These countries stand out for laying the groundwork for a robust energy transition.

Germany is the fourth-largest economy in the world and ranks 11 out of 120 countries on the ETI 2023. Since 2014, Germany’s score on the ETI has increased by 6%, which shows both the robustness of its energy transition efforts and the challenges large economies face in improving quickly. Within system performance, Germany’s scores on the secure and sustainable dimensions have improved, driven largely by supply security, an increase in share of renewable energy in the electricity mix and strong reductions in the energy intensity of the economy. Even though the carbon intensity of the overall energy mix has declined over the years by 9%, it remains relatively high, owing to persistent challenges in decarbonizing hard-to-abate sectors, such as heating, transport and heavy industry. Germany ranks fifth globally on transition readiness, which provides an assessment of the enabling environment for energy transition, as it is one of the top three countries on regulation and political commitment.

The core elements of Germany’s energy transition are improving energy efficiency and expanding renewables as quickly as possible. The government has invested in the development of energy-efficient technologies and infrastructure, such as smart grids and electric vehicle charging stations. This has resulted in Germany now producing over 40% of its electricity from renewables,³² having set a goal of reaching 80% by 2030.³³ The country has introduced several policies aimed at increasing the share of renewables in the energy mix, phasing out nuclear power (with the last plant closing in April 2023) and reducing GHG emissions, resulting in the country becoming a leader in the energy transition. The Energiewende (energy transition) was instituted nearly a decade ago as a plan for transforming the energy system, making it more efficient and supplied mainly by renewable energy.

The German Renewable Energy Sources Act has played a significant role in the transition by providing a legal framework and financial incentives for the expansion of renewable energy sources. This, together with the Energy Industry Act, forms the legal basis of the German energy industry and provides “a framework policy to enhance competition, security of supply and sustainable energy production …Furthermore, this Act stipulates supplementary provisions for the access of electricity from renewable sources to the grid as well as the construction of intelligent grids including electricity storage. In 2012 the law was amended to speed up the expansion of offshore wind farms. The major focus is on a system change towards a consistent and efficient offshore grid expansion by introducing a binding offshore grid development plan”.³⁴ The government also passed a law in 2020 that required phasing out all coal-fired electricity generation no later than 2038; the timeline was recently brought forward to 2030. The net result of these policies is reflected in the country’s high ETI scores on regulation and political commitment, as well as decarbonized and clean energy.

Energy transition remains a process as Germany’s diversification of its energy mix is not purely focused on sustainability and efficiency gains but also on security. Over-reliance on imported gas from Russia and high energy prices were the main challenges faced by Germany during the energy crisis. The Russia-Ukraine war prompted the government to institute emergency measures, such as building LNG regasification capacity and delaying coal plant closures, which slowed down the transition momentum and locked in more emissions in the system. To ensure reduced dependence on Russian gas and accelerate the longer-term transition in Germany, the government has instituted numerous amendments to existing laws and funding programmes that primarily focus on enhancing the nation’s renewable energy capabilities, particularly in onshore wind; increasing the volume of renewable power auctions; and speeding up grid planning and the growth of offshore wind connections to carry electricity generated from wind power in northern Germany to large industrial complexes in the south. Additional actions, such as “creating the legal and financial frameworks for carbon contracts for difference, an instrument that supports industry in transitioning to climate-neutral production processes”,³⁵ promoting research and development in green hydrogen to create modern future-oriented climate protection technologies, and forming strategic partnerships, could help ensure an orderly energy transition in Germany and provide lessons for other countries.

The United States (US) ranks 12 out of 120 countries on the ETI 2023. The overall ETI score for the US has seen a 10% gain over the past 10 years, driven by improvements in system performance, particularly in the secure and sustainable dimensions. Within the sustainable dimension, energy intensity and CO2 emissions per capita saw marked gains since 2014, falling by 20% and 22%, respectively. The focus on sustainability is further highlighted by the country’s momentum in this dimension. Within transition readiness, further improvements can be found in areas such as renewable capacity buildout; development of low-carbon jobs; public research, development and demonstration; and sustaining a stable regulatory framework and political commitments.

The country’s ageing energy infrastructure poses significant challenges for the energy transition, which requires massive deployment of energy efficiency and renewable energy, a nationwide modernization and expansion of the electricity grid, and broadening accessibility and affordability of clean energy technologies. Achieving this in an equitable way requires directing energy infrastructure and resilience investments to communities and industries that, until now, have struggled to transition. In recent years, several policies have been implemented in the US to accelerate the energy transition. The federal government set ambitious targets for reducing GHG emissions, encouraged the deployment of renewable energy technologies through tax credits and grants, and established mandatory renewable energy standards at the state level. Furthermore, the private sector has made substantial investments in clean energy research and development, and in the deployment of renewable energy projects. The net result of these efforts is reflected in the country’s high ETI scores on regulation and political commitment and decarbonized energy, showing that the US is now well positioned as a leader in the global transition towards a low-carbon, sustainable energy future.

