SUPPLY AND DEMAND

TWO PROFOUND QUESTIONS LOOM OVER ALL OTHER ENERGY CONCERNS: Will we have enough affordable energy in the near future? What will we do for the long term?


The answers depend on our inventory of sources. At present, oil accounts for 40% of total energy consumption in the United States. Coal provides 23% and natural gas provides 22% of our energy. Another 8% comes from nuclear power plants. Renewable energy sources round out the roster, accounting for 7% of consumption—mostly as the result of hydropower investments made in the last century and the use of biomass (organic matter such as wood, municipal waste, and agricultural crops) for energy production.


Those sources and their proportions will have to change eventually, since the planet’s known supplies of fossil fuels are limited. But during the next couple of decades, the nation’s energy menu is unlikely to be substantially different from today’s—assuming “business as usual” conditions.


That may be a lot to assume: Energy prices and availability aren’t solely determined by the size of the supply. They’re also affected by the economy, possible new laws and regulations governing energy choices (such as emissions of carbon dioxide and other gases), worldwide demand, the policies and political stability of petroleum-rich nations, lifestyle



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TWO PROFOUND QUESTIONS LOOM OVER ALL OTHER ENERGY CONCERNS: Will we have enough affordable energy in the near future? What will we do for the long term? The answers depend on our inventory of sources. At present, oil accounts for 40% of total energy consumption in the United States. Coal provides 23% and natural gas provides 22% of our energy. Another 8% comes from nuclear power plants. Renewable energy sources round out the roster, accounting for 7% of consumption—mostly as the result of hydropower investments made in the last century and the use of biomass (organic matter such as wood, municipal waste, and agricultural crops) for energy production. Those sources and their proportions will have to change eventually, since the planet’s known supplies of fossil fuels are limited. But during the next couple of decades, the nation’s energy menu is unlikely to be substantially different from today’s—assuming “business as usual” conditions. That may be a lot to assume: Energy prices and availability aren’t solely determined by the size of the supply. They’re also affected by the economy, possible new laws and regulations governing energy choices (such as emissions of carbon dioxide and other gases), worldwide demand, the policies and political stability of petroleum-rich nations, lifestyle 12

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that can be done locally to increase the oil supply. U.S. domestic production of crude oil peaked around 1970 at about 9.5 million barrels per day (MBD) and had declined to 5.1 MBD by 2006. Today America imports almost two-thirds of its oil from a handful of nations. The Energy Information Administration (EIA), a U.S. government agency that provides Relative contributions of official energy statistics and forecasts, expects U.S. energy sources to total production of oil to remain approximately constant U.S. energy consumption through 2030, while imports are projected to rise in 2006. gradually to about 70% of consumption. choices and business decisions, climate change, So the basic question remains: How long can we and the pace of developments in science and maintain our petroleum dependency? The EIA cites engineering. Any of these factors can change in a known conventional oil reserves at more than 1.3 very short period of time. trillion barrels worldwide, and the U.S. Geological Survey estimates that there may be another 600 Still, if the economy and the inflation rate perform billion barrels undiscovered to date. as expected and there are no drastic geopolitical changes or dramatic technological breakthroughs, At present, total world consumption is approximately objective forecasts show that traditional supplies of 85 MBD, 21 million of which is used by the United petroleum, gas, and coal will be adequate to meet States. The nation’s dependency on oil and the expanded demand for decades. rapidly rising demand for oil in other countries, such as China and India, are heightening concern OIL that we will reach a point where the oil supply can The United States, with less than 5% of the world’s no longer be increased to meet projected demand. population, is home to one-third of the world’s While this will certainly be true eventually, there is automobiles. Over the next 20 years, the total number no consensus as to whether we are already entering of miles driven by Americans is forecasted to grow by that period or it is decades away. Pinning down an 40%, increasing the demand for fuel. Yet there is little exact time frame is nearly impossible as estimates 13

