Optimism prevails in the global energy sector despite threat of political uncertainty, DNV report finds

DNV reveals a resilient optimism within the energy sector, despite prevailing caution. According to DNV's annual Industry Insight survey, 73% of senior energy professionals express confidence in the industry's growth trajectory for the upcoming year, a figure that has remained steady at around 74% since 2022, reflecting a resolute stance amid turbulence.

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• Positive sentiment of the energy sector remains remarkably steady at around 74%

• Political uncertainty, as the world readies for a tsunami of elections, has been highlighted by the energy sector in DNV's analysis of the views of nearly 1,300 senior energy professionals around the globe.

• Rising costs and supply chain disruptions are threatening the viability of many projects, dampening short-term optimism for electrification and renewables.

• The oil and gas sector, in contrast, is witnessing a resurgence in confidence, reflecting the industry's pivotal role in meeting global energy demand while navigating the transition to cleaner fuels.

• The cost of the energy transition remains cited as the biggest barrier to meeting Paris Agreement goals.

"The transition towards a sustainable energy future is not just desirable; it's imperative, Ditlev Engel, CEO Energy Systems at DNV states. “Key drivers of optimism include the relentless march toward decarbonization and electrification, offering long-term clarity amid near term uncertainty. Understanding this shift as a necessary progression aligns with the industry commitments under the Paris Agreement, reinforcing its determination to drive meaningful change. Consequently, the industry's optimism about the path ahead is well-founded – especially since the requisite technologies are already within our reach.”

However, beneath this apparent stability lies a complex landscape of shifting dynamics. While the industry as a whole maintains a positive outlook, specific sectors, such as electric power and renewables, have witnessed notable declines from previous peaks.

DNV's survey stresses that nearly two-thirds of the energy sector view global political uncertainty as the primary threat to success over the coming year. Specifically, DNV's study reveals that nearly two-thirds (62%) of respondents perceive the 2024 wave of elections and potential policy shifts as one of the steepest barriers to growth. Political uncertainty, which ranked as the 13th major concern in 2022, surged to sixth place in 2023.

2024 marks a record year for elections, with over two billion people heading to the polls. The prospect of continued policy upheaval is of particular concern in the Americas, with 71% of Latin American and 67% of North American energy professionals highlighting political issues, reflecting the polarized landscape of energy and climate politics. Given its importance to the global energy sector, the outcome of the upcoming elections in the United States holds particularly significant implications for energy industry sentiment and strategic planning.

“For decades, the energy sector has faced enduring political risks, evolving from localized tensions to global challenges affecting every aspect of the industry”, explains Engel. “Amidst fluctuating prices, disruptions in supply chains, wavering investor confidence, and shifting regulations, stakeholders stress the importance of maintaining a long-term perspective, anchored in stable supply contracts. In this climate of uncertainty, the sector must demonstrate resilience, adaptability, and a strategic vision for the future to overcome policy ambiguities and foster economic growth, job creation, and prosperity for all. Furthermore, to effectively scale the energy transition across various industries, it's imperative to streamline and standardize processes. A key challenge is to secure lasting regulatory support and clear visibility into the future to rapidly deploy existing technologies.”

Optimism among respondents in electrical power has dipped from 87% to 76%, while renewables have experienced a similar downward trend, from 87% to 78%. This decline mirrors a broader shift in industry growth expectations and organizational confidence, with rising costs and supply chain disruptions pose significant hurdles to project viability and the pace of energy transition. Notably, the electric power industry faces a pronounced shortage of skilled talent, hindering progress in energy transition and digital initiatives. Meanwhile, renewables grapple with regulatory hurdles and intensifying market competition.

There has also been a fall in optimism about organizational decarbonization targets among survey respondents, with the majority (62%) believing that financial costs are the greatest barrier to reaching the goals of the Paris Agreement.

“The price of carbon is still too low globally, and the political difficulty of having energy consumers face the cost of carbon in their everyday decisions is one of the reasons why the energy transition will move slower than many people hope,” says Eirik Wærness, Senior Vice President and Chief Economist, Head of Global External Analysis at Equinor. “So carbon border adjustment mechanisms are needed to encourage every government around the world to put a price on carbon. That is easier said than done, particularly in emerging market democracies, where there are so many urgent priorities.”

On a brighter note, the oil and gas sector has undergone a resurgence in confidence, rising from 58% in 2022 to 68% in 2024. This recovery reflects the industry's pivotal role in meeting global energy demand while navigating the transition to cleaner fuels. Established oil and gas companies have also gained from branching out into decarbonization and renewable energy.

“The price of power on any given day can be quite erratic,” says Arnaud Le Foll, Senior Vice President New business, Carbon neutrality at TotalEnergies Exploration and Production, “which is part of why we have kept to our vision of integrated businesses. It's through integration that we have remained strong through the cycles in oil and gas, and we think it will be similarly important in our electricity business.”

Jacqui Bridge, executive general manager, energy futures at Powerlink Queensland, an Australian transmission system operator, also stresses the importance of integrated approaches and systems thinking for navigating the future energy landscape, “looking across the entire power system, including all the different resources that customers are connecting within the distribution grid”. A position shared by Gerard Reid, co-founder of Alexa Capital, an investment bank focused on energy transformation, and co-host of the Redefining Energy podcast, who adds that “the biggest change since the outbreak of the Ukraine-Russia hostilities is that residential, commercial and industrial consumers are now driving change, irrespective of the actions of neighbours, grid operators or government.”