n Business and Industry Trends

assume various uptake levels of the tax credits project up to 274 GW more solar capacity by 2050 than there would be without the law.

Under the IRA, qualifying clean energy projects can receive additional bonus tax credits stacked on top of a base tax credit value if they satisfy certain requirements. A qualifying solar project can choose either a credit for the investment in clean energy, called an investment tax credit or a production tax credit.

Energy

Inflation Reduction Act’s effects on energy

In 2050, we project that total U.S. solar capacity, which includes both utility-scale solar and rooftop solar in the commercial and residential sectors, could range from 532 gigawatts to 1,399 GW.

In our annual outlook for 2023, we presented 16 scenarios that project long-term energy trends in the U.S. through 2050.

We looked at the Inflation Reduction Act and focused on 4 of the 16 cases that vary the amount of tax credits that clean energy technologies receive under the Act. In one case without the IRA, solar capacity reaches 726 GW by 2050. Three separate cases that

For instance, we assume in the AEO2023 Reference case that owners of solar projects in the electric power sector prefer the PTC, which has a base value of $5 per megawatt hour for the first 10 years of electricity sales. The value is five times higher for projects that receive a bonus credit for meeting labor requirements. Other bonus credits raise the credit value even higher if projects are built domestically or are located in the IRA’s definition of energy communities.

Warm start to year

Preliminary data from the National Oceanic and Atmospheric Administration for January and February indicate the first two months of 2023 may be close to the warmest on record for that period in data going back to 1895. The mild weather was concentrated in the eastern part of the United States.

Natural gas use down

We expect U.S natural gas consumption to average 99.1 billion cubic feet per day (Bcf/d) in the first quarter of 2023, down 5% from 1Q22. The decline in consumption is the result of very mild temperatures that have reduced demand for space heating. The largest decline is in residential and commercial consumption, which we expect will be 11% less in 1Q23 than in 1Q22.

Electric prices dropping

Our forecast indicates that wholesale electricity prices fall in 2023. The decline in price reflects the forecast drop in natural gas prices from 2022 to 2023. Natural gas is the most-used fuel for power generation in the United States. In addition, increasing electricity generation from renewable sources contributes to lower power prices.

Fuel use up

We expect global liquid fuels consumption to increase by 1.5 million barrels per day (b/d) in 2023 from 2022 and by an additional 1.8 million b/d in 2024. China is the main driver of growth in 2023 as the country shifts away from its zero-COVID policy, a shift that will increase travel. Growth in 2024 is more evenly distributed among countries as global GDP growth accelerates from 2.0% in 2023 to 3.2% in 2024.

Oil production falling

Our previous forecast of oil production in Russia included a steep decline in the coming months resulting from the EU’s ban on seaborne petroleum products from Russia that began Feb. 5. Russia recently announced a crude oil production cut of 0.5 million b/d for March, and we expect declines to be more than that, with Russia’s production falling by 0.7 million b/d in March. Despite the declines in March, recent petroleum exports from Russia have outpaced expectations, and we have revised our oil production forecast for Russia upwards by 0.4 million b/d in 2023. Overall, we expect global oil and liquid fuels production will average 101.5 million b/d in 2023, up 1.6 million b/d from 2022.