Climate and Sustainability Hub

Resilient US market adapts to continued supply chain disruption and upcoming policy changes in the first half of the year: Key takeaways from Energy Storage and Intersolar North America 2022

Key messages:

• Despite inhibiting factors like the Omicron variant, labor shortages, inflated pricing, and continued impacts to component supply (owing to measures against forced labor—e.g., the Withhold Release Order and Uyghur Forced Labor Prevention Act), the solar and battery industries remain cautiously optimistic as they learn to adapt to volatile pricing and disruptions in the supply chain.
• S&P Global forecasts that there will be year-over-year growth in 2022, although at lower levels than previously expected. Additionally, 2023 is expected to be a banner year for solar and storage installations as it will recover many of the project delays that do occur in 2022.
• Throughout the storage market, there is vertical integration up and down the supply chain and horizontal integration creating or breaking into new markets, like smart homes and energy companies adding storage options.
• State pipelines for solar continue to grow, and elevated natural gas prices have created favorable capture prices for solar, cushioning LCOEs and maintaining profitability for developers.
• Overall, the solar and storage markets will have to be adaptable to macroeconomic events like COVID-19, supply chain disruptions, labor shortages, and inflation. Currently, both markets have shown their adaptability, maintaining strong installations and greater technology adoption.

This is an abstract. The full deliverable is available for clients only.

Latin America aims to be a global powerhouse for low-carbon hydrogen: Policy and industry developments in the region

Latin America aims to become a global low-carbon hydrogen powerhouse. Particularly, Chile, Brazil, Argentina, and Colombia are developing ambitious policy road maps for a future low-carbon hydrogen industry and are gaining investor interest in response. The four countries pledged to become net zero by 2050, and their governments are looking to large-scale domestic hydrogen applications for the energy transitions. Nevertheless, the region’s ambitions very much revolve around exports: Latin America aims to be a global supply hub for hydrogen and associated clean fuels. This report explores policy and industry developments in the region, discussing the countries’ challenges and opportunities to develop a hydrogen economy.

This is an abstract. The full deliverable is available for clients only.

Decarbonizing road transportation: A growth market for the US power industry

Road transportation decarbonization is a major component of government policies striving to achieve mid-century net-zero carbon goals, and will likely require strong policy support to overcome practical and cost considerations. S&P Global research shows transportation decarbonization represents a substantial growth opportunity for the US power sector, and accounts for most of the power sector’s expected net demand growth through 2050. We have quantified this opportunity with two views of the future for decarbonization:

• The November 2021 release of the S&P Global Planning Case, in which the United States achieves 83% decarbonization of the power sector by 2050, and slightly more than a 50% economywide reduction by that date.
• The 2021 release of the S&P Global Fast Transition Case, which assumes US power sector and economywide carbon net neutrality by 2040 and 2050, respectively.

In both outlooks, aggregate US power demand growth, prior to consideration of demand derived from transportation, is expected to be modest through 2050, and transportation end uses are expected to be major power demand growth drivers.

In the Planning Case, increases in battery electric vehicle (BEV) charging load and hydrogen electrolysis power demand (to make hydrogen for fuel cell electric vehicles) account for 70% of total US power demand growth from 2021 to 2050.

• The impact in Fast Transition is even greater, with BEV charging load and electrolysis demand combining to provide 95% of power demand growth through 2050.

This is an abstract. The full deliverable is available for clients only.

Prospects of heightened competition in Europe’s renewable market

Renewables already play a leading role in Europe’s power market, and further growth lies ahead. Renewables account for 45% of net electricity generated today, and wind and solar will contribute 75% of expected capacity additions by 2030. How close Europe will come to delivering on its 2030 ambition of 40% renewables in energy demand will depend in large part on the share of renewables in power.

In the coming years, competition will heat up. Developers will compete for the right sites and for materials and equipment to build assets, and consumers will compete for supply as demand for green power increases.

This is an abstract. The full deliverable is available for clients only.

