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Short-Term Energy Outlook (STEO)
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| Forecast Highlights
Global liquid fuels
- The September Short-Term Energy Outlook (STEO) remains subject to heightened levels of uncertainty related to the ongoing recovery from the COVID-19 pandemic. U.S. economic activity continues to rise after reaching multiyear lows in the second quarter of 2020 (2Q20). U.S. gross domestic product (GDP) declined by 3.4% in 2020 from 2019 levels. This STEO assumes U.S. GDP will grow by 6.0% in 2021 and by 4.4% in 2022. The U.S. macroeconomic assumptions in this outlook are based on forecasts by IHS Markit. Our forecast assumes continuing economic growth and increasing mobility. Any developments that would cause deviations from these assumptions would likely cause energy consumption and prices to deviate from our forecast.
- Brent crude oil spot prices averaged $71 per barrel (b) in August, down $4/b from July but up $26/b from August 2020. Brent prices have risen over the past year as result of steady draws on global oil inventories, which averaged 1.8 million barrels per day (b/d) during the first half of 2021 (1H21). We expect Brent prices will remain near current levels for the remainder of 2021, averaging $71/b during the fourth quarter of 2021 (4Q21). In 2022, we expect that growth in production from OPEC+, U.S. tight oil, and other non-OPEC countries will outpace slowing growth in global oil consumption and contribute to Brent prices declining to an annual average of $66/b.
- More than 90% of crude oil production in the Federal Offshore Gulf of Mexico (GOM) was offline in late August following Hurricane Ida. As a result of the outage, GOM production averaged 1.5 million b/d in August, down 0.3 million b/d from July. We expect that crude oil production in the GOM will gradually come back online during September and average 1.2 million b/d for the month before returning to an average of 1.7 million b/d in 4Q21.
- Total U.S. crude oil production averaged 11.3 million b/d in June—the most recent monthly historical data point. We forecast it will remain near that level through the end of 2021 before increasing to an average of 11.7 million b/d in 2022, driven by growth in onshore tight oil production. We expect growth will result from operators beginning to increase rig additions, offsetting production decline rates.
- We estimate that 98.4 million b/d of petroleum and liquid fuels was consumed globally in August, an increase of 5.7 million b/d from August 2020 but still 4.0 million b/d less than in August 2019. We forecast that global consumption of petroleum and liquid fuels will average 97.4 million b/d for all of 2021, which is a 5.0 million b/d increase from 2020, and by an additional 3.6 million b/d in 2022 to average 101.0 million b/d, almost even with 2019 levels.
- U.S. regular gasoline retail prices averaged $3.16 per gallon (gal) in August, the highest monthly average price since October 2014. Recent gasoline price increases reflect rising wholesale gasoline margins amid relatively low gasoline inventories. In addition, recent impacts from Hurricane Ida on several U.S. Gulf Coast refineries are adding upward price pressures in the near term. Estimated gasoline margins surpassed 70 cents/gal in late August. We expect margins will remain elevated in the coming weeks as refining operations as U.S. Gulf Coast remain disrupted. We forecast that retail gasoline prices will average $3.14/gal in September before falling to $2.91/gal, on average, in 4Q21. The expected drop in retail gasoline prices reflects our forecast that gasoline margins will decline from currently elevated levels, both as a result of rising refinery runs as operations return in the first half of September following Hurricane Ida and because of typical seasonality.
- Propane net exports in our forecast average close to 1.2 million b/d for the remainder of 2021, reflecting elevated global demand for U.S. propane and reduced supply from other sources related to ongoing OPEC+ production cuts. In 1H22, we assume global production of propane and butanes will rise as OPEC+ countries increase crude oil production. We expect this increase will limit additional demand for U.S. propane exports, despite growing global propane demand, and keep U.S. net propane exports close to 1.2 million b/d in 2022.
Natural gas
- In August, the natural gas spot price at Henry Hub averaged $4.07 per million British thermal units (MMBtu), which is up from the July average of $3.84/MMBtu. The August increase reflects hotter temperatures in August on average across the United States compared with July, which caused demand for natural gas in the electric power sector to be higher than expected. Prices rose further in late August when Hurricane Ida caused a decline in natural gas production in the GOM.
- Henry Hub spot prices in August were $1.77/MMBtu higher than in August 2020. Steadily rising natural gas prices over the past year primarily reflects: growth in liquefied natural gas (LNG) exports, rising domestic natural gas consumption for sectors other than electric power, and relatively flat natural gas production. We expect the Henry Hub spot price will average $4.00/MMBtu in 4Q21, as the factors that drove prices higher during August lessen. Forecast Henry Hub prices this winter reach a monthly average peak of $4.25/MMBtu in January and generally decline through 2022, averaging $3.47/MMBtu for the year amid rising U.S. natural gas production and slowing growth in LNG exports.
