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Understanding the Stagnation of the Global Energy Transition

On June 28, 2023, a World Economic Forum report released a striking revelation about the global energy transition. After a decade of remarkable progress, the transition has reached a standstill due to the international energy crisis and widespread geopolitical instabilities. The report, titled ‘Fostering Effective Energy Transition 2023,’ raised critical concerns about the fairness of this transition, with emphasis on affordable access to energy and sustained economic development as key focal points.

The report, which is the 13th of its kind, was developed in collaboration with Accenture. It employs the Energy Transition Index (ETI) to provide meaningful insights into the state of the global energy transition. The ETI, which adopted an updated framework this year, scrutinizes 120 countries based on two main criteria: their energy systems’ performance concerning equity, energy security, and environmental sustainability; and the readiness of their environment to accommodate an energy transition.

The Historical Perspective of the Global Energy Transition

Over the years, the global energy transition has seen numerous highs and lows. The concept of an energy transition is not new and has been a part of the global conversation for decades, from the shift from wood to coal during the industrial revolution, to the ongoing transition from fossil fuels to renewable energy sources.

The global energy landscape began changing dramatically with the advent of industrialization in the 18th century. This brought about the first significant energy transition, from traditional biomass, such as wood and dung, to coal. The next major shift came in the late 19th and early 20th century with the rise of oil and gas. This period marked significant advancements in drilling technology and the development of the internal combustion engine, making oil a more attractive option.

In recent years, the world has begun a new energy transition, moving away from fossil fuels towards more renewable and sustainable energy sources. This has been driven by a variety of factors, including the need to reduce greenhouse gas emissions and combat climate change, technological advances in renewable energy, and changing economic dynamics that make renewable energy increasingly cost-competitive with traditional fossil fuels.

Impact and Progress

Against this historical backdrop, the present-day energy transition towards more sustainable and renewable sources is encouraging. The increase in clean energy investments, the arrival of technological innovations, and the urgent need to tackle climate change have all contributed to improvements in the Energy Transition Index (ETI) scores for 95% of countries over the last decade. Major energy consumers such as China, India, the Republic of Korea, and Indonesia have shown significant improvements.

However, the ETI scores have remained largely static over the past three years. This suggests that the pace of the global energy transition is not sufficient to meet the objectives outlined in the Paris Agreement. The recent global energy crises have also caused a noticeable shift in focus from universal affordability to the assurance of stable energy supplies, thereby impacting the progress made over the past decade.

Indeed, ETI scores saw a decline for approximately 50% of the countries in the past year. This setback has had a significant impact on vulnerable consumers, small businesses, and developing economies, illustrating the inequitable nature of the energy transition. Moreover, the growth rate of energy access has slowed down, and at the current pace, it is likely that the UN’s Sustainable Development Goal of ensuring affordable, reliable, and sustainable energy for all by 2030 will not be met.

The Role of Technology in the Global Energy Transition

The current energy transition is also unique due to the central role of technology. Technological advancements have made renewable energy sources like wind and solar more efficient and cost-effective, while innovations in battery technology have made it possible to store energy for use when the wind isn’t blowing or the sun isn’t shining.

Technologies such as smart grids and digital twins enable more efficient distribution and use of energy, while advances in data analytics and artificial intelligence help predict energy demand and optimize energy production. In addition, breakthroughs in nuclear fusion technology could potentially provide a nearly limitless source of clean energy in the future.

Leading Nations in the Global Energy Transition and Future Prospects

A promising finding from the ETI 2023 is that Sweden, Denmark, and Norway lead the rankings. These countries, despite their diverse energy system structures, share common attributes such as high levels of political commitment, stable regulatory frameworks, and substantial investments in research and development.

France is the only G20 country in the top 10, followed closely by Germany, the US, and the UK. These countries’ strong performance is supported by the rapid development of renewable energy infrastructure and rising levels of clean energy investments. Their commitment to the energy transition serves as an inspiration and benchmark for other nations embarking on this journey.

Emerging economies such as Brazil and China are also making strides in the global energy transition. Due to its abundant hydroelectricity capacity and leadership in biofuels, Brazil scored high on energy security and environmental sustainability. China, on the other hand, leads in renewable energy investments and capacity development, supported by mature domestic supply chains.

The energy transition is a long-term goal, and maintaining momentum in the face of current volatilities is crucial. Advanced economies – the US, Australia, and Estonia – scored highest in energy security, which measures the resilience and reliability of supply.

The report also revealed that over 90% of countries prioritizing sustainability focus on policies and programs promoting energy conservation, renewable technologies, and innovation in energy storage and grid modernization. Latin America is leading the charge, with low levels of carbon intensity in energy supply, low per capita emissions, and a high share of clean energy in final demand.

Addressing the energy crisis and tackling climate change are urgent matters. The global energy transition must accelerate to meet these challenges, ensuring a sustainable future for all.

Feel free to contact the Energy Transition Centre today with questions. 

·  Julius Moerder, Head of Energy Transition Centre

·  Oneyka Ojogbo, Head of Energy Transition Centre, Nigeria & West Africa

·  Leon van Der Merwe, Head of Energy Transition Centre, South Africa

Author: Memoona Tawfiq