Globally transforming the energy sector

The energy sector is responsible for nearly 60% of global Green House Gas (GHG) emissions. A joint response and well-coordinated efforts of various stakeholders are required to ensure closing the access gap and meeting the 2030 target of universal access to affordable, reliable, sustainable, and modern energy services. Main challenges to overcome are finding opportunities for the de-carbonization of the energy sector while tackling climate change. There are several emerging challenges around energy access in developing countries, while there has been a continuous deliberation on key solutions to ensure access to clean, safe, affordable, and reliable energy for all by 2030. Identifying the key sectorial challenges in financing clean energy investment along with solutions, will have the potential to effectively support energy transition.

The foremost focus is on advancing energy access to reduce energy poverty in low-income and lower middle-income countries. There is a never-ending tension within governments between offering relatively quick and affordable energy access by utilizing fossil fuel generators, on one hand, and adopting more expensive clean solutions, such as wind or solar, on the other hand.

Instead, they must focus on long-term clean energy policies and solutions to promote energy access, such as a gradual implementation of carbon taxes on a larger scale in the coming years. Government strategies should connect their needs to international trends and market evolution. Temporary limited solutions should be considered, as providing energy access “today” may generate enough economic growth “tomorrow” for the green transition to be implemented in time.

Developmental solutions must be people-centred for effective energy transition. Off-grid solutions such as the as the “Pay-As-You-Go” (PAYGo) model, which made it possible for IFC’s Lighting Africa to enable 20.5 million people across Africa to meet their basic electricity needs through quality verified off-grid solar products, must be promoted and adopted.

The implementation of such models required collaboration and engaged from multiple stakeholders. Banks and other financial institutions, mobile phone operators, education or health services providers should be engaged to contribute towards the newly developed local economy. Governments should facilitate these partnerships and join investments through strong analytical strategies and develop a proper plan for tackling these issues as part of their economic recovery.

Further exploring the avenues to unlock clean energy investment opportunities. To reach net-zero emissions by 2050, the International Energy Agency (IEA) estimates that annual investment in transmission and distribution grids should expand to $820 billion by 2030 (from $260 billion today) and annual investment in CO2 pipelines and hydrogen-enabling infrastructure should increase to around $40 billion in 2030 (from $1 billion today).

In this investment scheme, enabling infrastructure and technologies is vital as clean electricity generation, network infrastructure and end-use sectors are key areas for increased investment. However, two major barriers remain: (i) lack of funding (investment gap) and (ii) price of technology and technology-related investments such as research & development. To tackle these setbacks, there can be tax incentives, along with de-risking mechanisms, for renewable energy equipment, solar and other renewable energy sources. Making these assets relatively cheaper, the renewable energy competitiveness would rapidly lead to another investment boom, thereby decreasing the costs.

Increase in financing research and development will also boost innovation in the energy sector. Encouraging peer-to-peer collaboration on these emerging technologies is critical to saving time and funds. Additionally, enhancing entrepreneurship and supporting small and medium enterprises in the energy sector through special funding programs, will heighten the sector-wide cooperation.

Several studies have suggested that new jobs created in transition-related technologies would substantially outweigh the job losses in the fossil fuel sectors. Thus, well-coordinated action between government, education, labour, and social protection entities must support the establishment of energy education and professional training centres. Reskilling programs and initiatives should be implemented to develop the local workforce in the communities where clean energy installations will be located.

Following these suggestions, another avenue that requires prioritization is the acceleration electric mobility deployment. Electric mobility is the cornerstone of climate impact mitigation strategies. Governments, sector stakeholders, investors in developed economies should focus on the upcoming electric vehicle (EV) market structure and demand. Financial incentives to support the installation of home, corporate, industrial, and highway clean energy charging stations develop relevant financing instruments and mechanisms to further promote EV infrastructure and, thus, adoption.

The transport sector currently faces two major challenges: (i) the high saturation of out of commission vehicles being resold in developing markets; (ii) lack of infrastructure to electrify long-haul transport.

Once out of commission in the origin country, EVs are sold cheaper in developing markets. The US, EU, and Japan exported 14 million units between 2015-2018, where 80% of vehicles failed to meet minimum safety and environmental standards.28 Retrofitting could be considered as one of the solutions to address this problem. Retrofitting EVs include replacing their combustion engine and petrol tank with new or modified parts or equipment such as motors and batteries/fuel cell, which were considered necessary at the time of manufacture. As for the electrification of long-haul transport, adopt Coordinated Long-Haul Charging (CLC). The concept prescribes building off-grid, renewable energy driven, fast charging

stations which are intelligently coupled and analysed with long-haul vehicle’s route planning and scheduling. As this technology requires the involvement of multiple high-level stakeholders, advanced AI, large infrastructural rollout, and access to advanced electrical storage technologies, developed economies should lead the way in implementing and making CLC Servers the gold standard for sustainable ground-shipping/transport.

EV batteries, however, can be a major environmental issue if not properly recycled. Utility companies, EV manufacturers, and governments should partner in deploying grid-scale (or even household scale) and renewable energy storage using second-life battery packs. At a broader level, the transport sector too requires enthusiastic investments towards research and development. Investment in research of development projects will encourage improvements and scaling up current clean energy transport technologies. Support for clean energy can be garnered through the introduction of e-bikes and quadricycle as tools to replace cars and motorbikes in daily, short, personal, and commercial city rides.

Public-private partnerships are vital to for providing solutions that include solar energy and battery swapping stations across the cities. Furthermore, local authorities should continue their support in planning, financing, and building bike lanes, coupled with other policies that encourage bike adoption (vouchers for bicycles, bicycle parking lots, bike-only areas in cities).

Investment opportunities into clean energy need to be scaled up, especially in developing regions of the world. Fostering the adoption of electric vehicles (EVs) and nudging consumers towards clean means of transportation are important puzzle pieces in the collective efforts of consumers to reduce their emission footprint.

The power sector is expected to steady increase its contribution towards global energy consumption, as the penetration of electrification in the transport, heating, and cooking sectors will significantly rise, as a result of sustainable policies. However, 0.8 billion people still lack access to energy today. Immediate action needs to be taken to unlock the global economic opportunities available while governments create strong analytical strategies for tackling these issues.



Views expressed above are the author’s own.


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