Accelerating the energy transition: 4 dimensions for progress

While the 2015 Paris agreement was the theoretical call for action to limit worldwide temperature to well below 2 degrees, there is a need for implementing this call with concrete action.

Better energy, greater prosperity

As a Commissioner of the Energy Transitions Commission (ETC), I am privileged to be part of a diverse group of energy leaders who are driving the urgent need to ramp up the transition to low-carbon energy systems. The ETC recently released its “Better Energy, Greater Prosperity” report on realistic opportunities for governments, businesses, and investors to cut emissions in half by 2040.

This report shows that energy transition is technically and economically possible, in both mature and developing economies. It maps out how to achieve rapid progress along four dimensions:

1) Decarbonization of power combined with extended electrification

In many countries, new utility business models are taking shape to leverage a shift towards decentralized solutions such as microgrids and energy storage. Smart meters and on-site generation capabilities are giving utilities the flexibility and speed to deliver power when and where customers need it. In addition, opportunities for extended electrification are increasing. The ETC report indicates that in the residential and commercial building sector alone, at least 35% of energy needs not currently met by electricity could be electrified by 2040[1]. In transportation, electric vehicles could hit at least 95% of new sales and 73% of the stock of light duty vehicles by 2040[2].

2) Decarbonization of activities that cannot be cost-effectively electrified

The decarbonization of “hard-to-electrify” industrial applications and long-haul transport is begging for innovation from the private sector. Switching to fuels such as biofuels and hydrogen, capturing carbon, and converting carbon into products and storage, all show promise. Carbon pricing (a tax or payment linked to CO2 emissions) is one way to amplify innovation and investment.

3) Acceleration in the pace of energy productivity improvement

Moving towards greater electrification is a significant first step. The next is making sure electrified activities are as energy-efficient as possible. We need to speed up the pace of energy productivity improvement to meet the Paris climate objectives. Improvement must rise from 1.8% to 3% per year globally. At Schneider, we know the EE potential is still significant. In buildings, for example, 82% of the energy efficiency potential is not yet tapped; in industry, that number is 58%.[3] 

4) Optimization of fossil fuels use within overall carbon budget constraints

Today, fossil fuels account for 70% of final energy demand. The ETC reports that this number must drop to about 50% by 2040 in the two-degree scenario. Fossils fuels still play a major role in the energy mix, especially as they remain the primary source of energy in a growing world economy. We therefore must optimize their use by type, and escalate carbon capture.

The time for change

What is intuitive to us as advocates for cleaner energy takes an understandable overhaul of the way many of us have done business for generations. A “business as usual” approach, however, is not sustainable for the planet. As the “Better Energy, Greater Prosperity” report demonstrates, ongoing prosperity and economic development can happen alongside — and even because of — the energy transition. We must take action now.

At Schneider Electric, we are committed to driving energy efficiency across our main markets to help our customers do their part in our shared move towards a cleaner energy future.

Even in energy-intensive industries, change is possible. The China National Building Material Group (CNBM) has set an example here. Energy consumption accounts for more than 60 percent of CNBM’s total costs. Energy efficiency therefore is critical for the Group’s bottom line and for the environment. We’re helping CNBM lower its energy use.

At large, we have made 10 COP21 commitments. Among these, one goal is to reduce our own energy intensity by 3.5% each year, and we’re on track to ensure that 75% of our product revenue comes from our Green Premium? ecoLabel products by the end of this year.

The time is now for all of us to leverage the many opportunities from more decentralized, decarbonized, distributed, and electric energy.

[1] Copenhagen Economics analysis based on data from IEA, ETP (2016) and the Global Calculator, as reported in ETC’s “Better Energy, Greater Prosperity.”

[2] Copenhagen Economics analysis based on data from IEA, ETP (2016) and the Global Calculator, as reported in ETC’s “Better Energy, Greater Prosperity.”

[3] World Energy Outlook 2012, OECD/IEA; Internal analysis