As countries continue their progress in transitioning to clean energy, it is critical to root the transition in economic, political and social practices to ensure progress is irreversible, according to the latest edition of the World Economic Forum’s Fostering Effective Energy Transition 2021 report, published in collaboration with Accenture.
The 10th-anniversary report is the opportunity to reflect and ask the question of whether the energy transition is resilient and if the momentum is sufficient, a resilient transition being defined as one that maintains the direction, speed and required rate of progress towards a secure, affordable, sustainable and inclusive energy system even in the face of disruptions.
The index benchmarks 115 countries on the current performance of their energy systems across the three dimensions of the energy triangle: economic development and growth, environmental sustainability and energy security and access indicators – and their readiness to transition to secure, sustainable, affordable, and inclusive energy systems. Out of 115 countries, only 13 have made steady gains on the Energy Transition Index (ETI) in the past decade, highlighting that progress has been uneven.
“As we enter into the decade of action and delivery on climate change, the focus must also encompass speed and resilience of the transition,” said Roberto Bocca, Head of Energy and Materials at the World Economic Forum. “With the energy transition moving beyond the low hanging fruit, sustained incremental progress will be more challenging due to the evolving landscape of risks to the energy transition.”
On a positive note, 8 out of the 10 largest economies have pledged net-zero goals by mid-century. The annual global investment in the energy transition surpassed 500 billion US dollars for the first time in 2020, despite the pandemic. And the number of people without access to electricity has declined to less than 800 million, compared to 1.2 billion people 10 years ago.
“A resilient and just energy transition that delivers sustainable, timely results will require systemwide transformation, including reimagining how we live and work, power our economies and produce and consume materials,” added Muqsit Ashraf, a senior managing director who leads Accenture’s energy practice. “This, in turn, will require strong collaboration between policymakers, business leaders, energy consumers and innovators. The journey to achieving such a balanced transition has been slow and daunting, but it is picking up momentum and offering countries and companies many opportunities for long-term growth and prosperity.”
The top 10 countries on the ETI 2021 are Western and Northern European countries. Sweden leads the ETI for the fourth consecutive year, followed by Norway and Denmark.
Within Central and Eastern Europe, the Baltic countries, Latvia (12th), Lithuania (15th) and Estonia (16th) figure in the top 20. A good score also for Croatia (23rd) and Albania (25th) while other countries do not occupy a good position, with Bosnia and Herzegovina closing the list at 98th place, preceded by Moldova (90th) and Serbia (84th).
Overall, the region has moved forward compared to previous years, with the average score increasing by 5 per cent between 2012 and 2021. The region saw a balanced improvement across all three dimensions of the energy triangle. Improved diversity of energy mix, higher quality of electricity supply and strong energy intensity reductions were primary improvement levers.
However, this region has a higher share of coal than the European average and flexibility remains low, which may prove challenging as the share of renewable energy grows in power generation. According to the International Renewable Energy Agency (IRENA), renewable sources could cover more than one-third of energy demand in this region, with benefits in savings from energy costs, health and reduced dependence on imports for primary energy.
Are countries ready for the energy transition? The report defines readiness for energy transition as determined by factors including stability of the policy environment and level of political commitment, investment climate and access to capital, level of consumer engagement and development and adoption of new technologies.
Surely, enhanced political commitment and improved regulatory support for the energy transition is encouraging. Around 68 per cent of the world’s emissions from fuel combustion are covered by some type of net-zero target, compared with just 16 per cent a year earlier. One of the most significant announcements came from China, with a policy mandate to achieve net-zero by 2060. However, this ratcheting up of ambition needs to be reflected in legislation, policy and regulation and supported by concrete roadmaps and milestones.
The report makes 3 recommendations to enhance the resilience of the energy transition process: first, to pursue a just transition by prioritising measures to support the economy, workforces and society. Secondly, to amplify electrification while exploring other options for decarbonising industries. Finally, to attract diversified, resilient sources of capital from the public and private sectors to fund multi-year and multi-decade investments.