BrazilEuropean countries top WEF and McKinsey Energy Transition Index
The top ten countries in the world to effectively foster energy transition are all European, according to a new joint report by McKinsey & Company and the World Economic Forum. The list finds representation for every country in Scandinavia, as Sweden is crowned champion, followed by Norway and Switzerland.
In a recent report titled ‘Fostering effective energy transition: A fact-based framework to support decision-making,’ the World Economic Forum (WEF) outlines the imperatives necessary to facilitate a country’s energy transition in an effective manner. The report is a useful benchmarking mechanism as pressure mounts from the Paris agreement targets, and was prepared in collaboration with global management consulting firm McKinsey & Company, which offered analytical support.
McKinsey is a longtime partner of the WEF and has worked with the organisation on a number of projects, including the ‘Risk and responsibility in a hyperconnected world’ and ‘Innovation with a Purpose’ reports, as well as the New Concept for Europe strategy. The consulting firm is an advocate for sustainable economies and an industry thought leader in the energy transition domain.
Together, the two have produced the first Energy Transition Index, which is the centrepiece of the new report, and is aimed at becoming an industry standard for analysing national energy scenarios. The index is built off the Energy Architecture Performance Index, which the WEF has been creating in conjunction with another consulting heavyweight Accenture since 2013. The new index, however, allows for forward looking elements that indicate a country’s readiness to transition.
The index includes two broad, yet equally weighted sub-sections which develop a country’s ranking as a percentage. The first indicator is the system performance score, wherein a country can win a high score based on its balance between economic development, growth, environmental sustainability, security and accessibility. The leader in this category was Norway, followed closely by Sweden and the Czech Republic.
The second category of transition readiness was led by Finland and Denmark in the top two places. This score indicates that a country has put in place adequate foundations for an energy transition, which include capital & investment frameworks, regulations & other political commitments, institutions & governance, infrastructure & innovative capabilities in the business environment, human capital & consumer participation, as well as energy system structure.
The Nordic champions
Combining the systems performance score with the transition readiness score, Sweden ranked number one on the index with an overall score of 75.8%. The Nordic nation has no fossil fuel reserves and was heavily reliant on importing oil in the lead-up to its energy transition. The country decentralised this dependence after the 1970s energy crisis. Rather than focusing on nuclear energy at the time, the country put in place its first carbon tax in 1991.
Sweden has benefited from long-sighted policy measures that have put innovation and technology at the heart of its energy transition. By 2014, the country derived over half of its energy consumption from renewables – including hydroelectric supplies – and today the country has just an approximate 20% reliance on oil.
Neighbouring Norway – which ranked second with a score of 75% – has large oil and gas reserves and has used them to develop in such a way that it will remain a central player for European energy transition in the post fossil fuel era. The country has 50% of Europe’s entire power storage capacities, primarily due to its innovative method of pumping water upstream in leu of hydroelectric production. This model has given the country access to renewable energy power all year round and allowed it to diversify its energy grid.
Europe in the Index
European countries made up roughly 75% of the leading country category, accounting for the entire top 10 and 15 of the top 20 countries, indicating an advanced level of preparedness compared to the rest of the world. By 2016, an overwhelming majority (90%) of new additions within the European power sector were in renewable energies. In addition, Europe now has a 50% larger share of fossil-fuel-free energy generation technologies than other large industrial nations.
However, the continent still has a long way to go in the environmental sustainability category, given the fact that it has some of the highest primary energy consumption and carbon emissions around the globe. As a result of these high consumption rates, Europe scored an average of only 54% in the environmental sustainability section.
To remain global leaders in energy transition as a whole, more must be done for Europe to reduce dependency on fossil fuels and provide affordable energy to citizens. The report cites a previous collaborative McKinsey and the WEF project report ‘New Concept for Europe’, stating that “The goal described is for Europe to power itself in a green, affordable and secure manner to achieve the Paris Climate Agreement targets by developing an integrated, connected and sustainable energy supply and by enabling smart energy and resource consumption."
“Concrete methods mentioned include the acceleration of the phaseout of subsidies for high-emission energy sources, integrated and more efficient heating, the introduction of policies and standards promoting zero-emission buildings by 2030, and open access to energy data to foster new energy business models.”
Maroš Šefčovič, the Vice-President for the Energy Union and European Commissioner contender, said; "The Energy Union is about more than energy and climate alone; it is about accelerating the fundamental modernisation of Europe's entire economy, making it low-carbon, energy and resource efficient, in a socially fair manner. We should also strengthen the Energy Union's external dimension, to enhance the EU's global leadership role.”
