The New Energy World At War

Global Power and Renewables Research Highlights, May 2022

Rama Zakaria, 18 May 2022 (HIS Markit/S&P Global)

“…As the Russia-Ukraine conflict continues to rage, global energy markets are witnessing unprecedented volatilities…On the back of already tight global fuel markets from last year, the conflict has pushed spot coal and gas prices to record highs, making wholesale power prices skyrocket around the world. The crisis also prolonged global supply chain disruptions and instigated new energy security concerns….[C]oal and gas markets are expected to remain tight in the near term, continuing to pressure power prices. While the situation is particularly acute in Europe given its dependence on Russian fuel imports, the impacts are being felt globally—albeit to varying extents…

click to enlarge

Sustained tight fuel markets, in turn, challenge power system reliability, with supply disruption risks expected to be higher in markets such as South and Southeast Asia where affordability is a concern. In the short term, the focus on energy security could translate to higher coal and nuclear generation, but in the medium to long term, there will likely be a push to accelerate the energy transition and reduce fossil fuel dependence—although the pace of transition will likely be different in different regions…[T]he Ukraine conflict has also renewed supply chain risks for clean technologies, as Russia is a significant producer of critical materials used in wind, solar photovoltaics (PV), and battery storage.

click to enlarge

In 2021, raw material prices increased by 10-20% compared with the previous year, owing to the global supply chain crisis. While costs are projected to increase by an additional 5-10% in 2022, the impacts are anticipated to be temporary and clean energy supply chains are expected to remain resilient. A more lasting impact of the war would be increased regionalization of supply chain. Despite the Ukraine conflict, countries around the world are making progress on energy transition policies, to varying extents, while also keeping supply security and economic growth top of mind… click here for more

click to enlarge

Tweet