Speeding up green transition is cheaper than delaying, plus other top energy stories this week

Wind turbines in fields.
“Acting immediately and decisively … would provide significant benefits for firms, households, and the financial system", says the ECB report.
Image: REUTERS/Thomas Richter
  • This round-up brings you the latest developments in the global energy sector.
  • Top energy news: Speeding up green transition is cheaper than delaying, ECB says; UAE pledges $4.5 billion for green energy in Africa; Indonesia steps up renewable plans in bid to cut coal use.
  • For more on the World Economic Forum's work in the energy space, visit the Centre for Energy and Materials.

1. Speeding up green transition is cheaper than delaying – ECB

Frontloading investment in the green transition would be cheaper than delaying it for Eurozone companies, households and the banks that serve them, a European Central Bank (ECB) study shows.

The comprehensive ECB climate stress test finds that accelerating green policies and investment to phase out fossil fuels and save energy would ultimately result in fewer household and company loan defaults and, as a result, smaller losses for banks between now and 2030.

“Acting immediately and decisively … would provide significant benefits for firms, households, and the financial system, not only by maintaining the economy on the optimal net-zero emissions path (and therefore limiting the impact of climate change), but also by rapidly reducing their energy expenses and lessening the financial risk,” the report concludes.

Getting investment off the ground earlier will mean higher costs initially, but lower energy expenses and financial risk later on will more than offset those costs. Banks’ annual losses on loans would be €13 billion ($13.9 billion) in 2026, falling to €6.6 billion ($7 billion) by 2030. By contrast, a separate scenario where investment is delayed to 2026 and beyond sees annual losses climb steadily to €21 billion ($22.5 billion) by 2029.

Electricity companies and firms in emission-intensive mining and manufacturing will see the highest defaults if investment is delayed, the report says.

Graphic showing how firms will become less energy intensive over time, based on different scenarios.
Firms will become less energy intensive over time, but starting early accelerates progress
Image: ECB calculations based on Orbis, Urgentem and NGFS data

2. UAE pledges $4.5 billion for green energy in Africa

The United Arab Emirates (UAE) has pledged $4.5 billion in clean energy investments in Africa at a climate summit showcasing the continent’s potential for green energy, reports Al Jazeera.

The investment will “jump-start a pipeline of bankable clean energy projects in this very important continent”, says Sultan al-Jaber, the president of the COP28 climate summit and head of UAE national oil company ADNOC and government-owned renewable energy company Masdar.

The International Renewable Energy Agency puts Africa’s renewable generation capacity at 56 gigawatts as of 2022. The UAE pledge would help develop an additional 15 gigawatts by 2030, according to al-Jaber.

The three-day Africa Climate Summit brought together the continent's leaders and heads of industry to evolve a vision for green development in the run-up to COP28 in December.

After the summit, African leaders signed the Nairobi Declaration, which calls for a global carbon price to be applied to fossil fuel trading, shipping and aviation. It also says there needs to be a sixfold increase in Africa's renewable energy capacity, writes the Financial Times.

Africa has huge potential as a renewable energy producer and exporter. But it lacks financing – accounting for just 3% of all global energy investment – and is experiencing mounting debt, despite an abundance of natural resources.

“Renewable energy could be the African miracle, but we must make it happen,” United Nations Secretary-General António Guterres said at the Africa Climate Summit.

3. News in brief: More energy stories from around the world

Indonesia is stepping up its renewable energy capacity plans in an effort to reduce its reliance on coal, which generates around half of its power. State utility PLN aims to add 32 gigawatts of renewable capacity as well as invest in grids that can connect to more renewable power sources.

Investment in battery recycling is booming, with investors including BlackRock and Goldman Sachs Asset Management betting on the success of start-ups after government incentives wind down, The Wall Street Journal reports.

There is a risk of a "new model of colonialism" if nations with critical minerals do not regard custodianship as a "global responsibility", Indian Prime Minister Narendra Modi has said, as the race to ensure access to energy transition resources accelerates.

What's the World Economic Forum doing about the transition to clean energy?

Moving to clean energy is key to combating climate change, yet in the past five years, the energy transition has stagnated.

Energy consumption and production contribute to two-thirds of global emissions, and 81% of the global energy system is still based on fossil fuels, the same percentage as 30 years ago. Plus, improvements in the energy intensity of the global economy (the amount of energy used per unit of economic activity) are slowing. In 2018 energy intensity improved by 1.2%, the slowest rate since 2010.

Effective policies, private-sector action and public-private cooperation are needed to create a more inclusive, sustainable, affordable and secure global energy system.

Benchmarking progress is essential to a successful transition. The World Economic Forum’s Energy Transition Index, which ranks 115 economies on how well they balance energy security and access with environmental sustainability and affordability, shows that the biggest challenge facing energy transition is the lack of readiness among the world’s largest emitters, including US, China, India and Russia. The 10 countries that score the highest in terms of readiness account for only 2.6% of global annual emissions.

To future-proof the global energy system, the Forum’s Shaping the Future of Energy and Materials Platform is working on initiatives including, Systemic Efficiency, Innovation and Clean Energy and the Global Battery Alliance to encourage and enable innovative energy investments, technologies and solutions.

Additionally, the Mission Possible Platform (MPP) is working to assemble public and private partners to further the industry transition to set heavy industry and mobility sectors on the pathway towards net-zero emissions. MPP is an initiative created by the World Economic Forum and the Energy Transitions Commission.

Is your organisation interested in working with the World Economic Forum? Find out more here.

A new sustainable aviation fuel (SAF) facility could supply up to 7% of the EU's 2030 SAF target, reducing the amount of conventional jet fuel that is needed. Varo Energy will build the new facility at Gunvor's Rotterdam refinery, with production due to begin by the end of 2026, Reuters reports.

Concerns of a nuclear power shortage in France this winter are subsiding, as the country's power demand looks set to remain subdued and many reactors have been coming back online. France’s nuclear availability hit 30-year lows last year as a stress corrosion issue took multiple reactors offline, compounding a gas shortage caused by the conflict in Ukraine.

Meanwhile, Germany has reasserted its anti-nuclear stance, while Italy has pledged to increase its integration of nuclear energy. Nuclear energy remains a divisive topic in the EU, especially after its classification by the European Commission as a clean energy source.

Zimbabwe accounts for less than 0.1% of global emissions but has pledged to cut them by 40% by 2030. This could help the country realize numerous health, social and development benefits, reports The Conversation.

Ireland’s energy demand rose by nearly 5% last year – an increase that is incompatible with its EU energy efficiency obligations, the country's Sustainable Energy Authority says. Renewable energy has also not yet reached Ireland's 2020 target of a 16% market share.

Three floating solar farms in the Philippines will begin providing power from 2026, as part of government plans to boost renewable energy capacity in the country, according to CleanTechnica.

4. More on energy from Agenda

How much money has new renewable energy capacity saved Europeans during recent electricity price spikes? International Energy Agency data has the answer.

A just transition to a low-carbon economy is essential to avoid job losses and social impact. Companies need to engage employees, upskill workers and invest in new technologies to achieve this.

We need to accelerate our global energy transition or miss 2050 net-zero targets. Here are four innovative energy-generating solutions that can help.

To learn more about the work of the Centre for Energy and Materials, contact Ella Yutong Lin: ellayutong.lin@weforum.org

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