The Clean-Energy Fast Track
One of the biggest questions for policymakers, investors, and ordinary citizens is whether the development and adoption of clean-energy technologies will take place slowly or rapidly. There is ample evidence to suggest that it will happen quickly, and that those beholden to fossil fuels will soon be throwing good money after bad.
LONDON – The global transition from carbon-intensive fossil fuels to cleaner, more reliable renewables like wind and solar is already well underway. But the big question – for the 2020s and beyond – is how fast it will happen. A slow transition would mean that energy-sector incumbents continue to flourish, and we would all but certainly miss the emissions-reduction targets enshrined in the 2015 Paris climate agreement. But if the transition is rapid, incumbents will experience varying degrees of disruption – the price of keeping the Paris targets well within reach. As matters stand, both scenarios are possible, representing two paths that lie before us.
In a new report for the World Economic Forum’s Global Future Council on Energy, we and our co-authors identify four key areas that will determine which path we take. The Speed of the Energy Transitionoffers compelling evidence that the transition is coming fast, and that all stakeholders in the global energy system – which is to say, everyone – must start preparing.
One area where the gradual and rapid scenarios diverge is adoption of renewable energy. When will renewables start displacing incumbents? For markets, the key moment will be when renewables make up all of the growth in energy supply, as well as all the growth in electricity supply. That, most likely, will happen in the early 2020s, long before fossil fuels lose their dominant share of total energy supply. As renewables become the leading growth industries in the energy sector, financial markets will increasingly reallocate capital accordingly.