IRENA-2023年世界能源转型展望：1.5°C路径（英）VIP专享VIP免费

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WORLD

ENERGY

TRANSITIONS

OUTLOOK 2023

1.5° C PATHWAY

VOLUME 1

ABOUT IRENA

The International Renewable Energy Agency (IRENA) serves as the principal platform for international

co-operation, a centre of excellence, a repository of policy, technology, resource and financial knowledge,

and a driver of action on the ground to advance the transformation of the global energy system. A global

intergovernmental organisation established in 2011, IRENA promotes the widespread adoption and

sustainable use of all forms of renewable energy, including bioenergy, geothermal, hydropower, ocean,

solar and wind energy, in the pursuit of sustainable development, energy access, energy security, and

low-carbon economic growth and prosperity. www.irena.org

Unless otherwise stated, material in this publication may be freely used, shared, copied, reproduced, printed

and/or stored, provided that appropriate acknowledgement is given of IRENA as the source and copyright

holder. Material in this publication that is attributed to third parties may be subject to separate terms of use

and restrictions, and appropriate permissions from these third parties may need to be secured before any

use of such material.

ISBN: 978-92-9260-527-8

CITATION

IRENA (2023), World Energy Transitions Outlook 2023: 1.5°C Pathway, Volume 1, International Renewable

Energy Agency, Abu Dhabi.

Available for download: www.irena.org/publications

For further information or to provide feedback: publications@irena.org

DISCLAIMER

This publication and the material herein are provided “as is”. All reasonable precautions have been taken by

IRENA to verify the reliability of the material in this publication. However, neither IRENA nor any of its officials,

agents, data or other third-party content providers, provides a warranty of any kind, either expressed or

implied, and they accept no responsibility or liability for any consequence of use of the publication or material

herein.

The information contained herein does not necessarily represent the views of all Members of IRENA. The

mention of specific companies or certain projects or products does not imply that they are endorsed or

recommended by IRENA in preference to others of a similar nature that are not mentioned. The designations

employed, and the presentation of material herein, do not imply the expression of any opinion on the part

of IRENA concerning the legal status of any region, country, territory, city or area or of its authorities, or

concerning the delimitation of frontiers or boundaries.

WORLD

ENERGY

TRANSITIONS

OUTLOOK 2023

ACKNOWLEDGEMENTS

This report was developed under the guidance of Rabia Ferroukhi and Roland Roesch and was led by

Ute Collier and Ricardo Gorini. The executive summary was led by Elizabeth Press.

The chapters were authored by Sean Collins, Jinlei Feng, Maria Vicente Garcia, Krisly Guerra, Diala Hawila,

Melda Jabbour, Maisarah Abdul Kadir, Rodrigo Leme, Gayathri Prakash, Faran Rana, Nicholas Wagner and

Mengzhu Xiao. Modelling co-ordination was provided by Rodrigo Leme and Chapter drafting by Mengzhu

Xiao.

Significant contributions were provided by IRENA colleagues and consultants: Emanuele Bianco,

Ines Jacob, Stuti Piya, Gandhi Pragada (ex-IRENA), Pablo Rimancus and Michael Taylor.

Valuable input, support and comments were provided by IRENA colleagues, consultants and advisors:

Abdullah Abou Ali, Arina Anisie, Simon Benmarraze, Francisco Boshell, Yong Chen, Isaline Court, Jaidev

Dhavle, Nazik Elhassan, Gerardo Escamilla, Isaac Elizondo Garcia, Dolf Gielen (ex-IRENA), Luis Janeiro,

Karan Kochhar, Martina Lyons, Asami Miketa, Raul Miranda, Paula Nardone, Athir Nouicer, Juan Pablo

Jimenez Navarro, Pablo Ralon, Michael Renner, Daniel Russo, Danial Saleem, Lucio Scandizzo, Gondia

Sokhna Seck, Aakarshan Vaid (ex-IRENA), Iris van der Lugt, Adrian Whiteman and Badariah Yosiyana.

Editorial and communications support were provided by Francis Field, Stephanie Clarke, Nicole Bockstaller,

Daria Gazzola and Manuela Stefanides. The report was copy-edited by Steven B. Kennedy and a technical

review was provided by Paul Komor. The graphic design was provided by weeks.de Werbeagentur GmbH.

IRENA is grateful for the generous support of the German Federal Ministry for Economic Affairs and

Climate Action.

