Commodities Now: The U.S. Energy Information Administration ( EIA) has released the complete version of Annual Energy Outlook 2011 (AEO2011), which includes 57 sensitivity cases that show how different assumptions regarding market, policy, and technology drivers affect the previously released Reference case projections of energy production, consumption, technology, and market trends and the direction they may take in the future.

“EIA’s projections indicate strong growth in shale gas production, growing use of natural gas and renewables in electric power generation, declining reliance on imported liquid fuels, and projected slow growth in energy-related carbon dioxide emissions in the absence of new policies designed to reduce them,” said EIA Administrator Richard Newell. “But variations in key assumptions can have a significant impact on the projected outcomes.”

In addition to considering alternative scenarios for oil prices, economic growth, and the uptake of more energy-efficient technologies, the AEO2011 sensitivity cases explore important areas of uncertainty for markets, technologies, and policies in the U.S. energy economy.

Key results highlighted in AEO2011 include:

• U.S. reliance on imported liquid fuels falls due to increased domestic production including biofuels and greater fuel efficiency. Although U.S. consumption of liquid fuels continues to grow through 2035 in the Reference case, reliance on petroleum imports as a share of total liquids consumption decreases. Total U.S. consumption of liquid fuels, including both fossil fuels and biofuels, rises from about 18.8 million barrels per day in 2009 to 21.9 million barrels per day in 2035 in the Reference case. The import share, which reached 60 percent in 2005 and 2006 before falling to 51 percent in 2009, falls to 42 percent in 2035. Sensitivity cases illustrate opportunities for further reductions in U.S. reliance on imported liquid fuels through additional increases in fuel efficiency or domestic liquid fuels production.

• Domestic shale gas resources support increased natural gas production with moderate prices, but assumptions about resources and recoverability are key uncertain factors. Shale gas production continues to increase strongly through 2035 in the AEO2011 Reference case, growing almost fourfold from 2009 to 2035 when it makes up 47 percent of total U.S. production¿up considerably from the 16-percent share in 2009.

Although more information on shale resources has become available as a result of increased drilling activity in developing shale gas plays, estimates of technically recoverable resources and well productivity remain highly uncertain. Over the past decade, as more shale formations have gone into commercial production, the estimate of technically and economically recoverable shale gas resources has skyrocketed. However, the increases in recoverable shale gas resources embody many assumptions that might prove to be incorrect over the long term. Alternative cases in AEO2011 examine the potential impacts of variation in the estimated ultimate recovery per shale gas well and the assumed recoverability factor used to estimate how much of the play acreage contains recoverable shale gas.

• Proposed environmental regulations could alter the power generation fuel mix. The EPA is expected to enact several key regulations in the coming decade that will have an impact on the U.S. power sector, particularly the fleet of coal-fired power plants. Because the rules have not yet been finalized, their impacts cannot be fully analyzed, and they are not included in the Reference case.

However, AEO2011 does include several alternative cases that examine the sensitivity of power generation markets to various assumed requirements for environmental retrofits. The range of coal plant retirements varies considerably across the cases, with a low of 9 gigawatts (3 percent of the coal fleet) in the Reference case and a high of 73 gigawatts (over 20 percent of the coal fleet) in the most extreme case.

Electricity generation from natural gas is higher in 2035 in all the environmental regulation sensitivity cases than in the Reference case. The faster growth in electricity generation with natural gas is supported by low natural gas prices and relatively low capital costs for new natural gas plants, which improve the relative economics of gas when regulatory pressure is placed on the existing coal fleet. In the alternative cases, natural gas generation in 2035 varies from 1,323 billion kilowatthours to 1,797 billion kilowatthours, compared with 1,288 billion kilowatthours in the Reference case.

• Assuming no changes in policy related to greenhouse gas emissions, carbon dioxide emissions grow slowly. Energy-related CO2 emissions grow slowly in the AEO2011 Reference case due to a combination of modest economic growth, growing use of renewable technologies and fuels, efficiency improvements, slow growth in electricity demand, and more use of natural gas, which is less carbon-intensive than other fossil fuels.

In the Reference case, which assumes no explicit regulations to limit greenhouse gas (GHG) emissions beyond vehicle GHG standards, energy-related CO2 emissions do not return to 2005 levels (5,996 million metric tons) until 2027, growing by an average of 0.6 percent per year from 2009 to 2027, or a total of 10.6 percent. CO2 emissions then rise by an additional 5 percent from 2027 to 2035, to 6,311 million metric tons in 2035. The projections for CO2 emissions are sensitive to many factors, including economic growth, policies aimed at stimulating renewable fuel use or low-carbon power sources, and any policies that may be enacted to reduce GHG emissions, all of which are explained in sensitivity cases.

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The projections from the complete AEO2011, including the Reference case, all of the alternative cases, supplemental tables showing the regional projections, as well as a report on the major assumptions underlying the projections, can be accessed on EIA’s Internet site: www.eia.gov/forecasts/aeo