Ten steps to a faster energy transition

The global energy system is at a turning point on the road to a net-zero emissions future. As the COP28 conference kicks off this week, Rystad Energy outlines the 10 critical steps needed to accelerate the transition, limit global warming and secure a clean, reliable energy future

The transition from fossil fuels to clean energy sources is gathering pace, with notable progress in the adoption of clean technologies worldwide. Despite current progress, even more rapid expansion is needed, and the world's governments and business leaders will play a fundamental role in setting the pace.

Nevertheless, slow infrastructure development, under-investment in new technologies and poor network optimization are limiting significant progress. International collaboration is also vital, but recent global tensions and conflicts have proved a setback in recent years. While these tensions, along with the ongoing trade dispute between China and the USA, have accelerated the transition to renewable energies, they have also fragmented global supply chains,  which could hinder the development of clean technologies.

" Recent trends in energy and climate policy reflect a shift towards protectionism, with a growing emphasis on sovereign energy. This shift focuses on promoting domestic industry, reducing dependence on international trade, attracting local investment and job creation, and controlling the supply chain. To manage this transition effectively, it is essential that the global community avoids descending further down the energy pyramid due to conflicts that may arise from energy security issues," says Lars Nitter Havro, Senior Clean Technology Analyst at Rystad Energy.

"We have identified 10 steps that can dramatically accelerate the global energy transition while keeping the Paris Agreement's most ambitious targets within reach. These steps aim to target easy and effective decarbonization options that can accelerate renewable energy deployment, improve energy efficiency, address market failures and encourage the investments needed to reach net zero emissions," says Jon Hansen, Vice President of Global Energy Systems at Rystad Energy.

1. Accelerate the development of renewable energies

The supply chain is prepared and ready to rapidly expand its developments, but deployment needs to be accelerated. Approval times need to be shortened, and short-term financing obstacles such as high interest rates need to be mitigated, if new capacity is to reach its required target by 2030.  

According to our latest modeling, global renewable energy capacity needs to increase from around 3.6 terawatts (TW) last year to almost 11.2 TW by 2030 to meet a global warming scenario of 1.6 degrees. Solar photovoltaics will account for around 65% of this required expansion, but further work is needed before the world can move down this path. Based on existing projects, policies and industry trends, global renewable energy capacity will only reach 8 TW by 2030, and will not reach 11.2 TW until 2034 at the earliest. 

To accelerate the development of renewable energies, enabling reforms in the West, political support in Asia and optimization of the global solar supply chain are needed. In addition, Contracts for Difference (CfD) in markets with high renewable energy penetration can mitigate the financial risks of price cannibalization, encouraging stable investment in renewable energy projects.

2. Double the energy efficiency 

Of the 500 exajoules (EJ) of primary energy derived from fossil fuels, only 250 EJ are actually used. If solar, wind or hydro power were the main source of energy, around 440 EJ would be available to the end user.

When molecules are burned to produce electricity or motion, only 30-50% of the chemical energy is converted into useful energy. The remaining energy is lost as heat to the environment. By contrast, with renewable energy sources such as solar or wind power, 70-90% of the primary energy is available to the end user, even after taking storage and distribution into account. Heat pumps used in industry and buildings produce heat much more efficiently than traditional electric radiators. Consequently, the transition from fossil fuels to renewable energies would bring about a revolution in energy efficiency.

In addition, improvements in the energy efficiency of buildings, appliances and machinery have increased by one percent per year over recent decades, thanks to better materials and design. However, this trend requires stricter regulations and political incentives to accelerate and reach the levels required to align with the most ambitious climate scenarios.

3. Significant action on methane 

Methane is responsible for 15-20% of global greenhouse gas emissions, but reducing methane emissions is often overlooked in net-zero strategies. Methane is at least 25 times more potent than carbon dioxide (CO ₂ ) as a greenhouse gas, so clear targets, monitoring, penalties for non-compliance and incentives for methane capture are essential.

Agriculture, particularly livestock farming, and landfills are major sources of methane emissions. Supporting investment in emerging agricultural technologies such as cellular farming and precision fermentation can significantly reduce emissions from livestock. In addition, promoting landfill gas capture and anaerobic digestion can transform these emissions into energy or hydrogen, thereby reducing methane emissions into the atmosphere.