Two notable policies that appear to be working well for the US are the Bipartisan Infrastructure Law (BIL) and the Inflation Reduction Act (IRA). “The BIL includes significant funding for transmission and grid improvements ($75 billion), increasing resilience of the nation’s natural and physical infrastructure ($50 billion), investing in a national electric vehicle charging infrastructure ($7.5 billion), and reducing methane emissions from orphaned oil and gas wells ($4.7 billion).”³⁶,³⁷ One of the BIL’s most significant features is the creation of the Office of Clean Energy Demonstrations (OCED), dedicated to supporting “demonstration projects in clean hydrogen, carbon capture, grid-scale energy storage, small modular reactors, and beyond. With over $20 billion in initial funding, the OCED will fund research and development and proof-of-concept projects that seek to galvanize follow-on private sector investment to deploy clean technologies”.³⁸ The IRA provides positive incentives to support the energy transition in “the form of clean energy tax credits along with programs and pools of finance for commercial and emerging clean technologies, infrastructure, and products”, and local content requirements. “It commits roughly $369 billion in funding for climate and clean energy provisions”, and it is estimated it will “reduce US net emissions by 32% to 42% below 2005 levels by 2030, compared to 24% to 35% without it, and scale clean generation to supply up to 81% of all electricity”.³⁹

Projections from these policies suggest a huge potential for the US energy transition and provide many clean energy companies with the certainty they require. The relationship between incentives provided, capital invested and the effect of emissions, however, is not always straightforward. Additional lessons for the US were identified to enable a more orderly transition.⁴⁰ These include “designing and deploying a capital-efficient and affordable system; strengthening supply chains to provide stable access to raw materials, components, and skilled labour; securing access to adequate land with high load factors for the deployment of renewables while taking into account the needs of local communities; reforming transmission development to include proactive planning, fast-track permitting, and systematic consideration of transmission alternatives; creating market mechanisms for expanding firm capacity to ensure reliable and adequate clean energy supply; and accelerating technological innovation to ensure timely deployment of new clean technologies”.⁴¹ Without these additional elements, many of the clean energy benefits on offer may be lost.

The United Kingdom (UK), ranking 13 out of 120 countries on the ETI 2023, has seen an 11% improvement in its ETI score over the last 10 years. It has been a consistent performer, demonstrating a strong enabling environment for energy transition, particularly on dimensions such as education and human capital, infrastructure, and regulation and political commitment. The UK’s momentum has
stabilized in the secure dimension but continues to lead in equitable and sustainable. As reported by Thanet District Council, “in 2019, the UK became the first major economy in the world to legislate a binding target to reach net zero emissions by 2050”.⁴² Coal has been phased out of power generation ahead of schedule, and the share of renewables in the energy mix has increased.

The UK’s legal framework, including the 2008 Climate Change Act, has provided stability and consistency for investors and businesses, contributing to the success of renewable energy deployment and emissions reduction. The energy policy, however, has undergone several changes in recent years, creating uncertainty in the market, and recent reports have highlighted the need to provide long-term policy commitments and regulations.⁴³ Even so, the country has made significant investments in offshore wind, with one of the largest installed capacities globally, and is considered a leader in this space. The development of a large domestic supply chain for offshore wind energy has also created jobs and economic growth, which is reflected in the high ETI scores for human capital.

Nuclear power is seen as a key part of the UK’s low-carbon energy mix, with recent investments to replace ageing infrastructure and introduce new facilities. The government’s ambition to increase solar energy generation capacity by up to 70 gigawatt (GW) by 2035 demonstrates its commitment to diversifying its energy mix further.⁴⁴ To reduce emissions from hard-to-abate sectors, the UK is investing £20 billion over the next two decades to scale up its carbon capture sector.⁴⁵ With its 2023 International Climate Finance (ICF) Strategy, the UK aims to double ICF to £11.6 billion between 2021-2022 and 2025-2026. It seeks to further accelerate the transition in both energy-producing and energy-consuming sectors by rapidly expanding the portfolio of renewable investments; working through coalitions and partnerships under the Breakthrough Agenda; increasing investments in research and development of low-carbon technologies; strengthening governance, policy and regulatory frameworks and strategic energy systems planning; and deploying clean energy projects in energy intensive industries.⁴⁶

Dependence on oil and gas has left the UK exposed to the global fossil fuel price shock. Annual “gas and electricity price increases to April 2022 were the largest ever recorded in a series going back to 1970, and have continued to rise as Russia has restricted the supply of gas to continental Europe”, increasing concerns about energy affordability and security.⁴⁷ To overcome these challenges,
the government has been actively transitioning its energy sector to meet its 2050 net-zero target, focusing on the production, distribution and consumption of energy in more sustainable ways. A British Energy Security Strategy was published, aiming to decarbonize the electricity system and “set strong and stretching targets for the roll-out of low-carbon electricity generation” in the coming decade, though much of the strategy focuses on “electricity generation and oil and gas supply”.⁴⁸

The UK faces challenges with its grid, so any lessons learned in this space could be applied to others as well. To deliver genuine energy security, the country is prioritizing improving energy efficiency and reducing energy demand by implementing policies to improve energy efficiency in buildings, transport and industry. The Heat and Buildings Strategy includes a phase-out of gas boilers by 2035 and the installation of 600,000 heat pumps per year by 2028.⁴⁹ The Future Homes Standard also sets new standards and regulations to reduce carbon emissions in new homes from 2025, acting as an incentive for solar installations in housing developments.⁵⁰ The UK has brought forward its target date for discontinuing the sale of new petrol and diesel cars in favour of electric vehicles from 2040 to 2030.⁵¹ Backed by a £1.6 billion investment from the Electric Vehicle Infrastructure Strategy, the UK plans to expand its charging network to have 300,000 public chargers by 2030.⁵²

Brazil is the ninth-largest economy in the world53 and ranks 14 out of 120 countries on the ETI 2023. The overall ETI score for Brazil has seen an 8%
improvement since 2014, having slipped slightly in 2020 and then increasing again. Brazil’s scores on transition readiness have seen a significant improvement over the years. Today, Brazil ranks among the top 14 countries on sustainability of
the energy system, owing to its high share of renewables in the energy mix, with 80% of its electricity coming from large hydropower plants.⁵⁴ Investments in wind and solar generation have also increased significantly in recent years, making Brazil’s electricity sector one of the least carbon-intensive in the world. Recent droughts, however, have caused the country to rely on more expensive thermal power plants and imports to meet its electricity demand, resulting in some challenges across the equitable, secure and sustainable dimensions within system performance.

