Resilient Transformation of the Energy System: Navigating the When, How, and at What Speed

Charting the Path to a 1.5°C Future

The world faces a critical juncture in its energy future. Compounding crises, from the ongoing pandemic to the war in Ukraine, have accentuated the urgent need to accelerate the global energy transition. Short-term interventions to address immediate challenges must be accompanied by a steadfast focus on a successful long-term transition that aligns with the 1.5°C target set forth in the Paris Agreement.

Achieving the 1.5°C goal requires radical action to transform how societies produce and consume energy. IRENA’s 1.5°C Scenario positions electrification, efficiency, and renewable energy as the key drivers, enabled by hydrogen, sustainable biomass, and carbon capture and storage. This pathway would result in a 37 gigaton annual reduction in CO2 emissions by 2050.

However, the current energy transition trajectory is far from on track. The announcements and pledges made at COP26 are projected to reduce emissions by only around 20% by 2030 compared to business as usual, leaving a significant gap to the 1.5°C target. Urgent action is needed in the coming decade to put the world on the right path.

This article will explore the priority actions and policies required to accelerate the energy transition and achieve the 1.5°C goal by 2050, with a focus on navigating the when, how, and at what speed these changes must occur.

Accelerating Renewable Energy Deployment

The power sector has seen significant progress in renewable energy deployment, with renewable capacity increasing by 130% over the past decade. Solar PV and wind power have been the main drivers, with costs falling dramatically. Renewables are now the cheapest source of new electricity generation in most regions.

However, the pace of change is still not enough. To meet the 1.5°C target, annual renewable power capacity additions must nearly triple, reaching at least 800 GW per year through 2030. This will require a significant scale-up across all renewable technologies, including solar PV, wind (onshore and offshore), hydropower, bioenergy, geothermal, and emerging solutions like concentrated solar power (CSP) and ocean energy.

Key actions to accelerate renewable power deployment:

1. Implement targeted deployment policies: Structured procurement mechanisms like auctions and feed-in tariffs, along with financial and fiscal incentives, are crucial to build markets, facilitate scale-up, and reduce technology costs.

2. Enhance grid flexibility and integration: Upgrade and modernize grid infrastructure to increase resilience and accommodate high shares of variable renewable energy. Adapt electricity markets to the characteristics of decentralized generation.

3. Foster less mature technologies: Set technology-specific targets and policies to support the development and deployment of less mature renewables like CSP, ocean energy, and geothermal.

4. Ensure equitable access: Design policies and programs that enable distributed renewable energy solutions to reach underserved communities and facilitate a just energy transition.

Expanding Renewables Beyond Power

While the power sector has made significant progress, the direct use of renewable energy in end-use sectors like transport, buildings, and industry has lagged. Bioenergy, solar thermal, and geothermal currently account for the majority of renewable energy use outside the power sector, but their deployment must be scaled up significantly.

In the 1.5°C Scenario, the share of renewable energy in total final energy consumption needs to rise from 14% in 2019 to around 40% by 2030. This will require a combination of policies to support the direct use of renewables, including:

Key policies for direct renewable energy use:

1. Renewable energy targets and mandates: Set targets and implement mandates for the use of renewable energy in buildings, industry, and transport.

2. Financial and fiscal incentives: Provide grants, tax credits, and other financial support to make renewable heating/cooling, biofuels, and other direct renewable applications more cost-competitive.

3. Sustainability frameworks: Develop comprehensive guidelines and tools to ensure the sustainable production and use of bioenergy, including certification schemes and legislation.

4. Transition planning: Prioritize the use of bioenergy in applications that lack other renewable alternatives and accelerate the development of alternatives for hard-to-abate sectors.

Driving Energy Efficiency and Electrification

Energy efficiency and electrification are critical pillars of the energy transition, contributing to over 50% of the emissions reductions needed to reach the 1.5°C target. The rate of energy intensity improvement must more than double, from 1.2% per year in recent years to 3.1% by 2030.

