How Davos 2024 set the agenda for accelerating the energy transition in a fair and cost-effective way

The energy we use to power our transport, industry and buildings generates 80% of all global carbon emissions, as Schneider Electric’s chief executive officer deduced at Davos 2024, this year’s Annual Meeting in Davos, Switzerland. Consequently, mitigating the climate impact of energy systems has become a priority worldwide.

The environmental case for the energy transition was clearly articulated at the 2023 United Nations Climate Conference (COP28), where more than 120 countries agreed to double energy efficiency and triple the deployment of renewables by 2030. Nevertheless, the transition to sustainable, secure and just future energy systems extends beyond climate mitigation.

While global attention intensifies on achieving net zero, focusing on building the business case for the energy transition is critical. Low-carbon energy has to be economically viable for business and attractive to investors since nations can only lead the transition while safeguarding their economic competitiveness.

Equally important, the transition must be equitable, just and inclusive – providing affordable energy access for all. Capital must be directed where it’s most needed, particularly towards emerging and developing economies with rising population and energy demand.

At Davos 2024, government, industry and civil society leaders came together to discuss accelerating their roles in an energy transition that leaves no one behind and fuels sustained economic growth. These were the pivotal topics that came over the week, with the priority actions needed to drive the transition across the energy ecosystem.

“Energy efficiency is a no-brainer,” declared Fatih Birol, executive director of the International Energy Agency (IEA), during a televised session on transforming energy demand, “but we have not seen enough policy attention on it.” This is a missed opportunity, given the compelling reasons why it makes sense to save energy: it’s suitable for the climate, saves consumers hard-earned cash, promotes energy security and boosts the industry’s competitiveness.

Take buildings, for example, which consume about a third of all our energy. Using AI to run heating, ventilation and AC systems, we could cut power consumption by a quarter – a solution that pays for itself within a year. Retrofitting buildings and using efficient appliances could cut energy use by another 31%.

Meanwhile, the industry can save energy by identifying net-zero opportunities with neighbours and suppliers. Collaboration within industrial clusters – geographic areas where industries co-locate – offers great potential for sectors to accelerate towards net zero while contributing to gross domestic product growth and job creation. For example, the waste heat generated by industrial processes can be repurposed – in Sweden, energy recovered from the Kemira sulphuric acid plant now provides 25% of the heat for the neighbouring city of Helsingborg.

However, none of this is happening fast enough. There are many barriers to progress. Let’s examine a few below:

Along with demand-side interventions such as energy efficiency, a rapid and responsible scale-up of renewables is critical to the transition, aligning with the ambitious target set at COP28 to triple the world’s installed renewable energy generation capacity to at least 11,000 gigawatts (GW) by 2030. According to the IEA, 30 million new jobs could be created. But how can we make it happen fast and what are the barriers to progress? On the positive side, last year saw a 50% leap in global capacity, thanks to record investment in renewables of $1.8 trillion – far more than for fossil fuels. But to deliver on the target, financing needs to be 4-6 times that amount annually.

Nuclear can also provide a crucial contribution to the energy transition. The COP28 pledge signed by 22 countries to triple nuclear capacity by 2050 has generated fresh momentum for nuclear power. Beyond adding utility-scale nuclear projects, advanced nuclear technologies such as small modular reactors and fusion are poised to play pivotal roles. Though commercially viable power from nuclear fusion is not yet a reality, recent strides in fusion research underscore progress made, such as using lasers to achieve nuclear fusion ignition in a lab. Meanwhile, small modular reactors offer distinct advantages over traditional nuclear, featuring lower upfront capital costs and faster deployment, making them attractive and pragmatic options.

Some of the barriers and opportunities to tripling clean power include the following:

The permitting process remains a major bottleneck. The frustration at Davos was palpable, with delegates using words like “intolerable” and “insane” to describe a situation where renewable energy projects are waiting five years for permission and, even then, risk being challenged in the courts for a decade afterwards. European Commissioner for Energy Kadri Simson conceded that the continent has more renewable energy projects stuck at the permissions stage than under construction.

In contrast, 2,000 GW of renewable capacity in the United States are backed up by clearance procedures. Reform is urgently needed if we are to hit COP28’s target.

“To get to that 11,000 GW we have to be really smart to go fast,” said Jennifer Morris, chief executive officer of the Nature Conservancy. That means first identifying appropriate locations to install renewables. Choose degraded land rather than places that risk damage to nature or a local backlash. Identify communities amenable to development.

Morris compared Ohio, where farmers are anti-solar for cultural reasons (despite better returns), with East Kentucky, where a community once proud of producing energy from a now-defunct coal mine has welcomed a new solar photovoltaic (PV) installation. Once a location is chosen, developers should treat communities with humility and respect, ensuring they benefit through lower energy bills and reskilling opportunities. This, in turn, will speed up permitting.

Apart from accelerating permits, governments have a critical role in upgrading grid infrastructure, rolling out EV charging and connecting with neighbours. As John Kerry, US climate envoy, put it: “If we can break loose investment in grid infrastructure and build the cross-boundary transmission connections that we need, that’s huge.”

Another infrastructure priority is energy storage, to even out the peaks and troughs that come through generating electricity from wind and sun. Solutions include batteries for short-term and hydro-pumping for long-term storage.

While industry and government seek to scale renewables and transform demand, ensuring the energy transition is equitable, just and inclusive is imperative – leaving no one behind. Everyone should have access to affordable energy, and communities should benefit economically and socially from the transition. As Veronica Nilsson, general secretary of the Trade Union Advisory Committee to the Organisation for Economic Co-operation and Development, says: “The only way we can do it is through a just transition. You cannot impose changes on people. You have to do the changes with people.”

Achieving this requires directing stronger flows of capital for clean energy towards emerging and developing markets where populations are growing and energy demand is surging. According to the IEA, annual investment in clean energy in the Global South needs to triple from $770 billion to $2.2-2.8 trillion by the early 2030s. This presents a great opportunity for the global economy to ensure sustainable growth and positive societal impacts.

Enhanced investment is also needed to increase the supply of critical minerals to meet surging demand for the energy transition. Minerals such as lithium, nickel and cobalt are vital to producing batteries, wind turbines, solar panels, grid lines and electric vehicles. Without a sufficient supply of these minerals, we cannot meet the goal of tripling renewables. As well as more finance, coordinated government policies and technological innovation are equally crucial to address the challenge of securing minerals for the energy transition.

Some priorities to accelerate an equitable transition include the following: