WEF urges action for resilient energy transition, amid fuel price spikes

BY MADUABUCHI EFEGADI

The World Economic Forum, the international organisation for public-private cooperation, warns that the global energy security appears severely threatened, given the slow progress on climate action, imbalance and lack of collaboration in supply–demand levels.

WEF stressed that energy transition must address the challenges to environmental sustainability, energy security and energy justice and affordability. That the pace of energy transition needs to be supercharged, as demonstrated by the recent spike in fuel prices. To shape a balanced and effective energy transition could only be possible if there was new collaboration at supply and demand levels, the Switzerland based body said in a special report on the state of the global energy transition.

The new report, ‘Fostering Effective Energy Transition 2022’, indicates that urgent action was required by both private and public sectors to ensure a resilient transition as the world faces the most severe energy crisis since the 1970s.

According to the report, the urgency for countries to accelerate a holistic energy transition is reinforced by high fuel prices, commodities’ shortages, insufficient headway on achieving the climate goals and slow progress on energy justice and access.

Building on 10 years of the energy transition index, an annual country benchmarking report, the special edition report, launched in collaboration with Accenture, details key recommendations for governments, companies, consumers and other stakeholders on how to progress the energy transition.

The report insists that prioritising a resilient energy transition and diversification of the energy mix was crucial in responding to energy market volatility. To accelerate the transition to cleaner energy supply and demand, it notes that more countries need to make binding climate commitments, create long-term visions for domestic and regional energy systems, attract private sector investors for decarbonization projects and help consumers and the workforce adjust.

Roberto Bocca, WEF’s head of energy, materials and infrastructure, said countries are at risk of future events compounding the disruption of their energy supply chain at a time when the window to prevent the worst consequences of climate change is closing fast.

“While there are difficult decisions to be taken to align the imperatives of energy security, sustainability and affordability in the short term, now is the time to double down on action,” Bocca said.

Nigeria, an oil awash nation, still planning from behind, with no clear approach to its energy transition, would be certainly left behind by the rest of the world. With an unwaning appetite for petroleum export against creating credible domestic processing facilities, the country was asking the COP 26 participants last year not to allow defunding of gas projects, so that it (Nigeria) can use its large shares of gas.

Its vice president Yemi Osinbajo, in London last year, said much as Nigeria commits to the Paris agreement on climate change, the issue of limiting the development of gas projects poses dire challenges for the country, with its economy still battling to completely wriggle out of the pangs of a second recession since 2020.

With proven reserves in excess of 203 trillion cubic feet of gas, Nigeria is yet to develop critical gas utilisation infrastructure. Till date, the country is heavily dependent on crude export, with fewer options should gas projects be eminently limited by the strident global climate change campaign.

“The international community should understand that the plan to defund gas projects in the run up to the global net-zero emissions target would be unhelpful to developing countries like Nigeria,” Osinbajo had said in meetings he held ahead of the last Glasgow COP 26 summit.

The WEF new report also reveals the structural barriers to balancing energy affordability, security and availability with sustainability; saying this was due to compounded shocks to the energy system from a post-pandemic surge in energy demand, fuel supply bottlenecks, inflationary pressures and reconfigured energy supply chains as a result of the war in Ukraine.

To navigate this challenging situation, countries must pursue diversification on two fronts – not only in the domestic energy mix in the long term but also in considering their fuels and energy suppliers in the shorter term. Most countries rely on just a handful of trade partners to meet their energy requirements and have a deficient diversification of energy sources, providing limited flexibility to deal with disruptions, the report said.

It noted that of 34 countries with advanced economies, 11 rely on only three trade partners for over 70 percent of their fuel imports.

“The current energy crisis reveals just how important energy is to people and the economy,” said Espen Mehlum, WEF’s head of energy, materials and infrastructure programme for benchmarking.

He said, “it is now critical to tackle the structural risks that have become evident while also increasing momentum on climate action. Success will largely hinge on policy and investments. Prioritising energy efficiency and ramping up investment in clean energy infrastructure, renewables, clean hydrogen and new nuclear capacity can strengthen energy system resilience and will be a win-win for reducing emissions.”

For Muqsit Ashraf, a senior managing director and global energy business lead at Accenture: “Governments need to invest in decarbonizing their energy systems while securing affordable energy supply; and companies should look to adopt low-carbon technologies and energy-efficient processes. A key area of focus should be value-chain and industrial decarbonization initiatives, which hold great promise for emissions reductions, particularly when they involve collaboration across multiple stakeholders, including customers, suppliers and regulators, on initiatives like circular supply networks and CO2 handling infrastructure.”

There’s also a need to protect consumers and ensure affordable access to energy.