While Brazil has made progress in creating a robust enabling environment for energy transition – in terms of building a stable regulatory environment to attract capital and investment and building infrastructure to facilitate energy transition –more effort is needed to provide a stable policy environment backed by ambitious targets to accelerate the transition. The government’s main goal is to structure the public policies needed to place the country as a world leader in clean energy while also leveraging its significant oil and gas resources. Brazil has already implemented several policies to transition towards a more sustainable and low-carbon energy system. The Auctions for Renewable Energy Support programme was launched in 2004 to encourage the installation of new renewable energy projects through a competitive bidding process. These auctions have not only helped reduce the cost of renewable energy in Brazil, making it more competitive with traditional energy sources, but have also been successful in attracting significant investment in the sector. With the A-3 and A-4 auctions in July 2021, the government allocated 420 MW of wind and 270 MW of solar, as well as biomass and hydro.⁵⁵ In addition, the Brazilian Development Bank recently approved $650 million in financing for wind and solar energy projects.⁵⁶ The net results of these policies are reflected in the high ETI scores on regulation and political commitment, infrastructure, and financial investment.

Brazil has become the largest producer of wind energy in Latin America⁵⁷ and ranks among the top 10 largest producers in the world.⁵⁸ The Programme of Incentives for Alternative Electricity Sources paved the way to create local manufacturing capacity for wind turbines and the components industry.⁵⁹ The country has also implemented net metering and the Energy Compensation System for Micro and Mini-Generation to promote distributed solar generation, which currently makes up 70% of its installed capacity.⁶⁰ Brazil’s national biofuels policy, RenovaBio, came into effect in 2020 and set transportation emission targets, using decarbonization credits to encourage biofuel production and consumption. RenovaBio also promotes the development of advanced biofuels with even lower emissions and has succeeded in making Brazil the second largest biofuel producer globally.⁶¹

Brazil, with a large and complex grid system that has not fully kept up with the demands of the energy transition, loses about 16% of the power it generates. Historically, Brazil has lacked investment in new grid infrastructure, particularly in remote areas where the potential for renewable energy development exists. A recent World Economic Forum report⁶² highlights opportunities for the country to unlock clean energy investments through innovative solutions and collaborative actions, focusing on three areas for acceleration: distributed generation, hydropower modernization and clean energy access for isolated systems. These lessons can also be applied to other countries at similar levels of clean energy development. The proposed solutions include the creation of a distributed generation financing toolbox to support developers and financiers; suggestions of regulatory changes to remove barriers to the commercialization of hydropower plant services; climate risk and resilience mapping for hydropower generation assets; raising awareness of the Climate Bond Standard Hydropower Criteria among potential investors; and creating a platform for existing independent power producers to find developers as well as technical, marketing and financial support to integrate renewables and create hybrid generation models in isolated systems.

China ranks 17 out of 120 countries on the ETI 2023 and is a new entrant in the top 20 countries. It is among the biggest producers and consumers of energy in the world while also being one of its biggest GHG emitters, currently accounting for one-third of the total global GHG emissions. China has maintained a consistent upward trajectory on the ETI over the past 10 years, improving strongly on system performance and transition readiness. Scores on the secure dimension within system performance have improved, mainly through better quality of electricity supply diversification and associated grid improvements. Sustainable scores, however, remain low on an absolute scale as coal is still the main fuel for generation, accounting for 60% of total power output⁶³ despite large amounts of renewable energy capacity financed and installed over the years.

China’s attempts to improve the enabling environment for energy transition are steps in the right direction, evidenced by President Xi Jinping’s September 2020 commitment at the UN General Assembly to reach peak carbon emissions before 2030 and achieve carbon neutrality by 2060.⁶⁴ China is emerging as a world leader in innovation: public spending on research and development has risen by 35% since 2014.⁶⁵ In pursuing carbon neutrality, however, China faces the challenge of ensuring continued energy security while shifting away from fossil fuels. Nonetheless, in recent years, the theme of China’s energy industry has been green development, with several policies and measures designed to accelerate the energy transition, the net results of which are reflected in its high ETI score on regulation and political commitment.

In June 2022, China released its 14th FYP on Renewable Energy Development (2021-2025). As reported by the Energy Foundation, it is “a comprehensive blueprint for further accelerating [its] renewable energy (RE) expansion. The plan targets a 50 percent increase in renewable energy generation (from 2.2 trillion kWh in 2020 to 3.3 trillion kWh in 2025), establishes a 2025 renewable electricity consumption share of 33 percent (up from 28.8 percent in 2020), and directs that 50 percent of China’s incremental electricity and energy consumption shall come from renewables over the period 2021-2025. … The RE plan is the second major energy-related 14th FYP released [in 2022].… [It] establishes detailed targets for primary energy… [It] establishes detailed targets for primary energy and more. …These two FYPs together reaffirm China’s commitment to honouring its carbon pledges through accelerated RE growth”.⁶⁶

China has done a great deal to use green finance to increase renewables, investing over $380 billion in 2021, and being one of the first countries to issue a green bond project catalogue, to develop its own Green Bond Principles and to work with the EU to develop the Common Ground Taxonomy.⁶⁷ One of the most significant efforts in this surge was powering industrial clusters with green and renewable electricity. China’s environmental ministry also proposed to support exploration of near zero-carbon emissions and carbon neutrality pilot demonstrations. Simultaneously, the country is promoting construction of large-scale renewable energy bases, distributed development of wind and photovoltaic in the central and south-east regions, integrated development of water and solar bases in the south-west region, and centralized development of offshore wind in eastern coastal areas.

