Energy Industry Profile*
By Vikram Koundinya, graduate student, Iowa State University and Ray Hansen, program director, AgMRC, Iowa State University, firstname.lastname@example.org.
Updated April 2009 by Malinda Geisler, AgMRC, Iowa State University, email@example.com.
The largest source of energy in the United States is fossil fuels (coal, petroleum and natural gas). Use of individual fossil fuels changed at different rates over the decades, but all three major forms have been essential to meeting the nation’s energy requirements. In 1949, fossil fuel consumption in the United States totaled 29 quadrillion British thermal units (Btu); in 2007, the total was 86 quadrillion Btu. A second major form of energy is nuclear power, which got its start in the United States in 1957 when the Shippingport, Pennsylvania, nuclear electric power plant came on line. By 2005, the industry had expanded to supply 19 percent of the nation’s electrical output and 12 percent of all energy used in the country. The third form of energy is the renewable forms, which include conventional hydroelectric power; biomass such as wood, waste and alcohol fuels; geothermal; solar; and wind.
Before the expansion in fossil fuel use that began with coal in the late 1800s, wood was the primary fuel used in this country. Today, the United States is looking again at renewable resources to find new ways to use them to help the country meet its energy needs. In recent years, all forms of renewable energy together accounted for 6 percent of U.S. total energy consumption.
Per Capita Energy Consumption
Energy use per person stood at 215 million Btu in 1949. The rate generally increased until the oil price shocks of the mid 1970s and early 1980s when the trend reversed for a few years. From 1988 onwards, the rate held fairly steady. In 2007, 339 million Btu of energy were consumed per person.
Energy Usage Overview, 1949-2007
Since the mid 1950s, domestic usage of energy has exceeded the domestic production levels of all energy used by industry, transportation, commercial and residential users. With the exception of a brief rollback in the late 1970s and early 1980s, domestic consumption continues to outpace production despite additional technology that has created new energy resources and improved the production efficiencies of traditional energy supplies. In 2007, net imported energy accounted for 29 percent of all energy consumed.
Energy Consumption by Source
Most energy consumed in the United States comes from fossil fuels. Renewable energy sources supplied a relatively small but steady portion. In the late 1950s, nuclear fuel began to generate electricity, and in most years since 1988, nuclear electric power surpassed renewable energy.
Wood served as the preeminent form of energy for about half of the nation’s history. Around 1885, coal surpassed wood’s usage. Despite its tremendous and rapid expansion, coal was overtaken by petroleum in the middle of the 20th century. Natural gas also experienced rapid development into the second half of the 20th century, and coal began to expand again. Late in the 20th century still another form of energy, nuclear electric power, was developed and made significant contributions.
Energy Production by Major Source
Most energy produced in the United States comes from fossil fuels. Renewable energy resources supplied a relatively small but steady portion. Coal, the leading source at the middle of the 20th century, was surpassed by crude oil and natural gas for many years, but again became the leading source of energy in the mid-1980s, used primarily for electric generation.
In 1949, United States was self-sufficient in energy—producing and consuming 32 quadrillion Btu, importing less than 1.5 quadrillion Btu and exporting less than 1.6 quadrillion Btu. Over the following decades, consumption expanded rapidly, and for many years, production kept pace. By the early 1960s, however, indigenous supplies were no longer sufficient to meet demand. As domestically produced energy fell or remained flat in subsequent years, the nation turned to imported supplies. By 2007, Americans consumed just about 102 quadrillion Btu, with only 69 quadrillion from native resources and the remainder from other countries. Most imported energy was in the form of petroleum. In recent years, natural gas imports have grown, primarily from Canada. Exported energy was mainly in the form of coal until the late 1970s when petroleum exports expanded.
Most net generation of electricity came from coal. In fact, in 2007, fossil fuels (coal, petroleum and natural gas) accounted for 72 percent of all net generation, nuclear electric power contributed 19 percent and renewable energy resources nine percent. Most of the net generation for renewable energy resources was derived from hydroelectric power.
