So here we are, 2022! The beginning of a new year and the anticipation of good things. Could anyone have predicted a worldwide pandemic at the beginning of 2020? I certainly couldn’t have. COVID and its variants have dominated our lives and the news cycle for two years now. So, what’s the energy outlook for 2022? Here is my best guess at some of the opportunities and challenges for the energy industry:
Although the Biden administration was dealt a blow to their ‘Build Back Better’ plan in 2021, I believe a new version of the plan will pass in 2022. The plan will modernize the energy, roads, bridges and tunnel infrastructure. This part of the bill has always gained support on both sides of the isle. It’s the add-ons that put the parties at odds. I believe that significant funds to combat climate change will be included in the new bill as well. The midterm elections will prove to be a bloody battleground for one party to gain majority control. Energy policy will be one of the important talking points.
Energy demand will increase 2% – 4% from pre-pandemic levels. That’s big news. If you recall, we were in an economic boom in 2019. An increase in energy demand from those levels means increased economic growth on pace to outperform 2019. The takeaway here is: we are back, big time! All types of energy (other than nuclear) should benefit. Energy prices should remain high alongside an increased demand. Energy companies will prosper in this environment and energy should be a good investment sector.
Coal will keep diverging as reducing carbon continues to play an important role. The coal industry as a whole, while remaining a dominant fuel source for electricity production, is under attack. Although coal demand will increase with the overall energy demand, producers will need to navigate a hostile environment. One of the many challenges they will face is securing financing. Energy lending institutions are pledging to cut fossil fuel project funding in 2022
Renewables will continue to dominate the future energy conversation. We are all familiar with wind, solar and hydro power which will increase as a fuel sources for electricity production. The next disruptive ‘clean energy’ will come from other sources, such as hydrogen and fusion technology. Although 2022 is an aggressive target for one these new technologies becoming a disrupter, it’s clear that this is going to happen. 2022 will also prove to be the catalyst year for the carbon capture technology industry. Although this technology has been around for some time, the cost was a major hurdle in scaling. Prices have come down to the point where we will see these carbon capture projects gain worldwide momentum.
In the meantime, the smart money is betting big on the expansion of the electric vehicle and charging station infrastructure. Hopefully, 2022 starts a new cycle which does not include a pandemic and significant inflation. If so, it’s possible that this could be the beginning of the next roaring 20’s!
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