Global energy spending is set to reach a record $2.1 trillion in 2022, led by oil and gas as well as rising power prices and the EU reducing its reliance on Russian imports, according to Rystad Energy.
Post-Covid-19 pandemic inflation due to the rise in labour costs and shipping rates is also driving many countries to increase spending in the energy sector to secure supplies, the Oslo-based consultancy said.
“The world is now spending more on energy than ever before. The year 2014 was the last time we saw similar numbers,” said Audun Martinsen, head of energy service research at Rystad Energy.
“One can see a major shift in the amount of spending on green energy, which has increased, with a drop in expenditure on oil and gas. However, expenditure on other fossil fuels, such as coal, has remained constant.”
Spending on upstream oil is expected to rise 16 per cent to $658bn this year, with a production of 99.6 million barrels per day in liquids supply. Spending on the gas and LNG sector will rise 15 per cent to $401bn leading to an output of 396 million cubic feet per day, from 390.
Global capacity will grow at 250 gigawatts within wind and solar, and lead green energy spending to grow by 24 per cent, or $125bn.
Rising global inflation has led to project costs in oil and gas increasing between 10 to 20 per cent from 2020, on higher steel prices and a tighter market among suppliers. Lithium, nickel, copper and polysilicon – core renewable materials in battery and solar PV manufacture – have increased green project costs 10 to 35 per cent.
The European Union also aims to reduce its reliance on Russian gas supplies. In 2021, the EU imported 155 billion cubic meters of natural gas from Russia, which accounted for about 45 per cent of EU gas imports and close to 40 per cent of its total gas consumption, International Energy Agency figures indicate.
“Sourcing fossil fuels from alternative providers to Russia is just a temporary solution as the EU harbours a clear goal of reducing the bloc’s dependence on fossil fuel energy in general,” Rystad said. “Green energy – through solar and wind power, coupled with hydrogen and CCS [carbon, capture and storage] initiatives – will be key to improving the energy security but also delivering on member countries’ energy transition goals.”
Spending on solar energy will surge 64 per cent to $191.47bn, while onshore wind spending will grow by 24 per cent to $209bn.
"A concern in energy markets is that the ongoing war in Ukraine will derail the energy transition but the latest data suggests that spending on green energies will grow faster than in the fossil fuel sector," Rystad said.
"Without the invasion, however, there would have been less growth in investments in oil and gas and the share of green energies in global energy spending would be slightly more than today’s 31 per cent."