The energy crisis that has rocked the world over the past three years has created a perfect, multidimensional storm of sector-wide shocks including a capital crunch that has severely depleted investment levels, reveals a new research launched today by global professional services company GHD.
Shocked, one of the largest global opinion research studies ever undertaken among energy sector leaders, reveals that 94 percent of energy leaders believe the current energy crisis is the most severe their market has ever experienced. And according to energy sector CFOs, investment levels between 2020 and 2022 were an estimated $203 billion lower than they otherwise would have been.
Extreme market volatility and geopolitical tensions have put energy security high on the global agenda, with three-quarters of energy leaders reporting that this is the number one concern for their organisation.
This disruption has had a significant impact on economies and communities around the world and societal pressure on the energy sector to provide reliable, affordable, low-carbon energy has never been greater. Three-quarters of energy leaders (74 per cent) believe energy prices are currently the biggest contributor to inflation, and 76 per cent say the energy crisis is reducing the standard of living across the globe, the report said.
The climate shock continues to force an acceleration of the energy transition, but progress towards net zero is being impacted by the complex dynamics at play. While 42 percent say the current energy crisis has accelerated their organisation’s net-zero plans – by an average of five years – almost half of energy leaders (47 percent) state that the crisis has decelerated their net-zero plans – by an average of six years.
While the crisis may have put the brakes on net-zero strategies for many companies, the resulting volatility in natural gas prices has driven the diversification of energy assets, with 70 per cent of energy sector leaders reporting that the volatility in natural gas prices over the past 12 months has accelerated their business’s adoption of renewable energy generation assets.
Tom Foley, Executive Director (UK, Europe & Middle East) Future Energy at GHD, said: "Despite being a prominent global oil producer and thus less vulnerable to supply shocks, the UAE has recognised the importance of diversification and has significantly bolstered investments in energy transition projects. This is supported by our research, which has revealed that the prevailing global energy crisis has prompted 61 per cent of UAE energy companies to expedite their investments in expanding their renewable energy portfolio. As the upcoming host of COP28 later this year, there are international expectations on the nation to uphold its net zero aspirations and facilitate the energy transition.”
As GHD and global energy leaders look to the future of the industry, the Shocked report identifies five key priorities that will help de-risk the energy transition:
* Unlocking money and markets: De-risking and unlocking capital flows into energy projects will require smart planning, permitting, policy and regulatory frameworks.
* Supercharging engineered solutions: The integration of well-thoughtout design principles into new energy infrastructure and retrofitting of existing infrastructure will be critical to help build system resilience.
* Carefully balancing supply chains and resources: A successful transition will require access to new streams of raw materials, re-tooled supply chains and a (re)skilled workforce.
* Securing community understanding and social acceptance: Earning social acceptance for crucial projects will require engagement and education at both a macro and a community level.
* Ensuring a just transition: A de-risked transition is one that is fair, balanced and just. The cost of transition must be spread fairly between countries and across communities to ensure no one is left behind.
Shocked study utilised two core research methods: quantitative opinion research among 450 senior energy sector decision-makers and 10 qualitative interviews with industry thought leaders. The study focused on 10 key markets: Australia, Canada, Chile, Germany, New Zealand, Singapore, the Philippines, the UAE, the UK and the USA. Additional interviews were conducted with leaders based in Brazil, China, Egypt, India and South Africa, it said. - TradeArabia News Service