The energy system, driven by factors such as rising demand, technological innovation, geopolitical shifts and environmental concerns, is undergoing a pivotal transformation. While energy systems have always been in transition, the current energy evolution is unprecedented due to the modern energy system’s scale. Although faster than historic transitions, today’s pace may not be fast enough. According to a 2018 special report of the Intergovernmental Panel on Climate Change, global anthropogenic emissions will need to drop to net zero by 2050 to limit the global temperature increase to less than 1.5°C above the pre-industrial level. The energy system contributes two-thirds of global emissions and lies at the heart of this challenge. This is no trivial task, considering the size and inertia of the current energy architecture and the fragmented decision-making landscape.
Recent evidence highlights the complexity of transitioning to a lower-carbon energy system that fosters inclusive economic growth and provides affordable and secure supply. For example, even with the increased level of attention the Paris Agreement brought to this issue, global CO2 emissions were expected to increase by more than 2% in 2018, the highest in recent times. Coal consumption increased in 2018, after declining for three years. And, with the average age of Asian coal plants at 11 years, it will be decades before they are retired.
Electrification, critical for decarbonization, makes up only 19% of the total final consumption of energy. Investment in fossil fuels, as a share of total energy supply investment, grew in 2017 for the first time since 2014. The share of fossil fuels in total primary energy supply has remained stable at 81% for the past three decades. These trends cast a shadow of uncertainty on the effectiveness of energy transition efforts and underscore the need to accelerate them.
This document summarizes the findings from the second edition of the ETI, covering 40 indicators from 115 countries. Countries from Western and Northern Europe continue to lead the rankings. Sweden retains the top spot from last year, followed by Switzerland and Norway. The top 10 countries are diverse in their primary energy mix, energy system structure and natural resource endowments, which indicates the importance of country-specific circumstances in energy transition planning. However, a strong enabling environment is a common thread among top-ranked countries, evidenced by high scores on the transition readiness component. Laggards have poor energy system performance and transition readiness because of weak regulatory frameworks, lack of policy stability, ongoing geopolitical conflicts or strong path dependency from fossil fuel-powered energy systems.
Globally, energy transition has slowed. The year-on-year increase of the global average score on the Energy Transition Index was the lowest of the last five years. Three years after the global milestone of political commitment through the Paris Agreement, this lack of progress provides a reality check on the adequacy of ongoing efforts and the scale of the challenge.
Energy security and access continues to show greater improvement, driven by strong gains in access to electricity in Emerging and Developing Asia and by increasingly diversified import counterparts among fuel-importing countries. On average, 135 million people gained access to electricity each year between 2014 and 2016. The scores on environmental sustainability increased only marginally, indicating the lack of progress consistent with the evidence cited above. Due to rising household electricity prices and fuel import bills, the average scores on the economic development and growth dimension declined compared to the previous year.
Stages of economic development, social development priorities, institutional arrangements and the role of fossil fuels in the economy vary across countries. Fossil fuels have a direct impact on countries’ challenges and priorities relating to energy transition. In this report, countries with similar characteristics make up peer groups for analysis. Peer-group analysis shows that challenges and priorities are differentiated across country archetypes. A complex energy transition, which includes the interaction between different systems, leads to diverse challenges. Effective energy transition is not restricted to shifts in fuel mix or dominant technology for energy extraction, conversion or consumption. Rather, accelerating the energy transition will require coordinated action across economic, technological and sociopolitical systems.