This group brings together the best thinkers on energy and climate. Join us for smart, insightful posts and conversations about where the energy industry is and where it is going.


EIA's Annual Energy Outlook is a Projection, Not a Prediction

graph of U.S. energy production and consumption, as explained in the article text

Source: U.S. Energy Information Administration, Annual Energy Outlook 2016 Reference case

The U.S. Energy Information Administration provides a long-term outlook for energy supply, demand, and prices in its Annual Energy Outlook (AEO). This outlook is centered on the Reference case, which is not a prediction of what will happen, but rather a modeled projection of what might happen given certain assumptions and methodologies. Today, EIA released an annotated summary of the AEO2016 Reference Case—which includes the Clean Power Plan—and a side case without the Clean Power Plan.

The AEO is developed using EIA’s National Energy Modeling System (NEMS), an integrated model that seeks to reflect how various drivers of the U.S. economy and the different components of energy production and use will interact to determine energy supply, demand, and prices.

The Reference case, which incorporates only existing laws and policies, is not intended to be a most likely prediction of the future. EIA’s approach to addressing the inherent uncertainty surrounding the country’s energy future is to develop multiple cases that reflect different sets of internally consistent assumptions about key sources of uncertainty such as future world oil prices, macroeconomic growth, energy resources, technology costs, and policies.

The alternative cases in the report show the model’s sensitivity to different assumptions, which EIA updates and publishes each year. The assumptions that inform the modeling play an important role, and any results should be interpreted with the underlying assumptions in mind. These assumptions and results are discussed in the Annual Energy Outlook and EIA’s policy analysis reports such as the studies of removing restrictions associated with U.S. crude oil exports or the then-proposed version of the Clean Power Plan.

Policy assumptions tend to be especially complicated. In the United States, policies at the federal, state, and local levels can all affect energy supply, demand, and prices. Often these policies have timelines or other attributes that are revised by subsequent legislation or interpreted by executive departments. Some policies can interact in ways that are difficult to foresee. The AEO Reference case generally reflects current laws and regulations within the simplified but often expanding modeling parameters of NEMS.

Technological advances are also inherently difficult to anticipate. The Reference case typically projects technological evolutions rather than technological revolutions. For instance, energy production methods may become more effective and energy-consuming equipment may become more efficient in the Reference case, but EIA does not attempt to identify disruptive technologies or the timing of their availablity and widespread adoption.

The energy sector has always been dynamic and undoubtedly will continue to change in the future. EIA has tried to make its projections as objective, reliable, and useful as possible. However, the projections in the AEO should be interpreted with a clear understanding of the assumptions that inform them and the limitations inherent to any modeling effort.

Principal contributor: Owen Comstock

Original Post

U.S. EIA: Today in Energy's picture

Thank U.S. EIA: for the Post!

Energy Central contributors share their experience and insights for the benefit of other Members (like you). Please show them your appreciation by leaving a comment, 'liking' this post, or following this Member.


Joe Deely's picture
Joe Deely on May 19, 2016 7:58 am GMT

Unbelievable… these guys are already trying to cover themselves with this “projection” vs prediction. They’ll need all the CYA that they can muster because as usual their analysis is just pitiful. Does anybody review these reports before they send them out?

To pick one small item – let’s see how EIA does with coal in this report. Note: I am using EIA terminology Billions of KWh. Kind of confusing but that’s what they have.

Looking at the Total Net Energy Generation for Coal – here we see coal going from 1,582B kWh in 2014 to 1,355B kWh in 2015. Wow they got that right! So at least they have historical data correct.

So – how about 2016 – the year we are currently in – that should be easy right? EIA knows that a bunch of coal plants are closing this year. They know the price of natural gas. They know that a bunch of renewables were installed last year and that a lot more will be installed this year.
So what is there “projection” for coal 2016? They have coal at 1,357B kWh. Flat to up slightly. How could you possibly come up with that?

This preliminary outlook was released in May. Wouldn’t you think that someone might sneak a look at how coal was doing YTD. If you look at the most recent EIA Monthly Electricity Report – which has Jan-Feb – Coal is down from 260B kWh to 207B kWh over 20%. Yet they think that coal for the year will be flat to slightly up??

Let’s see if they have this fixed by time final report comes out in July. Somehow, I doubt it.

Get Published - Build a Following

The Energy Central Power Industry Network is based on one core idea - power industry professionals helping each other and advancing the industry by sharing and learning from each other.

If you have an experience or insight to share or have learned something from a conference or seminar, your peers and colleagues on Energy Central want to hear about it. It's also easy to share a link to an article you've liked or an industry resource that you think would be helpful.

                 Learn more about posting on Energy Central »