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The energy crisis that has gripped the world over the past three years has unleashed a perfect storm of multidimensional, industry-wide shocks, including a capital crunch that has severely depleted investment levels, according to new research released today by global professional services firm GHD.
Shocked, one of the largest ever global opinion studies of energy industry leaders, shows that 94% of energy leaders believe the current energy crisis is the worst crisis their market has ever experienced. The level of investment between 2020 and 2022 is estimated to be $203 billion lower than it would have been, according to energy industry CFOs.
Extreme market volatility and geopolitical tensions have put energy security at the top of the global agenda, with three-quarters of energy leaders reporting it as a top concern for their organizations.
This disruption has major impacts on economies and communities around the world, and the societal pressure on the energy sector to deliver reliable, affordable, low-carbon energy has never been greater. Three-quarters (74%) of energy leaders believe energy prices are currently the biggest factor causing inflation, and 76% say the energy crisis is lowering living standards around the world, the report said.
Climate shocks continue to force the energy transition to accelerate, but progress towards net zero is hampered by complex dynamics. While 42% say the current energy crisis has accelerated their organization’s plans for net zero emissions – an average of five years – almost half of energy leaders (47%) say the crisis has slowed down their plans for net zero emissions – — an average of six years ahead.
While the crisis may have halted many companies’ net-zero strategies, the resulting volatility in natural gas prices has driven diversification into energy assets, with 70% of energy industry leaders reporting that volatility in natural gas prices has accelerated over the past 12 months increase their corporate adoption of renewable energy generation assets.
Tom Foley, executive director (UK, Europe and Middle East) at GHD Future Energy, said: “While the UAE is a significant global oil producer and therefore less vulnerable to supply shocks, the UAE has recognized the importance of diversification and has stepped up its support for energy transition projects. Our research supports this, which shows that the current global energy crisis has prompted 61% of UAE energy companies to accelerate investments to expand their renewable energy portfolio. As part of the upcoming COP28 later this year As a host, the international community expects the country 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 to help de-risk the energy transition:
* Unlocking capital and markets: Reducing risk and unlocking the flow of capital into energy projects will require sensible planning, permitting, policy and regulatory frameworks.
* Supercharging Engineering Solutions: Integrating thoughtful design principles into new energy infrastructure and retrofitting existing infrastructure is critical to helping build system resilience.
* Carefully balance supply chains and resources: A successful transformation requires access to new raw material streams, a retooled supply chain, and a (re)skilled workforce.
* Ensuring community understanding and social buy-in: Social buy-in for key projects requires engagement and education at the macro and community levels.
* Ensuring a fair transition: The de-risking transition is fair, balanced and just. Transition costs must be shared equitably across countries and communities to ensure that no one is left behind.
The Shock Study employed two core research methods: a quantitative opinion study of 450 senior energy industry decision makers and 10 qualitative interviews with industry thought leaders. The study focuses on 10 key markets: Australia, Canada, Chile, Germany, New Zealand, Singapore, Philippines, UAE, UK and US. It said additional interviews were conducted with the leaders of Brazil, China, Egypt, India and South Africa. – TradeArabia News Service
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