Emergence of the New Global Energy Economy

• As all economies significantly bent under the weight of covid lockdowns and changes to consumer habits, renewable energy sources such as solar PV and wind continued their rapid growth across the globe with electric vehicles also setting new sales records.
• The energy economy we know has been forced to adapt to new policy regulations set by governments acting against climate change combined with technology innovation in the energy industry. The energy economy is becoming increasingly electrified, efficient, interconnected and clean.
• This transition is sustained by lower costs – in most markets, solar PV and wind now represents the cheapest available source of new electricity generation. These changes are progressively forcing industries to change their energy spending habits to gain value in the market and act against geopolitical market volatility.
• Clean energy technology is becoming a major new area for investment globally and companies are considering significant changes to their energy buying strategy.

 

WORLD ELECTRICITY OVERVIEW

Asia Pacific

Demand continues to outpace growth of renewables – but the gap is closing.

Demand

The COVID-19 pandemic caused significant economic slowdown which, in turn, lead to reduced electricity demand growth. Despite this, the region still maintained positive yearly growth rates during 2019 and 2020. It is estimated that demand had grown in 2021 by 8% from a low of 2% in 2020. This is driven by China and India growing by ~10%, who are the largest power consumers and generators in the region.

This demand growth is expected to continue up to 2024 from all countries in the Asia Pacific region, except for Japan, with the regional growth rate stabilizing around 4% per year on average. This increase is slightly below pre-pandemic levels but above the global average of <3%. The increase in demand across the region is predominately driven by industrial development combined with increased utilization and electrification in areas such as cooling, cooking and mobility.

Supply

2021 saw a significant increase in coal-fired generation, which grew by 8% to reach over 8,000 TWh. This increase was led by coal-fired generation increases in China and India in line with economic recovery from the pandemic, despite coal shortages in 2021.

Alongside the coal-fired generation increase, which grew the most in absolute terms in 2021, renewable energy generation also saw its’ highest growth rate to date – up 10%. This was again led by China and India for the region but is also reflected in all other countries across the region and is projected to continue.

Slower electricity demand between 2022 and 2024 means that approximately two thirds of the net demand increase in the region is forecast to be covered by renewables, followed by coal covering 27% of demand growth and nuclear covering 7%.

Carbon Intensity

Perhaps unsurprisingly, power grids in the Asia Pacific region are on average the most carbon intensive in the world, due to their reliance on fossil fuels and coal particularly.  The estimated CO2 intensity for the region is over 580 g CO2/kWh in 2021, making the region 28% above the world average of about 460 g CO2/kWh. While the expansion of renewable energy generation in this period to 2024 means the region’s carbon intensity is expected to steadily decline at a pace close to the world’s average, this reduction is not sufficient to prevent an increase in total emissions over that period. Forecasts show that we expect the average carbon intensity of generation in Asia Pacific to fall to approximately 550 g CO2/kWh.

 

Source: IEA. Electricity Market Report – Jan 2022. (https://www.iea.org/reports/electricity-market-report-january-2022)

 

China

Demand

Demand for both industrial and commercial power in China recovered strongly from the Covid-19 pandemic in 2021. Growth is forecast to resume pre-pandemic trends across all demand sectors during 2021 – 2024, with a slowing year on year positive growth. Electrification in the transport sector accelerates as China attempt to meet their goal of ending the sale of new internal combustion engine passenger cars by 2035, hence increasing electricity demand for road transport out to 2024 and beyond.

Despite a diversifying generation mix, China's electricity system remains largely coal-dominated. In 2021 coal made up 64% of power generation, followed by hydropower with a share of 16%, wind at 7% and nuclear at 5%. By 2024 we expect the share of coal in the mix to decline to 59%. Renewable energy sources are set to meet most of the additional demand during 2022-2024 (over 70%), while coal meets 25% of the increment.

Generation

Generation capacity continues to increase in China to satisfy growing demand for electricity. Despite the phase-out of central government subsidies for onshore wind and solar PV, both technologies continue to be deployed at a rapid pace and are expected to reach a cumulative capacity of more than 930 GW by 2024, up from close to 530 GW in 2020. To accompany the deployment of these variable renewable energy sources, China announced an ambitious target to install more than 30 GW of new non-hydro energy storage capacity by 2025, up from 3.3 GW in 2020.

