The world’s energy systems have become less affordable and are no more environmentally sustainable than they were five years ago. While access to energy has substantially improved, with less than one billion people now living without access to electricity, concerns over affordability and equity of energy transition are increasing. These are the findings of latest edition of the World Economic Forum’s Fostering Effective Energy Transition report.
The report’s Energy Transition Index (ETI) measures economies in two ways. Firstly, each economy is assessed for its energy “system performance”. This takes into account three criteria regarded as critical for transitioning to the future, namely: security and access, environmental sustainability and economic growth and development. The latter measures economic impact to households, industry and export revenues.
Over the past five years, the measurement that has seen the most improvement has been energy access and security, followed by economic growth and development and, lastly, environmental sustainability. The average system performance score had been improving since 2014, but it stalled last year as gains in energy security and access were offset by reductions in affordability and sustainability. Continued use of coal for power generation in Asia, increasing commodity prices and slower than needed improvements in energy intensity have contributed to this year’s stagnation in performance.
The second part of the ETI measures economies’ success in putting in place the necessary conditions for transition. This “transition readiness” looks at six individual indicators: capital and investment; regulation and political commitment; institutions and governance; institutions and innovative business environment; human capital and consumer participation; and energy system structure.
Small economies achieved higher scores on readiness, with the UK the only G7 economy in the top 10 of this subset. With the exception of Singapore, all are in Western Europe. The major challenge facing any attempt to future-proof global energy is the lack of readiness in the world’s largest economies. For example, the 10 countries that score the highest in terms of readiness account for just 2.6% of global annual emissions.
Transition readiness scores vs annual emissions per country
“We need a future where energy is affordable, sustainable and accessible to all. Solid progress in bringing energy within the reach of more and more people is not enough to mask wider failures, which are already having an impact on our climate and on our societies. Urgent action is needed now to accelerate transition that works for business, consumers and our environment,” said Roberto Bocca, Head of Future of Energy and Materials, Member of the Executive Committee, World Economic Forum.
However, there is some ground for optimism. While the world’s two most populous economies, China and India, score low in terms of system performance (ranking 97 and 86 respectively) they rank considerably higher when it comes to readiness (45 and 61 respectively). This suggests that, while their current outdated energy systems are not ready for transition, an enabling environment is being built to support future transition. In this respect, China ranks seventh in the world for regulation and political commitment.
The Energy Transition Index 2019
Advanced economies continue to lead the rankings table, demonstrating the maturity of their energy systems. Sweden(1) retains the top spot from last year, followed by Switzerland(2) and Norway (3). Australia (43), Canada (35), and Republic of Korea (48) are the only advanced economies with scores below the top quartile on the ETI, due to the high carbon intensity of their fuel mix, and high per capita energy consumption and carbon emissions. Affordability is emerging as a growing concern in advanced economies, as the gap between household and wholesale electricity prices increases.
Results show that energy transition in the world’s largest emitters has stalled in the past year. While the United States (27) has made progress in reducing the use of coal in power generation, it slipped in the rankings by two places reflecting concerns about the affordability of energy to households, and regulatory uncertainty on environmental sustainability.