(MENAFN- Frost & Sullivan)
What Does the Russian Invasion of Ukraine Mean for Global Power Markets?
Against the backdrop of the war in Ukraine, we are witnessing disruption to the traditional natural gas market. We are already seeing greater demand for liquefied natural gas (LNG) cargoes in other parts of the world coming to Europe, and we are starting to see disruptions to the Russian supply into Europe.
Russia is cutting off Poland because of non-payment. We also see Ukraine now cutting back and ceasing the transmission of Russian gas through its territory, which is going to have more implications for the European market.
We definitely experience more demand for LNG globally and more price pressure in the global market. This is anticipated to translate into higher LNG investments in the coming years, following Frost & Sullivan's earlier forecast of another round of LNG investment in the next few years. Despite the efforts for net-zero, we still believe gas has a role to play in the economy – however, that capacity will take time to come online.
We also see further uptake of renewable energy. Renewable investments were already looking at high levels for 2021 into 2022, but we're now seeing a large number of countries pushing forward with accelerated renewable plans. The European Union plan will be unveiled this week, but we're also seeing other leading states around the world looking at how they can bring more renewables into the power mix. Allied to that, therefore, will be the necessary grid investment that this will necessitate. We're likely to see higher demand for transformers, switch gears, and technologies that facilitate renewable energy coming online.
We also will see some negativity for our efforts to cut climate emissions. We're expecting a winter where coal is utilised more than it was in the previous winter. We also expect some coal in the European power supply that maybe would not have been there otherwise. Although other parts of the world are diversifying their investment in the short term, coal is likely to play a big role.
Another less talked about element of the power mix is nuclear—a clear baseload power supply for a number of key global markets. We are seeing countries rethinking their policy of closing down plants or at least in the timeframes they were considering. A number of European states that have shutdown policies are now examining whether that is something they can achieve.
This means the high energy costs that we have seen in the past six to 12 months are likely here to stay. Energy is often bought on longer-term contracts, so it's going to be unavoidable that we will see high retail energy prices and high prices for commercial industrial customers from 2022 through 2023, and probably even for 2024, because all of the changes in terms of new investments will need to be funded from somewhere.
However, the impact of these investments, like renewables coming into the mix, will not be felt for some time. Obviously, it's a volatile situation. Much can still change as the war progresses, but it looks certain that we are in for an era of higher investment in power but also higher cost for power. It will be fascinating to see how this develops.
About Jonathan Robinson,
Jonathan Robinson, Global Energy Program Lead, Frost & Sullivan's Industrial Practice
View all posts by Jonathan Robinson
MENAFN17052022005545012248ID1104230170
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.