Transforming the Energy System
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TRANSFORMING THE ENERGY SYSTEM – AND HOLDING THE LINE ON RISING GLOBAL TEMPERATURES © IRENA 2019 Unless otherwise stated, material in this publication may be freely used, shared, copied, reproduced, printed and/or stored, provided that appropriate acknowledgement is given to IRENA as the source and copyright holder. Material in this publication that is attributed to third parties may be subject to separate terms of use and restrictions, and appropriate permissions from these third parties may need to be secured before any use of such material. Citation: IRENA (2019), Transforming the energy system – and holding the line on the rise of global temperatures, International Renewable Energy Agency, Abu Dhabi. ISBN 978-92-9260-149-2 About IRENA The International Renewable Energy Agency (IRENA) is an intergovernmental organisation that serves as the principal platform for co-operation, a centre of excellence, a repository of policy, technology, resource and financial knowledge, and a driver of action on the ground to advance the transformation of the global energy system. IRENA promotes the widespread adoption and sustainable use of all forms of renewable energy, including bioenergy, geothermal, hydropower, ocean, solar and wind energy, in the pursuit of sustainable development, energy access, energy security and low-carbon economic growth and prosperity. www.irena.org Acknowledgements This report was developed under the guidance of Elizabeth Press and authored by Rabia Ferroukhi, Gayathri Prakash, Xavier Casals, Bishal Parajuli, Nicholas Wagner (IRENA), and Padmashree Sampath (IRENA consultant), with support from Claire Kiss and Neil MacDonald (IRENA). Valuable review and feedback were provided by Dolf Gielen, Ricardo Gorini, Paul Komor (IRENA), Jonas von Freiesleben (Ministry of Climate, Energy and Utilities, Denmark) and Hafida Lahiouel (UNFCCC). Steven Kennedy edited the report. IRENA is grateful for the generous support of the Government of Denmark, which made the publication of this report a reality. Available for download: www.irena.org/publications For further information or to provide feedback: [email protected] Disclaimer The designations employed and the presentation of materials featured herein are provided on an “as is” basis, for informational purposes only, without any conditions, warranties or undertakings, either express or implied, from IRENA, its officials and agents, including but not limited to warranties of accuracy, completeness and fitness for a particular purpose or use of such content. The information contained herein does not necessarily represent the views of all Members of IRENA, nor is it an endorsement of any project, product or service provider. The designations employed and the presentation of material herein do not imply the expression of any opinion on the part of IRENA concerning the legal status of any region, country, territory, city or area or of its authorities, or concerning the delimitation of frontiers or boundaries. 2 FOREWORD FOREWORD from the IRENA Director-General In response to the threat of climate change, countries around the world have pledged Francesco La Camera to invest in low-carbon energy. National plans and investment patterns, however, Director-General show a stark mismatch with the pathway to meet the commitments set out in the Paris International Renewable Agreement, which would keep the rise in global temperatures well below 2 degrees (°C) Energy Agency and ideally hold the line at 1.5°C. At least USD 95 trillion worth of energy investments are planned worldwide until mid- century. These must rise to USD 110 trillion to climate-proof the energy mix, IRENA analysis shows. At the same time, planned fossil-fuel investments must be substantially redirected, with annual investments in renewables more than doubled for the coming decade. Renewables and efficiency together offer the most realistic way to cut energy-related carbon-dioxide emissions in the timeframe identified by the Intergovernmental Panel on Climate Change. Combined with rapid electrification, they can achieve over nine- tenths of the reductions needed. Transforming the energy system is not only about installing renewables. It is about investing in more flexible infrastructure. It is about rethinking current plans to avoid stranding assets in outdated systems. Aligning energy investments with broader socio- economic policies can ensure just and timely changes that leave no one behind. The renewables-based transformation would grow employment 14% and add 2.5% to global GDP compared to current plans, IRENA’s roadmap for 2050 indicates. Every dollar spent delivers returns between three and seven dollars in fuel savings, avoided investments and reduced health and environmental damage. The sooner coal- and oil- burning plants are excluded as new investment options, the more countries can benefit from a modern, fit-for-purpose energy system. The market has given the signal with cost-competitive technologies. Policy makers must now put the enabling frameworks in place to accelerate climate-proof investments. We must create a low-carbon energy system to hold the line on rising global temperatures. It’s possible. 