacity additions from 2020 to 2050, and EIA projects that renewables’ share of the electricity generation mix will more than double by 2050. The natural gas share will remain relatively flat (36%), and coal and nuclear energy demand are expected to decrease by about half, according to baseline projections.

Of course, all of these are simply projections, and this year has experienced even more uncertainty than usual.

Predictions are based on EIA’s Reference case, which examines a future in which slower growth in consumption in an increasingly energy-efficient U.S. economy contrasts with increasing energy supply because of technological progress in renewable sources, oil, and natural gas. It examines other scenarios as well with varying economic growth, commodity prices and supply, and technology costs.

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