1. www.eia.gov U.S. Energy Information Administration Independent Statistics & Analysis For 2014 NYISO Energy Conference June 24, 2014 | New York, NY By Adam Sieminski, EIA Administrator Exploring the implications of low growth in electricity demand

2. In EIA’s AEO2014 Reference Case, growth in electricity use slows, but still increases by 29% from 2012 to 2040 percent growth (3-year compounded annual growth rate) Source: EIA, Annual Energy Outlook 2014 2 History Projections 2012 electricity use GDP Structural Change in Economy - Higher prices - Standards - Improved efficiency Annual Growth PeriodElectricity use GDP 1950s 9.8 4.1 1960s 7.3 4.4 1970s 4.7 3.2 1980s 2.9 3.0 1990s 2.4 3.2 2000-2012 0.7 1.8 2013-2040 0.9 2.4 2014 NYISO Energy Conference June 24, 2014

3. What might a low electricity demand growth future look like? Assumptions used to achieve low electricity demand growth: –Applied best available technology to buildings, and layered on greater industrial motor efficiency –Assumptions are technically achievable but not necessarily cost-effective at this time Shifts in demand are accompanied by changes in patterns of investment and prices –Consumers spend less for electricity, and utility bill savings nearly balance households’ increased costs for more efficient equipment, insulation, etc. –From 2012-2040, electricity generation capacity additions decline by about 50% relative to the AEO2014 Reference case, while retirements of fossil fuel-fired capacity more than double relative to the AEO2014 Reference case –Lower marginal energy prices in competitive wholesale electricity markets, relative to the AEO2014 Reference case –Declines in residential electricity generation prices are partially offset by near- term increases in transmission and distribution prices 2014 NYISO Energy Conference June 24, 2014 3

4. Historical and projected end-use electricity sales billion kilowatthours (with percent change, 2012-2040) Source: EIA, Monthly Energy Review and Annual Energy Outlook 2014 4 2014 NYISO Energy Conference June 24, 2014 Residential CommercialIndustrial Res+Com+Ind

5. Average electricity demand growth rates vary across regions 2014 NYISO Energy Conference June 24, 2014 5 2012 - 2040 Region Reference case Total U.S.0.80% New York City0.10% Long Island0.10% Upstate New York0.20% New England0.30% Eastern Wisconsin0.50% Mid Atlantic0.50% Lower Michigan0.50% Great Lakes0.60% Mississippi Basin0.60% Northern Plains0.70% Central Plains0.70% California0.90% Texas1.00% Florida1.00% Mississippi Delta1.00% Alabama/Georgia1.00% Tennessee Valley1.00% Virginia Carolina1.00% Southern Plains1.00% Northwest1.00% Arizona/New Mexico1.30% Rocky Mountain1.30% 2012 - 2040 Region Low Growth case Total U.S.0.00% New York City-0.70% Long Island-0.70% New England-0.60% Upstate New York-0.60% Lower Michigan-0.40% Eastern Wisconsin-0.30% Mid Atlantic-0.30% Great Lakes-0.30% Mississippi Basin-0.20% Northern Plains-0.10% Central Plains-0.10% Florida0.10% Alabama/Georgia0.10% Virginia Carolina0.10% Texas0.20% Mississippi Delta0.20% Tennessee Valley0.20% Southern Plains0.20% California0.20% Northwest0.40% Arizona/New Mexico0.50% Rocky Mountain0.50%

6. Utility bill savings nearly balance households’ increased costs for more efficient equipment, insulation Change in per-household expenditures and electric bills relative to Reference case 2012$ per year Source: EIA, Annual Energy Outlook 2014 2014 NYISO Energy Conference June 24, 2014 6 YearReferenceLow Growth 2020$1,434$1,228 2040$1,535$1,076 Table: Annual per household expenditures on electricity (2012$)

