Energy transition’s ‘window of opportunity’ is closing fast – WEF

Energy transition’s ‘window of opportunity’ is closing fast – WEF
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Although there has been broad progress on clean energy worldwide, equity in the industry remains a major challenge and “the window of opportunity for the energy transition is closing fast”, says the World Economic Forum (WEF).

This is according to the WEF’s report Fostering Effective Energy Transition 2023, which finds that equity is being side-lined as countries continue shifting their focus to energy security.

States the report: “The window of opportunity for the energy transition is closing fast. The limited number of countries simultaneously advancing across all aspects of the energy triangle highlights the challenges that countries face in progressing along their energy transition pathways.”

The report, published in collaboration with Accenture, draws on the Energy Transition Index (ETI).

This year’s WEF report used an updated framework to benchmark 120 countries in the trilemma triangle of equity, energy security and environmental sustainability; as well as the readiness of the enabling environment for the energy transition.

Muqsit Ashraf, senior managing director and global strategy lead for Accenture, commented on the report’s findings: “The window of opportunity for reaching net-zero targets is closing and countries must move urgently to cleaner energy systems. Leveraging technology – both physical and digital, including data and AI – will be essential.

“By pushing the boundaries of disruptive technologies, like generative AI, countries and companies can realize what was previously thought impossible and simultaneously bolster not just sustainability but also better enable energy security and affordability.”

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ETI rankings

Over the past decade, states the report, global ETI scores have improved by 10%, supported by an increase of 19% in transition readiness scores, but only a 6% increase in system performance scores.

According to report, Nordic countries, including Sweden, Denmark, Norway and Finland, continue to maintain their top ETI rankings, scoring highly on both system performance and transition readiness.

Despite their diverse energy system structures, states the report, the countries share common attributes. These include high levels of political commitment and stable regulatory frameworks, investments in research and development, increased renewable energy deployment and carbon pricing schemes to incentivise investments in low-carbon solutions.

A few countries, such as Kenya and Azerbaijan, jumped significantly in rank this year for making aggressive efforts and improving their regulatory environment and infrastructure.

Importantly, adds the report, in the last decade the world’s largest energy consumer, China, gained 43% – approximately double the global average – in its transition readiness scores, making its way into the top 20 as the only Asian country.

An equitable window is closing

However, only two countries – India and Singapore – were found to be making advances on all aspects of energy system performance. Broadly speaking, ETI scores have plateaued in the past three years; the WEF warns that this speed of transition is not sufficient to meet the Paris Agreement targets in an inclusive and secure way.

Geopolitical and macroeconomic volatilities that prompted the recent global energy crisis, they cite, have shifted countries’ focus to maintaining secure and stable energy supply at the expense of universal affordability and challenge progress observed in the past decade.

ETI scores declined for approximately 50% of the countries in the past year, which has disproportionately impacted vulnerable consumers, small businesses and developing economies, finds the report.

“The recent turbulence in energy markets has exposed how interconnected energy prices are with macroeconomic and social stability. This can, and has, put developing countries at risk of losing their momentum gained before the energy crisis on access to affordable, sustainable energy,” said Roberto Bocca, head of energy, materials and infrastructure for the World Economic Forum.

“It further demonstrates the importance of balancing improvements in energy security, sustainability and equity – at the same time – to enable an effective energy transition.”

High fuel prices, the report adds, have affected the cost-competitiveness of energy intensive industries, and the rising subsidy burden poses a risk to economic growth.

Additionally, low-income countries have been disproportionately affected, facing simultaneous challenges from fuel price inflation, food inflation and rising debt burden.

The WEF report states that, while performance on environmental sustainability has grown the fastest and countries are prioritizing energy security after lessons from the energy crisis, inclusiveness and equity considerations need to be addressed for a robust and resilient transition.