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Resilience Needed to Jump Start Final Stages of Energy Transition

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As countries continue their progress in transitioning to clean energy, it is critical to root the transition in economic, political and social practices to ensure progress is irreversible, according to the latest edition of World Economic Forum’s Fostering Effective Energy Transition 2021 report published today.

In its 10th edition, the report, published in collaboration with Accenture, draws on insights from the Energy Transition Index (ETI) 2021. The index benchmarks 115 countries on the current performance of their energy systems across the three dimensions of the energy triangle: economic development and growth, environmental sustainability, and energy security and access indicators – and their readiness to transition to secure, sustainable, affordable, and inclusive energy systems. This year’s report uses a revised ETI methodology, which takes into account recent changes in the global energy landscape and the increasing urgency of climate change action.

“As we enter into the decade of action and delivery on climate change, the focus must also encompass speed and resilience of the transition. With the energy transition moving beyond the low hanging fruit, sustained incremental progress will be more challenging due to the evolving landscape of risks to the energy transition,” said Roberto Bocca, Head of Energy and Materials at the World Economic Forum.

The results for 2021 show that 92 out of 115 countries tracked on the ETI increased their aggregate score over the past 10 years, which affirms the positive direction and steady momentum of the global energy transition.

Strong improvements were made on the Environmental Sustainability and Energy Access and Security dimensions. Eight out of the 10 largest economies have pledged net-zero goals by mid-century. The annual global investment in the energy transition surpassed $500 billion for the first time in 2020, despite the pandemic. The number of people without access to electricity has declined to less than 800 million, compared to 1.2 billion people 10 years ago (2010). Increasing renewable energy capacity has in particular helped energy importing countries achieve simultaneous gains on environmental sustainability and energy security.

However, the results also show that only 10% of the countries were able to make steady and consistent gains in their aggregate ETI score over the past decade. This highlights the inherent complexity of the energy transition challenge, as evidenced by thelack of measurable progress in the economic development and growth dimension – primarily through fiscal implications, labour market dislocations, and affordability challenges resulting from the energy transition. Moreover, the carbon intensity of the energy mix has been rising in many emerging economies in Asia and sub-Saharan Africa.

“A resilient and just energy transition that delivers sustainable, timely results will require systemwide transformation, including reimagining how we live and work, power our economies and produce and consume materials,” said Muqsit Ashraf, a senior managing director who leads Accenture’s energy practice. “This in turn will require strong collaboration between policy makers, business leaders, energy consumers, and innovators. The journey to achieving such a balanced transition has been slow and daunting, but it is picking up momentum and offering countries and companies many opportunities for long-term growth and prosperity.”

The social, economic, and geopolitical interlinkages of the energy transition have exposed vulnerability to systemic risks and disruptions, which may threaten progress on the energy transition. This report makes 3 recommendations to enhance the resilience of the energy transition process: (1) pursue a just transition by prioritizing measures to support the economy, workforces and society; (2) amplify electrification while exploring other options for decarbonizing industries; (3) attract diversified, resilient sources of capital from the public and private sectors to fund multi-year and multi-decade investments.

Stephanie Jamison, a senior managing director who leads Accenture’s utilities practice, said resilience is a very important concept for the journey to clean energy. “The role of electricity in the energy system will increase significantly by 2050, which is a big transformation,” she said. “While it is great to see renewable energy sources stronger coming out of COVID, there is still a lot more work to do to further progress the shift to net-zero -carbon energy and ensure buy-in from a broad set of stakeholders.”

Country highlights from ETI 2021

This year’s report tracks progress over the last decade. The list of top performers in the ETI has stayed broadly consistent over this period, sharing common attributes such as low levels of fossil fuel subsidies, enhanced energy security and a strong regulatory environment to drive the energy transition. The top 10 countries on the ETI 2021 are Western and Northern European countries. Sweden

(1) leads the ETI for the fourth consecutive year, followed by Norway (2) and Denmark (3). All top 10 economies have made strong improvements in environmental sustainability, specifically in decreasing the carbon intensity of their energy mix, supported by strong political commitment and investments in the energy transition.