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Electricity, the #1 Secondary Source Electricity can’t be pumped out of the ground generation is a zero-atmospheric-emissions like oil or captured from moving air like wind alternative that already produces one-fifth of energy. So it is called a secondary source of America’s electricity, efforts to increase that energy, meaning that it is produced by the use capacity face two large, though not insurmount- of primary energy sources such as coal, natural able, hurdles: high capital investment costs and gas, or nuclear reactions. Electricity plays such resistance from citizens groups that oppose the an essential role in contemporary America that use and storage of radioactive material. its supply and demand are often examined separately from the primary sources used to Getting electric power to consumers may be as produce it. much of a problem as generating it. Generating stations usually are built away from load centers Experts predict a 35% increase in demand for because sites are easier to find and fewer electricity by 2030. In practical terms, that means people are disturbed by the accompanying an equivalent increase in demand for coal and noise, emissions, and activity. This power must gas, at least for the next decade: Electricity be delivered by a high-voltage transmission generating plants now consume two-fifths of system that has become increasingly stressed U.S. energy from all sources, including 90% of in recent years as growing demand has America’s coal and nearly 30% of its natural gas. outstripped capacity. Widespread blackouts are possible, as evidenced by the August 2003 There is no immediate way to alter that situation. disruption to 50 million customers from Ohio In the near term, renewable sources such as solar, to New York and Canada. New transmission wind, and geothermal lines are difficult to build are unlikely to substan- because of uncertain tially change the mix of cost recovery and public our energy supply. (And opposition. Building small integrating the energy plants near customers, from many of these re- known as distributed newable energy sources generation, may become would likely require sub- more important in order stantial expansion of the to meet demand and electric transmission maintain reliability. system.) While nuclear Energy sources used to generate electricity in the United States in 2006.* * Percentages do not sum to 100% due to independent rounding. 14

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of the amount of “recoverable” oil available can the fuel—and most of that energy comes from fossil- change depending on new discoveries, technological fuel-based electricity or heating, offsetting much of developments, and price. the benefit. Over the past century, dependence on vehicles NATURAL GAS burning petroleum-based fuels has become a Unlike oil, our natural gas comes defining component of American life, bringing primarily from North America. The countless benefits. However, combustion of gasoline annual volume of consumption is and diesel fuel emits carbon dioxide, as well as projected to rise from 21.8 trillion particulate matter, oxides of nitrogen (a prime cubic feet (TCF) in 2006 to about component of “smog”), carbon monoxide, and 23.4 TCF in 2030. New activity in unburned hydrocarbons. Indeed, whenever any fossil Alaska will supply some of that, fuels are burned, carbon dioxide is released into the but most will likely come from atmosphere, where it functions as a heat-trapping the lower 48 states and the Gulf greenhouse gas. of Mexico. Although the nation imports less than 3% of its natural Efforts are already well under way to find suitable gas from outside North America, alternatives to oil. In the short term, the leading liquid it is forecast that imports will substitute is ethanol (“grain alcohol”), now chiefly increase in the next few decades, made from corn. The federal government has an from 0.5 TCF per year in 2006 to aggressive program to encourage its production. As a 2.9 TCF per year in 2030. These result, in 2005 about 4 billion gallons of fuel ethanol imports will largely take the form mixed with gasoline hit the domestic market. But in of liquefied natural gas, which is natural gas cooled the same year, the United States consumed about 140 to its liquid phase, making it easier to transport. billion gallons of gasoline and 40 billion gallons of diesel fuel, so ethanol accounted for only a small Global consumption of natural gas in 2004 was 100 percentage of the total gasoline pool. TCF. Known world reserves of conventional natural gas total about 6,000 TCF, with perhaps another one- Ethanol raises other concerns. One drawback of tenth of that amount still undiscovered. At that rate, corn ethanol production is that it requires a large known reserves will be adequate for about 60 years. amount of land and fresh water, along with inputs of fertilizers and energy. This results in potential Natural gas is often described as “clean burning” competition with food sources for land use and fresh because it produces fewer undesirable by-products water for other industrial and commercial uses. In than gasoline. Like all fossil fuels, its combustion emits addition, with current technology, two-thirds of the carbon dioxide, but at about half the rate of coal. energy value of corn ethanol is used just to produce 15