Electricity Tariffs

Electricity tariffs in China remain largely regulated (however this is forecast to begin changing in the coming years). On-grid tariffs for industrial and commercial consumers of electricity from coal-fired generation contain a variable part that floats with the coal price. Initially, the variable element was neither allowed to rise above 10% nor drop below 15% of the regional base price. Following the coal price surges during summer 2021, there have been net losses for coal power plants. In October, the authorities decided to allow the variable part of the tariff to float up to 20% above the price benchmark (up from 10%). China is looking into implementing time-of-use tariffs for most retail consumers to shift demand away from peak times and limit the need for additional capacity, although the timeline for this development has not yet been announced.

Since September 2021, the two grid operators in China, State Grid Corporation of China and China Southern Power Grid, have been piloting green electricity trading in response to demand for clean electricity from corporations. Under this scheme, corporations bid an energy price and a “green premium” on the power exchanges and establish direct contracts with renewable producers 1 month to 10 years ahead of delivery. This is similar to the REC operating model in the Western World.

Source: IEA. Electricity Market Report – Jan 2022. (https://www.iea.org/reports/electricity-market-report-january-2022)

 

Source: IEA. Electricity Market Report – Jan 2022. (https://www.iea.org/reports/electricity-market-report-january-2022)

 

India

Demand

India was subject to a 2% decline in electricity demand during 2020 due to the Covid-19 pandemic, however, 2021 saw a rebound with an estimated growth of 10% resulting in demand levels above pre-pandemic levels. During 2022-2024 annual demand growth is forecast to persist and remain above pre-pandemic levels at approximately 6.5% each year.

The push towards universal electricity access in India has long been the major driver for increased demand and this has been successful – raising electricity access in the country from 76% in 2010 to 98% in 2019. Now that this target has almost been achieved, the increase in demand levels is now being driven by growth in the industrial and residential sectors. Local manufacturing for the industrial sector in India has been promoted by the ‘Make in India’ government initiative, which is leading the demand increase in electricity.

Source: IEA analysis based on data from Central Electricity Authority, Ministry of Power, Government of India: https://npp.gov.in/

 

Electricity Mix

India’s electricity mix remains largely coal-dominated. In 2021 coal made up 74% of power generation, followed by renewables with a share of 20%. By 2024 we forecast coal-fired generation to account for 70% of the electricity mix, and renewables for 22%. 2021 saw a significant increase in coal-fired generation (up 13%) after contractions in 2019 and 2020 driven by economic slowdown, a heavy monsoon season in 2019 that increased hydro generation, and the Covid-19 pandemic.

As India’s demand for electricity continues to grow, the expansion of generation capacity accelerates from 2022 onwards. 48% of new demand is expected to be met by coal-fired generation, whilst low carbon sources provide about half of the additional supply. New records for renewable capacity addition are expected in 2021 and 2022, principally wind and solar PV. Consequently, renewables provide 35% of the incremental demand, with nuclear largely accounting for the balance. Driven by state and central auctions, as well as a target of 450 GW of installed renewable capacity, renewable generation is expected to increase by 30% by 2024 relative to 2021.

At the COP26 in Glasgow in November 2021, India pledged to reach net zero by 2070. However, despite this, new coal-fired plants are still being built and the coal-fired capacity is expected to continue growing soon as depicted in the graph below. The Ministry of Power confirms that coal will continue to provide a significant contribution to electricity generation through this period.

As of November 2021, India had seven nuclear reactors under construction with a total gross capacity of 5.2 GW. We expect nuclear generation to see a sustained increase in the coming years, surpassing gas from 2022 as the third-largest contributor to generation, after coal and renewables.

 

Source: IEA analysis based on data from IEA (2022): https://www.iea.org/data-and-statistics/data-products

 

Southeast Asia

Demand

Electricity demand has grown in Southeast Asia by 3.8% in 2021 after an overall decline in 2020. In 2021, gas and coal generation has remained constant for SE Asia compared to 2020, with the increase coming from renewable generation. As with the other Asian regions, the industrial sector led the increase in electricity demand for the first quarter of 2021. However, in the second quarter a surge in Covid-19 cases severely affected many countries, particularly Indonesia, Malaysia, Thailand, the Philippines and Vietnam. This delayed economic recovery and led to lower demand growth, the largest impact being in the residential and commercial sectors. From 2022 we expect a stronger recovery, with annual demand growth close to 5% in 2022-2024.

