Looking Ahead – 2023 Energy Industry Trends

It was another volatile year for the energy sector.

While domestic producers were challenged with keeping up with energy demand and meeting storage goals, the conflict in Ukraine disrupted energy access throughout the world. U.S. exports of liquefied natural gas (LNG) increased, further affecting prices here at home, while the role of renewable energy remained a focus for the industry and consumers.

As we look toward the new year, it's clear that the volatility we’ve experienced in 2022 will follow us into 2023. But what else can we expect?

In this article, we highlight 4 trends that could impact consumers in 2023.

Volatility continues into 2023

For several reasons – including notable industry changes and challenges that have occurred over the last few years – we expect to see volatility in the energy market again in 2023.

According to the World Bank, global natural gas and coal prices are expected to drop in 2023 – after hitting record highs this year. But despite this decline, energy prices next year will still be 75 percent above the average over the past five years.

As for power prices, the Energy Information Administration (EIA)'s December Short-Term Energy Outlook expects higher retail electricity prices in 2023, influenced by high wholesale power prices that are driven by the rising cost of natural gas.

Ultimately, energy prices this winter will be impacted by the weather. Some areas of the U.S. may see record-breaking cold temperatures, but we won't know the true impact of seasonal weather on the market until the spring.

Natural gas is officially a global commodity

U.S. natural gas is officially a global commodity. Since 2017, when the U.S. began exporting more natural gas than it imports, natural gas exports – by pipeline and LNG – have grown significantly. The U.S. is now one of the world's top LNG exporters.

In 2023, the EIA predicts LNG exports will increase to more than 12 billion cubic feet a day in the first quarter of the year, before tapering off – which could help lower gas prices domestically.

Renewables experience another year of growth

While some gas generation is replacing coal, much of the energy generated in 2023 is expected to come from renewable sources.

In the EIA's 2023 forecast, the increase in U.S. electricity generation comes almost entirely from solar and wind. The EIA expects renewable sources will supply 24 percent of U.S. generation in 2023, up from 22 percent in 2022 and 20 percent in 2021. However, renewable energy generation is still not great enough to replace peak energy demand.

We'll see a push for pragmatic solutions to climate change

Organizations across the U.S. continue to set emissions reduction targets in line with ESG goals and influenced by eco-conscious investors. As domestic coal production drops, natural gas – which results in about half the carbon emissions of coal – is still an essential part of net-zero strategies.

We’ll see increases in natural gas investment in 2023, including investments to reduce the greenhouse gas intensity of natural gas. Additionally, certified natural gas and carbon-neutral LNG are expected to continue increasing momentum in 2023, according to a recent report from Deloitte.

Looking ahead

If you're not sure what steps to take to manage the volatility of the energy market, now's the time to reach out to your energy partner to discuss a strategy for the year ahead – and beyond.

With the newly normalized global demand for natural gas, now could be the time to lock in for a longer term at the current price – and explore other energy strategies for your business.