7. More fossil capacity is retired in the Low Growth case 7 2014 NYISO Energy Conference June 24, 2014 Source: EIA, Annual Energy Outlook 2014 Coal Natural Gas/Oil Nuclear Renewable / Other U.S. electric power sector capacity retirements gigawatts (cumulative) Reference case Low Growth case

8. 8 2014 NYISO Energy Conference June 24, 2014 Capacity additions decline dramatically in the Low Growth case Reference case Low Growth case U.S. electricity generation capacity additions gigawatts Capacity under construction is still assumed completed Projected renewable builds primarily occur in the buildings sector; power sector builds are much lower and are primarily natural gas-fired Source: EIA, Annual Energy Outlook 2014 History Projections History Projections 2012

9. In the Low Growth case, total carbon dioxide emissions from the electric power sector in 2040 are 22% below the Reference case 9 2014 NYISO Energy Conference June 24, 2014 Total carbon dioxide emissions million metric tons CO 2 Source: EIA, Annual Energy Outlook 2014 500 million metric tons 2012 HistoryProjections Reference case Low Growth case

10. 10 Gas generation grows much more slowly in the Low Growth case U.S. electricity net generation trillion kilowatthours Source: EIA, Annual Energy Outlook 2014 Reference case Natural gas Renewables Nuclear Coal 2012 30% 12% 19% 37% 35% 16% 32% Natural gas Nuclear Coal 44% 14% 27% Natural gas Renewables Nuclear Coal 24% 21% 19% 35% 2014 NYISO Energy Conference June 24, 2014 Low Growth case 2012 32% 19% 18% 31% Natural gas Renewables Nuclear Coal Projections History Projections 30% 12% 19% 37%

11. End use sales are flat in the Low Growth case, but direct use grows due to technology assumptions Total electricity use billion kilowatthours 2014 NYISO Energy Conference June 24, 2014 11 Reference case Low Growth case Direct Use Industrial Commercial Residential Direct Use Industrial Commercial Residential Source: EIA, Annual Energy Outlook 2014 2012 History Projections History Sales to the grid

12. Projected end-use electricity prices are lower in the Low Growth case Average end-use electricity price, all sectors 2012 cents per kilowatthour 2014 NYISO Energy Conference June 24, 2014 12 2012 HistoryProjections Reference case Low Growth case Source: EIA, Annual Energy Outlook 2014

13. Declines in residential electricity generation prices are partially offset by near-term increases in transmission and distribution prices 2014 NYISO Energy Conference June 24, 2014 13 2012 History Projections Source: EIA, Annual Energy Outlook 2014 Average electricity price components, residential sector 2012 cents per kilowatthour Reference case Low Growth case Generation price Transmission and distribution price

14. In the long term, lower demand growth leads to lower energy prices in competitive wholesale electricity markets Average marginal energy prices 2012$ per megawatthour Source: EIA, Annual Energy Outlook 2014, electricity model regions averaged to approximate existing ISOs/RTOs 1 The “Midwest” region combines the electricity model regions used to approximate the Midcontinent ISO (MISO) and the Southwest Power Pool (SPP). 2014 NYISO Energy Conference June 24, 2014 14

15. Delivered coal and natural gas prices are reduced in the Low Growth case Average delivered fuel prices to electric power plants 2012$ per million Btu Source: EIA, Annual Energy Outlook 2014 2014 NYISO Energy Conference June 24, 2014 15 HistoryProjections 2012 natural gas Reference case Low Growth case

16. EIA can run what-if scenarios and analyses which can help explore the various implications of grid modernization and fuel switching 2014 NYISO Energy Conference June 24, 2014 16 Fuel Switching –Drivers Levelized electricity costs Plant retirements – Accelerated retirements cases Changes in demand – Low demand growth case Policies – Reference case vs. Extended Policies case –Implications Projected changing electricity mix Projected capacity additions Grid Modernization –The NEMS model includes regional T&D with capacity limits and implicit cost assumptions –T&D losses could be varied