The United Kingdom (7), France (9) and Germany (18) are the only G20 countries in the top 20. Their progress is supported by strong performance on the environmental sustainability dimension, though their scores on economic growth and development have regressed over the past decade due to affordability challenges.

The United States (24) and Italy (27) have improved on all three dimensions of the energy triangle, while also strengthening their enabling environment. Japan (37) registered moderate improvements in its overall aggregate ETI score, primarily due to strong declines in per capita energy consumption as a result of energy-efficiency improvements, though it continues to face energy security challenges due to rising energy imports.

China (68) and India (87), which collectively account for a third of global energy demand, have both made strong improvements over the past decade, despite coal continuing to play a significant role in their energy mix. China’s improvements primarily result from reducing the energy intensity of the economy, gains in decarbonizing the energy mix through the expansion of renewables and strengthening the enabling environment through investments and infrastructure. India has targeted improvements through subsidy reforms and rapidly scaling energy access, with a strong political commitment and regulatory environment for the energy transition.

Among commodity exporting countries, Canada (22), Australia (35), Russia (73) and Saudi Arabia (81) lead globally on energy access and security dimensions, due to abundant domestic reserves. However, they have displayed divergent trajectories over the past decade. Australia has improved its scores through sustained increases in investment and renewable energy capacity, and the gradual phasing out of coal. Russia improved its scores due to the strengthening of the enabling environment for the energy transition, though the uptake of renewable energy remains low and fossil fuel exports remain high. Scores for Canada and Saudi Arabia declined marginally.

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Clean energy demand for critical minerals set to soar as the world pursues net zero goals

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Supplies of critical minerals essential for key clean energy technologies like electric vehicles and wind turbines need to pick up sharply over the coming decades to meet the world’s climate goals, creating potential energy security hazards that governments must act now to address, according to a new report by the International Energy Agency. 

The special report, The Role of Critical Minerals in Clean Energy Transitions, is the most comprehensive global study to date on the central importance of minerals such as copper, lithium, nickel, cobalt and rare earth elements in a secure and rapid transformation of the global energy sector. Building on the IEA’s longstanding leadership role in energy security, the report recommends six key areas of action for policy makers to ensure that critical minerals enable an accelerated transition to clean energy rather than becoming a bottleneck.

“Today, the data shows a looming mismatch between the world’s strengthened climate ambitions and the availability of critical minerals that are essential to realising those ambitions,” said Fatih Birol, Executive Director of the IEA. “The challenges are not insurmountable, but governments must give clear signals about how they plan to turn their climate pledges into action. By acting now and acting together, they can significantly reduce the risks of price volatility and supply disruptions.”

“Left unaddressed, these potential vulnerabilities could make global progress towards a clean energy future slower and more costly – and therefore hamper international efforts to tackle climate change,” Dr Birol said. “This is what energy security looks like in the 21st century, and the IEA is fully committed to helping governments ensure that these hazards don’t derail the global drive to accelerate energy transitions.”

The special report, part of the IEA’s flagship World Energy Outlook series, underscores that the mineral requirements of an energy system powered by clean energy technologies differ profoundly from one that runs on fossil fuels. A typical electric car requires six times the mineral inputs of a conventional car, and an onshore wind plant requires nine times more mineral resources than a similarly sized gas-fired power plant.

Demand outlooks and supply vulnerabilities vary widely by mineral, but the energy sector’s overall needs for critical minerals could increase by as much as six times by 2040, depending on how rapidly governments act to reduce emissions. Not only is this a massive increase in absolute terms, but as the costs of technologies fall, mineral inputs will account for an increasingly important part of the value of key components, making their overall costs more vulnerable to potential mineral price swings.

The commercial importance of these minerals also grow rapidly: today’s revenue from coal production is ten times larger than from energy transition minerals. However, in climate-driven scenarios, these positions are reversed well before 2040.

