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 elec tricity. 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.

Industrial Sector

89

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.

Forecast Comparisons

Natural Gas

The diversity among published forecasts of natural gas prices, production, consumption, and imports (Table 19) indicates the uncertainty of future market trends. Because the forecasts depend heavily on the underlying assumptions that shape them, the assumptions should be considered when different projections are compared. The forecasts for total natural gas consumption in 2015 vary from a high of 32.99 trillion cubic feet in the AEO99 high economic growth case to a low of 28.43 trillion cubic feet in the low economic growth case. The variation in the 2020 projections is even greater, with the higher projection only 16 percent above the lower projection in 2015 but 22 percent above the lower projection in 2020. The high projection for 2020 is 34.81 trillion cubic feet in the AEO99 high economic growth case, compared with a low of 28.58 trillion cubic feet in the DRI forecast.

The American Gas Association (AGA) forecast (July 1998) for growth in residential consumption relative to historical levels is significantly higher than the others, whereas the DRI and WEFA forecasts of growth in commercial consumption lag behind the rest, even by 2020. GRI is the most optimistic about the future of industrial consumption, in both absolute and percentage growth terms. By a large margin, all forecasters expect the greatest growth to be in the electricity generator sector, with WEFA leading the pack. The DRI growth rate for generator consumption of natural gas through 2020 is less than one-third of WEFA's forecast (although it should be noted that DRI includes cogenerators in this category).

The projections of average lower 48 natural gas wellhead prices in 2015 in the AEO99 high economic

growth and reference cases are higher than the other forecasts, with the lowest price across all forecasts coming from WEFA, at 15 percent below the AEO99 reference case and 3 percent below the low economic growth case. By 2020 the wellhead price forecasts from DRI and WEFA fall within the range of the AEO99 cases, with DRI above the AEO99 reference case and WEFA below. Excluding the AEO99 low economic growth case, the 2015 residential and commercial prices are highest for GRI and lowest for AGA, with a differential between the two of $0.79 and $0.97 (13 and 19 percent), respectively, for the two sectors (however, the AGA prices do not include some State and local taxes).

The industrial (and to a lesser extent the electricity generator) sectoral prices are difficult to compare in absolute terms because of differences in definitions across the forecasting groups. For 2015, the AEO99 reference case, DRI, and WEFA forecast slight growth in industrial prices, GRI a slight decline, and AGA a more significant decline. From 2015 to 2020 the DRI forecast for the industrial price increases more significantly than the others, which show more moderate growth or a slight decline (in the AEO99 low economic growth case).

There are significant differences in the projected growth rates for natural gas prices to electricity generators. GRI, WEFA, and AGA project a slight decline through 2015, whereas DRI projects slight growth and AEO99 more significant growth, especially in the high economic growth case. Through 2020, the DRI forecast for gas prices to electricity generators rises more rapidly, coming close to the AEO99 reference case forecast, with the WEFA and EIA forecasts showing only moderate or no growth.