So, what can we say about Natural Resources and Energy worldwide? What changes have occurred compared to the previous year?
First of all, it's worth noting that compared to the previous year, when a lot of attention was given to ESG, this year the focus has shifted towards energy transition: the energy transition to renewables and optimisation of energy networks is a key issue of today, which is receiving a lot of attention in the world. Energy systems today consist of linear and inefficient energy flows, mostly happening in one direction. The future integrated energy system envisions energy flows between consumers and producers, which will be accompanied by significant savings in resources and money.
Investments in clean energy are growing faster than investments in fossil fuels. Since 2021, there has been an increase of 24% and 15%, respectively. Expected investments in energy in the world are about $ 2.8 trillion, of which $ 1.7 trillion are investments in clean energy. Renewables are currently the best area for private investments in the energy sector. Solar energy continues to take a significant share. Investing in low-carbon molecules for the energy transition will increase twice until 2030: biofuels, biogas, hydrogen and e-fuels, recycling, and biopolymers.
Due to high prices and increasing support policies, investments in critical minerals extraction have increased by 30%. Private sector exploration and financing spending in lithium, copper and nickel mining has increased significantly in recent years.
Investors in the Oil and Gas sector are also observing a revival, as the price increase caused by russia's full-scale invasion into Ukraine, has changed the dynamics of this sector, which has faced a lack of investment for decades. The demand for oil is estimated to peak by 2032.
It is already observed that energy systems are being built around renewable energy sources.
Let's dwell on the topic of Green hydrogen (Green H2) in a little more detail, as it has been actively discussed in recent years. The production of Green hydrogen requires significant capital investment. As of today, the cost of producing 1 kg of H2 ranges from €10 to €12. According to data from Aurora Energy Research (June 2022), 1 kg of H2 could cost €5 per kilogram in 2025 by combining solar and wind farm with small electrolyser. At scale Green H2 projects are CAPEX intensive. For example, in France one of the flagship project’s CAPEX is estimated at €100 million for 40 MW. Nevertheless, the number of countries with a Hydrogen Strategy has increased significantly: from 15 in 2020 to 60 in 2023.
Another intriguing topic for discussion this year was AI-based solutions for the NR & Energy sector, as BDO network is well-known for innovation in work with our clients. So, what is the potential of GEN AI solutions for this sector? Our colleagues from BDO Lixar (BDO Canada), who already have a successful project with a local hydropower company, shared their insights.
GEN AI solution potential for Energy:
- Managing renewable assets, prediction equipment failures, and making insightful decisions around maintenance and aging infrastructure.
- Optimizing deployment, and management of renewable energy assets by locating optimal locations for new projects and forecasting production.
- A customer engagement and support platform providing personalized customer interactions and automated support services.
- A personalized energy management system for the orgs customers, providing tailored insights and support for optimizing energy consumption.
- Monitor and adapt to the evolving regulatory environment by automatically identifying, analyzing, and reporting on new regulations.
GEN AI solution potential for Oil & Gas:
- Harness the power of generative AI to provide executives and managers with data-driven insights for strategic planning and optimization.
- Streamline ESG data collection, analysis, and reporting, enhancing transparency and stakeholder engagement.
- Asset management solution that optimizes the performance and lifecycle of infrastructure assets.
- Solution designed to enhance health, safety, and environmental (HSE) performance, ensuring a safer and more efficient workplace.
- Harness the power of generative AI to facilitate effective communication and collaboration between your partners, and the company's communities.
GEN AI solution potential for Mining:
- Synthesize insights and analysis to inform operational planning including maintenance, production and mine to mill processes.
- Assist in the generation of ESG and CSR reports to ensure compliance and to help companies proactively manage environmental impacts.
- Solution designed to enhance health, safety, and environmental (HSE) performance, ensuring a safer and more efficient workplace.
- Optimize workforce management by predicting the optimal work schedule for employees.
Therefore, the energy transition is real, as there is a global need to reduce hydrocarbon usage. However, it is happening more slowly than expected. For example, according to preliminary estimates, the U.S. targets will not be achieved before the 2040s. Estimates of the current progress indicate that approximately $1.9 trillion is invested annually in the energy transition. But to reach the set goals, investments need to be increased up to $2.7 trillion.
It's very interesting to observe how the Natural Resources and Energy sector is developing and transforming worldwide. This is highly important for Ukraine, as we have much to rebuild. Therefore, implementing new trends and advanced technologies in this area will help us become an energy-independent state. To learn more about BDO's solutions for the Natural Resources and Energy sector, please follow this link.