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Published: 20 April 2021

Fostering Effective Energy Transition 2021 edition

Appendix: Methodology

The Energy Transition Index 2021 Methodology and Technical Notes

The Energy Transition Index (ETI) benchmarks progress on energy transition in 115 countries. Previously published as the “Energy Architecture Performance Index” from 2012 – 17, the ETI 2021 is the 10th edition of the World Economic Forum’s benchmarking energy transition globally. This appendix presents the methodology and structure of the ETI.

A. Framework

The ETI framework consists of two parts: current energy system performance and the enabling environment for the energy transition (Figure 1). System performance provides an assessment of performance of countries’ energy system related to their delivery in three key priorities:

I) the ability to support economic development and growth,

II) security, reliability, and universal accessibility of energy

III) environmental sustainability across the energy value chain

The objective of energy transition in a country should be to deliver simultaneously across these three priorities, thereby maintaining a balanced “energy triangle”.

Progress on a country’s energy transition will be determined by the extent to which a robust enabling environment can be created. This includes strong political commitment, a flexible regulatory structure, a stable business environment, incentives for investments. and innovation, consumer awareness and the adoption of new technologies, among other factors[1] .

Revisions in 2021: None.

B. Indicators

The composite ETI score for a country is aggregated from 38 indicators overall, with each indicator assigned to a specific dimension of “System Performance” or “Transition Readiness” sub-indices shown in Figure 1. Table 2 lists the complete set of indicators aggregated to derive the ETI score, along with the respective sources, temporal coverage over the past 10 years, geographical coverage, standardization methods applied if any, and the minimum and maximum thresholds applied to the indicator. The selection of indicators is determined by conceptual relevance to the dimension, availability of robust data at country level with global and temporal coverage, credibility of the source, frequency of updates, and consistency of methodology in collection and reporting of the data by the respective sources.

Revisions for ETI 2021: Due to the lack of availability of consistent data, the indicator on “Investment in Energy Efficiency” was dropped from the “Capital and Investment” dimension. The weight of the dropped indicator was redistributed equally among other indicators in the same dimension, as shown in Figure 2.

C. Indicator Thresholds and standarization

To allow for aggregation of indicators with difference scales and magnitude, the ETI adopts a min-max method to transform an indicator score on a common scale of 0-100. In most cases, the data ranges are narrowed to control for outliers. With the exception of a few highly volatile indicators, each indicator is rescaled according to the following formula:

Where valuec is the raw value of a country c, min is the lowest value for an indicator, and max corresponds to the best possible outcome. Depending on the indicator, the maximum value may be a policy target or aspiration, the maximum possible value, or a number derived from statistical analysis of the distribution. If a value for a country on an indicator is below the lowest possible value, its score is 0; if a value is above the max, its score is capped at 100. A full list of upper and lower threshold values used for the normalisation of each indicator is shown in Table 2.

Due to the volatility of the following indicators, and their sensitivity to scale, following indicators were exceptionally standardized using separate approaches, while maintaining the effect of their direction and magnitude in the comparative analysis across countries:

  • Cost of externalities (as % of GDP): logarithmic transformation
  • New renewable energy capacity (as % of total power generation capacity): Average of scaled scores of share of new renewable energy capacity in total capacity in current year, and share of renewable energy in total capacity in previous year.
  • Share of jobs in clean energy (as % of total labour force): Previous year scores + 0.1 x (current year score - previous year score)

Revisions for ETI 2021: The min-max thresholds for indicators need to be updated at regular intervals to account for natural evolution in the spread of the cross-sectional data. This year, in line with the broader methodology review, thresholds for 10 out of 38 indicators, covering 30% of the total index weight, were updated in line with the most up-to-date data, considering changes in some data sources.

D. Weighting and Aggregation

The computation of the ETI is based on successive aggregation of scores from indicator level (lowest) to overall ETI score (highest). A linear aggregation approach is adopted by taking the sum of the weighted scores of component parts at each level of aggregation. For individual indicators, prior to aggregation, raw values are transformed into a normalised range from 0-100, with 100 being the ideal state.

Given the systemic and endogenous nature of the energy transition, country scores are the result of a blend of factors including resource endowments, geography, climate, demography, and economic structure. Moreover, country scores in some dimensions are based on factors beyond the scope of national decision-making such as commodity market volatility, geopolitics, international climate change action and financial market sentiment. Country scores should therefore be considered in the context of a country’s unique set of circumstances.

Revisions in ETI 2021: As we enter a crucial juncture of global action toward a sustainable energy future, we have adjusted the weights of several core energy system indicators. We do this to emphasise the urgency of country action to decarbonise their energy systems. Countries that take greater action to shift their energy systems away from a fossil-based one will see greater improvements in their scores going forward. Indicator weights that have been adjusted are shown in the Table 1. As a result of the revisions to indicator weights listed in Table 1, the weights of remaining indicators in the respective dimensions have also been adjusted to keep the cumulative weight of all indicators in a given dimension at 100%.

E. Country Selection

The ETI provides an assessment of the progress on energy transition for 115 countries. The selection of a country on the ETI ranking table is guided by availability of a consistent indicator data at respective sources for more than a minimum number of indicators in each dimension, as identified in Figure 2. Countries with less than minimum number of required indicators in any dimension are excluded from the list of ETI countries. Table 1 lists the criteria for inclusion of countries for coverage by the ETI. To facilitate the trend analysis over time for country scores and regional, and global aggregates, the ETI has maintained coverage of a consistent list of 115 countries over the past 10 years.

Revisions in ETI 2021: None

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