Head of Shaping the Future of Energy and Materials; Member of the Executive Committee, World Economic Forum
This article is part of:World Economic Forum Annual Meeting
Energy security is currently the top priority for many governments, marked by short-term policy measures.
The big question that will dominate 2023 is whether this priority will adversely affect long-term sustainability goals.
Investment, transition and deployment on a large scale must take place by 2030 in a way unparalleled by any other global transformation.
The pandemic, economic rebound, uneasy geopolitics and war in Ukraine have created severe pressures throughout the energy value chain from supply to delivery and demand, creating a global energy crisis.
It remains possible to deliver a holistic energy transition, but as events in 2022 highlighted, plans and priorities are at the mercy of geopolitics, investment decisions and economic development imperatives, suggesting that pragmatism, agility, ambition and a systemic approach will be necessary.
Currently, energy security is the top priority for many governments, marked by short-term policy measures – such as fuel substitution, market interventions and fiscal policy – aimed at maintaining the living standards that a functioning energy system provides. Over the medium to long term, reaching climate goals, ensuring economic growth and enabling a just energy transition for everyone are paramount, because by 2050 it is estimated that the global economy will have doubled in size, serving an additional two billion people.
The modern and future economy’s building block
Energy is a foundational block of the global economy, and as such, the crisis has forced us to fundamentally rethink the way in which we produce, deliver and – importantly – consume it. Tackling the status quo and delivering on all three dimensions of sustainability, security and affordability is, however, a daunting and highly complex task, underpinned by, and intertwined with, a multitude of challenges.
The big question that emerged during 2022 and will dominate 2023 is whether the short-term urgency to keep the lights on will adversely affect long-term sustainability goals. While evidence from recent months is mixed, the crisis has been a wake-up call on the urgency of reforming the energy system, and not just for sustainability reasons.
Balancing these multiple dimensions and ultimately achieving net zero by 2050 relies on rapid clean power generation deployment, energy efficiency improvements and extensive use of carbon dioxide removal measures. The clock is ticking and major changes are required immediately. Investment, transition and deployment on a large scale must take place by 2030 in a manner perhaps unparalleled by any other global transformation.
The key pillars of energy transition
Improving efficiency is the first step in the transition. While energy efficiency may not have the glamour that new sources of energy do, evolution in digital technologies offers a tremendous opportunity to eradicate the unnecessary waste that is embedded in our current energy system. With this comes considerable emissions reductions.
The second step is to change industrial and retail demand patterns. As economies develop and grow, so does the demand for energy-intensive products like cement and steel. Responding to these developments in a way that meets sustainability goals means that the quantity of energy that is necessary to produce one unit of GDP in 2050 has to be 50% of what it is today. In this respect, beside the clean power electrification, fuels like hydrogen will play an important role, serving as a decarbonization tool in industry processes and thereby industry transformation.
The World Economic Forum’s Transitioning Industry Clusters initiative is bringing together companies and governments to share knowledge and best practices for achieving net zero. The overall aim is to reduce emissions in hard-to-abate industries and energy sectors, while supporting economic competitiveness and job growth.
The third factor is the need to generate clean power on a large scale. To achieve this, zero-carbon electricity supply must increase at least three-fold by 2030. Alongside this, the permitting process for clean power and related infrastructure from project to operating phase must be accelerated. Total grid investment must rise from approximately $300 billion to $820 billion by 2030, and electricity networks (that took more than 130 years to build) must more than double in length by 2040, and increase by another 25% by 2050.
Finally, recognizing that fossil fuels will be a part of the economy for years to come, a likely and realistic short-term direction is to future proof these types of fuel. This means accelerating progress in carbon capture, utilization and storage (CCUS) technologies, and maximizing the efficiency of existing assets. CCUS can fulfil three roles globally and at the country level. It can lower net greenhouse gas emissions in the near term, counterbalance hard-to-abate residual emissions in the medium term and achieve net negative emissions in the long term.
Holistic and structural solutions
Accelerating a sustainable, secure and just energy transition requires a holistic approach and structural solutions. Focusing effort on energy’s supply, delivery and demand, together with wider transformation in all areas from the fuels used to the infrastructure built, is fundamental.
It will be necessary to address new – and largely unforeseen problems – that different fuel types and their supply chains will create. Policy-makers will also need to take into account the energy sector’s interconnectedness with other major systems, notably food, water, biodiversity and mobility. New energy policies will have consequences for these systems, and vice versa.
Developing common ground through radical collaboration across financial, regulatory and industry models will ensure we can navigate this crisis and pursue opportunities that will create a sustainable, secure and affordable energy future.
License and Republishing
The views expressed in this article are those of the author alone and not the World Economic Forum.