- More than 90% of natural gas production in the GOM was offline in late August following Hurricane Ida. GOM production of marketed natural gas averaged 1.9 billion cubic feet per day (Bcf/d) in August, down 0.4 Bcf/d from July. We expect that natural gas production in the GOM will gradually come back online during the first half of September and average 1.5 Bcf/d for the month before returning to an average of 2.1 Bcf/d in 4Q21.
- We expect dry natural gas production will average 92.7 Bcf/d in the United States during 2H21—up from 91.7 Bcf/d in 1H21—and then rise to 95.4 Bcf/d in 2022, driven by natural gas and crude oil prices, which we expect to remain at levels that will support enough drilling to sustain production growth.
- We expect that U.S. consumption of natural gas will average 82.5 (Bcf/d) in 2021, down 0.9% from 2020. U.S. natural gas consumption declines in 2021, in part, because electric power generators switch to coal from natural gas as a result of higher natural gas prices. In 2021, we expect residential and commercial natural gas consumption combined will rise by 1.2 Bcf/d from 2020 and industrial consumption will rise by 0.6 Bcf/d from 2020. Rising natural gas consumption in sectors other than the electric power sector results from expanding economic activity and colder winter temperatures in 2021 compared with 2020. We expect U.S. natural gas consumption will average 82.6 Bcf/d in 2022, mostly unchanged from 2021.
- We estimate that U.S. natural gas inventories ended August 2021 at about 2.9 trillion cubic feet (Tcf), which is 7% lower than the five-year (2016–20) average for this time of year. Injections into storage this summer have been below the previous five-year average, largely as a result of hot weather and high exports occurring amid relatively flat natural gas production. We forecast that inventories will end the 2021 injection season (end of October) at almost 3.6 Tcf, which would be 5% below the five-year average.
Electricity, coal, renewables, and emissions
- We expect the share of electricity generation produced by natural gas in the United States will average 35% in 2021 and 34% in 2022, down from 39% in 2020. In 2021, the forecast share for natural gas as a generation fuel declines in response to our expectation of a higher delivered natural gas price for electricity generators, which we forecast will average $4.69/MMBtu in 2021 compared with $2.39/MMBtu in 2020. The share of natural gas as a generation fuel also declines through 2022 because of expected increases in generation from renewable sources. As a result of the higher expected natural gas prices, the forecast share of electricity generation from coal rises from 20% in 2020 to about 24% in both 2021 and 2022. New additions of solar and wind generating capacity are offset somewhat by reduced generation from hydropower this year, resulting in the forecast share of all renewables in U.S. electricity generation to average 20% in 2021, about the same as last year, before rising to 22% in 2022. The nuclear share of U.S. electricity generation declines from 21% in 2020 to 20% in 2021 and to 19% in 2022 as a result of retiring capacity at some nuclear power plants.
- We forecast that planned additions to U.S. wind and solar generating capacity in 2021 and 2022 will increase electricity generation from those sources. We estimate that the U.S. electric power sector added 14.7 gigawatts (GW) of new wind capacity in 2020. We expect 17.6 GW of new wind capacity will come online in 2021 and 6.3 GW in 2022. Utility-scale solar capacity rose by an estimated 10.5 GW in 2020. Our forecast for added utility-scale solar capacity is 15.9 GW for 2021 and 16.3 GW for 2022. We expect significant solar capacity additions in Texas during the forecast period. In addition, we project that after increasing by 4.5 GW in 2020, small-scale solar capacity (systems less than 1 megawatt) will grow 5.8 GW and 5.7 GW in 2021 and 2022 respectively.
- Coal production in our forecast totals 601 million short tons (MMst) in 2021, 66 MMst more than in 2020. We expect demand for coal from the electric power sector to increase by 100 MMst in 2021 as a result of high natural gas prices, and coal exports to increase by 21 MMSt. However, production is unlikely to match those increases in demand in the near term due to capacity constraints at coal mines and limited available transportation. In 2022, we expect coal production to increase by 47 MMst to 648 MMst, despite our forecast of declines in coal consumption, as the production and transportation constraints experienced in 2021 ease. Secondary inventories of coal at electric utilities decreased in 1H21, and we forecast this trend will continue into 2H21 and 2022.
- We estimate that U.S. energy-related carbon dioxide (CO2) emissions decreased by 11% in 2020 as a result of less energy consumption related to reduced economic activity and responses to COVID-19. For 2021, we forecast energy-related CO2 emissions will increase about 8% from the 2020 level as economic activity increases and leads to rising energy use. We also expect energy-related CO2 emissions to rise in 2022 but at a slower rate of 2%. We forecast that after declining by 19% in 2020, coal-related CO2 emissions will rise by 22% in 2021 and then decrease by 2% in 2022. Short-term changes in energy-related CO2 can be affected by temperature. A recent STEO supplement examines these dynamics.
