Clark Silcox, General Counsel, NEMA

The U.S. Energy Information Administration’s (EIA) Annual Energy Outlook 2020 was released last week, updating 2019 estimates and future projections for domestic electricity generation and use.  On the generation side, EIA projects for the first time that renewable energy sources will lead electricity generation, taking over for natural gas at some point between 2040 and 2050.  By 2050, EIA projects that renewable energy will represent 38 percent of the energy sources for electricity generation and natural gas will represent 36 percent of the energy sources for electricity generation. On the electricity use side, EIA projects rising electricity use in both the residential and commercial sectors between 2019 and 2050.

Lighting Again Leads in Electricity Use Reduction

As we previously reported, EIA data demonstrates that lighting represented the greatest decline in electricity use over the first 18 years of the 21^st century as overall electricity use increased.   That trend continued in 2019, with lighting shaving an estimated additional 0.05 quads of delivered electricity use from 2018 to 2019 in the residential sector, while remaining flat in the commercial sector.   Lighting was the only end-use category showing a significant year-over-year decline in the residential sector.  EIA projects that lighting will continue to contribute to reducing delivered electricity use over the next 6 years and beyond; however, the annual rate of decline from residential lighting will fall significantly (about 75 percent) for residential lighting and accelerate slightly in commercial lighting.  From 2001 to 2019, estimated delivered electricity use by residential lighting declined on average 0.024 quads per year; from 2019 to 2025 estimated delivered electricity use by residential lighting is projected to decline on average only 0.006 quads per year, reflecting that the residential transition to energy-efficient lighting has largely already occurred.  The commercial sector sees larger opportunities for declining electricity use from lighting, falling by more than two percent per year according to EIA, with the transitioning of linear fluorescent lighting to LED lighting in commercial buildings continuing, primarily over the next decade.

Data from the EIA Annual Energy Outlook (2004-2020) documents the estimated change for delivered electricity in both residential and commercial end-uses from 2001 to 2019.

Aside from lighting, where does EIA forecast additional reductions in delivered electricity between 2019 and 2050?  In the residential sector: home computers, furnaces, and space heating.  In the commercial sector: space heating, water heaters, ventilation, and cooking.  The projected reduction in electricity use from space heating, furnaces, and ventilation likely received a boost from the shift to variable speed drive motor technology applied to fans.  Increased electricity use by air conditioning, associated with rising average temperatures, is forecast for both the residential and commercial sectors.

Energy Efficiency Does Not Lead Decarbonization in the Electric Power Sector

The leading headline from AEO-2020 is the growing contribution of renewable energy to the generation of electricity over the next 30 years, and the decline of carbon emissions notwithstanding that electricity generation will continue to rise.  Between 2019 and 2050, EIA projects that net electricity delivered to the grid will increase by about 25 percent from 3.965 trillion kilowatt-hours per year to 4.969 trillion kilowatt-hours.  Carbon emissions in the electric power sector will decline over the entire period, primarily from the power sector’s reduction in coal use and the rise of renewable energy sources.

In projecting reduced carbon emissions in the electric power sector, EIA does not assume a material change in public policy directed at decarbonization.  Scattered state policies such as California and the New England states’ cap-and-trade programs along with state Renewable Portfolio Standards and Clean Energy Standards that are on the books today are presumably included in the EIA model’s assumptions.  As portrayed below, EIA sees the largest future carbon emission reductions in the electric power sector occurring primarily between 2019 and 2025 and then continuing to decline gradually after that.  That decline corresponds with the shift in energy mix during that same time period shown above.  EIA projects that total energy-related carbon emissions will increase gradually after 2030 as economic growth and increasing energy demand outweigh improvements in efficiency.

Energy efficiency regulation of electrical products and equipment may marginally reduce the demand for electricity and therefore marginally limit the rate of increase in the generation of electricity and power plant emissions over time, but it does nothing by itself to reduce carbon intensity by shifting electricity generation to less carbon-intensive fuel sources, which EIA data shows have the greatest impact on carbon reduction.  Tree planting does not reduce emissions either, but it does increase carbon absorption that is later converted to oxygen and has the potential to reduce a portion of the carbon accumulation in the atmosphere, perhaps more so than energy conservation.  As an article on the NASA website recently commented, “[Reforestation] is definitely not a solution by itself to addressing current climate change. To do that, we need to reduce human emissions of greenhouse gases. But it could still have some partial impact on our ability to reduce climate change.”  Carbon capture technology is in the same place right now with uncertainty over cost and scale.  As American Nobelist William Nordhaus demonstrated in his 2013 book, Climate Casino, energy efficiency regulation is the costliest method of removing a ton of carbon from the atmosphere.  This conclusion does not dismiss either energy efficiency or reforestation as laudable policies, which can have incremental value independent of their inability to lead to meaningful decarbonization.    As Nordhaus wrote, “Significant reductions in emissions cannot be done easily, quickly or cheaply with today’s technologies or those that are ready for large-scale deployment . . . we need to ensure that societies rely on the least expensive approaches.”

Meaningful decarbonization is achieved by shifting energy sources from carbon-intensive to less carbon-intensive fuels, and it must contemplate increased electrification to leverage carbon reduction in the electric power sector, not only in the transportation sector but also the building sector.  Advanced technology will play an important role here, but technology alone is likely not a major decarbonization solution.  While carbon sequestration technology is frequently talked about, the potential of advanced heat pump technology to promote electrification in buildings, electrical storage in support of variable electricity generation and electrification of transportation, and small modular nuclear reactors for electricity generation may see increased investment. But to kick-start, meaningful carbon reduction requires policies that promote a shift in fuel sources.

Inside corporations, trade associations, and think-tanks, there are thoughtful, bi-partisan discussions underway that are to promote a shift toward less carbon-intensive energy sources that will induce meaningful decarbonization over the short- and long-term, beyond the EIA forecast above.  These discussions include a mix of carbon pricing and clean energy Standard policies, technology, and an assessment of the most effective way to decarbonize at a cost that does not break the economy or unduly add regulatory burden.  There is a growing recognition that both extreme pessimistic views about climate change are less plausible, and business-as-usual is not acceptable.