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WORLDENERGYTRANSITIONSOUTLOOK20231.5°CPATHWAYVOLUME1ABOUTIRENATheInternationalRenewableEnergyAgency(IRENA)servesastheprincipalplatformforinternationalco-operation,acentreofexcellence,arepositoryofpolicy,technology,resourceandfinancialknowledge,andadriverofactiononthegroundtoadvancethetransformationoftheglobalenergysystem.Aglobalintergovernmentalorganisationestablishedin2011,IRENApromotesthewidespreadadoptionandsustainableuseofallformsofrenewableenergy,includingbioenergy,geothermal,hydropower,ocean,solarandwindenergy,inthepursuitofsustainabledevelopment,energyaccess,energysecurity,andlow-carboneconomicgrowthandprosperity.www.irena.org©IRENA2023Unlessotherwisestated,materialinthispublicationmaybefreelyused,shared,copied,reproduced,printedand/orstored,providedthatappropriateacknowledgementisgivenofIRENAasthesourceandcopyrightholder.Materialinthispublicationthatisattributedtothirdpartiesmaybesubjecttoseparatetermsofuseandrestrictions,andappropriatepermissionsfromthesethirdpartiesmayneedtobesecuredbeforeanyuseofsuchmaterial.ISBN:978-92-9260-527-8CITATIONIRENA(2023),WorldEnergyTransitionsOutlook2023:1.5°CPathway,Volume1,InternationalRenewableEnergyAgency,AbuDhabi.Availablefordownload:www.irena.org/publicationsForfurtherinformationortoprovidefeedback:publications@irena.orgDISCLAIMERThispublicationandthematerialhereinareprovided“asis”.AllreasonableprecautionshavebeentakenbyIRENAtoverifythereliabilityofthematerialinthispublication.However,neitherIRENAnoranyofitsofficials,agents,dataorotherthird-partycontentproviders,providesawarrantyofanykind,eitherexpressedorimplied,andtheyacceptnoresponsibilityorliabilityforanyconsequenceofuseofthepublicationormaterialherein.TheinformationcontainedhereindoesnotnecessarilyrepresenttheviewsofallMembersofIRENA.ThementionofspecificcompaniesorcertainprojectsorproductsdoesnotimplythattheyareendorsedorrecommendedbyIRENAinpreferencetoothersofasimilarnaturethatarenotmentioned.Thedesignationsemployed,andthepresentationofmaterialherein,donotimplytheexpressionofanyopiniononthepartofIRENAconcerningthelegalstatusofanyregion,country,territory,cityorareaorofitsauthorities,orconcerningthedelimitationoffrontiersorboundaries.3WORLDENERGYTRANSITIONSOUTLOOK2023ACKNOWLEDGEMENTSThisreportwasdevelopedundertheguidanceofRabiaFerroukhiandRolandRoeschandwasledbyUteCollierandRicardoGorini.TheexecutivesummarywasledbyElizabethPress.ThechapterswereauthoredbySeanCollins,JinleiFeng,MariaVicenteGarcia,KrislyGuerra,DialaHawila,MeldaJabbour,MaisarahAbdulKadir,RodrigoLeme,GayathriPrakash,FaranRana,NicholasWagnerandMengzhuXiao.Modellingco-ordinationwasprovidedbyRodrigoLemeandChapterdraftingbyMengzhuXiao.SignificantcontributionswereprovidedbyIRENAcolleaguesandconsultants:EmanueleBianco,InesJacob,StutiPiya,GandhiPragada(ex-IRENA),PabloRimancusandMichaelTaylor.Valuableinput,supportandcommentswereprovidedbyIRENAcolleagues,consultantsandadvisors:AbdullahAbouAli,ArinaAnisie,SimonBenmarraze,FranciscoBoshell,YongChen,IsalineCourt,JaidevDhavle,NazikElhassan,GerardoEscamilla,IsaacElizondoGarcia,DolfGielen(ex-IRENA),LuisJaneiro,KaranKochhar,MartinaLyons,AsamiMiketa,RaulMiranda,PaulaNardone,AthirNouicer,JuanPabloJimenezNavarro,PabloRalon,MichaelRenner,DanielRusso,DanialSaleem,LucioScandizzo,GondiaSokhnaSeck,AakarshanVaid(ex-IRENA),IrisvanderLugt,AdrianWhitemanandBadariahYosiyana.EditorialandcommunicationssupportwereprovidedbyFrancisField,StephanieClarke,NicoleBockstaller,DariaGazzolaandManuelaStefanides.Thereportwascopy-editedbyStevenB.KennedyandatechnicalreviewwasprovidedbyPaulKomor.Thegraphicdesignwasprovidedbyweeks.deWerbeagenturGmbH.IRENAisgratefulforthegeneroussupportoftheGermanFederalMinistryforEconomicAffairsandClimateAction.4WORLDENERGYTRANSITIONSOUTLOOK2023TherecentSynthesisReportoftheIPCCSixthAssessmenthasdeliveredasoberingmessage-ourcollectiveabilitytoadheretoa1.5°Cpathwayhangsinthebalance.Thisdecade,oursuccessinreducinggreenhousegasemissionswilldeterminewhetherglobaltemperaturerisecanbelimitedto1.5°Coreven2°C.Theramificationsofeachfractionofadegreecannotbeoverstated-particularlyfortheworld'smostvulnerablepopulations,whoarealreadysufferingthedestructiveimpactsofclimatechange.Theubiquityofclimate-induceddisasters-betheyfloods,droughtsorfires-demonstratesthepressingneedforacoursecorrection.Withinthetimeframeto2030,wemustsimultaneouslyrealisethegoalsofthesustainabledevelopmentagendaandsignificantlyreduceemissions.Energyplaysanessentialroleinclimatecoursecorrectionandtherealisationofsustainabledevelopment.IRENA’s1.5°Cpathway,setoutintheWorldEnergyTransitionsOutlook,positionselectrificationandefficiencyaskeytransitiondrivers,enabledbyrenewableenergy,cleanhydrogenandsustainablebiomass.Increasingly,countriesarepositioningthesetechnologicalavenuesatthecentreoftheirclimateaction,aswellastheireconomic,energysecurityanduniversalaccessstrategies.ThisvolumeoftheWorldEnergyTransitionsOutlook2023providesanoverviewofprogressbytrackingimplementationandgapsacrossallenergysectors.Itshowsthatmostoftheprogressachievedtodatehasbeeninthepowersector,whereavirtuouscircleoftechnology,policyandinnovationhastakenusalongway;butthescaleandextentofimplementationfallfarshortofwhatisrequiredtostayonthe1.5°Cpathway.Anequallyconcerningtrendisthegeographicconcentrationofthesedeployments,whichremainslimitedtoafewcountriesandregions.Thispattern,whichhaspersistedforthepastdecade,hasexcludedalmosthalfoftheglobalpopulation,andparticularlythoseincountrieswithsignificantenergyaccessneeds.Thebusinesscaseforrenewablesisstrong,butdeeplyentrenchedbarriersstemmingfromthesystemsandstructurescreatedforthefossil-fueleracontinuetohamperprogress.TheWorldEnergyTransitionsOutlooksetsoutavisionforovercomingthesebarriers.Itenvisagesthreepillarsthatwouldformthefoundationsforawayforward:first,buildingthenecessaryinfrastructureandinvestingatscaleingrids,andbothlandandsearoutes,toaccommodatenewproductionlocations,tradepatternsanddemandcentres;second,advancinganevolvedpolicyandregulatoryarchitecturethatcanfacilitatetargetedinvestments;andfinally,strategicallyrealigninginstitutionalcapacitiestohelpensurethatskillsandcapabilitiesmatchtheenergysystemweaspiretocreate.FOREWORD5VOLUME1FrancescoLaCameraDirector-General,IRENAThisalsorequiresarealignmentofthewayinwhichinternationalcooperationworks.Multilateralfinancinginstitutionsshouldprioritisebuildingtheinfrastructurethatwouldunderpinthenewenergysystem.Thiswouldcoherentlyandsimultaneouslyhelpdeliverdevelopmentandclimatepriorities,triggeringvirtuouseconomicandsocialdynamics.Importantly,thiswouldenableprivatesectorinvestmentincountriesandregionsthatcurrentlyfacebarrierssuchashighcapitalcosts.Thebulkofthisfundingshouldbeintheformofconcessionalloans,whilstforthemostvulnerablesuchasleastdevelopedcountries(LDCs)andsmallislanddevelopingstates(SIDS),ashareofgrantfundingisneeded.Ourcollectivepromisewastosecureaclimate-safeexistenceforcurrentandfuturegenerations.Wesimplycannotcontinuewithincrementalchanges;thereisnotimeforanewenergysystemtoevolvegraduallyovercenturies,aswasthecaseforthefossilfuel-basedsystem.Theenergytransitionmustalsobecomeastrategictooltofosteramoreequitableandinclusiveworld.Theupcoming28thConferenceofthePartiestotheUNFCCC(COP28)andtheGlobalStocktakemustnotonlyconfirmourdeviationfroma1.5°Cpathwaybutalsoprovideastrategicblueprinttosteerusbackontrack.ItismybeliefthattheWorldEnergyTransitionsOutlookcanoffercriticalinputtoshapingourcollectiveactionfollowingthisimportantclimateactionmilestone.WORLDENERGYTRANSITIONSOUTLOOK20236WORLDENERGYTRANSITIONSOUTLOOK2023Figures...................................08Tables......................................10Boxes......................................11Abbreviations............................12Executivesummary.....................14Introduction.............................26References...............................166CHAPTER1THE1.5°CCLIMATEPATHWAYANDPROGRESSINTHEENERGYTRANSITIONHighlights................................291.1Transformingtheglobalenergysystem......................301.2The1.5°CScenario:Globalperspectives.................331.3Implicationsforthe1.5°CScenarioofrevisedNDCsandotherpledges...........421.4Theenergycrisisanditsimplicationsfortheenergytransition....................471.5Conclusions...........................5101TABLEOFCONTENTSVOLUME17VOLUME1TABLEOFCONTENTS0203CHAPTER2SECTORALTRANSFORMATIONPATHWAYSANDSUPPORTINGPOLICIESHighlights................................532.1Introduction.........................562.2Powersector........................562.3Emergingfuels:Cleanhydrogenanditsderivatives.......762.4Bioenergysupplyandconsumption........................842.5Industrysector......................922.6Buildingssector....................1082.7Transportsector....................1172.8Conclusions.........................129CHAPTER3INVESTMENTNEEDS,FINANCINGANDENABLINGPOLICYFRAMEWORKSHighlights................................1313.1Introduction.........................1333.2Investmentstoacceleratetheenergytransition................1333.3Renewableenergyinvestmentsandpoliciesoverthepastyear..................1433.3Roleofpublicfinanceandpoliciesforajustandinclusiveenergytransition........1568WORLDENERGYTRANSITIONSOUTLOOK2023FIGURES1Keyenergytransitionpillarsandbarriers...........................................21FIGURE1.1Powergenerationneedstomorethantripleby2050inthe1.5°CScenario.............35FIGURE1.2Breakdownoftotalfinalenergyconsumptionbyenergycarrierbetween2020and2050underthe1.5°CScenario.................................................36FIGURE1.3Totalprimaryenergysupplybyenergycarriergroup,2020-2050underthe1.5°CScenario...........................................................37FIGURE1.4EstimatedtrendsinglobalCO2emissionsunderthePlannedEnergyScenarioand1.5°CScenario,2023-2050....................................................39FIGURE1.5Carbonemissionsabatementunderthe1.5°CScenarioin2050......................40FIGURE1.6CO2emissiontrajectoriesbasedonCOPannouncementsandthe1.5°CScenario......43FIGURE2.1Annualpowercapacityexpansion,2002-2022.......................................57FIGURE2.2Changeinglobalweightedaveragelevelisedcostofelectricitybytechnology,2020-2021.......................................................................59FIGURE2.3Powergenerationmixandinstalledcapacitybyenergysource:PlannedEnergyScenarioand1.5°CScenarioin2020,2030and2050................63FIGURE2.4Totalglobalpowergenerationcapacityexpansionneededby2030and2050torealisethe1.5˚CScenario........................................................67FIGURE2.5Globalcleanhydrogensupplyin2020,2030and2050inthe1.5°CScenario...........77FIGURE2.6RecommendationsforG7members................................................83FIGURE2.7Primarybioenergysupplybycarrierin2020,2030and2050underthePlannedEnergyScenarioand1.5°CScenario........................................84FIGURE2.8Bioenergyfinalenergyconsumptionbysectorsin2020,2030and2050underthe1.5°CScenario..........................................................86FIGURESVOLUME19VOLUME1LISTOFFIGURESFIGURE2.9Apolicyframeworkforsustainablebioenergydevelopment.........................90FIGURE2.10Industry:FinalconsumptionunderthePlannedEnergyScenarioandthe1.5°CScenarioin2020,2030and2050,andcorrespondingemissions................93FIGURE2.11Temperaturerangesandtechnologiesforindustrysectors...........................102FIGURE2.12Buildings:FinalenergyconsumptionunderthePlannedEnergyScenarioandthe1.5°CScenarioin2020,2030and2050,andcorrespondingemissions........108FIGURE2.13Heatpumpsalesin21EUmarkets,2014-2022.......................................112FIGURE2.14Transport:FinalenergyconsumptionunderthePlannedEnergyScenarioandthe1.5°CScenarioin2020,2030and2050,andcorrespondingemissions........118FIGURE2.15Measurestoimprovetransportstrategies...........................................124FIGURE3.1Globalinvestmentbytechnologicalavenue:PlannedEnergyScenarioand1.5°CScenario,2023-2050.............................................................134FIGURE3.2Globalinvestmentinenergytransitiontechnologies,2015-2022......................145FIGURE3.3Globalannualfinancialcommitmentsinrenewableenergybytechnology,2013-2022.....146FIGURE3.4Globalannualrenewableenergyinvestmentsbyapplication,2013-2022..............148FIGURE3.5Investmentinrenewableenergybyregionofdestination,2013-2022.................149FIGURE3.6Globalinvestmentinrenewableenergybyfinancialinstrument,2013-2020...........151FIGURE3.7Renewableenergyinvestmentbyregionandtypeofinvestment(debtvs.equity),2013-2020.......................................................152FIGURE3.8PortionofDFIfundingintheformofgrantsandlow-costdebt,2013-2020...........153FIGURE3.9CumulativerenewableenergyinvestmentinAfricaandglobally,2000-2020..........154FIGURE3.10Globalsharesofannualcommitmentsinoff-gridrenewablesbyfinancialinstrument,2013-2021....................................................159FIGURE3.11Flowofpublicfinanceforajustandinclusiveenergytransition......................16210WORLDENERGYTRANSITIONSOUTLOOK2023TABLES1Trackingprogressofkeyenergysystemcomponentstoachievethe1.5°CScenario.......16TABLE1.1Keyperformanceindicatorsforachievingthe1.5°CScenariocomparedwiththePlannedEnergyScenarioin2030and2050.....................................34TABLE1.2Keymeasurestoacceleratetheenergytransition...................................49TABLE2.1Keyperformanceindicatorsforthepowersector:PlannedEnergyScenarioand1.5°CScenarioin2030and2050...............................................65TABLE2.2Keyperformanceindicatorsforcleanhydrogenanditsderivatives:PlannedEnergyScenarioand1.5°CScenarioin2030and2050......................................79TABLE2.3Keyperformanceindicatorsforbioenergysupplyandconsumption:PlannedEnergyScenarioand1.5°CScenarioin2030and2050......................88TABLE2.4Keyperformanceindicatorsfortheindustrysector:PlannedEnergyScenarioand1.5°CScenarioin2030and2050...............................................94TABLE2.5Keyperformanceindicatorsforthebuildingssector:PlannedEnergyScenarioand1.5°CScenarioin2030and2050................................................111TABLE2.6Keyperformanceindicatorsforthetransportsector:PlannedEnergyScenarioand1.5°CScenarioin2030and2050...............................................121TABLE3.1RequiredannualinvestmentsunderthePlannedEnergyScenarioand1.5°CScenario,2023-2030.........................................................136TABLESVOLUME111VOLUME1TABLEOFBOXESBOX1.1Keyenergytransitionpillars.......................................................31BOX1.2IRENA’sregionalstudies...........................................................41BOX1.3TheParisAgreementGlobalStocktake.............................................44BOX1.4InsightsfromanalysingthealignmentbetweenLTESandLT-LEDS...................46BOX2.1Flexibilityandtheimportanceofcross-borderpowerexchange......................69BOX2.2Enablingactionstospeeduppermittingprotocolsforoffshorewindprojects..........72BOX2.3Powersectorsintherenewableenergyera–settinguporganisationalstructures......75BOX2.4Recommendationsforacceleratinghydrogendeployment...........................82BOX2.5Acceleratingthetransitiontoadecarbonisedsteelsector:KeyactionsfromtheBreakthroughAgendaReport.....................................................98BOX2.6Emergingtechnologiesfordecarbonisingheatinginindustry........................102BOX2.7Thecirculareconomyandindustrialdecarbonisation................................106BOX2.8Emergingtechnologiesforheatingbuildings.......................................112BOX2.9Emergingtechnologiesforthee-mobilitysector....................................123BOX2.10Avoid-shift-improvestrategiesforroadtransport...................................124BOX3.1InvestmentsinrenewableenergyinAfricabyregionandsourceoffinancing..........154BOX3.2Off-gridrenewableenergyinvestmentsindevelopingcountries......................159BOX3.3Short-terminvestmentpriorities(by2030).........................................163BOX3.4IRENAInvestmentForums........................................................165BOXES12WORLDENERGYTRANSITIONSOUTLOOK2023ASEANAssociationofSoutheastAsianNationsBECCSbioenergywithcarboncaptureandstorageBFblastfurnaceBOFbasicoxygenfurnaceCAGRcompoundannualgrowthrateCCScarboncaptureandstorageCCUcarboncaptureandutilisationCCUScarboncapture,utilisationandstorageCFORCollaborativeFrameworkforOffshoreWindCNYChineseyuanCOPConferenceofthePartiesCO2carbondioxideCSPconcentratingsolarpowerDCdirectcurrentDFIdevelopmentfinanceinstitutioneCFe-crackingfurnaceEEAEuropeanEconomicAreaEJexajouleEUEuropeanUnionEUReuro(currency)EVelectricvehicleFiTfeed-intariffGBPBritishpoundGCFGreenClimateFundGHGgreenhousegasGIZGermanAgencyforInternationalCooperationGLADGlobalLifeCycleAssessmentDataAccessGOWAGlobalOffshoreWindAllianceGtgigatonneGWgigawattGWECGlobalWindEnergyCouncilHVACheating,ventilationandairconditioningIATAInternationalAirTransportAssociationICAOInternationalCivilAviationOrganisationICEinternalcombustionengineIDDIIndustrialDeepDecarbonisationInitiativeIEAInternationalEnergyAgencyILOInternationalLabourOrganizationIMOInternationalMaritimeOrganisationIPCCIntergovernmentalPanelonClimateChangeIRENAInternationalRenewableEnergyAgencyJETPJustEnergyTransitionPartnershipKPIkeyperformanceindicatorLCOElevelisedcostofelectricityLNGliquefiednaturalgasLTESlong-termenergyscenariosLT-LEDSlong-termlowgreenhousegasemissionstrategiesMEPSminimumenergyperformancestandardsNDCNationallyDeterminedContributionNGOnon-governmentalorganisationOECDOrganisationforEconomicCo-operationandDevelopmentPESPlannedEnergyScenarioPJpetajoulePPApowerpurchaseagreementPVphotovoltaicPWhpetawatthoursRD&Dresearch,developmentanddemonstrationSDGSustainableDevelopmentGoalSIDSsmallislanddevelopingstatesSOEstate-ownedenterpriseSOFIstate-ownedfinancialinstitutionTFECtotalfinalenergyconsumptionTPEStotalprimaryenergysupplyTWterawattUAEUnitedArabEmiratesUKUnitedKingdomUNUnitedNationsUSUnitedStatesUSDUnitedStatesdollarVREvariablerenewableenergyWEFWorldEconomicForumZEVzero-emissionvehicleABBREVIATIONS13TheWorldEnergyTransitionsOutlookoutlinesavisionforthetransitionoftheenergylandscapetoreflectthegoalsoftheParisAgreement,presentingapathwayforlimitingglobaltemperatureriseto1.5°CandbringingCO2emissionstonetzerobymid-century.ThereportbuildsontwoofIRENA’skeyscenariostocaptureglobalprogresstowardmeetingthe1.5°Cclimategoal:The1.5°CScenariodescribesanenergytransitionpathwayalignedwiththe1.5°Cclimategoaltolimitglobalaveragetemperatureincreasebytheendofthepresentcenturyto1.5°C,relativetopre-industriallevels.Itprioritisesreadilyavailabletechnologysolutions,whichcanbescaleduptomeetthe1.5°Cgoal.1.5°CScenarioThePlannedEnergyScenarioistheprimaryreferencecaseforthisstudy,providingaperspectiveonenergysystemdevelopmentsbasedongovernments’energyplansandotherplannedtargetsandpoliciesinplaceatthetimeofanalysis,withafocusonG20countries.PlannedEnergyScenarioVOLUME1WORLDENERGYTRANSITIONSOUTLOOK202314WORLDENERGYTRANSITIONSOUTLOOK2023EXECUTIVESUMMARY15VOLUME1EXECUTIVESUMMARYTheenergytransitionisoff-track.TheaftermathoftheCOVID-19pandemicandtherippleeffectsoftheUkrainecrisishavefurthercompoundedthechallengesfacingthetransition.Thestakescouldnotbehigher-everyfractionofadegreeinglobaltemperaturechangecantriggersignificantandfar-reachingconsequencesfornaturalsystems,humansocietiesandeconomies.Limitingglobalwarmingto1.5°Crequirescuttingcarbondioxide(CO2)emissionsbyaround37gigatonnes(Gt)from2022levelsandachievingnet-zeroemissionsintheenergysectorby2050.Despitesomeprogress,significantgapsremainbetweenthecurrentdeploymentofenergytransitiontechnologiesandthelevelsneededtoachievethegoaloftheParisAgreementtolimitglobaltemperaturerisetowithin1.5°Cofpre-industriallevelsbytheendofthiscentury.A1.5°Ccompatiblepathwayrequiresawholescaletransformationofthewaysocietiesconsumeandproduceenergy.CurrentpledgesandplansfallwellshortofIRENA’s1.5°Cpathwayandwillresultinanemissionsgapof16Gtin2050.NationallyDeterminedContributions(NDCs),long-termlowgreenhousegasemissiondevelopmentstrategies(LT-LEDS)andnet-zerotargets,iffullyimplemented,couldreduceCO2emissionsby6%by2030and56%by2050,comparedto2022levels.However,mostclimatepledgesareyettobetranslatedintodetailednationalstrategiesandplans-implementedthroughpoliciesandregulations-orsupportedwithsufficientfunding.AccordingtoIRENA'sPlannedEnergyScenario,theenergy-relatedemissionsgapisprojectedtoreach34Gtby2050,underscoringtheurgentneedforcomprehensiveactiontoacceleratethetransition.Annualdeploymentofsome1000GWofrenewablepowerisneededtostayona1.5°Cpathway.In2022,some300GWofrenewableswereaddedglobally,accountingfor83%ofnewcapacitycomparedtoa17%sharecombinedforfossilfuelandnuclearadditions.Boththevolumeandshareofrenewablesneedtogrowsubstantially,whichisbothtechnicallyfeasibleandeconomicallyviable.Policiesandinvestmentsarenotconsistentlymovingintherightdirection.Whiletherewererecordrenewablepowercapacityadditionsin2022,theyearalsosawthehighestlevelsoffossilfuelsubsidiesever,asmanygovernmentssoughttocushiontheblowofhighenergypricesforconsumersandbusinesses.GlobalinvestmentsacrossallenergytransitiontechnologiesreachedarecordhighofUSD1.3trillionin2022,yetfossilfuelcapitalinvestmentswerealmosttwicethoseofrenewableenergyinvestments.Withrenewablesandenergyefficiencybestplacedtomeetclimatecommitments-aswellasenergysecurityandenergyaffordabilityobjectives–governmentsneedtoredoubletheireffortstoensureinvestmentsareontherighttrack.Everyyear,thegapbetweenwhatisachievedandwhatisrequiredcontinuestogrow.IRENA’senergytransitionindicators(TableS1)showsignificantaccelerationisneededacrossenergysectorsandtechnologies,fromdeeperend-useelectrificationoftransportandheat,todirectrenewableuse,energyefficiencyandinfrastructureadditions.DelaysonlyaddtothealreadyconsiderablechallengeofmeetingIPCC-definedemissionreductionlevelsin2030and2050fora1.5°Ctrajectory(IPCC,2022a).Thislackofprogresswillalsoincreasefutureinvestmentneedsandthecostsofworseningclimatechangeeffects.16WORLDENERGYTRANSITIONSOUTLOOK2023IndicatorsRecentyears2050Progress(off/ontrack)2030IndicatorsRecentyears2050Progress(off/ontrack)2030ShareofrenewablesinelectricitygenerationRenewablepowercapacityadditionsAnnualsolarPVadditionsAnnualwindenergyadditionsInvestmentneedsforREgenerationELECTRIFICATIONWITHRENEWABLEScontinuedShareofrenewablesinﬁnalenergyconsumptionSolarthermalcollectorareaModernuseofbioenergy(directuse)Geothermalconsumption(directuse)RenewablesbaseddistrictheatgenerationInvestmentneedsforrenewablesendusesanddistrictheatDIRECTRENEWABLESINEND-USESANDDISTRICTHEATInvestmentneedsforpowergridsandﬂexibilityEnergyintensityimprovementRENEWABLESY28%91%68%35%295GW/yr975GW/yr1066GW/yr191GW/yr551GW/yr615GW/yr75GW/yr329GW/yr335GW/yr1380USDbillion/yr1300USDbillion/yr486USDbillion/yr210USDbillion/yr290USDbillion/yr13USDbillion/yr17%82%585millionm2/yr3882millionm2/yr21EJ53EJ46EJ2.2EJ13EJ1552millionm2/yr1.7%/yr3.3%/yr0.9EJ0.9EJ4.3EJ1.4EJ2)4)1)1)1)1)5)6)7)9)10)11)12)13)16)15)14)3)3)3)8)274USDbillion/yr605USDbillion/yr800USDbillion/yrTABLES1Trackingprogressofkeyenergysystemcomponentstoachievethe1.5°CScenario17VOLUME1EXECUTIVESUMMARYIndicatorsRecentyears2050Progress(off/ontrack)2030continuedNotes:seenextpageRenewablesbaseddistrictheatgenerationInvestmentneedsforrenewablesendusesanddistrictheatShareofdirectelectricityinﬁnalenergyconsumptionPassengerelectriccarsontheroadInvestmentsneedsforcharginginfrastructureofEV'sandEVadoptionsupportInvestmentneedsforheatpumpsCleanhydrogenproductionElectrolysercapacityInvestmentneedsforcleanhydrogenandderivativesinfrastructureCCS/U-emissionsabatedBECCSandotherstoabatetotalemissionsInvestmentneedsforcarbonremovalandinfrastructureEnergyintensityimprovementrateENERGYEFFICIENCYELECTRIFICATIONHYDROGENCCSANDBECCS29%Investmentneedsforenergyconservationandeciency1525USDbillion/yr1780USDbillion/yr295USDbillion/yr0.04GtCO2captured/yr0.002GtCO2captured/yr3.8GtCO2captured/yr0.8GtCO2captured/yr210USDbillion/yr290USDbillion/yr13USDbillion/yr13EJ1.7%/yr2.8%/yr3.3%/yr30USDbillion/yr170USDbillion/yr1.1USDbillion/yr100USDbillion/yr107USDbillion/yr6.4USDbillion/yr38USDbillion/yr0.9EJ4.3EJ51%22%10.5million360million2180million364USDbillion/yr137USDbillion/yr523Mt/yr125Mt/yr0.7Mt/yr5722GW0.5GW1)1)13)16)18)17)27)19)20)21)28)29)30)23)24)25)15)14)230USDbillion/yr22)26)31)64USDbillion/yr233GW3.2GtCO2captured/yr1.4GtCO2captured/yr237USDbillion/yr(contd.)TABLES1Trackingprogressofkeyenergysystemcomponentstoachievethe1.5°CScenario18WORLDENERGYTRANSITIONSOUTLOOK2023TableS1notes:[1]Averageannualinvestmentsrequirementtoreachthe1.5°Ctargetduringtheperiod2023-2030and2023-2050areshownintheinvestmentsrowsunder2030and2050,respectively.AllinvestmentfiguresforrecentyearsareincurrentUSD;theparticularsofrecentyearsusedfortheindicatorsare:[2]2020;[3]netcapacityadditionsfor2030and2050areexcludingreplacementstockforend-of-lifeunits;[4]2022;[5]2022;[6]2022;[7]2022;[8]2022;[9]2020;[10]2021;[11]2020-non-energyusesarenotincluded;[12]2020;[13]2020;[14]futureinvestmentsneededinrenewablesinenduses,districtheating,biofuelsandbio-basedinnovativefuels;[15]2022;[16]Recentyearsvalueisanaveragebetween2010and2020;[17]futureinvestmentsinenergyconservationandefficiencyincludethoseinbio-basedplasticsandorganicmaterials,chemicalandmechanicalrecyclingandenergyrecovery;[18]2021;[19]2020;[20]2022;[21]2022;[22]2022;[23]2021;[24]theshareforgreenhydrogenis40%in2030;[25]theshareforgreenhydrogenis94%in2050;[26]2022;[27]futureinvestmentsneededinelectrolysers,infrastructure,H2stations,bunkeringfacilitiesandlong-termstorage;[28]2022;[29]IncludesCO2captureinnaturalgasprocessing,hydrogen,otherfuelsupply,powerandheat,industry,directaircaptureoffacilitiesinoperation,2022;[30]Currenttotalcapturecorrespondstofuelsupply,2022;[31]2022.CCS/U=carboncaptureandstorage/use;BECCS=bioenergy,carboncaptureandstorage;EV=electricvehicle;RE=renewableenergy;yr=year;m2=squaremetre;EJ=exajoule;Gt=gigatonne.19VOLUME1EXECUTIVESUMMARYTheshareofrenewableenergyintheglobalenergymixwouldincreasefrom16%in2020to77%by2050inIRENA’s1.5°Cscenario.Totalprimaryenergysupplywouldremainstableduetoincreasedenergyefficiencyandgrowthofrenewables.Renewableswouldincreaseacrossallend-usesectors,whileahighrateofelectrificationinsectorssuchastransportandbuildingswouldrequireatwelve-foldincreaseinrenewableelectricitycapacityby2050,comparedto2020levels.Globally,annualrenewablepowercapacityadditionswouldneedtoreachanaverageof1066GWperyearfrom2023to2050underthe1.5°Cscenario.Electricitywouldbecomethemainenergycarrier,accountingforover50%oftotalfinalenergyconsumptionby2050inthe1.5°Cscenario.Renewableenergydeployment,improvementsinenergyefficiencyandtheelectrificationofend-usesectorswouldcontributetothisshift.Inaddition,modernbiomassandhydrogenwouldbothplaymoresignificantroles,meeting16%and14%oftotalfinalenergyconsumptionby2050,respectively.By2050,94%ofhydrogenwouldberenewables-basedinthe1.5°Cscenario.Hydrogenwouldplayakeyroleinthedecarbonisationofend-usesandflexibilityofthepowersystem.The1.5°CScenarioenvisagesthattotalfinalenergyconsumptionwoulddecreaseby6%between2020and2050,duetoefficiencyimprovements,deploymentofrenewables,andchangesinbehaviourandconsumptionpatterns.AnenduringinvestmentgapAcumulativeUSD150trillionisrequiredtorealisethe1.5°Ctargetby2050,averagingoverUSD5trillioninannualterms.AlthoughglobalinvestmentacrossallenergytransitiontechnologiesreachedarecordhighofUSD1.3trillionin2022,annualinvestmentmustmorethanquadrupletoremainonthe1.5°Cpathway.ComparedwiththePlannedEnergyScenario-underwhichacumulativeinvestmentofUSD103trillionisrequired–anadditionalUSD47trillionincumulativeinvestmentisrequiredby2050toremainonthe1.5°Cpathway.AroundUSD1trillionofannualinvestmentsinfossilfuel-basedtechnologiescurrentlyenvisagedinthePlannedEnergyScenariomustthereforeberedirectedtowardsenergytransitiontechnologiesandinfrastructure.Renewableenergyinvestmentremainsconcentratedinalimitednumberofcountriesandfocusedononlyafewtechnologies.Investmentinrenewableenergy(includingbothpowerandend-uses)reachedUSD0.5trillionin2022(IRENAandCPI,2023);however,thisisaroundone-thirdoftheaverageinvestmentneededeachyearinrenewablesunderthe1.5°CScenario.Furthermore,85%ofglobalrenewableenergyinvestmentbenefittedlessthan50%oftheworld’spopulationandAfricaaccountedforonly1%ofadditionalcapacityin2022(IRENA,2023a;IRENAandCPI,2023).Investmentsinoff-gridrenewableenergysolutionsin2021amountedtoUSD0.5billion(IRENAandCPI,2023)–farbelowtheUSD15billionneededannuallyto2030.Whilemanytechnologychoicesexist,mostinvestmentswereinsolarPVandwindpower,with95%channelledtowardthesetechnologies(IRENAandCPI,2023).Greatervolumesoffundingneedtoflowtootherenergytransitiontechnologiessuchasbiofuels,hydropowerandgeothermalenergy,aswellastosectorsbeyondpowerthathavelowersharesofrenewablesintotalfinalenergyconsumption(e.g.heatingandtransport).20WORLDENERGYTRANSITIONSOUTLOOK2023Some75%ofglobalinvestmentinrenewablesfrom2013to2020camefromtheprivatesector.However,privatecapitaltendstoflowtothetechnologiesandcountrieswiththeleastassociatedrisks,betheyrealorperceived.In2020,83%ofcommitmentsinsolarPVcamefromprivatefinance,whereasgeothermalandhydropowerreliedprimarilyonpublicfinance-only32%and3%ofinvestmentsinthesetechnologies,respectively,camefromprivateinvestorsin2020(IRENAandCPI,2023).Strongerpublicsectorinterventionisrequiredtochannelinvestmentstowardscountriesandtechnologiesinamoreequitableway.Publicfinanceandpolicyshouldcrowdinprivatecapital,butgreatergeographicalandtechnologicaldiversityofinvestmentrequirestargetedandscaled-uppubliccontributions.Formanyyears,policyhasfocusedonmobilisingprivatecapital.Publicfundingisurgentlyneededtoinvestinbasicenergyinfrastructureinthedevelopingworld,aswellastodrivedeploymentinlessmaturetechnologies(especiallyinendusessuchasheatingandtransport,orsyntheticfuelproduction)andinareaswhereprivateinvestorsseldomventure.Otherwise,thegapininvestmentbetweentheGlobalNorthandtheGlobalSouthcouldcontinuetowiden.OvercomingbarrierstothetransitionPolicymakersneedtostriketherightbalancebetweenreactivemeasuresandproactiveenergytransitionstrategiesthatpromoteamoreresilient,inclusiveandclimate-safesystem.Severaloftherootcausesofcurrentcrisesstemfromthefossilfuel-basedenergysystem,suchasoverdependenceonalimitednumberoffuelexporters,inefficientandwastefulenergyproductionandconsumption,andthelackofaccountingfornegativeenvironmentalandsocialimpacts.Anenergytransitionbasedonrenewablescanreduceoreliminatemanyofthese.Itisthereforethespeedofthechangethatwilldeterminethelevelsofenergysecurityandeconomicandsocialresilienceatthenationallevelandoffernewopportunitiesforimprovedhumanwelfareglobally.Acceleratingprogressworldwiderequiresashiftawayfromstructuresandsystemsbuiltforthefossilfuelera.Theenergytransitioncanbeatoolwithwhichtoproactivelyshapeamoreequalandinclusiveworld.Thismeansovercomingexistingbarriersacrossinfrastructure,policy,workforcesandinstitutionsthathamperprogressandimpedeinclusivity(FigureS2).Morecanbedoneintheshortterm.Whiletheenergytransitionundoubtedlyrequirestime,thereissignificantpotentialtoimplementmanyoftheavailabletechnologyoptionstoday.Upwardtrendsinthedeploymentofthesesolutionsdemonstratethatthetechnicalandeconomiccaseissound.However,comprehensivepoliciesareneededacrossallsectorstorampupdeployment,aswellastoinstigatethesystemicandstructuraloverhaulrequiredtorealiseclimateanddevelopmentobjectives.EnablinginfrastructurePolicyandregulationsSkillsandinstitutionalcapacityForward-lookingplanning,modernisationandexpansionofsupportinginfrastructurebothonlandandseatofacilitatethedevelopment,storage,distribution,transmissionandconsumptionofrenewables.Infrastructureshouldfacilitatenational,regionalandglobalstrategiesfornewsupply-demanddynamics.Designpolicyandregulatoryframeworksthatfacilitatedeployment,integrationandtradeofrenewables-basedenergy,improvesocio-economicandenvironmentaloutcomesandpromoteequityandinclusion.Theseneedtoenabletheenergytransitionatvariouslevels,fromlocaltoglobal,andreflectnewsupply-demanddynamics.Awareness-andcapacity-buildingofinstitutions,communitiesandindividualstoacquirerequisiteskillsandknowledgetodriveandsustaintheenergytransition.Thisincludesco-ordinationbetweeneducationalinstitutionsandindustry.Strengthenedinstitutions,socialdialogueandcollectivebargainingwillhelpbringaboutgreatersocio-economicbenefits.BarriersSolutions▲Insucientinfrastructuretoconnectrenewableenergytomarkets,includingenergystorageandgridintegrationinfrastructure.▲Lackofreadinessofthedistributioninfrastructureforelectricity,gasesandfuels.▲Unpreparednessofend-usesectorfacilitiestoswitchtorenewables.▲Policyandregulatoryframeworksthatarestillshapedaroundfossilfuels,oeringinsucientpublicfundingforenergytransitionsupport.▲Lackofintegratedplanningforenergyproductionandconsumption.▲Insucientattentiontothesocio-economicdimension,includingalackofindustrialpolicyforviablesupplychains.▲Misalignmentsbetweenfossilfueljoblossesandrenewablejobgains(skills-related,sectoral,spatial,temporal).▲Skillsgapsduetoinadequateeducationandtrainingopportunities;unevenaccessforwomen,youth,minorities;andunmetreskillingandupskillingneeds.Alsolackofawarenessofopportunities.▲Jobqualityissues,includingwages,occupationalhealthandsafety,andoverallworkplaceconditions.21VOLUME1EXECUTIVESUMMARYFIGURES1Keyenergytransitionbarriersandsolutions22WORLDENERGYTRANSITIONSOUTLOOK2023TheGlobalStocktakeatthe2023UnitedNationsClimateChangeConference(COP28)mustserveasacatalystforscalingupactionintheyearsto2030toimplementexistingenergytransitionoptions.Whilstplanningmustprovideroomforinnovationandadditionalpolicyaction,asignificantscaleupofexistingsolutionsisparamount.Forexample,advancingefficiencyandelectrificationbasedonrenewablesisacost-effectiveavenueforthepowersector,aswellasfortransportandbuildings.Cleanhydrogenanditsderivatives,andsustainablebiomasssolutions,alsooffervarioussolutionsforenduses.TheperiodfollowingCOP28willbepivotalforeffortstocurbclimatechangeandachievethesustainabledevelopmentgoalsoutlinedinthe2030Agenda.Theenergytransitioniscrucialfordeliveringoneconomic,socialandenvironmentalpriorities.Itisimperativeforgovernments,financialinstitutionsandtheprivatesectortourgentlyre-evaluatetheiraspirations,strategiesandimplementationplanstorealigntheenergytransitionwithitsintendedtrajectory.Developingstructuresforarenewables-basedenergysystemAprofoundandsystemictransformationoftheglobalenergysystemmustbeachievedwithin30years.Thiscondensedtimeframenecessitatesastrategicshiftthatexpandsbeyondthefocusondecarbonisationofenergysupplyandenergyconsumption,towarddesigninganenergysystemthatnotonlyreducescarbonemissionsbutalsosupportsaresilientandinclusiveglobaleconomy.Asaresult,planningneedstoextendbeyondbordersandthenarrowconfinesoffuelstofocusontherequirementsofthenewenergysystemandtheeconomiesitwillsustain.Focusingontheenablersofarenewables-dominatedsystemcanhelpaddressthestructuralbarriersthathinderprogressintheenergytransition.Pursuingfuelandsectoralmitigationmeasuresisnecessary,butisinsufficienttotransitiontoanenergysystemfitforthedominanceofrenewables.Fromenergyproductionandtransportationtoprocessingcoal,oilandgas,theglobalinfrastructurededicatedtoenergywillneedtochange.Thiswillhaveimpactsonpowergeneration,industrialproductionandmanufacturing,aswellasonrail,pipelines,shipyardsandothermeansofsupplyingfossilfuels.Enhancingthefocusonsystemsdesignwillhelpacceleratethedevelopmentofanewenergyinfrastructureandsustainitsimplementation.Aprofoundandsystemictransformationoftheglobalenergysystemmustoccurwithin30years23VOLUME1EXECUTIVESUMMARYGovernmentscanproactivelyshapearenewables-basedenergysystem,overcometheflawsandinefficienciesofcurrentstructures,andmoreeffectivelyinfluenceoutcomes.Thesimultaneous,proactiveshapingofphysical,policyandinstitutionalstructureswillbeessentialtorealisingdevelopmentandclimateobjectives,andachievingamoreresilientandequitableworld.Theseunderpinningsshouldformthepillarsofastructurethatsupportstheenergytransition:Physicalinfrastructureupgrades,modernisationandexpansionwillincreaseresilienceandbuildflexibilityforadiversifiedandinterconnectedenergysystem.Transmissionanddistributionwillneedtoaccommodateboththehighlylocalised,decentralisednatureofmanyrenewablefuels,aswellasdifferenttraderoutes.Planningforinterconnectorstoenableelectricitytrade,andshippingroutesforhydrogenandderivatives,mustconsidervastlydifferentglobaldynamicsandproactivelylinkcountriestopromotethediversificationandresilienceofenergysystems.Storagesolutionswillneedtobewidespreadanddesignedwithgeo-economicimpactsinmind.Publicacceptanceisalsocriticalforanylarge-scaleundertakingandcanbesecuredthroughprojecttransparencyandopportunitiesforcommunitiestovoicetheirperspectives.Policyandregulatoryenablersmustsystematicallyprioritisetheaccelerationoftheenergytransitionandareductionintheroleoffossilfuels.Today,theunderlyingpolicyandregulatorysystemsremainshapedaroundfossilfuels.Whileitisinevitablethatfossilfuelswillremainintheenergymixforsometime,theirsharemustdramaticallydecreaseasweapproachmid-century.Policyframeworksandmarketsshouldthereforefocusonacceleratingthetransitionandprovidetheessentialunderpinningsforaresilientandinclusivesystem.Awell-skilledworkforceisalynchpinofasuccessfulenergytransition.WorkbyIRENAandtheInternationalLabourOrganization(ILO)hasshownthattherenewableenergysectoremployedsome12.7millionpeopleworldwidein2022,growingfromabout7.3millionin2012.Energytransitionmodellingindicatesthattensofmillionsofadditionaljobswilllikelybecreatedinthecomingdecadesasinvestmentsgrowandinstalledcapacitiesexpand.Abroadrangeofoccupationalprofileswillbeneeded.Fillingthesejobswillrequireconcertedactionineducationandskillsbuilding,andgovernmentshaveacriticalroleinco-ordinatingeffortstoaligntheofferingsoftheeducationsectorwithprojectedindustryneeds-whetherintheformofvocationaltrainingoruniversitycourses.Toattracttalenttothesector,itiscrucialthatjobsaredecent,andthatwomen,youthandminoritieshaveequalaccesstojobtraining,hiringnetworksandcareeropportunities.24WORLDENERGYTRANSITIONSOUTLOOK2023Thewayforward:PrioritisingboldandtransformativeactionsAchievingthenecessarycourse-correctionintheenergytransitionwillrequirebold,transformativemeasuresthatreflecttheurgencyofthepresentsituation.Aconsiderablescale-upofrenewablesneedstogohand-in-handwithinvestmentsinenablinginfrastructure.Comprehensivepoliciesareneedednotonlytofacilitatedeploymentbutalsotoensurethetransitionhasbroadsocio-economicbenefits.Net-zerocommitmentsmustbeembeddedinlegislationandtranslatedintoimplementationplansthatareadequatelyresourced.Withoutthiscrucialstep,climateannouncementsremainaspirational,andthenecessaryprogressoutofreach.Thecurrentenergysystemisdeeplywovenintosocio-economicstructuresthathaveevolvedovercenturies.ThismeanssignificantstructuralchangemustoccurinacondensedtimeframeoflessthanthreedecadestosuccessfullydeliveronthegoalsoftheParisAgreement.Everyinvestmentandplanningdecisionconcerningenergyinfrastructuretodayshouldconsiderthestructureandgeographyofthelow-carboneconomyofthefuture.Energyinfrastructureislong-lived,soinvestmentinfixedinfrastructureshouldconsiderthelongterm.Electrificationofenduseswillreshapedemand.Renewablepowerwillrequireexistinginfrastructuretobemodernised,withgridreinforcementandexpansiononbothlandandsea.Greenhydrogenproductionwillalsooccurinlocationsotherthantoday’soilandgasfields.Thetechnicalchallengesandeconomiccostsofredesigninginfrastructureshouldbeaccountedfor,andtheenvironmentalandsocialaspectsadequatelyaddressedfromtheoutset.Ajustandinclusiveenergytransitionwillhelptoovercomedeepdisparitiesthataffectthequalityoflifeofhundredsofmillionsofpeople.Energytransitionpoliciesmustbealignedwithbroadersystemicchangesthataimtosafeguardhumanwell-being,advanceequityamongcountriesandcommunities,andbringtheglobaleconomyinlinewithclimate,broaderenvironmentalandresourceconstraints.Supportingdevelopingcountriestoacceleratetheenergytransitioncouldimproveenergysecuritywhilepreventingtheglobaldecarbonisationdividefromwidening.Adiverseenergymarketwouldreducesupplychainrisks,improveenergysecurityandensurelocalvaluecreationforcommodityproducers.Accesstotechnology,training,capacitybuildingandaffordablefinancewillbevitaltounlockthefullpotentialofcountries’contributionstotheglobalenergytransition,especiallyforthoserichinrenewablesandrelatedresources.Humanwelfareandsecuritymustremainattheheartoftheenergytransition.Systemicchangesbeyondtheenergysectorwillbeneededtoovercomepervasiveproblemsrelatedtohumanwelfareandsecurity,aswellasdeeplyembeddedinequalities;arenewables-basedenergytransitioncanhelpalleviatesomeoftheconditionsthatunderlytheseissues.Themoretheenergytransitioncanhelpsolvethesebroadchallenges,themoreitspopularacceptanceandlegitimacywillrise,providedalsothatcommunityneedsandinterestsarewellrepresentedandintegratedintotransitionplanning.25VOLUME1EXECUTIVESUMMARYRewritinginternationalco-operationThedynamismofenergysectorsandgeopoliticaldevelopmentsnecessitatesgreaterscrutinyofinternationalco-operationmodalities,instrumentsandapproachestoensuretheirrelevance,impactandagility.Toachieveasuccessfulenergytransition,internationalco-operationneedstobeenhancedandredesigned.Thecentralityofenergytotheglobaldevelopmentandclimateagendaisundisputed,andinternationalco-operationinenergyhasincreasedexponentiallyinrecentyears.Thisco-operationplaysadecisiveroleindeterminingtheoutcomesoftheenergytransitionandisacriticalavenueforachievinggreaterresilience,inclusionandequality.Theexpandingvarietyofactorsengagedintheenergytransitionrequiresanassessmentofrolestoleveragerespectivestrengthsandefficientlyallocatelimitedpublicresources.Theimperativesofdevelopmentandclimateaction,coupledwithchangingenergysupplyanddemanddynamics,requirecoherenceandalignmentaroundpriorityactions.Forinstance,investmentinsystemsforcross-borderandglobaltradeofenergycommoditieswillrequireinternationalco-operationonanunprecedentedscale.Itis,therefore,essentialtoreconsidertherolesandresponsibilitiesofnationalandregionalentities,internationalorganisations,andinternationalfinancialinstitutionsandmultilateraldevelopmentbankstoensuretheiroptimalcontributiontotheenergytransition.AchievingtheenergytransitionwillrequirecollectiveeffortstochannelfundstotheGlobalSouth.In2020,multilateralandbilateraldevelopmentfinanceinstitutions(DFIs)providedlessthan3%oftotalrenewableenergyinvestments.Goingforward,theyneedtodirectmorefunds,atbetterterms,towardslarge-scaleenergytransitionprojects.Moreover,financingfromDFIswasprovidedmainlythroughdebtfinancingatmarketrates(requiringrepaymentwithinterestrateschargedatmarketvalue)whilegrantsandconcessionalloansamountedtojust1%oftotalrenewableenergyfinance(IRENAandCPI,2023).Theseinstitutionsareuniquelyplacedtosupportlarge-scaleandcross-borderprojectsthatcanmakeanotabledifferenceinacceleratingtheglobalenergytransition.26WORLDENERGYTRANSITIONSOUTLOOK2023Theyearsincethepublicationofthe2022editionoftheWorldEnergyTransitionsOutlookhasbeenachallengingonefordecisionmakers.Withtheworldstillreelingfromtheeconomiceffectsofthepandemic,theconsequencesofeventsinUkraineescalatedwhathasbecomeoneoftheworstenergycrisesindecades.Atthesametime,thescaleoftheglobalclimateemergencyhasbecomeevermoreobvious.UnprecedentedheatwavesinEurope,widespreadfloodinginPakistanandtheworstdroughtonrecordintheHornofAfricaarejustafewoftherecentextremeweathereventsthathavebeenlinkedtoclimatechange.TheIntergovernmentalPanelonClimateChange(IPCC),inasynthesisreportpublishedinMarch2023,stressedtheneedforrapidandfar-reachingtransitionsacrossallsectorsandsystems(IPCC,2023).AstheInternationalRenewableEnergyAgency(IRENA)hasurgedinpreviouseditionsoftheWorldEnergyTransitionsOutlook,asetofcomplementarytransitions-inrenewables-basedelectrification,energyefficiency,anddirectusesofrenewablesintransport,industryandbuildings-offerapathwaytotheIPCC’s1.5°Cclimatetargetbasedontechnologiesandmeasuresthatare,forthemostpart,alreadyavailable.Thepastyearhasdemonstratedtheclearbenefitsofthisrenewables-basedpathwayinstrengtheningenergysecurity,reducingthenegativeeffectsoffossilfuelpricevolatility,andmakingenergymoreaffordable.Renewableshavebecomeincreasinglycompetitiverelativetofossilfuelsinmanycases,offeringthepotentialtoholddownenergycostswhileallowingcountriestoreducetheirdependenceonimports.Theimpactsoftheglobalenergy-relatedchallengescountrieshavefacedoverthepastyear-suchasrisingenergyprices,inflation,highercapitalcostsandenergyinsecurity-wouldhavebeenlesssevereifcountrieshadinvestedearlierintransitiontechnologiesandassociatedinfrastructureinthepowerandheatsectors.Furtherdelayswillcompoundthesechallenges.Nonetheless,itisnottoolatetochangecourse.Severalenergytransitionindicatorsshowthatdespitethecrisis,thereisresilienceinthevariouscomponentsoftheenergytransition,withsomeevenpickingupspeed.Overall,however,theenergytransitionisnotontrack;eachyearthegapgrowsbetweenwhatisbeingdoneandwhatisrequired.Toomanydecisionmakershavebeenaddressingtheenergycrisisinwaysthatareincompatiblewiththelonger-termneedforprofoundtransformation,notonlyoftheenergysectorbutoftheeconomyandsocietyaswell.Theslowpaceofprogressnowwillincreaseinvestmentneedsinthefuture,bothtoproducetheenergyweneedandtocopewithworseningclimatechangeeffects.Thesimultaneous,proactivereshapingofphysical,policyandinstitutionalstructureswillbeessentialtotherealisationofamoreresilient,productiveandequitableworld.ThisfirstvolumeoftheWorldEnergyTransitionsOutlook2023proposesa1.5°C-compatiblepathwayto2050,whiledocumentingtheprogressachievedtodateinthedeploymentofinvestmentandenergytransitionsolutions.Itpresentswaystodealwiththeshort-termenergycrisiswhileremainingontheenergytransitionpath;containsnewanalysisandinformation;providesperspectivesonthelatestdevelopmentsandprogressinenergyscenariosandinvestments;andoffersnewviewsonenablingfinanceandframeworks.Thesecondvolumeoftheoutlook,tobepublishedlaterin2023,willexaminethesocio-economicimpactsoftheenergytransition.INTRODUCTION27Thisvolumecomprisesthreechapters:Chapter1presentstransitionpathwaysto2030and2050underthePlannedEnergyScenarioandthe1.5°CScenario,examiningtherequiredtechnologicalchoicesandemissionmitigationmeasurestoachievethe1.5°CParisclimategoal.Inadditiontotheglobalperspective,thechapterpresentstransitionpathwaysattheG20level,andemphasisestheG20’sroleinreducingemissionsandacceleratingthedeploymentoflow-carbontechnologies.AlongwiththelatestinformationontheNationallyDeterminedContributionsfromthe2022UnitedNationsClimateChangeConference(COP27),theemissionsgaptothe1.5°Ctargetisdiscussed.Additionally,itincludesanexaminationofresponsestothecurrentenergycrisisandtheirimplicationsfortheenergytransitions.Thechapterconcludeswithrecommendationsforpolicyactionstorespondtothepresentenergycrisisandlonger-termclimategoals.Chapter2providessector-andtechnology-specificdetailsofthetransitionto2030and2050.Theanalysisshowsthatarangeoftechnologiesandstrategiesmustbedeployed.Renewablesmustplayadominantroleinallend-usesectors,notablyelectricity,greenhydrogenandsyntheticfuelsproducedfromrenewablepower.Bioenergyandbiomassfeedstocksmustalsoplayagrowingrole,especiallyinindustryandtransport.Institutionalandregulatoryframeworksandpoliciestopropeltheenergytransitionareexaminedforthepowersector,suppliesofemergingfuelsandend-usesectors.Chapter3identifiestheinvestmentsrequiredby2030and2050underthe1.5°CScenario,comparingthemwithcurrentlevels.Afterexploringhowgovernmentscanbalanceshort-andlong-termenergytransitioninvestmentneeds,thechapterexaminesthepressingneedtoaccelerateinvestmentininfrastructure.Recenttrendsinenergy-transitioninvestmentareanalysedbytechnology,regionandsourceoffunding.Toachievebothanoverallscale-upofdeploymentandatrulyglobalenergytransition,publicfinance(bothnationalandinternational),co-ordinatedregulation,andpolicysupportwillplaycrucialrolesinthedeploymentofrenewableenergy,especiallyinregionsandcountriesthathavenotbeenabletoattractprivatecapital.Understandingthesocio-economicconsequencesofthetransitionpathways(atdifferentlevelsofambition)isafundamentalaspectofproperplanningandpolicymaking.Policymakersneedtoknowhowtheirchoiceswillaffectpeople’swell-beingandoverallwelfare,justastheyneedtobeawareofthepotentialgapsandhurdlesthatcouldaffectprogress.Fortheenergytransitiontoyielditsfullbenefits,countrieswillrequireacomprehensivepolicyframeworkthatnotonlytransformsenergysystems,butalsoprotectspeople,livelihoodsandjobs.TheclimatepolicybasketsthatunderlieIRENA’smacroeconometricmodel,theresultsofwhichwillbepresentedintheforthcomingsecondvolumeoftheWorldEnergyTransitionsOutlook2023,containarangeofmeasures(e.g.investmentsinpublicinfrastructure,increasedsocialspending,andcross-sectoralcarbonpricingandsubsidies)tosupportajustandinclusivetransition,inadditiontopoliciesthatdeploy,integrateandpromoteenergytransitiontechnologies.Chapter1Chapter2Chapter3VOLUME1INTRODUCTIONWORLDENERGYTRANSITIONSOUTLOOK2023CHAPTER01THE1.5°CCLIMATEPATHWAYANDPROGRESSTOWARDSTHEENERGYTRANSITIONWORLDENERGYTRANSITIONSOUTLOOK20230129VOLUME1CHAPTER01•Despitetheprogressachievedtodate,thedeploymentofenergytransitiontechnologiesfallsfarshortofthelevelsrequiredtoachievethe1.5°CParisclimategoal.A1.5°C-compatiblepathwayrequiresacompletetransformationofhowsocietiesconsumeandproduceenergy.Tosecuretheoutcomesofthisscenario,theworldwillneedtoreachnet-zeroemissionsintheenergysectorby2050,requiringreductionsinannualenergy-relatedcarbondioxide(CO2)emissionsofabout37gigatonnes(Gt)comparedwithestimatedlevelsin2022-whichareexpectedtorepresentanall-timehigh.By2050,globalenergyconsumptionwillneedtodropby6%from2020levelsthroughsubstantialimprovementsinenergyefficiency,whiletheshareofrenewablesintheglobalenergymixwillhavetoriseto77%by2050,upfrom16%in2020.Allend-usesectorswillhavetousemorerenewables,andtherequisitescaleofelectrificationinthetransportandbuildingssectorswillrequireatwelve-foldincreaseinrenewableelectricitycapacityby2050,comparedto2020levels.•Membercountriesmadecommendablecommitmentsatthe27thUnitedNationsClimateChangeConference(COP27)inEgypt-includingNationallyDeterminedContributions(NDCs),long-termlowgreenhousegasemissiondevelopmentstrategies(LT-LEDS)andnet-zerotargets.Yet,thesewillfailtoachievethe1.5°Cclimategoalby2050,leavinganemissionsgapofabout16GtofCO2in2050.Inaddition,NDCsandotherclimatepledgesmustbetranslatedintonationalstrategiesandplans.These,inturn,mustsettargets(e.g.forrenewableenergy)andbeimplementedthroughpolicies,regulationsandothermeasuresthatcoverallaspectsoftheenergysectorinordertoattractsufficientfunding.ArapidaccelerationoftheseeffortsisneededtoclosethegapandachievetheclimategoalsarticulatedintheParisAgreement.•Theenergycrisishasledmanygovernmentstoimplementshort-termmeasurestosecureenergysuppliesandprotectconsumers,suchasnewinvestmentsinfossilfuelinfrastructure(e.g.liquefiednaturalgas[LNG]terminals)andsubsidiesforconsumers.Governmentsneedtoensurethatshort-termmeasuresarealignedwiththelonger-termaimsoftheenergytransitionbyredoublingtheireffortstoachieveenergyefficiencyandrenewableenergydeployment.Thepotentialrewardsshouldbepersuasive;a1.5°C-compatibleenergysystemholdsthepromiseoflong-termenergysecurityandpricestability.Energyefficiency,combinedwithrenewables,canmakecountrieslessdependentonfossilfuelimports,diversifysupplyoptions,promoteenergytradeandco-operation,andhelpdecoupleeconomiesfromvolatileinternationalfossilfuelpricefluctuations.HIGHLIGHTS30WORLDENERGYTRANSITIONSOUTLOOK20231.1TransformingtheglobalenergysystemAprofoundandsystemictransformationoftheglobalenergysystemmustoccurwithinthenext30yearsiftheworldistoavoiddevastatingconsequencesfromclimatechangeandasteadyerosionofenergysecurity.Thiscondensedtimeframenecessitatesastrategicshiftthatmovesbeyondthedecarbonisationofsupplytowardsanenergysystemthatcutscarbonemissionswhilesupportingaresilientandinclusiveglobaleconomy.Planningmustthereforetranscendthebordersoftechnologytofocusonthebroaderexigenciesofthenewenergysystemandtheeconomiesitwillsustain.Thesimultaneous,proactivereshapingofphysical,policyandinstitutionalstructureswillbeessentialtotherealisationofamoreresilient,productiveandequitableworld.Thepillarsoftheenergytransitionrequiredtodeliverthatworldare(1)physicalinfrastructure,(2)policyandregulatoryenablersand(3)skillsandcapacities(seeBox1.1).Thecurrentstructurescontainmanybarriersthathamperthetransition.Adiversifiedandinterconnectedenergysystemrequiresthemodernisationandexpansionofinfrastructure.Transmissionanddistributionsystemswillneedtoaccommodatethehighlylocalised,decentralisednatureofmanyrenewablesources,alongwiththevarioustraderoutesinvolved.Withregardtotheinterconnectorsrequiredtotradeelectricityandshippingroutesforhydrogenandderivatives,planningmustconsiderastaggeringarrayofglobaldynamics,proactivelylinkingcountriestopromotediverseandresilientenergysystems.Publicacceptance,whichiscriticalforanylarge-scaleundertaking,canbesecuredthroughtransparencyinplanningandimplementationandbyprovidingopportunitiesforcommunitiestovoicetheirperspectives.Arapidtransformationoftheenergysystemisneededby205031PHYSICALINFRASTRUCTURE:forward-lookingplanning,modernisationandexpansionofsupportinginfrastructureonlandandseatofacilitatethedevelopment,storage,distributionandtransmission,andconsumptionofrenewables.Infrastructureshouldfacilitatenational,regionalandglobalstrategiesfornewsupply-demanddynamics.POLICYANDREGULATORYENABLERS:designofpolicyandregulatoryframeworksthatfacilitatedeployment,integrationandtradeofrenewables-basedenergy,improvesocio-economicandenvironmentaloutcomesandpromoteequityandinclusion.Theseneedtoenabletheenergytransitionatvariouslevels,fromlocaltoglobal,andreflectnewsupply-demanddynamics.SKILLSANDCAPACITIES:awareness-andcapacity-buildinginstitutions,communitiesandindividualstoacquiretherequisiteskills,knowledgeandexpertisetodriveandsustaintheenergytransition.Strengthenedinstitutions,socialdialogueandcollectivebargainingwillhelpbringaboutgreatersocio-economicbenefits.VOLUME1CHAPTER01BOX1.1Keyenergytransitionpillars321ThesecondvolumeoftheWorldEnergyTransitionsOutlook2023,tobepublishedlaterintheyear,willfurtherexplorethesocio-economicimpactsoftheenergytransitionandtheroleofinternationalcollaboration.WORLDENERGYTRANSITIONSOUTLOOK2023Today,althoughmorepolicyinitiativesandregulatorymeasuresseektopromoterenewablesourcesandreducegreenhousegasemissions(asshowninthesubsequentchapters),theunderlyingpolicyandregulatorysystemsarestillgearedtowardfossilfuels.Whilstitisinevitablethatfossilfuelswillremainintheenergymixforsometime,theirsharemustbedramaticallyreducedasthemid-centurymarkapproaches.Policyframeworksandmarketsshouldthereforefocusonacceleratingthetransitionandestablishingtheunderpinningsofaresilientandinclusivesystem.Askilledworkforceisalinchpinoftheenergytransition.Inaseriesofsocio-economicstudiesconductedsince2016(IRENA,2016a,2020a,2021a,2022a),IRENAandtheInternationalLabourOrganizationhaveshownthattherenewableenergysectoremployedsome12.7millionpeopleworldwidein2022,upfrom7.3millionin2012.Boththeprivateandpublicsectorswillrequireabroadrangeofoccupationalprofiles,includingupskilledstaffinthepublicsector(government,agenciesandregulators)toundertaketransitionplanningandcraftappropriateregulations.Toattracttalenttothesector,jobsmustofferdecentwagesandopportunities,withequalaccessforwomen,youthandminoritiesinsearchoftraining,hiringnetworksandcareeropportunities.1Internationalco-operationonenergywillalsoneedtobeenhancedandredesigned.Withthecentralityofenergytotheglobaldevelopmentandclimateagendaundisputed,internationalco-operationhasincreasedinrecentyears,helpingtosteertheenergytransition.Thespeedatwhichenergysectorsrespondtogeopoliticaldevelopmentsmakesitimperativethatco-operativemodalities,instrumentsandapproachesremainagileandrelevant.Fortheirowngood,andforthatofthedevelopingworld,theG20countries–thataccountforthebulkofglobalemissions-mustactinconcert,raisingtheirclimateambitionsandfulfillingtheirpledges.Forthedevelopingworld,collaborationiscrucialifcountriesaretoleapfrogsystemsalreadynearingobsolescenceinthedevelopedworldandtherebyavoidmisplacedinvestments.Specificcombinationsoftechnologiesincertaincountryandinstitutionalsettingscandriveenergytransitionsinend-usesectors.Theycanalsochangesupply-sideandtransformationalprocesses,dependingoninstitutionalconditions,resourceavailabilityandinfrastructure.Butacommonfactoracrossallcountriesistheneedtoelectrifyheatandtransportusingrenewableelectricity,efficiencymeasuresandthedirectuseofrenewables(bioenergy,solarandhydrogen).Thischapterpresentspossibleenergysystemtransitionpathwaysundera1.5°CScenarioalignedwiththeIPCCspecialreportonlimitingglobalwarmingtonomorethan1.5°Cby2050(IPCC,2022a).Itexaminesthetechnologicalchangesandmitigationmeasuresrequiredthrough2030and2050.Thechapteralsoexplorestheimplicationsofthecurrentenergycrisis,proposingasetofmeasuresgovernmentscantaketoalleviatethecrisiswhilsthelpingtoacceleratetheenergytransition.This2023editionoftheWorldEnergyTransitionsOutlookfocusescloselyonthetransitionpathwaysintheGroupofTwenty(G20)countriesandemphasisestheirroleinreducingemissionsandstrengtheningthedeploymentoflow-carbontechnologies.33VOLUME1CHAPTER011.2The1.5°CScenario:GlobalperspectivesAsinpreviouseditions,IRENAusessixperformanceindicatorstomonitorprogresstowardsthe1.5°Cpathway:•Useofrenewablestogenerateelectricity:comprisingtwosub-indicators;1)theamountofelectricitygeneratedfromrenewablesand2)theshareofrenewablesinthetotalelectricitygenerated.