By Dr Mike Enskat with research and support by Luise Dahmen
Worldwide, policy frameworks are being overhauled to accommodate renewable energy into conventional energy systems. These changes are accompanied by significant shifts at the market level, as renewable energy is becoming increasingly cost-competitive and technological innovation reaches sectors that had long been deemed irrevocably fossil-fuel dependent. Under the current COVID-19 pandemic, governments have shown that they are able to act quickly and drastically. Now they must apply the same determination to pursue a just global energy transition. This will only be successful if the world joins forces.
A business case for renewables
Renewable energies such as solar, wind and hydropower have taken centre stage in the global energy market. In the European Union (EU) they have become the single most important source of electricity. Globally, they already account for more than a quarter of electricity generation and will allow to give electricity supply to hundreds of millions of people within the next decade.
“”The business case for renewables is solid. Annual investments in renewables more than doubled in the past ten years, reaching 301.7 bn US dollars in 2019. Turbulences and insecurities on the international oil market – heightened by the COVID-19 pandemic – make divesting from fossil fuels even more attractive.”
In 2019, installed renewable power capacity grew by more than 200 GW – the fifth year in a row that it overtook the combined net installations of fossil fuels, including nuclear. In most cases, renewables provided a better business case even than coal, the cheapest fossil fuel. This is reflective of the overall trend of the past ten years, where costs of solar PV decreased by 82%, those of onshore wind by 40% and those of offshore wind 29%.
The business case for renewables is solid. Annual investments in renewables more than doubled in the past ten years, reaching 301.7 bn US dollars in 2019. Turbulences and insecurities on the international oil market – heightened by the COVID-19 pandemic – make divesting from fossil fuels even more attractive.
But the main driver behind these numbers are comprehensive policy frameworks. Today, 161 countries have a renewable energy policy, 61 even strive for 100% renewable electricity. Feed-in policies and tenders are the most proliferated instruments, with 113 and 109 countries having used them respectively.
Influential international institutions for the energy transition
Those are the preliminary results of more than three decades of ambitious bi- and multi-lateral cooperation in the field of climate change and sustainable development. The United Nations Framework Convention on Climate Change UNFCCC is emblematic for that, as it is one of the most universally recognized treaties. Under the 2015 Paris Climate Agreement, almost all its 197 members agreed to keep global warming well under 2° C and promised to pursue this goal at the national level.
Another key organization is the International Renewable Energy Agency IRENA. Once initiated by Germany, Denmark and Spain in 2009, it currently counts 161 countries as its members and is one of the most respected authorities in the sector. IRENA constantly benchmarks the global energy transition and diplomatically urges states to “up their game”.
In a similar way, the 2030 Agenda for Sustainable Development defines and interrelates its numerous fields of actions, linking climate action and clean energy to transport, industry, poverty and reduced inequalities. The SDGs underline that sustainable development necessitates more than simply adding renewables to the system. While the global electricity sector is transforming, transport, heating and cooling still lack momentum. Only 11% of the total final energy consumption in 2018 was covered by modern renewables. According to the International Energy Agency (IEA) and IRENA, around 65% of renewables will be needed in the energy mix by 2050 to fulfil the Paris Agreement.
Global policy efforts still fall short of reaching these targets. While most states handed in their Nationally Determined Contributions (NDCs) to the Paris Agreement and 121 even plan to achieve carbon neutrality by 2050, most commitments just do not go far enough. The challenge no longer lies with capacity scale-up alone, but with sector coupling, stable energy supply and ensuring a just transition for all. This cannot be achieved by a policy pick ’n’ mix.
More harmonization, less fragmentation
The global energy transition will likely reshape traditional geopolitical energy patterns and redistribute long-term resource hegemonies. So, there is a unique opportunity to reconsider the system’s social, environmental and economic impacts, to render it more sustainable and just for all. But to get there, governments and business alike must choose policy harmonization over fragmentation, and co-creation over competition.
“The global energy transition will likely reshape traditional geopolitical energy patterns and redistribute long-term resource hegemonies.”
Existing platforms such as IRENA can advise and broker this process, using formats such as the recent Global Commission on the Geopolitics of the Energy Transformation. Ultimately, bi- and multilateral cooperation lie at the heart of this transformation. There are additional gains if countries join forces, for example to increase the market penetration of renewable energies by expanding electricity grids in order to connect with areas with high renewable energy potential. Another example is the use of renewable energy beyond the direct supply of electricity, for instance to produce “green” hydrogen that can be traded across continents and thus help to decarbonise energy supply in those areas that enjoy less favourable conditions for the use of renewables. Germany is only the latest country to have produced a strategy for low-carbon hydrogen – developing an international market is a crucial element in this.
Last year, the EU Commission’s European Green Deal set the goal of making the EU the first carbon-neutral continent by 2050. It recognized that achieving this goal will need closely knit “green” energy relations with international partners. The EU’s Energy Diplomacy Action Plan already insinuated what this might look like: More energy cooperation and dialogues, particularly to build sustainable energy markets and stronger support for the global energy architecture and multilateral initiatives.
One example of successful cooperation are the bilateral energy partnerships which Germany has set up with several countries. Not only do they facilitate the implementation of climate-friendly energy technologies. They also serve as high-level platforms to create political momentum for the global energy transition. Furthermore, they help to tap on the efficiency potential that come with the joint creation of innovative energy policies. This is especially true in these times, when governments all over the world struggle to prioritise their spending.
There are many promising bases for international cooperation in the field of renewable energy are manifold. Now they must be scaled-up to bring the just energy transition to everyone.
Dr Mike Enskat is the head of the Energy, Water, and Transport section at Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, a global service provider in the field of international cooperation for sustainable development and international education work. GIZ is a public-benefit federal enterprise owned by the German Federal Government.