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Expect Higher Priced Electricity, Gas

Prices of residential electricity, motor gasoline and natural gas are expected to rise in the short term and over the next few years, according to the U.S. Energy Information Administration’s latest Energy Outlook Report.

The report shows that residential electricity pricing will average 11.6 cents per kilowatt hour (kWh) in 2010, up from 11.5 cents per kWh in 2009, reaching 11.9 cents per kWh in 2011.

NREL analysts recently reported that the rate premium that customers pay for green power continues to drop. The average net price premium for utility green power products has decreased from 3.48 cents/kWh in 2000 to 1.75 cents/kWh in 2009.

EIA projects that spot pricing for natural gas will be $4.48 per million Btu (MMBtu) this year (up $0.04 per MMBtu from last month’s forecast),  which is a $0.53-per-MMBtu increase over the 2009 average. The Henry Hub spot price is expected to average $5.34 per MMBtu in 2011, due to a decline in natural gas drilling, according to the report.

Regular-grade gasoline price is expected to average $2.86 per gallon in 2010 and $2.98 per gallon in 2011. Summer pricing will settle at about $2.94 per gallon, up from $2.44 per gallon last summer.

Diesel fuel retail prices, which averaged $2.46 per gallon in 2009, will average $3.05 per gallon in 2010 before increasing to $3.20 in 2011.

So far, EIA reports that energy production, shipments, and prices have not been significantly impacted by the oil spill caused by the Deepwater Horizon drilling rig off the Louisiana coast.

The report also estimates that carbon dioxide (CO2) emissions from fossil fuels, which declined by 7.0 percent in 2009, will increase by 0.6 percent and 1.6 percent in 2010 and 2011, respectively, as economic growth spurs higher energy consumption. However, even with the increases, CO2 emissions in 2011 will be lower than annual emissions from 1999 to 2008.

EIA’s long-term outlook shows that the strongest growth in fuel use will be renewable fuels to generate electricity and to produce liquid fuels for the transportation sector. The agency attributes the growth to several factors including the federal renewable fuels standard (RFS), various state renewable portfolio standard (RPS) programs, and stimulus funding in combination with rising fossil fuel prices.

Although fossil fuels will continue to provide most of the energy consumed in the United States over the next 25 years their share of overall energy use is expected to fall from 84 percent in 2008 to 78 percent in 2035.

U.S. consumption of liquid fuels is expected to grow over the next 25 years but the nation’s reliance on petroleum imports will decrease. Biofuels will account for all growth in liquid fuel consumption over the next 25 years, while consumption of petroleum-based liquids will be flat, partly due to rising oil prices that drive incentives for continued development in biofuels.

Other contributing factors include climate change concerns and energy security, which are helping to drive increased interest in alternative-fuel vehicles.

The role that natural gas plays in the future is still uncertain, according to EIA. Over the next few years the combination of relatively slow growth in total demand for electricity, strong growth in renewable sources, and the completion of a number of coal-fired power plants already under construction, will limit the potential for increased use of natural gas in the electric power sector, according to the report.

This chart shows energy price trends from 2008 to 2011.

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