The energy transition in China requires a huge shift in resources, innovation and new technologies to enhance energy efficiency and resource productivity. A recent World Bank report estimates that China will need between $14 trillion and $17 trillion in additional investments up to 2060 for green infrastructure and technology in the power and transport sectors alone⁶⁸ and highlights important lessons, including the need for public and private sectors to work together, “a more predictable regulatory environment as well as better access to markets and finance that would allow the private sector to play a central role in delivering market solutions, improving productivity, reducing costs, stimulating technological innovation, and filling the financial gap. … [In addition], training and reskilling workers from the fossil fuel sector and providing targeted assistance to the most affected local communities”⁶⁹ could ensure an equitable energy transition.

Canada is the second-largest country in the world by land area⁷⁰ and ranks 19 out of 120 countries on the ETI 2023. With an overall ETI score that has remained fairly stable over the past decade, Canada has consistently ranked among the top 25, with strong results on system performance. Specifically, Canada is a global leader on the equitable and secure aspects of energy transition, as it is a major producer and exporter of oil, gas, hydroelectricity and uranium, and has a growing renewables sector. In recent years, however, Canada has fallen behind its peer group and challenges need to be addressed to accelerate the sustainability of its energy system. The country faces high energy intensity of its economy, high levels of energy consumption per capita and higher-than-average carbon intensity. Within transition readiness, Canada has shown increasing improvement on regulation and political commitment. In fact, the country is leading with bold measures which are critical for an effective energy transition, resulting in strong scores within country commitments.

Canada’s vast geography poses challenges for transitioning to renewable energy, as many of the country’s remote and northern communities rely on diesel generators for electricity, which are expensive to operate and emit high levels of GHGs. Building renewable energy infrastructure in these areas can be costly and logistically challenging. To better understand energy usage and engage with these communities, the federal government launched the Remote Communities Energy Database in 2018.⁷¹ By providing valuable insights into energy consumption patterns and opportunities for renewable energy development, the database helps to shape the development of effective energy policies and programmes as well as support the transition to a low-carbon, sustainable energy system.

Energy production and use in Canada currently accounts for over 80% of its GHGs.⁷² Production from oil sands is highly emissions-intensive, requiring large amounts of energy and water for extraction and processing. To reduce emissions, the federal government implemented a carbon pricing scheme in 2019, targeting a range of emissions including fuel combustion, industrial processes and waste disposal. The carbon price in May 2022 stood at CAD 50 per tonne of CO2 emitted and is set to increase to CAD 170 per tonne by 2030.⁷³ Industry itself is also taking steps to reduce emissions, with oil and gas companies investing in carbon capture and storage technology. Furthermore, the federal government’s launching of funds, such as the Low Carbon Economy Fund (in which the government is investing another CAD 2.2 billion for seven years, beginning in 2022-2023)⁷⁴ and the Canada Infrastructure Bank’s strategy to invest CAD 35 billion,⁷⁵ provides support for renewable energy projects, energy efficiency measures, and research and development.

Indigenous communities play a substantial role in Canada’s energy transition. To foster collaboration and partnership between those communities and the energy sector, the government has established various programmes and initiatives, including the Indigenous Off-Diesel Initiative, which was launched in 2018⁷⁶ and aims to transition remote indigenous communities from diesel-powered electricity to cleaner energy sources. It also seeks to enhance the capacity of indigenous communities through training, technical support and other resources required to develop and operate their energy projects.

Like other major oil- and gas-exporting nations, Canada’s energy infrastructure was designed to primarily support fossil fuel production and distribution, making it challenging to integrate renewable energy into the grid. One aspect of Canada’s energy transition is its reliance on hydroelectricity, which also means its electricity is 83% non-emitting and among the cleanest in the world.⁷⁷ Many of the hydroelectric facilities, however, are located on or near Indigenous lands, which could affect the expansion of hydropower in these areas. Through careful planning, investment and community engagement, Canada could accelerate its transition towards a clean energy future and meet its GHG emissions goals. Other countries at similar levels of clean energy development could learn from Canada’s trajectory.

Japan ranks 27 out of 120 countries on the ETI 2023, with relatively stable overall ETI, system performance and transition readiness scores over the past 10 years. At a natural disadvantage due to its high dependence on energy imports, Japan maintains high scores on the secure dimension within system performance through the diversification of energy sources as well as import counterparts. The country has notably accelerated within the sustainable dimension, primarily by reducing the energy intensity of its economy, a result of sustained efforts to enhance energy efficiency and productivity across different demand sectors. The enabling environment for energy transition in Japan has steadily improved, evidenced by strong regulation and political commitment, infrastructure, and investments in human capital and education. The recent announcement of net-zero targets provides further momentum to the energy transition but will require sector-specific roadmaps, including for hard-to-abate sectors, with interim milestones to ensure timely progress.

Following the 2011 Fukushima disaster and the country’s heavy reliance on imported fossil fuels at a huge cost, several policies were introduced to increase Japan’s use of renewable energy sources, while also promoting energy efficiency and conservation to secure its energy transition. This is reflected in the country’s high ETI scores on regulation and political commitment. The Sixth Strategic Energy Plan, released in October 2021, set a target for renewables to account for 36-38% of Japan’s energy mix by 2030.⁷⁸ This decision accelerated the deployment of solar, wind, and hydropower.⁷⁹ To meet the target, the total installed capacity would need to increase by 94 GW, with the majority coming from solar photovoltaic. Japan is a densely populated country, however, with limited available land for large-scale renewable projects. To overcome these challenges, Japan established itself as a leader in floating solar power, utilizing its inland lakes and reservoirs for this purpose.⁸⁰ In December 2022, the country announced its plan to restart nuclear power plants to help address its shortage of energy and pursue low-carbon development.