Supply

Electricity supply in Southeast Asia continues to be led by coal (~43%), followed by gas (~31%) and then renewables (~25%). However, the share of both coal and gas in the mix declined in 2021 while the renewables share increased by more than two percent. While renewables growth is set to continue up to 2024, we expect the sum of coal and gas-fired generation to meet around two-thirds of new demand from now until 2024.

Source: IEA analysis based on data from IEA (2022): https://www.iea.org/data-and-statistics/data-products

 

Source: IEA analysis based on data from IEA (2022): https://www.iea.org/data-and-statistics/data-products

 

Americas

Strong demand growth and high gas prices lead to a temporary rebound for coal.

Demand

Countries in the Americas displayed a strong rebound in electricity demand of 4% in 2021, following declines of 2% in 2019 and 3.0% in 2020 (covid impacted). The growth in demand is set to level off over the next three years, averaging close to 1% between 2022 and 2024. This is largely driven by the United States, which comprises about two-thirds of overall regional demand. It is expected that the US demand growth to have reached 3% in 2021, slowing to less than 0.5% over the next three years. The figures in Canada are largely in line with its neighbor, while in Mexico we expect 2021 to have seen a stronger rebound in 2021 of 6%, which then moderates to 3-4% annually over the next three years.

In South America annual demand growth reached 6% in 2021 with Brazil’s demand has grown by over 7.5%. We estimate growth to have been above 7% in Peru and Colombia, and approximately 3% in Argentina and Chile.

Electricity demand for transport is expected to see the strongest growth between 2021 and 2024, albeit from a very small base. The increasing electrification of transport, as well as other end uses like heating and cooling, is expected to be a main driver of electricity demand in the future, although partially offset by increasing efficiency in current forms of electricity use.

Supply

After 6 straight years of decline, coal-fired generation posted a remarkable annual rise in output of 17% in 2021. This was caused by lower hydro availability from drought in the region and higher natural gas prices that drove gas-to-coal switching. This increase is not predicted to remain as the hydro levels return to near-normal in 2022, combined with increases in solar and wind capacity. This is due to reduce the coal demand by 7% annually over the next 3 years.

Renewables including hydro accounted for about 34% of annual generation in the region in 2021, the largest share of all sources, followed by gas at 32%, coal at 17%, nuclear at 14% and oil at 2.6%. By 2024 renewables are expected to account for ~40%, its share increasing almost entirely at the expense of coal, which is expected to decline to a share of 13%.

Emissions

This will drive emissions lower, both in their overall level and intensity. We expect emissions intensity to fall to 272 g CO2/kWh in 2024, down from 311 g CO2/kWh in 2021 and 404 g CO2/kWh in 2014. Overall emissions are set to decline to 1.9 billion t CO2 in 2024, from 2.1 billion t CO2 in 2021.

 

Source: IEA analysis based on data from IEA (2022): https://www.iea.org/data-and-statistics/data-products

 

Source: IEA analysis based on data from IEA (2022): https://www.iea.org/data-and-statistics/data-products

 

United States

Electricity Generation

Gas

Higher natural gas prices swept across the United States in 2021, in turn, leading to a decline in gas-fired generation by 3%. The price of gas at Henry Hub, the benchmark US location, reached $5.5 per MBtu in October, up from $2.4 per MBtu for the same month in 2020 and the highest price for the month since 2008. In 2022, low electricity demand growth combined with strong renewables growth squeezes both gas and coal generation.

Coal

Coal-fired generation also benefitted from the increase in natural gas in 2021 with an increase of 21%. This is the first annual increase in coal-fired generation since 2014. This increase was also aided by the strong demand growth in the US. This is anticipated to be short lived with the average coal-fired generation decreasing by an average of 6% annually between 2022 and 2024.

Nuclear

Nuclear generation is expected to have declined by 1.5% in 2021, continuing a slight downward trend over the past five years as facilities retire, including Indian Point 3 in New York at the end of April. The commissioning of Vogtle Units 3 and 4 has been delayed until late 2022 and early 2023 respectively. Construction of these facilities commenced in 2012.

Hydroelectric

Hydroelectric power generation declined by 11% in 2021 compared with 2020 due to long-term drought conditions In many parts of the western states. These levels are anticipated to grow for 2022 and beyond with 8% growth year-on-year.

Wind and Solar PV

Most of the growth in electricity generation between 2022 and 2024 is likely to be from wind and solar PV. In 2021 wind generation increased by 11%, while solar output grew by 26%. We expect wind output to grow by an annual average of 8% between 2022 and 2024, and solar generation to grow at an average rate of 22% over the same period.