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coal disturbs the land and modifies the chemistry of rainwater runoff, which in turn affects stream and river water quality. Coal-fired power plant emissions include oxides of nitrogen, sulfur dioxide, particulate matter, and heavy metals (such as mercury) that affect air quality and human health, often even hundreds of miles from the power plant. In response to strict environmental laws, “clean coal technologies” are being developed to reduce harmful emissions and COAL improve the efficiency of these plants. America has plenty of coal. Its mines produced 1.2 billion tons in 2006, nearly all of it destined for RENEWABLE ENERGY SOURCES electricity generation. That was a record year, but Use of renewable energy sources will increase, in it barely scratched the surface of U.S. recoverable some cases dramatically, over the next two decades. coal reserves, which are estimated at about 270 While they may make significant contributions billion tons. More than one-fourth of the total known to the energy supply in certain geographic areas, world coal reserves are in the United States, and absent major changes in economic, political, or supplies are sufficient for hundreds of years at current technological factors, they will still provide a small consumption rates. fraction of our overall energy. Demand is projected to increase by 30% between Hydropower is unlikely to increase much between now and 2030, propelled by rising use of electricity now and 2030, but energy from biomass products and possibly the expanded use of still-developing (which include wood and wood byproducts, technology that converts coal to liquid fuel. Most municipal waste, methane from landfills, and fuel of the increased supply will probably come from from agricultural crops) will likely increase more than western states, which now provide about six-tenths of the nation’s coal. Wyoming alone accounted for 38% of all domestic coal mined in 2006. Of all the fossil-fuel sources, coal is the least expensive for its energy content. In 2005, a million BTUs of energy from coal cost approximately $2, compared to $5 for natural gas and $10 for petroleum. However, burning coal in electric power plants is a major source of CO2 emissions, and its use has repercussions beyond combustion. Mining 16

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60% by 2030. Energy from wind, solar, and other renewable sources is expected to nearly triple. But the net effect of all that activity will probably only raise the total contribution of renewables from 7% of total consumption now to about 8% in 2030. Hydroelectric production currently accounts for about 2.9% of our total energy production, while geothermal accounts for about 0.4%. Wind and NUCLEAR FUEL solar-to-electric technologies account for a very America is unlikely to face problems in obtaining small part of our total energy production, but wind, enough uranium ore to meet anticipated demand for currently assisted by a production tax credit, has several decades. According to government estimates, been penetrating the market rapidly in the past few output from nuclear power plants is expected to years and accounted for almost 1% of the electricity increase only 18% by 2030. However, a U.S. nuclear generated in the United States in 2006. renaissance is possible, and a growing number of nuclear plant design and construction permits The idea of drawing our energy from sources that are have been submitted to the Nuclear Regulatory renewable, are independent of foreign nations, and Commission over the past year. Some countries have do not emit greenhouse gases has powerful appeal. successfully embraced nuclear power generation: But capturing these resources is expensive, and many for example, nuclear power plants produce nearly are intermittent, or sporadic, which complicates 80% of all electricity in France. In the United States, using them on a large scale. Further development the issue prompts considerable debate, including promises reduced costs and improved storage and concern over security and arguments about where controls to overcome the intermittency problem. and how to dispose of nuclear waste. But interest is growing, and nuclear energy may one day play a much larger role in supplying America’s electricity. Even with renewed U.S. interest in nuclear power generation, sufficient uranium supplies will likely be available. According to the Council on Foreign Relations, known worldwide reserves are adequate for about 70 years at current consumption rates and under current policies. 17