Energy Consumption History and Outlook
While the nation’s energy history is one of large-scale change as new forms of energy were developed, the outlook for the next couple of decades is for continued growth and reliance on the three major fossil fuels—petroleum, natural gas and coal; modest expansion in renewable resources; and relatively flat generation from nuclear electric power.
Energy Consumption by Sector
The main four sectors of energy consumption are relatively evenly divided in terms of percentages of consumption. Industrial uses lead the energy consumption sectors with 32 percent of the demand followed by transportation at 28 percent, residential at 22 percent and commercial applications using 18 percent.
The industrial sector of the economy used the largest share of energy and showed the greatest volatility. Steep drops occurred in 1975 and 1980 to 1983 in response to high oil prices.
Energy Consumption by End-Use Sector, 1949 to 2007
U.S. natural gas production and consumption were close to balance through 1986. When consumption began to outpace production, imports of natural gas rose to meet requirements for fuel. Consumption in 2007 was 23.7 trillion cubic feet (Tcf), production at 19.8 Tcf and net imports at 3.9 Tcf.
Gas well productivity, measured as gross withdrawals per day per well, peaked in 1971 and then fell until the mid-1980s. Productivity remained steady from 1985 through 1999 and then fell annually through 2005.
Net imports as a share of consumption registered in the 4 percent to 6 percent range from 1970 through 1987. Net imports measured 4.2 percent of consumption in 1986, which was followed by consumption increases that outpaced production growth. Net imports in 2002 accounted for 16 percent of consumption. The share fell in 2003 and then rose again in 2004 and 2005.
The industrial sector was both the largest consuming sector of natural gas and the greatest volatility sector over the years due to variability in industrial output. The electric power sector accounted for nearly one-fourth of all natural gas consumption in 2002. In 2005, industrial sector accounted for 35 percent of all natural gas consumption.
Natural gas consumption is expected to increase from 20.4 Tcf in 2007 to 23.7 Tcf in 2030. Average wellhead natural gas prices are expected to increase from $6.39 per thousand cubic feet in 2007 to $8.40 per Tcf in 2030.
As a result of technological improvements and rising natural gas prices, natural gas production from unconventional sources (tight sands, shale, and coal bed methane) is projected to increase more rapidly than conventional production. This is projected to result in the net import share of U.S. total natural gas to change from 16 percent in 2007 to less than 3 percent in 2030.
The government outlook expects the Alaska natural gas pipline to be completed in 2020. Once in service, Alaska's total natural gas production is projected to increase to 2 trillion cubic feet in 2021.
When U.S. domestic production of petroleum peaked at 11.3 million barrels per day in 1970, net imports stood at 3.2 million barrels per day. As domestic production declined, consumption grew. In 1996, net imports exceeded production. In 2007, domestic production was 5.1 million barrels per day and net imports were 12.1 million barrels per day.
Crude oil production peaked in the lower 48 states at 9.4 million barrels per day in 1970. As production fell, Alaska’s production came on line and helped supply U.S. needs. Alaskan production peaked at 2.0 million barrels per day in 1988. In 2007, production stood at .72 million barrels. Crude oil productivity was 10.1 barrels per day per well in 2005, 46 percent below the peak (18.6 barrels per day per well in 1972).
Over the second half of the 20th century, transportation was the largest consuming sector of petroleum and the one showing the greatest expansion. In 2007, 14.25 million barrels per day of petroleum products were consumed for transportation purposes, accounting for 68 percent of all petroleum used.
Motor gasoline is the single largest petroleum product consumed in the United States. Its consumption stood at nearly 9.3 million barrels per day in 2007. Distillate fuel oil and Liquefied Petroleum Gas (LPG) were other important products.
