Looking Back At 2022: A Year Of Uncertainty For The Energy Sector
Now we are settled into the new year, it may seem a little strange to look backwards rather than forward, but a year like 2022 can not be overlooked. Throwing many challenges our way, 2022 was a tumultuous year. The energy sector, in particular, battled the high waves of an energy crisis and a cost of living crisis, affecting energy providers, businesses and domestic consumers. Our review of 2022 gives a reflection of the year just gone, providing some insight into what impact this has had on energy consumption and prices. Afterall, sometimes you have to look back to lead forward.
The energy crisis
Following the invasion of Ukraine by Russian military forces back in February 2022, global gas supplies were impacted. This, and many other factors have led us to the point we are now. As the world recovered from the unexpected breakout of COVID-19, countries began facing shortages and increased prices for oil, gas and electricity, even back in 2021. This has placed us in a position where the price of oil hit its highest levels since the 2008 global financial crisis.
The higher wholesale prices have placed energy providers into the difficult situation of having to raise their prices for both domestic and non-domestic energy customers.
Ultimately, we have witnessed how the increasing energy prices have forced families into extremely vulnerable financial positions. Across Europe, in particular, the close ties to Russian gas supplies has created huge concern and discussion around the inevitable “cutting of ties” between major European countries and Russia, while homes and businesses are at risk of dealing with potential gas rationing and blackouts.
As we move into 2023, governments are looking to alternative energy sources to help relieve the incredible financial pressures this has placed on consumers and businesses over the last two years. We touched on this in another blog article several months ago, exploring the topic of Russian reliance.
Energy trends from July – September 2022
Key to helping understand the market and to forecast for the next year, are the facts and figures to come out of 2022. The UK government recently released a report discussing the energy trends from Q3 (July-September) of 2022. Here are some key points to come out of said report:
- Fuel imports from Russia continue to drop as the UK stopped importing any Russian LNG (liquified natural gas) from March 2022 onwards. While imports of Russian oil have dropped to 0.4% from 10.2% in 2021.
- Energy consumption actually increased in the third quarter of 2022. It was up 4.1% from the year before, mostly due to an increase in the consumption of transport fuels. However, it is worth noting that domestic consumption did the opposite. This can be put to a few factors, but the government have based their findings on the assumption that people were spending more time outside, following the end of Covid-19 restrictions. Although, it is important to bear in mind that rising energy prices will have also had an effect on consumption in this period.
- Qatar remains the largest source of LNG in the UK, accounting for over 50% of imports. The last cargo of LNG from Russia came in March 2022.
- The UK saw an 18% increase in renewable electricity generation in Q3 2022. Most of this increase was generated by wind generation, thanks to higher wind speeds and new offshore wind capacity.
- Solar PV electricity generation saw a record high in the UK in Q3 2022. This can be attributed to the longer, warmer summer we experienced last year.
Looking ahead into 2023
Upon reflection of the current energy crisis and the statistics produced by the government, it is clear that the energy sector is experiencing a shift. Both in production of electricity and gas but also changes in consumer behaviour. With renewables experiencing a positive upward trend, it wouldn’t be unreasonable to suggest that such sources of energy may be the desirable option for governments. Not only because capacity for the generation of renewables is increasing, but also because of the goals in place to reduce carbon emissions over the next few decades.