The pandemic, the economic recovery, geopolitical difficulties and the war in Ukraine have created severe pressures along the entire energy value chain, from supply to delivery and demand, generating a global energy crisis.
A holistic energy transition is still possible, but as evidenced by the events of 2022, plans and priorities are at the mercy of geopolitics, investment decisions and economic development imperatives, suggesting that pragmatism, agility, ambition will be needed. and a systemic approach.
Currently, energy security is the top priority for many governments, characterized by short-term policy measures, such as fuel substitution, market interventions and fiscal policy, aimed at maintaining the living standards guaranteed by a functioning energy system. In the medium to long term, achieving climate goals, guaranteeing economic growth and the possibility of a fair energy transition for all are essential, since it is estimated that by 2050 the global economy will have doubled and will serve another two billion people .
The backbone of the modern and future economy
Energy is a fundamental element of the global economy and, as such, the crisis has forced us to radically rethink the way we produce, supply and, above all, consume it. However, overturning the status quo and achieving the three dimensions of sustainability, security and affordability is a very complex and arduous task, which presents a multitude of challenges and intersects with them.
The big question that emerged over the course of 2022 and will dominate 2023 is whether the short-term urgency of keeping the lights on could negatively impact long-term sustainability goals. Although data from recent months are conflicting, the crisis has been a wake-up call on the urgency of reforming the energy system, and not just for reasons of sustainability.
To balance these multiple dimensions and ultimately to reach net zero by 2050, rapid deployment of clean energy generation, improvement of energy efficiency and massive use of carbon dioxide removal measures are required . Time is running out and major and immediate changes are needed. Investment, transition and large-scale deployment must occur by 2030 in a way that may be unprecedented in any other global transformation.
The pillars of transformation
Improving efficiency is the first step in the transition. Although energy efficiency does not have the same appeal as new energy sources, the evolution of digital technologies offers the extraordinary opportunity to eliminate the unnecessary waste inherent in our current energy system. This leads to a significant reduction in emissions.
The second step is to change the retail and industrial demand patterns. As economies develop and grow, so does the demand for energy-intensive products, such as cement and steel. Responding to these developments in a way that meets sustainability goals means reducing the amount of energy needed to produce a unit of GDP in 2050 to 50% of what it is now. In this regard, in addition to clean electrification, fuels such as hydrogen will play an important role, acting as a decarbonisation tool in industrial processes and therefore for the transformation of industry.
The World Economic Forum’s Transitioning Industry Clusters initiative is bringing together businesses and governments to share knowledge and best practices to achieve net zero. The overall aim is to reduce emissions in industries and energy sectors that are difficult to compress, while promoting economic competitiveness and job growth.
The third factor is the need to generate clean energy on a large scale. To achieve this goal, the supply of zero-carbon electricity must increase at least three-fold by 2030. In parallel, permitting procedures for clean energy and related infrastructure need to be accelerated, from design to operational . Overall grid investment needs to grow from about $300 billion to $820 billion by 2030, and power grids – which took more than 130 years to build – need to more than double by 2040 and grow another 25 percent by 2050.
Finally, considering that fossil fuels will be part of the economy for years to come, a likely and realistic near-term direction is to future-proof these types of fuels. This means accelerating advances in carbon capture, utilization and storage (CCUS) technologies and maximizing the efficiency of existing plants. CCUSs can play three roles at the global and national level. They can reduce net greenhouse gas emissions in the short term, offset residual emissions that are hard to abate 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. It is essential to focus efforts on energy supply, supply and demand, together with a broader transformation in all sectors, from the fuels used to the infrastructure built.
It will be necessary to address the new, largely unforeseen challenges that different fuel types and their supply chains will create. Policy makers will also need to consider the interconnection of the energy sector with other important systems, notably food, water, biodiversity and mobility. The new energy policies will have consequences for these systems and vice versa.
Developing a common approach through a radical collaboration between financial, regulatory and industrial models will enable us to overcome the crisis and pursue the opportunities that will create a sustainable, secure and affordable energy future.
This article is part of the 2023 World Economic Forum Annual Meeting