Unadjusted for inflation (nominal dollars), the refiner acquisition composite (domestic and foreign) cost of crude oil reached $35.24 per barrel in 1981. The price fell dramatically over the years that followed, reaching $18 per barrel in 1999. After that it rose again and was at $50.23 per barrel in 2005, a new peak nominal level and up 36 percent over the 2004 price.
In nominal dollars, Americans paid an average of 65 cents per gallon for motor gasoline in 1978. The 2005 average price of $2.34 was 260 percent higher than the 1978 rate, but adjusted for inflation, it was 46 percent higher.
Projected U.S. petroleum consumption varies with the projected crude oil price, but the largest variation is seen for different assumptions about economic growth. Total consumption in 2025 ranges from 26.9 million to 31.8 million barrels per day in the low and high growth cases, respectively.
Domestic crude oil production and other domestic production were 5.07 and 3.59 million barrels per day respectively in 2007. By 2030 they are expected to go up to 7.38 and 5.39 million barrels per day respectively. Domestic supply in 2030 is projected to total 7.4 million barrels per day.
In 2007, net imports of petroleum were 26 quadrillion Btu, while the consumption was 40.75 quadrillion Btu. Net imports are expected to change to 18.44 quadrillion Btu, while the consumption for 2030 is projected at 41.5 quadrillion Btu.
Unlike petroleum or natural gas, domestic supplies of coal nearly always outpaced U.S. consumption of the resource at 1,069 metric short tons. Coal exports peaked at 113 million short tons in 1981. In 2002, the United States exported 43 million short tons, over a third of it to Canada. In 2005 exports stood at 50 million short tons. In 2004 and 2005, however, production and consumption were in balance at 1.11 billion short tons produced and consumed in 2004 and 1.13 billion short tons produced and consumed in 2005. In 2007, 1.15 billion short tons of coal was produced and 1.13 billoin short tons were consumed in the United States.
In the 1950s, most coal was consumed in the industrial sector, many homes were still heated by coal and the transportation sector consumed coal in steam-driven trains and ships. By the 1960s, most coal was used for generating electricity. In 2007, the electric power sector’s share stood at 92 percent of all coal consumption.
Coal consumption stood at 22.7 quadrillion Btu in 2007 and is expected to rise to 26.4 quadrillion Btu by 2030. Domestic coal demand is projected to increase from 1,129 million tons in 2007 to 1,358 million tons in 2030, because of projected growth in coal use for electricity generation. Total coal demand in other domestic end-use sectors is projected to remain relatively constant.
Although coal is projected to maintain its fuel cost advantage over both oil and natural gas, gas-fired generation is expected to be the most economical choice for construction of new power generation units in most situations, when capital, operating and fuel costs are considered. Between 2007 and 2030, more generation of natural gas and renewable energy and reduced investment in new coal-fired generating capacity are projected to result in recuding demand for coal-fired baseload capacity.
Except for a few years in the 1960s when imported and exported electricity were nearly equal, the United States imported more electricity than it exported. Most imported electricity came from Canada. In 2005, net imported electricity was just 0.7 percent of all electricity used in the United States. Total electricity consumption grows from 3,903 billion kilowatts in 2007 to 4,902 billion kilowatts in 2030.
Over the latter part of the last century, nuclear electric power played a key role in meeting the nation's rapidly growing electricity requirement. In 2007, 19 percent of U.S. total electricity net generation came from nuclear electric power.
Capacity factors measure actual power generation as a share of maximum possible output. Factors for the industry were in the 50- to 60-percent range through the 1980s but improved to 89 percent by 2005.
The largest number of units ever operable in the United States was 112 in 1990. As of December 31, 2007, 104 units were operable. Between 2007 and September 2008, 20 firms have submitted applications to build and operate a commercial nuclear reactor.
By operating at nearly 90 percent of capacity, the U.S. nuclear industry continues to supply one fifth of the nation’s total energy supply.
Electricity generation is projected to grow from 806 billion kilowatts in 2007 to 905 billion kilowatts in 2030.
