Urgent action needed to ensure energy transition, World Economic Forum says

High fuel prices, commodity shortages and poor progress on climate-change goals are obstacles to energy security

The World Economic Forum says countries must try to diversify their domestic energy mix in the long term and also their fuels and energy suppliers in the shorter term. Getty Images

Urgent action is required by the private and public sectors to ensure a resilient energy transition as the world faces the most severe energy crisis since the 1970s, according to the World Economic Forum.

The urgency for countries to accelerate a “holistic energy transition” is being reinforced by high fuel prices, commodity shortages, insufficient headway on achieving climate-change goals and slow progress on energy justice and access, a report from the Switzerland-based organisation on Tuesday said. It was launched in collaboration with Accenture.

“Countries are at risk of future events compounding the disruption of their energy supply chain at a time when the window to prevent the worst consequences of climate change is closing fast,” said Roberto Bocca, the WEF's head of energy, materials and infrastructure.

“While there are difficult decisions to be taken to align the imperatives of energy security, sustainability and affordability in the short term, now is the time to double down on action.”

New capacity for generating electricity from renewable sources is expected to set another record in 2022, as governments around the globe seek security in renewable energy and its climate benefits, the International Energy Agency said on Wednesday.

World wide, new renewable power capacity rose 6 per cent in 2021 to a record 295 gigawatts, shaking off the rising cost of raw material, pandemic-driven construction delays and global supply chain challenges, the Paris-based agency said in its Renewable Energy Market update.

This year, the IEA expects global capacity additions to rise another 8 per cent to 320 gigawatts — equal to an amount that would come close to meeting the entire electricity demand of Germany, or matching the EU’s total electricity generation from natural gas.

Diversification of the energy mix is crucial for responding to volatility in the energy market, the WEF report emphasised.

Countries must try to diversify their domestic energy mix in the long term and also their fuels and energy suppliers in the shorter term, it recommended.

Most countries rely on a handful of trade partners to meet their energy requirements and have a deficient diversification of energy sources, providing limited flexibility to deal with disruptions.

Among 34 countries with advanced economies, 11 rely on only three trade partners for more than 70 per cent of their fuel imports, the report found.

To accelerate the transition to cleaner energy supply and demand, more countries need to make binding climate commitments, create long-term visions for domestic and regional energy systems, attract private sector investors for decarbonisation projects and help consumers and the workforce to adjust, the report said.

Structural barriers to energy security include compounded shocks to the energy system from a post-pandemic surge in energy demand, fuel supply bottlenecks, inflationary pressures and reconfigured energy supply chains as a result of the war in Ukraine, the research revealed.

“The current energy crisis reveals just how important energy is to people and the economy,” said Espen Mehlum, head of energy, materials and infrastructure programme for benchmarking at the WEF.

“Success will largely hinge on policy and investments. Prioritising energy efficiency and ramping up investment in clean energy infrastructure, renewables, clean hydrogen and new nuclear capacity can strengthen energy system resilience and will be a win-win for reducing emissions.”

There is also a need to protect consumers and ensure affordable access to energy, the WEF said.

"Governments need to invest in decarbonising their energy systems, while securing affordable energy supply, and companies should look to adopt low-carbon technologies and energy-efficient processes,” said Muqsit Ashraf, senior managing director and global energy business lead at Accenture.

Companies must help to protect against rising costs of living, including in transport, utilities and electricity, said Kathleen O’Reilly, global lead at Accenture Strategy.

“Vulnerable populations, in particular, who most feel the impact of volatile energy prices and their impact on other basic goods and services, must be a strategic focus in a transition to sustainability that is equitable in value and scalable in impact,” she said.