The 28th United Nations Climate Change Conference (COP28) in December 2023 marked the first conclusion of the first “Global Stocktake”. The Global Stocktake is a crucial process for countries and stakeholders to see where they are collectively in meeting the goals of the Paris Climate Change Agreement – and where they are falling short. The findings were sobering, revealing that global efforts are far from sufficient to limit global warming to 1.5 degrees Celsius, and that the time window to achieve this goal is rapidly closing.
The global energy market is poised to undergo significant transformation. In the wake of COP28, there has been a united push by global leaders to accelerate the transition away from fossil fuels to renewables. Additionally, technological advancements are also driving changes in the way we consume and approach energy.
Main Factors Leading Changes in the Energy Market
Government Policies and Regulations
As the climate clock ticks, governments and corporations are facing increasing pressure from the public to adhere to strict climate guidelines and shift away from fossil fuels to clean and renewable energy. This has resulted in countries worldwide setting more ambitious green targets. Internationally, nearly 200 countries have pledged to triple the world’s renewable energy capacity and doubling efficiency improvements by 2030.
As of 2023, global annual renewable capacity stands at 3,870 gigawatts (GW) and is expected to increase 2.7-fold by 2030, as forecasted by the International Renewable Energy Agency (IRENA). Although this trajectory indicates a positive direction, it still falls short of the goal to triple annual renewable capacity by the decade’s end, indicating an ambition gap and challenges surrounding implementation.
Several countries have become heavyweights in the push for renewable energy, for example, China, the U.S., India and Brazil.
Looking at China, national energy security has been an overarching strategic goal at the heart of the nation’s energy policies. With a long-term aim to become energy independent, the world’s largest emitter plans to phase out state-controlled coal during the 15th Five-Year Plan from 2026-2030. Renewable energy will be the principal driver of this energy transformation. This commitment is best exemplified by China’s latest energy guidelines issued this year, which include new carbon measurement standards, promoting green and low-carbon transition in industrial structure and the energy sector, as well as green transition in the transport sector and urban-rural development.
Overall, China aims to hit peak carbon emissions by 2030 and achieve carbon neutrality by 2060. With China’s CO2 emission falling by 1% in Q2 2024, the first quarterly drop since Covid-19, it suggests that the Government’s commitments are gradually bearing fruit. To further facilitate the nation’s ambitious green target, China will continue to pursue fiscal and taxation policies that are conducive to actively supporting green & low-carbon development and green projects with the use of a central budget, as well as develop financial instruments that promote green investing. These are just some of the regulatory commitments China has implemented to further its commitment to renewables.
Similarly, the U.S. has established the Final Renewable Energy Rule under President’s Biden goal of creating a carbon pollution-free power sector by 2035. Under the Final Renewable Energy Rule, federal acreage rents and capacity fees will be reduced by 80% until 2035, eventually stepping down to a 20% reduction by 2038. By reducing these fees, renewable energy projects are more financially attractive, encouraging more development. The U.S. has already surpassed its goal of permitting 25 GW of clean energy projects on public lands by 2025 in April 2024. However, with renewables accounting for only 21.4% of total electricity generated in 2023, further measures such as the Clean Electricity tax credits have been introduced to increase the renewable energy share in the power mix to 34% by 2028.
Additionally, the Securities and Exchange Commission (SEC) has mandated that publicly listed companies provide climate-related disclosures in their annual reports and registration statements, beginning with annual reports for the year ending December 31, 2025. These disclosures, including material climate targets and goals and emissions data, are designed to enhance transparency between investors and corporations, placing additional scrutiny on corporate climate initiatives.
While countries like China and the U.S. are actively pursuing the increased adoption of renewables and the majority of the G20 and developing economies are on track to realise their climate ambitions, IRENA is calling other countries in the ASEAN and Eurasia region to consider increasing their commitments. This is due to the untapped economic potential of renewable energy, as well as the necessity to execute the goals set forth by the Paris Climate Change Agreement.
Technological Advancements
Technological innovations are significantly influencing energy production methods.
As traditional fossil fuel sources like oil get harder to extract, the industry faces a pressing need to develop more advanced extraction techniques such as fracking or deepwater drilling. These methods are not only more costly but also more complex, challenging the economic viability of oil companies. Conversely, advancements in renewable energy technologies have led to more efficient equipment and manufacturing processes, greatly benefiting the implementation and profitability of renewable energy farms.
For instance, the cost of solar photovoltaics has fallen by 90% over the past decade, while the average panel conversion efficiency has increased from 15% to 23% over time. Although the steep decline in prices will likely not be sustained over the next decade, costs are expected to continue to drop as economies of scale increase, further supported by favourable government policies and incentives on both the supply and demand sides. Indeed, the International Energy Agency (IEA) has reported that solar power is now the cheapest source of electricity.
