The COVID-19 global health crisis has shown the world what a severe disruption looks like, and it’s presenting humanity with a unique opportunity to build a better more resilient world through sustainable systems that will reduce the emissions that are driving climate change.
Despite the increasingly clear benefits of clean energy systems, the pace of the global transition away from fossil fuel systems is still not clear.
With this in mind, the World Economic Forum, in collaboration with the Global Future Council on Energy, has released a working paper to explore the knowns and unknowns of the energy transition from a fundamental structural perspective, acknowledging that the current global health crisis clearly adds an additional layer of complexity.
This complexity is aggravated by the uncertainty on how policy-makers around the world will respond to the combined factors of the sudden pandemic shock and the underlying realities of the energy system.
We need the energy transition to happen quickly and to make it happen we need to combine radical efficiency with renewable energy to decarbonise electricity, electrifying almost everything, and using some variety of hydrogen and other technologies for everything else.
According to the report; “Those who would benefit from a transition vastly outnumber those who benefit from continuity. Eighty per cent of people live in countries that import fossil fuels.” In fact, just 1% of the global workforce is employed by the fossil fuel industry, and most of the industry’s profits end up in the hands of a small number of fossil fuel exporters.
Another clear fact of the transition is the continuously falling costs of new energy technologies including solar, wind, batteries and electric vehicles (EVs). As lead report author Kingsmill Bond explains in a recent article on Carbon Tracker, “the cheapest source of electricity in almost every country in the world today is renewables. Electric vehicles are a cheaper way to run a transport system, and the sticker price of an EV is about to reach parity with that of traditional cars”.
Finally, a third area of relative certainty related to the continuously falling costs of clean energy technologies is that peaks for existing fossil fuel technologies have already started. “As a result of the rapid cost falls, key renewable energy technologies are growing very rapidly on exponential growth curves known as S-curves, making it possible for them to supply incremental energy demand in specific sectors and countries.”
The less certain factors are largely related to policy. The Global Future Council on Energy’s working paper describes how the response of governments, companies and societies to fundamental changes in the energy industry is difficult to forecast.
Resistance to change may in fact slow the transition in certain geographies or sectors, while a more aggressive approach to change can accelerate it in other regions or industries. Ultimately, the speed of transition will depend on the courage shown by decision makers.
Another important unknown factor is when precisely the global peak for fossil fuel demand will occur, an uncertainty that is further amplified by the sudden pandemic crisis.
Finally, a third area of uncertainty focuses on the pace and scale of innovative technologies such as hydrogen or carbon capture. This type of innovation is closely related to some remaining uncertainty on how to fully decarbonize harder-to-abate sectors of the economy such as aviation, shipping, trucking, steel and cement.
Download a copy of the paper here.
Source: World Economic Forum