The pace of energy transition needs to be supercharged as the world confronts a spike in fuel prices, challenges to energy security and the slow progress on climate action, said a report.
Therefore, urgent action is required by both private and public sectors to ensure a resilient transition as the world faces the most severe energy crisis since the 1970s, said a special report on the state of the global energy transition released by the World Economic Forum.
According to the report, Fostering Effective Energy Transition 2022, the urgency for countries to accelerate a holistic energy transition is reinforced by high fuel prices, commodities’ shortages, insufficient headway on achieving the climate goals and slow progress on energy justice and access.
Binding climate commitments
Building on 10 years of the Energy Transition Index, an annual country benchmarking report, this special edition report, launched in collaboration with Accenture, details key recommendations for governments, companies, consumers and other stakeholders on how to progress the energy transition.
Prioritising a resilient energy transition and diversification of the energy mix is crucial in responding to energy market volatility. To accelerate the transition to cleaner energy supply and demand, the report notes that more countries need to make binding climate commitments, create long-term visions for domestic and regional energy systems, attract private sector investors for decarbonisation projects and help consumers and the workforce adjust.
“Countries are at risk of future events compounding the disruption of their energy supply chain at a time when the window to prevent the worst consequences of climate change is closing fast,” said Roberto Bocca, Head of Energy, Materials and Infrastructure, World Economic Forum. “While there are difficult decisions to be taken to align the imperatives of energy security, sustainability and affordability in the short term, now is the time to double down on action.
The report also reveals the structural barriers to balancing energy affordability, security and availability with sustainability. This is due to compounded shocks to the energy system from a post-pandemic surge in energy demand, fuel supply bottlenecks, inflationary pressures and reconfigured energy supply chains as a result of the war in Ukraine.
To navigate this challenging situation, countries must pursue diversification on two fronts – not only in the domestic energy mix in the long term but also in considering their fuels and energy suppliers in the shorter term.
Most countries rely on just a handful of trade partners to meet their energy requirements and have a deficient diversification of energy sources, providing limited flexibility to deal with disruptions. The report notes that of 34 countries with advanced economies, 11 rely on only three trade partners for over 70% of their fuel imports.
Importance of energy
“The current energy crisis reveals just how important energy is to people and the economy,” said Espen Mehlum, Head of Energy, Materials and Infrastructure Programme for Benchmarking, World Economic Forum.
“It is now critical to tackle the structural risks that have become evident while also increasing momentum on climate action. Success will largely hinge on policy and investments. Prioritising energy efficiency and ramping up investment in clean energy infrastructure, renewables, clean hydrogen and new nuclear capacity can strengthen energy system resilience and will be a win-win for reducing emissions.”
Muqsit Ashraf, a Senior Managing Director and Global Energy Business Lead, Accenture, said: “Governments need to invest in decarbonising their energy systems while securing affordable energy supply and companies should look to adopt low-carbon technologies and energy-efficient processes. A key area of focus should be value chain and industrial decarbonisation initiatives, which hold great promise for emissions reductions, particularly when they involve collaboration across multiple stakeholders, including customers, suppliers and regulators, on initiatives like circular supply networks and CO2 handling infrastructure.”
Need to protect consumers
“While navigating this challenging energy and materials landscape, companies have to help protect against rising costs of living for consumers, including in transportation, utilities and electricity,” said Kathleen O’Reilly, Global Lead, Accenture Strategy. “Vulnerable populations in particular, who most feel the impact of volatile energy prices and their impact on other basic goods and services, must be a strategic focus in a transition to sustainability that is equitable in value and scalable in impact. A key facet of this involves defining financial mechanisms to help vulnerable consumers cope with economic shocks, while not reducing incentives for companies to focus on energy efficiency and adoption of sustainability services.”-- TradeArabia News Service