It’s an exciting time to be part of the energy sector. Recent energy industry trends include the explosive growth in renewables, volatile commodity prices, and new energy policies that are shaping the future of the energy landscape. This article takes a look back at the current year and forecasts future energy trends.
Looking Back At 2023 Energy Trends
There were many changes in the energy sector in 2023. From conflicting opinions on whether or not energy prices would increase or decrease in 2023, to the EU gas rate cap, it was an exciting year. Here are some of the highlights.
EU Gas Cap
In the aftermath of the Russia-Ukraine conflict and its impact on energy prices, natural gas rates in European countries skyrocketed. This threw Europe into an energy crisis as power rates followed suit. In an effort to combat the shortage in natural gas supply due to the Russia-Ukraine war, the European Union instituted a gas rate cap in Europe. This prevented gas prices from superseding certain levels in an effort to keep energy costs low for consumers and businesses. The gas cap worked and the markets settled shortly thereafter.
Energy Price Volatility In The U.S.
As the economy reached full swing post-Covid in 2022, there was a significant increase in energy demand in the United States. Unfortunately, natural gas producers were not ready causing a large disparity in supply and demand. In fact, when referencing the chart below displaying natural gas storage levels, you will notice that supply levels did not reach a 5-year average until late 2022. In 2023, however, production reached its highest level since the pandemic and prices began to fall.
This caused lots of volatility in commodity prices for consumers. Some consumers panicked in 2022 thinking prices would continue to run away, and locked into long term energy supply contracts. Those that waited enjoyed lower energy prices in 2023. Experts believe that this energy price trend will continue into 2024.
Clean Energy Investment Increased
With new acts such as the Inflation Reduction Act from 2022, encouraged investment into clean energy and renewables. In 2023, the trend continued as the total annual clean energy investment continued on its upward direction. As evidenced by the chart below, all clean energy sectors grew from 2022 to 2023.
What Are The Trends In The Energy Industry/Energy Market Currently?
Across the globe, energy consumption in 2023 will grow by just about 2% while investment in renewable energy and clean technology will continue to grow at a steady pace. Here are some of the current trends in the energy market.
Renewables Are Growing By 32%
Investment in renewable energy grew by over 32% from 2022 to 2023. In fact, by the end of 2023, global renewable energy production will account for about 450 gigawatts of power. Many things, such as additional investment tax credits available for solar, are inspiring this growth.
Energy Storage Sets New Records
In 2023, energy battery storage installations set new records. According to American Clean Power Association, Wood Mackenzie, utility grade battery storage grew by 91% since 2022, and commercial energy storage capacity grew by 79%. Storage investment is needed to help further the development of solar energy at a utility level as batteries help to make solar installations more sustainable.
Electric Grid Investment Continues
The electricity grid in the U.S. is notoriously outdated in certain parts of the country. Many new energy regulations, including the infrastructure bill passed by President Biden, are aimed at enhancing grid resilience. The Department of Energy announced in 2023 an investment of $3.5 billion for 58 projects across 44 states to strengthen the electric grid and promote power reliability.
Energy Efficiency Growth, Over $600 Million In Investment
Growth in energy efficiency projects continued in 2023 and is expected to land just around $600 million dollars at the end of the year. These investments include lighting upgrades, HVAC motor optimization, energy-efficient construction, and demand response programs. Growth in this sector is expected to slow into 2024 due to increased cost of capital and high interest rates.
What Is The Energy Sector Forecast For 2024?
According to the U.S. Energy Information Administration (EIA), there are lots of areas to watch out for in 2024. Let’s explore the energy market by sector and outline some of the anticipated energy trends for 2024.
Power Consumption
Electricity consumption in 2024 is expected to rise by 2% according to the EIA. After seeing a slight decline in 2023 due to economic conditions, power consumption is expected to increase again. Much of this increase is forecasted to happen in the residential sector, however, as more people are working and spending time at home.
Renewable Electricity Generation
Renewable energy as a source of electricity generation is expected to increase again in 2024. As a total percentage of U.S. power generation, renewable energy is projected to reach 24% in 2024, as opposed to just 21% in 2022. Most of this increase can be attributed to nearly 60 gigawatts of new solar energy production that is coming online in 2023.
Fossil Fuels
Fossil fuels as a source of power generation are expected to decline in 2024 yet again. Natural gas as a source of electricity production is expected to fall from its peak of 42% in 2023 to just 41% in 2024. In Texas alone, generation from natural gas will fall from 46% in 2023 to 41% in 2024. Coal, on the other hand, is projected to fall from 16% in 2023 to 15% in 2024. Coal production totals 585 million short tons (MMst) in 2023 and is forecast to decline by more than 100 MMst in 2024. This is due to falling demand from the U.S. electric power sector.
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