Feed-in tariffs were introduced in 2012 to promote the development of solar, wind and biomass. The tariffs for solar started at more than JPY 40/ kilowatt-hour (kWh) in 2013 and were reduced steadily to JPY21/kWh for 2020-2021 to encourage greater cost competitiveness while also reducing the financial burden on consumers.⁸¹ In addition, an auction system for renewable energy projects was introduced to further promote cost efficiency and competitiveness. Japan’s grid infrastructure, which was traditionally designed for centralized power generation from large power plants, requires significant upgrades (transmission and distribution losses have increased 16% since 2014).⁸² As a result, the government is focused on developing a more distributed and diverse energy system, which includes microgrids, energy storage systems and demand response technologies, while also providing subsidies and other incentives to support the development of energy storage projects.

To encourage energy efficiency and conservation, the Top Runner Programme was implemented to set energy efficiency standards and encourage manufacturers to develop more efficient products, reducing Japan’s reliance on imports and improving its energy security. To further limit its emissions, Japan also imposes a carbon tax on fossil fuels used by power companies and industrial facilities, and a carbon emissions trading system for large emitters, with a commitment to increase the carbon tax rate over time and expand the emissions trading system to cover more industries and facilities.

Japan’s energy transition differs from other countries due to its lack of natural resources and space for renewables as well as its historical reliance on nuclear power. While the country has become a global pioneer in hydrogen and has made important progress towards developing an efficient, resilient and sustainable energy system, a report by the IEA⁸³ examines Japan’s energy issues and recommends solutions to help the country attain a secure, affordable and sustainable energy future. The solutions cover accelerating the use of low-carbon technologies, removing regulatory barriers to encourage investments in zero-emissions electricity and improve power system flexibility, and increasing competition in its energy markets.

Indonesia, as the largest energy consumer in South-East Asia⁸⁴ and a source of rising energy demand, holds the key to effective energy transition in the region and ranks 55 out of 120 countries on the ETI 2023. The country has improved its ETI score by almost 14% since 2014, with the biggest improvement in transition readiness (55%), supported by infrastructure and regulation and political commitment, which remain critical enablers of the energy transition. Within system performance, Indonesia’s scores on the equitable dimension have shown the most improvement, with the biggest push coming from access to electricity. Though Indonesia is still one of the largest producers of coal and the fifth-largest GHG emitter,⁸⁵ the country has been shifting actively towards scaling up renewable energy in recent years and, with continued momentum, is well positioned to set priorities to limit global warming to 1.5°C.

Sustainable energy transition was one of the main themes of Indonesia’s G-20 presidency in 2022, including the recognition that without energy access it would be impossible to achieve an economywide energy transition. Indonesia championed a new target for a modern energy minimum that aims to better capture the link between energy consumption and economic growth. The new threshold raises the bar for minimal energy to 1,000 kilowatt/hour (kWh) per person per year, with at least 300 kWh at home and 700 kWh consumed in the wider economy, ensuring that international efforts to end energy poverty ultimately result in meaningful development outcomes.⁸⁶ In addition, a JETP for Indonesia was launched to mobilize $20 billion in public- and private-sector financing over a three- to five-year period to facilitate the country’s transition from coal to renewable energy, reduce power-sector emissions and achieve net zero by 2050. It lays out a strategy for the country based on the expansion of renewables in the energy mix (34% by 2030), the reduction of on- and off-grid coal-fired electricity generation, and additional commitments to regulatory reforms and energy efficiency while implementing tangible actions to attain an equitable energy transition for workers and communities.⁸⁷

Quickening the deployment of renewable energy capacity will be an important step for Indonesia to boost its energy security and reduce its reliance on fossil fuel imports. Presidential decree no.112/2022 of September 2022 highlights measures to promote renewable energy, including establishing a competent pricing regime for renewable energy sources, tax incentives for renewable energy projects and changing the negotiation process to reach a pricing agreement.⁸⁸ Based on the success of its G-20 presidency and as chair of the Association of Southeast Asian Nations (ASEAN) in 2023, Indonesia aims to implement several energy sector measures, including strengthening the ASEAN power grid to support the energy transition and ensure energy security in the region; developing an ASEAN energy security roadmap; stimulating sustainable energy financing; building regional ecosystems for electric vehicles; exploring the potential of emerging clean energy innovations to improve energy access in islands and remote grids, as well as emissions trading schemes and carbon offset platforms; assessing bioenergy potential; and promoting smart and integrated digital energy management in industrial, commercial and building sectors.⁸⁹

Though Indonesia has taken significant steps internationally and regionally to accelerate the energy transition, achieving its raised ambitions will not be easy. In the absence of direct subsidies, the current tariff mechanism does not allow renewable energy projects to compete fairly with fossil fuel-based infrastructure, limiting their financial viability. Furthermore, discrepancies in planning and policy considerations and a lack of transparency, add a layer of complexity for investors. The World Economic Forum policy paper, “Policy Opportunities to Advance Clean Energy Investment in Indonesia”, outlines recommendations that could help unlock Indonesia’s clean energy future. These include creating a renewable energy tariff regime; removing regulatory barriers and implementing stable frameworks to facilitate the uptake of corporate renewable electricity sourcing; working with utilities or electricity suppliers to accelerate the growth of renewable energy infrastructure; implementing legislative and incentive mechanisms; and enhancing the transparency, sustainability and additionality of renewable energy certificates to finance new renewable energy capacity.⁹⁰

South Africa, the second-largest economy in Africa, has a large energy sector and ranks 82 out of 120 countries on the ETI 2023. The country has improved its overall ETI score by 6% since 2014. South Africa’s system performance scores have improved, supported by better performance in energy access, electricity and clean cooking fuels. While scores in the sustainable dimension are accelerating due to the reduced energy intensity, significant challenges remain. The energy transition in South Africa has historically been an uphill battle, even though the share of renewable energy has increased over the past 10 years. The country still derives about 70% of its electricity from coal, the carbon intensity of the energy mix remains high, and clean energy sources only constitute around 13% of the total energy mix.¹¹⁸