To produce the report, the IEA built on its detailed, technology-rich energy modelling tools to establish a unique database showing future mineral requirements under varying scenarios that span a range of levels of climate action and 11 different technology evolution pathways. In climate-driven scenarios, mineral demand for use in batteries for electric vehicles and grid storage is a major force, growing at least thirty times to 2040. The rise of low-carbon power generation to meet climate goals also means a tripling of mineral demand from this sector by 2040. Wind takes the lead, bolstered by material-intensive offshore wind. Solar PV follows closely, due to the sheer volume of capacity that is added. The expansion of electricity networks also requires a huge amount of copper and aluminium.

Unlike oil – a commodity produced around the world and traded in liquid markets – production and processing of many minerals such as lithium, cobalt and some rare earth elements are highly concentrated in a handful of countries, with the top three producers accounting for more than 75% of supplies. Complex and sometimes opaque supply chains also increase the risks that could arise from physical disruptions, trade restrictions or other developments in major producing countries. In addition, while there is no shortage of resources, the quality of available deposits is declining as the most immediately accessible resources are exploited. Producers also face the necessity of stricter environmental and social standards.

The IEA report provides six key recommendations for policy makers to foster stable supplies of critical minerals to support accelerated clean energy transitions. These include the need for governments to lay out their long-term commitments for emission reductions, which would provide the confidence needed for suppliers to invest in and expand mineral production. Governments should also promote technological advances, scale up recycling to relieve pressure on primary supplies, maintain high environmental and social standards, and strengthen international collaboration between producers and consumers.

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Global e-commerce jumps to $26.7 trillion, fuelled by COVID-19

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Parts of the online economy have boomed since COVID-19 began, while some pre-pandemic big-hitters have seen a reversal of their fortunes in the last year, amid widespread movement restrictions, UN economists have found.

According to UN trade and development experts UNCTAD, the e-commerce sector saw a “dramatic” rise in its share of all retail sales, from 16 per cent to 19 per cent in 2020.

The digital retail economy experienced most growth in the Republic of Korea, where internet sales increased from around one in five transactions in 2019, to more than one in four last year.

“These statistics show the growing importance of online activities”, said Shamika Sirimanne, UNCTAD’s director of technology and logistics. “They also point to the need for countries, especially developing ones, to have such information as they rebuild their economies in the wake of the COVID-19 pandemic.” 

The UK also saw a spike in online transactions over the same period, from 15.8 to 23.3 per cent; so too did China (from 20.7 to 24.9 per cent), the US (11 to 14 per cent), Australia (6.3 to 9.4 per cent), Singapore (5.9 to 11.7 per cent) and Canada (3.6 to 6.2 per cent).  

Online business-to-consumer (B2C) sales for the world’s top 13 companies stood at $2.9 trillion in 2020, UNCTAD said on Friday.

Bumpy ride

UNCTAD also said that among the top 13 e-commerce firms – most being from China and the US – those offering ride-hailing and travel services have suffered.

These include holiday site Expedia, which fell from fifth place in 2019 to 11th in 2020, a slide mirrored by travel aggregator, Booking Holdings, and Airbnb.

By comparison, e-firms offering a wider range of services and goods to online consumers fared better, with the top 13 companies seeing a more than 20 per cent increase in their sales – up from 17.9 per cent in 2019.

These winners include Shopify, whose gains rose more than 95 per cent last year – and Walmart (up 72.4 per cent). 

Cashing-up

Overall, global e-commerce sales jumped to $26.7 trillion in 2019, up four per cent from a year earlier, the UN number-crunchers noted, citing the latest available estimates.

In addition to consumer online purchases, this figure includes “business-to-business” (B2B) trade, which put together was worth 30 per cent of global gross domestic product two years ago.

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COVID-19 has reshaped last-mile logistics, with e-commerce deliveries rising 25% in 2020

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COVID-19 has shifted the way people buy goods, accelerating the rise in online shopping and e-commerce deliveries. According to a new report from the World Economic Forum, this has led to a 25% rise in consumer e-commerce deliveries in 2020.

