The global energy transition, pivotal to climate change mitigation efforts and for delivering secure and affordable energy for all, has made gradual progress in recent years.
According to trend analysis from the World Economic Forum’s Energy Transition Index – a composite indicator tracking the progress of the energy transition across countries – the global average score has increased in nine out of the past 10 years, with more than 80 per cent of the countries worldwide making an improvement. The speed of the energy transition kept some pace through the Covid-19 pandemic. In 2021, wind and solar powered electricity accounted for more than 10 per cent of global power generation for the first time ever, and the scale of electric vehicles doubled.
Despite this progress, alarm bells on global warming keep getting louder, and the world is also facing an energy crisis with concerns about energy security and affordability. More than 700 million people across the world still lack access to basic energy needs, and progress on universal access has stalled since the onset of the pandemic. The latest assessment report by the IPCC issued a code red for humanity, posing a seemingly impossible challenge of peaking global greenhouse gas (GHG) emissions in the next three years to stay within sight of Paris Agreement goals of net-zero by 2050.
Much of the progress on the energy transition has historically been enabled by supply side interventions, substituting the carbon heavy fuel sources with renewable energy alternatives.
Considering that fossil fuels still supply more than 80 per cent of world’s energy, supply side measures will not be sufficient for net-zero transformation. To add to the challenge, the “decade of delivery” has ushered in a phase of compounded uncertainties. Supply chain bottlenecks exacerbated by the pandemic, trade disputes, macroeconomic headwinds, and Russia’s war on Ukraine have shaken the foundations of the energy system.
Countries are facing simultaneous pressures on all three pillars of the energy transition: economic development and growth, environmental sustainability, and energy security and affordable access. There are significant unknowns beyond the frontiers of the energy transition, requiring a paradigm shift in strategies and immediate actions.
International climate targets need to be legally enforceable through domestic policies
An ambitious and stable long term policy environment is essential. Despite the landmark global consensus on climate goals achieved at the Paris Agreement, the voluntary Nationally Determined Contributions outlined by countries are not consistent with the level of ambition required to limit global warming to below 1.5 deg C by 2050. Beyond international agreements, legally enforceable domestic policies are necessary.
Among the top 10 global GHG emitters, only Japan, Canada, the European Union, and South Korea have legally binding net-zero targets. Given the increasingly volatile political climate marked by rise of populism, climate change efforts cannot be held hostage to shifting political priorities. Enshrining climate targets into domestically enforceable laws can offer stability and certainty, enabling steady progress through political cycles.
Energy security planning needs to shift to a “just-in-case” model
The unexpectedly fast economic rebound from the pandemic and Russia’s war on Ukraine have exposed the vulnerabilities of energy security in even the best prepared countries. The energy supply chain has so far proven to be a well-oiled machine, and a just-in-time approach has enabled innovation and optimised efficiencies across the value chain.
However, the limitations of this approach are apparent, with security constraints prompting a strong comeback for coal-fired power generation in many countries.
As energy systems reconfigure through the transition, energy security planning needs to shift from just-in-time to just-in-case, requiring maintenance of sufficient reserve capacity and storage infrastructure, with market mechanisms to incentivise investments in these solutions. Further energy security gains can be found by working also on the demand side of energy and not only supply – energy efficiency and energy savings can play a role also here.
Moreover, the simple rule of “not putting all your eggs in one basket” also applies to energy security. By diversifying the energy mix and energy import counterparts, energy security can be improved.