 

Source: IEA analysis based on data from IEA (2022): https://www.iea.org/data-and-statistics/data-products

 

Mexico

Electricity Demand

Electricity demand recovered from pandemic levels in Mexico in 2021, growing by more than 6%. Most of the demand increment in 2021 was met by an increase in gas-fired generation, despite the widespread loss of gas-fired generation in February 2021 that led to power cuts to about 11 million users due to the unavailability of gas supplies from across the border, caused by record low temperatures in the southern United States.

Electricity Generation

In 2022, generation from renewable energy is set to grow by 17%, a higher rate than other sources, providing ~12 TWh of additional electricity compared to 2021, driven primarily by new wind and solar capacity and higher hydro availability.

In late 2021 the Mexican government announced a constitutional reform proposal to reverse the 2014 electricity market reform. Growth in renewable generation is expected to slow after 2022 (yet still increasing because of additional solar rooftop PV installations and increased dispatch from the country’s hydropower generation facilities). Additional government measures to increase renewable energy as part of the reform proposal include building a 1,000 MW solar PV park, a 25 MW new geothermal generation unit and repowering hydropower stations to increase capacity by 264 MW. Renewables are expected to grow very slowly in 2023 and 2024, meaning that oil-fired generation will be needed to cover the growing demand.

 

Source: IEA analysis based on data from IEA (2022): https://www.iea.org/data-and-statistics/data-products

 

Europe

The comeback of fossil fuels in Europe is only temporary.

Demand

After demand for electricity in Europe fell by 1.3% in 2019 and 4% in 2020, it increased by more than 4% in 2021 to about the pre-pandemic level of 2019. Two factors were the main drivers for the strong rebound. First, the region’s economy grew strongly, headed by the industrial sector while the commercial sector’s recovery was dampened by health protection measures. Second, colder temperatures raised heating demand – April 2021 was the coldest since 2003. During 2022 we expect demand to continue to grow, albeit at a slower pace of 1.7%, supported by continued economic recovery. A return to static demand is likely in 2023 and 2024.

Supply

The most prominent development on the electricity supply in 2021 was the strong growth of coal-fired generation, increasing by more than 11% after a 20% decline in 2020. This was the first increase since 2012. Coal served 40% of the year’s incremental demand, followed by nuclear at 30% (growing by 6%). The rebound of coal can be attributed to the strong growth in demand coupled with relatively low growth in renewables generation (up 1%, caused by exceptionally low wind speeds for the region).

Additionally, high natural gas prices improved the competitive position of coal-fired plants, despite allowances under the EU emissions trading system (EU ETS) being over twice the price of those in 2020 (this is explained later in the report). High fuel prices resulted in record-high wholesale prices. Fourth quarter prices in Germany, France, Spain and the UK were three to more than four times higher than the fourth quarter 2016-2020 average. The period from 2022 to 2024 is expected to be characterised by strong renewables growth, which crowds out fossil fuels (declining by almost 10% during the period) and compensates for declining nuclear generation in 2022 and 2023 (down 4% over the whole period). The nucelar decline is related to the German nuclear phaseout and further closures in Belgium and the United Kingdom. Additionally, France has began closing over 6 nuclear power plants due to their old and potentially dangerous infrastructure and design.

As gas prices are expected to be relatively high throughout 2022, coal is set to largely maintain its role during the year (declining by 3%) but is likely to decline significantly in 2023 (down 15%) and 2024 (down 13%) due to gas prices declining to their usual level and slower demand growth. Gas benefits from improving competitiveness against coal in 2023, when its generation increases by 7%, but it is increasingly replaced by renewables in the medium term.

Emissions

In 2021, the European Union put forward a wide range of reforms to the EU ETS as part of its Fit for 55 package. These reforms are intended to align the carbon market with the new 2030 EU emission target of reducing greenhouse gas emissions by at least 55% from 1990 levels (increased from 40%). For the EU ETS, a 61% reduction in emissions by 2030 from 2005 levels is proposed (increased from 43%). After a year-on-year emissions surge of 8% in Europe in 2021 (4% higher emissions intensity), a fall of 24% is expected by 2024 compared with the pre-pandemic level of 2019 (emissions intensity down 27%).

