Energy efficiency is the world’s ‘first fuel’ – and the main route to net zero, says IEA chief

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Kate Whiting, Senior Writer, Formative Content

• Improving energy efficiency is an essential element of the transition to net zero.
• The International Energy Agency’s Executive Director, Fatih Birol, called it “the first fuel” at a Davos Agenda session.
• Here, Birol and Björn Rosengren, CEO of sustainability technology company ABB, explain what needs to happen to improve energy efficiency and reach net zero.

Energy efficiency is so important in the world’s journey to net zero, to keep global warming at 1.5 degrees Celsius, that it’s nicknamed “the first fuel” by the International Energy Agency (IEA).

So said the IEA’s Executive Director Fatih Birol in a session on Navigating the Energy Transition at Davos Agenda.

In November, the IEA’s latest Energy Efficiency report showed 2020 had been the worst year in a decade, and although efficiency improved in 2021, there’s still a way to go to meet climate change targets.

Birol was joined by panellist Björn Rosengren, CEO of ABB, a company which makes technology for a sustainable future, including electric vehicle charging infrastructure.

Here’s what they said about why saving energy is so important to save the planet.

At IEA, we call energy efficiency ‘the first fuel’ – which shows the significance of energy efficiency. —Fatih Birol

Energy going to waste

Today, two-thirds of the total prime energy in the world goes to waste, that includes through power generation, transportation, industry and buildings, explained Rosengren.

“We need to rethink industrial production, transportation and the way we live from a sustainability angle.”

We like to say that the best energy is the one we don’t waste, but save. —Björn Rosengren

Energy efficiency improvement will drive more than 40% of the reduction of energy-related greenhouse gas emissions over the next 20 years, according to the IEA.

In 2021, global energy intensity – a measure of the economy’s energy efficiency – is expected to improve by 1.9% after improving by only 0.5% in 2020.

But that’s still only half the 4% a year that’s needed to achieve the transition to net zero.

“Let’s make sure we tackle the most energy- and carbon-intensive industries first to make a difference,” said Rosengren.

The good news is most of the technologies needed already exist today.

From mining operations that are already starting the journey to electrification, to green steel and e-mobility, and smarter, more energy-efficient buildings, much work is in progress, he added.

Besides new and efficient technologies, there is also a strong need for changing consumer choices and behaviour.

“The IEA estimated 55% of emissions reduction will be driven by consumer choices. To reach this, the right incentives and regulation frameworks need to be in place.”

Global roadmap to net zero

“A major worldwide push to increase energy efficiency” is an essential part of the efforts needed to reach net zero by 2050, according to the IEA’s global roadmap, published in May 2021 – a response to the IPCC special report on climate change.

Governments around the world – from India to Chile to Indonesia to South Africa and Europe – are asking the IEA to work with them on preparing a domestic version of the roadmap, said Birol.

“Scientists told us [that] to keep the planet as it is, safe and sustainable, the global temperature can increase maximum 1.5 degrees Celsius full-stop.

“We have translated this 1.5 in order to reach [that] target, [saying] what steps need to be taken in the energy sector. We did not say it’s easy, difficult, likely or unlikely, just that these need to be done.

To go from 80% of energy coming from fossil fuels to net zero by 2050 requires a Herculean effort. It’s very, very difficult. But it’s not impossible. —Fatih Birol

“We have two choices,” said Birol. “Either we continue to use unabated fossil fuels – coal, oil and gas – and live with climate change, much more frequent extreme weather events, or we change the way we produce and consume energy.

“Today, 80% of the emissions causing climate change comes from the energy sector. Without fixing the problem in the energy sector, we have no chance.”

Costs and challenges of the clean energy transition

The road to net zero will be an expensive one, fraught with potential pitfalls.

“For clean energy, renewables, carbon capture, nuclear and energy efficiency, every year, the world has to invest about $3 trillion dollars, but today, we are investing about $1 trillion,” said Birol.

“In terms of fossil fuels, we will still need them, but their contribution will decline, we will still need gas and oil for many years to come. For that we need $300 billion each year.

“The issue is how to manage the clean energy transition properly and if we don’t manage it properly, we could see a lot of volatility in the markets,” he warned.

What’s the World Economic Forum doing about the transition to clean energy?

Moving to clean energy is key to combating climate change, yet in the past five years, the energy transition has stagnated.

Energy consumption and production contribute to two-thirds of global emissions, and 81% of the global energy system is still based on fossil fuels, the same percentage as 30 years ago. Plus, improvements in the energy intensity of the global economy (the amount of energy used per unit of economic activity) are slowing. In 2018 energy intensity improved by 1.2%, the slowest rate since 2010.

Effective policies, private-sector action and public-private cooperation are needed to create a more inclusive, sustainable, affordable and secure global energy system.

Benchmarking progress is essential to a successful transition. The World Economic Forum’s Energy Transition Index, which ranks 115 economies on how well they balance energy security and access with environmental sustainability and affordability, shows that the biggest challenge facing energy transition is the lack of readiness among the world’s largest emitters, including US, China, India and Russia. The 10 countries that score the highest in terms of readiness account for only 2.6% of global annual emissions.

To future-proof the global energy system, the Forum’s Shaping the Future of Energy and Materials Platform is working on initiatives including, Systemic Efficiency, Innovation and Clean Energy and the Global Battery Alliance to encourage and enable innovative energy investments, technologies and solutions.

Additionally, the Mission Possible Platform (MPP) is working to assemble public and private partners to further the industry transition to set heavy industry and mobility sectors on the pathway towards net-zero emissions. MPP is an initiative created by the World Economic Forum and the Energy Transitions Commission.

Is your organisation interested in working with the World Economic Forum? Find out more here.

Birol also stressed the need to recognize the tasks for developed and developing countries are different – they have different responsibilities and different means.

Rosengren said adoption of technology is another challenge facing efficiency.

“There are about 300 million electric motors operating in the world today and only about 20% equipped with a variable speed drive that makes them more efficient.

“By adding these drives to the rest of these motors worldwide, we could save 10% of the electricity in the world, we’re talking about a really huge number just to drive that efficiency.”

Watch the full session here.