The challenges of forecasting our energy future with so many changes underway

Forecasting is not easy and we admire the work that organisations such as the International Energy Agency do to give us future projections. Chelsea Harvey writes a good article in the Washington Post about the controversies in the US over the accuracy and usefulness of projects from the US Energy Information Agency. Do you have any views?

 

How we get energy is changing fast — and it’s sparking a huge fight over forecasting the future

For the first time since September 2014, the U.S. Energy Information Administration, the Department of Energy’s key data and forecasting branch, has released a set of long-range international energy projections aimed at helping inform public policy. But at a time of major transition in the energy sphere, some critics are suggesting that the agency has failed to include key information in its models — and as a result, critics are questioning both the accuracy and the usefulness of the report.

The projections span the time period from 2012 to 2040. Under a “business as usual” scenario, EIA forecasts that even 24 years from now, the world will still be burning a great deal of coal and that carbon dioxide emissions will have grown by about 34 percent. This is, naturally, a nightmare scenario for those concerned about climate change — who note the currently strong progress away from coal and toward renewables, and say they simply don’t believe EIA’s projections.

The preface to the EIA report is careful to note that all of these scenarios “generally assume that current laws and regulations are maintained throughout the projections.” And therein lies the problem, according to some environmentalists. They’re arguing that proposed or pledged policy changes — namely, the Obama administration’s Clean Power Plan and certain international commitments included in the newly signed Paris Agreement — were not included, and that the report could provide a misleading view of the future as a result. They’re also saying that projecting out 20 or more years while assuming no new policies doesn’t make any sense at a time of clear global momentum to address climate change.

“Today the EIA has failed to provide real insight into the future of energy, by blindly assuming the failure of world governments to achieve the commitment made in Paris last December to keep global warming well below 2 degrees Celsius,” said David Turnbull, campaigns director of Oil Change International, in a statement.

What EIA did

To more closely examine this controversy, let’s first look at the agency’s projections themselves. Under the agency’s “reference case” — a business-as-usual scenario, in which current trends are assumed to continue to the year 2040 — the report has projected an increase in total world energy consumption of about 48 percent, with much of the growth coming from nations outside the Organization for Economic Cooperation and Development (OECD). By 2040, the projections suggest that nearly two-thirds of all primary energy consumption will occur in non-OECD economies, particularly in Asia.

It’s not surprising that, with growing populations and the extension of electricity to hundreds of millions of people, energy use will grow in the future. But the report suggests that energy-associated carbon dioxide emissions will also grow by about 34 percent — meaning that that growth will be satisfied by a significant amount of fossil fuels, rather than by renewables.

Granted, the projections indicate that renewables will be the fastest-growing energy source through 2040, with renewable consumption increasing by about 2.6 percent each year throughout the study period. But by 2040 the projections indicate that fossil fuels will still account for about 78 percent of global energy use, with natural gas as the fastest-growing fossil fuel in this scenario and coal plateauing around the year 2030.

What the critics say

The problem here, according to some critics, is that the report fails to take into account certain international policy commitments — proposals that would further reduce the growth of fossil fuels and that would result in a more optimistic future.

This was an issue acknowledged by Adam Sieminski, administrator of the EIA, during his presentation of the new report on Wednesday at the Center for Strategic and International Studies. “We’ve been asked, well, how much of Paris is included in this [report] and how is that going to look going forward,” Sieminski said at the event. “That’s a complicated question.”

Some countries’ pledges under the Paris agreement reflect policies that already exist in these nations, Sieminski noted. Those would have been rolled into the projections. But others have not yet been implemented or enforced, he said, and those will have to be addressed in later projections. Additionally, he noted, the outlook addresses much of the world by region rather than by country, meaning that each nation’s specific policies or commitments cannot be addressed.

Jonathan Cogan, a spokesperson for the EIA, reiterated those points in an email to The Washington Post, affirming that the outlook generally reflects existing policies and does not incorporate regulations that are not already in place.

“Within the context of international modeling, incorporating existing policies and regulations and interpreting announced country targets can be complex,” he said. According to Cogan, analysts at the EIA also factor in assessments of the likelihood of certain nations to meet the goals described in their own policies based on their previous track records.

An even deeper issue, though, is that the Paris agreement isn’t expected to be the end of things — it is already known that the world will have to adopt more ambitious climate goals, and fast, to hold warming below 2 degrees Celsius. So the EIA not only doesn’t take into account current levels of ambition, but also possible future ones.

“The EIA’s Reference Case is a recipe for disaster, and indicates that we need a new set of ingredients to create the clean energy economy necessary to solve the climate crisis,” Turnbull of Oil Change International said in his statement. “The time is now for the Obama Administration to implement a real climate test and require the EIA to chart the course of climate action rather than plot the status quo of climate failure.”

But the EIA has countered that its report shouldn’t be taken as a prediction at all, but rather a set of scenarios that policymakers can use as a baseline to see how changing certain assumptions might affect the future.

“It’s hugely valuable to the public to try to understand what doing things or what changing assumptions means to the numbers,” Sieminski said. “You might find that you change an assumption and it doesn’t change very much, and that tells you something. Or you change an assumption, it makes a big difference, and that gives you another story.”

However, the risk of misunderstanding on this front has worrisome policy implications, according to some experts.

“There is a large risk of confusion, and some of that is due to deliberate misrepresentation,” said David Hawkins, director of the climate program at the Natural Resources Defense Council. “In the past, fossil fuel producers have pointed to these EIA analyses as though they were a prediction of the future … and of course that’s not right.” Such misrepresentations might indicate that a large fossil-fuel share in energy consumption is inevitable in the future, when nations around the world are working to ensure that this is not the case.

He pointed to the American Petroleum Institute’s 2016 State of American Energy Address in January, which included this: “According the EIA, fossil fuels will account for 80 percent of U.S. energy consumption through 2040 and the agency estimates that even under the best-case scenario for alternative fuel use, fossil fuels will still account for 78 percent of our energy needs. This is just another data point in support of a long-standing tenet of energy policy held by most economists, academics and government analysts: Fossil fuels will remain the foundation upon which our modern society rests for decades to come.”

The problem with energy forecasting

This isn’t the first time the EIA’s outlooks have come under fire. Some experts have suggested that the agency’s projections — particularly when it comes to the growth of renewables — are consistently inaccurate. It’s a problem with energy forecasting in general that has been pointed out frequently during the past couple of years (here, here and here are some examples), and most recently again by David Roberts at Vox.

But the bigger issue, Roberts writes, is not so much that energy modeling is tricky (and the results often prove wrong) — it’s that reporters and policymakers alike haven’t learned how to treat the resulting reports with the proper caution.

“It is not a prediction,” he writes of the EIA’s reference case. “It is not even meant to be taken as any more probable than any other scenario. It is just the center in a range of scenarios. But journalists and pundits can’t help treating it as a prediction. What’s worse, utility executives and energy investors treat it that way. It distorts their decisions, causing them to underestimate wind and solar growth.”

The most important issue, then, is to be sure that these issues are transparently presented and then correctly interpreted by policymakers — as hypothetical scenarios meant to be used as supplemental tools, rather than true forecasts.

“It does raise the question of whether these kinds of reports that assume no policy change are increasingly irrelevant in a world where we know there is going to be policy change,” Hawkins said. “The real issue is the speed of that change and whether we’ll be smart enough to act faster in the future than we have in the past.”

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