Differences in long-run economic forecasts can be traced primarily to different views of the major supply-side determinants of growth: labor force and productivity change. Other forecasts are presented in Table 12. The WEFA forecast shows the highest economic growth compared to the AEO99 and DRI reference cases, including higher growth rates for the labor force. The AEO99 long-run forecast of economic growth is higher than the AEO98 forecast by 0.2 percent, when compared on a similar basis, with a projected annual growth rate for GDP of 1.8 percent from 1997 to 2020.

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(BTAB) are shown in Table 13 (IEA, 1996; PEL, February 1998; PIRA, October 1997; NRCan, April 1997; BTAB, September 1998). With the exception of IEA in 2005 and PEL, the range between the AEO99 low and high world oil price cases spans the range of other published forecasts beyond 2005.

Table 13. Forecasts of world oil prices, 2000-2020 1997 dollars per barrel

Total Energy Consumption

The AEO99 forecast of end-use sector energy consumption over the next two decades shows far less volatility than has occurred historically. Between 1974 and 1984, volatile world oil markets dampened domestic oil consumption. Consumers switched to electricity-based technologies in the buildings sector, while in the transportation sector new car fuel efficiency nearly doubled. Natural gas use declined as a result of high prices and limitations on new gas hookups. Between 1984 and 1995, however, both petroleum and natural gas consumption rebounded, bolstered by plentiful supplies and declining real energy prices. As a consequence, new car fuel efficiency in 1995 was less than 2 miles per gallon higher than in 1984, and natural gas use (residential, commercial, and industrial) was almost 25 percent higher than it was in 1984.

Given potentially different assumptions about, for example, technological developments over the next 20 years, the forecasts from DRI, GRI, and WEFA have remarkable similarities to those in AEO99. Electricity is expected to remain the fastest growing source of delivered energy (Table 14), although its rate of growth is down sharply from historical rates in each of the forecasts, because many traditional

uses of electricity (such as for air conditioning) approach saturation while average equipment efficiencies rise. Petroleum consumption grows at the same rate as in recent history. Consumption growth for the remaining fuels slows as a result of moderating economic growth, fuel switching, and increased end-use efficiency.

Residential and Commercial Sectors

Growth rates in energy demand for the residential and commercial sectors are expected to decrease by more than 60 percent from the rates between 1984 and 1996, largely because of projected lower growth in population, housing starts, commercial floorspace additions, and colder winter weather in 1996. Other contributing factors include increasing energy efficiency due to technical innovations and legislated standards; voluntary government efficiency programs; and reduced opportunities for additional market penetration of such end uses as air conditioning.

Differing views on the growth of new uses for energy contribute to variations among the forecasts. By fuel, electricity (excluding generation and transmission losses) remains the fastest growing energy source for both sectors across all forecasts (Table 15). Natural gas use also grows but at lower rates, and petroleum use continues to fall.

it did between 1984 and 1996 (Table 16). The decline is attributable to lower growth for GDP and manufacturing output. In addition, there has been a continuing shift in the industrial output mix toward less energy-intensive products. The growth rates in the industrial sector for different fuels between 1984 and 1996 reflect a shift from petroleum products and coal to a greater reliance on natural gas and electricity. Natural gas use grows more slowly than in recent history across the forecasts, because much of the potential for fuel switching was realized during the 1980s. A key uncertainty in industrial coal forecasts is the environmental acceptability of coal as a boiler fuel.

Table 16. Forecasts of average annual growth in industrial energy demand (percent)

1.1

Electricity losses

1.2

0.3

0.9

2.4

1.6

Primary energy

1.9

0.8

0.8

1.6

1.2

Industrial Sector

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growth cases (4,013 and 4,687 billion kilowatthours, respectively). Different assumptions governing expected economic activity, coupled with diversity in the estimation of penetration rates for energyefficient technologies, are the primary reasons for variation among the forecasts.

All the forecasts compared here agree that stable fuel prices and slow growth in electricity demand relative to GDP growth will tend to keep the price of electricity stable or declining in real terms-until 2020.

Both the DRI and GRI forecasts assume that the electric power industry will be fully restructured, resulting in average electricity prices that approach long-run marginal costs. AEO99 also assumes that competitive pressures will grow and continue to push prices down until the later years of the projections. AEO99 also assumes that increased competition in the electric power industry will lead to lower operating and maintenance costs, lower general and administrative costs, early retirement of inefficient generating units, and other cost reductions. Further, in the DRI forecast, it is assumed that time-of-use electricity rates will cause some flattening of electricity demand (lower peak period sales relative to average sales), resulting in better utilization of capacity and capital cost savings.

The distribution of sales among sectors affects the mix of capacity types needed to satisfy sectoral demand. Although the AEO99 mix of capacity among fuels is similar to those in the other forecasts, small differences in sectoral demands across the forecasts lead to significant changes in capacity mix. For example, growth in the residential sector, coupled with an oversupply of baseload capacity, results in a need for more peaking and intermediate capacity than baseload capacity. Consequently, generators are expected to plan for more combustion turbine and fuel cell technology than coal, oil, or gas steam capacity.

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