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| EIA: This Week in Petroleum – Propane Prices Rising
As winter approaches, propane prices are higher across the globe. In 2019, domestic consumption accounted for 51 percent of total supply, down from 84 percent in 2014, indicating that the growing export market is having an increasing impact on domestic prices. Since mid-September 2020, propane prices at Mont Belvieu, Texas have increased 120 percent from $0.51 per gallon (gal) in the week ending September 11, 2020 to $1.12/gal in the week ending September 10, 2021. For a full analysis, visit EIA’s This Week in Petroleum focused on this issue here.
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DOE and the National Renewable Energy Laboratory (NREL) recently published their first State and Local Planning for Energy (SLOPE) Platform Story—a case study featuring Milwaukee, Wisconsin. This narrative uses interactive data visualizations to illustrate how the city and county of Milwaukee are using SLOPE to better understand their energy use and clean energy potential.
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| SLOPE integrates and delivers data on energy efficiency, renewable energy, and sustainable transportation into an easy-to-access online platform to enable data-driven state and local energy planning.
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| New Fuel Terminal to Open Near Dickson in Summer 2022
Titan Partners, a subsidiary of Houston-based midstream energy company Buckeye Partners, is building a fuel storage and distribution terminal at the I-40/I-840 interchange in an unincorporated area of Dickson County, TN. This new terminal is scheduled to open in the summer of 2022 and will have a three-bay truck loading rack, fire water tank, warehouse, six above-ground storage tanks, and fueling areas on a 34-acre site within the nearly 150 acre property. The rack will be able to deliver ethanol, gasoline, and distillate while the storage tanks will store approximately 13.7 million gallons of gasoline and 3.9 million gallons of distillate. Titan will pull product from an existing interstate BP pipeline that crosses Tennessee but currently does not supply any Tennessee terminals. Overall, this fuel terminal will boost Tennessee’s energy security by diversifying the fuel supply and providing additional storage capacity to the area, thereby expanding fuel availability to Middle and West Tennessee.
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|  | Rendering of the planned terminal (Source: Titan Partners)
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| RESPONSE FOCUS: HUMPHREYS COUNTY FLOODING
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|  | Floods in Waverly, Humphreys County, TN, August 2021. Photos: (L) Nashville Fire Department (R) TEMA
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| On Saturday, August 21, Tennessee experienced catastrophic flooding from a line of rain and storms that moved through the state and cost 20 Tennesseans their lives. Dickson, Hickman, Houston, and Humphreys Counties were all impacted. Up to 17 inches of rain fell in Humphreys County in under 24 hours – a new state record according to the National Weather Service. In response to the disaster, TEMA activated the Tennessee Emergency Management Plan, which led to a Level 3 – State of Emergency declaration. The OEP Primary ESC was activated to assess the Energy Lifeline, which includes status of the power grid and fuel. Gov. Lee issued Executive Order 85, and President Biden declared a major disaster for the affected counties.
During this disaster, our energy stakeholders responded in kind. With help from the Tennessee Fuel and Convenience Store Association, several major convenience store companies donated pallets of bottled water for Waverly residents while the local water treatment plant was out of service. Thanks to the Tennessee Propane Gas Association, a member donated the use of its propane-heated shower trailer for displaced residents to use a shelter. The Tennessee Poultry Association coordinated large donations of pre-cooked meats and the use of refrigerated trailers for storage to help feed both those in shelters and workers responding to the disaster. We are extremely grateful for the outpouring of donations and support from these stakeholders.
Learn more about FEMA’s Community Lifelines concept here. FEMA created Community Lifelines to reframe incident information, understand and communicate incident impacts using plain language, and promote unity of effort across the whole community to prioritize efforts to stabilize the lifelines during incident response.
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| TVA Power Demand Reached Highest Peak in Nearly a Decade
With the extreme summer heat in July, TVA saw power demand over 30,000 Megawatts – a demand not seen since 2012. TVA is the largest government-owned electricity provider in the U.S. and generates nearly 100 percent of the electricity used by Tennesseans. For more details, see EIA’s Today in Energy article on TVA here.
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| TVA Publishes Annual Environmental, Social and Governance (ESG) Report
TVA’s updated information in the Edison Electric Institute template for 2020 shows continued progress in providing clean energy to the Tennessee Valley. As of 2020, TVA reduced carbon dioxide emissions by 63 percent from 2005 levels by reducing reliance on carbon-based generation sources. Additionally, nearly 60 percent of the energy supplied by TVA in 2020 came from carbon-free sources including nuclear, hydroelectric, and other renewables. For the full report, see here.
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| TVA Eyes Shutdown of Kingston Coal Plant, Debates What Will Replace Coal as New Power Source
TVA proposes to retire three Kingston coal-fired generating units as early as 2026, but no later than 2031. The remaining six units at Kingston could be shut down as early as 2027. TVA said the closure schedule is "dependent on when replacement generation could be constructed and brought online," which could be a combination of solar power and/or natural gas generation.
