Energy Transition Trends To Watch In 2023

A few years ago, conversations about the global energy transition centered on growing adoption of wind and solar power. Today, renewable energy continues to proliferate, thanks to strong demand, falling costs and a host of new clean energy incentives. Yet the context surrounding the energy transition has changed.

Innovation has driven breakthroughs in spheres from long duration energy storage (LDES) to carbon capture, utilization and storage (CCUS); policies and regulations have changed markedly; and crises including the COVID-19 pandemic and Russia’s invasion of Ukraine have forced some countries to shift their short-term energy priorities. “The world is trying to find the right balance between decarbonization, affordability and energy security,” says Todd Brezler, Chief of Staff at Mitsubishi Power Americas, a leader in global energy solutions.

Common themes are beginning to emerge as governments and companies try to strike that balance. As a result, the following trends look poised to drive the energy transition in 2023.

“[The Inflation Reduction Act] is going to be a catalyst for projects that decarbonize the energy sector.”

1. The far-reaching impact of the IRA in its first year

There’s no better place to start than the U.S. Inflation Reduction Act (IRA), which was passed in August and aims to boost the U.S. economy by investing in domestic clean energy production to the tune of $369 billion. With its unprecedented funding, the law is seen as a trend accelerant. “It’s going to be a catalyst for projects that decarbonize the energy sector,” says Brezler.

He predicts it will propel U.S. federal spending on clean energy manufacturing infrastructure to nearly triple over the next decade. Federal programs will empower companies to take risks on new technologies while driving momentum and economies of scale that make renewable energy cheaper and easier to produce. Greater funding will promote advances in energy storage on many fronts, including hydrogen, pumped hydro storage, thermal batteries and a variety of electrochemical battery technologies.

CCUS and clean hydrogen also figure to get enormous boosts. Major initiatives are already underway. In November, ExxonMobil partnered with Mitsubishi Heavy Industries (MHI) to use MHI’s CO₂ capture technology for the energy giant’s end-to-end carbon capture and storage solution. And the hydrogen production tax credit included in the IRA has the potential to make green hydrogen—hydrogen generated by renewable energy—profitable at scale. The Advanced Clean Energy Storage hub in Utah, where a joint venture between Mitsubishi Power Americas and Magnum Development is building the world’s first utility-scale renewable hydrogen hub, is in the vanguard of this trend.

“This kind of leadership is needed to make the hydrogen hub concept a reality and to develop hubs all over the U.S.,” says Ricky Sakai, Senior Vice President of Investment & Business Development at Mitsubishi Heavy Industries America (MHIA).

“There is a growing market for [sustainable aviation fuel], particularly in the United States and Europe. It’s all about economics.”

2. Advances in sustainable aviation fuel

Another technology getting a boost from the IRA is sustainable aviation fuel (SAF)—aircraft-powering fuel produced from renewable biomass and waste resources. SAF use has been limited for the past few years, but it appears on the verge of truly taking off as money from the IRA helps spur innovation and make widespread adoption more possible. In December, JetBlue announced that it will increase its use of SAF in 2023 and convert 10% of its fuel to SAF by 2030.

“There is a growing market for SAF, particularly in the United States and Europe,” says Sakai. “It’s all about economics, because the cost of SAF production is much higher than that of conventional jet fuel.”

Meanwhile, plane manufacturers are testing a variety of longer-term low-carbon solutions. Airbus recently announced that it’s on track to test a passenger airliner fueled by liquid hydrogen by 2026, and to put the plane in service by 2035.

“We’re shaping strategies that are going to help the future of mankind – how we lead the world to a brighter future.”

3. The shift toward energy affordability and security

The Paris Agreement of 2015 made decarbonization an explicit long-term priority for countries around the world, with the goal of limiting temperature increases to 2 degrees Celsius compared to pre-industrial levels. Decarbonization remains central to most countries’ long-term energy vision. Yet countries increasingly are prioritizing affordability and security now in the wake of the energy market disruption caused by Russia’s invasion of Ukraine, and some are putting decarbonization on the back burner.

“Some wealthier countries have been willing to sacrifice affordability while going all-in on decarbonization and reliability,” Brezler says. “Other countries, especially those with growing populations and economies, have prioritized affordability and reliability.”

As Russia’s invasion of Ukraine drags on, some European countries are restarting coal plants to provide emergency energy production. Meanwhile, U.S. companies are sending liquified natural gas to Europe to help aid countries there trying to become less energy-dependent on Russia. In 2023 and beyond, look for countries to continue emphasize shoring up short-term energy security and affordability.

As much as 2023 will bring new changes to the energy transition, one thing won’t change – what it feels like to be in the industry right now. “Energy is the backbone of society, and industry is driving real transformation that impacts every aspect of life,” says Brezler. “We’re shaping strategies that are going to help the future of mankind – how we live, how we do business, how we interact with each other and how we lead the world to a brighter future. There are many challenges to be solved, but governments and companies are collaborating and making commitments to deliver a decarbonized energy future.”

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