Renewable Energy Sources
Renewable energy contributes only 6 percent of the total energy produced in the United States. Of this 6 percent, hydroelectric power contributes 45 percent followed by wood (31 percent).
Renewable energy consumption was 6.8 quadrillion Btu in 2007. Biomass energy consumption was 3.6 quadrillion Btu that same year. Many areas of renewable consumption remained relatively stable in 2007 including biomass, geothermal and solar. However, increases did occur with wind and biofuels.
The five leading states for renewable generation during 2007 were as follows: Washington, California, Oregon, New York and Texas. Hydroelectric generation dominated renewable generation in each state. Despite the decline in hydropower output, these states accounted for over two-thirds of the total renewable electricity generated in the United States.
Production and Consumption
In 2007, hydroelectric power contributed 46 percent of the renewable energy consumed. However, renewable energy’s share of total energy consumption was only 7 percent.
Hydroelectric's share of total energy generation is projected to remain between 6 percent and 7 percent from 2007 to 2030. Environmental concerns and a scarcity of new large-scale sites limit conventional hydroelectric generation.
Renewable Energy Consumption by Source
Total U.S. renewable energy consumption, which stood between 6.5 and 7.0 quadrillion Btu per year from 1995 to 1999, fell in 2000 and 2001 but rebounded in 2007 to 6.8 quadrillion BTU. Conventional hydroelectric power, which accounted for about half of the total, declined in 2000 and 2001 but recovered to 2.4 quadrillion Btu in 2007. Wood was the next largest source of renewable energy at .43 quadrillion BTU, followed by waste and geothermal sources. Smaller quantities came from alcohol fuels, solar and wind.
Most renewable energy was consumed by the electric power sector to generate electricity. After 1958, the industrial sector was the second largest consuming sector of renewable energy, mostly black liquor, a waste product of the paper-making process. Residential sector usage of renewable energy (mostly wood) was the third largest consuming sector.
Biomass accounted for 53 percent of renewable energy and was the leading provider of renewable energy in 2007 with 3.6 quadrillion Btu. Wood and wood wastes provided around 59 percent (2.1 quadrillion Btu) of biomass consumed for energy in 2007.
Despite improvements and incentives, grid-connected generators that use renewable fuels (including wind, heat and other end-use generators) are projected to remain minor contributors to U.S. electricity supply. Total renewable electricity generation grows by nearly 380 billion kilowatt hours to 730 billion kilowatt hours in 2030, or 14.2 percent of the domestic power production in 2030.
New biomass capacity is projected to increase by 200 percent by 2030. Energy generation from biomass grows from 39 billion kilowatthours in 2007 to a projected 231 billion kilowatthours in 2030. Generation from biomass comprises nearly 80 percent or 91 billion kilowatthours, of end-use renewable electricity in 2030.
The volume of biofuels consumed is sensitive to the price of the petroleum-based products. Total projected biofuel consumption will vary depending on future oil prices. In the low oil price case, total liquid biofuel consumption is projected to reach 27 billion gallons in 2030. If oil approaches $200 per barrell (using 2007 dollars), biofuel consumption in 2030 is projected to reach 40 billion gallons.
Geothermal capacity, all located in western states, is projected to increase but at a slow rate and is not projected to gain market share in 2030. Wind capacity was 15,616 megawatts in 2007. Wind energy capacity is projected in increase by 38 percent from 2007 to 2030, from 0.8 percent of total electricity generation in 2007 to 2.5 percent in 2030.
EIA projects solar technologies will remain too costly for grid-connected applications although customers of PV applications will grow rapidly.
Annual Energy Outlook 2009, Energy Information Administration, U.S. Department of Energy.
Annual Energy Review 2007, Energy Information Administration, U.S. Department of Energy.
Energy Information Administration
*In the forecasts made, the reference case assumes that current policies affecting the energy sector remain unchanged throughout the projection period.