Recent announcements for net-zero emissions by 2050 constitute steps in the right direction and indicate the increase in political commitment and strengthening regulatory environment. Several policy developments and measures have been put in place to help the country accelerate its clean energy transition. As reported by Global Compliance News: “At COP 27 in November 2022, South Africa launched its new Just Energy Transition Investment Plan (JET IP) and announced a five-year investment plan for the $8.5 billion financing package, which was announced as part of the country’s Just Energy Transition Partnership with France, Germany, the United Kingdom, the United States and the European Union at COP26. The JET IP is aligned with the Cabinet-approved National Just Transition Framework and outlines the investments required to achieve the country’s decarbonization commitments, while promoting sustainable development, and ensuring a just transition for affected workers and communities. … The JET IP covers electricity, new energy vehicles (NEVs) and green hydrogen, and identifies $98 billion in financial requirements over the next five years, to come from both the public and private sectors.”¹¹⁹

South Africa’s National Development Plan, draft Integrated Energy Plan and Renewable Energy White Paper all outline the country’s policy foundation for energy transition, “an increased focus on a diversified energy mix that includes renewable energy, distributed generation and battery storage”¹²⁰ and a move away from carbon-fuelled energy. The Renewable Energy Independent Power Producer Procurement Programme, introduced in 2011, was a competitive tender process designed to facilitate private-sector investment into grid-connected renewable energy generation. The programme’s sixth round got under way in 2022, in line with the 2019 Integrated Resources Plan, aiming to procure 2.6GW of solar and wind power.¹²¹ To encourage the self-generation of renewable energy, the government scrapped the 100 MW licence-exemption threshold for distributed generators and proposed a feed-in tariff for self-generating households and businesses.¹²² Moreover, the South Africa Hydrogen Society Roadmap, published in February 2022 and focusing on national ambitions, sector prioritization, the overarching policy framework and the macroeconomic effect of the hydrogen economy throughout South Africa, is an important milestone for the country as it navigates its energy transition.¹²³

Debt and mismanagement have rendered Eskom, a public electricity utility, vulnerable and caused capacity gaps resulting in load-shedding, frequent electricity blackouts and a lack of affordable and secure power. In the immediate term, the government has put amendments in place to address the electricity supply deficit. South Africa’s energy transition nevertheless faces challenges in the medium to long term, including key players influencing policy formulation and having an incentive to support coal, as well as economic and social fallout from the loss of jobs and livelihoods in the coal industry. Room exists to speed up actions to decarbonize the energy mix through energy efficiency measures, the development of renewables, electrification, and the use of carbon capture technologies. Still, given the importance of extractive industries in South Africa, additional opportunities exist to ensure an equitable transition by creating a high-level centralized body to manage the process, engaging all stakeholders early and often, promoting transparency and accessibility in the policy process and forming a supportive legislative framework.

India ranks 67 out of 120 countries on the ETI 2023, steadily improving across the three dimensions of the energy triangle over the past decade. Achieving universal access to electricity, replacing solid fuels with clean cooking options (primarily liquefied petroleum gas) and increasing renewable energy deployment have been primary contributors to the improvement of India’s ETI performance. India also emerged relatively less affected from the recent energy crisis, largely due to the low share of natural gas in power generation and increased use of existing generation capacities. With rising energy demand, India’s energy imports have increased in tandem. Although the country maintains a well-diversified mix of energy trade partners, rising import dependence represents a risk amid global energy market volatilities. The energy sector’s sustainability profile has improved, due to the reduced energy intensity and the increasing share of renewable energy. The energy mix, however, remains predominantly carbon intensive, with a low share of clean energy in final demand. Improvements in the enabling environment have been driven by political commitment, an ambitious reform agenda, infrastructure investments and a competitive renewable energy landscape.

Since 2000, India’s energy consumption has more than doubled. As the fastest-growing major economy, this trend is expected to continue. At COP26, India committed to achieving net-zero emissions by 2070 and raised its ambition in its revised nationally determined contribution to reduce emission intensity by 45% from 2005 levels and attain 50% of cumulative non-fossil fuel power generation capacity by 2030.¹¹³ Decarbonization of power generation and electrification of final demand are key levers of India’s energy transition.

The share of renewable energy in power generation has steadily increased to more than 30%, with solar and onshore wind accounting for 92% of incremental capacity in 2022.¹¹⁴ India’s commitment to install 500 GW of non-fossil fuel power generation capacity by 2030,¹¹⁵ however, will require a substantial increase in investments and the modernization of the grid infrastructure. The financial sustainability and operational efficiency of the distribution sector is key to unlocking faster growth. India is implementing the world’s largest smart metering programme, with the target to replace 250 million conventional meters with smart meters. Strengthening financial performance and improving competitiveness of distribution companies is the focus of the proposed Electricity (Amendment) Bill 2022.¹¹⁶ Interregional transmission capacity, which increased recently to 112 GW,¹¹⁷ will enable better use of the unevenly distributed renewable energy potential. Grid losses amount to more than 15% of generated electricity, which can be a barrier for growth of renewable energy.

Beyond supply, India has initiated programmes for energy efficiency and the decarbonization of key demand sectors. The Energy Conservation (Amendment) Bill 2022 introduces renewable energy mandates for large energy-intensive consumers and proposes a carbon credits trading scheme. Through the National Green Hydrogen Mission, India aims to facilitate demand, production and distribution of green hydrogen, and establish a competitive Green Hydrogen ecosystem. Furthermore, India has also announced the Lifestyle for Environment (LiFE) initiative to nudge individual and collective action towards sustainable consumption.