Electrification will be a key enabler, with the share of direct electricity in final energy consumption expected to rise from 21% in 2019 to 30% by 2030. This will require a massive scale-up of electric vehicles, heat pumps, and other electric end-use technologies.

Key actions to drive energy efficiency and electrification:

1. Ambitious efficiency standards: Implement stringent energy efficiency standards for buildings, appliances, and industrial processes, backed by financial incentives and public awareness campaigns.

2. Electrification strategies: Develop comprehensive electrification roadmaps that align with renewable energy deployment plans and address the impact on power grids.

3. Supportive policies for EVs and heat pumps: Provide financial incentives, public procurement programs, and charging infrastructure mandates to accelerate the adoption of electric vehicles and electric heating/cooling solutions.

4. Integrated planning: Ensure close coordination between energy efficiency, electrification, and renewable energy policies to maximize synergies and avoid unintended consequences.

Scaling Up Hydrogen and Carbon Removal

Hydrogen and carbon capture and storage (CCS) will play crucial roles in decarbonizing hard-to-abate sectors and enabling negative emissions.

In the 1.5°C Scenario, green hydrogen production needs to grow from negligible levels today to 154 million tonnes by 2030, requiring an investment of $88 billion per year in electrolyzers, infrastructure, and feedstock. Bioenergy coupled with CCS (BECCS) and other carbon removal technologies will also be essential, reaching nearly 1 Gt of CO2 captured and stored per year by 2030.

Key actions to scale up hydrogen and carbon removal:

1. Develop hydrogen roadmaps and strategies: Establish clear policies, targets, and support schemes to drive the development of the global hydrogen market and reduce costs.

2. Invest in CCS and BECCS: Accelerate the deployment of CCS and BECCS through targeted policies, public-private partnerships, and international cooperation to scale up carbon capture and storage capacity.

3. Ensure sustainability: Implement strong, evidence-based sustainability frameworks and regulations to guide the expansion of bioenergy and carbon removal solutions.

4. Foster innovation: Increase investment in research, development, and demonstration projects to advance hydrogen and carbon removal technologies and drive down costs.

Financing the Transition

Achieving the 1.5°C target will require a significant scale-up of investments, from $2.1 trillion per year in 2019 to $5.7 trillion per year through 2030. This includes redirecting $0.7 trillion per year from fossil fuels to energy transition technologies.

While the private sector is expected to provide the majority of the additional capital, public financing will play a crucial role in catalyzing private investment, creating an enabling environment, and ensuring a just and inclusive transition.

Key actions to finance the transition:

1. Redirect fossil fuel investments: Implement policies to phase out fossil fuel subsidies and ensure that the full environmental, health, and social costs of fossil fuels are reflected in their prices.

2. Leverage public financing: Increase public funding for energy transition technologies, infrastructure, and social programs to support a just transition, with a focus on developing countries.

3. De-risk private investment: Provide financial de-risking mechanisms, such as loan guarantees and insurance, to attract private capital to energy transition projects.

4. Enhance international cooperation: Strengthen global collaboration to channel financial resources, knowledge, and capacity to developing countries and ensure an equitable energy transition.

A Comprehensive Policy Framework

Achieving the 1.5°C target will require a comprehensive policy framework that addresses the technical, social, and economic aspects of the energy transition. This includes:

1. Deployment policies: Implement a suite of measures, such as targets, auctions, and financial incentives, to drive the large-scale deployment of renewable energy, energy efficiency, and electrification.

2. Enabling policies: Eliminate market distortions, phase out fossil fuel subsidies, and implement carbon pricing and other fiscal policies to enhance the competitiveness of energy transition solutions.

3. Structural and just transition policies: Manage the socio-economic impacts of the transition, support workforce retraining, and promote local value creation and community participation.

4. Holistic global cooperation: Strengthen international collaboration to facilitate the flow of finance, technology, and capacity, and ensure a fair and equitable transition for all countries.

The energy transition is a complex undertaking that requires coordinated action across sectors and stakeholders. By implementing a comprehensive policy framework and accelerating the deployment of proven solutions, we can put the world on a resilient path to a 1.5°C future.

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