The U.S. Energy Information Administration is notoriously conservative in its energy outlook, both in the U.S. and abroad.
That conservatism was openly acknowledged during a presentation for the organization's 2016 International Energy Outlook report today. “There are a lot of places where projection forecasts can go wrong,” said Adam Sieminski, EIA’s Administrator.
The hardest factors to predict: geopolitics and technological changes, said Sieminski.
In many ways, EIA forecasts aren't just a snapshot of business as usual today -- they're a snapshot of business as usual yesterday. EIA modeling often does not adequately take into account market and political forces that are already underway in its forward projections. It has aggressively been ratcheting down its predictions for coal use in recent years, for example.
The Paris climate agreement, signed by more than 170 countries, was not fully factored into the most recent EIA outlook even though it was initially adopted nearly five months ago. When asked specifically how much of December’s Paris climate agreement was included in the projections, Sieminski answered honestly: “That’s a complicated question.”
EIA does factor in policies as part of the Paris agreement -- but only those that are already solidified as national law and reflected in regional aggregates. The organization does not specifically address every individual country, Sieminski added.
In this current international projection, EIA also does not account for the Clean Power Plan, which is now in legal limbo. The upcoming U.S. energy outlook will factor in the carbon rules.
As a result, EIA forecasts nearly 50 percent growth in global energy demand by 2040, while the International Energy Agency sees world energy demand growing by just under one-third in the same timeframe.
Even though the EIA’s methodology may not be as robust as some would like, the agency outlines the same trend documented by other agencies: developing economies will drive up global energy use and fossil fuels will not be supplanted anytime soon.
EIA forecasts that developing Asian economies, including China and India, will be responsible for more than half of the global growth through 2040. Industry will remain the dominant end user of energy through 2040.
Even that outlook could change, however. The agency noted that just two years ago, reference case projections estimated China would consume 122 quadrillion Btu of coal in 2040. Now that figure is 83 quadrillion Btu of coal in 2040.
Coal use may decline even further. EIA forecasts a small uptick in coal use in China until about 2022, but some Chinese government data suggests peak coal may have already been reached.
However, both IEA and EIA agree fossil fuels will make up approximately three-quarters of the world energy supply in 2040 -- split between oil, coal and natural gas.