India is the only major economy with energy transition momentum accelerating across the ETI’s equitable, secure and sustainable dimensions. The pace of thermal power plant expansion has considerably slowed, though strategies for early retirement or repurposing of the existing fleet will be crucial. Continued progress will be challenged by two key macro trends: strong economic growth, and the urgency to create quality jobs for a growing working age population. Manufacturing exports are playing an increasing role in the economy, although the share of low-carbon products in domestic manufacturing and exports remains low. Developing globally competitive manufacturing expertise in emerging low-carbon niche technologies could be a strong vehicle of future growth. A skilled workforce, public-private collaboration in innovation, and investment in research and development in low-carbon technologies are necessary to enable India’s energy transition.

Saudi Arabia ranks 57 out of 120 countries on the ETI 2023. The country has long been a dominant player in the oil market, and in recent years has undergone a significant energy transition, recognizing the need to shift towards renewable energy and reduce its carbon footprint. Over the past 10 years, Saudi Arabia has shown an 11% improvement in its overall ETI score, including both system performance and transition readiness. It leads the Middle East, North Africa and Pakistan peer group and ranks highly in both the secure and equitable dimensions. Although its sustainable ranking is making progress, there is still room for improvement, particularly in reducing energy and carbon intensity. To achieve this, measures such as expanding renewable resources and using carbon capture technologies could be implemented. Within transition readiness, significant progress has been made on regulation and political commitment.

Saudi Arabia’s Vision 2030 was launched in 2016 and aims to diversify the country’s economic resources and help it become more sustainable. Through the Vision, the Kingdom seeks to diversify non-oil exports and increase its share of non-oil GDP from 16% to 50% by 2030.⁹¹ The King Abdullah Petroleum Studies and Research Center maintains that “non-oil exports are an important component of Saudi Arabia’s economic diversification, as they can play crucial roles in sustainable economic development and job creation”.⁹² According to one analysis, “hydrogen production would allow Saudi Arabia to become less reliant on domestic oil as a key source of income”⁹³ and would use its existing oil and gas infrastructure and supply chain networks. Saudi Arabia’s National Hydrogen Strategy, targeting 4 million tonnes per year of clean hydrogen,⁹⁴ aims to make the country a leader in its production and export. The Public Investment Fund (PIF) has invested in several hydrogen-related projects, including a joint venture with Air Products to build a $5 billion green hydrogen plant in the country.⁹⁵ In October 2022, PIF also successfully auctioned 1.4 million tons of carbon credits, making it the first voluntary carbon market in the region.⁹⁶ The country’s shift towards renewables, with 11.4GW capacity under development,97 represents a significant departure from the traditional economic model and may have geopolitical implications.

Despite the objective of reducing fossil fuel subsidies under Vision 2030, Saudi Arabia still had the world’s third-largest subsidies in 2019 at nearly $30 billion, primarily directed towards oil, fossil-fuel electricity production and natural gas.⁹⁸ Cheap, available fossil fuels reduce incentives for investments in renewable energy technologies, as companies and investors may view them as less financially viable. Launched in 2021, the Saudi Green Initiative (SGI) describes itself as “steering the implementation of a sustainable long-term climate action plan. Three overarching targets guide SGI’s work – emissions reduction, afforestation, and land and sea protection.”⁹⁹ By 2030, the Kingdom has promised that 50% of its energy will come from renewable sources, and SGI is leading several ambitious efforts that will lower emissions and change the domestic power mix, including creating a programme for carbon capture and storage (Carbon Circular Economy), increasing energy efficiency (Saudi Arabia Energy Efficiency Programme) and investing in new energy sources.

The Kingdom has been investing in research and development to support new solar and wind technologies and improve the efficiency and cost-effectiveness of existing technologies. The renewable power sector encounters various challenges, however, including a shortage of skilled human resources. In addition, oil exports remain central to the Kingdom’s economic development and export portfolio; Saudi Arabia aims to expand its oil production capacity to 13 million barrels per day by 2027.¹⁰⁰ While this may maintain the country’s position as a reliable and versatile global supplier in a volatile market,¹⁰¹ the additional production and related revenues also provide an opportunity to invest in and develop technologies that can capture generated emissions to ensure the Kingdom meets its emission reduction targets. In addition, Saudi Arabia can become an even stronger leader of the energy transition in the region by developing joint investments, research programmes, training and education, as well as incentives that help accelerate the move to electrification, energy efficiency and use of hydrogen.

The United Arab Emirates (UAE), a major oil and gas producer and exporter, ranks 63 out of 120 countries on the ETI 2023. Over the last 10 years, the UAE’s ETI score has fluctuated, mainly due to the transition readiness dimension, but the overall trend suggests a gradual strengthening of the enabling environment for the energy transition. The UAE performs strongly on regulation and political commitment, which remains a critical enabler of the energy transition. In addition, progress on system performance remains strong, although progress within the sustainable dimension is slowing. Further improvements can be unlocked by targeting a reduction in energy intensity as well as carbon intensity of the energy mix.

The UAE has invested $40 billion in clean energy in the past 15 years,¹⁰² which translates into significant strides to promote renewable sources of energy. More than $160 billion is expected to be invested to achieve net zero by 2050,¹⁰³ which will see the UAE continue to shift its energy mix towards renewables, reduce GHG emissions and improve energy efficiency across sectors. The national Renewable Energy Strategy 2050 was launched in 2017 to increase the share of renewables in the total energy mix to 50% by 2050.¹⁰⁴ The country has made significant progress towards achieving this target by investing heavily in renewable energy projects and is home to one of the world’s largest single-site solar power plants, the Mohammed bin Rashid Al Maktoum Solar Park, covering 76 km2. The solar park currently generates 1.63 GW and offsets roughly 1.4 million tonnes of CO2 emissions every year, and its capacity will expand to 5 GW by 2030.¹⁰⁵,¹⁰⁶ The Abu Dhabi National Oil Company also announced a $3.1 billion investment to explore and implement carbon capture and storage technology in its operations, seeking to capture 5 million tonnes of CO2 annually by 2030.¹⁰⁷ While the net results of these efforts are reflected in UAE’s high ETI scores on regulation and political commitment and decarbonized energy, much more remains to be done to reduce the UAE’s high emissions per capita globally.¹⁰⁸

