Authors: Ana Rita Gomes and Flávia Lima, board members of the Future Energy Leaders Portugal, and co-founders of Mulheres na Energia (“Women in Energy Portugal”).

Click aici pentru versiunea în limba română

Over the past years, the world energy landscape has changed, inaugurating the era of renewable energy sources prominence. Although renewables’ relevance worldwide increased over the past decade, in the last few years, renewables witnessed a major boost in installed capacity, cost reduction, and long- term investment. Investment in renewable energy sources surpassed fossil fuels in 2016 and, since then, investment in the sector has been achieving new records. According to the International Energy Agency (IEA) report “World Energy Investments 2024”, the world now invests almost twice as much in clean energy as it does in fossil fuels, and, for 2024, global energy investment in clean energy technologies and infrastructure is expected to reach USD 2 trillion.

Shifting to renewables is no hype…

Despite the stronger concerted action to tackle the climate emergency in past years, the sharp drop in costs over the past decade played a crucial role in boosting investment in renewable energy. Costs to the technology have substantially dropped over the past decade, mainly in solar which has been detrimental to the sector transformation. According to the IEA report, solar panel costs have decreased by 30% over the last two years. The technologies also have improved, IEA claims that “each dollar invested in wind and solar PV yielded 2.5 times more energy output than a dollar spent on the same technologies a decade prior”.

The end of “cheap money ”, excess capital, and redundant energy capacity from 2020 onwards did not alter the course and speed of the transition. The increase in energy prices in the post Covid-19 recovery and the Russian invasion of Ukraine stimulated speedier action from the European Union towards improving its energy independency and resilience. In 2022, the European Commission launched its REPowerEU plan, aimed at saving energy, diversifying energy supplies, and increasing clean energy production. Furthermore, the fast-approaching Paris Agreement 1.5°C thresholds in the World’s average temperature (above pre-industrial levels), signaled to countries the need to increase efforts through more ambitious decarbonization strategies.

…but some challenges lay ahead of this transition

The energy transition also brings some global challenges. As Nations ramp up their deployment of renewable capacity, potential disruptions might happen in technologies’ global supply chains, particularly for critical raw materials such as rare earth elements or lithium, which are essential for battery manufacturing and other renewable energy components. These vulnerabilities can arise from many factors, including natural disasters, geopolitical conflicts, and trade restrictions, all of which can delay projects and increase costs.

At the political level, the rise in protectionism and political polarisation also brings challenges to the renewable energy environment. Protectionist policies, such as tariffs on imported energy technologies or goods, might improve the carbon footprint, reducing carbon leakage and promoting fair competition, but also might increase the cost of deployment and slow down the adoption of clean energy solutions, creating a complex situation. A lack of clear policies or long- term planning can also bottleneck energy policies and strategies, undermining long-term investments and planning. In some cases, polarisation may also fuel resistance to renewable energy projects, especially at the local level, driven by illiteracy, misinformation, or conflict of interests.

The main question is: how to address these challenges to effectively transition to a cleaner energy matrix?

Walking the talk

Investments in grid expansion, optimization of the current renewable energy assets, and energy system’s flexibility are needed to achieve the ambitious decarbonisation targets set by countries. Increasing the system’s flexibility might be done by storage (i.e batteries, hydro pumping and/or hydrogen) to respond to the renewable’s intermittency/variability challenge, but also through ancillary services. In this landscape, consumers will and should play a pivotal role in the energy system as prosumers, being connected to the distribution grid, producing, consuming, and storing through different technologies, and with an active role in markets.

Also, hybridization, the integration of different renewable technologies (such as solar and hydropower), can increase energy efficiency, by sharing infrastructure and stabilizing costs, ultimately contributing to energy security and resilience. Not forgetting the retrofitting and modernization of the existing power plants and installations, by repowering the current assets. Furthermore, expanding and building the infrastructure to accommodate the increase in renewable capacity and shift from centralized to decentralized energy sources will be crucial.

Given the current uncertainties and strategic shifts, it is crucial to acknowledge that current investment levels fall short of what’s needed to limit global warming to 1.5°C above pre-industrial levels. According to IEA’s report, a gap of USD 500 billion per year remains to meet the IEA’s Net Zero Emissions by 2050 Scenario. Therefore, it is essential to strengthen public policies, secure adequate financing, and mobilise international efforts to sustain and increase investments in sustainability, even in the face of economic and strategic challenges.

Policymakers in their turn, must adopt a holistic approach, strengthening domestic supply chains for critical raw materials, fostering international cooperation to ensure a stable and open trade environment, and building broad political consensus around the importance of renewable energy for national security and economic resilience.

A diversified energy matrix is undoubtedly the best option to balance the energy trilemma, hence, addressing the challenges holistically. A diverse energy matrix reduces dependency on imported fossil fuels and shields the national energy systems from the volatility of global energy markets, protecting consumers and ensuring the sustainability of its matrix. This shift mitigates the risks associated with geopolitical tensions and supply disruptions and contributes to long-term sustainability by reducing greenhouse gas emissions. In short, the energy transition supports the efforts to achieve a more resilient Europe. It is important to seize these opportunities while the momentum behind renewable energy is strong while securing a more stable and resilient energy future, even in an increasingly complex and uncertain global landscape.

---

Article published in Energy Messenger nr. 235, July-August 2024, Newsletter of the Romanian National Committee of the World Energy Council (CNR-CME), pag 44-45.