Every year, the Energy Information Administration (EIA) releases a report on the future of energy in America. And every year, renewable energy advocates say the report is a bust.
The Annual Energy Outlook routinely overestimates the cost of wind and solar energy and underestimates the future price of fossil fuel costs, experts say, which can lead to less renewable energy development — which means greater focus on developing conventional energy sources, such as natural gas.
In the 2015 report, released Tuesday, the EIA predicted that the United States would only increase its use of renewable energy consumption from 8 percent to 10 percent by 2040. Coal will continue to account for 18–19 percent of U.S. energy consumption over the next 25 years, while natural gas’s slice of the pie will grow 2 percent, the group predicted. Other analysts, including Bloomberg New Energy Finance, expect the U.S. coal fleet to continue to diminish.
But lowballing renewables can have major impacts on our energy future, some experts say.
“Real policies are being designed around these assumptions,” Jeff Deyette, an analyst with the Union of Concerned Scientists, told ThinkProgress. For example, predictions that natural gas prices will be low can skew power plant developers away from choosing renewable resources.
Deyette blamed the low renewable projections on inertia at the government agency. Costs for solar, wind, and other renewables have dropped significantly over the past few years, and the rate of installation has greatly increased. These rapid changes can be hard to include in modeling that includes years of data, but in any case, there is a pattern in the EIA’s estimates. The EIA itself has reported that it was overly optimistic on natural gas prices for the past several years.
Meanwhile, estimates for wind capital costs have been high, said Michael Goggin, an analyst at the American Wind Energy Association (AWEA). Capital costs used for this year’s report have not been released, he said, but the pattern of underestimating fuel costs is a problem.
“It’s not just that they are wrong — any projection is going to be wrong — it’s that there is consistent bias” in the case of natural gas, Goggin said.
The discrepancies in predictions can be striking. The report this year predicts that by 2040, the U. S. will have added only 48 gigawatts of solar generating capacity. The Solar Energy Industries Association (SEIA) expects that the industry will add half of that by the end of 2016.
This difference is partly because the agency predicts that when the solar investment tax credit (ITC) expires in 2016, the utility sector of the industry will plummet.
“It’s going to be very hard for these plants to be competitive in a post-ITC world,” Gwen Bredehoeft, an EIA analyst, told ThinkProgress.
But Ken Johnson, a spokesman for the SEIA, said that the report is “based on some flawed assumptions.” In an email to ThinkProgress, Johnson acknowledged the failure to extend the ITC would be a huge economic blow for the industry, costing tens of thousands of jobs, but said SEIA was optimistic that the tax credit could be extended.
“Even if the ITC is not extended, the solar industry isn’t going to whither on the vine, as this report seems to indicate,” he wrote. “Advancements in technology, lower prices, consumer demand and climate change will help our industry to eventually bounce back and resume its growth.”
The Union of Concerned Scientist’s Deyette agreed that EIA’s projections were overly pessimistic for solar. “I think it’s really underestimating the growth potential and cost decline potential beyond [the expiration of the ITC],” he said.
According to data from the industry group, utility-scale prices have dropped 62 percent since 2010 — four years after the ITC went into effect. That price drop indicates that the scaling up of the industry the ITC was meant to foster has been responsible for more cost reduction that the 30 percent tax credit itself.
Indeed, one of the biggest problems with drawing conclusions from the EIA projections is that the agency does not factor in policy changes. If the ITC is extended, solar’s forecast could dramatically change. If more states and cities enact fracking bans, the outlook for natural gas could change.
Even the Environmental Protection Agency’s proposed Clean Power Plan, a rule that will limit the carbon emissions from power plants and is expected to dramatically reduce U.S. dependence on high-emission coal generation, is not accounted for in the EIA report — because the rule hasn’t been finalized yet.
Deyette said failure to accurately capture pricing data and more general changes in the direction of energy production makes the EIA’s report out of touch.
“It just doesn’t really pass the test of sensibilities in terms of where we’re going,” he said.