Brad A. Molotsky – Duane Morris Energy and Environmental Blog

February 25, 2025February 25, 2025 by Brad A. Molotsky

Energy – Sources and Uses of Energy in the United States – A 101 Overview

Over time, I have noticed that colleagues and friends have a passing interest and knowledge base regarding where we get our energy from and how we use it in the United States. Folks are interested in learning but are not sure where to look. Given this, we have decided to kick off an introductory series for those interested in learning more about energy, the players in the energy arena, energy policy both federal and state, and technology involving energy.

If you are a 301 or 401 student, this is NOT the place for you, even though you are always welcome.

The US energy mix (i.e., where we get our energy from and how we use it) is primarily composed of fossil fuels, with petroleum being the largest source (36%), natural gas being the second largest source (31%), followed by coal (13%), making up approximately 79% of total primary energy production; renewable energy sources like solar, geothermal, hydro and wind accounting for approximately 14% (but showing continued growth), with nuclear power also contributing approximately 7% to the source of power.

Sources focus on where our energy comes from. Uses focus on how energy is used.

Sources of Energy in the United States:

Petroleum is the top source of energy in the US, accounting for approximately 38% of total source energy; petroleum is primarily used in the transportation sector and the industrial sectors to run motor vehicles and equipment.

Natural gas is the second highest source of energy in the US, accounting for around 31% of total primary energy production; natural gas is primarily used in the industrial sector, the residential, commercial sectors and to a great degree in the creation of electricity.

Nuclear power is a significant contributor to electricity generation in the US.

Renewable energy growth – Renewable energy sources like solar, hydro, geothermal and wind are and have been continuing to increase their share in the US energy mix. Their use continues to increase and expand over time with increased creation being used in electric generation and industrial use for power.

Coal – while reducing in overall use as time marches on, coal continues to be used as a back up source of power to create electricity and commercial buildings as a source of heat.

The breakdown of what sources of energy are used to create electricity in the US are as follows:

Natural gas: 43% – a naturally occurring fossil fuel found underground; used in electric power creation, industry, residential, commercial buildings, and transportation; production has increased 90% in the US since 2008; The power sector continues to be a huge consumer of natural gas.
Renewable energy: 21% – includes hydroelectric, solar, wind as well as geothermal; in 2022, renewable energy generation surpassed coal as a source of energy for the first time in history; US electric production.
Nuclear power: 19% – contributed nearly 20% of the electric power generated in the US; used to produce reliable, low-carbon energy;
Coal: 16% – found underground in sedimentary deposits; continues to diminish in use even though a relatively cheap source of power given its impact on the workers who mine it and the air quality around areas that use it; nearly all coal that is mined in the US is used to create electricity; and
Petroleum (crude oil): .4% – per Statista, petroleum is the primary source of energy in the US; it is a naturally occurring fossil fuel found underground; refined into gasoline, diesel, jet fuel and other fuels. The biggest use of petroleum products is in fuel for vehicles, planes and ships.

Electricity Generation –

In 2023, approximately 4,178 billion kilowatt hours (kWh) (or about 4.18 trillion kWh) of electricity were generated at utility-scale electricity generation facilities in the United States[i]. About 60% of this electricity generation was from fossil fuels—coal, natural gas, petroleum, and other gases. About 19% was from nuclear energy, and about 21% was from renewable energy sources.

The U.S. Energy Information Administration estimates that an additional 73.62 billion kWh of electricity generation was from small-scale solar photovoltaic systems in 2023.[ii]

U.S. utility-scale electricity generation by source, amount, and share of total in 2023

Energy source	Billion kWh	Share of total
Total – all sources	4,178
Fossil fuels (total)	2,505	60.0%
Natural gas	1,802	43.1%
Coal	675	16.2%
Petroleum (total)	16	0.4%
Petroleum liquids	12	0.3%
Petroleum coke	5	0.1%
Other gases³	11	0.3%
Nuclear	775	18.6%
Renewables (total)	894	21.4%
Wind	425	10.2%
Hydropower	240	5.7%
Solar (total)	165	3.9%
Photovoltaic	162	3.9%
Solar thermal	3	0.1%
Biomass (total)	47	1.1%
Wood	31	0.8%
Landfill gas	8	0.2%
Municipal solid waste (biogenic)	6	0.1%
Other biomass waste	2	0.1%
Geothermal	16	0.4%
Pumped storage hydropower	-6	-0.1%
Other sources[iii]	10	0.2%
Data source: U.S. Energy Information Administration, Electric Power Monthly, February 2024; preliminary data

Electricity Consumption in the US:

After decades of flat electricity consumption, US energy demand is now projected to increase from between 24 to 29% by 2035, nearly twice the rate estimated in 2023. A combination of new investments in AI data centers, manufacturing, and broader electrification are the primary drivers behind this projected increase, with data centers accounting for 30% of the expected growth, according to a Goldman Sachs report in April 2024. One estimate suggests that data centers alone could consume 9% of total US electricity generation by 2030 (up from 4% today).

