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April 3, 2024

Fragmented leadership risks ‘disorderly energy transition’, warns report

Wind turbines in Germany
The World Energy Council’s report notes that new technologies are increasing the supply of renewable electricity, but that there are differences in how and where this is adopted (Photo: Patrick Pleul/picture-alliance/dpa/AP Images)

Investor confidence in de-risking clean energy investment has improved, except in Africa, Latin America and the Caribbean, says the World Energy Council

Competing political agendas between nations, energy security concerns and divergent priorities over climate action risk undermining the world’s energy transition, says the World Energy Council, a UK-based membership organisation, which warns that “the risk of disorderly energy transitions looms large”.

The council’s latest report, based on a survey of around 1,800 energy leaders from more than 100 countries, earmarks five global drivers of change, namely digitisation, decarbonisation, decentralisation, diversification and disruption, and singles out the war in Ukraine and disruption in the Middle East for their impact on global energy resilience.

Geopolitical instability has contributed to a shifting of energy security fears, from supply-side security concerns to “demand-driven shocks and disruptions”, it adds, highlighting that these “shocks and disruptions” also include climate change.

The report acknowledges that new technologies are increasing the supply of renewable electricity, but underlines differences in how and where these are adopted.

The use of carbon capture, utilisation and storage technologies, for example, are considered a priority in the Middle East and Gulf states, but not elsewhere in the world, the report says. “This is expected considering the regions’ interest in establishing a circular carbon economy framework that helps identify economic opportunities by assigning a monetary value to CO2 emissions” via processes such as CCS, the council says. 

The need to strengthen energy grids and create more flexible energy storage is accepted across the globe, the report notes. There are differences in opinion, however, on how to prioritise climate action between regions, it adds.

The interdependence of food, water and energy systems was considered a priority by African respondents, but came lower down on the priority list for Latin American and Caribbean respondents, who prioritised “trilemma management”, namely the balance between energy security, equity and environmental sustainability.

Meanwhile, investor confidence in de-risking clean energy investment has largely improved, except in Africa, Latin America and the Caribbean, with energy transition investment up 17 per cent in 2023 compared with 2022, the report says. This growth was faster than investment in fossil fuels, with the International Energy Agency speculating that overall energy investment would reach $2.8tn in 2023, concentrated among a few dominant countries, including China, it adds.

“New mixes of policy and regulations are needed to manage the multiple objectives in redesigning energy for people and planet,” the report says, noting that change is afoot.

It highlights, for example, how governments are increasingly removing or reducing fossil subsidies and tax breaks in line with the commitment set at COP28 to transition away from fossil fuels, and how “the acceleration of investment in renewable energy has shifted the focus from simply adopting renewable sources to considering their entire life cycle impact”.

“This change reflects a broader trend away from a narrow focus on decarbonisation and electrification, towards a more holistic transformation of the entire energy system,” says the report.

You can find the full report here.

A service from the Financial Times