This analysis is from BloombergNEF. It appeared first on the Bloomberg Terminal.
Energy has rarely been out of the news over the last year. From Russia’s invasion of Ukraine convulsing oil and gas markets, to big-power politics around OPEC+, a surge in interest in renewables, and in December a landmark US breakthrough in nuclear fusion research. BloombergNEF has analyzed these and other key developments, and here we look forward to what might be coming in 2023.
Oil – The return of china
China’s oil demand declined in 2022 for the first time this century as the nation jumped from one lockdown to the next. With the giant energy consumer seeming set on easing its Covid-19 restrictions, the potential for growth is enormous, pressuring an already tight and turbulent market. Chinese demand grew to 15.4 million barrels per day (b/d) in 2021 from some 11.3 million b/d in 2015. Over the period, it added millions of gasoline-consuming cars – equivalent to 3.7 times Germany’s total car fleet, and rapidly expanded its petrochemical sector. In 2022, consumption of oil in the industrial sector boomed as gas prices spiked, and with economics for oil burn favorable in 2023 despite declining spot LNG prices, demand looks set to remain strong. As road and air traffic rebound, the International Energy Agency estimates China’s 2023 oil demand to climb by about 0.78 million b/d, eclipsing any previous annual growth. The speed at which China returns to normality will dictate the shape and level of oil prices in 2023. -Philip Geurts, oil analyst.
Hydrogen – Financing Will Take Off
While 2022 saw many electrolyzer-based clean hydrogen projects announced, few were financed. That should change in 2023. US developers are waiting for guidance on the generous Inflation Reduction Act tax credits. As soon as it’s released – which should happen in the next six months – developers will move quickly to finalize investment decisions. In Europe, policy guidance on key subsidy mechanisms may take longer. But developers who plan to start operating in 2025, including three hydrogen-based steelmaking projects, will need to reach a final investment decision in 2023 to start on time. For example, Sweden-based H2 Green Steel has already secured offtake for 1.5 million tons of green steel production for five to seven years and received debt financing of 3.5 million euros. -Martin Tengler, hydrogen team leader.
Gas – Geopolitics to shape market
The geopolitical struggle between Europe and Russia will continue to govern the dynamics of global gas markets in 2023, as LNG is the main short- to mid-term option for Europe to counter the reduction in Russian pipeline supplies. Global liquefied natural gas demand is likely to surpass 400 million tons in 2023, with Europe accounting for the majority of the demand growth. Gas demand destruction levels and implementation of a possible gas price cap are the key things to watch for Europe in 2023. China’s LNG demand is a big wildcard next year as it emerges from sweeping Covid restrictions. More nuclear generation in Japan and Korea will lower demand for gas in power generation, reducing the need to import LNG. Most of the LNG supply growth will come from the resumption of normal operation at plants under maintenance in 2022, with US projects leading the production expansion. -Abhishek Rohatgi, head – global LNG and APAC gas.
Solar – From boom … to boom
Global solar deployment will continue to grow in 2023 to about 316 gigawatts, up from about 268GW in 2022 and 182GW in 2021. The boom in 2022 was quite unexpected, as at the beginning of the year BNEF anticipated just 228GW. But the Chinese market grew strongly especially in the residential and commercial segments. European solar is surging at all scales, driven by high electricity prices, though expansion has been bottlenecked by grid connection, land availability and labor shortages. -Jenny Chase, solar specialist.
Carbon capture – Tax credits to drive growth
In the year to October 2022, more than 85 million tons of carbon capture capacity were announced, leading to a 44% hike in the forecast for installed capacity by 2030. BNEF expects a larger jump in 2023 thanks to even more generous tax credits for carbon capture, utilization and storage (CCUS) included in the US Inflation Reduction Act, and an acceleration in net-zero transitions by European companies. By the end of 2023, the cumulative CCUS capacity expected by 2030 could be almost 420 million tons, a 50% increase. Most of this new capacity will be directed toward decarbonizing industrial emitters such as cement and petrochemicals, and the power sector. -Julia Attwood, head of sustainable materials.
Bloomberg
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