Just Released 2022 World Energy Report
The 2022 World Energy Outlook, a 524-page document, has just been released. It’s the most significant report they have ever published. Why?
This headline says it all:
Russia’s invasion of Ukraine has sparked a global energy crisis.
This report is a mixture of challenging, particularly challenging, and positive news. Here are some of the key points:
The world is in the midst of its first global energy crisis – a shock of unprecedented breadth and complexity.
Russia is the world’s largest exporter of fossil fuels, but its curtailments of natural gas supply to Europe and European sanctions on imports of oil and coal from Russia are severing one of the main arteries of global energy trade. All fuels are affected, but gas markets are the epicenter as Russia seeks leverage by exposing consumers to higher energy bills and supply shortages.
Prices for spot purchases of natural gas have reached levels never seen before, regularly exceeding the equivalent of USD 250 for a barrel of oil.
High gas and coal prices account for 90% of the upward pressure on electricity costs. To offset shortfalls in Russian gas supply, Europe is set to import an extra fifty billion cubic meters of liquefied natural gas in 2022 compared with the previous year. This has been eased by lower demand from China due to lockdowns and subdued economic growth.
The crisis has stoked inflationary pressures and created a looming risk of recession, as well as a huge USD 2 trillion windfall for fossil fuel producers above their 2021 net income.
Higher energy prices are also increasing food insecurity in many developing economies. The heaviest burden falls on poorer households, where a larger share of income is spent on energy and food. Some seventy-five million people who recently gained access to electricity are likely to lose the ability to pay for it.
A key question for policymakers, and this Outlook, is whether the crisis will be a setback for clean energy transitions or a catalyst for faster action.
Climate policies and net zero commitments were blamed in some quarters for contributing to the run-up in energy prices, but there is scant evidence for this. In the most affected regions, higher shares of renewables were correlated with lower electricity prices, and more efficient homes and electrified heat have provided an essential buffer for some consumers.
New policies in major energy markets help propel annual clean energy investment to more than USD 2 trillion by 2030, a rise of more than 50% from today.
Clean energy now becomes a huge opportunity for growth and jobs and a major arena for international economic competition. By 2030, annual solar and wind capacity additions in the United States [will] grow two-and-a-half-times over today’s levels, while electric car sales [will be] seven times larger.
My Thoughts:
Let’s analyze this last point. For those familiar with the energy crisis of the 1970s, we know it was a challenging time. But many positive things resulted from that crisis. We started building homes and facilities that are more energy efficient; auto manufacturers began producing cars with better gas mileage; and for the first time, there was greater interest in renewable energy.
Are we in for a challenging time? Likely so. But, when it comes to the environment and sustainability, it's also likely good will come from this period, just as it did in the 1970s.
