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Yesterday, the Department of Energy’s released the Energy Information Administration’s (EIA’s) “Annual Energy Outlook 2015“. Before even reading the summary, there are two things that we know:

• EIA is WRONG!
  • Forecasting is extremely difficult and the energy sector is no exception to the rule.
    • Note, to say “EIA is WRONG!” is something that can be written about any forecaster / forecast — the questions are to what extent are the forecasts useful in helping planning and decision-making (individual, investor, government, business, etc ….).
  • Takeaway: Use the EIA material as a reference case and guidance but not as gospel.  You need to understand the underlying material and, if using the EIA material to support planning (business, government, policy, environmental, or otherwise), make sure to think through alternatives to ‘satisfice’ when reality varies away from the predictions.
• EIA is extremely PESSIMISTIC ABOUT RENEWABLE ENERGY!
  • Without exception, the EIA forecasting about renewable energy trends has been (far too) pessimistic about how renewables actually develop.
    • While there are a number of (somewhat) understandable bureaucratic rules and analytical process reasons behind this, the EIA has been very consistent in its erroneous renewable energy projections — the real world has always outperformed what the EIA says it would do.
      • Reasons for the bias included difficulties in projecting innovation (technology, business methods, etc …) and requirements to stay within current policy (which heavily subsidies, indefinitely, fossil fuels and has supports for renewable energy sunsetting) parameters.
      • Note that in an analytically ‘unbiased’ world, one would expect projections to vary in errors both in too pessimistic and too optimistic.  This is seen within EIA work on gas and oil, for example.  The renewable energy projections are always, however, on the ‘negative’ side.
  • Takeaway:  In planning, the EIA “reference case” on renewable energy penetration and development is to be taken as the ‘worst’ case situation. We can be near certain that there will be (far) more renewable energy in the years ahead than what EIA predicts.

UPDATE: Greentech media published an overlapping/reinforcing article: Why EIA’s Energy Outlook Misses the Real Value of Renewable Energy: EIA outlook lowballs renewables through 2040, and doesn’t include EPA’s proposed carbon rule. And, CAP’s Climate Progress chimed in with This Federal Report Underestimates Renewables Every Year, And Energy Experts Have Had Enough

Okay …  I wrote the above without looking at the EIA report or summary.  And, well, looking at the material it certainly seems to be accurate.  The first (EIA/forecasting is wrong) is simply a truism.  Time will tell.  As to the second, EIA is projecting very modest growth in renewables.  The reference case less than doubles total renewable electricity production and the “high” case is less than a tripling.  Anyone who follows the explosion of renewable electricity production around the world and the remarkable leaps that are occurring in technologies and business models will have to choose between laughing and/or crying looking at this.

Take a look at EIA’s overview (provided in full at the bottom of this post). Notable to me (you?): the (non)prominent discussion (e.g., total absence) of  renewable energy.  To provide perspective on just how wrong the EIA renewable forecast almost certainly is, here is material from a 2013 discussion by Lowell Feld, a former EIA employee, EIA Renewable Energy Forecast Isn’t Just Wrong, It’s Wildly, Laughably Too Low:

In 2005, EIA forecast that U.S. solar power capacity would hit about 1.2 GW in 2013. Where are we right now? According to Greentech Media, the U.S. is closing in (if it already hasn’t passed) the 10 GW mark in solar PV capacity right about now, and that’s not even counting solar thermal power generating capacity (according to this article, you can add another 1 GW or so of U.S. solar thermal power capacity). In sum, EIA forecast 1.2 GW of U.S. solar power capacity in 2013; the actual figure is around 11 GW – nearly 10 times higher than EIA forecast!

And, for additional perspective, 2014 solar generation was 100 percent greater than in 2013 (and here).

Or, to really drive the point home, “this striking chart shows why solar will take over the world“.

The question, looking at that chart, the history of EIA forecasting of renewables, and then this EIA forecast, is not whether the high-end projection for 2040 will be topped by 2025 but how many years earlier than that.