3 CONTENTS CONTENTS Figures, tables and boxes __________________________________________ 05 Key findings ____________________________________________________ 06 Key numbers ____________________________________________________ 10 1. A climate-safe energy future __________________________________12 1.1. Current plans – or a real energy transformation? _____________________ 14 1.2. What a climate-safe energy transformation looks like – ________________17 1.3. – and what it would deliver _____________________________________ 19 2. Investments needed to hold the line __________________________ 20 2.1. Investments in renewable power generation _______________________ 23 2.2. Investments in energy efficiency ________________________________ 28 2.3. Investments in electrification and direct uses ______________________ 29 2.4. Breakdown of investment by region _______________________________31 2.5. Shifting investment ___________________________________________ 34 3. Drivers of the energy transformation – and their socio-economic footprint __________________________ 36 3.1. Global GDP and job creation ____________________________________ 38 3.2. Regional GDP and employment _________________________________ 43 3.3. Varying effects of the shift to renewables _________________________ 45 4. Policies to ensure equitable outcomes ________________________ 47 4.1. Deployment policies __________________________________________ 48 4.2. Enabling policies _____________________________________________ 48 4.3. Integration policies ____________________________________________51 References _____________________________________________________ 52 Abbreviations ___________________________________________________ 52 Annex: The socio-economic footprint of Current Plans vs. Energy Transformation __________________________________________ 53 4 CONTENTS CONTENTS FIGURES, TABLES AND BOXES Figures, tables and boxes __________________________________________ 05 Figure 1.1 Annual energy-related CO2 emissions and Figure 3.2 The energy transformation and its reductions, 2010-2050 ________________ 15 socio-economic footprint ______________38 Key findings ____________________________________________________ 06 Figure 1.2 Key indicators for two scenarios: Current Plans Figure 3.3 Global GDP, trade, consumer spending and Key numbers ____________________________________________________ 10 vs. Energy Transformation _____________ 16 investment differences (%) between Current Plans and Energy Transformation, Figure 1.3 Renewable and non-renewable 2019–2050 _________________________39 shares of total primary energy supply until 2050: Two scenarios __________________ 17 Figure 3.4 Global employment difference (%) between 1. A climate-safe energy future __________________________________12 Current Plans and Energy Transformation, Figure 1.4 Global electricity costs from utility-scale 2019–2050 ________________________ 40 1.1. Current plans – or a real energy transformation? _____________________ 14 renewable power generation, 2010–2018 __ 18 Figure 3.5 Global employment in the energy sector and ________________ Costs and savings under Energy 1.2. What a climate-safe energy transformation looks like – 17 Figure 1.5 renewables, 2017, 2030 and 2050 ________ 41 Transformation until 2050, compared 1.3. – and what it would deliver _____________________________________ 19 with Current Plans ___________________ 19 Figure 3.6 Global employment in Energy Transformation 2050, disaggregated by technology, value Figure 2.1 Cumulative investment in Current Plans segment and required skills ____________43 2. Investments needed to hold the line __________________________ 20 and Energy Transformation scenarios until 2050 __________________________ 21 Figure 3.7 Effect of Current Plans vs. Energy _______________________ 23 2.1. Investments in renewable power generation Transformation on GDP in selected regions Figure 2.2 Average annual investments in renewable ________________________________ and countries by 2050 (% difference) ____ 44 2.2. Investments in energy efficiency 28 power generation capacity until 2050 ____23 2.3. Investments in electrification and direct uses ______________________ 29 Figure 3.8 Effect of Current Plans vs. Energy Figure 2.3 Cumulative investment in renewable power Transformation on employment in 2.4. Breakdown of investment by region _______________________________31