Energy Market Dynamics: How Renewable Energy is Changing the Game

One of the fastest growing and most complicated markets, energy markets are of major significance in the global economy. In the recent few years, following an economic rebound after a global pandemic and intensifying geopolitical tensions, energy markets have been at the forefront of major turbulence. At the same time, encouraging sustainability spirits like reducing emissions and the growing need for making a fossil energy transition, aspects of the energy market have seen disruptions.

Accelerated growth for Green energy

By 2035, more than 30% of the global energy mix will be green energy comprising bioenergy, hydrogen, and other synfuels. By the end of 2050, this percentage is anticipated to represent more than 50%.  Investments in renewable energy will grow by more than 4% until 2035. It is going to represent more than one-third of global energy investments in the next 15 years. Investment in this area, when combined with decarbonization technology, will account for roughly one-fourth of all investments in the energy sector by the end of the next decade.

Markets offering growth opportunities

In the last two years, investments in renewable energy have significantly increased in emerging economies. With a nearly $370 billion investment in the APAC region, these markets alone showed historic growth in climate investments in 2021. Due to factors including supply chain interruptions and rising inflation, developed economies like the USA saw a slowdown in energy investments in 2022. Even while similar bottlenecks will persist into 2023, this year's growth will be better due to more frantic energy transition initiatives, which will prepare the stage for more incredible demand growth. The United States, China, Germany, the United Kingdom, France, Australia, India, Spain, Japan, and the Netherlands are the top 10 hot markets for investments in renewable energy. At the same time, China has remained the top country for more than a decade, to invest in renewable energy followed by USA and Japan heftily.

Is the fossil fuels segment going to see a dip?

For at least the next five years, the demand for fossil fuels will remain at its pinnacle. Oil markets will reach their peak in the next years, but soon after that, demand will begin to fall by around 75% by the year 2050. Of all the fossil fuels, gas will continue to be the most resilient category. It is essential to support transition efforts, which are currently at an all-time high. Gas demand is expected to increase steadily by 10% through the end of the decade. By 2050, it is anticipated that fossil fuels would supply slightly more than 40% of the world's energy needs. Investments in this industry will decline. Investments in this segment will drop by nearly 20% from that of 2021 by the next decade. However, the absolute number of investments in gas and oil is going to stay stable for a significant time.

Emerging Electricity

Energy use for utility purposes contributes nearly 70% to global energy emissions. To fuel decarbonization in this area, electrification is the most potential solution. Attributed to its lower cost and easiest implementation, electricity is prominently considered the primary decarbonizing lever. It is projected to account for a growth of up to 5% annually until 2050. The estimated rise in demand will be nearly three times in a decade or so.

Growing Avenues

In keeping with a global commitment to decreasing emissions, new routes for investigating alternatives such as green hydrogen and synfuels are constantly coming up. This could bring additional prospects for expansion in the energy sector. Manufacturing is being redesigned to embrace cleaner and greener energy operations, with large investment projects and plants on the horizon. 2023 will mark several such investments and announcements which will not only open up more fields for innovation and utilization but also ease supply chain hindrances.

Asia is set to seize the green business growth

With more than 25 green energy businesses recently joining the unicorn club, Asia, with its thriving startup culture, is poised for maximum growth. Green business potential in Asia is greater than ever before, because of advancements in technology, funding, and regulatory laws. Newly commercialized technologies are establishing themselves as quickly developing and disruptive business models. Hydrogen, batteries, recycling, carbon offsets, and carbon capture, utilization, and storage (CCUS) technologies are nearing scaling. Home to 60% of the global population which is continuing to grow, the energy trends emerging and implemented here will highly determine the global energy landscape. Firm vows and congruence with shifting consumer standards, as well as investor and regulator commitments, are critical to growth and scale in the Asian energy landscape.

The world is far from achieving the objective of keeping global warming below 1.5 °C at the current trajectory. The countries approach 2023 with heightened spirits ready to embark on a revolutionary journey following the recently concluded Cop 27 in Egypt. The energy market will be extremely turbulent in the years to come due to severe regulatory restrictions on carbon-intensive fuels and the acceleration of transition energy done with technical and financial incentives. It will be interesting to see how the trends influence each segment's proportion of the enormous market.

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