Society is feeling the squeeze from the current global energy crisis and urgent action is needed if the world is to emerge with its net-zero ambitions intact, writes Sarah FitzGerald, global program lead, future energy, at professional services company GHD.
An unprecedented convergence of global shocks in recent times has created the worst crisis the energy sector has experienced. Unlike the oil crisis of the 1970s, which was triggered by wars and revolution in the Middle East, or the 1990 oil crisis that resulted from Iraq’s invasion of Kuwait, the current energy crisis is global, multi-fuelled and has many dimensions that are reverberating across society.
According to a recent study, ‘SHOCKED’, by professional services company GHD, 94 per cent of global energy leaders believe the crisis is more severe than any other in the sector’s history.
Furthermore, a capital crunch has depleted investment levels, with the energy sector’s chief financial officers reporting that investment fell by around US$203 billion from 2020 to 2022.
The 450 senior decision-makers and thought-leaders across 10 global markets that GHD interviewed said now is the time to make bold moves. Forty per cent of those said the current energy crisis has accelerated their net-zero plans by an average of five years, while 47 per cent said it has decelerated those plans by as much as six years.
Australian energy leaders bucked this trend, with 68 per cent saying their organisations increased investment in their renewable energy mix during the past 12 months. Only 12 per cent put the brakes on this investment.
There is a clear commitment within the Australian energy sector to continue down the path to net-zero emissions by 2050. Australian governments and businesses are fully aligned behind the target of reducing emissions by at least 43 per cent by 2030 and reaching net-zero by 2050.
However, achieving this target is easier said than done, and there is now a growing understanding of the complexity, scale and cost of investment required.
At the forefront is the need for project approvals processes that are fit for purpose. The leaders surveyed for ‘SHOCKED’ said this is one of the most significant barriers to getting new projects started.
The GHD report identifies a “trilemma” of shocks – security, societal, climate – affecting Australia and the rest of the world.
It highlights five priorities that will help build resilient energy systems, de-risk the nation’s international renewable energy opportunities, and enable Australia to build its reputation and capacity as a renewable energy superpower.
Security shock: Security shock has been triggered by extreme market volatility and geopolitical tensions. On average, global leaders told GHD their business could meet normal energy supply demands for only 70 days if energy imports were cut.
More concerningly, 10 per cent indicated they had less than 20 days’ storage. In Australia, 82 per cent of leaders say energy supply is top concern for their organisation.
Societal shock: In the survey, 76 per cent of energy sector leaders said they believe standards of living are falling because of the energy crisis, and 78 per cent believe rising energy prices are having the biggest impact on the poorest parts of society.
Globally, 70 per cent of leaders pinpoint community opposition as one of the largest obstacles to new clean energy project approvals needed to emerge from the energy crisis. In Australia, that figure is 65 per cent, which could derail the nation’s net-zero plans.
Climate shock: The energy sector is dealing with unprecedented pressure from consumers demanding reliable and affordable low-carbon energy. The pressures to reduce emissions are no longer the domain of government regulators and financial investors – consumers are advocates and activists in this arena.
In Australia, 75 per cent of energy sector leaders are feeling more pressure than ever from customers.
‘SHOCKED’ identifies five key priorities to help de-risk the energy transition:
• De-risking and unlocking capital flows in energy projects
• Supercharging engineered solutions and well-thought-out design principles
• Carefully balancing supply chains, workforce and raw materials
• Securing community understanding and social acceptance of new energy projects
• A fair, balanced and just transition where no-one is left behind
While recent shocks to the energy system are unprecedented, the sector has the motivation, urgency and technical know-how to de-risk the transition. The barriers facing the industry are significant, but the sense of urgency and motivation to achieve net-zero by 2050 is greater. We have the capability, the will and the means to succeed.
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