Energy Uses in the United States

There are generally five energy consuming sectors in the US:

The industrial sector consumes approximately 35% of all energy consumption, including electricity; this sector includes facilities and equipment used for manufacturing, agriculture, mining, and construction. The largest contributor of power to this sector is natural gas.
The transportation sector consumes approximately 37% of all energy consumption, including electricity; this sector includes vehicles that transport people or goods, such as cars, trucks, buses, motorcycles, trains, aircraft, boats, barges, and ships. Note that the lion’s share of petroleum uses are consumed in transportation related activities.
The residential sector consumes approximately 16% of all energy consumption, including electricity; consists of homes and apartments.
The commercial sector consumes approximately 12% of all energy consumption, including electricity and includes offices, malls, stores, schools, hospitals, hotels, warehouses, restaurants, and places of worship and public assembly.
The electric power sector consumes primary energy to generate most of the electricity consumed by the other four sectors.

If you have additional energy topics you would like to see us explore, feel free to drop me a note at bamolotsky@duanemorris.com and we would be happy to add it to our growing list of things folks are asking for information about.

Duane Morris has a robust industry facing Energy and Environmental Group focused on incentives, regulatory, permitting, financing and development of energy projects internationally including renewables, solar, wind, geothermal and power purchase agreements and P-3 procurements. If you have any questions or follow ups, please do not hesitate to contact Brad A. Molotsky, Brad Thompson, Phil Cha, Shelton Vaughan or the lawyer in the firm whom you normally deal with on other matters.

[i] Utility-scale electricity generation is electricity generation from power plants with at least one megawatt (or 1,000 kilowatts) of total electricity generating capacity. Data is for net electricity generation. From USEIA data set.

[ii] Small-scale solar photovoltaic (PV) systems are electricity generators with less than one megawatt (MW) of electricity generating capacity, which are not connected at a power plant that has a combined capacity of one MW or larger. Most small-scale PV systems are at or near the location where the electricity is consumed and many are net metered systems. Smaller PV systems are usually installed on building rooftops or parking lots. From USEIA data set.

[iii] Other (utility-scale) sources includes non-biogenic municipal solid waste, batteries, hydrogen, purchased steam, sulfur, tire-derived fuel, and other miscellaneous energy sources. From USEIA data set.

December 6, 2024December 10, 2024 by Brad A. Molotsky

Clean Energy Investment Tax Credit Final Regulations Issued by Treasury

Earlier this week, on December 4, 2024, the U.S. Treasury Department released final regulations for Section 48 – also known as the clean energy investment tax credit.

After much industry push back, of particular note is, that the proposed definition of what qualifies as applicable “energy property” was modified to include functional components of various systems in calculating what the total energy credit is worth.

The revised definition reflects what Treasury intended to be broad but functional descriptions of integral components for various renewable energy technologies eligible under Internal Revenue Code Section 48.

To avoid limiting future energy technologies, Treasury, in consultation with the U.S. Department of Energy, determined that “the best option is to adopt a function-oriented approach to describe the types of components that are considered energy property”.

Per Treasury, the ITC has fueled US clean energy development by providing a tax credit for investments in qualifying clean energy projects – generally 30% of the cost of the project.

The Inflation Reduction Act extended the ITC as well as the production tax credit (the “PTC”), until 2025, at which point the ITC and PTC will switch to a technology neutral approach with investment tax credits that will be available in full for projects beginning construction through at least 2033.

The final rules now allows project owners to include the costs of upgrading equipment in the basis, which is used to calculate the value of the Section 48 credit.

Additional clarity was provided for offshore wind equipment (allowing owners to claim the credit for power conditioning and transfer equipment and cables), geothermal heat pumps (allowing owners of underground coils to claim the ITC if they own at least one heat pumps used in connection with the coils), biogas (clarifies what property is qualified biogas property and what is integral part of the project), co-located energy storage (allows that claimed energy storage technology that is co-located with and shares power conditioning equipment with a qualified facility will also qualify) and hydrogen storage (allows that energy storage property does not need to store hydrogen that is solely used as energy to qualify).

The proposed rules, released November 2023, initially prohibited upgrading equipment to qualify. Moreover, initially, Treasury said in the proposed rules that the ownership of only geothermal components is not considered ownership of the entire unit of the energy property. The final rules modified both of these provisions to allow for upgraded equipment and component ownership to qualify.

