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Why are the government’s energy forecasts so bad?

Why are the government’s energy forecasts so bad? thumbnail

In 2009, the federal government’s Energy Information Administration made a forecast for the next two decades: U.S. wind power would grow modestly, reaching 44 gigawatts of generating capacity in 2030, while solar power would remain scarce, inching up to 12 GW.

Just six years later, U.S. wind capacity is already up to 66 GW, and solar has shot up to 21 GW. There’s now enough installed wind and solar to power 25 million American homes— more than three times what the EIA expected before President Obama took office.

Oops.

On Monday the Advanced Energy Economy Institute, a nonprofit promoting alternatives to fossil fuels, released a new report on America’s fast-moving clean energy revolution, documenting how renewable power and energy efficiency have become cost-competitive in the Obama era. But the report can also be read as a damning indictment of America’s official energy information service, the EIA, which has been a consistent source of misinformation for the policymakers, planners and other energy stakeholders who rely on its forecasts.

As Yogi Berra recognized, predictions are hard, especially about the future. But the EIA isn’t just some random pundit. Its Annual Energy Outlook, the nation’s most comprehensive analysis of energy data, has tremendous influence in Washington and state capitals, providing the numbers that shape policies like Obama’s Clean Power Plan to regulate carbon emissions at power plants. So it really matters that, as the new clean-energy report pointed out, the agency’s “projections bear little resemblance to market realities.” The EIA’s annual visions of the future haven’t just been wrong; they’ve been reliably and obviously wrong, to the extent that I was snarking about them on Twitter during last year’s EIA conference:

An EIA spokesman told me Monday the agency is reviewing the Advanced Energy Economy report, but otherwise did not comment on the report or the EIA’s forecasting record. In recent years, as its Annual Energy Outlook has diverged farther from reality, the EIA has emphasized that its “reference cases” are not really supposed to be forecasts, just scenarios, a set of best-guess baselines for a future in which government policies and other conditions do not change. The introduction to the 2015 Outlook seems to have expunged former references to EIA “projections,” although I did notice that the word “forecasts” still appears in the URL.

The thing is, most of the energy world still thinks of EIA baselines as official forecasts. Just last Thursday, in a Washington Post column boasting about declines in U.S. oil consumption, senior White House officials Brian Deese and Jason Furman wrote: “The EIA, which produces some of the most influential and well-regarded forecasts in the field, until recently consistently projected increases in oil consumption. In fact, U.S. consumption in 2014 was 6.4 million barrels per day below the projection it made in 2003—an amount greater than the oil produced by Iraq and Kuwait combined.”

Oops again.

The EIA is at its least Nostradamusesque when it comes to green energy. As the Advanced Energy Economy report details, EIA “forecasts are consistently off by a wide margin, always underestimating—and never overestimating—future deployment of renewables.” The main point of the report was that the transition from dirty to clean power can be much quicker and easier than most Americans think, but first the authors had to spend pages debunking better-known EIA analyses that suggest otherwise.

Part of the problem can be attributed to technical constraints in the way the EIA calculates its baselines, which always assume that the legislative status quo will persist. For example, the agency always calculates its baseline for wind power under the assumption that Congress will fail to renew tax credits for wind power when they expire, even though Congress has always renewed those credits.

But part of the problem is also that the EIA is a prisoner of its own models, which are in turn prisoners of the past. Wind power was much more expensive than fossil energy in 2009, so the EIA expected it to continue growing slowly. Instead, costs dropped sharply and installations tripled. Solar power was cost-prohibitive and virtually nonexistent in America at the time, so the EIA had no reason to expect installations to increase much. Instead, they’ve increased more than 20-fold in just six years, as prices have plunged more than 80 percent.

The polite way to put it is that EIA models don’t seem to capture the notion that past performance is no guarantee of future results. I put it less politely one Friday in May:

These failures of foresight may be defensible. Change is hard to anticipate. But when it comes to renewables, the EIA seems to have failures of plain sight. The agency’s latest reference case suggests solar capacity will double from 2014 levels by 2026. But as the new report points out, an industry analysis based on actual projects in the pipeline has projected that solar capacity will double by next year—and so far it’s on track to do just that. Similarly, the U.S. has been adding an average 6.5 GW of wind every year since 2007, but the EIA’s reference case only envisions an additional 6.5 GW over the next 15 years. If any EIA renewables analysts want to put their money where their reports are, they should contact me to place a bet. I’ll take the over.

“They have constraints that tie their hands a bit, but that doesn’t explain why they’re so consistently wrong in the same direction,” said Advanced Energy Economy vice president Robert Keough. “They’re not just conservative about change. They’re ignoring the evidence of what’s actually happening in the market.”

The EIA has also consistently overestimated electricity demand, which has a huge impact on power plant construction and utility planning. The EIA’s latest reference case also suggests coal-fired power generation, which has been in freefall, will somehow remain stable through 2040, which is not going to happen under any real-world scenario. Again, if anyone at EIA wants to wager, I’ll take the under.

