Oslo, Norway, 23 February 2022 – Energy industry leaders say the energy transition is accelerating faster than ever, and that 2022 is set to be a strong year for industry growth, as set out in a new global report from DNV analysing the views of more than 1,000 senior energy professionals.
Senior industry players from across power, renewables, and oil and gas believe the huge commercial opportunities presented by the transition outweigh the risks to their businesses, according to The Power of Optimism: Managing scale and complexity as the energy transition accelerates.
Energy leaders are finding most confidence from their own company’s strategies within renewables and low-carbon gas, followed by expectations for supportive policy changes and reforms. Confidence for growth is highest among power and renewables companies, and while it is lower in oil and gas, the sector has bounced back from a crash in confidence going into 2021.
Skills shortages are the greatest barrier to growth for the energy industry, followed by a lack of policy support. Renewables players say permitting and licensing issues are the greatest barrier to growth, and the power and renewables sectors both point to supply chain pressures as a significant barrier. Almost two thirds of the energy industry believes that supply chain issues are slowing down the energy transition.
“We see an optimistic energy industry: confident about growth, boosting investment, and making critical strategic decisions in the energy transition. But we also see significant concerns about barriers to progress – from a skills shortage, to policies, financing, supply chains, and permitting – as the enormous task of transforming the energy system gathers pace,” says Ditlev Engel, CEO, Energy Systems at DNV.
Maintaining reliable energy supply is also a concern, with many in the oil and gas industry convinced that not enough is being invested in exploration and upstream expansion to meet future demand. Some 38% of oil and gas respondents say that their organization is finding it increasingly difficult to secure reasonably priced finance for projects.
“The world is not on track to meet the targets of the Paris Agreement. We can and must do much more to transition faster to a deeply decarbonized energy system,” says Engel. “We see complexities in timing the transition, and in matching the scaling down of fossil fuels with the scaling up of clean energy – in terms of raw total energy, but also in its affordability and reliability. The solution is to scale up clean energy much, much faster.”
“Optimism is a much-needed and powerful force in the energy industry today. The power of optimism is behind most of humanity’s greatest accomplishments, from medicines to moon-landings, and achieving an energy transition that limits global warming to 1.5°C certainly fits into that category,” says Engel.
Expectations are on the rise for large, capital-intensive projects to be approved in the year ahead, while almost half of the industry expects their organization to increase capital expenditure.
Green hydrogen is the specific technology that the greatest number of energy companies are targeting for increased investment in 2022, followed by solar PV, floating offshore wind, and carbon capture and storage (CCS).
Much of the industry is increasing investment in decarbonization, but it is telling that only 42% are optimistic about their company reaching its decarbonization targets, and 28% are outright pessimistic.
Many in the industry believe COP26 did not achieve enough, and that policy failures are holding back greater action on climate change. Less than half say net zero targets in the country or territory where their business is based are realistic and achievable. The industry finds agreement on rules for a global carbon market the most welcome and encouraging outcome of COP26.
“For now, we see a mismatch between the industry’s shorter-term optimism and the world’s longer-term progress on decarbonization,” says Engel. “The priority needs to be reducing greenhouse gas emissions. As we make clear in our Energy Transition Outlook, and as we see in the view from the industry: technology and capital are ready for a faster transition. It is policy and a lack of actionable regulatory plans that are holding back a clean energy future.”
Much of the energy industry is increasing focus on digitalization, with power and renewables leaders concluding that a decentralized energy system is impossible without digital systems.
Energy companies will increase the scale and spread of their collaboration in the year ahead, working with new stakeholders as they to adapt to the energy transition.
“New partnerships are forming as the energy industry develops new value chains in areas such as hydrogen, CCS, and energy storage, and innovation and digitalization are playing central roles as the industry looks to scale technologies and manage the growing complexity in the energy system – from the decentralization of energy generation and storage, to the variability of renewables, to the diversity of inputs integrated with gas and electricity networks, transport, and industrial processes,” says Engel.