The oil and gas sector also makes a significant contribution to methane emissions, mainly due to leaks from production and transport infrastructures. Implementing best practices for regular and advanced leak detection, followed by timely repairs, minimizing flaring and accelerating the deployment of modern pneumatic systems, can significantly reduce emissions.

4. Putting a price on carbon

A gradual maturing of the value of carbon will send a powerful financial signal to polluters to reduce their emissions. This is particularly important in hard-to-reduce sectors, where the price of carbon directly influences the rate of adoption of clean technologies. For example, in the cement sector, the economic case for carbon capture, utilization and storage (CCUS) is strengthened by a value on carbon.

At present, CCUS is costly, but advances in the chemical absorption process should significantly reduce costs in the coming years. Chemical absorption is paving the way for the adoption of CCUS technology in the cement sector, accounting for 32% of the technology announced in forthcoming projects, including one led by Heidelberg Cement, which aims to capture 400,000 tonnes per year.

5. Increase investment in clean technologies

Investment in clean technologies, particularly solar and wind power, will overtake investment in oil and gas by 2025. However, it is crucial to accelerate the process, particularly in emerging countries and technologies such as green hydrogen.

In 2023, 70% of low-carbon investments were made in eight countries, including 50% in China and 20% in the G7 countries. The remaining 30% was made mainly in developed economies, with the exception of India, which accounted for 2.5% of global low-carbon investment. It is therefore essential to stimulate early demand for low-carbon products in emerging economies by investing in mature end-user technologies that can drive demand for electrification and clean technologies.

6. Optimize network utilization 

The limitations of electricity grids often hold back renewable energy sources. It's widely believed that integrating new, variable renewables requires massive investment in grid infrastructure, but this is incorrect. Only 40-50% of grids are actively used. Increasing grid efficiency could therefore significantly reduce the amount of new capacity required.

By implementing existing, affordable technologies such as topology optimization and dynamic line evaluation, transmission capacity can be increased by 30-40% and 20%, respectively. This would significantly improve network resilience, flexibility and efficiency. In addition, robust energy storage solutions could manage peaks in demand during heat waves and cold snaps. .

7. Adopt electrification of road transport

The switch to electric vehicles (EVs) is crucial to reducing our dependence on fossil fuels. Road transport alone accounts for 19% of the world's final energy demand and 15% of global CO ₂  . To be on track towards a 1.6 degree warming scenario, we need to set an ambitious but achievable target of 70% electric vehicle penetration.

To facilitate an accelerated transition in the sector, financial incentives such as the $7,500 per vehicle subsidy provided by the U.S. Inflation Reduction Act are crucial, as is the expansion of the charging network.

8. Reduce, reuse, recycle

The circular economy is essential to an effective decarbonization strategy. The reuse of materials, such as the reuse of electric vehicle batteries for stationary energy storage, and a significant increase in recycling rates are essential. Without specific actions and supportive policies, opportunities for sustainable industrial practices could be missed.

Recycling is particularly crucial in sectors that are difficult to reduce, such as steel production. Primary steel production emits 2.3 tonnes of CO ₂  per tonne of steel, while recycled steel produces only 680 kg of CO ₂  per tonne, resulting in a 70% reduction in emissions. This highlights the essential role of recycled steel in environmental sustainability, and policymakers should take note.

9. Eliminate inefficient fossil fuel subsidies

Inefficient fossil fuel subsidies create a significant distortion in global energy markets. These subsidies encourage inefficient and increased use of fossil fuels, create inaccurate price signals in favor of energy efficiency, and give an unfair advantage to the transition to clean energy technologies.

Although significant, the direct financial impact of these subsidies is further compounded by the environmental and health impacts. A structured, phased phase-out should be implemented to level the playing field, realign market dynamics towards sustainable energy use and facilitate a smoother transition for economies and consumers accustomed to subsidized energy prices.

10. Preventing trade tensions from holding back progress

To effectively combat climate change, world leaders must face up to the risks of trade tensions and the trend towards relocation of supply chains. While localizing production stimulates domestic industries, it can considerably slow down the energy transition by encouraging subsidy races in key cleantech sectors such as batteries, hydrogen and solar photovoltaics. What's more, injecting funds into these sectors is not a cure-all, especially given the associated skills shortages.

By Rystad Energy