According to IHS Markit Strategic Report, #electricity #demand growth is expected to continue in 2022 but at a more moderated level as countries get closer to pre-pandemic levels, although uncertainties on new COVID-19 waves or lockdown restrictions remain. At the same time, the ongoing global energy supply crunch — exacerbated by russia’s war against Ukraine — means that high and volatile power prices will continue.
📍 Supply chain bottlenecks and increases in raw material prices, amplified by the ongoing war, are also putting pressure on #renewable costs. Yet renewables are expected to continue to grow, driven by decarbonization targets and secondary routes to market such as corporate power purchase agreements. Meanwhile, infrastructure challenges and grid reliability will dominate policy discussions while tensions between decarbonization and supply security lead governments and companies to consider an expanding range of clean technologies.
🔹 Europe focus
On the back of already tight global fuel markets, russia’s invasion to Ukraine has pushed spot coal and gas prices to record highs, making wholesale power prices skyrocket. The situation is especially pronounced in Europe given its dependence on russian #fuel #imports.
📍 According to the IHS Markit Insight under a “severe” scenario, European wholesale energy bills could reach close to €1,500 billion in 2022, with windfall profits to non-gas generators. European governments have started intervening with measures to reduce the impact of high energy prices on consumers. In early March, the European Commission released its #REPowerEU #proposal, an outline of a plan to make the European Union independent from russian fossil fuels well before 2030.
🔹 #Clean #energy #investments continue
Against this backdrop of heightened supply security concerns, efforts to ramp up clean energy investments continued. Renewable energy attracted the most foreign capital of any sector – $85.2 bln (40% – solar energy projects, 27% – wind power projects) in 2021. According to the IHS Markit Insight, spending on low-carbon power will reach $530 billion in 2030, with a total of $4.4 trillion in cumulative spending between now and the end of the decade, low-carbon power accounted for 30% of the $1.5 trillion capex in the energy sector supply side in 2021 — up from 22% in 2015. Whereas, investments in upstream and mid/downstream sectors have fallen from 50% in 2015 to 37% in 2021 cumulatively.
📍 Looking ahead, the overall capital investment efficiency for low-carbon power technologies is expected to improve by 30% by 2030, which means that while renewables are projected to grow rapidly, spending grows more slowly. To meet more ambitious climate objectives, annual low-carbon spending levels would need to double compared with current projections and reach about $1 trillion in 2030.
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