The UAE launched the National Water and Energy Demand Management Programme in 2022 “to improve the energy efficiency of the three most energy-intensive sectors in the country, namely transport, industry and construction, by 40% in 2050. It will launch several initiatives to cut energy demand by 40%, to raise the share of renewables in the energy mix to 50% and to boost water reuse by 95%”.¹⁰⁹ Newly implemented building codes and regulations require certain energy standards to be met, such as the use of energy-efficient appliances and equipment. The Emirates Energy Efficiency Strategy will retrofit 30,000 existing buildings in Dubai by 2030, abating 1 million tonnes of CO2.¹¹⁰ The UAE is also promoting public transport, alternative fuels and electric vehicles, with the intention of having 42,000 electric vehicles by 2030.¹¹¹ A carbon trading exchange and carbon clearing house was announced in Abu Dhabi in 2022 to attract investment in carbon emissions reduction by allowing companies to trade and finance carbon credits. The revenue generated from the carbon pricing system will be used to support renewable energy and energy efficiency projects. The UAE has also invested $2 billion in new desalination plants;¹¹² these are highly energy
intensive, however, and contribute to GHG emissions, which in turn drives the need for more clean energy.

The energy sector has been an important enabler of economic development and growth in the UAE, accounting for approximately a third of its GDP. Like other major exporting nations, the UAE has traditionally relied on its oil and gas resources to fuel its economy, but as the world transitions towards cleaner energy sources, demand for fossil fuels will decline over time. The cost of UAE’s renewables has been decreasing rapidly in recent years, making them increasingly competitive with fossil fuels. This provides an opportunity for the UAE to diversify its energy exports to include cheap renewable energy, clean technology and services to ensure it maintains its position as a leading energy exporter while also supporting its own energy transition goals. The UAE’s natural resource endowment, legacy energy infrastructure and availability of skilled labour, due to investment in education and training programmes (up 30% over the decade), position it favourably in the new energy landscape and provide a reference point for countries at similar levels of clean energy development.

Nigeria ranks 108 out of 120 countries on the ETI 2023 and is the largest economy and richest oil resource centre of the African continent, as well as the largest gas consumer and producer of West Africa.¹²⁴ Over the last 10 years, Nigeria’s overall ETI score has improved (3%), while its system performance scores have fallen slightly (1%). The country’s growing population and array of socioeconomic issues mean it needs sustainable energy sources to meet the increasing needs for all sectors of the economy. High scores on regulation and political commitment, relative to other enabling dimensions, are evidenced by the country’s notable power-sector reforms and plans to accelerate its clean energy transition and meet key development goals, including achieving net zero by 2060.

Nigeria’s Climate Change Act, which was signed into law in November 2021, “provides the legal framework and a bold institutional arrangement for action on climate change. The Act established a National Council on Climate Change, chaired by the President, to lead work under the Act and help mainstream climate change action into the country’s development agenda. … The vital next step is for the Council to publish Nigeria’s first carbon budget as requested by law and put in place efforts to monitor implementation and compliance”, according to global think tank ODI¹²⁵ In addition, the launch of the country’s Energy Transition Plan in August 2021 sets out a timeline and framework for achieving reduction in emissions across five key sectors: power, cooking, oil and gas, transport, and industry. These two important steps and a revised nationally determine contribution are reliable signs of Nigeria’s future. Nevertheless, challenges remain to turn these commitments into action.

As ODI points out, a “major obstacle to Nigeria’s transition away from fossil fuels is the high levels of government subsidies for their production and consumption. Progress on reforming fossil fuel subsidies has been challenging, as consumers expect accessible energy and affordable pricing from the government as a benefit of being a major oil producer”.¹²⁶ Nigeria currently has one of the highest rates of energy poverty in the world. The electricity access rate stands at 25% for rural populations for whom biomass and waste are the primary source of energy for cooking. Conversely, Nigeria has one of the highest costs of electricity in the world at an average of $0.52/kWh.¹²⁷ “Development finance institutions and other donors, wealthier, high-emitting countries, and international NGOs are well-placed to support this agenda through financing and research, and by encouraging constructive engagement on subsidy reform and justice and social responsibility in energy transition more broadly.”¹²⁸

Nigeria’s energy transition creates significant investment opportunities, including establishing and expanding industries for solar, hydrogen and electric vehicles, and using its vast natural gas resources for economic development. A Renewable Energy Roadmap was produced with the International Renewable Energy Agency and the Energy Commission of Nigeria in January 2023 that “encompasses all key sectors of the Nigerian energy system to provide additional context for energy policy discussions on how increased ambition in terms of renewable energy – beyond current government policy and targets – can be realised.”¹²⁹

Overall, the energy transition in Nigeria still requires significant investment from the government and support from its citizens. Prioritizing economic development, along with proper planning and strengthening institutional and fiscal frameworks, can help Nigeria accelerate its transition. Based on lessons learned from other countries, the government could identify (and support) low-carbon energy solutions, especially in the rural and peri-urban areas of Nigeria; place greater emphasis on innovation in new energy infrastructure development; improve energy efficiency in small and medium-sized enterprises; explore the effective use of domestic funding; and harmonize different energy policy frameworks. Together with the Renewable Energy and Energy Efficiency Associations-Alliance, the World Economic Forum is engaging key public- and private-sector stakeholders to further understand Nigeria’s energy transition policy plans, associated investment barriers to accelerate the clean energy transition, and practical solutions to address those barriers.