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Knowns and Unknowns of the Energy Transition

We live in times of great uncertainty. The COVID-19 pandemic has brought suffering, indescribable loss, and suffering all around the world. It also has shown us just how quickly our whole world can change, but it is not the only big change that we are facing in the early 21st century. The greatest changes will in fact be the result of the climate crisis, which is already creating disasters that upend lives across the world.

Energy is changing as well. This week for the first time, oil prices in Texas briefly dropped to below zero. More broadly, we know that we are in the midst of a global shift away from fossil fuels towards clean energy solutions, but the contours of this transition and its status are still uncertain.

In an effort to shed some light on these matters and separate what we do know from what we do not know, this week together with other members of the World Economic Forum’s Global Future Council on Energy, we published a new paper, “The A to Z of the Energy Transition: Knowns and Unknowns.”

This effort is particularly important as the energy transition is not static, but evolving, and our understanding evolves with it. We know things today that we did not know 10 years ago, or in some cases even a few years ago.

We know that the transition is happening, that it is inevitable, and that it is driven increasingly by the superior economics of energy efficiency, renewable energy and electrification. Technologies like LEDs, solar PV, wind turbines, and electric vehicles (EVs) aren’t just what we need to combat climate change: they are technically superior solutions to the older energy technologies they replace. This is why they usually win in places where the market is allowed to function.

Another thing that has become clear in recent years is that fossil fuel use is peaking. The peak of fossil use came in Europe in 2005, global coal use peaked in 2013, and petroleum use has already peaked in the developed world. These peaks are already having dramatic impacts on investment in these sectors, and there will be consequences for those who do not see what is coming.

 

The Unknowns

However, there is still a lot of work to be done. Even with favorable economics, it is not going to be easy to transition whole economies off of fossil fuels towards these cleaner options.

Part of the problem is that there are still many things that we do not know, and many details that are still unclear. We do not know the exact timing of coming fossil fuel peaks, or the adoption of clean alternatives. Many of the dynamics of the energy transition follow non-linear patterns, and there are likely to be many non-linear and unpredictable results of changing our energy system.

Crises like the recent COVID-19 pandemic further add to the uncertainty. This disaster has crushed fossil fuel demand, but also slowed the deployment of clean energy solutions that are needed to structurally replace oil and other fossil fuels.

There are still questions about technology. While LEDs, solar, wind and lithium-ion batteries—inside or outside EVs—are firmly established at this point as essential technologies, the transition will require more technologies, some of which are still being developed and scaled. We simply don’t know which of these will win out and which will solve some of the thornier problems of this transition, like decarbonizing the last 20 percent of our electricity system.

But we know enough to act. With renewable energy sources cheaper than fossil fuels, there are no longer any valid excuses to delay accelerating the energy transition. This paper by our Global Future Council is a call to action for investors, decision-makers at corporations, policymakers, and civil society writ large. The time has come to seize the opportunity presented by the energy transition, and to act boldly. Join us.