Volatility in energy markets will not continue in long term

The volatility of the energy markets over the last year – starting with high prices for oil and natural gas earlier on, which dipped following the terrorist attacks of 11 September – is not set to continue in the long term, with energy intensity – energy use per dollar of GDP – set to decline over the next 20 years, according to a new Department of Energy report. However, carbon dioxide emissions are expected to increase by 526 million metric tonnes per year over the same time period.

The Annual Energy Outlook 2002, due to be published 21 December by the US Department of Energy’s Energy Information Administration (EIA), focuses on long-term events, such as supplies and prices of fossil fuels, the development of US electricity markets, improvements in technology, economic growth and carbon dioxide emissions. Between 1970 and 1986, energy intensity in the US declined at an average annual rate of 2.3% as the economy moved to less energy intensive industries. Over the next 20 years it is predicted to continue declining at an average annual rate of 1.5% due to continuing energy efficiency and structural changes in the economy. However, the bad news is that carbon dioxide emissions are predicted to increase more rapidly than total energy consumption, as a result of increasing use of fossil fuels, a slight decline in nuclear power and slow growth in renewable generation.

Predicted economic growth in the US over the next 20 years is 3% per year, with a 1.4% average annual increase in energy consumption, taking into account efficiency standards for new energy using equipment in buildings and for motors. Residential energy consumption is predicted to grow by only 1% per year, with the most rapid growth being for computers and other electronic equipment, with commercial and industrial energy demand growing by 1.7% and 1.1% respectively.

The highest predicted growth in energy consumption is in transportation, with a projected annual increase of 1.9% due to rapid growth in travel (see related story) and slow growth in efficiency (see related story).

Annual increases in fuel demand are predicted to be 2% for natural gas, 1.2% for coal, and 1.5% for petroleum, with 1.7% annual growth for renewable fuels primarily due to state mandates. The slow growth in renewable technologies is due to the relatively low costs of fossil fuels. By 2020, 55% of renewable energy demand will be for electricity, and the rest for dispersed heating and cooling, industrial uses such as cogeneration, and fuel blending.

Nuclear power is predicted to fall over the next 20 years, with 10 gigawatts of the 2000 total of 98 gigawatts predicted to be retired by 2020, and no new nuclear plants expected to be constructed due to the relative economics of alternative technologies.

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