Three-quarters of energy leaders say that security of energy supply is the number one concern for their organisation.
Energy security is the leading concern resulting from the global energy crisis that has led to a capital crunch and severely depleted investment levels, new research shows.
The majority 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.
The research by professional services company GHD finds that extreme market volatility and geopolitical tensions have put energy security high on the global agenda, with three-quarters of energy leaders reporting that security of energy supply 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 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 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 per cent 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 per cent) 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 report that the volatility in natural gas prices over the past 12 months has accelerated their business’s adoption of renewable energy generation assets.
“As the discourse surrounding energy in the UK evolves to prioritise energy security, our research highlights the gravity of the present crisis confronting the UK energy industry,” said Tom Foley, executive director (UK, Europe & Middle East) of future energy at GHD.
“To ensure we remain on track to achieve the UK’s ambitious net zero goal by 2050, a significant amount of work lies ahead. There is a need to foster transparent dialogues across the private and public sectors to effectively mitigate risks and tackle challenges. This becomes particularly crucial given that 69 per cent of energy leaders in the UK perceive community opposition as one of the largest obstacles to getting new projects approved.”
As GHD and global energy leaders look to the future of the industry, the 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-thought-out 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.