“Energy” has been the key theme of 2022. A year in review and what expect for 2023

“Energy” is probably the person – or better - the key theme of 2022 in my opinion (and it reserves a seat in first row for 2023 too). Throughout the year, the critical importance of energy has become evident to all. The reasons are many but above all there are 10 key ones I tried to sum up here.

1.      Energy reminded everyone to be the backbone of society and its extraordinary importance to any human activity. Without energy, most of things simply cannot be done

2.      The good, old (and never disappeared) link between energy and geopolitics moved to the centre of stage as was not the case since very long time. 

3.      Energy security was a concept almost forgotten in the western world. It has come back strongly and loudly.

4.      Energy affordability theme was basically absent in Europe since times of the oil embargos of half a century ago. It knocked back on the door of many people, unfortunately.

5.      After twenty years of insufficient but continuous progress, energy access reverted the trend and start deteriorating due to war and high price 

6.      Energy transition is assuming a new meaning, in particular becoming a fundamental avenue to address geopolitical risks (and in some cases country’s blackmails)

7.      The interlinkage between energy and climate change got stronger and more worrying. Dramatic heatwaves and lack of cooling in many affected areas highlighted a dangerous vicious circle. Without fixing energy issue, the climate crisis can only get worse. 

8.      Energy and industrial policies finally get intertwined with manufacturing plans in many parts of the world becoming a ‘trade d’union’ among the multiple goals of decarbonisation, development and employment 

9.      The 2022 reminded something that since too many and for too long forgot: energy is a tremendous serious thing; it is not for granted and requires a massive system behind.

10.  Finally, energy landed heavily on the tables of world leaders. It has not been the case for a while. 

If 2022 has not been a ‘rose garden’, it is clear that in such volatile geopolitical context, 2023 presents a countless number of uncertainties. How the Russia invasion of Ukraine will evolve is naturally the elephant in the room. But outside the military field, probably the biggest wild card of 2023 is what the world’s largest energy consumer, China, will do.

 If we look at this year’s numbers, those of China has been dramatically weak. Due to local lockdowns, global economy slowdown and some important domestic issues, the Chinese energy number of this year have been “horrible”. Both for oil and natural gas, Chinese demand is seen in decline. It was not happening for oil since more than three decades; it was not happening for natural gas since 40 years. And most likely it never happened before that China decreased both oil and gas consumption in the same year. 

 While China is a global leader in clean technologies – both in terms of manufacturing and deployment – its oil and gas use is still very much aligned with its domestic economy performance. If China’s economy would rebound strongly in 2023 it would obviously be a good news for the global outlook but tensions on energy markets might increase further and to levels rarely seen. 

 There are also important trends that has emerged in the difficult context the world has experienced over the last years, first with the pandemic and then with the Russia’s war more recently. In this regard, 2023 is called to confirm that some of the lessons of past months have been finally learnt and some of progress made will consolidate and increase further. Yes – even in one of darkest years of modern age, there are sign for optimism. Key ones include: 

• 2023 needs to be another record for investment in clean energy. After 2021, also 2022 marked a new all-time high in the sector. Two in a row are encouraging; three in a row would make a proof 

• Progress in energy efficiency – finally back to an insufficient but decent level of improvement in 2022 - has to continue everywhere, but especially in those areas where energy affordability and availability might be put under further question. 

• Deployment of new clean tech has dramatically accelerated over the last period. Electric vehicles, heat pumps, modern appliances have achieved record sales. In most cases those remain a minority share in their own markets. But starting to displace old energy technology is on sight and 2023 will tell if such trend is a durable boom or has been an illusional bust.

• Modern renewables in the power sector are not questionable anymore. The amount of new renewables power capacity installed each year has been reaching levels that were not even imaginable few years ago. There are now two main jobs to do: in the electricity sector, to make the final jump required to be in line with climate scenario. And the second job is getting some traction also for renewables in heating and industry.

2023 needs also to prove that consumers have finally understood that energy is not only a matter of supply but also - and often mainly- a matter of demand. There is no other way to meet climate and energy security goals to use energy in a different and much more efficient way. Europe is an important case in this sense. The IEA analysis shows that a big supply-demand gap in natural gas might materialise next year. And also in the oil sector, there are several question marks on how the market will re-balance once the embargo on oil products will take effect the next February. In such context an approach that always look at external suppliers to solve own problems might be short-sighted, both in terms of costs but also in terms of concrete volume available. Better for Europe – and anyone else – starting to treat energy in a very diligent way and reduce demand structurally, especially if aims to maintain even a portion of its industrial structure.

In 2023 we should also see the full effects of the plans deployed between 2021 and 2022 to give big boost to what has been defined the “sustainable recovery”. The plans adopted in US, Europe, Japan, and other emerging economies take time before unleashing their potential, especially in terms of production and supply chains. While there are still some question marks on the new equilibrium that will arise and the economic competition is already getting very fierce, there are also encouraging signs that many greentech are moving from ‘niche’ dimension to full ‘industrial scale’. The big question is who will be more capable to capitalise the new trend and take a leading position.

Finally, on the international scene, 2023 will be a transition year in political terms as it will not have all the deadlines we experienced in 2022 and all the ones that will come in 2024, including US Presidential elections and EU ones. The 2022 US mid-term elections have gone; in Europe a series of countries including France, Italy and Sweden had their elections; Brazil got its new (old) President and more…. So in 2023 we might have the opportunity to focus key international efforts on important multi-lateral appointments. It will be the year with India, the world’s fastest emerging giant, leading the G20 at a time of deep fractured world. It is an extraordinary opportunity for India to show its rise to the status of a global leader. Also, a big hydrocarbon producing country, the United Arab Emirates, will host a key COP meeting later in the year, being called to find a proper equilibrium between a just transition that appears to be problematic especially in its own region and the urgency of fulfil the global climate goals.

The year that is set to start soon presents several challenges, but there are no doubts that re-starting from multi-lateralism approach and a more convinced international collaboration will be vital for achieving the multiple social, economic and environmental goals that cannot be procrastinated anymore

P.S. the TIME Magazine will forgive me for having taken the freedom to ‘adjust’ one of its beautiful cover…