Power up During the last two years, the Covid pandemic and other factors sent the oil market on a roller coaster ride, culminating in current oil prices reaching levels not seen since 2014. We have also witnessed a perfect storm in the global gas market, sending gas prices to record highs. Looking at the power markets, volatility is nothing new. The non-storability aspect of the power market, where there is a constant balance between demand and supply, is unique compared to most other markets, making it one of the most volatile commodity markets that exist. In 2021, global electricity demand increased by about 6%. Despite the impressive growth of renewable power, electricity generation from coal and gas also hit record levels, causing increased GHG emissions from the power sector. The forward electricity market is set to see demand rise in all energy transition scenarios, driven by growing income and consumption. The increased electricity demand will be met by a change in the generation mix; while new renewable power from solar and wind will grow the fastest, this new supply will need to be backed up by storage and flexible supply from hydro power and gas. The power sector has a critical role to play in the decarbonization of economies around the world. We foresee that the power sector in most countries could be the first sector to be decarbonized, followed by buildings, transportation and industries. Also, we are more optimistic than most other analysts and agencies with regard to the level of investments needed for grid expansion. The green shift will of course trigger a need to build new grids and replace old equipment. However, fast growth of batteries integrated in the grid, combined with distributed renewables and smart grid solutions, could shave peak loads and reduce grid upgrade investments. In addition, the grid utilization in mature geographies has been reduced in recent decades due to deindustrialization and energy efficiency. Thus, smart use of this overcapacity could lower the burden of grid investments. These are some of the issues and questions we will address in the upcoming Rystad Talks Energy, to be broadcast on Thursday 24 February. The power market is highly complex, and as we will hear from our own experts and our guest, Graeme Cooper, there is not necessarily a “one size fits all” solution as we all work towards net zero by 2050. |