That said, Jesse Jenkins, an excellent energy analyst who has defended the EIA from my mockery on Twitter, told me in an interview that the agency does a great job collecting data and sharing it with the public. He also said the Annual Energy Outlook can be valuable when used to compare different scenarios, rather than predict the future.

“You can fault the EIA for failing to make it clear that these are scenarios, not projections, but the scenarios can be really useful,” Jenkins said.

But Jenkins said he does not rely on the EIA’s scenarios for renewables, either, because the cost estimates tend to be out of date. Unfortunately, the Environmental Protection Agency leaned heavily on those scenarios when devising its Clean Power Plan, which helps explain why the plan’s targets for coal retirements and renewable deployment are so unambitious.

I certainly don’t think the EIA’s bias against renewable power is an intentional bias. Renewables were a blip on the electricity radar screen until quite recently; it’s no surprise that veteran EIA analysts focus on traditional power sources. EIA director Adam Sieminski is the former director of Deutsche Bank’s global oil and gas team, and a former member of the U.S. National Petroleum Council, but I’ve been told that he’s pushed internally for better analysis of emerging technologies. The agency is also known for its political independence, even though it’s housed inside Obama’s Department of Energy.

How independent? The keynote speaker for this year’s EIA conference was the staunch Republican Harold Hamm, the Oklahoma oil and gas billionaire who was a top donor and energy adviser to Mitt Romney’s 2012 presidential campaign. He probably didn’t talk about renewables, but he surely gave the audience something to think about over their falafel.

politico.com



17 Comments on "Why are the government’s energy forecasts so bad?"

  1. BobInget on Fri, 26th Jun 2015 5:02 pm 

    Who woulda thunk?
    Cut the price of gasoline and folks go back to buying 5,000 lb, 18 MPG, SUV’s.

    Puts dough in the hands of auto workers, share holders, car salesman, near term.

    Shoot, life’s short, if leasing a $64,000 SUV makes a person happy, WTF.

    The public is so cynical they believe almost no one concerning oil prices.

    This Monday or next it may take an extra $30
    to fill young squires ‘gas’ tank. Who cares?
    If banks are dumb enough to carry me for another year, so be it.

    AS sea levels rise, heat, drought, fire consume
    food supplies, that dreaded realization creeps up. Life may be even shorter then we thought.

  2. ghung on Fri, 26th Jun 2015 6:22 pm 

    Perhaps the Puppet Masters at the EIA (or their masters) don’t want to freak out an economically-stressed public by telling them their energy mix (and options) are likely to change a lot in the next couple of decades. Could it be that some of these new options actually work? Albeit at a price.

    Places like Kodiak, AK, Hawaii,, even Texas, are discovering that wind and solar can be really cool when integrated into the mix. Whodda thunk. This ain’t California’s left-wing energy anymore. Kodiak and Oahu will see quick returns on their investments (both transitioning from oil), and Texas is cashing in on growth. North Carolina, second in installed solar, hasn’t extended its tax credits beyond 2015. We’ll see…..

    If the EIA had predicted this sort of thing I would have been sceptical. Political/policy-driven entities don’t generally make good predictions.

  3. Bob Tegir on Fri, 26th Jun 2015 6:35 pm 

    While we have ‘nameplate’ GW capacity, solar only works for 8 hours a day….and generates nowhere near nameplate capacity on a yearly basis. Same for wind – which blows 1/3rd the time. All of these ‘new’ facilities require massive new natural gas fired turbines (inefficient) to not crash the grid. In the winter time, solar output is way low and you can have days without wind. So far these have failed to even get to 5% of GW hours generated overall.

    of course, the better part of a trillion in tax incentives does trigger lots of investments – strictly for the tax credits and credits per KWH generated. warren Buffet said there is no money to be made without the giant tax and other subsidies.

  4. ghung on Fri, 26th Jun 2015 7:12 pm 

    Yeah, Bob, 8 hours/day (generally less) with virtually no ongoing inputs excepting maintenance (low). It’s a neat trick if you can pull it off. Also, many new gas-fired plants are being built to replace old, nasty coal plants. With natural gas prices what they are; no big deal there. And it’s not like other energy sources haven’t had their share of government support, incentives, and centuries of freedom to use my atmosphere, streams and rivers as a dumping ground. Let’s call it a wash when comparing alternatives.

    Anyway, we’re pretty much at the point where we, collectively, can’t afford any of this stuff. Grow your own, build your own, maintain your own, harvest your own electrons, and help your neighbors, eh? I’m betting there’ll come a time when places like Kodiak will be damned glad they get less than 1% of their electricity from fossil fuels.

  5. Makati1 on Fri, 26th Jun 2015 8:23 pm 

    Bob, you are correct. It is ALL about money and delaying the inevitable crash. Meanwhile, the government is using every means possible to distract the sheeple from the real world that is killing them slowly. It is now called “news”. All of the “alternatives” today don’t amount to 1% of the energy used in the real world.

    And they ALL require petroleum to exist. Even to recycle the parts into new takes NET energy not available in “renewables”. They are extenders of BAU if anything and have only niche uses.

    Now if we only had dilithium crystals to control the antimatter…lol.