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The Flow of Energy This figure depicts the flow of energy, measured in and is positioned closer to the middle of the chart quadrillion (1 million billion) BTUs, across the en- to display its inputs and outputs. Note that hydro, ergy system of the United States for 2006, based on wind, and solar electricity inputs are expressed data from the Energy Information Administration of using fossil-fuel plants’ heat rate to more easily the U.S. Department of Energy. The chart illustrates account for differences between the conversion the connections between primary energy resources efficiency of renewables and the fuel utilization (fossil, nuclear, and renewables), shown at the far for combustion- and nuclear-driven systems. This left, and end-use sectors categorized into residen- enables hydro, wind, and solar to be counted on tial, commercial, industrial, and the three principal a similar basis as coal, natural gas, and oil. For this components of transportation: cars, freight, and reason, the sum of the inputs for electricity differs aviation. Electricity, a carrier derived from primary slightly from the displayed total electricity output. resources, powers the sectors to varying degrees Estimated Energy Usage in 2006: ~97.1 Quads Solar 0.07 Nuclear 8.21 Hydro 2.86 7.32 Electricity Wind 0.26 38.98 25.89 0.31 Unused energy 2.19 Geo 0.33 4.62 54.59 0.02 1.74 Residential 12.86 0 11.02 4.7 4.47 4.66 5.02 Natural gas Commercial 3 22.47 7.07 8.37 6.63 2.55 20.64 0.09 3.42 0.01 8.83 Coal 0.05 Useful 22.53 1.8 Industrial energy 18.79 23.49 42.51 0.39 4.3 3.11 0.78 1.54 0.03 Bio 3.19 0.43 Cars 17.16 0.68 1.44 0.85 0.52 0.6 9.66 Freight Oil 7.77 16.73 39.57 7.14 3.39 Aviation 3.39 Source: LLNL 2008; data is based on DOE/EIA-0384(2006), June 2007. If this information or a reproduction of it is used, credit must be given to the Lawrence Livermore National Laboratory and the Department of Energy, under whose auspices the work was performed. Distributed electricity represents only retail electricity sales and does not include small amounts of electricity imports or self-generation. Energy flows for non-thermal sources (i.e., hydro, wind, and solar) represent electricity generated from those sources. Electricity generation, transmission, and distribution losses include fuel and thermal energy inputs for electric generation and an 18 estimated 9% transmission and distribution loss, as well as electricity consumed at power plants. Total lost energy includes these losses as well as losses based on estimates of end-use efficiency, including 80% efficiency for residential, commercial, and industrial sectors, 20% efficiency for light-duty vehicles, and 25% efficiency for aircraft.

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the U.S. energy bill would be hundreds of billions of GETTING MORE FOR LESS dollars per year higher. Energy-efficiency investments Given the anticipated growth in every U.S. economic and structural shifts in the economy away from sector and in demand for all energy sources, it’s energy-intensive industry and toward service and natural to wonder how that growth can possibly be information-based jobs have both contributed to the sustained. After all, America, with only 5% of the phenomenon. So have engineering improvements planet’s population, already consumes one-fifth of the in scores of systems, from automobile engines to world’s total energy. And other countries are poised building insulation to electric power-generating to experience increases in energy use as they become facilities. more industrialized and improve their standard of living. Can the United States actually meet its This trend is expected to continue. The EIA projects growing needs? that by 2030 Americans will be using only slightly more energy per capita than they did in 1980—but It remains to be seen. Yet one important factor is less than half as much per dollar of GDP. working in our nation’s favor. The demand for energy has not been growing as rapidly as the economy, Continuing this downward trend in energy intensity resulting in a significant drop in what is called energy depends in part on the nation taking advantage of intensity. At present, Americans use about half as numerous opportunities for efficiency advances much energy per dollar of Gross Domestic Product in current technology. Fortunately, recent history (GDP)—the total market value of all the goods and provides ample evidence that efficiency research and services produced in a country during one year—as education can pay enormous dividends. they did in 1970. Were it not for this development, Energy use per capita and per dollar of GDP from 1980 to 2030. 19