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For over 570 days now, OEP’s Primary ESC has shared responsibilities as the Infrastructure Branch Manager over ESF-1 Transportation, ESF-2 Communications, ESF-3 Infrastructure, and ESF-12 Energy. During the quarter, OEP ESCs participated in virtual tabletop exercises for (1) TEMA’s Vigilant Guard (2) TVA Watts Bar Nuclear Plant; (3) U.S. Coast Guard Cumberland River Recovery, (4) ExxonMobil Nashville Fuel Terminal, (5) Kinder Morgan Knoxville Fuel Terminal, and (5) TEMA’s COVID-19 vaccine exercise. If you are interested in having our ESCs participate in your exercise or present on energy security and resiliency, please contact us at TDEC.OEP@tn.gov.
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| Personal Preparedness: Emergencies Won’t Wait, and Neither Should You
September is National Preparedness Month. TEMA Director Patrick Sheehan addressed the need for Tennesseans to be ready for any disaster in this brief article.
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| Personal Preparedness: ReadyTN App
ReadyTN is a mobile device application from TEMA that provides emergency preparedness, response, and recovery information to Tennesseans. The app displays real time weather and emergency alert messages, as well as maps of open Red Cross Shelters, Smartway maps of real time traffic conditions from the Tennessee Department of Transportation, and local emergency management contact information. ReadyTN has resources to help individuals build emergency kits, create emergency plans for themselves and their families, and learn about the emergency hazards Tennesseans face. Download ReadyTN for your mobile device at either the Apple Store (iPhone) or Google Play Store (Android).
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DOE Releases its Cybersecurity Capability Maturity Model (C2M2)
DOE updated its C2M2 guidance to account for updates made to the National Institute of Standards and Technology’s Cybersecurity Framework. The guidance is intended to address the implementation and management of cybersecurity practices associated with information technology (IT) and operations technology (OT) assets and the environments in which they operate. Full guidance may be found here.
DOE Invests $10M to Establish University-Based Regional Cybersecurity R&D Centers
On September 23, DOE announced it will establish a network of collaborative, academic cybersecurity centers focused on developing new technologies and the workforce needed for the grid of the future. The funding seeks to bolster the overall security and resilience of U.S. electric power systems through technological innovations and development of a cybersecurity workforce that is well versed in both electrical engineering and critical infrastructure cybersecurity requirements. Concept papers are due October 13, 2021. For the full release, see here.
DOE “Get Your Stuff Off Search” – CISA Promotes Tools for Finding ICS Devises Exposed to the Internet
The Cybersecurity and Infrastructure Security Agency (CISA) has published a series of resources designed to help critical infrastructure organizations reduce internet attack surfaces that are visible to anyone on web-based search platforms. CISA calls this program “Get Your Stuff Off Search” and focuses much of its attention on the risks posed to exposed industrial control systems and the potential for impacts to public safety, human life, and national security. As CISA notes, many device owners and operators may not realize their devices are partially or fully exposed and can be found on the public internet. To help address these vulnerabilities, CISA highlights three publicly available tools organizations can use to identify internet-accessible devices, which include Shodan, Censys, and Thingful. It also provides how-to guides for each of these tools.
To receive more critical cybersecurity alerts, contact Tennessee’s Special Agent for Cybersecurity at James.Cotter@tn.gov and ask to be added to his IT Manager listserv.
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| ABOUT EMERGENCY SUPPORT FUNCTION (ESF) 12 (ENERGY)
Emergency Support Functions (ESFs) are mechanisms developed under the National Response Framework to provide federal, state, and local governments a common language and organization structure for responding to natural disasters, terrorist attacks, and other catastrophic events. Each of the 15 ESFs has a corresponding organization or agency tasked with overseeing the preparedness, response, and recovery phases of incident management. Tennessee was one of the first to integrate the ESF concept, and TEMA was tasked to manage the activities of the ESCs.
The purpose of ESF-12 Energy is to facilitate energy security in areas of the state affected by an emergency. While TVA is responsible for electricity generation and the electric grid, OEP has primary responsibility for monitoring the status of the transportation and heating fuel distribution network, and, if necessary, coordinating the State response to fuel disruptions. Working with our public sector partners, such as TEMA, the Governor’s Office, Department of Agriculture, Department of Commerce and Insurance, and the Department of Safety and Homeland Security, the State is able to convene the necessary government agencies and private sector stakeholders to ensure a continuous supply of transportation and heating fuels to citizens throughout the State. If you would be interested in having our ESCs present on energy security or energy resiliency, please contact us at TDEC.OEP@tn.gov.
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CONTACT OEP ESF-12 STAFF:
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