To coincide with G20 Hamburg, Christoph Frei explains why innovation policies are key to driving progress on the Energy Trilemma goals

Posted on 13 July 2017

Innovation policies the key to driving progress on the
Energy Trilemma goals

By Dr Christoph Frei, Secretary General, World Energy Council *

 

The energy sector is at a transition point and faces a number of growing challenges in a context defined by unprecedented speed of change. Continued innovation on the policy and technology side is critical to addressing these challenges.

Countries have committed to reducing greenhouse gas emissions under the 2015 climate change agreement in Paris (COP 21), putting a renewed focus on the decarbonisation of the energy sector.

At the same time energy services must expand to meet rising global energy demand, particularly in many emerging economies to address the inequity of the 1.1 billion people who still do not have access to electricity and modern energy services. Adapting market designs, transforming and expanding energy infrastructure, will put additional strain on energy security and reliability, which is already under pressure by increasing risks and resilience challenges.

The Paris Agreement has therefore raised the bar on what countries must do to have a sustainable energy policy – one which delivers not just on energy security, access and affordability; but is also capable of delivering the Paris commitments. The World Energy Council refers to this approach as balancing the energy Trilemma. Countries must act now to progress on the trilemma with secure, equitable and environmentally sustainable energy to support a thriving energy sector, a competitive economy and a healthy society.

Key findings emerging from innovative policies are analysed in the World Energy Council’s latest Energy Trilemma report, leveraging on interviews with policymakers and private sector energy leaders. This alighted with an analysis of five years of our Energy Trilemma Index with benchmarks national energy and climate policies helps to provide a strong evidence base for successful policy development at a national level.

To truly transform the world’s energy supply, policymakers and decision makers must set few and clear targets. The 2016 Trilemma report defines measures to progress on the three goals of energy security, energy equity and environmental sustainability with the aim to accelerate the energy transition and lead countries to prosperity and increased competitiveness of their individual economies. It provides guidance in the complex task of translating the trilemma goals into tangible actions.

One of the findings of our Energy Trilemma work is that the secret to success for the implementation of innovative energy policies is to clearly benchmark and measure the impact of the policy strategy.

Our 2016 Energy Trilemma Index has been designed to help countries simply assess success by providing the world’s most comparative assessment of how countries perform in delivering sustainable energy systems. The index enables countries to visualise their energy system and identify areas for action, and is being adopted by many governments across the world as a neutral guide to assist successful national policy making.

At CEM7 in San Francisco last year, a great focus was on innovation to achieve these objectives.
Dynamic and flexible renewable energy investment policies are unlocking the potential of new technologies to respond to evolving market dynamics and technological developments.

To increase private sector investments in infrastructure expansion and modernisation, in emerging and developing economies, countries should, and are, beginning to reform regulatory frameworks to decrease the cost of doing business and increase competitiveness in the electricity market. At the same time, adequate market design has to incentivise and provide for critical system services.

In a world of fast changing dynamics of energy supply and demand and an accelerating pace of technological and business model change staying on top of the new realities becomes critical. The combination of digitalisation, decentralisation and new technologies will drive new business models, change the way we think about supply-demand interaction, and challenge our current thinking on issues such as sovereignty, privacy or cyber security.

However, greater, collaborative, forward-looking dialogue among policymakers business leaders and the investment community, is critical for the delivery of adequate and robust policy frameworks at a global level. For these frameworks to be effective they cannot just be limited to national energy policy but also depend on aligned international trade and climate agreements.

The world lacks a process that illustrates the co-dependence of such diverse agreements from a sustainable energy and future sustainability perspective. With no formulation of relevant objective priorities or a relevant tracking of progress we will miss out on significant synergies.

The Council’s Energy Trilemma Index has been identified by a proposed G20 Expert Advisory Commission, as a powerful tool to assist the G20’s Energy Transformation Processes. The Commission would build upon the expertise and comprehensive knowledge already existing in the scientific and policy expert communities. The primary aims of the Expert Advisory Commission would be to pool and condense the current evidence base on energy transformations and to deliver comprehensive analyses which would benefit from the exchange of different perspectives.

While the specific national context requires that every country find its individual solution to the best trilemma balance, it is clear that many energy challenges will have their most effective solutions in collaborations that go beyond borders.

The goal of achieving a sustainable energy future critically depends on sound policy and an internationally coordinated, collaborative, approach. There is a real opportunity for the G20 to promote and deliver such an alignment process, which ultimately will define how successful we are in driving progress on the Energy Trilemma goals.

* This article was originally published in G20 magazine.