The World Economic Forum’s Fostering Effective Energy Transition report calls for urgent action on the part of policy-makers and business to safeguard energy development for future generations.
Fostering Effective Energy Transition report is part of the World Economic Forum’s System Initiative on Shaping the Future of Energy. The report summarizes insights from the “Energy Transition Index”, which builds upon the previous series of “Global Energy Architecture Performance Index” by adding a forward looking element of country readiness for energy transition.
The index benchmarks 115 countries on the current level of their energy system performance, and the readiness of their macro environment for transition to a secure, sustainable, affordable and inclusive future energy system.
The fact-based framework and rankings are intended to enable policy makers and businesses to identify the destination for energy transition, identify imperatives, and align policy and market enablers accordingly.
MENA & Energy Transition
The Middle East and North Africa group accounts for 6.8% of the global energy demand and 7.1% of the world’s population. The region is well endowed with fossil fuel resources that have greatly influenced its energy mix, with 92% of its primary energy supply provided by oil and gas. Geopolitical tensions and instability in these countries affects political priorities, opportunities for energy systems integration and the ability to attract investments required for the energy transition.
While the average score of system performance within the region is closer to the global average, analysis of the three dimensions reveals imbalance in meeting the three objectives of the energy triangle.
The group has consistently registered the lowest average score in the environmental sustainability dimension compared to other groups. Outdoor air pollution, measured by the level of airborne PM2.5, is the highest in the world. These counties also have the highest carbon intensity at double the world average, a direct result of the high concentration of oil and gas in their energy mix.
Significant plans are under way to diversify the fuel mix. Earlier this year, Saudi Arabia announced the tripling of its renewable energy targets to have over 60 gigawatts of installed capacity by 2030, thereby increasing the share significantly to displace oil consumption in the power sector.
The United Arab Emirates is targeting a shift in its energy mix to have 44% sourced from clean energy sources. Analysis of the underlying data reveals the region has the lowest average household and industry electricity prices and the lowest wholesale gas prices. The positive impact of low prices on the economic development dimension, however, is offset by the negative impact of having the highest level of energy subsidies in the world, calculated as the share of a country’s GDP.
Significant efforts are under way within these countries to reform energy prices. Nine countries, at a minimum, have imposed certain forms or levels of energy price reforms over the past few years: Saudi Arabia, United Arab Emirates, Oman, Qatar, Kuwait, Bahrain, Algeria, Iran and Egypt. In Saudi Arabia, some fuel product prices have increased up to 200% compared to 2015 levels.
On the energy security and access dimension, the region scores high in electrification with an average of 98%. This is offset by the lower score in the energy security dimension resulting from the concentration of oil and gas within the energy mix. On both energy security and economic growth, the region can greatly benefit from further integration of the energy supply infrastructure.
One notable effort, is in Egypt, where a 3,000‑megawatt power transmission line has been approved to link the power grid to Saudi Arabia to improve the country’s energy security. Two other connections exist with Jordan and Libya, and studies are under way to evaluate a potential connection with Cyprus.5
In terms of ranking, Morocco ranks highest and is followed by Qatar, which is driven by a strong performance score supported through low energy prices and significant fuel exports. Lebanon ranks lowest, driven by low performance in the energy security dimension due to import diversity, low quality of electricity supply and high energy subsidies.
Advanced Economies & Energy Transition
Advanced economies continue to lead the rankings table, demonstrating the maturity of their energy systems. Sweden (1) retains the top spot from last year, followed by Switzerland (2) and Norway (3).
The only advanced economies with scores below the top quartile on the ETI, are Australia (43), Canada (35), and Republic of Korea (48),due to the high carbon intensity of their fuel mix, and high per capita energy consumption and carbon emissions. Affordability is emerging as a growing concern in advanced economies, as the gap between household and wholesale electricity prices increases.
Results show that energy transition in the world’s largest emitters has stalled in the past year. While the United States (27) has made progress in reducing the use of coal in power generation, it slipped in the rankings by two places reflecting concerns about the affordability of energy to households, and regulatory uncertainty on environmental sustainability.
The results of the Energy Transition Index 2019 establish the need for speed in energy transition. Given the scale and complexity of the challenge and the urgency of collective action, it is not a trivial task. Energy transition is not restricted to shifts in the fuel mix or dominant technologies used in energy extraction, conversion or consumption.
“We need a future where energy is affordable, sustainable and accessible to all. Solid progress in bringing energy within the reach of more and more people is not enough to mask wider failures, which are already having an impact on our climate and on our societies. Urgent action is needed now to accelerate transition that works for business, consumers and our environment”Roberto Bocca, Head of Future of Energy and Materials, Member of the Executive Committee, World Economic Forum.
A fundamental transformation in the way the world harnesses and consumes energy has far reaching economic, technological and political implications across multiple systems. Accelerating energy transition will require coordinated efforts that address the interconnections of the energy system with different elements of the economy and society.
Explore the full report, infographics and more here