Full report
Published: 20 April 2021

Fostering Effective Energy Transition 2021 edition

Executive Summary

The past decade has established the strong initial momentum to transform the energy system for the decades ahead. The scaling of nascent technologies and an increased focus on climate change have fixed global attention firmly on the decarbonization of energy systems. This journey is far from over. As of 2018, 81% of the world’s energy was still supplied by fossil fuels1, global greenhouse gas emissions rose through 2019 and more than 770 million people around the world still lack access to electricity2. The transformation of our energy systems needs to increase its momentum to help achieve critical objectives such as the UN’s Sustainable Development Goals and the Paris Agreement.

A decade into the energy transition marks a new high, but acceleration is required

This edition marks the 10th anniversary of the World Economic Forum’s benchmarking of countries on their energy transition progress. We have taken the opportunity to look back at the lessons learned from the past decade, while also looking forward to the journey ahead.

  • Aggregate ETI scores rose over the past decade for countries collectively accounting for 86% of global total energy supply and for 88% of global CO2 emissions from fuel combustion.
  • The ranking of top countries on the ETI has remained broadly consistent over the past decade. Denmark, Finland, and the United Kingdom, the highest improvers in the top 10 positions, were able to improve their energy system performance and sustainability outcomes thanks to a stable regulatory environment, diversified energy mix, and cost-reflective energy pricing.
  • Countries with rising energy demand, such as China, India, and Sub-Saharan African nations, have registered the largest gains, but their scores on the ETI remain low in absolute terms.

Strides made on energy access; reliability is the next frontier

Over the past 10 years, more than 70% of the countries in the ETI made progress on the energy access and security dimension, primarily due to improvement in levels of electricity access around the world. However, more efforts are needed to improve the quality of electricity supply in newly electrified areas. This is critical for the delivery of public services, such as testing and vaccination programmes for COVID-19. Moreover, increasingly frequent and unpredictable extreme weather events have exposed the vulnerability of grids, underscoring the urgent need to modernize and enhance the resilience of electricity transmission and distribution infrastructure.

Strong gains made in environmental sustainability, but significant gaps remain

Encouraging progress has been made in environmental sustainability over the past 10 years, with countries accounting for 88% of global total energy supply improving their scores on this dimension.

  • Global average energy intensity fell by 15% between 2010 and 2018. However, this improvement has yet to fully translate into meaningful gains, as the carbon intensity of the energy mix was broadly flat over the same period.
  • While there has been encouraging progress in areas such as rising levels of investment and political commitment, progress has been far slower in translating ambitions into actions and in realizing the transformation of the energy system structure itself.
  • The total amount of electricity generated from coal has been on an upward trajectory over the past 10 years. Identifying viable ways for the early retirement of carbon-intensive assets will be needed to accelerate the transition.

Assessing the resilience of energy transition

Over the past 10 years, only 13 of the 115 benchmarked countries have made consistent gains (defined as consistently above-average performance improvements on the index). This demonstrates the difficulty in sustaining progress and the complexities of the energy transition.

Systemic disruptions such as the pandemic have underscored the impact of external shocks. The energy transition has shown signs of resilience through COVID-19, which highlighted the resilience of renewables in particular3. However, despite the short drop in emissions during the pandemic, global emissions have since rebounded, according to the International Energy Agency4. As we head deeper into the decade of action5 – during which we must accelerate progress towards transition and halve emissions by 2030 to remain on track to meet the 1.5°C Paris Agreement goal – we cannot afford to lose momentum or, worse, go into reverse.

This report identifies three imperatives to increase the resilience of the energy transition:

1. Deliver a “just transition” for all.

Inequality is on the rise and broad stakeholder buy-in is a prerequisite for resilience. The energy transition itself will change resource flows and reset sectors of the energy system in ways that, if not planned for, could lead to unintended consequences and leave entire communities adrift. Policy-makers should prioritize measures to support the economy, workforces and society at large as countries shift to a low-carbon energy system. This will require an inclusive approach to evaluating energy policy and investment decisions.

2. Accelerate electrification and go beyond.

Electrification and the scaling up of renewables are critical pillars of the energy transition and need to be ramped up quickly. However, coordination on the demand side and the contribution of other energy sources are necessary to achieve the full impact required. Increased R&D funding and cross-sector collaboration are needed to fully decarbonize energy systems, from green hydrogen and negative emission technologies to digitally enabled demand optimization.

3. Double-down on public-private sector collaboration.

The UN Intergovernmental Panel on Climate Change (IPCC) estimates that annual investments in clean energy and energy efficiency need to increase by a factor of six by 20506, compared with 2015 levels, to limit warming to 1.5˚C. Despite the growing inflow of capital into the sector, significant funding gaps remain, particularly in emerging markets and nascent technologies. Collaboration between public and private sectors, including risk-sharing as low-carbon solutions mature, will attract the diversified, resilient sources of capital needed for multi-year and multi-decade investments into energy systems.

Building an effective and resilient energy transition requires all hands on deck. As countries seek to recover from the impact of COVID-19, there is an opportunity to reset and rethink the way we power our economies, produce materials and even how we travel and live. It is critical to root the energy transition in economic, political and social practices so that progress becomes irreversible.

1. Introduction

The past decade saw transformative changes across the energy system. In 2011, the average price for crude oil was close to $100/barrel7. Solar and wind energy were economically uncompetitive compared to fossil fuel-based electricity generation, and just over 70 GW8 of solar and 238 GW of wind capacity had been installed globally. From 2011 to 2019, global installed capacity grew sevenfold for solar PV and approximately threefold for wind energy9, supported by improving cost competitiveness and operational efficiency. Global investment in the energy transition rose from less than $300 billion per annum in 2011 to almost $500 billion by 202010. Eight out of the world’s 10 largest economies have committed to achieving net-zero emissions by mid-century11.

However, clear challenges remain. As of 2018, 81% of the world’s energy came from fossil fuels,12 global emissions rose steadily over the period to 2019 and more than 770 million people around the world still lack access to electricity.

Is the energy transition resilient?

This 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 is 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.

Throughout 2020, the World Economic Forum engaged global experts from the public and private sectors and across the energy value chain. The broad consensus is one of “cautious optimism” but with a clear recognition of the work still needed, especially with respect to climate change and emissions targets.

As we continue through the decade of action and delivery on tackling the climate change challenge, it is more urgent than ever to accelerate the energy transition. This report will focus on the environmental sustainability dimension of the energy triangle and how leading countries have achieved progress on that dimension, even in the face of emerging risks and challenges.

The report summarizes insights from our analysis of the ETI and the lessons from 10 years of benchmarking countries on energy transition. We then provide an assessment of the evolving risk landscape and some key considerations for increasing the momentum and building resilience into the energy transition

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