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EIA Annual Energy Outlook: Takeaway #2

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This article is the second of a four-part series covering the 2018 Annual Energy Outlook from the U.S. Energy Information Administration. The 2018 edition covers predictions through 2050, offering insights for energy decision makers.

4 Takeaways 

The 2018 Energy Outlook offers four key takeaways:

  1. Net Exports

  2. Increased Efficiencies

  3. Production Growth

  4. Generation Capacity

In the first post, we examined how the United States is projected to become a net energy exporter in the next few years. Now, we’ll dive into the second major takeaway: how will increased energy efficiency offset moderate growth in energy demand?

Energy Demand in the United States

The main conclusion of the 2018 Annual Energy Outlook is clear: the United States will become a net energy exporter in the world economy as soon as 2022. While energy production remains strong, energy demand is perhaps the biggest predictor of this forecast.

It’s simple math: if U.S. energy consumers use less domestic gas, oil and renewables, then we can export more of what we produce. According to multiple reports, that's exactly what we are beginning to see. In fact, as the Institute of Electrical and Electronics Engineers (IEEE) suggests, this trend is not new. In a 2015 report, the group noted that annualized electricity demand had not grown since 2007, despite the economy having grown about eight percent during the same period.

The third annual Sustainable Energy in America fact book reports that growth of electricity demand has slowed since 1990, and has now come to a grinding halt. "There has been an outright decoupling between electricity growth and economic growth," the report states. Furthermore, it notes, the U.S. economy has become less energy-intensive.

The IEEE suggests that demand has been stagnant since 2007. And in the time since their 2015 report was published, not much has changed. Aggregated reports suggest that residential, industrial, transportation and commercial energy demands have all remained relatively flat since 2015. 

The EIA Outlook projects stagnation to persist in the near and long-term future, with just 0.4 percent annual growth in the United States by 2050. This stagnation stands in stark contrast to the 28 percent global energy demand growth projected between 2015 and 2040 by the EIA just last September. Energy demand continues to grow in nations such as China and India where economies are strong.

Gross Domestic Product Outpaces Energy Growth

When you consider the mature state of the U.S. energy industry, slow growth of energy demand makes sense. The EIA projects a two percent average annual growth in Gross Domestic Product (GDP) between now and 2050. This projection is consistent with recent history, as the United States has seen its GDP grow between negative two and six percent in most years since the economic recession in 2008. Other forecasts project similar increases in the coming decades.

GDP growth first began to outpace energy consumption in the 1990s, and is, by all accounts, set to continue doing so. The long-term consequences of this ongoing trend are not crystal clear. But the reason for it is undisputed: increased energy efficiency.

Implications of Increased Energy Efficiency

It comes as no surprise that industrialized economies are moving toward sustainable and efficient energy sources. This trend persists despite recent domestic policy changes that emphasize traditional energy sources like coal. 

According to the EIA’s Annual Energy Outlook, energy efficiencies will help reduce commercial electricity consumption per square foot through 2050. Notably, heating and cooling equipment are expected to create major efficiencies, using less than two-thirds the amount of electricity that they consume today. Businesses are also adapting more efficient lighting with LED bulbs – a change that may reduce lighting intensity by as much as 56 percent. 

The report also considers growing renewable energy options, noting that on-site generation, CHP and solar panels will minimize traditional grid energy consumption for many large enterprises.   

The EIA projects that energy intensity is on the decline in the industrial sector. And according to the American Council for an Energy-Efficient Economy (ACEEE), this core measure of energy efficiency has been trending downward for at least a decade.

Energy efficiencies result in less energy consumption – a critical factor in the projection that domestic production will soon outpace demand.

What does energy efficiency mean for your business?

For most business owners and decision makers, taking steps to reduce the carbon footprint is a no-brainer, particularly as technologies become more attainable through lowered costs. 

As suggested by Harvard Business Review last year, rising energy efficiency offers significant opportunities for organizations. Efficiencies are natural operational cost savers. Efficiency and renewable energy projects can enhance the public image of your business and improve market value of your space. And if they contribute to lower demand on the whole, and lower energy prices as a result, this move has "enormous opportunities to reduce risk, improve resilience, and create value."

Check out the next entry in our series – a look at the growth of liquid and natural gas production in the U.S. energy market.

Read Takeaway #3

Posted: June 26, 2018