US EIA Projected the Future of Electricity Generation in 2001. Why Were They So Wrong?

By James Morton Turner, an environmental studies professor at Wellesley College and author of the forthcoming book Charged: A History of Batteries and Lessons for a Clean Energy Future. He published the lead op-ed in the journal Science’s special climate change issue two weeks ago (June 24, 2022).

Back in 2001, the U.S. Energy Information Administration peered into its crystal ball and forecast the future of the U.S. electricity supply through 2020. In retrospect, there is a lot to learn from what the EIA got right, and, if you care about the future of clean energy, what it got wrong.

The EIA’s forecasts looked a lot like more of the same. In short, they expected the start of the 21st century to look a whole lot like the end of the 20th century. They forecast more coal, a small role for renewables, and steady growth in total electricity demand.  The one big change the EIA anticipated was a boom in the use of natural gas for electricity generation.

For natural gas, at least by the numbers, it looks like the EIA got it right. As the agency predicted, electricity generation from natural gas nearly tripled. But the EIA expected this shift to be driven primarily by the turn to lower-cost and more efficient natural gas generators at electric utilities.

But that was only part of the story. What the agency missed was how much the supply side of the natural gas equation would change. Even in 2001, no one anticipated how hydraulic fracking would transform the natural gas industry — driving up supply and holding prices steady. By 2020, fracked natural gas accounted for two-thirds of domestic natural gas production.

The EIA did not anticipate the collapse of the coal. In 2001, it seemed like U.S. reliance on coal for electricity generation was a given. The EIA forecast that coal-fired electricity generation would grow 27 percent between 2001 and 2020. As we now know, the opposite happened. As natural gas generation boomed, the use of coal for electricity generation fell by a whopping 60 percent.

What explains the decline of coal? The obvious answer is the rise of natural gas. But that would overlook the role of renewables and changes in the overall demand for electricity. In 1999, the EIA was not expecting non-hydro renewables to be a major source of electricity. What growth it did anticipate, it expected to come from burning biomass and municipal-solid waste (we can leave aside whether those should be considered “renewable” at all).

Where did wind and solar fit in? In the EIA’s 2001 analysis, they did not. The agency expected wind and solar to amount to a rounding error in their analysis, adding up to just 0.5 percent of U.S. electricity demand in 2020. And, on this point, the forecasts were tremendously wrong. Wind and solar grew at a record pace after 2000, growing to meet 12 percent of U.S. electricity demand in 2020. That was twenty times more than the EIA forecast in 2001.

Why was the EIA so off with regards to wind and solar power?

Why was the EIA so far off? In its view, the high cost of renewables would continue to limit deployment. The agency could not foresee policies that would give renewables a leg up in the early 2000s — including net-metering for solar and investment tax credits to support renewables. But, most importantly, the agency did not foresee that the price of wind and solar would fall much faster than anticipated, especially as deployment began to scale.

The other interesting projection is the EIA’s expectations for total electricity demand. Even though the EIA adopted lower projections for electricity demand, based on the adoption of new efficiency standards and adoption of more efficient equipment, it still expected overall electricity demand to increase by 34 percent by 2020. But it turns out that transitioning to LED light bulbs (and many other efficiency improvements) added up. Overall electricity demand only grew by 14 percent.

Put all of this together and it reveals one final surprise. In 2001, the EIA expected CO2 emissions from electricity generation to grow 28 percent to 2.73 billion metric tons in 2020. But the slower growth in electricity demand, the rise of renewables, and the shift to natural gas, dramatically changed the CO2-intensity of the electricity sector. In 2020, actual CO2 emissions from electricity totaled 1.55 billion metric tons — 43 percent lower than what the EIA forecast in 2001. That means U.S. CO2 emissions from the electricity sector are lower than they were in 1990, even though electricity generation is up 33 percent.

What lessons can we draw from the EIA’s energy projections as we anticipate a clean energy transition? The first lesson is just how hard it is to anticipate, much less forecast, the rapid transformation of the electricity sector. That points toward the second lesson. History reminds us that change can happen a lot faster than anyone anticipates. And right now, given the urgency of addressing climate change, we need a lot of change.

This post is adapted from James Morton Turner’s forthcoming book, Charged: A History of Batteries and Lessons for a Clean Energy Future (August 2022). You can learn more about Charged at http://charged-the-book.com

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