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S&P Global — 5 June 2024

Daily Update: June 5, 2024

The Future of Global Energy Markets in Five Trends

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By Nathan Hunt

Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy

Forecasting is a dangerous business. If you’re wrong, no one will let you forget it. If you’re right, people will say it was all very obvious (in retrospect). Energy markets are especially resistant to forecasts. Just when you think you’ve got them figured out, an outlier, such as a land war in Europe, occurs, and you have to start over from scratch. However, S&P Global Commodity Insights has a bit of an advantage in taking the long view, having offered insight into energy markets for over a century. So, when Etienne Gabel and Qingyang Liu of S&P Global Commodity Insights offer “Five trends that will define global power markets in the next 10 years,” it’s worth reading the article.

The two authors took the huge changes we saw in energy markets between 2015 and 2023 as their starting point. Global clean energy resources grew to 530 GW per year from 120 GW per year over that period. Looking forward to 2035, the number is expected to reach 730 GW per year. This build-out of renewable energy generation represents a major change in a well-established market and will be a main driver of the five emerging trends.

The first trend is that global power demand will increase by a third over the next 10 years. Of this growth, 66% will come from Asia-Pacific, with India making up a substantial portion. Electrification and datacenter energy demand will also account for a huge amount of additional growth in well-developed energy markets in Europe and North America.

The second trend is that most of the new power capacity for this increased demand will come from renewables. Renewables will make up 90% of new power generation and account for 70% of power capacity by 2035.

However, fossil fuels aren’t disappearing in the next decade. The third trend is that conventional thermal fuels, especially natural gas, will continue to play a major role, providing a baseload of power and flexibility to power systems. The remaining 30% of power capacity will come from fossil fuels, including coal in some markets.

The fourth trend is that investment in renewables, battery storage and hydrogen will grow substantially, averaging $775 billion annually between now and 2030. Adjusted for inflation, that is 40% above the investment levels of 2023, the last full year for which data is available. Of the investment total, Asia-Pacific will receive 46%, with Europe getting 26% and North America receiving 16%.

Two factors will drive the final trend in energy markets. The first is the retirement of most coal generation in the US and Europe and a slowdown in coal generation in China. The second is the widespread adoption of and lower costs associated with renewables. Together, these changes mean that global power generation will emit 10% less CO2 in 2035 than it does today, despite all of the additional power demand and capacity.

To read the full set of trends for global power markets, click here.

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