•Directusesofrenewables:comprisingtwosub-indicators;1)theshareofrenewableenergyintotalfinalenergyconsumptionand2)thequantityofmodernbioenergyused.•Improvementsinenergyintensity.•Theelectrificationofend-usesectors.•Productionandsupplyofcleanhydrogenandderivativefuels.•Theamountofcarbondioxidecapturedandremovedbyvariousmethods.Table1.1detailsthe2020standingofthesixindicators,bothgloballyandintheG20,comparedwithprojectionsoftheirstandingin2030and2050underthe1.5°CScenarioandareferencescenariobasedoncurrentplans.34TABLE1.1Keyperformanceindicatorsforachievingthe1.5°CScenariocomparedwiththePlannedEnergyScenarioin2030and2050Recentyears203020502020PES1.5°CScenarioPES1.5°CScenarioKPI.01RENEWABLES(POWER)Electricitygeneration(TWh/yr)Global746816504273583811882148G20623714269223973107160547Renewableenergyshareinelectricitygeneration(%)Global28%46%68%73%91%G2028%48%69%74%91%KPI.02RENEWABLES(DIRECTUSES)RenewableenergyshareinTFEC(%)Global18%23%35%33%82%G2016%22%36%35%82%Modernuseofbioenergy(EJ)1Global2130504164G201926363342KPI.03ENERGYINTENSITYEnergyintensityimprovementrate(%)Global1.7%1.8%3.3%2.0%2.8%G202.1%2.1%3.6%2.3%3.1%KPI.04ELECTRIFICATIONINEND-USESECTORS(DIRECT)ElectrificationrateinTFEC(%)Global22%23%29%28%51%G2024%26%31%32%55%KPI.05CLEANHYDROGENANDDERIVATIVESProductionofcleanhydrogen(Mt)Global0.7Mt/yr2212521523G200.5Mt/yr229420373KPI.06CCS,BECCSANDOTHERSCO2capturedfromCCS,BECCSandotherremovalmeasures(Gt)Global0.04GtCO2/yr30.12.20.57.0G200.03GtCO2/yr30.12.10.44.9WORLDENERGYTRANSITIONSOUTLOOK2023Notes:ThePlannedEnergyScenario,thereferencecaseforWETO2023,isbasedoncountries’currentplans.1.Includesnon-energyuses.2.OperationalprojectcapacitythroughOctober2022(IEAHydrogenProjectDatabase).3.OperationalprojectcapacitythroughMarch2023(IEACCUSDatabase).BECCS=bioenergywithcarboncaptureandstorage;CCS=carboncaptureandstorage;CO2=carbondioxide;EJ=exajoule;G20=GroupofTwenty;Gt=gigatonne;KPI=keyperformanceindicator;Mt=megatonne;PES=PlannedEnergyScenario;TFEC=totalfinalenergyconsumption;TWh/yr=terawatthoursperyear.35VOLUME1CHAPTER01Underthe1.5°CScenario,electricitygenerationwouldmorethantriplefrom2020to2050,with91%ofthetotalelectricitysupplycomingfromrenewablesources,comparedto28%in2020(seeFigure1.1).Coal-andoil-basedpowergenerationwouldexperienceasharpdeclineoverthedecadebeforebeingphasedoutentirelybymid-century.By2050,naturalgaswouldprovide5%oftotalelectricityneeds,withtheremaining4%beingmetbynuclearpowerplants.Thetransitionfeaturesasynergybetweenincreasinglyaffordablerenewablepowertechnologiesandthewideradoptionofelectrictechnologiesforend-useapplications,especiallyintransportandheat.Theelectrificationoftransport,heatandotherendusesimpliesthatglobalrenewablepowergenerationcapacitywouldneedtoexpandbyafactorofalmost12byend-2050,comparedto2020levels,inordertomeetthe1.5°Ctarget.AdetailedanalysiscanbefoundinChapter2.FIGURE1.1Powergenerationneedstomorethantripleby2050inthe1.5°CScenarioFossilfuelsFossilfuelsRenewablesRenewablesNuclearNuclear62%62%10%10%5%5%4%4%28%28%91%91%27PWh90PWh20202050(1.5°CScenario)Grosselectricitygeneration(PWh)Grosselectricitygeneration(PWh)Note:PWh=petawatthours.36WORLDENERGYTRANSITIONSOUTLOOK2023Thescale-upwouldgrowtheshareofrenewableenergyintotalfinalenergyconsumption(TFEC)from18%in2020to82%by2050.The1.5°CScenarioenvisageselectricitybecomingthemainenergycarrier,accountingforover50%ofTFEC(seeFigure1.2).Renewableenergydeployment,improvementsinenergyefficiencyandtheelectrificationofend-usesectorscontributetothisshift.Inaddition,modernbiomassandhydrogenareprojectedtoplaymoresignificantroles,with16%and14%ofTFECby2050,respectively.Notably,94%ofhydrogenproductionisexpectedtocomefromrenewables,indicatingagrowingrelianceoncleanenergysources(IRENA,2022b,2022c,2022d).ThepathwayalsosuggeststhatTFECcouldfall6%between2020and2050,suggestingapotentialtrendtowardsdecarbonisationandamoresustainableenergyfuture.FIGURE1.2Breakdownoftotalfinalenergyconsumptionbyenergycarrierbetween2020and2050underthe1.5°CScenarioNotes:Thefiguresaboveincludeonlyenergyconsumption,excludingnon-energyuses.Forelectricityuse,28%in2020and91%in2050arefromrenewablesources;fordistrictheating,thesharesare7%and84%,respectively;forhydrogen(directuseande-fuels),therenewableenergyshare(i.e.greenhydrogen)wouldreach94%by2050.Hydrogen(directuseande-fuels)accountsfortotalhydrogenconsumption(greenandblue)andothere-fuels(e-ammoniaande-methanol).Electricity(direct)includestheconsumptionofelectricitythatisprovidedbyallsourcesofgeneration:renewable,nuclearandfossilfuel-based.TraditionalusesofbiomassrefertotheresidentialTFECofsolidbiofuelsinnon-OECDcountries.Modernbioenergyusesincludesolidbiomass,biogasandbiomethaneusedinbuildingsandindustry;andliquidbiofuelsusedmainlyintransport,butalsoinbuildings,industryandotherfinalconsumption.Remainingfossilfuelsin2050correspondtonaturalgas(mainlyusedinindustryandtransport,andtoalesserextentinbuildings),oil(mainlyinindustryandtransport,andtoalesserextentinbuildings)andcoal(correspondstousesinindustry-cement,chemicals,ironandsteel).Othersincludedistrictheatandotherrenewablesconsumption.EJ=exajoule;OECD=OrganisationforEconomicCo-operationandDevelopment;TFEC=totalfinalenergyconsumption.TFEC(%)20202050(1.5°CScenario)374EJTotalﬁnalenergyconsumption353EJTotalﬁnalenergyconsumption22%Electricity(direct)51%Electricity(direct)4%6%Traditionalusesofbiomass5%Modernbiomassuses63%Fossilfuels16%Modernbiomassuses14%Hydrogen(directuseande-fuels)7%OthersFossilfuels12%OthersRenewableshareinhydrogen94%91%Renewableshareinelectricity28%Renewableshareinelectricity37VOLUME1CHAPTER01Totalprimaryenergysupplyremainsstableduetoincreasedenergyefficiencyandgrowthofrenewables(seeFigure1.3).Theshareofrenewableenergyinprimaryenergysupplywouldgrowfrom16%in2020to77%in2050.Theenergymixwouldchangedrasticallyintheprocess,withanetgainof61percentagepointsofrenewableenergyshareintotalprimaryenergysupply,drivenbyamixofend-useelectrification,renewablefuelsanddirectuses.Achievingthislevelofrenewableenergypenetrationiscriticaltomeetingglobalclimategoalsandwouldrequiresignificantinvestmentandpolicysupport,aswellascontinuedinnovation.FIGURE1.3Totalprimaryenergysupplybyenergycarriergroup,2020-2050underthe1.5°CScenario202020502045204020352030TPES(EJ/year)8006004002000RenewablesNuclearFossilfuelsWhereweneedtobe(1.5°CScenario)-63p.p.-63p.p.79%79%5%5%6%6%6%6%6%6%6%6%7%7%16%16%34%34%47%47%59%59%69%69%77%77%60%60%47%47%35%35%25%25%16%16%+61p.p.+61p.p.Notes:Globalprimaryenergysupplyreferstothetotalamountofenergythatisproducedandconsumedinvariousformsaroundtheworld.Itincludesalltheenergysourcesthatareusedtoproduceelectricity,powertransportation,heatbuildingsandhomes,andpowerindustrialprocesses.Renewablesincludehydro,solar,wind,bioenergy,geothermalandoceanenergy.EJ/yr=exajoulesperyear;TPES=totalprimaryenergysupply.Renewableswouldaccountfor77%ofprimaryenergysupplyby2050inthe1.5°CScenario38WORLDENERGYTRANSITIONSOUTLOOK2023Theenergytransitionshouldaimtodeliverimprovedenergyintensityacrosstheeconomythrougharangeofenergyefficiencytechnologies,complementedbystructuralandbehaviouralchanges.Energyintensityimprovementsareassociatedwithacombinationofdeploymentsofrenewableandefficienttechnologiesinend-usesectors,alongwithextensiveelectrification.Powerdemandwouldneedtogrowthree-foldby2050throughextensiveelectrificationofend-usesectors-37%suppliedbysolarand36%bywind.By2030theinstalledcapacityofrenewablepowerwouldneedtoexpandalmostfourtimestosettheworldontrackforthetransition.Specifically,theshareofvariablerenewableenergy(VRE)inthegenerationmixwouldneedtoincreasefromthecurrent9%to46%by2030,requiringadditionalflexibilityintheoperationoftheenergysystemforeconomicandsecurityreasons.Bioenergyformodernusesinvariousforms(i.e.solidbiomass,biogas,biomethaneandliquidbiofuels)wouldsupply22%oftotalprimaryenergyby2050-2.5timespresentlevels.Inthetransportsector,sustainablebiofuelswouldmeet13%ofTFECby2050.Fromitsnegligiblelevelsin2020,theproductionofcleanhydrogen,bothfordirectuseaswellasuseofderivativefuels,shouldrampupto523Mtby2050.Hydrogenanditsrelatedcompounds–ammonia,methanolandkerosene–wouldaccountfor14%offinalenergyuseby2050.Earlyinvestmentinthegreenhydrogensupplychain(electrolysis,fuelcells,transportpipelines,storagecaverns,etc.)isvitaltotheuptakeofhydrogenapplicationsinend-usesectorsandtocarbonreductiongoals.Thisisespeciallythecaseforhard-to-decarbonisesectorslikeair,marineandheavy-dutytransport,aswellassomeprimaryindustrialprocesses.By2030IRENAexpectsthat50Mtofgreenhydrogenwouldberequired,whichwouldneedtoscaleupten-foldby2050.Withonly0.04Gtofcarboncapturedin2020,removalandstoragemeasures-fromcarboncaptureandstorage(CCS)tobioenergywithcarboncaptureandstorage(BECCS)andothermethods–shouldbescaleduptoremove7Gtby2050.Althoughambitiousexpansionsofrenewablesandefficiencymeasuresaccountformostemissionreductions,remainingcarbondioxide(CO2)emissionsfromfossilfuels-primarilyinindustrialprocessesandsometransport–wouldrequireCCStechnologiestogetherwithCO2removalmeasures.Atotalof109GtofCO2wouldrequireremovalbetween2023and2050.CCSfrombioenergywillbeimportantinpower,heatandcogenerationplants,aswellasinsomeindustrialapplications.Meanwhile,fossilfuel-basedcarboncaptureandutilisation(CCU)andCCSarevitalprocessesforremovingemissionsincement,iron,steelandchemicalsproduction.Capturedcarbonneedstoreach2.2Gtby2030fromcurrentnegligiblelevels,withthemainfocusbeingindustrialprocesses.Muchimprovedenergyefficiency,structuralandbehaviouralchangesareallneededunderthe1.5°CScenario39VOLUME1CHAPTER01FIGURE1.4EstimatedtrendsinglobalCO2emissionsunderthePlannedEnergyScenarioand1.5°CScenario,2023-20504035302520151050-52023202520302035204020452050RemovalsNetannualenergy-andprocess-relatedCO2emissions(GtCO/year)-12.7GtCO-12.7GtCO-9.8GtCO-9.8GtCO-1.3GtCO-1.3GtCO-2.5GtCO-2.5GtCO-7.9GtCO-7.9GtCOPlannedEnergyScenario34GtCO1.5°CScenario-0.2GtCOReductionsinsectorsin2050fromPESto1.5°CScenarioBuildingsTransportOtherPowerandheatplants2050IndustryBuildingsTransportOtherPowerandheatplantsIndustryNotes:GtCO2=gigatonneofcarbondioxide;PES=PlannedEnergyScenario.InthePlannedEnergyScenario,thereferencecaseofthisstudy,annualemissionswoulddeclineonlyslightlyto34GtCO2in2050(seeFigure1.4).Bycontrast,tomeetParisAgreementcommitments,IRENA’s1.5°CScenarioplotsasteepandcontinuousdroptonet-zeroCO2emissionsby2050.TheScenariodependsonasteepreductioninglobalCO2emissionsthrough2030,followedbyacontinueddownwardtrajectory,reachingnetzeroby2050.Toaccomplishthis,substantialeffortsbeyondthosealreadyplannedinsectorssuchaspower,heatandindustrywouldbeneeded,withnegativeemissionsdeliveringthenecessaryadditionalcarbonreductions.40WORLDENERGYTRANSITIONSOUTLOOK2023FIGURE1.5Carbondioxideemissionsabatementunderthe1.5°CScenarioin2050Abatements2050Renewables(poweranddirectuses)EnergyconservationandeciencyElectriﬁcationinendusesectors(direct)BECCSandothercarbonremovalmeasuresHydrogenanditsderivativesCCS/Uinindustry19%12%8%25%25%11%-34.2GtCO2/yr-34.2GtCO2/yr100%1.5°CScenarioNotes:BECCS=bioenergywithcarboncaptureandstorage;CCS/U=carboncaptureandstorage/utilisation;GtCO2/yr=gigatonneofcarbondioxideperyear.Ifalltheabove-mentionedtechnologiesandmeasureswereachieved,globalCO2emissionscouldbereduceddramatically,reachingnegativeemissionsof0.2GtCO2/yearby2050(i.e.removingmoreCO2thanisproduced).Thelargestdeclineswouldcomefromtheuseofrenewablesinpowergenerationandfordirectusesinheatandtransport,combinedwithenergyconservationandefficiency;togetherthesewouldmakeupmorethanhalfthecutsinglobalCO2emissions,followedbya19%contributionfromthedirectelectrificationofvariousend-usesectorsand12%fromtheuseofhydrogenanditsderivatives,includingsyntheticfuelsandfeedstocks(seeFigure1.5).Asnotedabove,theremainingCO2intheperiodto2050wouldneedtobecapturedandstoredeitherthroughCCS/CCU,BECCSorothercarbonremovalmeasuressuchasdirectaircapture,soilcarbonsequestration,enhancedmineralisation,ocean-basedCO2removalandafforestationorreforestation.IRENAalsocompilesseveralregionalrenewableenergyandenergytransitionoutlooks.Thesestudiesprovidedeeperregionalandcountryinsightsintothetechnologies,measures,policiesandimpactsassociatedwiththetransition.Theyalsoprovideviewsonregionalco-operationandjointactions(seeBox1.2).41VOLUME1CHAPTER01BOX1.2IRENA’sregionalstudiesIRENAhasproducedseveralregionalrenewableenergyandenergytransitionoutlooks.Thesestudiesprovidedeeperregionalandcountryinsightsintothetechnologies,measures,policiesandimpactsentailedbythetransition.Theyalsoprovideviewsonregionalco-operationandjointactions.RenewableenergyroadmapforCentralAmerica:Towardsaregionalenergytransition(IRENA,2022l)isatechnicalassessmentofthefutureenergylandscapeinBelize,CostaRica,ElSalvador,Guatemala,Honduras,NicaraguaandPanama.ThereportcontributestothedebatearounddecarbonisingtheenergysectorinCentralAmerica.Integratedregionalplanningisvitalfortheenergytransition,inwhichenergyandclimatepoliciesarelinkedtocountrycommitments.Withthispropositioninmind,theroadmapevaluateshowwelltheregion’srenewableandlow-carbontechnologiesareintegratedintoitsend-useandpowersectors;a“flexibility”analysisoftheregionalpowersystemisincluded(IRENA,2022l).Akeyfindingisthattheenergytransitionshouldfocusonthetransportandpowersectors.TheenergysystemdecarbonisationwillcostanestimatedUSD1930billionintotal–includinginvestmentinnewinstalledpowercapacityandgrids,operationandmaintenance,fuelcostsandend-usetechnology–inthemostambitiousscenario.Anevenmorecostlyinvestment,ofUSD1950billion,isseenintheeventthatcurrentenergypoliciesareimplementedbetween2018and2050.ThefutureenergylandscapeoftheAssociationofSoutheastAsianNations(ASEAN)isassessedinRenewableenergyoutlookforASEAN:Towardsaregionalenergytransition(IRENA,2022m).TheASEANcountriesBruneiDarussalam,Cambodia,Indonesia,theLaoPeople’sDemocraticRepublic,Malaysia,Myanmar,Philippines,Singapore,ThailandandVietNamareundertakinganintegratedregionalplanforthetransition,linkingenergyandclimatepolicieswithactualcountrycommitments.Meanwhile,membercountriesareidentifyingalow-carbonenergypathwaypoweredbyrenewableenergy,increasedefficiency,andrelatedtransitiontechnologiesandmeasures.Asagrowthdriverofglobalenergydemandoverthenextthreedecades,theASEANregionwillbeanimportantpartnerinclimatechangeefforts.Theregion’sintegratedregionalapproachwillexpandthetotalrenewableenergycapacityfrom2770GWto3400GWby2050underthe1.5°CScenario.Theassessmentshowsthatinthe1.5°CScenario,thetotalcostsofenergysupplycanbereducedbyasmuchasUSD160billion,cumulatively,by2050.Additionally,avoidedexternalitiesfromthe1.5°CScenariorangefromUSD508billiontoUSD1580billion,cumulatively,to2050.Theoutlookconcludesthatthe1.5°CScenariocanbeachievedatalowercostwhileenergyemissionsarereduced.IRENAisalsoworkingonregionaloutlooksforAfrica,SouthAmericaandEuropethatanalysetheentireenergysystem,providingempiricalevidenceonthemacroeconomicimpactsoftheenergytransition,includinginthecontextofdevelopmentandclimategoals.422Asof16October2022,EritreahadnotratifiedtheParisAgreementbuthadsubmittedanNDC.WORLDENERGYTRANSITIONSOUTLOOK20231.3Implicationsforthe1.5°CScenarioofrevisedNDCsandotherpledgesGlobalenergy-relatedCO2emissionsgrewby0.9%,or321Mt,in2022,toreachanewhighof36.8Gt(IEA,2023a).Asnotedabove,IRENA’s1.5°CScenarioplotsasteepandcontinuousdroptonet-zeroCO2emissionsby2050.Beyondenergy-relatedemissions,thoserelatedtolandusemustdeclineandbecomenegativeintheapproachto2050sothattheoverallburdenontheremainingcarbonbudgetisatleastneutral.AlthoughCOP27redoubledmitigationtargets,moreisrequiredtobridgethegaptothe1.5°Ctarget.TheemissionsgapbetweenthetrajectorydefinedbytheCOPannouncementsandthe1.5°CScenarioin2050remainsat16Gt.StrongerNDCs,LT-LEDS(asdefinedinarticle4.19oftheParisAgreement)andnet-zerotargets,iffullyimplemented,couldcutCO2emissionsby6%by2030and57%by2050,comparedwith2022levels.However,mostclimatepledgeshaveyettobetranslatedintodetailednationalstrategiesandplans,implementedthroughpoliciesandregulations,orsupportedwithsufficientfunding.IntheirNDCs,severalcountriesidentifyanurgentneedforthemeanstoimplementtheiremissions-reductiongoals,whichthecurrentenergycrisismaymakeevenmoredifficult.CommitmentsfromoutsidetheNDCprocess,beyond2030,arealsoemerging.ByApril2023,130countries,126regionsand246citieshadmadenet-zerocommitmentsfor2050(NetZeroTracker,2022).Privatecompanieshavealsomadepledges.Ofthe2000largestpubliclytradedcompaniesglobally,almost900aresaidtobeconsideringanet-zerotarget(NetZeroTracker,2022).Many,however,havenotyetbackedtheirtargetswithoperationalplansandstrategies,raisingquestionsaboutwhattheywillachieve(EnergyTrackerAsia,2022).ByMay2023,193partieshadratifiedtheParisAgreement,while194hadsubmittedNDCs.2Ofthe166partiesthatsubmittedneworupdatedNDCs,99(representing81%ofglobalGHGemissions)hadenhancedtheirambitions,revisingtheirtargetsupwards.Theremaining67(togetheraccountingforabout14%ofglobalemissions)submittedNDCswiththesameemission-reductiontargetsasintheirfirstNDCs,lowertargets,ortargetsthatarenoteasilycomparablewiththeirinitialNDCs(ClimateWatch,2022).Despitetheenhancements,thenewclimatepledgesdonotsignificantlychangetheemissionsprojectionsofcurrentpledges;awidegapremainsbetweentheclimatepledgesannouncedintherun-uptoCOP28andwhatisneededtoreachthe1.5°Ctarget.Figure1.6showstheestimatedfutureglobalCO2emissionsingigatonnes(Gt)basedon1)atrajectorythatalignswiththeannouncementsmadeuptoCOP27and2)theIRENA1.5°CScenario.TobealignedwiththeIRENA1.5°CScenario,CO2emissionsin2030wouldneedtobeabout23GtCO2,comparedto34GtCO2undertheCOPannouncementstrajectory.Net-zerocommitmentsneedtobetranslatedintooperationalplansandstrategies43VOLUME1CHAPTER01TheCOPannouncements’trajectoryincludesallNDCs,LT-LEDSandnet-zerotargetscommunicatedbythepartiesasofOctoberandNovember2022,respectively.Thistrajectoryisbasedonan“optimistic”climateanalysisthatassessesthehighestambition(i.e.lowestemissionlevels)ofthefullNDCimplementation,includingbothconditionalandunconditionalcontributions.Renewableenergyisclearlyvitaltotheenergytransition,buttargetsforitsdeploymentarenotincludedineveryNDC.Asofmid-October2022,183partieshadincludedrenewableenergycomponentsintheirNDCs;ofthese,143hadaquantifiedtarget.Ofthetotaltargets,108focusonpower;and31focusonheatingandcooling,transportorcooking.Only12partieshadcommittedtoapercentageofrenewablesintheiroverallenergymixes.Ofthe108partieswithdefinedtargetsforrenewablesinthepowersector,47presentedthemonlyintheformofadditions–mostlyintheformofcapacity(gigawatts,GW)andafewintermsofoutput(gigawatthours,GWh).Ofthe61partieswithtargetsdefinedasashareofthepowermix,13committoachievingarenewableenergysharelowerthan24%,23committoasharebetween25%and59%,13committosharesbetween60%and89%,and12tosharesbetween90%to100%(IRENA,2022e).FIGURE1.6CO2emissiontrajectoriesbasedonCOPannouncementsandthe1.5°CScenarioAnnualnetenergy-relatedemissions(GtCO2/year)2040204520252030202220352050403020100-5IRENA1.5°CScenarioCOPannouncementsNotes:COPannouncementstrajectorycalculatedbasedondatafrom:(Meinshausenetal.,2022).COP=ConferenceoftheParties(UnitedNationsClimateChangeConference);GtCO2=gigatonneofcarbondioxide.44WORLDENERGYTRANSITIONSOUTLOOK2023BOX1.3TheParisAgreementGlobalStocktakeTheGlobalStocktakeevaluatesprogressontheworld’seffortstoreducegreenhousegasemissions;adaptandbuildresiliencetoclimateimpacts;andalignfinancialsupportwiththescaleandscopeneededtotackletheclimatecrisis.ItsoutcomeswillprovidevaluableinformationontheremaininggapsandopportunitiestobridgethemtoreachthegoalsoftheParisAgreement.IRENA’sWETOtracksthegapsbetweenthePlannedEnergyScenarioand1.5°CScenariotargetsfor2030thatcouldcontributetothediscussionofglobalstocktakewithdetailedanalysisontechnologyavenues(section1.2),policy(chapter2)andinvestments(chapter3).IRENAalsoworkscloselywithcountriestosupportthedevelopmentandimplementationofrenewableenergypoliciesandstrategies.Thisincludesprovidingtechnicalassistanceandcapacitybuildingtohelpcountriestoincreasetheshareofrenewableenergyintheirenergymix(section1.4).Thisworkcanbeusefulformanyinternationalprocesses,includingtheglobalstocktake.IRENAroadmapsprovideaframeworkforcountriestosettargetsanddeveloppoliciesforthedeploymentofspecificrenewableenergytechnologies.Forexample,IRENAhasdevelopedtechnologyroadmapsforarangeofrenewableenergytechnologies,includingwindpower,solarphotovoltaics,hydropower,andbioenergy.Theseroadmapsprovideacomprehensiveassessmentofthecurrentstateofthetechnology,aswellasitspotentialforgrowthanddeployment.Theroadmapsalsoprovideguidanceonpolicyandregulatoryframeworksthatcansupportthedeploymentofthetechnology,aswellasmeasurestoaddresstechnicalandinstitutionalbarriers.Byprovidingthesetechnologyroadmaps,IRENAhelpscountriestodevelopeffectivepoliciesandstrategiesforthedeploymentofrenewableenergytechnologies,whichinturncanhelptoacceleratetheenergytransitionandreducegreenhousegasemissions.Theseroadmapsalsoprovidevaluableinformationfortheglobalstocktakeprocess,byhighlightingthepotentialfordifferentrenewableenergytechnologiestocontributetotheachievementoftheParisAgreementgoals.Overall,IRENAaimstomakeacriticalcontributiontotheglobalstocktakeprocessthroughassessingprogresstowardstheParisAgreementgoalsandidentifyingopportunitiesforfurtheractiononrenewableenergy.45VOLUME1CHAPTER01ForrenewableenergypledgesortargetsinNDCstoberealised,theyneedtobealignedwithrenewableenergytargetssetundereachrespectivecountry’sinstitutionalenergyframework,suchasthoseinnationalenergyplansandlaws.Asofmid-October2022,149countrieshadtargetsforrenewablepowerintheirnationalpoliciesandplansbutonly82ofthesehadcomparabletargetsinNDCs.Inmostcountries,renewableenergytargetsinNDCsdonotalignwiththoseincludedinnationalenergyplans(IRENA,2022e).ByaligningrenewableenergytargetsinNDCswithnationalenergyplans,thetargetsbecomemoreeffectiveandcredible.Insodoing,theyreinforceintendedsignalstoinvestors,developersandotherplayersacrossthesupplychain,strengtheningtherenewableenergysector.Insomecases,nationaltargetswouldneedtobeestablishedorupdated.Inothercases,theywouldneedtobereflectedinthenextroundofNDCs.InordertokeeptheworldontracktoachievetheenergytransitionunderIRENA’s1.5°CScenarioby2050,thelevelofambitionofrenewableenergypowertargetssetinnationalplansandstrategiesfor2030wouldneedtoalmostdouble.Infact,non-ambitioustargetsmayeffectivelyactasacaponrenewables,hinderingratherthanpromotingtheirdeployment.Thehighertargetisreadilyachievable,ascurrenttargetsarebelowthemarketpaceandlagrecentdeploymentlevels.Countriesarecurrentlyaimingforaverageannualrenewablepowercapacityadditionsof262GWby2030intheirnationaltargets.Thisisbelowthecapacityinstalledinthepasttwoyears,whichamountedto294GWand264GWin2022and2021,respectively,evenagainstthebackdropoftheCOVID-19pandemicandtherelatedsupplychaindisruptions,thecrisisinUkraineandglobalinflation.AlthoughmanydevelopingcountrieshavesetambitiousrenewableenergytargetsintheirNDCs,mostareconditionalonexternalsupportfromdevelopedeconomies.Forinstance,insmallislanddevelopingstates(SIDS),morethanhalfofthe11.5GWtargetedcapacityby2030remainsconditionalontheprovisionofinternationalsupportintheformoffinancing,technicalassistance,technologytransfer,capacitybuildingandotherformsofsupportbasedoneachcountry’snationalcontext(RanaandAbouAli,2022).Providingsuchsupportwillallowdevelopingcountriestocapitaliseontheirrenewableenergyresourcestomitigateandadapttotheirclimate-inducedvulnerabilitieswhileensuringenergysecurityandsustainablesocio-economicgrowth.RenewableenergytargetsinNDCsandnationalenergyplansneedtobebetteraligned46WORLDENERGYTRANSITIONSOUTLOOK2023BOX1.4InsightsfromanalysingthealignmentbetweenLTESandLT-LEDSClimateandrenewableenergycommitmentsmustbematchedbyimplementation.AligningpledgeswithnationalenergyplansisaprioritynotonlyforNDCsbutalsoforlonger-termstrategies.IRENA’s(2023d)report,Long-termenergyscenariosandlow-emissiondevelopmentstrategies:Stocktakingandalignment,compares24officiallong-termenergyscenario(LTES)documentsand36long-termlowgreenhousegasemissiondevelopmentstrategies(LT-LEDS)covering45countriestogaugehowwellthetwoprocessesarealignedattheinstitutionalandtechnicallevels,andinvestigateareasforimprovement.ThereportreviewsthegovernanceframeworksdevelopedforLTESandLT-LEDSreports,includingco-ordination,stakeholderconsultationsandtypeofpublication.Italsolooksatscenario-supportingelements,frominfrastructuretosocialfactorsandotherconstraints.ThereportfindsthataligningLTESandLT-LEDSprocessesleadstomorerobustmitigationplans;planningdocumentsproducedbymultipleorinterdisciplinaryministrieslayoutscenariosthatcovermoreelementsofthetransition.LTESandLT-LEDSprocessescanalsocomplementoneanotherinvariousways;LTEShave10-20%morequantitativerepresentationofenergyproduction,transmissionanddistribution,andstoragethanLT-LEDS,andLT-LEDShaveapproximately10-15%morequantitativerepresentationofsocio-economicelementsthanLTES.BothLTESandLT-LEDSneedtoimprovetheirrepresentationofhydrogenande-fuelinfrastructureinscenarios;however,lessthan50%ofallscenarioshavequantitativerepresentationofthoseelements.Thiscouldriskoverestimatingthepotentialforapplicationofthosetechnologies,andpossiblemisallocationofinvestments.Ataminimum,itisrecommendedthatclimatechangemitigationstrategiesbebasedonscenarios,asthisleadstomorescientificallyrobustco-ordinationofplanningwiththeresultingproposals.ThirtysixoutofthefiftythreeLT-LEDSpublishedasofOctober2022havefeaturedscenariosastheirmaintooltooutlinealternativepathwaysandtargets,andtoquantitivelyassesstheshort-andmedium-termpoliciesneededtoreachtheirlong-termgoals.47VOLUME1CHAPTER011.4TheenergycrisisanditsimplicationsfortheenergytransitionOverthepastfewyears,globaleventshavecomplicatedactionontheenergytransitionandclimateaction.AglobalenergycrisisbroughtaboutbyreboundingdemandfollowingtheCOVID-19pandemic,adverseweatherandreducedfossilfuelsuppliesescalatedinearly2022owingtothefalloutfromtheUkrainecrisis.Therapidriseinenergypricesaffectedcountriesaroundtheworld,eitherdirectlyorindirectly.EnergysuppliestightenedinEurope,particularlysuppliesofnaturalgasfromRussia.TheensuinghighpricesaffectedhouseholdsandbusinessesacrossEuropeandspilledovertofoodproductionandothercommodities,affectingvulnerablehouseholdsanddevelopingcountries(UN,2022).Amongtheworld’smostvulnerableregions,Sub-SaharanAfricaexperienceda6%riseinextremepovertyin2022(IEA,2022a),withtheenergycrisiscompoundingeconomicpressuresintheregion.Inresponsetotheenergycrisis,anumberofgovernmentsannouncedmeasurestoaddresssupplyshortagesandmitigatepricehikes.Whilesomeofthemeasuresfocusedondemandreduction,fasterrenewableenergydeploymentandsupportforgreenhydrogen,otherscalledforadditionalfossilfuelinvestmentsorotherstepsincompatiblewiththeenergytransition.TheEuropeanCommissionpresenteditsREPowerEUplaninMay2022.Focusingondiversification,energysavingsandacceleratingcleanenergy,theplanseekstomaketheEuropeanUnion(EU)independentofRussianfossilfuelswellbefore2030.AspartoftheEuropeanGreenDealandtheREPowerEUplan,theEUprovisionallyagreedinMarch2023tospeedupitsrolloutofrenewableenergywithstrongerlegislation.ThisactionraisedtheEU’sbindingrenewabletargetfor2030to42.5%,withtheambitiontoreach45%(EuropeanCommission,2023).TheEUisalsopromotinghydrogeninfrastructureandplanstoproduce10Mtofgreenhydrogen,andtoimportanother10Mtby2030.Spain,FranceandPortugalhaveagreedtobuildanunderseapipelinetotransporthydrogenfromtheIberianPeninsulatoFranceandtherestofEurope,strengtheningtheEU’senergyindependence(Sullivan,2022).Supportisneededtohelpdevelopingcountriesrealiseambitiousrenewableenergytargets48WORLDENERGYTRANSITIONSOUTLOOK2023Atthesametime,sincetheonsetoftheUkrainecrisisinFebruary2022,investmentsofatleastUSD50billioninnewinfrastructureforliquefiednaturalgas(LNG)havebeenannounced,includingfloatingandfixedterminalsandnewpipelines.MostoftheseinvestmentsindiversifyingimportshavebeenmadeinEuropeancountries-amongthemFinland,Germany,Greece,Italy,theNetherlandsandSpain.ThenewLNGstorageterminalswillgivetheEuropeanUnionatleast60billioncubicmetresofannualcapacity(Aposporis,2022;Bloomberg,2022;Esau,2022;Habibic,2022;Jewkes,2022;Karres,2023;Kurmayer,2022;Landini,2022;Reuters,2022a,2022b;Sharma,2022).Inaddition,theEUpassedanactclassifyingnaturalgasasa“transitional”energysourceforsustainableinvestment,withtechnicalandemissionstandardssetforcorrespondingprojects.TohelpEuropeanhouseholdsandbusinesses,severalgovernmentsprovidedconsumersubsidiestosoftentheriseinenergyprices.Asaresult,estimated2022fossilfuelsubsidieswerethehighestever(IEA,2023b).Forexample,Franceprovidedsubsidiestofarmerstomitigatepetrolpriceincreases;in2023itannounceda15%caponpowerandgaspriceincreasesforhouseholds(Struna,2022).TheUKgovernmentintroducedtheEnergyBillsSupportSchemeandtheEnergyBillsSupportSchemeAlternativeFund,whichprovidedaone-timeGBP400paymenttohouseholdstohelpwithbillsoverthewinterof2022-2023(Mawhood,BoltonandStewartetal.,2022).TheGermangovernmentagreedtoareliefpackageworthuptoEUR200billiontocushiontheimpactofexpensiveenergyuntil2024(AmelangandWettengel,2022).Althoughmanycountrieshavekeptrenewableenergyatthetopoftheirinvestmentlists,theyriskendingupwithstrandedassetsintheirLNGcontractsandinfrastructure–bothcomplicatethe“phasingout”ofnaturalgas.Governmentswillnaturallyprioritiseshort-termresponsestotheenergycrisis,buttheyneedtomaintaintheirstrategicdirectionatthesametime.Acomprehensiverangeofmeasuresisneededtoscaleupdeploymentandhelpachievelong-termtransitiongoals(seeTable1.2).Renewablesandenergyefficiencyareconsistentwithclimatecommitments,andimprovebothenergysecurityandenergyaffordabilityforall.Multilateralactioniscritical,yeteachcountryandeachregionwillneedtotailoritsownresponsetoitscurrentresources,infrastructure,accesstofinanceandlocalisedchallenges(UN,2022).RenewablesandenergyefficiencycanbothhelpalleviatetheenergycrisisandachievetheenergytransitionENABLINGPHYSICALINFRASTRUCTURE•Undertakeintegratedcross-sectorinfrastructureplanningfortheenergytransitionwithambitioustargetsforexpansion(e.g.powergrids,electricvehicle[EV]charginginfrastructure,heatnetworks,alllinkeduptooptimisevariablerenewableelectricity).•Provideincentivesforinfrastructureinvestmentswheremarketbarriersexist.•Streamlinepermittingproceduresforlarge-scaleinfrastructurewithoutcompromisingenvironmentalandsocialimpactassessmentsandensurepublicacceptanceisfostered.•Setobligationsormandatorytargetsforneworrenovatedbuildings(e.g.numbersofEVchargers,connectiontoheatingandcoolingnetworks).•Providemorepublicfinanceforthedevelopmentoftheinfrastructurerequired(e.g.throughdirectownershipofassetssuchastransmissionlines).POLICYANDREGULATIONPowersector•Adoptapowersystemstructurethatisconducivetohighsharesofvariablerenewableenergy,recognisingtheirtechno-economiccharacteristics.Thiscouldincludedualprocurementofenergywithlong-termprocurementthroughauctionsandashort-termflexibilitymarket.•Streamlinepermittingproceduresforrenewablepowerprojectswithoutcompromisingenvironmentalandsocialimpactassessments.Ensurepublicacceptanceisfostered.•Bettersynchronisepowergridexpansionandotherinfrastructuredevelopmentswithrenewablepowerdeploymenttoavoidbottlenecks.•Designrenewableenergyprocurementprocesses(e.g.auctions)toserveobjectivesbeyondlowestprice(e.g.developmentoflocalindustry)andconsiderdesignelementstodistributetherisksofsupplychaindisruptionsamongstakeholders(e.g.indexationofcomponents).•Designpoliciesforself-consumptioninaprogressivewaythatsupportsequitableaccesstodeployedsolutionsandthedistributionofsocio-economicbenefits.End-usesectors–buildings,industry,transport•Developenergyefficiencyprogrammesandmeasuressuchasfuelefficiencystandardsfortransport,andminimumefficiencystandardsforindustryandbuildings.Promotebehaviourchangesthroughsufficiencymeasures.•Adoptorimprovebuildingcodestopromoterenewableconsumptioninpublic,commercialandresidentialbuildings.•Promotebehaviourchange(e.g.toshifttransportdemandtolow-carbonmodesortoadjustroomtemperatures).•Mobilisepublicfinancetoprocurelow-carbonindustrialproductsandmaterials.49VOLUME1CHAPTER01TABLE1.2KeymeasurestoacceleratetheenergytransitioncontinuedPOLICYANDREGULATION(contd.)Cross-sectorandcross-cuttingpolicies•Introducefiscalpolicymeasures:obligationsforreinvestingwindfallprofitsoffossilfuelenergyrevenuesinenergytransitiontechnologies,reducedsubsidiesforfossilfuelsandraised/newlyintroducedCO2priceswhenfossilfuelpricesfall.Ensurethesocio-economicbenefitsofsuchinstrumentsaredistributedfairly.Reformtaxesandleviesonheatingfuels,VATexemptionsforrenewables,etc.•Increasepublicfinance(domesticandinternational)andstrategicallyplan,selectandimplementinstrumentstochannelitincluding:(1)governmentspendingsuchasgrants,rebatesandsubsidies;(2)debtincludingexistingandnewissuances,creditinstruments,concessional/blendedfinancingandguarantees;(3)equityanddirectownershipofassets(suchastransmissionlinesorlandtobuildprojects).•Define‘risk’inamorecomprehensivewaythatgoesbeyondthenarrowinvestor-centricdefinitionofrisk(e.g.ofinvestmentinenergyassetsnotpayingoff)toincludebroaderenvironmentalandsocialrisks.•Continuetousepublicpolicyandfinancetocrowdinprivatecapital.•Enhanceinternationalcollaborationacrossarangeofrelevantareasincludingsustainabilitygovernance,energyandclimatefinance,technologyandinnovation,regionalpowergrids,greenhydrogendevelopment.•Developnationalbioenergyand/orhydrogenstrategies(includingsectoralprioritisation)toensurebioenergyandhydrogencanplaythemostappropriateroleindecarbonisation.•Incentivise/mandateacirculareconomyapproach(reduce,re-use,recycle),forexampleforenergy-intensiveproductslikesteel,renewableenergytechnologies,batteries,cars,etc.Thiswillbothreduceenergydemandandthedemandforcriticalmaterials.•Putgreaterfocus(includingthroughinternationalcollaboration)onachievingtheuniversalaccesstargetsofSDG7.•Reformtheexistinglendingpracticesofdevelopmentfinanceinstitutionsbyprovidingmoregrantsandconcessionalloans,particularlyforcountriesthatfaceunder-investmentandmaybeindebtdistress.JOBSANDSKILLS•Integraterenewableenergyintoeducationalcurricula;expandtechnicalandvocationaleducationandtrainingopportunities.•Stepupeffortstoanticipatefutureoccupationalneedsineachrenewableenergysectorandworkwithindustryassociationsandtraininginstitutionstoaligntheirplanning.•Ensurebetteraccesstotrainingopportunitiesforwomen,youthandminorities.