What's the global energy outlook for 2023?

The world is in the midst of the first "truly global energy crisis", the International Energy Agency (IEA) said in its World Energy Outlook in October 2022.

It's multidimensional - it's about more than the world's reliance on natural gas from Russia. It's about global energy security, fuelling the transition to clean energy for the climate and the interconnection between the energy crisis and food security.

For the first time in a decade, the number of people without access to modern energy is growing, says the IEA. Some 75 million people who have only just got access to electricity may no longer be able to afford it, while 100 million people may need to return to cooking using biomass.

In April, the Intergovernmental Panel on Climate Change (IPCC) found that meeting the Paris Agreement target of keeping warming to 1.5°C would require emissions to “peak before 2025 at the latest” and drop by 43% by 2030.

But addressing emissions also represents an opportunity for the green economy. Those industries helping the world shift to net-zero emissions could be worth $10.3 trillion to the global economy by 2050, according to sustainable development consultancy Arup and economics advisory firm Oxford Economics.

The challenge facing the energy sector today is how to redesign the entire system while maintaining an affordable, resilient supply that's sustainable for the planet.

Energy leaders came together to discuss the outlook for 2023 at the World Economic Forum's Annual Meeting in Davos in January, in a panel session titled Mastering New Energy Economics.

Facilitating the session was CNN Anchor Julia Chatterley and the speakers were: Fatih Birol, Executive Director, International Energy Agency; Vicki Hollub, President and Chief Executive Officer, Occidental Petroleum Corporation; Patricia K. Poppe, Chief Executive Officer, PG&E; Martin Wolf, Associate Editor and Chief Economics Commentator, the Financial Times and Jozef Sikela, Minister of Industry and Trade, Ministry of Industry and Trade of the Czech Republic.

"Our world has never seen an energy crisis of this depth and of this complexity." Fatih Birol began the session by reasserting the challenge we all face. Triggered by Russia's invasion of Ukraine, and further weakened by the world's reliance on Russian oil exports, the climate crisis looms large.

However, there is some positive news – clean energy development in solar, wind, electric cars etc, has received a massive boost. But not, as Birol points out, for environmental reasons, "the biggest driver of renewable energy growth today is energy security."

Martin Wolf, from the Financial Times, agreed that "massively expanding the renewable energy is a climate and security priority." But he warned that in order to keep close to 1.5C and meet climate targets by 2030, would require "dramatic serious de-risking of investment across the world." The scale of investment, particularly in relation to developing countries is an urgent issue.

On a local level, Patricia K. Poppe highlighted how the US State of California is tackling demand-side pressure using technology. California is on the frontline of climate change and during a recent heatwave, the state sent an emergency text message to all cell phones in California requesting that people cut back on their electricity use. "Instantaneously, 2,500 MW came off the system. This reaffirmed my hypothesis that demand management with modern technology can be automated."

So how does the energy transition fit into a such fragmented world? Countries like the Czech Republic, which are largely energy dependent on Russian fuel suppliers, understand the need for unity. Jozef Sikela pointed out how with European Energy Council support, they were able to "introduce a package of measures which helped us to calm down the prices, to balance the demands and the supply."

In a separate Davos session, De-Globalization or Re-Globalization?, Adam Tooze from Columbia University, described how "the energy transition is effectively a set of interdependencies." For example, most of the microchips needed by the West for clean energy technology will come from China, therefore the energy transition will be a driving force towards "a new cocktail of globalization rather than a typical continuity."

The challenge facing governments and business leaders around the world is clearly focused on energy security, with many acknowledging this is now a key driver of growth for renewables. As we head into 2023, energy strategies will need to accelerate investment and build resilience whilst tackling affordability and sustainability.

For more on how the World Economic Forum is helping to unlock a clean energy future in emerging markets, click here.