In previous years, discussions about the global shift towards renewable energy were primarily focused on the increasing adoption of wind and solar power. However, today, renewable energy sources continue to gain momentum due to high demand, decreasing costs, and various incentives for clean energy. Nevertheless, the landscape surrounding the energy transition has evolved significantly.
Innovation has sparked breakthroughs in areas such as long duration energy storage (LDES), and carbon capture, utilisation, and storage (CCUS). Additionally, policies and regulations have undergone notable changes, and recent events like the COVID-19 pandemic and Russia’s invasion of Ukraine have compelled some countries to revise their short-term energy priorities.
“The world is grappling with finding the right balance between decarbonisation, affordability, and energy security,” notes Todd Brezler, Chief of Staff at Mitsubishi Power Americas, a global leader in energy solutions.
Amidst these developments, certain common themes are emerging as governments and companies strive to strike that balance. Consequently, the following trends are expected to drive the energy transition in 2023.
1. The Far-Reaching Impact of the IRA in Its First Year
The U.S. Inflation Reduction Act (IRA), passed in August, is set to be a game-changer for clean energy production, with $369 billion invested to boost the U.S. economy. This unprecedented funding is expected to triple federal spending on clean energy manufacturing infrastructure in the next decade, driving innovation and economies of scale for renewable energy. Energy storage technologies, including hydrogen, pumped hydro storage, thermal batteries, and electrochemical battery technologies, are poised to advance significantly with increased funding.
Initiatives such as ExxonMobil’s partnership with Mitsubishi Heavy Industries for CO2 capture, and the hydrogen production tax credit in the IRA, which can make green hydrogen profitable at scale, are expected to propel the growth of clean hydrogen and carbon capture, utilisation, and storage (CCUS) technologies. The Advanced Clean Energy Storage hub in Utah, a joint venture between Mitsubishi Power Americas and Magnum Development, is at the forefront of this trend, building the world’s first utility-scale renewable hydrogen hub.
2. Advances in Sustainable Aviation Fuel
Sustainable aviation fuel (SAF), which is produced from renewable biomass and waste resources, is poised to gain momentum with support from the IRA. The increased funding from the IRA is driving innovation and making widespread adoption of SAF more feasible. JetBlue has already announced plans to increase its use of SAF in 2023 and convert 10% of its fuel to SAF by 2030. While the cost of SAF production remains higher than that of conventional jet fuel, the growing market for SAF in the United States and Europe is driving advancements in low-carbon solutions. Airbus, for example, has plans to test a passenger airliner fueled by liquid hydrogen by 2026, with the goal of putting the plane into service by 2035.
3. The Shift Toward Energy Affordability and Security
The Paris Agreement of 2015 prioritised decarbonisation as a long-term goal for countries worldwide, aiming to limit temperature increases to 2 degrees Celsius.
However, recent energy market disruptions caused by Russia’s invasion of Ukraine have shifted some countries’ priorities towards affordability and security in the short term. While wealthier countries may prioritise decarbonisation and reliability, others with growing populations and economies prioritise affordability and reliability.
As Russia’s invasion of Ukraine continues, some European countries are restarting coal plants for emergency energy production, and the U.S. is sending liquefied natural gas to Europe to reduce energy dependence on Russia. In 2023 and beyond, countries are expected to focus on shoring up short-term energy security and affordability.
Despite the challenges, the energy industry continues to drive real transformation that impacts all aspects of life. Governments and companies are collaborating and making commitments to deliver a decarbonised energy future, shaping strategies that will shape the future of humanity in terms of how we live, do business, interact with each other, and lead the world to a brighter future.