This past week saw the EIA publish their most recent edition of its Annual Energy Outlook, which provides 30+ year projections across a wide range of sectors in the energy industry. With EIA data used as a foundation for many industry models and forecasts, we thought it would be a good idea to see how the EIA’s outlook has changed over the past few reports. Let’s focus on some hot topics that have been receiving a lot of attention in the market: LNG exports, coal plant retirements, and electric vehicles (EVs).
With the recent start-up of Cove Point deliveries and the continuing strength of Sabine Pass deliveries (currently averaging about 3.2 Bcf/d), demand for natural gas from LNG export terminals has added a new, much needed, source of incremental demand to match growing production. However, with more than 300 million tons per year (about 40 Bcf/d) of incremental US export capacity proposed, is the market going to be overbuilt? The EIA’s demand projections would suggest not, with each of the last three year’s outlooks calling for more capacity to come online than the 9.5 Bcf/d currently under construction.
Given the long lead time needed for an export facility to come online, we will need to start seeing final investment decisions (FIDs) being made shortly to meet the EIA’s projections. However, the global LNG supply and demand balance could make this more difficult in the coming years.
Even as other countries seek to diversify their electricity fuel supply around the globe with LNG, changes back home continue as well. When it comes to the changing US electricity fuel mix, mainly coal retirements, the EIA has been consistent in their past three reports, with coal capacity making up about 14% – 16% of the US’s fuel mix by 2040.
Perhaps more interesting is that the EIA is calling for renewables’ share of the fuel mix to surpass coal’s in the next few years. In their most recent report, the EIA calls for this shift to happen in 2020.
Moving away from the electricity supply and pivoting to the demand side, electric vehicles are thought to be an emerging source of electricity demand, and subsequently natural gas demand. The hype surrounding EVs is understandable given the recent technological strides made, but should we buy into it?
Even though the EIA has revised their electric vehicle projections up multiple times in the past few years, their most aggressive forecast still only calls for EVs to make up 15% of the total US fleet by 2050. From an electricity and natural gas demand perspective this leaves plenty to be desired if EVs are going to have a significant impact on the energy market.
Everything discussed above are the opinions of the EIA, but what does BTU Analytics think? Does the US or global market need a second wave of LNG terminals? And what will the impact of electric vehicles be on natural gas demand? We will be discussing our views on all of these topics and more at our February 22nd conference in Houston, What Lies Ahead.