I. ENERGY OVERVIEW

$6 Trillion will be invested in New Energy Facilities over the Next 20 Years

The era of cheap energy is over. As a result, the yearly capital investment to provide the world’s energy will average $304 billion per year over the next 20 years.

The largest investment category will be new coal-fired boilers with an average investment of $48 billion/yr.  However, the trend for coal will be down. This means that the investment in the first 10 years will be greater than in the last 10 years. In the first 10 years the average investment in coal-fired power plant upgrades will be $10 billion/yr but will average only $6 billion in the final 10 years.

YEARLY CAPITAL INVESTMENT IN ENERGY TECHNLOGIES

Also the trend will be down for gas turbines, refineries, and production of oil and natural gas. Investment will instead turn to newer alternatives such as fossil synthetic fuels including tar sands and coal liquefaction.

Planned investments in LNG liquefaction plants, tankers, and regasification terminals already represent close to $100 billion in capital expenditures. The U.S. will be increasingly dependent on LNG to replace its shrinking natural gas production.

Coal gasification and nuclear power will take a larger market share of electricity generation over the next two decades. However, achievements in improving efficiency of conventional coal-fired plants, and therefore minimization of CO₂, will slow the transition.

Hundreds of ethanol plants are now in planning and construction. The promise of new technology to make ethanol from grass instead of corn will make this fuel competitive with a shrinking supply of petroleum.

Cost of wind power is now attractive and there is already a booming market for this category of power generation. Solar power promises to be an attractive option longer term, but costs are still relatively high.  Biomass including waste-to-energy is already a big business and will grow modestly throughout the period.

The trend in each of these categories is shaped by developments in the others. Negative developments in one category will lead to positive growth in others, but in some cases the opposite is true. If oil production peaks in 2010 instead of 2020 and production declines faster than anticipated, then ethanol will be bigger. But conversely, if coal is more attractive, ethanol also increases. This is because the cost of ethanol production falls if cheap coal is used to generate steam.

There are a number of uncertainties which will lead to continuing adjustment of these forecasts as better insights are gained. The global warming issue is a big wild card. Technology developments in coal-to-liquids and solar power are also two big variables. New technology will play a big role in shaping this market.

The economic and political variables are major ones. If GDP in China continues to grow at its present rate, China would become the largest consumer of electricity and transportation fuels during the period. The average American uses 10 times as much energy as people in other countries. The demand impact of major increases in per capita energy consumption could be substantial.

The political variable is the largest. Dependency on Middle East political stability is a major risk. The vulnerability of nuclear, LNG, oil and gas production and refining facilities contrasts with the relative security of coal, wind, solar, biomass, and ethanol.

Suppliers of equipment, steel, plastics and other materials, pumps, valves, piping and other components, information technology including instrumentation and software, consulting services and chemicals are finding opportunities in all these segments. Some represent bigger opportunities than others. So the size of the future market is going to be shaped by the competition among these alternative energy supply sources.

B. World Energy Outlook

World consumption of marketed energy according to EIA will expand from 412 quadrillion BTU in 2002 to 553 quads in 2015 and 645 quads in 2025 for a 57 percent increase over the 2002-2025 time frame.

Oil is expected to remain the dominant energy source with its share dropping from 39 percent in 2002 to 38 percent in 2025. Oil consumption is expected to rise from 78 million b/d in 2002, 103 million b/d in 2015 and 119 b/d in 2025.

Natural gas is expected to be the fastest growing energy source with world growth of 2.3%/yr over the 2002-2025 period. This is based on production 92 trillion ft³ in 2002, 128 in 2015 and 156 in 2025.

Coal use is projected by EIA to increase by 2 billion short tons between 2002-15 and an additional 1.0 billion tons in 2015-2025.

Electricity generation is expected to nearly double in the 2002-25 period. From 14,275 to 26,018 billion KWh. Nuclear power generation is expected to increase from 2,560 billion kWh in 2002 to 3,032 billion kWh in 2015 and 3270 billion kWh in 2025.

These EIA projections are based on a GDP growth rate of 3.1 percent in the U.S. 2.8 percent for the mature market economies and 5.5 percent for the emerging Asian economies.

The following is the complete EIA analysis from July 2005: World Energy and Economic Outlook Click here for more information.

C. U.S. Energy Outlook

The EIA 2006 Outlook forecasts that net petroleum imports will account for 60 percent of demand in 2005 up from 58 percent in 2004. The forecast is more pessimistic relative to LNG imports than it was in last years forecast. Now imports are anticipated to be 4.1 trillion cubic feet in 2025 as compared to the previous 6.4 trillion cubic feet.

In the latest EIA forecast oil rises to $54/barrel in 2025. This is a huge $21/barrel increase than in the 2005 scenario. Total energy consumption is pegged at 1.2%/yr resulting in an increase from 100 quads to 127 quads over the 20 years.

Energy intensity is projected to decline at an average annual rate of 1.8 percent. . For more information on Energy Trends to 2030 CLICK HERE
 

D. Economic Factors Driving Energy Growth

For more information on Trends on Economic Activity CLICK HERE

E. Emissions and Impact on Energy Use

According to EIA CO₂ emissions are slated to rise in the U.S. from 6 billion tons in 2004 to 8 billion tons in 2030. In that year electricity generation will account for 3.2 billion and transportation 2.8 billion. This does not take into account the McIlvaine scenario which includes big investments in super critical coal-fired boilers with 30 percent less CO₂ generation than the current fleet.

Sulfur oxide emissions from electricity generation are forecast to drop to 3.7 million tons in 2030 according to EIA. McIlvaine forecast sulfur emissions of less than 1 million tons.

NO_x emissions from electricity generation were 6.7 million tons in 1990, are presently 3.7 million tons and will fall to 2.2 million tons in 2030 according to EIA. McIlvaine believes that all base load power plant equipment will have NO_x control with at least Low NO_x burners but in the vast majority of plants SNCR and SCR as well. This will result in NO_x reductions of less than 1 million tons.

The entire EIA 2006 emissions analysis Carbon Dioxide Emissions, CLICK HERE