The International Energy Agency (IEA) has recently released its World Energy Outlook 2022 report which stated that global emissions will peak in 2025. This report explores key questions about the crisis, including setbacks for clean energy transitions, government responses on energy markets and possible risks ahead on the path to net zero emissions. Talking specifically about India, the 524-page report says that the primary challenge for the country is going to be about meeting its rising electricity demand. Citing government programmes such as Gati Shakti National Master Plan and the Atmanirbhar Bhart scheme along with strong economics it says that India will see a robust growth in renewables and electric mobility, notably for two/three‐wheelers. The World Energy Outlook report also states that the global energy crisis sparked by the Ukraine conflict is having far-reaching implications for entire economies, prompting short-term responses from governments as well as a deeper debate about the ways to promote energy security.
Russia’s invasion of Ukraine has sparked a global energy crisis:
- The world is in the midst of its first global energy crisis – a shock of unprecedented breadth and complexity.
- Pressures in markets predated Russia’s invasion of Ukraine, but Russia’s actions have turned a rapid economic recovery from the pandemic – which strained all manner of global supply chains, including energy – into full-blown energy turmoil.
- 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.
- 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.
- Faced with energy shortfalls and high prices, governments have so far committed well over USD 500 billion, mainly in advanced economies, to shield consumers from the immediate impacts.
Policy responses are fast-tracking:
- New policies in major energy markets help propel annual clean energy investment to more than USD 2 trillion by 2030 in the STEPS, a rise of more than 50% from today.
- Clean energy becomes a huge opportunity for growth and jobs, and a major arena for international economic competition
- As markets rebalance, renewables, supported by nuclear power, see sustained gains; the upside for coal from today’s crisis is temporary.
- International energy trade undergoes a profound reorientation in the 2020s as countries adjust to the rupture of Russia-Europe flows, which is assumed to be permanent.
- For the first time, a WEOscenario based on prevailing policy settings has global demand for each of the fossil fuels exhibiting a peak or plateau.
- Global fossil fuel use has risen alongside GDP since the start of the Industrial Revolution in the 18th century: putting this rise into reverse while continuing to expand the global economy will be a pivotal moment in energy history.
- Full achievement of all climate pledges would move the world towards safer ground, but there is still a large gap between today’s ambitions and a 1.5 °C stabilisation.
- The world is in a critical decade for delivering a more secure, sustainable and affordable energy system – the potential for faster progress is enormous if strong action is taken immediately.
- Supply chains for some key technologies – including batteries, solar PV and electrolysers – are expanding at rates that support higher global ambition.
- Today’s high energy prices underscore the benefits of greater energy efficiency and are prompting behavioural and technology changes in some countries to reduce energy use.
- Concerns about fuel prices, energy security and emissions – bolstered by stronger policy support – are brightening the prospects for many low-emissions fuels.
- A huge increase in energy investment is essential to reduce the risks of future price spikes and volatility, and to get on track for net zero emissions by 2050.
- Shortfalls in clean energy investment are largest in emerging and developing economies, a worrying signal given their rapid projected growth in demand for energy services.
- If clean energy investment does not accelerate as in the NZE Scenario then higher investment in oil and gas would be needed to avoid further fuel price volatility, but this would also mean putting the 1.5 °C goal in jeopardy.
- Immediate shortfalls in fossil fuel production from Russia will need to be replaced by production elsewhere – even in a world working towards net zero emissions by 2050.
- Russia’s invasion of Ukraine is prompting a wholesale reorientation of global energy trade, leaving Russia with a much-diminished position.
- Russia’s reorientation to Asian markets is particularly challenging in the case of natural gas, as the market opportunity for large-scale additional deliveries to China is limited.
- A new energy security paradigm is needed to maintain reliability and affordability while reducing emissions.
- As the world moves on from today’s energy crisis, it needs to avoid new vulnerabilities arising from high and volatile critical mineral prices or highly concentrated clean energy supply chains.
- Energy markets and policies have changed as a result of Russia’s invasion of Ukraine, not just for the time being, but for decades to come.