17. For more information U.S. Energy Information Administration 17 U.S. Energy Information Administration home page | www.eia.govwww.eia.gov Annual Energy Outlook | www.eia.gov/aeowww.eia.gov/aeo Short-Term Energy Outlook | www.eia.gov/steowww.eia.gov/steo International Energy Outlook | www.eia.gov/ieowww.eia.gov/ieo Monthly Energy Review | www.eia.gov/merwww.eia.gov/mer Today in Energy | www.eia.gov/todayinenergywww.eia.gov/todayinenergy State Energy Portal | www.eia.gov/statewww.eia.gov/state Drilling Productivity Report | www.eia.gov/petroleum/drilling/www.eia.gov/petroleum/drilling/

18. 18 Supplementary slides 2014 NYISO Energy Conference June 24, 2014

19. Low Growth case uses a combination of assumptions that result in zero growth in end-use electricity sales AEO2014 Best Available Demand Technology case assumptions for the buildings sectors –Future equipment purchases assume only the most efficient model is available for each technology –Consumers accept longer payback periods for efficiency investments –Residential new construction: shell efficiency is assumed to be code compliant and built to the most efficient specification after 2013 –Residential existing housing stock: shell efficiency improves by 32% for heating and 12% for cooling by 2040 vs. 17% and 6% in the Reference case –Commercial: shell efficiency improves by 23% for new construction and 10% for existing buildings by 2040 vs. 15% and 7% in the Reference case Reduction in industrial motor electricity use –Industrial motors for compressors, fans, and pumps: assumed reduction in motor average energy usage ranges from 10% (for 1-5 hp class) up to 32% (for 101-200 hp class) 2014 NYISO Energy Conference June 24, 2014 19

20. Average levelized electricity costs for new power plants, excluding subsidies, in the Reference case, 2020 and 2040 20 new power plant costs 2012 cents per kilowatthour Source: EIA, Annual Energy Outlook 2014 Incremental transmission costs Fixed costs Variable costs, including fuelCapital costs 2040 2020 2014 NYISO Energy Conference June 24, 2014

21. Accelerated power plant retirements and nuclear side case assumptions 21 Accelerated Coal Retirements case –Starts from AEO2014 High Coal Cost case, with coal prices 68% above Reference case in 2040 –Annual O&M increase of 3% in real terms from 2012 to 2040, compared to no increase in the Reference case Accelerated Nuclear Retirements case –No subsequent license renewals for nuclear units past 60 years compared to the Reference case assumption that license renewals allow units to operate beyond 60 years –Annual O&M increase of 3% in real terms from 2012 to 2040, compared to no increase in the Reference case Accelerated Coal and Nuclear Retirements case –Combines assumptions from the previous two cases Low Nuclear case –Same assumptions as the Accelerated Nuclear Retirements case plus High Oil and Gas Resource case assumptions, resulting in lower natural gas price trajectory No Sunset case assumptions, resulting in more renewable energy generation 2014 NYISO Energy Conference June 24, 2014

22. Natural gas and renewables capacity additions are expected to fill the void left by accelerated coal and nuclear retirements through 2040 22 cumulative capacity additions gigawatts Source: EIA, Annual Energy Outlook 2014 Renewables Coal Natural gas Nuclear 2014 NYISO Energy Conference June 24, 2014 Cumulative retirements of coal-fired generating capacity in four cases

23. Natural gas and renewables generation share increases through 2040 in accelerated retirement cases but overall electricity demand decreases slightly due to higher natural gas prices 23 net electricity generation billion kilowatt-hours Source: EIA, Annual Energy Outlook 2014 Petroleum Renewables Coal Natural gas Nuclear 2014 NYISO Energy Conference June 24, 2014

24. Delivered natural gas increases modestly across all cases by 2040 due to increase in natural gas demand for generation 24 natural gas prices 2012 dollars per thousand cubic feet Source: EIA, Annual Energy Outlook 2014 2014 NYISO Energy Conference June 24, 2014

