Aldo Santillan

Opinion How will energy shape in 2022? Key trends for next year’s economic panorama

2022 will bring new challenges and opportunities for companies of all industries; however, keeping a strong financial architecture and a sustainability approach will be vital.

By Aldo Santillan Managing Director and Editor in Chief, Energy Capital Magazine

2021 was a pivotal year for the energy sector. Coming out of the demand destruction that 2020 represented, during 2021, companies from all industries faced severe headwinds and a deep need for transformation. The Covid-19 pandemic kept its grip over the markets, and the climate change agenda became more relevant than ever.

Nevertheless, through the implementation of sustainability efforts, clean energy purchasing, and other trends that we've discussed previously (like carbon capture), upstream, midstream, downstream, and power companies were able to adapt and ride the transformational wave. The outlook for 2022 will still have its challenges and opportunities, and only those able to add flexibility, resiliency, and sustainability will seize the most significant

opportunities of them all. Firstly, during next year global energy consumption will rise by 2,2%, as economies keep recovering from the pandemic.

Such growth in demand will support high energy prices. As a result, all types of energy will benefit. According to the Economist Intelligence Unit's Outlook for 2022, even coal will see a tailwind, as increased commodity prices will prompt a switch to coal for power generation and other industrial activities.

However, many energy companies will need to undertake an urgent review of their strategies to fulfill pledges and new regulations coming out of the COP26 Summit. Consequently, coal and oil companies may find it difficult to get financial backing, especially as the European Investment Bank has said that it will stop investing in coal projects from 2022.

Key events of the economic panorama for 2022

What will be pivotal events in energy for 2022? Firstly, the Infrastructure Bill approved by the United States government will modernize its energy systems, therefore pushing it forward in its combat against climate change. The vast investment from the bill will strengthen existing and create new programs for new technologies development, which will enable the adoption of new energies like biofuels, hydrogen, and advanced nuclear.

On the other hand, during 2022, most likely the first quarter, the Nord Stream 2 pipeline will start operations. The pipeline will connect Russia through the Baltic Sea to Germany, increasing Germany's dependence on Russian gas. Currently, Germany gets around 30% COP26, AND CLIMATE CHANGE, TO SHAPE MUCH OF THE ENERGY SCENARIO FOR NEXT YEAR

of its gas from Russia. After Nord Stream 2 will be more than 60%. Under such a scenario, geopolitical tensions with Ukraine may rise. However, the energy crisis in Europe may ease.

Moreover, the Climate Change agenda will be more relevant than ever. In fact, meeting emissions reductions and sustainability goals will be the biggest challenges of them all. This trend will boost the decarbonization of the power sector by encouraging renewable energy generation. Solar, wind, geothermal will be essential sources during 2022.

Consequently, developing a solid financial architecture and a bulletproof business model, one that balances clean energy generation, sustainability, grid connectivity, as well as substantial returns of investment, will be vital for operators, executives, and stakeholders to encourage investment, development, and adoption.

Finally, Mark Davis, GridBeyond's Managing Director UK, has said that "it's imperative for our economy that industries of all kinds remain profitable and competitive. Businesses have a once in a lifetime opportunity to use their energy strategy to remake themselves into cleaner energy users." As a result, bigger and bolder investments for the decarbonization of the energy sector will be crucial for 2022 and beyond, especially to achieve the 2050 net-zero goal.