A historic 2022 will drive what happens this year.

In our last December edition, we reflected on the five trends we predicted would shape 2022. This week, we’re looking at five trends we’re watching at Cipher in 2023.

Every year since 2018, I’ve looked back and ahead at the trends shaping the past year and the year to come, including reality checks of my previous predictions. We’re keeping the tradition going.

1. Energy security, fossil fuel edition.

Russia’s 2022 invasion of Ukraine catapulted national security to the forefront of arguments for tackling climate change through renewable energy investments. Now, Europe lives a nightmare as it tries to build a future without Russian natural gas.

Europe appears to have enough gas to get through this winter—albeit at quite high prices—but we should already be worried about next winter, Anca, based in Brussels, writes.

Countries managed to fill their underground storage tanks early enough in 2022 when piped Russian gas was more available.Later this year, things are bound to look different.

Russian supplies have significantly dwindled and the liquefied natural gas market that Europe has been increasingly reliant on could be tight if demand rebounds in China. How low temperatures drop next winter will also impact how much fuel Europe needs to stay warm.

The war has strengthened Europe’s resolve to green its economy faster, but the gigantic shift cannot happen overnight.

In the short term, Europe is left burning more coal while striking new natural gas deals with African and Middle Eastern countries, angering environmentalists.

2. Energy security, cleantech edition.

Security and resource risks aren’t just for fossil fuels. Such risks associated with cleantech are also becoming clearer as our dependence grows.

“The material availability issues that are going to frustrate deployment at scale are on my mind,” said Eric Toone, the technical investment lead at Breakthrough Energy Ventures, one of the world’s biggest funders of climate tech startups.

Prices of lithium-ion battery packs—a key component in electric vehicles—increased for the first time last year, analysis firm BloombergNEF found. Lithium is mostly processed in China, according to the IEA.

Source: BloombergNEF • All values in real 2022 dollars. Weighted average survey value includes 178 data points from passenger cars, buses, commercial vehicles and stationary storage.

Just a small fraction of vehicles today are battery-powered, Toone said, “and we’re already running into these challenges.”

Related challenges include higher interest rates, inflation and supply chain bottlenecks. These issues afflict the entire economy but could prove especially insurmountable for nascent cleantech industries trying to get off the ground.

Two advanced nuclear power companies, for example, encountered big setbacks last month: NuScale is facing rapidly rising costs due to high interest rates and TerraPower is delaying its reactor and energy storage plant because the current, sole producer of its fuel is a company owned by the Russian government.

3. How the new U.S. climate law permeates at home and abroad.

After Russia’s invasion of Ukraine, the Inflation Reduction Act was 2022’s other big surprise. The law is directing nearly $370 billion into clean energy subsidies and related programs.

We’ll be watching the effects of the record-shattering amount in three distinct arenas: within Washington, D.C., across the United States and around the world.

In Washington, a familiar debate may emerge. More than a decade ago, solar manufacturer Solyndra won a roughly half-billion-dollar loan guarantee from the Energy Department and then went bankrupt.

Cheap solar production from China was the primary culprit, but Republicans levied allegations of cronyism (a mostly distracting rabbit hole), highlighting the political pitfalls of taking necessary risks in cleantech investments.

Rep. Cathy McMorris Rodgers (R-WA), who is likely to be the chair of the House Energy and Commerce Committee, called IRA “Solyndra on steriods” in a video published on Twitter last summer.

Across the U.S., Cipher will cover how IRA enables the rapid growth of—and growing opposition to—all types of clean energy. We’ll follow the most familiar tech today, like wind and solar, as well as more novel technologies, including renewable hydrogen, carbon dioxide pipelines and direct air capture facilities.

Globally, IRA is frustrating some U.S. allies, especially in Europe, by imposing restrictions or offering additional subsidies for some North American-made clean energy products.

“As the economic situation in Europe deteriorates, politicians will look for culprits to blame,” said Jason Bordoff, co-founding dean of the Columbia Climate School and founding director of the school’s Center on Global Energy Policy, a think tank. He said IRA will serve as a “good target as companies shift planned investments” to the U.S.

4. To what degree fossil fuel infrastructure and workers can transition to cleantech.

Renewable energy is growing rapidly, but so far it has been mostly in addition to sustained growth in oil, natural gas and coal.

Source: International Energy Agency

To combat climate change, cleaner energy needs to replace fossil fuels. To do that, we must consider two overlapping factors:

How to retrain workers from the fossil fuel industry to work in new cleantech sectors or redirect their skills to other sectors.

To what degree fossil fuel technologies can be replaced with clean technologies or repurposed to function with clean energy in every sector from electricity to manufacturing.

Communities, states and countries dependent on fossil fuels are unlikely to fully embrace clean energy replacements until or unless they can ensure companies and state-owned enterprises won’t face a massive set of financially stranded fossil fuel assets and also gain confidence their workers will still have jobs.

This is especially true for developing countries in Southeast Asia and Africa that are still growing their economies.

Discussions around these topics will reach a fever pitch in November, when the United Nations hosts its annual climate conference in Dubai, United Arab Emirates, a fossil-fuel powerhouse in the Middle East. UAE, along with other nations in the region, are investing heavily in renewable energy while maintaining oil and gas production.

5. Move over mitigation. We need room for adaptation.

Climate-fueled extreme weather received top billing at last year’s annual UN conference, held in November in Sharm el-Sheikh, Egypt. World leaders agreed to create the first-ever loss and damage fund wherein richer countries pay developing countries to respond to extreme weather events they’re unable to adapt to, Anca wrote following the event.

This year, we expect adaptation will continue to get more attention across the economy, including from governments, corporations and venture capitalists.

BEV, the investment firm Toone helps lead, is wading into the adaptation space, looking to commercialize companies that can make money responding to extreme weather and other impacts of a warming world.

“While BEV’s principal focus will continue to be mitigation, we will now work on adaptation as part of our portfolio,” Toone said at a summit Breakthrough Energy hosted in Seattle last fall. He mentioned several areas of focus, with water at the top of the list.

Editor’s note: Breakthrough Energy Ventures (BEV) is a venture capital fund within the Breakthrough Energy network, which also supports Cipher. Bill Gates, founder of Breakthrough Energy, is a primary investor in TerraPower and is its chairman of the board.

Correction: Solyndra received a half-billion-dollar loan guarantee from the Energy Department. The original version of this story said it was a half-million-dollar.