•Developpathwaysforfossilfuelindustryworkerstoretrainandrecertifyforcareersinrenewableenergy.Thiswillrequirepublicfundingfortraining.50WORLDENERGYTRANSITIONSOUTLOOK2023(contd.)TABLE1.2Keymeasurestoacceleratetheenergytransition51VOLUME1CHAPTER011.5ConclusionsThischapterhasshownthatthe1.5°Cclimatetargetcanbeachievedthroughtheapplicationofarangeofpoliciesandtechnicalstrategies,includingmanyexistingsolutions.Poweredbyrenewableenergy,cleanhydrogenandsustainablebiomass,electrificationandenergyefficiencyaredrivingthetransition;butthescaleandextentofthetransformationareattainableonlythrougharapidandsystemictransformationoftheenergysystem.Aspeedyshiftawayfromthecurrentfossilfuel-basedsystemisobviouslyvital.Ontopofamajorscale-upofrenewablesinthepowersector,allend-usesectorswillberequiredtocommitnotonlytothedirectuseofrenewablesbutalsotomajorefficiencyupgrades,processchanges,circulareconomyapproachesandbehaviouralchanges.Chapter2exploreshowtheenergytransitionwilltransformindividualsectorsanddiscussesthepolicyapproachesthatcanbringitabout.52WORLDENERGYTRANSITIONSOUTLOOK2023CHAPTER02SECTORALTRANSFORMATIONPATHWAYSANDSUPPORTINGPOLICIESWORLDENERGYTRANSITIONSOUTLOOK202353VOLUME1CHAPTER02Powersector•Thecostsofrenewableelectricitycontinuetodeclineglobally,andrenewablesarenowthemostaffordablepowergenerationoptioninmostregions.In2021,163gigawatts(GW)ofrenewablepowergenerationcapacityproducedelectricitythatcostlessthantheelectricitygeneratedfromthecheapestsourceofnewfossilfuel-basedcapacity.These163GWaccountedfor73%ofthetotalnewrenewablepowergenerationcapacityaddedglobally.Theglobalweightedaveragelevelisedcostofelectricity(LCOE)ofnewlycommissionedutility-scalesolarPVprojectsfellby88%between2010and2021.TheLCOEofCSPfellby68%,andonshoreandoffshorewindby68%and60%,respectively.Renewablesarenowthedefaultoptionforcapacityadditioninthepowersector,wheretheydominateinvestments.•Theenergytransitionrequiresarapidexpansionofrenewables-basedelectricitygeneration.Underthe1.5˚CScenario,end-usesectorswouldseerapidelectrificationby2050,causingglobalelectricitydemandtotriplefromthatof2020toreachover87000terawatthours(TWh).Underthe1.5°CScenario,renewables’shareinthepowergenerationmixwouldgrowfrom28%to91%(7468to82148TWh)intheperiodfrom2020to2050.Installedrenewablepowercapacitywouldgrowfrom2813GWto33216GWoverthisperiod,necessitatingannualadditionsof1066GWofnewrenewables-basedgenerationcapacitybetween2023and2050.Variablerenewableenergy(solarPVandwind)woulddominatethetransformationoftheglobalelectricitysectorandaccountfor70%ofelectricitygeneration.Smart,digitalisedmeasuresforenhancedflexibilitywillbeneededtoaccommodatedailyandseasonalvariability.•Achievingthe1.5°CScenariowillrequirecountriestoadoptandimplementambitioustargetsandpoliciestosupportthemassivescale-upinrenewablepowerrequired.Auctionsareagoodwaytoharnesscompetitionwhilealsopursuingbroaderpolicyobjectives,suchassystemintegration,socio-economicbenefits,andthedevelopmentoflocalsupplychainsforenhancedenergysecurityandindependence.Apartfrompolicyinstrumentssupportingtheexpansionofrenewableenergy,theenergytransitionrequiresanenablingenvironmentforrelevantprojects,includingpermittingprocessesthataddressenvironmentalandsocialimpactsbutminimisedelaysinprojectdelivery.HIGHLIGHTS02continued54WORLDENERGYTRANSITIONSOUTLOOK2023Energytransitionfuels•Fuelssuchashydrogenanditsderivatives(e.g.ammoniaandmethanol)willplayauniqueroleintheenergytransition,especiallyforindustrialprocessesandcertaintransportmodes.Underthe1.5°CScenario,thetotaldemandforthesefuelswouldneedtogrowto15exajoules(EJ)and63EJby2030and2050,respectively.By2050,totalhydrogendemandwouldneedtobemetentirelywithcleanhydrogen,themajorityofwhichisgreenhydrogen.Thiswouldrequirerapidexpansionofbothrenewablepowerandelectrolysercapacity.Greenhydrogenisstillinitsinfancy,andpolicysupportisneededtoscaleitfromanichetoamainstreamenergysource.Policysupportcouldincludeproactiveplanning,targetsetting,financialandfiscalsupport,greenhydrogenquotas,etc.•Bioenergyplaysakeyroleintheenergytransition.UnderIRENA’s1.5°CScenario,bioenergy’sshareintheprimaryenergysupplywouldgrowto22%in2050.Bythesameyear,theshareofmodernusesofbioenergyinTFECwouldgrowto15%globally.Theindustrysectorwouldaccountforthemajorityofthisconsumption(52%),followedbytransport(23%),buildings(18%)andothercategories(8%).Bioenergywouldneedpolicysupportintheformofbiofuelblendingquotas,mandatesandobligations;grants,subsidiesandtaxrebatesforbioenergyprojectsandinfrastructure;andresearch,developmentanddemonstration(RD&D)fornoveltechnologies.Toensuretheenvironmental,socialandeconomicbenefitsofbioenergyaremaximised,countrieswouldhavetoimplementregulationsandcertificates,andpromotepartnershipstoensuresustainabilityofbiomassfeedstockandtheentiresupplychain.Morebroadly,bioenergydeploymentshouldbebasedonthelocalcontextandco-ordinatedwithothersectoralstrategies.HIGHLIGHTS02continued55VOLUME1CHAPTER02End-usesectors•Hard-to-decarboniseindustrysectorsrequirearangeofsolutionstobecomealignedwiththe1.5°Ctarget.Theseincludeoptionsbasedongreenhydrogen,bioenergy,directelectrification,andtheintegrationofCCSandBECCStotackleresidualemissions,aswellasenergyefficiencyandcirculareconomyprinciples.Theseapproacheswouldreducethesector’senergyconsumptiontoc.180EJby2050,withelectricityasthemainenergycarrier(27%),followedbybioenergy,districtheatingandotherrenewables(27%)andgreenhydrogen(22%).Scale-upofthesesolutionswouldrequirevariouspolicymeasurestocreatetheinitialmarketdemandforrenewables-based,low-carbonindustrialmaterialsandproducts;improvetheircost-competitiveness;acceleratetheadvancementofnoveltechnologies;andpromotethesharingofknowledgeandexperiences.Keypolicytoolsincludeindustrialdecarbonisationroadmaps,greenpublicprocurement,supportforresearchanddevelopment,andcirculareconomyapproaches.Internationalcollaborationintechnologytransferandinvestmentsisurgentlyneededtosupporttheindustrialdecarbonisationprocessindevelopingcountries.•Inthebuildingssector,efficiencyisthemainenableroftheenergytransition.Efficientappliancesaretobeincreasinglyadoptedandexistingbuildings,rapidlyrenovatedandrefurbished.Further,heatpumpswillplayanimportantroleindecarbonisingspaceandwaterheatingandmakingspacecoolingmoreefficient.Cooking,whichreliesheavilyonfossilfuelsandtraditionalbiomassglobally,wouldneedtorapidlyadoptelectricity-poweredefficientstovesandsustainablebiomass.Projectionsshowthatthe1.5°C-compatiblepathwouldneedtheshareofrenewablesinthesectortogrowto86%by2050,whichincludeshighly-decarbonisedelectricityanddistrictcooling/heating,bioenergyandrenewablesdirectuse(solarthermalandgeothermal).Thetransitiontonet-zerobuildingswouldrequiremeasurestoreducetheenergydemandforbothexistingandnewbuildings,aswellaspoliciestopromotetheelectrificationanddirectuseofrenewablesforheatingandcooling.Somewidelyadoptedpoliciesinthissectorinclude:buildingcodes;bansontheuseoffossilfuelforheating;financialandfiscalincentivesforrenovation,efficiencyandrenewables;targetsfornet-zerobuildings;minimumenergyperformancestandardsforappliancesandmandatesforsolarhotwaterforpublicbuildings.•Inthetransportsector,directelectrificationwoulddominateroadandrailtransport,whereasgreenammoniaandmethanolwouldbekeyinshipping.Meanwhile,amixofsyntheticfuelsandbiofuelswouldbeneededinaviation.By2050,electricitywouldaccountfor52%ofthetransportsector’sfinaldemand,followedbyhydrogenanditsderivatives,andbiofuels,accountingfor23%and13%,respectively.Intotal,renewables’sharewouldgrowto84%ofthefinalconsumptioninthissectorby2050.Policiesforroadtransportwouldneedtosupportthescale-upofelectricvehiclesandcharginginfrastructure.Policytoolsinthisregardcouldincludethephasingoutofinternalcombustionengine(ICE)vehicles;targetsaroundzero-emissionvehicles,zero-emissionzonesandpreferentialmeasuresatthecitylevel.Forshippingandaviation,policymakersandindustriesshouldadoptParisAgreement–alignedtargetsthroughinternationalplatforms.Thetargetsmustbesupportedbynationaleffortstopromoterenewables-basedfuelsthroughfundingforresearchanddevelopmentandblendingmandates.HIGHLIGHTS02562.1IntroductionTheenergytransitionrequireschangesonthesupplyside(discussedinsections2.2-2.4)aswellasonthedemandside(discussedinsections2.5-2.7).Thischapterprovidessector-andtechnology-specificdetailsofthetransition,providingaforward-lookingperspectiveuntil2030and2050.Theanalysisshowsthattheenergytransitionwouldrequiredeployingvarioustechnologiesandstrategies,whichwouldneedpolicysupportandtheimplementationofenablingmeasures.Renewablessuchasgreenelectricity,greenhydrogenorsyntheticfuelsproducedfromgreenhydrogenwillplayadominantroleinallend-usesectors.Bioenergyandbiomassfeedstockswillplayanincreasingrole,notablyinindustryandthetransportsector.2.2Powersector2.2.1StatusandtrendsInstalledrenewableenergycapacityandgenerationThepowersectorhasseengoodprogressininstalledrenewablecapacityandgeneration.Renewablesrepresented83%ofcapacityadditionsandinstalledpowergenerationcapacityreached40%globallyin2022,withtheadditionof295gigawatts(GW)ofrenewables(Figure2.1),thelargest-everannualincreaseinrenewableenergycapacity(IRENA,2023a).Thestrongbusinesscaseforrenewables,combinedwithpolicysupport,hassustainedanupwardtrendintheirshareoftheglobalenergymix.However,overalldeploymentremainscentredonafewcountriesandregions,withChina,theEuropeanUnionandtheUnitedStatesaccountingfor75%ofcapacityadditions.Althoughlarge-scalerenewableenergydeploymentistypicallyassociatedwithcountriesthathavewell-developedpowersystems,deploymentmustbeexpandedelsewhere,especiallyindevelopingnationslackingelectricityaccess.Thepowersectoriscrucialfortheenergytransitionrequiringrapidscale-upofrenewables-basedgenerationcapacityWORLDENERGYTRANSITIONSOUTLOOK202357FIGURE2.1Annualpowercapacityexpansion,2002-2022Annualcapacityinstallations(GW/year)2014200220162010201820062004201220082020202250%15%59%37%57%23%28%52%38%82%83%300225150750Newcapacitynon-renewables(GW)Newcapacityrenewables(GW)Amongrenewabletechnologies,solarphotovoltaic(PV)installationsgrewthefastest,withatwentysix-foldincreaseinthe13-yearperiodfrom2010to2022.Thiswasduetosignificantcostreductionsbackedbytechnologicaladvancements,highlearningrates,policysupportandinnovativefinancingmodels.Bytheendof2022,globalcumulativesolarPVinstalledcapacityreached1047GW,ofwhich191GWwasaddedin2022alone,with59%oftheinstallationsinAsia(IRENA,2023a).VOLUME1CHAPTER02Note:GW=gigawatt.58Windpowersawoverfive-foldgrowthinthe13-yearperiodfrom2010to2022.In2022,globalcumulativeonshorewindpowerinstalledcapacityreachedapproximately836GW.AswithsolarPV,Asialedintheonshorewindmarket,with393GWofcumulativeinstalledcapacity,anditwashometomorethan55%oftheinstallationsin2022.Theoffshorewindmarketremainssmallerthantheonshorewindmarket,with63GWofcumulativeinstalledcapacitybytheendof2022.BothAsiaandEuropecontributed50%tothistotalcapacity(IRENA,2023a).Hydropowercontinuestobethelargestrenewablepowersourceintermsofinstalledcapacity.In2022,globalhydropowerinstalledcapacity(excludingpumpedhydro)reached1256GW(37%oftotalrenewablecapacity).Otherrenewablepowertechnologies,suchasbioenergy,geothermal,solarthermalandmarineenergy,alsogrewrapidlyoverthepastdecade,albeitfromasmallbase.Thecombinedinstalledcapacityoftheserenewablesreached171GWin2022,ofwhichbioenergypoweraccountedfor87%(IRENA,2023a).Concerningoff-gridrenewables,theircumulativecapacity(inallregionsexcludingEurasia,NorthAmericaandEurope)grewby1237megawattsin2022toreach12.4GW,an11%increasefrom2021levels.Solarexpandedby478megawattstoreach5.1GW,off-gridhydrocapacityremainedaboutthesameasin2021andtheremainderofthisincreasecamefromtheexpansionofdifferenttypesofbioenergy(IRENA,2023a).Renewables-basedpowergenerationcostsandenergypricevolatilityRenewablesrepresentavitalpillarintheglobalefforttoreduceandultimatelyphaseoutfossilfuelsandincreasecountries’resiliencetovolatilityoffossilfuelprices.Highcoalandfossilgaspricesin2021and2022furtherunderminedthecompetitivenessoffossilfuels,makingsolarandwindevenmoreattractive.Thedeclineinrenewableelectricitycostshasmakeitthemosteconomicalchoiceforpowergenerationinmanyareas.In2021,over163gigawatts(GW)ofrenewablepowergenerationcapacityproducedelectricityatalowercostthanthecheapestsourceofnewfossilfuel-basedcapacity.These163GWrepresented73%ofthetotalglobalincreaseinrenewablepowergenerationcapacity.Thenewprojectsdeployedin2021willgeneratecumulativeundiscountedsavingsofatleastUSD149billionovertheirlifetimes.Besidesthesedirectcostsavings,renewables’deploymentbringssubstantialeconomicbenefitsduetoreducedCO2emissionsandlocalairpollutants.Theseneedtobefactoredin-asdotheirenergysecurityadvantages-whenconsideringthetotalbenefits.Intotal,the12-yearperiodbetween2010and2021sawthedeploymentof786GWofrenewablepowergenerationcapacitythatcostlessthanthecheapestfossilfuel-basedalternativeintheGroupofTwenty(G20).Renewablepowerhasseensignificantgrowthsince2010withsolarcapacitygrowingby26timesWORLDENERGYTRANSITIONSOUTLOOK202359Since2010,therehasbeenaseismicshiftinthecompetitivenessofrenewablepowergenerationoptions.Theglobalweightedaveragelevelisedcostofelectricity(LCOE)ofnewlycommissionedutility-scalesolarPVprojectsdeclinedby88%overthe12-yearperiodfrom2010to2021.Meanwhile,theLCOEforonshorewind,concentratedsolarpowerandoffshorewindfellby68%,67%and60%,respectively.In2021,theLCOEofutility-scalesolarPVdeclinedby13%year-on-year,whereasthoseofonshorewindandoffshorewindfellby15%and13%,respectively(Figure2.2).FIGURE2.2Changeinglobalweightedaveragelevelisedcostofelectricitybytechnology,2020-2021-13%-13%1050-5-10-15Year-on-yearpercentagechange2020-2021-15%SolarphotovoltaicOshorewindOnshorewindConcentratingsolarpower+7%Renewableelectricitycostscontinuedtheirhistoricdownwardtrend,inspiteofthepandemicVOLUME1CHAPTER0260PricesofPVmodulesandwindturbinesIncreasesincommodityandrenewableequipmentpricesaffectprojectcostswithadelay,giventhereisatimegapbetweenafinancialinvestmentdecisionandwhenaprojectiscommissioned.Hence,theglobalweightedaveragecostsofsolarPV,aswellasonshoreandoffshorewindpower,fellin2021.However,thetotalinstalledprojectcostdatafortheprojectscommissionedin2021didnotshowanysignificantincreaseonaverage,despitetheemergingsupplychainchallengesandrisingcommoditycostsinthesameyear.Thiswasattributedtothelagbetweenequipmentcostincreasesinthecommissionedprojects.TheglobalweightedaverageLCOEofonshorewindprojectscommissionedin2021fellfromUSD0.039/kWh(kilowatthour)in2020toUSD0.033/kWh.TheglobalweightedaverageLCOEofnewlycommissionedutility‑scalesolarPVprojectsfellfromUSD0.055/kWhtoUSD0.048/kWhin2021.Thiswasdrivenbya6%declineinthistechnology’sglobalweightedaveragetotalinstalledcost,fromUSD916/kWin2020toUSD857/kWfortheprojectscommissionedin2021.Thiswaslessthanthe12%declineobservedin2020,sincerisingPVmodulepricesattheendof2020appeartohavehadsomeimpactontotalcostsforasignificantnumberofprojects.Overall,theimpactwaslimited,withonlythreeofthetop25marketsfornewinstallationsin2021seeinganincreaseintheircountry-levelweightedaveragetotalinstalledcosts.Since2022,manycountrieshaveseentheaveragecostofelectricityfromsolarPVandonshorewindincrease.IncreasesaremorecommonforonshorewindandarealsolargerthanforsolarPV.Boththesupplychainconstraintsthatbeganin2020,andthegeneralcommoditypriceinflationbeginningin2022,arenowbeingfeltinprojectcostsmuchmorewidelythanin2021,atleastforonshorewind.Atagloballevel,theimpacthasbeenmuted,giventhedominanceofChinaintheshareofsolarPVandonshorewinddeployment,andtheircontinuedcostdeclines.WORLDENERGYTRANSITIONSOUTLOOK202361Yet,asnotedabove,theimpactofthesefactorsontheprojectscommissionedin2021wasnotenoughtoraisethefull-yearweightedaverageLCOEinmanyindividualmarketsaswellasglobally.3Thatisnottosaythatindividualprojectscommissionedtowardstheendof2021didnotexperiencehighercoststhanin2020,butthatthecostofelectricityforallprojectsin2021wasonaveragestilllowerthanin2020.AlthoughtherearelimitstowhatcanbeextrapolatedfromIRENA’sdata,fivekeyfactorsmaybenoted:•Overallequipmentcostincreasesweremoderateinlate2020andearly2021,whenmanyprojectscommissionedin2021wouldhaveplacedtheirorders.•Largerprojectshavegreaterpurchasingpowerandlongerleadtimes,bluntingpricehikesanddelayingtheirimpact.SuchlargerprojectsarealsoincreasinglydominatingcapacityadditionsoutsideEurope.•Contingencyallowancesinmostprojectsappearinmanycasestohaveabsorbedsomeorallofanyincreasedcosts.•Technologyimprovements(e.g.moreefficientPVmodulesandlargerwindturbines)andimprovementsinmanufacturingefficiencyandscalecontinue,reducingtheimpactofincreasesincommodityprices.•Chinaremainsthedominantmarketfornewsolarandwindcapacityadditionsandhaslowercommoditypricesandtransportcosts,whilein2021,itslocalmarket/policydynamicsalsofavouredlowerpricing–atleastforonshorewind.