New research reveals unprecedented convergence of security, climate and societal shocks impacting the energy sector
- 94% of global energy leaders say the current multi-faceted crisis is the most severe they have witnessed.
- Underscored by USD203 billion hit to global investment.
- Australia is better placed to de-risk the energy transition, where 68% of energy leaders have accelerated investment in renewable energy.
1 June 2023: New research launched today underscores the seismic impacts of the current global energy crisis – with a perfect, multidimensional storm of sector-wide shocks leading to the most severe crisis ever faced.
SHOCKED – one of the largest global opinion research studies undertaken among energy sector leaders – finds 94 per cent of leaders believe the current energy crisis is the worst the market has experienced.
The report by global professional services company, GHD, suggests that while Australia is better placed than many countries to address the challenges, there are a number of significant barriers to progress.
The report identifies three ‘shocks’ that underlie the energy crisis.
A security shock is being triggered by extreme market volatility and geopolitical tensions; on average, global leaders estimate their business could meet normal energy supply demands for only 70 days if energy imports were cut (with 10 per cent indicating less than 20 days). In Australia, 82 per cent of energy sector leaders say energy supply is the number one concern for their organisation.
Rapidly disappearing energy affordability and reliability has created a societal shock. Over three-quarters (76 per cent) of global energy leaders say standards of living are falling because of the energy crisis. In Australia, 65 per cent of energy leaders point to the approvals process and community concerns as one of the biggest barriers to advancing new energy projects that could help tackle the crisis.
A climate shock is also unfolding as the climate crisis accelerates, with 76 per cent of leaders believing they are under more pressure than any other industry to decarbonise. Some are already responding to those pressures, with 42 per cent globally saying the energy crisis has accelerated their organisation’s net zero plans by an average five years – but, worryingly, 47 per cent say the crisis has decelerated their net zero plans by an average six years.
While the SHOCKED report provides a frank picture of the energy crisis, GHD says a groundswell of determination, collaboration, innovation and expertise within the Australian energy industry provides a strong platform from which to navigate the crisis. The research found that 68 per cent of Australian energy companies accelerated their investment in increasing their renewable energy mix during the past year, while a significantly lower 12 per cent decelerated investment.
“Australia is relatively well placed to come through the energy crisis and to a large extent, Australian governments and the business sector are now broadly aligned with a goal of net zero emissions by 2050,” says Glen Conway, Australian Future Energy Leader at GHD.
“However, to achieve this it’s critical that we collaborate to de-risk the energy transition.”
SHOCKED identifies five key priorities to help de-risk the energy transition:
Priority 1: Unlocking money and markets
De-risking and unlocking capital flows into energy projects will require Australian approvals processes, policies and regulatory frameworks to be redesigned.
Priority 2: Supercharging engineered solutions
The integration of well-thought-out design principles into new energy infrastructure and retrofitting of existing infrastructure will be critical to help build system resilience.
Priority 3: Carefully balancing supply chains and resources
A successful transition will require access to new streams of raw materials, re-tooled supply chains and a (re)skilled workforce. Australia is well-endowed with many critical minerals that the world is demanding, with energy and rare minerals to form the third pillar of the Australia-US alliance. However, the processes of extracting, processing and transporting them needs to be approached holistically.
Priority 4: Securing community understanding and social acceptance
Earning social acceptance for crucial projects will require engagement and education at both a macro and a community level. Bipartisan and wide-reaching public education campaigns will be required, with skilled communicators to drive a collective understanding of the trade-offs needed to accelerate the energy transition.
Priority 5: Ensuring a just transition
A de-risked transition is one that is fair, balanced and just. The cost of transition must be spread fairly between countries and across communities to ensure no one is left behind.
“One of the examples we highlight in the report is the urgent need for fit-for-purpose approvals processes that are holistic, open and efficient,” says Sarah FitzGerald, Global Program Lead, Future Energy. “This includes greater flexibility to initiate and integrate community-led inputs and co-designed solutions that will improve outcomes.”
Further to this, Mr Conway says energy storage and transmission technologies are also critical to addressing the energy security shock facing Australia.
“The security shock revealed by this new research emphasises the urgent need for Australia to develop renewable energy storage solutions.
“The good news is that we are seeing viable commercial models emerging in the battery storage space. Short-term storage deployment using batteries is accelerating and scaling at an encouraging pace, but we need to do more to develop and deliver medium and long-term storage options.
“Other emerging technologies include alternative electrochemical, mechanical, chemical and thermal storage. Once these are technically and commercially ready, many of them could experience the same growth trajectory we are already seeing with lithium ion-based batteries.”
While this is a critical moment for the sector, Mr Conway remains optimistic that Australia has the expertise and commitment to deliver the energy transition.
“While recent shocks to the energy system have been unprecedented, the sector has the motivation, urgency and technical know-how to de-risk the transition and play its critical role in achieving not only net zero emissions goals, but the global net negative we must ultimately achieve.”
Notes to editor:
SHOCKED is one of the largest studies ever conducted with the global energy sector C-suite. It utilises two core research methods: quantitative opinion research among 450 senior energy sector decision-makers and 10 qualitative interviews with industry thought leaders.
The study focuses on 10 key markets: Australia, Canada, Chile, Germany, New Zealand, Singapore, the Philippines, the UAE, the UK and the USA. Additional interviews were conducted with leaders based in Brazil, China, Egypt, India and South Africa.
Visit the SHOCKED microsite to read more about the challenges confronting the energy industry and routes to build resilience – shocked.ghd.com
GHD is a leading professional services company operating in the global markets of water, energy and resources, environment, property and buildings, and transportation. Committed to a vision to make water, energy and communities sustainable for generations to come, GHD delivers advisory, digital, engineering, architecture, environmental and construction solutions to public and private sector clients. Established in 1928 and privately owned by its people, GHD’s network of 11,000+ specialists are connected across 200 offices located on five continents. www.ghd.com
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