25. U.S. electricity net generation trillion kilowatthours Source: EIA, Annual Energy Outlook 2014 Early Release 25 Over time the electricity mix gradually shifts to lower-carbon options, led by growth in natural gas and renewable generation 30% 19% 37% 12% 1% Nuclear Oil and other liquids Natural gas Coal Renewables 2012 ProjectionsHistory 16% 32% 35% <1% 1993 11% 13% 19% 53% 4% 30% 17% 37% 15% 1% 2025 2040 2014 NYISO Energy Conference June 24, 2014

26. 26 Changing electricity generation mix in AEO2014 reference case and extended policies side case U.S. electricity net generation trillion kilowatthours 2014 Reference Case 2012 Extended Policies Case 28% 23% 15% 32% Natural gas Renewables Nuclear Coal 1% 2014 NYISO Energy Conference June 24, 2014 30% 12% 19% 37% Natural gas Renewables Nuclear Coal 35% 16% 32% Source: EIA, Annual Energy Outlook 2014 Early Release and Preliminary side cases

27. Additional Analysis Case Definitions 27 $10 and $25 Carbon Dioxide Allowance Fee Cases Applies a price for CO2 emissions throughout the economy, starting at $10 or $25 per metric ton in 2015 and rising by 5 percent per year through 2040. Extended Policies Case Assumes extension of all existing energy policies and legislation that contain sunset provisions, except those requiring additional funding (e.g., loan guarantee programs) and those that involve extensive regulatory analysis, such as CAFE improvements and periodic updates of efficiency standards. Also includes extension of the $1.01 per gallon ethanol subsidy and $1.00 per gallon biodiesel subsidy to the end of the projection period. Low Electricity Demand Growth Case Assumes that all future equipment purchases in the residential and commercial sectors are made from a menu of technologies that includes only the most efficient models available in a particular year, regardless of cost. Residential building shells for new construction are all assumed to be code compliant and built to the most efficient specifications after 2013, and existing residential shells have twice the improvement of the Reference case. New and existing commercial building shell efficiencies improve 50 percent more than in the Reference case by 2040. Assumes greater improvement in industrial motor efficiency. 2014 NYISO Energy Conference June 24, 2014

28. 28 Changing electricity generation mix in Reference case and carbon dioxide fee allowance side cases U.S. electricity net generation 2014 Reference Case 2012 Natural gas $10 CO2 Allowance Fee Case Renewables Nuclear Coal 34% 23% 22% 19% Natural gas Renewables Nuclear Coal 32% 27% 38% 1% 30% 12% 19% 37% Natural gas Renewables Nuclear Coal 35% 16% 32% trillion kWh 2012 $/ton $25 CO2 Allowance Fee Case 2012 $/ton trillion kWh Source: EIA, Annual Energy Outlook 2014 Petroleum and other CO2 fee 2012 $/ton CO2 fee 2012 $/ton trillion kWh 2014 NYISO Energy Conference June 24, 2014

29. Gas-fueled units account for most projected capacity additions in the AEO2014 Reference case 29 U.S. electricity generation capacity additions gigawatts Source: Form EIA-860 & EIA Annual Energy Outlook 2014 2014 NYISO Energy Conference June 24, 2014

30. Growth in buildings sector distributed generation contributes to the shift toward natural gas and renewable generation 30 electricity net generation billion kilowatthours per year Source: EIA, Annual Energy Outlook 2014 Growth in PV generation expected to slow when the federal investment tax credit expires at the end of 2016 Buildings sector natural gas distributed generation technologies are modeled as CHP systems Buildings PV averages 6.9% growth per year 2012-2040 Natural gas-fired CHP generation experiences 8.3% growth per year bolstered by commercial sector use of microturbines 2014 NYISO Energy Conference June 24, 2014