Energy Update: Energy commodity prices rose in 2016

Jan. 23, 2017

The spot energy index in the S&P Goldman Sachs Commodity Index rose 48 percent in 2016, more than any other commodity group in the S&P GSCI.

Energy commodity prices increase in 2016

The spot energy index in the S&P Goldman Sachs Commodity Index (GSCI) rose 48 percent since the beginning of 2016, more than any other commodity group in the S&P GSCI. The spot S&P GSCI industrial metals, precious metals, and agriculture indices increased less, rising 22 percent, 8 percent, and 5 percent, respectively, while the spot S&P GSCI livestock index declined 10 percent. Among individual commodities, zinc, natural gas, crude oil, and diesel saw larger percentage increases than all other commodities in the S&P GSCI. Commodity price movements were influenced by global economic growth as well as by commodity-specific supply-side factors in 2016.

EIA’s Annual Energy Outlook projects U.S. to be a net energy exporter

The U.S. Energy Information Administration’s Annual Energy Outlook 2017 (AEO2017) projects the U.S. to be a net energy exporter in most cases as petroleum liquid imports fall and natural gas exports rise. Exports are highest, and grow throughout the projection period, in the High Oil and Gas Resource and Technology case, because favorable geology and technological developments result in the production of oil and natural gas at lower costs.

The High Oil Price case provides favorable economic conditions for crude oil and natural gas producers while restraining domestic consumption, enabling the most rapid transition to net exporter status. In all cases but the High Oil and Gas Resource Technology case, which assumes substantial improvements in production technology and more favorable resource availability, U.S. energy production declines in the 2030s, which slows or reverses projected growth in net energy exports.

EIA’s AEO2017 presents updated projections for U.S. energy markets. This AEO is the first to have projections through 2050 in the AEO tables.

Coal production declines in 2016

U.S. coal production in 2016 is expected to total 743 million short tons (MMst), 17 percent lower than in 2015, and the lowest level since 1978, according to the U.S. Energy Information Administration (EIA). Falling production in 2016 continues an eight-year decline from peak production in 2008. Production in all major coal regions fell by at least 15 percent. Low natural gas prices, warmer-than-normal temperatures during the 2015-16 winter that reduced electricity demand, the retirements of some coal-fired generators, and lower international coal demand have contributed to declining U.S. coal production.

Most new generating capacity additions are renewable technologies

Once final data are in, EIA expects 24 gigawatts (GW) of new generating capacity to be added to the power grid during 2016. For the third consecutive year, more than half of these additions are renewable technologies, especially wind and solar.

Of the 2016 renewable additions, nearly 60 percent were scheduled to come online during the fourth quarter. Renewable capacity additions are often highest in the final months of the year, in part, because of timing qualifications for federal, state, or local tax incentives. Estimated fourth-quarter capacity additions for 2016 are based on planned additions reported to EIA and are subject to change based on actual project schedules.

About 30 percent of distributed solar capacity is owned by third parties

Distributed solar capacity in the U.S., which includes all solar power capacity other than utility-scale installations 1 MW or larger, totaled 12.3 gigawatts (GW) as of September. About 30 percent of that amount (3.7 GW) was owned by third-party owners, according to U.S. Energy Information Administration (EIA). Third-party owners are private companies that provide either solar electricity or equipment to generate it to building owners or tenants, typically with little or no upfront costs.

Winter residential electricity consumption expected to increase from last winter

The U.S. Energy Information Administration’s Short-Term Energy Outlook (STEO) projects the average residential customer will consume 4 percent more electricity from December through March compared with the same period last winter. However, this forecast is highly dependent on winter temperatures. If temperatures are warmer than expected, as they have been the past two months, average electricity use could be slightly below that of the previous winter.

New EIA survey collects data on production and sales of wood pellets

During the first half of 2016, U.S. manufacturers produced approximately 3.3 million tons of wood pellets and sold 3.1 million tons, mostly to foreign markets, according to data from EIA’s newly released Densified Biomass Fuel Report.

Wood pellet fuel, also known as densified biomass fuel, is used for electric power generation and for domestic heating needs. About 85 percent of raw materials for biomass pellets come from wood waste streams such as logging residues, sawmill residues, and wood product manufacturing residue. Roundwood timber—generally logs harvested for industrial use—account for about 15 percent of raw materials.

EIA’s new survey collects data from manufacturers of densified biomass fuels, primarily wood pellets. The new survey began collection in January 2016 with data from about 120 planned and operational densified biomass manufacturing facilities in the U.S. These facilities have the capacity to produce a total of 11.4 million tons of densified biomass annually.

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