The regulations also revised the definition of “energy project” so that multiple properties with the same owner can claim the credit. Such properties must meet at least 4 of the 7 factors of an energy project listed in the final regulations, such as the facilities share a common substation or are financed by the same loan agreement.

Energy storage equipment located in the same area as power conditioning equipment for a facility that claims a related renewable energy production tax credit is also eligible for the credit under the final regulations.

The final regulations implemented start with a base credit of 6% of a renewable energy development’s basis or qualified investment. The value of the credit can increase to 30% for projects that meet certain standards, such as the prevailing wages and apprenticeship requirements. The law also made newer renewable energy technologies, such as electrochromic glass, energy storage, microgrid controllers and biogas properties, eligible for the incentive.

The 2022 law created a new clean electricity ITC that has a much longer expiration date under Section 48E. This new provision will apply to any energy property designed to emit zero greenhouse gas emissions, including nuclear facilities. Section 48E, along with the related clean electricity production tax credit under Section 45Y will take effect in January, 2025 but the effectiveness of those incentives could be scaled back as President-elect Donald Trump and Congress seek revenue sources to offset the renewal of expiring provisions under the 2017 Tax Cuts and Jobs Act.

Duane Morris has a robust industry facing Energy Group focused on incentives, regulatory, permitting, financing and development of energy projects internationally including renewables, solar, wind, geothermal and power purchase agreements and P-3 procurements. If you have any questions or follow ups, please do not hesitate to contact Brad A. Molotsky, Brad Thompson, Phil Cha, Shelton Vaughan or the lawyer in the firm whom you normally deal with on other matters.

January 30, 2024 by Brad A. Molotsky

New Jersey – Developing, Investing and Leasing Healthcare Facilities

Fresh off a panel of distinguished contributors at the MidAtlantic Real Estate Healthcare Conference in Edison, NJ earlier today featuring Andrew Antognoli, Blake Goodman, Randy Horning, Cory Atkins, Pasquale Avallone and Jonathan Marks, where they discussed and debated a wide range of topics focusing on healthcare related real estate issues.

As you may be aware, New Jersey ranks 8th in the US in terms of healthcare satisfaction, with over 113 hospitals and 72 acute care facilities in the State. Over 150,000 employees are employed in these facilities making them the largest private sector employee base in the State with over 15 Million patients being served a year.

Key Take Aways:

Development – limited new development due to interest rates and constructions costs despite there not being many if any new facilities for rent at the moment. Adaptive reuse of existing buildings continues to be the main game noting that some of the older B and C product in the marketplace will not be able to meet current design specifications of the users.

Construction Costs for Medical Office – continue to be at or near an all time high in NJ.

Key Design Issues – access, parking, visibility, redundant sources of power, sewage capacity and growing desire to have more sustainable spaces.

Acquisitions – muted at the moment due to interest rates and slow moving product historically.

Cap Rates – generally around 6-6.5% on single tenant, good credit buildings and 7-7.5% for multi tenant buildings.

Average Lease Size – approximately 3,000 SF but as more and more systems continue to consolidate, the larger systems want larger spaces for back office operations of around 10,000 SF.

Rents – depending on product type but mid to high $20s depending on what part of the state and how old the building is with approximately $3.00 in electric.

Leasing Velocity – our team of top shelf brokers felt that leasing velocity is picking up and relatively strong due to the lack of new space availability.

Tenant Improvement Dollars – owners prefer tenants to be investing in sophisticated equipment to create more “stickiness” but willing, with the right tenant, to provide T/I dollars of approximately $50 psf for a 7 year term.

Urgent Care – continued activity in this space with multiple engagements for 10 sites or more around the state.

Sustainability – more important to some owners than in the past. Electric Car chargers are being considered and requested by more and more tenants and owners but surprisingly solar was less of interest to the panelists, despite the ability to use state incentives and reduce power costs.

Section 179-D – with changes under the Inflation Reduction Act to allow non-profits to monetize and transfer the tax deduction or reduce the cost of their building out, many of the owners and brokers in the room thought this was worth exploring to see how the potential $5.25 PSF in tax deduction could be utilized by their clients.

A super turn out, packed house and folks engaging in networking and learning. Kudos to MARE for yet another excellent, well attended event. Duane Morris, LLP looks forward to our continued involvement with the group.

Duane Morris has a robust real estate group and healthcare group focused on regulatory, permitting, executive compensation and real estate related and incentive issues and programs. f you have any questions or follow ups, please do not hesitate to contact Brad A. Molotsky, Erin Duffy or the lawyer in the firm whom you normally deal with on other maters.