Carbon capture, utilization, and storage (CCUS) in industrial sectors—Steel

Key messages:

• The steel industry plays a key role in the global development.  As a result, steel production is expected to increase in the next decade. However, iron and steel production is a carbon intensive industry responsible for about 9% of global greenhouse gas emissions, making it subject to increasing environmental pressure.
• Multiple options exist to lower the carbon footprint of steel—CCUS and hydrogen (H2)–based steelmaking are the main routes explored today.  The attractiveness of each solution will vary by region and by the age profile of the steelmaking plants. However, all the low-carbon solutions will require carbon pricing and government incentives.
• In mainland China, owing to the age profile of the steelmaking plants in the region, retrofitting with CCUS becomes an attractive option.  However, it will require emissions trading scheme prices above $60 per metric ton of carbon dioxide (CO₂), and since this solution will only reduce up to 57% of CO₂ emissions, deep decarbonization solutions like blue H2–direct reduced iron and scrap–electric arc furnace (EAF) could be a better option in the long term.
• Recycling steel or scrap-EAF is a mature process that could currently reduce CO ₂  emissions by 84–95%.  Although it could be a good deep decarbonization pathway for the steel industry, this route is limited by the availability of the scrap and highly sensitive to the scrap price that is expected to increase over the next 10 years.

This is an abstract. The full deliverable is available for clients only.

Global Downstream: The top 10 questions for 2022

Even as the number of new COVID-19 cases rises to record levels, there is a growing sense that the end of the pandemic may not be far off. But what lies on the other side, for energy and for refined products? We consider 10 questions that will set the tone for the global downstream industry in 2022:

1. Will 2022 be any calmer than 2020 or 2021?
2. Will refiners be treated to a profitable year?
3. How will the US’ and Europe’s climate policy aspirations pan out?
4. How many more refineries will the global majors sell or close?
5. How will inflation and supply chain issues affect the downstream industry?
6. Will petrochemical feedstock cracks continue to thrive?
7. Will producers pivot from renewable diesel and ethanol to sustainable aviation fuel (SAF) in 2022?
8. Will the fight between gasoline and bunkers send vacuum gasoil (VGO) into the stratosphere?
9. Will the refining sector’s fuel retail renaissance continue?
10. Will light-heavy crude differentials remain wide?

This is an abstract—the full deliverable is available for members only.

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Why are carbon offsets and voluntary carbon markets important?

As nations and companies continue to escalate their climate ambitions and announce net-zero targets, the role of carbon offsets and voluntary carbon markets (VCMs) has come into sharp focus. Offsetting is likely to play an important role in getting us to net-zero, and the market is expected to expand considerably. However, this is a complex topic, and there are major challenges to overcome alongside the great opportunity for growth. This report is the first of a series on offsets from our services: we introduce key concepts around carbon offsetting and VCM, address some fundamental questions, and discuss the challenges and opportunities as we head into 2021.

Full report available on the Climate and Sustainability Hub.

Top 10 questions facing the North American gas and power market in 2022

In 2021, the North American gas and power market faced an unprecedented winter storm that left much of Texas in the cold. Natural gas prices in the second part of the year surged to levels not seen in more than a decade for that time of year as demand growth vastly outpaced supply growth. Meanwhile, the power sector registered the largest build-out of renewables and battery energy storage in a single year, eclipsing the record set in 2020. What is in store for 2022? This short report identifies some of the key questions facing the North American gas and power markets that we are following and will be discussing throughout the year in our research.

Full report available on the Climate and Sustainability Hub.

10 big questions facing the Asia Pacific natural gas market in 2022

With the start of 2022, S&P Global considers the 10 “big questions” on the Asia Pacific natural gas market. These questions reflect the key issues that will shape up the regional natural gas and energy market development with implications on the global market and will guide the research agenda for the S&P Global Asia Pacific natural gas coverage this year.

1. How will the regional economy affect gas demand growth in 2022?
2. How will the follow-up measures by governments to achieve carbon commitments impact gas demand growth?
3. What guidance and targets will be included in China’s 14th Five-Year Plans for energy and natural gas?
4. How will gas market reform proceed?
5. Will LNG importers continue their term contracts shopping spree or risk supply shortages and price volatility from the spot market?
6. Will the recent high LNG procurement cost push up end users’ prices and reduce gas demand growth?
7. How will power market dynamics impact gas-fired power generation?
8. How will piped gas supply affect the region’s LNG demand?
9. Can Asia Pacific supply maintain the record LNG export levels reached in 2021?
10. Will ISO containers help accelerate gas consumption in emerging markets?