 

Source: IEA analysis based on data from IEA (2022): https://www.iea.org/data-and-statistics/data-products

 

EU Emissions Trading

EU ETS flexibility relives pressure from gas markets

The EU ETS (Emissions Trading System) is a cornerstone of the EU’s policy to combat climate change and it is a key tool for reducing greenhouse gas emissions cost-effectively. It is the world’s first major carbon market and remains the biggest to date.

The EU ETS puts a cap on total emissions that can be emitted by power plants, industry and the aviation sector. Each year, the number of new emission allowances decreases. Allowances can be traded and every year emitters must submit sufficient allowances to cover their annual emissions. Excess allowances can be carried forward into the next year.

Prices are determined by the long-term expectations of market participants regarding demand and supply of allowances, which are valid for more than ten years. This balance can be affected, for example, by an unexpectedly large increase in energy demand, as currently seen due to the strong economic recovery, or a tightening on the supply side as proposed in the ‘Fit for 55’ package.

For the electricity sector, the EU ETS typically regulates the balance between the generation costs of gas and coal-fired power plants: with all other things remaining unchanged, a systematic increase in gas prices relative to coal results in gas-to-coal switching. Consequently, carbon emissions increase. However, as the total carbon emissions in the EU ETS are capped, the carbon price increases together with gas prices to prevent widespread fuel switching. This can be thought of as a fixed supply of emission allowances available within the EU ETS. If the demand for allowances increases due to increasing coal-fired electricity generation, the price of allowances also increases to keep demand and supply in balance.

Gas prices increased strongly from the end of 2020 and in particular in the second half of 2021 (pandemic impacted), leading to more than the simultaneous increase in coal prices. Consequently, electricity market participants began gas-to-coal switching and therefore emissions surged. The EU ETS market responded by increasing the price for emission allowances, this partially offset the growing price difference between gas and coal.

 

Source: Natural gas prices: TTF; coal prices: CIF ARA; carbon costs: EU ETS. Latest update: 5 January 2022.

 

Germany

German coal-fired generation has increased by 25% in 2021 compared with 2020 figures, yet, still remains 4% below the 2019 level. Causes for this are that electricity demand recovered by about 4% following its Covid-19 related 4.6% drop in 2020. Secondly, renewable generation declined for the first time in more than 20 years (down 4.5%) due to low wind speeds. Lastly, high gas prices rendered coal fired generation more competitive compared to gas.

Germany’s remaining nuclear capacity (which provided ~12% of total generation in 2021) is due to be phased out by the end of 2022 – this change has been created with the change in German government who oppose the use of nuclear energy in Germany. About 4.3 GW are set to be retired in two steps: at the end of 2021 and the end of 2022. It is expected that coal and gas fired generation in 2022 to remain at a similar level to 2021. Due to the new capacity and an expected return to historical average wind speeds, we expect additional renewable generation – 15% - to compensate for the decline in nuclear.  Growth of around 1% could bring demand back to the pre-pandemic level of 2019.

Coal-fired generation is forecasted to decline by one third in total in 2023 and 2024 compared to 2022, enabled by four main factors:

• Coal being retired according to the approved ‘coal phase out plans’ – down from 35 GW at the end of 2021 to 30 GW in 2022 and less than 26 GW in 2024.
• Renewables continue to grow by over 11% in total over both years.
• According to the IEA’s model analysis, it is expected that Germany’s net exports will decline and the country will become a net importer of electricity for the first time since 2002.
• Due to a continued increase in the competitiveness of gas comparted to coal and induced fuel switching, we expect gas fired generation to grow by 16% over 2023 and 2024.

France

Demand for electricity fell by 5% in 2020, largely driven by the contraction of economic activity, which led to an 8% decrease in GDP following the lockdown measures enforced in March 2020 and into 2021. We expect the industrial and commercial sectors to have supported an overall recovery in power consumption of close to 5% in 2021. For 2022 to 2024, demand is expected to stagnate as efficiency gains offset increased electrification in the country.

With the announcement of France to close its last coal fired plant in 2022, renewables are expected to continue to steadily increase whilst nuclear electricity generation remains the dominant source as its’ production levels remain relatively stable. A number of old units undergo planned outages as part of their maintenance. The start of the new ‘Flamanville 3 reactor’ is delayed and commercial operation will not be expected before the second half of 2023.

France’s power sector emissions are already a very small share of total national CO2 emissions at 6%, and are also among the lowest in Europe. These are expected to decline by a further 25% by 2024 compared with 2021 figures.