Similarly, wind energy is experiencing a downward trend in costs due to lower manufacturing expenses and improved efficiency, driven by similar trends observed in the solar sector.
However, this positive trend comes with challenges. Solar and wind energy can oversaturate existing electricity grids, leading to erratic energy supply due to variables like temperature or wind speeds. This unpredictability can compromise grid stability, potentially causing damage, interruptions, and power outages. To mitigate these risks, the pursuit of technologies such as energy storage solutions is crucial to ensure grid reliability.
Main Consumers of Energy
Looking from a global perspective, the primary consumers of energy are some of the world’s largest economies.
According to Enerdata, global energy demand grew by 2.2% in 2023, primarily driven by emerging economies, notably China, India, and Brazil. Conversely, OECD countries saw a decline in energy consumption as several European economies grappled with economic stagnation, leading to reduced industrial and manufacturing activities.
However, as several of the biggest economies achieve a soft-landing status and interest rates are cut across major economies, there is an expected rebound in industrial activities across major economies. The most significant of these is energy demand in Europe and China. The EU economy is poised for a recovery, supported by easing monetary policies, continuous employment, and real wage growth. Private consumption is expected to bolster the EU’s near-term economic growth, with forecasts of 1.6% real GDP growth in 2025, compared to 1.0% in 2024 and -0.4% in 2023. Similarly, China is currently experiencing an industrial slowdown, but there is potential for revitalisation in its energy demand following Beijing’s latest stimulus package, especially as its oil demand has declined year-on-year for the fourth consecutive month in July.
Looking ahead, global energy demand is projected to grow, driven by emerging economies, where increasing populations and a strengthening middle class will result in higher energy demand. A key area of growth will be in electricity consumption, as the process of electrification accelerates. Beyond traditional uses, such as building electrification, the rise of new sectors like electric vehicles and data centres will significantly increase the electricity demand. Given the acceleration in electrification, renewable energy has a huge role to play, as IEA forecasts that renewables will account for 42% of global electricity generation, with wind and solar power making up more than half of it at 25%.
Demand trends in the U.S. and Singapore
The U.S.
According to the U.S. Energy Information Administration (EIA), U.S. power consumption is on track to rise to new records in 2024 and 2025. This observation stems from growing power demand from data centres, manufacturing and the electrification of transports and buildings. Projected power demand will rise to 4,101 billion kilowatt-hours (kWh) in 2024 and 4,185 billion kWh in 2025.
To meet this growing demand, power supply is anticipated to increase by 3% year on year, with solar and natural gas contributing the majority of new generation. Alongside these increasing energy needs, consumer preferences for energy sources are also evolving. A survey by Pew Research found that 64% of U.S. adults prioritise expanding renewable energy over fossil fuels. However, 69% believe that the U.S. energy supply should still include a mix of fossil fuels and renewable sources, indicating that traditional fossil fuels will remain significant in the U.S. energy landscape for the short to medium term.
Singapore
Compared to the U.S., Singapore’s energy demand is much lower. According to the Energy Market Authority (EMA) in Singapore, the 2023 figures show electricity consumption at 55.4 billion kWh and natural gas consumption at 62,244.4 terajoules (TJ) or 17.3 billion kWh.
Much of Singapore’s demand for electricity is supported by the industrial sector. However, this trend has been slowing since 2021, with commerce and services-related activities catching up.
Looking ahead, Singapore envisions renewables gradually replacing natural gas over the next couple of decades. Due to geographical constraints, expanding renewable energy significantly is challenging for Singapore. Nonetheless, the nation aims to boost its solar capacity to 2 gigawatts (GW) by 2030 as part of its 2030 Green Plan. Innovative solutions, such as integrating solar panels on buildings and developing floating solar farms, are being pursued instead of conventional solar farms. Additionally, Singapore is looking to leverage energy capabilities from neighbouring countries, targeting the import of 6GW of energy by 2030.
With the anticipated rise in electricity demand driven by the growth of both established and emerging electricity-intensive sectors such as advanced manufacturing, the digital economy, food, and transport industries, Singapore is also exploring hydrogen energy to achieve net zero emissions and strengthen energy security. EMA is currently inviting the private sector to build, own, and operate hydrogen energy plants, with operations expected to start in 2029 and 2030. In this evolving energy landscape, natural gas will remain a significant source for Singapore but will increasingly be supplemented by alternative sources as the nation continues its developmental trajectory.