As a note, let’s make clear that EIA is far from the only group that gets renewable forecasts wrong.  What is impressive is how virtually no one — including major advocate groups — has been on target with, for example, solar electricity developments.

The AEO2015 executive summary:

Annual Energy Outlook 2015

Energy Information Administration

14 Apr 2015

Executive Summary

Projections in the Annual Energy Outlook 2015 (AEO2015) focus on the factors expected to shape U.S. energy markets through 2040. The projections provide a basis for examination and discussion of energy market trends and serve as a starting point for analysis of potential changes in U.S. energy policies, rules, and regulations, as well as the potential role of advanced technologies.

Key results from the AEO2015 Reference and alternative cases include the following:

• The future path of crude oil and natural gas prices can vary substantially, depending on assumptions about the size of global and domestic resources, demand for petroleum products and natural gas (particularly in non-Organization for Economic Cooperation and Development (non-OECD) countries), levels of production, and supplies of other fuels. AEO2015 considers these factors in examining alternative price and resource availability cases.
• Growth in U.S. energy production-led by crude oil and natural gas-and only modest growth in demand reduces U.S. reliance on imported energy supplies. Energy imports and exports come into balance in the United States starting in 2028 in the AEO2015 Reference case and in 2019 in the High Oil Price and High Oil and Gas Resource cases. Natural gas is the dominant U.S. energy export, while liquid fuels [4] continue to be imported.
• Through 2020, strong growth in domestic crude oil production from tight formations leads to a decline in net petroleum imports [5] and growth in net petroleum product exports in all AEO2015 cases. In the High Oil and Gas Resource case, increased crude production before 2020 results in increased processed condensate[6] exports. Slowing growth in domestic production after 2020 is offset by increased vehicle fuel economy standards that limit growth in domestic demand. The net import share of crude oil and petroleum products supplied falls from 33% of total supply in 2013 to 17% of total supply in 2040 in the Reference case. The United States becomes a net exporter of petroleum and other liquids after 2020 in the High Oil Price and High Oil and Gas Resource cases because of greater U.S. crude oil production.
• The United States transitions from being a modest net importer of natural gas to a net exporter by 2017. U.S. export growth continues after 2017, with net exports in 2040 ranging from 3.0 trillion cubic feet (Tcf) in the Low Oil Price case to 13.1 Tcf in the High Oil and Gas Resource case.
• Growth in crude oil and dry natural gas production varies significantly across oil and natural gas supply regions and cases, forcing shifts in crude oil and natural gas flows between U.S. regions, and requiring investment in or realignment of pipelines and other midstream infrastructure
• U.S. energy consumption grows at a modest rate over the AEO2015 projection period, averaging 0.3%/year from 2013 through 2040 in the Reference case. A marginal decrease in transportation sector energy consumption contrasts with growth in most other sectors. Declines in energy consumption tend to result from the adoption of more energy-efficient technologies and existing policies that promote increased energy efficiency.
• Growth in production of dry natural gas and natural gas plant liquids (NGPL) contributes to the expansion of several manufacturing industries (such as bulk chemicals and primary metals) and the increased use of NGPL feedstocks in place of petroleum-based naphtha [7] feedstocks.
• Rising long-term natural gas prices, the high capital costs of new coal and nuclear generation capacity, state-level policies, and cost reductions for renewable generation in a market characterized by relatively slow electricity demand growth favor increased use of renewables.
• Rising costs for electric power generation, transmission, and distribution, coupled with relatively slow growth of electricity demand, produce an 18% increase in the average retail price of electricity over the period from 2013 to 2040 in the AEO2015 Reference case. The AEO2015 cases do not include the proposed Clean Power Plan.[8]
• Improved efficiency in the end-use sectors and a shift away from more carbon-intensive fuels help to stabilize U.S. energyrelated carbon dioxide (CO2) emissions, which remain below the 2005 level through 2040.