Full report available on the Climate and Sustainability Hub.

A review of 2021 and the 5 big questions facing Southeast Asia’s power markets in 2022

As 2022 begins, S&P Global looks at the power markets and highlights the most pertinent issues for the sector in the Southeast Asia. These markets are estimated to add 17.4 GW of capacity (6% increase year on year), comprising 7.6 GW of renewables and 9.8 GW of conventional capacity in 2022.

Below are the five big questions facing Southeast Asia’s power market in 2022 that will need to be watched closely and will be covered in the research agenda for the year:

1. Will there be a rebound in power demand to pre-pandemic levels?
2. What does the energy transition in the power sector look like for Southeast Asia?
3. What are the prospects for renewables in 2022?
4. Will there be more cross-border power transactions?
5. Will international players continue entering the region, mostly through acquisitions?

Full report available on the Climate and Sustainability Hub.

Decarbonizing electric power: Key challenges amid a global energy crunch and climate negotiations

As the world goes through an energy crunch with supply disruptions and record-high prices, leaders gathered in Glasgow for the 26th United Nations Climate Change Conference of the Parties (COP26). Affordability, reliability, and sustainability of energy supply have rarely simultaneously caught global attention as they have today. The electric power sector has had a first-mover advantage in the low-carbon transition as technologies like wind and solar photovoltaic (PV) matured rapidly during the past two decades, and more ambitions have been announced at COP26. Yet as these variable generation resources grow to take much larger shares in power systems, existing challenges can intensify while new ones emerge. Four in particular stand out that could slow down the pace of decarbonization but at the same time present immense opportunities for market participants:

• Strains on global supply chains for clean energy.  Solar panels, wind turbines, and batteries all have long supply chains that are global in nature. As the current global supply chain crisis is illustrating, bottlenecks anywhere can amplify and lead to severe consequences. For renewables to expand much faster, supply chains for new technologies—currently highly concentrated in a few regions and with some prominent “champion” companies leading the pack—will require significant expansion and derisking.
• Power system reliability risks on the rise.  The transition is taking place across the energy value chain, but the current energy crunch in China and Europe shows that the pace of transition for different parts of the energy value chain is not synchronized, creating more volatilities and instabilities. High solar and wind penetration rates are also testing the reliability of decarbonized power systems, especially as climate change brings more extreme weather. Before technologies like long-duration storage commercialize, some existing zero- or low-carbon technologies such as nuclear and natural gas will continue to play a major role.
• Grid constraints and energy poverty.  Power networks since the days of Edison and Westinghouse have been used to manage stable electricity output from large, centralized generators. The modern grid is poorly adapted to variable—and sometimes distributed—energy sources and requires sufficient ancillary services to maintain reliability. Meanwhile, access to electricity services remains elusive to an estimated one-tenth of humanity, adding more pressure to grid investment.
• The rise of “Big Renewables” and potential community opposition.  Renewable resources are typically diffuse, and exploiting them on a massive scale will create land use competition with other economic and environmental interests. Should “Big Oil” and “Big Coal” be replaced by “Big Renewable,” issues that face the fossil fuel industry when it comes to land use and community relations will emerge for renewable developers too.

Full report available on the Climate and Sustainability Hub.

10 questions for the LNG market in 2022

The global gas market tightened dramatically in 2021, with prices reaching record highs as markets scrambled to secure enough supply to meet recovering demand. This dynamic came just one year after prices plummeted to all-time lows during a period of LNG surplus and the onset of the COVID-19 pandemic. Whether the current price recovery continues through 2022 is a major uncertainty that has implications for future supply investment and demand growth, especially with growing momentum towards decarbonization. In this report, we address the major questions facing the LNG market at an inflection point.

 

Full report available on the Climate and Sustainability Hub.