The energy market has been shaken by the Covid-19 pandemic. But like many other sectors, this shake up has provided an opportunity for change.
2020 saw a major rise in green energy initiatives as businesses and politicians looked to rebuild the economy with sustainability at its core. The election of President Joe Biden, the looming prospect of the UN Climate Change Conference, and COP26 in the UK will mean green energy initiatives move into high priority on the political agenda on both sides of the Atlantic. In 2021, economic recovery and the acceleration in energy transition, alongside a continuing shift towards sustainability in geopolitics will likely drive a transition in the global energy market.
In partnership with our sister company, Flow & Ebb, we have outlined the key drivers behind the energy market in 2021.
Sustainability at the heart of recovery
We expect the pandemic to continue to act as an agent for change in energy. As vaccines roll out and economic recovery takes hold, technology will continue to facilitate ways of working developed through the pandemic. This will mean reduced travel and more energy efficiency, which in turn is likely drive commodity prices upwards.
While the economic situation is likely to get worse before it gets better, significant behavioral changes from populations, businesses, and governments indicate a transition to greener energy as the global economy recovers.
The Energy Transition
Governments continue to make ambitious promises on the energy transition across everything from off-shore wind, phasing out of gas and the rise of hydrogen, to new greener funding options. The sentiment is all, unusually, in the same direction.
The UK is at the heart of this revolution. Government has moved the coal phase-out to 2024 and is developing the first un-subsidized windfarms and solar farms, as well as introducing policy changes on gas boilers in domestic homes and phasing out combustion.
Most corporates are now being assessed on how they manage and meet energy targets, and large companies in the public eye are expected to have set clear net-zero strategies.
Governments are taking the transition much more seriously and corporates must therefore decide if they want to be industry leaders or wait for requirements to be imposed.
In 2020, we saw a shift in geopolitics and a distinctly nationalist approach to action. International cooperation is unlikely to fully recover in 2021, but the changed political environment will shape the energy market in a post-Covid world.
The Organisation for Economic Co-operation & Development (OECD) sees global GDP returning to pre-pandemic levels by the end of 2021, and fiscal relief packages appear to be paying dividends. Rising gas prices in Europe may continue to drive demand for liquified natural gas (LNG) in Asia. This will set an important tone for international cooperation in the energy market which will be cemented by the UK hosting COP26 and an increased focus on international environmental cooperation in the US.
The UK Government will be under pressure to lead by example at COP26 and its net-zero targets will set the tone of the meeting. Renewed US involvement is also likely to lead to wider international commitments. As the vaccine rollout accelerates in the latter half of 2021, we expect improving GDP and new environmental commitments will drive changes to the energy market.
In 2021, the global energy market will be reshaped by recovery, transition, and a shift in geopolitics. Economic recovery is at the forefront of everyone’s mind, but trends from 2020, such as increased demand for LNG and renewed commitments to climate action, will also shape the market.
Energy is the life force of every business and comes under relentless scrutiny from business leaders on the basis of cost, efficiency and sustainability. Corporate and consumer priorities around energy usage are changing rapidly and businesses are simultaneously looking to drive down costs. It is therefore essential that businesses understand how to buy and use energy wisely and efficiently.
Click here to get a full copy of the Energy Markets Outlook Report 2021 by Flow and Ebb.