What it takes to transform the energy system
This is article 1 of a 4-part series on the clean energy transition. It aims to give an overview and set the broader context before delving into technologies, case studies, and startups in space.
The integration of clean energy infrastructure into large sectors of society is critical to reach climate targets. The energy sector accounts for around 75% of the total global GHG emissions, making a fast transition to a new energy system vital to reach net-zero by mid-century. And the transition has gained momentum. Investments in renewable energy exceeded investments in fossil fuels in the last decade and hit a record of $1.7 trillion in 2023, which is a 65% increase from the 2015 levels. Despite the progress, there are still uncertainties in how the transition will unfold and whether we will reach large-scale decarbonization in time. There are a few overarching themes that stand out when navigating the clean energy transition landscape: the urgency, the importance of breakthrough technologies, and the need for a resilient and equitable system. Let us dive into each of them.
The deployment rate of clean energy infrastructure must accelerate
The window of opportunity to transition to a clean energy system is closing fast. In 2030, around 30% of the total energy supply must come from renewable sources to stay on track with the pathway to net-zero by 2050. That number is today about 14%. Hence, a major course correction with significant pivots across all industries is needed. A goal of tripling the renewable energy capacity by 2030 was set during COP28, which would mean reaching a global renewable energy capacity of 11,000 gigawatts (GW). To give some context, an average utility-scale wind turbine has an energy capacity of around 3.2 MW - making 11,000 GW equivalent to roughly 3.4 million wind turbines.
Such a transformation is not without obstacles. One of the things that needs to be addressed to accelerate the deployment rate is supply shortages. The disruptions in global supply chains have affected many important parts of the transition, such as wind turbine and battery manufacturing. Actions need to be taken to diversify supply chains and build a more resilient system. A secure flow of raw materials and components is after all essential to have a chance to deploy the technology in time. Another thing that decreases the speed of expansion is the permitting processes for renewable energy. The pre-work done before any large wind or solar park can be built is of course heavily important, but it is also crucial to streamline the procedures and accelerate the process for permitting projects.
Decarbonization after 2030 relies on breakthrough technologies
The strong growth of solar PV and wind are bright spots in the energy transition. But they will not be enough to reach the scale of decarbonization needed by 2050. Until 2030, most of the emission reductions will be driven by technologies already on the market today. Post-2030 though, half of the emission reductions will come from technologies that today are in an early stage of development. Examples of such technologies are hydrogen, more advanced power grids, and sustainable aviation fuels. Those technologies have a long way to go before they can reach a commercial scale with significant decarbonization contributions. In addition to deploying large-scale solar and wind parks, attention must therefore also be paid to enhancing innovation and technological development to bring these technologies to scale in time.
To accelerate the development of next-generation energy technologies, a significantly increased flow of capital to early-stage technology is needed. The problem is that such investments are capital intensive and associated with high risk, leading to significant investment gaps with the financing system of today. To successfully deploy those critical technologies in the 2030s, they need to be validated on a commercial scale in the upcoming years. As a result, the development needs to be accelerated and mechanisms are needed to make the technologies financeable. Solutions to overcome market failure and bring the technologies from the R&D stage to commercial viability include innovative financing solutions, de-risking measures, and collective action among multiple stakeholders.
Resilience and equity must be part of the solution
The recent macroeconomic and geopolitical events have shed light on the importance of building a resilient and equitable energy system. Russia’s war on Ukraine and the energy crisis that followed forced many countries to take emergency measures to ensure adequate energy supply, with increased carbon emissions as a result. To develop a more secure and resilient energy system, diversification is key. Solely relying on a few sources of energy entails high risk and vulnerability to disruptions. Increasing cross-border cooperation and interconnect grids is one way to increase diversification and thereby build a more robust and flexible system.
The World Economic Forum (WEF) has developed a framework called The Energy Transition Index (ETI) which tracks the state of the energy transition from three different dimensions: equity, security, and sustainability. The global average ETI score has shown significant progress in the last decade, but the development has plateaued in the last three years. The slowed progress stems from challenges related to equity and inclusiveness of the transition. As the world moves to a new energy system, no one can be left behind. Efforts to ensure a transition where all segments of society have access to clean and affordable energy are instrumental, not just to ensure justice in the transition but also to unlock the potential of individuals and communities at the core of the transition.
In the end, the transformation of the global energy system is one of the largest transitions in the world’s history and will require unprecedented levels of collaboration. A successful transition requires a multifaceted approach to drive scale and action in a secure and equitable manner. This article has touched upon some of the most important barriers and challenges that we need to overcome, but let us acknowledge that the challenge is so complex that much has been left out. This article has focused largely on the supply side of the transition, but transforming the demand side through measures such as increasing energy efficiency is equally important. In the upcoming articles in this article series, we will dive into technologies, case studies, and start-ups driving decarbonization in the clean energy sector. See you there.
Recommended resources on the clean energy transition:
Fostering Effective Energy Transition 2023 | WEF
Building Trust through an Equitable and Inclusive Energy Transition | WEF
Net Zero by 2050: A Roadmap for the Global Energy Sector | IEA