The current energy evolution is unparalleled due to its scale. Although much more accelerated than seen historically, today’s pace may not be fast enough. According to a 2018 IPCC report, global man-made emissions will need to reduce to net zero by 2050 to limit the global temperature increase to less than 1.5°C above the pre-industrial level. The current energy system contributes over 66% of global emissions. This puts the global energy systems at the centre of this challenge.
Recent evidence highlights the complexity of transitioning to a lower-carbon energy system. Even with the level of attention, the Paris Agreement brought to the issue, global CO2 emissions were expected to increase by more than 2% in 2018, the highest in recent times. After declining for three years coal consumption increased in 2018, with the average age of Asian coal plants at 11 years, it will be some time before we see retiring them in mass.
Electrification, key step for decarbonization, make up only 19% of the total final consumption of energy. Investment in fossil fuels, grew in 2017 for the first time since 2014 the portion of fossil fuels in total primary energy supply has remained unchanged at 81% for the past three decades. These trends cast a shadow of uncertainty on the effectiveness of energy transition efforts and underscore the need to accelerate them.
Western and Northern Europe countries continue to lead the rankings. Sweden maintaining the top spot, followed by Switzerland and Norway. These countries are diverse in their primary energy mix, energy system structure and natural resources, which underlines the importance of circumstances of each country in energy transition planning.
Globally, the energy transition has slowed. Three years after the global milestone of political commitment through the Paris Agreement, lack of progress provides a reality check on the need for ongoing efforts and the magnitude of the challenge.
Stages of economic development, social development priorities, institutional arrangements and the role of fossil fuels in the economy vary across countries. Fossil fuels have a direct impact on countries’ challenges and priorities relating to energy transition:
- Advanced Economies do well in energy transition, but still, face the challenge of balancing economic growth and environmental sustainability. Household electricity prices have been rising faster than electricity prices for industry, raising concerns about the equity considerations of energy transition, as evidenced by the recent Yellow Vest protests in France and the momentum of the Green New Deal in the United States.
- Economic growth, urbanisation and improving living standards are underlying factors fuelling the increased energy demand in Emerging and Developing Asia. Coal maintains a significant portion of the energy mix. Managing the balance between growing the economy, meeting rising demand and improving environmental sustainability represents the key challenge for energy transition in this region.
- Apart from persistent gaps on universal access to electricity and clean cooking fuels in Sub Saharan Africa, affordability and reliability of power supply are important challenges. Technology can be one approach to bring energy to this region. Leveraging on technology a strong regulatory framework, policy stability and effective governance are essential to attracting investment in capacity expansion and modernisation, and to reap the economic dividends from the region’s natural resource endowments.
- Latin America and the Caribbean region show the highest environmental sustainability due to large hydroelectric capacity and rapid progress made on installing renewable sources of electricity. With these trends, the electrification of transport could unlock further improvement in environmental sustainability. Developing capacity for regional integration of electricity markets through technology, and harmonising policies and standards could help improve other dimensions of the energy triangle.
Challenges and priorities are differentiated across each country. A complex energy transition, which includes the interaction between different systems, leads to varied challenges requiring a different approach for each case in each country. Accelerating the energy transition will require coordinated action across economic, technological and socio-political systems:
- Economy system: Economic growth is closely associated with increasing energy consumption. Decoupling energy consumption from economic growth will require economic diversification to less energy-intensive industry sectors, energy efficiency in production processes and increased cooperation between countries for technology transfer and capacity building.
- Society system: Disruptive unintended consequences, such as the distribution of the cost of energy transition in society and the concerns of communities which depend on fossil fuel industries for their livelihood needs to be managed.
- Technology system: Widespread commercialisation of low carbon technologies. To keep up with society’s requirement, this needs to be done at a faster pace.