As of now, energy security concerns outweigh clean and affordable energy when it comes to the list of priorities for energy companies, which is concerning across the world since the energy system is not going to resolve the energy trilemma in the coming decade, as per DNV’s research, which analysed the views of over 1300 senior energy professionals based upon a timely survey held in December 2022 and January 2023.
It is well to be noted that energy security will take centre stage as far as oil and gas as well as the power sectors are concerned in the year to come. Renewable players are maintaining their focus on clean energy, although the priorities of industrial energy consumers contrast when it comes to their partners and suppliers, as they are looking to give thrust to affordable as well as accessible energy.
Around 39% of energy professionals are confident they can meet decarbonization and climate goals. That said, the progress of the energy transition happens to be the greatest driver when it comes to the confidence of energy professionals for the year ahead, and the fact is that the majority of them believe that the energy transition is indeed accelerating.
Resolving the trilemma in energy, i.e., delivering secure, clean, and affordable energy, is focused on by the energy industry as a long-term objective. Only 17% of respondents in the industry believe that the transition is going to deliver secure, clean, as well as affordable energy in the next decade across all parts of the energy system in their respective countries. Almost 41% look at this being achieved in the next 10–20 years, while a major chunk of about 32% is of the opinion that the crucial outcome of the energy transition will not be realised until the 2040s. Apparently, there is a general agreement when it comes to this outlook as far as the region is concerned, with only energy professionals from North America being a bit more conservative as far as the timeline goes.
As per Ditlev Engel, DNV’s Energy System CEO, the energy trilemma happens to be in transition. In a difficult and complex year for the energy industry, they happen to see a trilemma leading to priorities that are competitive. However, in a decarbonized energy system, affordability, sustainability, and security all pull in the same direction, and the fact is that the public-private sector can go on to resolve the trilemma by way of a new approach when it comes to scaling as well as implementation.
Around 80% of the professionals in the renewables sector believe that the energy security concerns may go on to lead to elevated renewables investment in the year to come, whereas 61% of those in the energy sector opine that their company can go on to become more profitable by enhancing sustainability. The record year when it comes to oil and gas, on the other hand, has redefined what acceptable profits look like for the industry. Last year, 52% of the oil-gas executives expressed that their organisations would go on to make acceptable profits in the event that oil prices averaged USD 40 to USD 50 a barrel. In the year ahead, only 39% feel the same. Half of the oil and gas industry respondents opine that their organisation is going to elevate its investment in gas this year, which will be up 8 percentage points y-o-y. Almost 43% of the oil and gas sector expects to elevate oil investments, which is a sure thing by 9 percentage points.
Oil and Gas companies are moving towards slowing their shift outside of the core hydrocarbons area and are, as a matter of fact, holding back their decarbonization focus vis-à-vis 2022.
By this year, the energy sector is expecting to elevate its investment as far as clean energy sources as well as carriers are concerned. Half of the energy professionals, 53% to be exact, expect their companies to put funds in low carbon hydrogen/ ammonia and almost similar in proportions when it comes to wind- 49% and solar-46%. More than a third expect organisations to increase their investments in the carbon capture and storage portfolio. When it comes to enabling technologies, 6 in 10 say that their company is elevating energy efficiency and digitalization investment, and almost half of the industry is going ahead with energy storage technology investment.
According to Engel, the energy transition has indeed accelerated through the pandemic as well as the energy crisis and has left markets to keep the pace across distribution and transmission systems, supply chains, licencing and permission, as well as infrastructure and workforce. This year, as per him, there may be a slowing in the scale-down of fossil fuels, but at the same time, there may be a slowing in the scale-up of clean energy too, if barriers aren’t removed.
It is opined that the policymakers and the governments must step up their game to overcome barriers so as to implement, and everyone across the sector must move forward in the transition.
DNV research also finds signs that the barriers may as well slow the energy transition pace in the year ahead, but the momentum is beginning to break these obstacles as societies increasingly go on to feel the effects when it comes to the energy crisis and as the bottlenecks become more acute when it comes to holding back the progress.
There is indeed a strong agreement in the power sector that an urgent need for greater grid investment is required, whereas just a fifth of those in the sector state that the present transmission capacity planning happens to be sufficient for enabling the expansion of renewables.
Three-quarters of the energy sector states that the supply chain issues are pretty much slowing down the transition, while less than half of the sector, i.e., 44%, expects a prominent enhancement in the goods availability this year. In the case of the renewables industry, lack of government or policy support as well as permission and licencing happen to be critical in meeting climate goals. Around 40% of the energy companies are finding it exceedingly challenging to get reasonably priced funding for the projects. Significantly, finance is easier to access for companies across Europe and North America when it comes to the regions. Sector-wise, almost half of the power companies, i.e., 47%, are finding it increasingly challenging to get funding.