A disruptive world is an opportunity to speed up energy transition

Clean energy transition has been facing enormous challenges. From the very beginning, due to the costs involved in the process and the harsh criticism from people of different strata, there has been cautious optimism among advocates of energy transition.

Back then, the financing instruments and the policies were not ready. Countries were seriously concerned as to how intermittent renewable energies, such as solar and wind, would ensure uninterrupted energy supply. And to many, demand-side energy efficiency was, to some extent, a maintenance project. 

From then onwards, countries have increased their share of renewable energies. While the pace was very slow at the outset, the renewable energy dissemination saw an upsurge over the last decade. Due to gradual reduction in cost, net economic benefits now clearly favour renewable energies over fossil fuels in most of the countries.

In the last several years, the capacity addition of renewable energy-based electricity generation systems has outpaced fossil fuels. Energy efficiency is now termed the first fuel, as opposed to what was considered a hidden fuel only a few years ago. Countries have drawn lessons from different clean energy projects. 

Yet, the pace of the transition is inadequate compared to the level necessary to address the worst risks of climate change. Furthermore, during the last two and a half years, the enormous strains, led by Covid-19, and macro-economic and geopolitical shocks, have raised serious alarm over energy transition now and in the immediate future. 

High energy prices, supply constraints and growing energy demand appear to be significant impediments to ensuring affordable energy. However, the prevailing energy market volatility is, in fact, an opportunity to take. Today's disruptive world, resulting from Covid-19 and the Ukraine-Russia war, presents the option to us – to gear up concrete actions on the ground to increase clean energy capacity and reshape end-use energy demand to phase down conventional energy sources and reduce external price shocks.

The countries that have thus far done comparatively well on the energy transition front are revisiting their energy strategies to speed up energy transition in the respective countries. Apart from their targets for greenhouse gas (GHG) mitigation, they have two major issues to fix – reducing cost to make energy affordable and enhancing national energy security while attenuating dependence on energy imports. 

For instance, the EU countries, combinedly, generate over 20% of the gross final energy consumption from renewable energy sources. However, for the remainder of the final energy consumption, the EU largely relies on imports. Of the total petroleum products being imported per annum by the EU, around one-third is sourced from Russia. 

Similarly, more than 40% of the EU's natural gas imports come from Russia. Like any other country that depends on energy imports, EU countries have found themselves utterly vulnerable to the global energy price hike, led by pent-up demand as part of the Covid-19 recovery process and then the Russian invasion of Ukraine. 

While two years ago we were grappling with global disruptions attributable to Covid-19, we now have energy-related disruptions owing to the Ukraine-Russia war. Other unforeseen events may further impact global supply chains and energy systems. 

Hence, it is imperative now to focus on the resilience of energy supply against supply shocks to keep the price at a reasonable level. This calls for undertaking a robust approach to step up the clean energy transition process.

Apart from the EU, a similar approach would be necessary in other parts of the world to avoid any distraction in efforts towards decarbonisation. Notably, one-tenth of global oil is supplied by Russia. And following the Russian invasion of Ukraine, the sanctions have created an oil demand-supply imbalance in the oil market. The elevated price of oil and the subsequent price hike of gas have increased overall energy costs and raised global energy security concerns. 

On the one side of the coin, countries may put climate change mitigation measures on hold while focusing on energy security by ensuring the flow of imported fossil fuels to meet future demand. On the other hand, high energy costs have substantiated that the over-reliance on imported fossil fuels would only jeopardise energy security of countries and create severe economic strains. 

As such, redesigning energy sector strategies and policies to move away from reliance on fossil fuels by investing in cheaper clean energy sources would be more logical and economical. And obviously, investment should be channelled to ramp up energy efficiency, which helps reduce energy demand, save costs, provide leeway to delay capital expenditure for new power plants and avoid GHG emissions. 

A report of the International Energy Agency (IEA) reveals that the overall energy efficiency potential in the world, supported by the currently available technologies, is 3,070 Terawatt-hours (TWh), equivalent to more than 12% of the global electricity consumption in 2018.

The global economic model that largely depends on fossil fuels, produced by a selected few countries, has been proven to be fragile and extremely risky. To that end, governments can build on clean energies and energy efficiency for their future energy security. 

As countries are expected to submit their improved action plans for climate change mitigation in the COP27, scheduled to take place later this year, clean energy transition would surely get increased attention. Be that as it may, the clean energy transition process hinges on the political and societal consensus at the country level. 

In today's disruptive world, following the Ukraine crisis and the associated impacts on energy prices provides a salient opportunity to forge consensus on rebooting the prevailing energy system and propelling the clean energy transition forward. 

Shafiqul Alam is an Environmental Economist. 

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.