Clean energy supply chain
Rudy Kahsar is a manager, Katie Mulvaney is a senior associate and James Newcomb is a managing director in RMI’s Strategic Analysis & Engagement Group. This contributed content represents the views of the authors, not those of Canary Media.
Later this month, the International Energy Agency will release the report Net Zero in 2050: A Roadmap for the Global Energy Sector. The report was requested by the president of the United Nations Climate Change Conference in advance of the body’s COP 26 meeting in November 2021. It will invariably influence the conversation about the viability of a future in which climate change can be limited to less than 1.5 degrees Celsius.
As media, businesses, governments and other institutions digest the report, it is important to bear in mind the IEA’s unique perspective — in terms of both strengths and weaknesses. The IEA is arguably the most authoritative source of global energy analysis, and its studies and conclusions carry considerable weight among key decision-makers. This authority stems from the fact that its datasets, models and experts are deeply embedded in the global energy system as it exists today.
Although this gives the IEA the legitimacy to inform a wide range of public and private institutions, the agency’s inertia has tended to slow the evolution of its assumptions and historical perspectives. Existing approaches become ossified in its models and outlooks. For example, since IEA’s members are national governments, its analyses focus more on the effects of national policies than on the expansive, diverse and complex ecosystem of actors at corporate and subnational levels that are now becoming increasingly influential.
The IEA’s perspective has also been shaped by its history. The organization was formed in the aftermath of the 1973 oil crisis, a time when conventional energy security dominated policy conversations. These roots remain embedded in the institution. The IEA’s annual World Energy Outlook still reports energy statistics in units of million tons of oil equivalent and maintains a heavy focus on oil and gas.
Over the past decade, the IEA has faced intensifying criticism from outside energy experts and advocates for systematically underestimating the role of renewable energy sources and breakthrough technologies in future energy systems. Critics have contended that the IEA’s reports are influenced by political and institutional biases and that the organization has downplayed the likelihood of a swift transition to a sustainable, low-carbon energy future.
The IEA’s forthcoming Net Zero in 2050 report is in part a product of these pressures. The organization itself now stands at a crucial juncture. It has the potential to leave behind its historical focus on conventional energy and become the world’s preeminent source for forward-thinking analysis on the energy transition. Can the IEA remain relevant and provide meaningful guidance throughout the energy transition? That will depend on whether it can keep pace with the rate of change and the new forces that are driving fundamental shifts in energy systems.
In this moment, the IEA’s unparalleled degree of authority is both an asset and a liability. With an annual budget of €30 million ($36 million) and a staff of 480, the IEA’s energy analysis apparatus has become deeply attuned to the existing global energy system. Its long-term models of energy and economic systems rely primarily on microeconomic analysis, tweaked by policy levers, to describe market behavior.
But as the world sets its sights on a 1.5° C-aligned pathway, the energy system will fundamentally shift, with systemic changes coming from unprecedented sources that evolve in complex ways. The IEA will need to disrupt its legacy tools and approaches in order to keep pace with these changes and with the new energy landscape that lies ahead.
Fixing the IEA’s energy analysis machine to address today’s challenges is about much more than fine-tuning assumptions about the costs and scaling trajectories of renewable energy supply sources. It’s about identifying and outlining new avenues for system-level change. These could include unforeseen technological breakthroughs, behavioral changes driven by cultural movements, and voluntary climate action commitments made by nonstate actors such as corporations, financial institutions and subnational governments. The IEA currently does not model these drivers, but if societies commit to them, they will likely bring about decarbonization, innovation and action at a rate far more rapid than existing models are able to predict.
We see several areas where such changes are possible, or even likely, and that should warrant special attention as we think about the new forces that are driving change in the energy system. These are:
· Energy efficiency gains achieved from system-level design improvements, not just from component-level replacements.
· Finance as a catalyst.
· Better data and advanced analytics.
· Rapidly advancing clean energy technology.
· Dramatic reductions in the use of carbon-intensive materials.
· Behavioral changes at the customer level as consumption-related carbon footprints become vividly comprehensible to consumers.
· Business-model innovation that transforms conventional high-emissions sectors based on innovative methods of delivering services instead of products.
Whatever the IEA’s Net Zero in 2050 report has to offer in the way of insights and conclusions, it’s important to remember that the map is not the territory. The future will be of our own making, and possibilities abound for changes that can speed the transition to a low-emissions future. If clean-energy market realities can beat the forecasts in the 2020s as they did in the 2010s, we’ll be off to a good start to keep the planet on a path to a long-term 1.5° C future. Let’s make it so.
(Lead photo: Patrick Hendry)