Italy

The IEA estimates that Italy’s electricity demand has increased by more than 5% in 2021, taking it back to pre-covid levels. Demand growth has largely been driven by economic recovery and higher space heating requirements amid colder than usual spring temperatures. In the first half of 2021, gas fired generation rose by 10%, whilst coal fired generation significantly decreased by over 20%.

Gas prices in Europe have surged in the last 6 months which has lead to gas-to-coal switching in the second half of the 2021, with coal plants increasing their output by 3% while gas generation growth slowed down to 5% year-on-year.

The IEA expects Italy’s electricity demand to see declines of less than 1% in 2023 and 2024 driven by an improvement in energy efficiency. Renewable generation is on a path to increase by over 9% by 2024 compared with 2021 levels, with coal fired generation being phased out by 2025.

Spain

In 2021, renewable energy generation in Spain reached an all time high of 47% and is expected to continue this growth moving forward. This is due to the growing installed wind and solar PV capacity. This figure has been increased from the previous high of 43% in 2020.

In 2021, electricity prices reached levels never seen before, pushed by higher CO2 and, in particular, gas prices. December’s average day-ahead price reached close to EUR 240/MWh, almost five times higher than the average December values in the previous five years. In September 2021, as prices continued to rise, the government issued a Royal Decree-Law modifying the Electricity Act, including the temporary reduction of the special tax on electricity (down to 0.5% from 5.1%) and the suspension of the tax on production (7%). Towards the end of 2021, measures were extended until April 2022. In addition, the government committed to add EUR 900 million to the previously planned EUR 1.1 billion annual cross-subsidy from CO2 auctions to the cost of the power system. Additionally, the Spanish government passed a decree to temporarily claw back so-called “windfall profits” from hydro, nuclear, PV and wind producers who were considered as unduly benefitting from high CO2 and gas prices.

 

Source: IEA analysis based on data from IEA (2022): https://www.iea.org/data-and-statistics/data-products

 

Russian Invasion of Ukraine

Europe is ill-prepared for a large-scale disruption of Russian gas supplies, making it vulnerable to arm-twisting during the conflict in Ukraine.

Currently, Europe has a large dependency on Russia for its gas supply. Natural gas contributes to 20% of Europe’s primary energy consumption, as well as 20% of all electricity generation and heating and industrial processes. Europe has been steadily increasing its dependance on Russia for their gas supply – in 2020 44% of all European gas was imported from Russia, whereas, in the fourth quarter of 2021 53% was imported from Russia (Source: https://www.gisreportsonline.com/r/russia-europe-gas/).

Implications of Russian Invasion

With the current ongoing conflict occurring between Russia and Ukraine, the gas and electricity market prices in Europe have roared back to the highs of December 2021. The main reason for this spike in pricing is the uncertainty the Russian invasion poses. If the conflict intensifies and the West continues to place Russia under sanctions, such as cutting them out of the SWIFT international banking system and freezing assets, Russia could reduce the gas supply into Europe, significantly increase the price that we receive this at or shut it off completely. All these options means one outcome – an increase in pricing for energy in Europe and potentially the all Western countries.

 

Source: Eurostat; ISPI; EIU

 

There are growing concerns that as the conflict intensifies, Russia will weaponize the energy supply by switching off the supply. Additional to gas, Germany (along with several other EU nations) gets half of its coal from Russia, meaning this supply could also be impacted.

The concern with reduced gas supply from Russia is that Europe will run on dangerously low gas storage in a matter of months due to the disruption of supply. See below gas storage levels across key countries in Europe which have been continuously falling over the last 3-month period. This drop is not unusual and typically occurs in the winter months, however, the threat now is that levels will continue falling which in turn will leave storage levels lower than usual later in the year when there is increased demand.

Forecasting in a Turbulent Market

As discussed earlier in this section, energy prices have increased back to the 2021 winter highs. This is observed in both the gas and oil pricing which, in turn, creating the same highs in electricity markets. Oil currently hits highs not seen since February 2013 as an outcome of the Ukraine conflict, brent crude is currently at $110.46/bbl.

Purchasing recommendations currently are to WAIT where possible – the markets are unstable and turbulent. It is not wise to lock into long term agreements where they are not required at this time. In the next quarter, energy pricing could stabilize and there will be a better indication of a Ukraine-Russia agreement. And in turn, a revised EU and US energy strategy.

 

Source: Engie impact report – 4th March 2022