The U.S. Department of Energy’s Energy Information Administration is about to publish its annual best guess as to what the future will hold, energy-wise. But if the past is any guide, their best guess is likely to lowball renewable energy’s potential contribution. That has real implications for our nation’s efforts to tackle climate change. Here’s what to watch for when the 2015 Annual Energy Outlook comes out, and why it matters.
Renewables’ progress, EIA’s lag
Renewable energy has made incredible strides in recent years. Costs for rooftop solar systems dropped by half between 2009 and 2013—and 9-12% more in 2014—helping fuel explosive growth in solar power installations big and small. And the cost of energy from wind turbines fell by almost three-fifths from 2009 to 2014.
But you wouldn’t necessarily know about the great progress on wind/solar costs and performance from looking at the Annual Energy Outlook (AEO). EIA consistently uses cost estimates that are way higher than real-world data show—including data from the government’s own national laboratories.
My colleague Steve Clemmer pointed out some of the disconnects between the real world and EIA’s inputs several years ago. EIA’s capital cost assumptions for wind at the time were 20% higher than the costs from actual, steel-in-the-ground projects from the previous year, for example, and Lawrence Berkeley National Laboratory was predicting another 8-18% drop in the following two years—none of which EIA’s numbers captured.
The result, as we and dozens of others noted last year, is that EIA’s lowballing of progress results in projections for future renewable energy development that “have been unreasonably low and have not been borne out by actual experience.”
EIA has gotten better, and may be getting better still, but its modeling has continued to depend on costs that don’t reflect current reality.
Why the Annual Energy Outlook matters for the Clean Power Plan
So why do we care? Well, it turns out that the EPA depends an awful lot on the EIA and the AEO for guidance in the proposed Clean Power Plan (CPP) to bring some carbon sense to our power sector.
The EPA needs to know how much states can and should cut their carbon emissions under the CPP based on the economic and technical potential of carbon-cutting solutions. As part of that, the EPA needs to figure out how much renewables can contribute.
And to do that figuring, EPA has been relying on… yup, the EIA. EIA’s still overly conservative assumptions, though, meant that the renewables targets in the EPA’s draft plan were way lower than they would have been with assumptions based on how much wind and solar costs and performance have actually improved.
The EIA-to-EPA-to-CPP process and other aspects of the EPA’s CPP assessments made for some wacky predictions:
- Under EPA’s calculations, 17 of the 29 states with renewable electricity standards would get to lower levels of renewables than their own existing laws require them to.
- Seven states would have less renewable generation in 2030 than they have right now.
Lowballing renewable energy’s potential has consequences across the board: if EIA’s projections make you less able to envision renewables’ true role, for example, you might be overly disposed to gamble on too much natural gas, including for complying with the CPP.
When you fix the math—when you update inputs to reflect reality—you get a very different picture. Our analysis found that states could do almost twice as much non-hydro renewable energy as the EPA had proposed. That means the overall CPP target could be much stronger, too. (For a sample discussion of the changes we make in our modeling, and why, see here.)
Bohr and Berra: Making predictions
The EIA’s Annual Energy Outlook is an important opportunity to take stock of our energy situation. But that opportunity gets realized only if it’s built on a strong foundation.
We get that, as noted philosopher Yogi Berra (or maybe Danish physicist Niels Bohr) might have said, it’s tough to make energy predictions, especially about the future. We’re not looking for perfection in EIA’s modeling.
What we are looking for, though, is projections based firmly in the current reality, not outdated notions that don’t capture the incredible recent progress in renewable energy. As we and our allies put it last year, we need EIA to:
…re-evaluate the underlying assumptions and methodology being used in developing its renewable energy forecasts and provide projections that more closely reflect the current status and recent, real-world, growth rates of renewables.
If you don’t know where you stand, it’s a whole lot harder to guess where you’re going. And in a field as important—and exciting—as energy, it’s really important to have a clear picture of where we are and where we’re headed, to help us create the future we want and need.
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