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An Updated Annual Energy Outlook 2009 Reference Case Reflecting Provisions of the American Recovery and Reinvestment Act and Recent Changes in the Economic Outlook
 

2.  Summary of Impacts

The primary factors driving the differences between the published AEO2009 reference case and the no-stimulus case are the updated macroeconomic forecast and the adjustments to the near-term world oil prices.  However, other factors including the updated CAFE standards and the reintroduction of CAIR have impacts in specific sectors.

Figure 1. Non-Hydroelectric Renewable Generation (billion kilowatthours). Need help, contact the National Energy Information Center at 202-586-8800.
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Figure 2. Residential and Commercial Sector Energy Expenditures (billion 2007 dollars). Need help, contact the National Energy Information Center at 202-586-8800.
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Figure 3. Energy-Related Carbon Dioxide Emissions (million metric tons). Need help, contact the National Energy Information Center at 202-586-8800.
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Relative to the published AEO2009 reference case:

  • Gross domestic product (GDP) growth rates are substantially lower in the short term; although the long-run growth rate is only lower by 0.1 percentage points over the 23 years from 2007 to 2030.  Both investment and exports show the largest downward revisions due to higher projected inflation and interest rates and lower expected foreign growth.  Most of the differences between the revised reference with ARRA and the no-stimulus case occur within the first 6 years of the projection period, during which the ARRA provisions dampen the depth of the economic downturn.  However, by 2030 real GDP is higher in the no-stimulus case as a result of higher investment, lower interest rates, and lower inflation at the end of the period in the no-stimulus case.
  • Industrial output growth is lower, as exports and investment show slower projected growth.  Machinery and primary metals industrial growth slows as these sectors are impacted by exports and investment demand. The reduction in industrial output is due to revisions in forecasted final demands rather than any update in recent historical output.  Most of the differences in industrial output growth occur between the original and revised baselines rather than between the updated reference case with ARRA and the no-stimulus case.

When comparing the no-stimulus case to the updated reference case with ARRA, the largest impacts are seen in the renewable electricity and buildings sectors.  The key differences include:

Renewable Electricity

  • A significant expansion in the use of renewable fuels for electricity generation, particularly in the near-term.  The extension of key Federal tax credits and the new loan guarantee program in ARRA both stimulate increased renewable generation relative to the published AEO2009 reference case and the no-stimulus case (Figure 1).
  • By 2012, wind generation with the ARRA is expected to be more than twice that projected in the no-stimulus case, 201 billion kilowatthours compared to 86 billion kilowatthours and estimated generation of 53 billion kilowatthours in 2008.  Although wind capacity growth is projected to slow significantly after the expiration of the Federal tax credits in 2012, by 2030 total installed wind capacity is projected to be 67 percent greater because of the ARRA-stimulated growth than in the no-stimulus case.
  • Geothermal capacity is also projected to grow significantly more than in the no stimulus case.  Installed geothermal capacity in 2013 is 16 percent greater in the updated reference case with ARRA than in the no-stimulus case, 3.0 gigawatts, compared with 2.6 gigawatts.
  • Projected additions of new biomass capacity are also accelerated by the renewable electricity provisions of the ARRA, and by 2030, projected installed capacity is 18 percent higher compared to the no-stimulus case.

Buildings

  • Weatherization and efficiency improvements spurred by ARRA funding affect household heating and cooling energy use the most, reducing heating consumption by 1.7 percent in 2030 and cooling consumption by 3.4 percent in 2030.
  • The provisions of ARRA lead to lower household energy bills.  Over the 2009 to 2030 period, annual non-transportation household energy expenditures average $64 (real 2007 dollars) lower with ARRA, with a peak year difference of $98 (4.5 percent) lower in 2028.
  • ARRA funding for Federal buildings and the State Energy Program funds efficiency improvements for public buildings, reducing commercial fuel oil consumption by 3.0 percent in 2030.
  • The ARRA funding and emphasis on renewable energy projects foster an increase in commercial sector photovoltaic capacity of 121 megawatts (15 percent) by 2011.  The removal of the $4,000 cap on the investment tax credit for distributed wind turbines also provides an added boost, leading to a 120 megawatts (527 percent) increase in commercial sector wind capacity by 2016 in the updated reference case with ARRA.
  • ARRA reduces commercial sector energy expenditures by an average of $5.7 billion (2.7 percent) annually (real 2007 dollars) between 2010 and 2030.
  • Excluding transportation-related expenditures, total residential and commercial energy bills are $13 billion (2.6 percent) and $21 billion (3.8 percent) lower respectively in 2020 and 2030 (Figure 2).

Carbon Dioxide Emissions

  • Energy-related carbon dioxide emissions in the updated reference case with ARRA are 1.3 percent lower than in the no-stimulus case in 2013 because of ARRA’s impacts on renewable electricity generation and overall energy consumption (Figure 3).  By 2030, they continue to be below the level in the no-stimulus case, but only by 0.6 percent.  Again, the emission changes largely result from ARRA’s energy-efficiency and renewable incentives that lead to reduced use of fossil fuels.