The new report, Pandemic, Parcels and Public Vaccination: Envisioning the Next Normal for the Last-Mile Ecosystem, explores changes seen over the last year which will greatly influence last mile deliveries in the future. For example, it’s expected that 10%-20% of the recent increase in e-commerce deliveries will continue after the pandemic and the lifting of COVID-19 restrictions.

“Covid-19 shutdowns have completely reshaped how we live and of course this includes how and what we’re buying,” said Christoph Wolff, Head of Mobility, World Economic Forum. “Leaders must consider and respond to the effects COVID-19 has had on e-commerce deliveries and what impact these changes will have on their cities and communities.”

Beyond rising demand, the past year has also seen a large shift to greener delivery options, with wider spread EV across the industry and more stringent carbon emission rules from cities expected to shape delivery networks in the near future.

Overall, the report finds six main structural changes to the delivery and logistics sector that are expected to last:

Six structural changes

The pandemic has caused an increase in last-mile deliveries that are likely to persist.
In 2020, business-to-consumer parcel deliveries have risen by about 25%. The report suggests that part of this increased demand will be durable, with at least 10%-20% of the growth remaining post-pandemic.

Consumers increasingly buy new types of products online and consider environmental and health impact when buying.
As consumers continue to buy a wider array of goods online, they are also becoming more ecologically aware. For example, 56% of millennials cite environmental protection as the reason for choosing alternatives to home delivery.

Decarbonization of last-mile deliveries has accelerated.
Companies and cities have ramped up commitments to make emission-free deliveries, while many pandemic-related economic stimulus packages, especially in the European Union and China, contain provisions to support green mobility and goods transport.

Faced with budget challenges and increased transport needs, cities steer last-mile transitions.
Many cities, like Seattle and Boston, have started to repurpose kerb space to designated delivery pick-up. Others, including Santa Monica and Amsterdam, are taking bold action on cleaner delivery with “zero-emission delivery zones” and electric vehicle charging infrastructure.

Proven technologies are fuelling the last-mile ecosystem revolution.
While disruptive new technologies, such as drones and delivery robots, will continue to emerge, the last-mile revolution is happening now as proven technologies scale up. The likes of parcel lockers and data sharing for load pooling are being adopted around the world as the costs of implementation decrease

New business models emerge to meet increased demand for sustainable delivery vehicles.
Certain logistics companies are now offering services to online retailers, which will help them identify the delivery routes most suited to make the immediate transition to electric delivery vehicles.

Last mile for vaccines

While ensuring equitable access to COVID-19 vaccines remains the most pressing issue in global vaccine distribution, effective last-mile delivery is another critical issue for countries. The key challenges are cold storage, second vaccine dose needs, and a disconnect between the vaccine and patient journey.

“Governments and logistics companies could think about teaming up with players who are experienced in managing very local, capillary demand and with integrating a large number of local retail outlets,” says Anja Huber, Engagement Manager, McKinsey & Company. “Examples include large online retailers, eGrocery giants and technology platform players”

Potential solutions countries can implement for efficient vaccine delivery include real-time logistics planning, data integration, centralized management of delivery strategies at the national level and many more.

There are also early examples of countries that have handled this challenge particularly well. While there are many factors in vaccine distribution success, broadly speaking, countries with tight integration of healthcare and logistics stakeholders seem to show the highest national vaccination rates two months into 2021.

These include Israel, the UK and Chile outperforming other countries with more decentralized healthcare systems, like the US and Germany, which had slower initial vaccine rollouts.

Clearly, much still needs to be done to ensure developed countries overcome operational issues with vaccine delivery. However, mobility solutions should not overshadow an even larger ethical challenge in the differences of vaccine access between the global north and global south, which is a priority for greater equity.

Future of the last mile

The impact of COVID-19 on the last-mile delivery has accelerated existing trends across the sector, leading to six structural changes expected to shape the future of last mile deliveries.

These will be part of a broader urban mobility transition, driven by public policy and company actions. As cities and logistics leaders continue the sustainable urban delivery transition, close public-private coordination will be critical. Zero Emissions Urban Fleets (ZEUF) network, for example, provides a relevant dedicated stakeholder platform for this work.

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