5 must-reads that will get you up to speed on the energy transition

When it comes to the energy sector, there’s a lot to understand right now – from supply and demand to critical minerals and an equitable transition.

This piece rounds up some of the World Economic Forum’s research in these areas.

In the race to net zero, the focus is often placed on energy supply. But with the world’s population set to grow by 2 billion by 2050 and GDP forecast to double, addressing the pace of energy demand, while also supporting economic output, will be vital.

In fact, according the Forum white paper Transforming Energy Demand, produced with PwC, acting on energy demand by 2030 could reduce energy intensity by more than 30% and deliver $2 trillion in savings a year.

The paper says that this is “doable, affordable and profitable”, and that all countries and companies can use existing levers to reduce energy intensity. It recommends a focus on three areas: energy savings, energy efficiency and value chain collaboration.

Companies and governments must work together to develop plans to address energy demand as an “essential next step”, it says.

That’s the question explored by a recent Forum white paper exploring the energy transition and geopolitics. Critical minerals such as lithium and copper are vital to many net-zero technologies, as the graphic below shows.

The world is likely to become more dependent on these minerals and less dependent on fossil fuels, such as oil and gas. With demand soaring and raw and processed critical materials overly concentrated in a handful of countries, what will this shift mean for geopolitics, energy and the environment?

The Forum paper attempts to provide an initial framework for answering this question, arguing that while most concerns around critical minerals have focused on supply, the most important factors driving potential scarcity in the market relate to demand.

The report highlights a range of policy initiatives to help, including recommending a measure to help markets operate more effectively and being more transparent around data.

Is the world where it needs to be as it moves to a sustainable energy future? Answers can be found within the Forum’s Fostering Effective Energy Transition 2024 report. The paper benchmarks energy system performance and readiness through its Energy Transition Index (ETI).

Scores on this index – which allows decision-makers to track countries’ progress – have reached record highs and most nations are progressing in the energy transition.

But alongside, the pace of progress has slowed, partly because of uncertainties in the global landscape, including the pandemic, extreme weather events and conflict across the world. The report says that while sustainability is showing a gradual improvement, energy security continues to be tested and energy equity has gone backwards.

With investment uneven across regions, the report says that international support and new approaches, tailored to country-specific requirements, are needed to close a widening transition financing gap and direct enough funding to emerging and developing economies.

There is an urgent need to accelerate the green transition to reach international climate goals and help tackle the consequences of extreme weather events such as floods and heatwaves. But new policies and measures are raising concerns around issues including the cost of living, the uneven distribution of costs and benefits, and impacts on employment and economic development.

Ultimately, this could slow both environmental and socioeconomic progress, according to Accelerating an Equitable Transition: A Data-Driven Approach, a report from the Forum in collaboration with Boston Consulting Group. Ensuring the energy transition doesn’t exacerbate existing economic inequities and leave society more fragmented and polarized is vital, it says.

The report says the current toolkit available to policymakers and businesses won’t result in this equitable transition. To help, it groups countries into six ‘archetypes’, seen in the graphic below, to help stakeholders assess the relative degree of exposure of workers, consumers, and small business to equity risks that different climate mitigation actions can intensify.

This episode of the Forum’s Radio Davos podcast (scroll down the linked page for the transcript, if you would rather read) hears from four very different companies that are working on new ways of producing or delivering energy.

From aviation fuel and electric vehicles to green hydrogen and new nuclear, the episode was recorded at the inaugural meeting of Advanced Energy Solutions, a World Economic Forum community working to speed up deployment of advanced energy solutions while eradicating the green premium, or the additional cost of choosing a clean technology over a polluting one.