  6. ghung on Fri, 26th Jun 2015 8:42 pm 

    Mak: “And they ALL require petroleum to exist. Even to recycle the parts into new takes NET energy not available in “renewables”. They are extenders of BAU if anything…”

    Sure, Mak. Get back to us when you’re living in a mud-fucking-hut, use absolutely nothing with embodied petroleum including your diet, your transportation, and the computer you’re using to annoy people with your comments. Until then, you’re nothing but a “BAU extender”.

    BTW: http://mecometer.com/whats/philippines/electricity-production-by-source/

    You are using more of your so-called “extenders of BAU [which] have only niche uses” than most people on this board (excluding myself, of course). I don’t suppose your government had anything to do with that, eh?

  7. Boat on Sat, 27th Jun 2015 2:20 am 

    Seems obvious. The EIA reads PO and listens to the doomers. We must all be trained to think the crash is inevitable. Accurate forecasts might be read as encouraging and the end is not here but has to wait on Climate change.

  8. GregT on Sat, 27th Jun 2015 3:18 am 

    That’s right Boat, your ‘government’ wants everyone to believe that the crash is inevitable. That’s why they continue to shout the growth mantra, even though anyone with two functioning brain cells left to rub together, understands that infinite exponential growth is an impossibility.

  9. Boat on Sat, 27th Jun 2015 3:30 am 

    Is that why China and Russia announced the new pipeline. To cut growth? Seems ya’ll favorite countries love the idea of growth.

  10. Makati1 on Sat, 27th Jun 2015 7:15 am 

    ghung, what are you but what you claim I am? lol Look in the mirror. I’ll be living in a nice concrete and CMU home in the jungle, when the streets of America are aflame.

    The US is turning up the heat with racial prejudice, class divisions and homophobia to distract the sheeple from reality. Several, not mainstream MSM, economists have been warning that the second half of this year is going to bring a major negative event in the Empire. Are you prepared?

  11. ghung on Sat, 27th Jun 2015 8:05 am 

    Mak: “ghung, what are you but what you claim I am?”

    Exactly, except I’m not constantly taking shots at an entire population, most of whom have little control over any of this.

    “I’ll be living in a nice concrete and CMU home in the jungle”

    Pretty much the same here, except I’m not talking the talk; been there for nearly 20 years, too busy to spend much time telling Americans (or anybody else) how screwed up they are. While you stay busy biting the hand that feeds you, I’m working on the feeding part.

  12. Davy on Sat, 27th Jun 2015 8:11 am 

    Mak, you can’t even compare to a pimple on the G-man’s ass. That is how low you are.

    You should take note when one of the more respectable member of our forum calls you out with “you’re using to annoy people with your comments”. Most people would take that to heart and self-reflect. I know I would.

  13. JuanP on Sat, 27th Jun 2015 10:16 am 

    “Why are the government’s energy forecasts so bad?” The EIA’s forecasts are political, not scientific, reports. They do serve a disinformation purpose as such and are, therefore, not bad. What the EIA’s forecasts are is consistently inaccurate, but that is very easy to understand if they are regarded as political propaganda documents.

  14. joe on Sat, 27th Jun 2015 6:24 pm 

    The predictions are wrong because they don’t matter. The US is a free market economy, if they tried to match results to predictions then that would imply a managed economy, like China, or Singapore. Predictions are extrapolations of current trends, and if we learned nothing in the last 15 years it should be that we can’t really predict anything.

  15. Makati1 on Sat, 27th Jun 2015 10:09 pm 

    ghung, so you went native a long time ago. What makes that better than my plan? I hope you enjoyed those years, but I had a family to raise in a world that had not fallen apart, yet. Now I am experiencing a new lifestyle and place, far from the Empire of Chaos homeland.

    I am 70. I don’t give a damn about dying, as it comes to all of us eventually. Today. In 20 years. I don’t care. That too comes from living a long and full life. So, if I end it in the city or on the farm, it is not going to change my exit date, only the method of my passing, maybe.

    You made your choice. I made mine. We are only two of the 7,000,000,000 plus who make choices every day. So what? Across the world there are thousands of deaths every hour. Eventually, we will be part of those statistics, but I would like to live to see how this all ends. Wouldn’t you? Good luck!

  16. Davy on Sun, 28th Jun 2015 3:56 am 

    Mak, the G-man has a plan and you have talk. The G-man has results of years of building upon a plan you have a few short years of talk. G-man has resources you have a small social security check and three suitcases. That right there should give you pause. In other words you are a joke that fantasizes about a plan. Your plan should be how you are going to survive the next couple of years being an angry old man in the third world with no medical insurance.

  17. Boat on Sun, 28th Jun 2015 1:09 pm 

    As Obama took office the economy had taken a huge blow along with the rest of the world. Forecasting is a little tough in that environment. The American Recovery and Investment Act threw 840 billion at the hole in the economy and nobody is smart enough to predict the outcomes. I have not read a lot about the inner workings of the EIA but Dr.Chue talked about the DOE being so outdated with record keeping that many reports couldn’t be compiled in time to spend their portion of the money quickly enough.

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