Navigating the energy transition in 2024

This year, volatile market forces, governmental policies, and societal demands will converge to shape the pace and direction of the energy transition. We expect global energy prices to remain volatile this year, influenced by factors such as geopolitical tensions, the upcoming elections, market speculation, and fragile supply chains that are not secure enough to deliver on our energy needs.

Looking ahead to the key forces set to shape energy demand, we expect to see the following advances, and challenges, in 2024.

Sovereignty considerations will be at the forefront of the energy transition

The energy transition’s pace hinges on this year’s crucial global elections, involving nearly half the world’s population. The outcome of these elections will decide how governments worldwide implement policies and incentives to speed up the move to cleaner energy alternatives. Though we’ll have to watch and wait for the political outcome, what we do expect to continue is the US making progress in clean electricity through its Inflation Reduction Act (IRA) and China’s carbon emissions declining this year, driven by a substantial increase in clean energy investments.

We also anticipate a stronger link between renewables and energy sovereignty. Our World Energy Markets Observatory (WEMO) 2023-24 found that more countries are transitioning to in-country renewable sources as a way to protect energy supply against geopolitical uncertainties. The energy transition will continue to be a way to safeguard supply against geopolitical threats this year. Whatever the outcome of elections, we expect governments and regulators to lead market interventions, such as demand response and flexibility schemes, which are crucial for ensuring the integration of intermittent renewable energy sources and maintaining grid stability. We also expect to see more governments reassessing investments in larger, long-term assets like nuclear.

SMRs have a simplified design based on existing and proven light water reactor technology (Gen III+ and predecessors), along with a mature and robust fuel supply chain. This reduces the overall licensing and build risk. While SMRs enjoy a well-established technological basis, other technologies such as advanced (Generation IV) reactors (Rs) will also see increased interest in 2024 as demonstration projects and the development of the fuel supply chain progress.  

Nevertheless, many nuclear projects will face financial setbacks and will encounter regulatory challenges, as we have seen in the US. This is not unexpected as the industry emerges and will require innovative approaches to minimize risk to ensure project feasibility.  To be sure, there will be winners and losers, but fortune will favor the well-prepared.

The year of consolidation

As governments around the world gear up for elections, the private sector will also be looking closely at their priorities. The oil and gas industry will continue a period of consolidation as companies streamline their operations and focus on assets that align with their transition plans.

The role of gas in a net-zero emissions future is also subject to debate, and the private and public sector alike will need to carefully consider the environmental and economic implications of its continued use. We expect to see this consolidation accelerate in 2024 as companies seek to optimize their portfolios and adapt to the changing energy landscape.

The potential of generative AI will become reality

Last but not least, 2023 was indisputably the year of AI, with the technology having a profound impact on the world’s businesses. AI has more than 50 different uses in the energy system, and the market for the technology in the sector could be worth up to USD 13 billion.

AI is already having a huge impact on the growth of smart grids and smart meters, so we anticipate an AI boom in the running of components within energy systems over the coming year, especially relating to customer service.

Overall, as we continue to navigate the energy transition in 2024, the global landscape is undergoing profound shifts, presenting both challenges and opportunities. We are expecting to see further synergies between digital and sustainable innovation, taking advantage of the potential of technologies to accelerate the energy transition for the better. The continued integration of AI, alongside advancements in renewable energy and nuclear technologies, positions 2024 as a pivotal year in our collective journey towards a sustainable and resilient future within the energy sector.