Security of CleanEnergy Transitions

Introduction Unprecedented events – the global coronavirus pandemic (Covid-19), the climate emergency and the turbulence in global energy markets, resulting from the Russian Federation’s (hereafter, “Russia”) invasion of Ukraine – have shocked the world in 2022. Unprecedented challenges, stemming from the triple global crisis require extraordinary actions to foster solidarity and fight the first and largest global energy crisis. In 2022, the G20’s lead on energy security and solidarity is more important than ever. Even before these events, the G20 has discussed and tackled a variety of related issues, proposing solutions and calls for action. In 2021 energy ministers at the G20 Ministerial in Naples, Italy, agreed on the G20 Naples Principles, which give guidance on collaboration towards maintaining and improving energy security during energy transitions. The objective of this report is to update and deepen the analysis, based on the G20 Naples Principles and with a specific focus on ways of maintaining and improving energy security during the current global energy crisis. It provides a series of recommendations to allow G20 countries to achieve secure clean energy transitions through important near-term actions which are aligned with long-term goals.

In the short term, there is a need to maintain energy security and rebalance supply and demand of energy by reducing demand and increasing supply, maximising the existing infrastructure, while radically reducing emissions of oil, gas and coal. This will help decrease pressure on global energy markets and prices. In March and April 2022, IEA member countries agreed to take collective action to release oil from their strategic reserves; the largest collective actions in the history of the IEA. IEA members underscored their strong and unified commitment to stabilising global energy markets, which was welcome by many G20 members. As these collective actions show, international collaboration and concrete actions are critical in ensuring the stable supply of energy, notably for developing economies. As underlined by the IEA report, Net Zero by 2050: A Roadmap for the Global Energy Sector, energy security becomes even more important on the way to net zero. Governments and industry must boost preparedness and resilience in the face of new and more frequent threats beyond traditional energy infrastructure disruption, such as cyberattacks and extreme weather events, particularly with regard to electricity infrastructure. The establishment of reliable and cost-effective supply chains for clean hydrogen and ensuring the adquacy of the global supply of critical minerals to meet the demand from ramping up clean energy technologies is part and parcel of achieving secure clean energy transitions.

Growing electricity demand and electrification Electricity plays a growing role in all economies and its share of total energy demand is expected to grow universally under the impetus of improving living standards and electrification of end uses. The need to expand access to affordable and clean energy to all citizens, in line with the United Nations’ Sustainable Development Goal 7 (SDG7), continues to be a critical driver of electricity demand growth. As household incomes increase, more appliances are connected and electricity demand rises. While emerging economies are on track to achieve universal access by 2030, developing economies in sub-Saharan Africa and developing Asia are at risk of not meeting the target (figure below).

Preparedness and response to global energy crises Traditional energy security risks related to oil and gas supply have been back in the spotlight due to rapid economic recovery after the Covid-19 pandemic and Russia’s invasion of Ukraine. While energy transitions raise new challenges to energy security, traditional supply security risks linked to fossil fuel use, notably oil and gas, continue to play an important role in ensuring sufficient energy supply. It should be noted that demand for oil and gas is recovering robustly and this trend is expected to continue, even during clean energy transitions, far above the path required to achieve net zero. But energy security is evolving, and the extent and type of risks to energy supplies are broadening, requiring countries to anticipate and manage both existing and newly emerging energy security challenges. Accelerated transitions are likely to amplify both old and new security factors, requiring the bolstering of resilience and emergency response capacities to ensure the uninterrupted flow of affordable energy.

Oil and gas remain significant during energy transitions Oil and gas consumption will remain important during the transition. Even under the IEA Net Zero Scenario, the dependency of developing Asia on oil and gas imports remains high, notably on OPEC+ supplies.

Price may also heavily influence the uptake of critical minerals. The price of many minerals and metals that are essential for clean energy technologies have recently soared due to a combination of rising demand, disrupted supply chains and concerns around tightening supply. The prices of lithium and cobalt more than doubled in 2021, and those for copper, nickel and aluminium all rose by around 25% to 40%. The price trends have continued into 2022. The price of lithium has increased by an astonishing two and a half times since the start of the year. The price of nickel and aluminium – for which Russia is a key supplier – has also kept rising, driven in part by Russia’s invasion of Ukraine. For most minerals and metals that are vital to the clean energy transition, the price increases since 2021 exceed by a wide margin the largest annual increases seen in the 2010s. While innovation and economies of scale rapidly reduced the cost of key clean energy technologies such as solar PV and batteries, surging raw material prices could now reverse these gains, with a major impact on the financing needs for clean energy transitions around the world. Raw materials now account for a significant and growing share of the total cost of clean energy technologies.


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