•Whenexaminingthecostofcapital,whichisamajordeterminantofthecostofelectricityfromrenewabletechnologies,theverylowfinancingcostsforrenewablepowerprojectsin2020and2021havealsocontributedtothelowLCOEsseenin2022,despitetheequipmentcostincreases,giventhatthemajorityofprojectswouldhavebeenfinancedin2021priortothesharpincreasesinrisk-freerates(IRENA,2023b).3Globalweightedaveragescanvarywithoutanyunderlyingcostchanges,sincedifferentmarketshavestructurallydifferentcosts.Assumingnochangesincostorperformance,theglobalweightedaveragecostcanchangeiftheshareofnewcapacityin“high-cost”or“low-cost”marketschanges.VOLUME1CHAPTER02622.2.2Powersectortransformation:KeyindicatorsThepowersectorisoneofthelargestcontributorstoglobalemissionsandaccountedfor40%ofCO2emissionsin2022(IEA,2023a).Decarbonisationofthissectorby2050isanambitiousyetcrucialgoalincombattingclimatechangeandreducinggreenhousegas(GHG)emissionsworldwide.Electrificationisakeyenablerofpowersectordecarbonisation,which,alongwithachievementofthe1.5°Ctarget,requiresatransitionfromfossilfuelstorenewablestogenerateelectricity.Thetechnicalpotentialofrenewableenergytechnologiesfarexceedsthecurrentglobalelectricityproduction(IRENA,2022a).Infact,overtheoutlookperiod,mostcapacityadditionsareprojectedtocomefromrenewables.Tosupportrenewables’expansion,adatabaseofsuitablepowerprojectsshouldbepreparedinthiscomingdecadetobuildapipelineofprojectsinfurtherdecadesleadingupto2050.InthePlannedEnergyScenario(PES),renewableenergycapacityexpandsto6773GWby2030and15835GWby2050(seeFigure2.3andTable2.1).Renewables’shareingenerationscalesupfrom28%in2020to46%in2030,andtoover70%in2050.However,thecurrentplansasforeseeninthePlannedEnergyScenariofallwellshortoflimitingtheglobaltemperatureincreaseto1.5°C.Thegapbetweenwhereweneedtobeandwhereweareheadediswideningeveryyear.Thedecarbonisationofthepowersectorby2050iscrucialtoachievethe1.5°CtargetWORLDENERGYTRANSITIONSOUTLOOK202363FIGURE2.3Globalpowergenerationmixandinstalledcapacitybyenergysource:PlannedEnergyScenarioand1.5°CScenarioin2020,2030and2050Ocean/tidal/waveGeothermalWindonshoreWindoshoreCSPSolarPVBioenergyHydro(excl.pumped)NuclearNaturalgasOilCoalElectricitycapacity(GW)05000100001500020000250003000035000Renewableenergyshare37%37%37%37%80%80%58%58%77%77%94%94%VREshare19%19%19%19%67%67%43%43%62%62%81%81%202020301.5-S2030PES202020501.5-S2050PESOcean/tidal/waveGeothermalWindonshoreWindoshoreCSPSolarPVBioenergyHydro(excl.pumped)NuclearNaturalgasOilCoalElectricitygeneration(TWh)150003000045000600007500090000Renewableenergyshare28%28%28%28%73%73%46%46%68%68%91%91%VREshare9%9%9%9%53%53%27%27%46%46%70%70%202020301.5-S2030PES202020501.5-S2050PES0Ocean/tidal/waveGeothermalWindonshoreWindoshoreCSPSolarPVBioenergyHydro(excl.pumped)NuclearNaturalgasOilCoalElectricitycapacity(GW)05000100001500020000250003000035000Renewableenergyshare37%37%37%37%80%80%58%58%77%77%94%94%VREshare19%19%19%19%67%67%43%43%62%62%81%81%202020301.5-S2030PES202020501.5-S2050PESOcean/tidal/waveGeothermalWindonshoreWindoshoreCSPSolarPVBioenergyHydro(excl.pumped)NuclearNaturalgasOilCoalElectricitygeneration(TWh)150003000045000600007500090000Renewableenergyshare28%28%28%28%73%73%46%46%68%68%91%91%VREshare9%9%9%9%53%53%27%27%46%46%70%70%202020301.5-S2030PES202020501.5-S2050PES0VOLUME1CHAPTER02Notes:1.5-S=1.5°CScenario;CSP=concentratedsolarpower;GW=gigawatt;PES=PlannedEnergyScenario;PV=photovoltaic;VRE=variablerenewableenergy;TWh=terawatthour.Bioenergyincludesbiogas,biomasswaste,biomasssolid,andbiomasssolidCCS;CCS=carboncaptureandstorage.64InIRENA’s1.5°CScenario,electricityconsumptioninend-usesectorswouldtripleby2050,toover87000terawatthours(TWh),comparedwith2020.Tomeettherisingdemand,thepowersectorwouldundergoevendeeperdecarbonisationthanmostothersectors,reaching68%and91%ofrenewableenergyshareinthetotalelectricitygenerationin2030and2050,respectively(seeTable2.1).Totalinstalledrenewablegenerationcapacitywouldneedtoincreasefour-foldby2030(11174GW)andtwelve-foldby2050(33216GW),overthe2020level.Thismeansannualaveragerenewableenergycapacityadditionofapproximately1000GWinthecurrentdecade,morethanthreetimestheinstalledrenewablecapacityadditionin2022andcloseto1100GWby2050.Inlinewiththedeepdecarbonisationofthesector,theshareinoverallelectricitygenerationofcoal-andoil-firedpowerplantswouldseeasharpdeclineoverthedecade(from34%in2020to9%in2030fortheformer,andfrom3%in2020to0%in2030forthelatter)beforebeingcompletelyphasedoutbythemiddleofthecentury.By2050,naturalgaswouldaccountfor5%ofthetotalelectricitygenerationandtheremaining4%wouldbeprovidedbynuclearpowerplants.Thescalingupofrenewablepowergenerationcapacityfromarangeoftechnologiesinallcountriesacrosstheglobeisrequiredtomeetthe1.5°Ctarget.Thedegreeofpenetrationofdifferentrenewableenergytechnologieswithincountriesvariesdependingupontheirtechnicalresourcepotentialandcostcompetitivenessinthemarket.MostofthedeploymentisexpectedtooccurintheG20,whichwouldaccountformorethan80%ofrenewableinstalledcapacitiesgloballyby2030.G20countries'renewablecapacityneedstoscaleupbyalmostfourtimestoreach9400GWby2030,andbytentimestoreachnearly24900GWby2050,fromthe2020level,inordertoalignwitha1.5°Cpathway.Variablerenewables,mostlysolarPVandwind,willdominatethecapacityrolloutglobally,representingthevastmajorityofcapacityadditionsandtransformingelectricitysystemsandmarkets.Thisseesthesetechnologiessupplying46%and70%ofelectricitygenerationby2030and2050,respectivelyfromacombinedshareof9%in2020(seeTable2.1).Thegrowthisdrivenbytheavailabilityofampleresources,technologycostreductions,themodularityofthesetechnologies,advancementofenergystoragetechnology,andgovernmentpoliciessupportingrenewableenergydevelopment.Thenatureoftheseresourcesseesaneedforscalingandenhancedmanagementoftransmissionanddistributionsystemstofacilitatehigherelectrificationandtransmitrenewablepowertodemandcentres.Coupledwithelectricitystorageandsmartelectrification,thesecanflexiblyallowdemandtobemet,whilstminimisingcurtailmentofrenewablesacrossverywidegeographicareas(seeBox2.1forfurtherelaborationonthebenefitsofpowersystemflexibility).ThehighrolloutofVREwithouteffectiveintegrationmeasuresacrossthesystemwillleadtomorecostlyelectricitysupply,sotheymustscaletogether.GenerationsourcesthatcanbereadilydispatchedtomeetdemandduringperiodsoflowVREsupply(suchasreservoirhydropower)willalsobeveryimportantandakeycomponentinpowersystemdesignatlowestcost.ExistingVREtargetsincludedinthePlannedEnergyScenariowouldincreasethetotalVREcapacityto5071GWby2030,representingslightlymorethanhalfofthecapacity(8990GW)neededtoachievethe1.5°Ctarget.UnderIRENA’s1.5°CScenario,installedsolarPVcapacitywouldexceed5400GWby2030and18200GWby2050.Windinstallationswouldsurpass3500GWby2030andreachalmost10300GWby2050.WORLDENERGYTRANSITIONSOUTLOOK202365TABLE2.1Keyperformanceindicatorsforthepowersector:PlannedEnergyScenarioand1.5°CScenarioin2030and2050Historical203020502020PES1.5°CScenarioPES1.5°CScenarioKPI.01RENEWABLES(POWER)Totalgeneration(TWh)Global2699136119401405243689878G202261629560324084186766273Totalinstalledcapacity(GW)Global769411670144621974835339G2064959575117461573426098REtotalinstalledcapacity(GW)Global28136773111741583533216G202435595993591314424868REshareingeneration(%)Global28%46%68%73%91%G2028%48%69%74%91%VREshareingeneration(%)Global9%27%46%53%70%G2010%31%50%59%76%REshareininstalledcapacity(%)Global37%58%77%80%94%G2037%62%80%84%95%Batterystorage(GW)Global1722735915834098G201617227811812925AvoidedCO2emissionsin1.5-ScomparedtoPES(cummulativeemissions2023-2050)EmissionsGlobal155GtCO2G20113GtCO2VOLUME1CHAPTER02Notes:1.5-S=1.5°CScenario;G20=GroupofTwenty;GtCO2=gigatonnesofcarbondioxide;GW=gigawatt;KPI=keyperformanceindicator;PES=PlannedEnergyScenario;RE=renewableenergy;VRE=variablerenewableenergy;TWh=terawatthour.66SolarPVcapacityhasgrownsignificantlyinrecentyears,anditcontinuestoshowanupwardtrend.Asmentionedearlier,underIRENA’s1.5°CScenario,theglobalinstalledsolarPVcapacitywouldincreasealmosteight-foldby2030,comparedto2020capacity,surpassing5400GW,andwouldexpandtoover18200GWby2050.Toaccomplishthis,annualsolarPVcapacityadditionswouldincreasefrom191GWin2022to615GWonaverageoutto2050.ThepotentialforsolarPVvariessignificantlyacrossregions.Thisvariationdependsonsolarirradiationandotherfactors,suchaslandavailabilityandpolicysupport.TheglobalsolarPVmarketwouldbedominatedbyG20countries,withthemarketexpectedtogrowseven-foldby2030,reachingacumulativecapacityofapproximately4530GW,andtwenty-foldby2050,reaching13315GWofcapacityfromthe2020level.Achievingthesetargetswouldinvolvenetaverageannualcapacityadditionofalmost450GWinthe28-yearperiodfrom2023to2050.Windenergyhasgrownrapidlyoverthepastdecade,withinstalledcapacitytreblingovertheperiodbetween2012and2022(IRENA,2023a).AccordingtoIRENA’s1.5°CScenario,windenergywouldbeoneofthelargestsourcesofelectricityworldwide,withinstalledcapacityexpandingtoalmost10300GWby2050.Overthepastdecade,55GWofwindcapacitywereaddedannuallyonaverage,with75GWaddedin2022.Meanwhile,theoveralloutlookperiodwouldsee335GWofnetaverageannualwindcapacityadditions.Globalonshorewindrequiressignificantexpansion,withnearly280GWofannualcapacitydeploymentonaverage,toreach3040GWwithinthisdecade.Thisgrowthwouldhavetobeevenfastertoreachnearly7820GWby2050–amorethaneleven-foldincreasefromthe2020level.China,theUnitedStates,Canada,BrazilandmanyEuropeancountrieshavehighonshorewindpotential.Underthe1.5°CScenario,theglobalinstalledoffshorewindcapacitywouldreachalmost500GWin2030,afourteen-foldgrowthover2020levels.Meetingthistargetwouldrequireamassiveexpansioninannualcapacityadditions(54GW)inthisdecadeasagainstonly3GWperyearinthepreviousdecade.By2050,offshorepowerplantsofalmost2500GWincombinedcapacitywouldneedtobeinstalledglobally.G20countrieswouldaccountforthelargestsharesof94%(approximately460GW)and95%(approximately2300GW)ofthetotaloffshorecapacityin2030and2050,respectively.Themajorityofexpansionswouldbeinthetopfourmarkets(China,EU-27,theUnitedStatesandIndia),accountingformorethan60%oftheentiremarketby2030.Overthecomingdecades,solarPVandwindwilldominatethegrowthofrenewablesinthepowersectorWORLDENERGYTRANSITIONSOUTLOOK202367Thepowersystemsoftomorrowwillneedtointegrateverylargesharesofgenerationfromvariablerenewables.Thiswillbeaconsiderablechallenge,butispossibletoachievewithnoveloperationalstrategiesandmechanisms.However,arangeofrenewablesourcesareneededtoachievethe1.5°Ctargetandeachtechnologyplaysakeyroleinmeetingelectricitydemand.VREwoulddominatethecapacityexpansioninboththenearandlong-term,asshowninFigure2.4.Thiswouldrepresentatransformativeshiftinpowersystemsupplyanddemanddynamics.Linkingthisexpansionwithbatterycapacitywouldenablesmootherintegrationofthesesourcesovertimeandhelpreducetheimpactoftransmissionbottlenecksinpowernetworks.VOLUME1CHAPTER02FIGURE2.4Totalglobalelectricitygenerationcapacityexpansionneededby2030and2050torealisethe1.5˚CScenario0400003500030000250002000015000100005000Electricitygenerationcapacity(GW)NetchangeincapacityNetchangeincapacityNon-renewablesNon-renewablesNon-renewables7694769414462144623533935339493349332803280321021091912522527171-1592-15921348513485-1165-116567466746400400898910431043280280SolarGeothermalWindHydroBioenergyOcean2020203020501.5-S1.5-SSolarWindBioenergyGeothermalHydroOceanSolarWindBioenergyGeothermalHydroOceanNotes:GW=gigawatt;1.5-S=1.5°CScenario.68The1.5°CScenarioseesbatterystorageofferingsignificantflexibilitytothepowersystem,reachingalmost360TWby2030,and4100GWby2050,withtwo-thirdsofthisbeingintheG20.Whereaspumpedhydrowouldalsoprovidemuchneededshort-andlong-termsystemflexibility,long-termstorageusinghydrogenisexpectedtoberestrictedtoverylimitedapplicationswherefewalternativesareavailable,owingtoitsmuchlowerefficiency.Alsoimportantaresourcesofcleanrenewablepowerthatcanofferinherentflexibilityanddispatchability.Underthe1.5°CScenario,by2030,globalinstalledhydropowercapacity(excludingpumpedhydro)wouldgrowbyalmost21%fromthe2020level,reaching1465GW.By2050,globalhydropowerinstalledcapacitywoulddoublefromthe2020level,surpassing2500GW.Achievingthe1.5°CScenariowouldrequireincreasingglobalaverageannualadditionstoalmost50GWovertheoutlookperiod.G20countriestogetheraccountfor79%(over1100GW)oftheglobalhydropowercapacityby2030.Amongthedifferentregions,Asiancountrieshavesubstantialtechnicalpotentialforhydropowergrowth.AllofthishydropowermustadheretotheHydropowerSustainabilityStandard,aglobalcertificationschemethatdetailssustainabilityexpectationsforhydropowerprojectsaroundtheworld.Itisalsoworthmentioningthatwhilesignificanthydropowerisneeded,withoutit,otherrenewableswouldhavetobedeployedatmuchhigherlevelstocompensateforenergyshortfalls.Furthermore,extensivelong-andshort-termstoragewouldberequiredtoensureyear-roundelectricitysupply.Bioenergy,geothermal,concentratedsolarpowerandoceanenergywouldplayamajorsupportingroleintheenergytransitionofthepowersector,especiallyinthelaterdecades,andmanyprojectscan-andwill-providemuchneededsystemflexibilityinoperation.Theirtotalinstalledcapacityisexpectedtoscalealmostfive-foldby2030fromthe2020level,reachingalmost720GW,asshowninFigure2.4.Thiswouldrequireaverageannualcapacityadditionsofaround70GWinthisdecade.By2050,stronggrowthinthesetechnologieswouldleadtonearly2200GWofinstalledcapacity.G20countrieswouldaccountformorethanhalfoftheglobalinstalledcapacitiesin2030and2050.Whilestorageenablesflexibilityoverwidertimespansinpoweruse,transmissionenablesflexibilityacrosswiderdistances.Italsoenablesmorecost-effectiveuseofgenerationassetsoverwiderareas,whichappliestobothVREandnon-VREsources,butonlyifcoupledwitheffectivesystemoperationacrosstheseareastominimisethecostofelectricityoverall.Ultimately,eachcomponentofthepowersectortransformationiskeyandallmustcombinetodeliveraneffective,reliable,highlyrenewableanddecarbonisedpowersector,usingtechnologiesthatexisttoday.Suchaglobaluptakeofrenewablescoulddeliver155gigatonnesofCO2(GtCO2)reductionsinthe1.5°CScenariocomparedwiththePlannedEnergyScenarioandplayaformativeroleinaclimatecompatibleworld.Allpowersectorcomponentsmustcombinetodeliveraneffective,reliable,highlyrenewableanddecarbonisedpowersystemWORLDENERGYTRANSITIONSOUTLOOK202369VOLUME1CHAPTER02BOX2.1Flexibilityandtheimportanceofcross-borderpowerexchangeTransformingtheenergysystemtowardsonedominatedbyrenewableenergycomeswithchallenges.Powersystemflexibilityisessentialforasuccessfulenergytransitionbecauseitenablesthedecarbonisationoftheelectricitysectorwithsomeofthelowest-costpowersourcesavailabletoday,whichiscrucialineffectivelyachievingclimategoals.Inpractice,flexibilitysmoothenssolarandwindintegrationbyensuringthebalancebetweensupplyanddemandandsupportingthesystem'sstability.Inthe1.5°CScenario,around77%ofthetotalprimaryenergysupplyin2050wouldbesatisfiedbyrenewables,whichalsoaccountfor91%ofelectricitygeneration.Solarphotovoltaicsandwindtogethersupply70%ofthatyear'selectricity.Thishighshareofvariablerenewableenergywillrequireenhancedpowersystemflexibility.Thatcanbeprovidedthroughshort-andlong-termenergystorageanddemandresponse,whichcancoupletheelectricitysectortotheprovisionofheating,chargingofelectricvehicles,andtheproductionofgreenhydrogen.Inaddition,robustnationaltransmissionnetworksdispatchgenerationwhereitismostneeded,andcross-borderpowerexchangefacilitiesshareflexibilityacrossanentireregion.Whereasbatteriescanprovidetime-relatedflexibilitybyaddressinganeventualmismatchbetweenthemomentelectricityisgeneratedandconsumed,anadequateelectricnetworkenablesflexibilityacrossspacebysharingthecapabilityofnationalassetsthroughoutaregion.Eachcountryhasitsownuniquerenewableenergymixanddemandpattern.Byinterconnectingcountries,itispossibletomaximisethecomplementaritybetweenproductionandconsumptionpatternsacrosscountries.Besides,theyenableexportingovergenerationfromrenewables,particularlysolarandwind.Forinstance,Germany'sexportstoneighbouringcountrieshavehelpedaccommodatewindgenerationthatmightotherwisehavebeencurtailed.Similarly,regionswithnoprominentstorageresourcescanrelyonneighbourswithsuchcapabilities,includinghydropower-relatedreservoirs.Hence,cross-bordercapacityvirtuallyincreasesaccesstostorageandotherflexibilityassets.Similarly,countriescanimportelectricitywheninternalresourcesareinsufficienttomeetdemandorwhenimportingischeaperthannationalproduction.Therefore,interconnectionsreducerenewables'curtailmentandtheneedforcomplementaryfossilfuels.TheIRENAFlextooltoassessesthedeploymentofpowersystemsinspecificnationalandregionalcontextsandprovidesinsightstopolicymakers,regulatorsandotherstakeholders(IRENA,2018a).IRENA'sanalysisfindsthatexpandinginterconnectioncapacityto15%ofthecountries'installedcapacitycouldreduce86%ofthevolumesofcurtailedelectricityfor2030.SuchanapproachissimilartothetargetsetbytheEuropeanUniontoencourageelectricityexchangebetweenMembers.Whencountriesareinterconnected,sometendtobenetexportersandothersnetimporters.However,thispositionshiftscontinuouslyduringtheyearandthroughouttheday.Asaresult,allcountrieswillsometimesactasexportersand,atothertimes,asimporters.Interconnectionsbearbenefitstobothexportersandimporters.Exportersmaximisetheuseoftheirrenewablecapacities,increasingtheirprofitability.Importersavoidthecostofoverinvestingincapabilitiesthatcouldremainidlepartofthetime.Criticalchallengesinimprovingflexibilityincludeinvestmentcosts,regulatorybarriers,systemintegration,dataandmodelling,andpublicacceptance.Toenableuptake,arangeofpolicymeasurestosupportthedeploymentofflexibilitytechnologiesareneeded,includingincentives,regulatoryframeworks,andeducationandawarenesscampaigns(IRENA,2018b).Digitalinnovationssuchasadvanceddataanalytics,artificialintelligenceandmachinelearningcanmakesystemoperationmoreeffective,enhancingflexibility(IRENA,2020b).702.2.3PoliciesforpowersectortransformationCountrieswouldneeddeploymentpoliciestoexpandinstalledcapacityandpowergenerationtothelevelsrequiredby2030and2050underthe1.5°CScenario.Thepoliciesmustbetailoredtodifferentcontexts.Thechoiceofapolicyinstrumentanditsdesignshouldconsiderthenatureoftheproposedsolution(e.g.utilityscale,distributed,off-grid),thelevelofdevelopmentofthesector,thepowersystem’sorganisationalstructureandbroaderpolicyobjectives.Governmentsmustsetmeasurabletargetsandcreatepowersectorplanstomobiliseimmediateactionintheshorttermandco-ordinaterenewables-basedsolutiondeploymentinboththepowersectorandinendusesinthelongterm.Deploymentplansmustalsobeaccompaniedby,andalignedwith,measurestoincreaseenergyefficiencyanddeveloptheneededinfrastructure.Atthesame,theymustpreventconflictsamongpathwaysandassetstranding.Technology-specifictargetscanbesettosupporttheintroductionoflessmaturetechnologies,suchasoceanenergyandconcentratedsolarpower,intotheenergymix.Thetransitiontoapowersectordominatedbyrenewableswouldrequiretranslatingtargetstopoliciesandmeasures.Quantifiedquotasforrenewablepowercanbeconsidered,alongwithasystemforissuingandtrackingenergyattributecertificates.Structuredprocurementpolicies,suchasfeed-intariffs,premiumsandauctions,areinstrumentalinaddressingcontext-specificbarriersandrisks,andservespecificobjectives.Asmarketconditionschangeandthepricesoftechnologiesdeclinewhiletheirdeploymentgrows,administrativelysettariffsmustbeadaptedtoreflectfallingcosts.Alternatively,pricescanbedeterminedbycompetition.WORLDENERGYTRANSITIONSOUTLOOK2023714IRENAprovidescapacitybuildingandpolicyadvicetocountrieslookingtodesignrenewableenergyauctionsthroughthePolicyFrameworkfortheEnergyTransition(PFET).Competitivepricingthroughauctionscanbeconsideredtokeeppacewithtechnologyandothercosts,suchaslabourandfinancingcosts.However,provisionsshouldbemadetoallocatetherisksofdrasticcostchanges(e.g.commodities,shipping,financing),suchasthoseexperiencedin2021-2022,amongdifferentmarketplayersinamannerthatensurescontinueddeploymentatfairprices.Auctionsareagoodwaytoharnesscompetitionwhilealsopursuingbroaderpolicyobjectivessuchassystemintegration,socio-economicbenefitsanddevelopinglocalsupplychainsforenhancedenergysecurityandindependence.Auctiondesignshouldbetailoredtospecificcountrycontextsandbroaderobjectivestomaximisethebenefitsfromauctionsandminimisetherisksassociatedwiththeirweaknesses.4Inadditiontopolicyinstrumentsthatmandateorsupportthedeploymentofrenewableenergy,theenergytransitionrequiresanenablingenvironmentforthedevelopmentofprojects.Especiallyforwindprojects,longpermittingprocessescanslowdeploymentduetotheassociatedsetofrulesandregulations.Whilepermittingrulesandproceduresarecrucialforenvironmentallyandsociallysustainableprojects,streamliningthem(whileensuringtheyremainthorough)canhelpspeeduptheenergytransition.Box2.2showcasesglobalpracticestoacceleratethepermittingprocessforoffshorewind.Auctiondesignshouldallocaterisks(includingsupplychainrisks)amongstakeholdersinawaythatsupportsthesustainabilityoftheindustryVOLUME1CHAPTER0272WORLDENERGYTRANSITIONSOUTLOOK2023BOX2.2EnablingactionstospeeduppermittingprotocolsforoffshorewindprojectsGiventheurgentneedtoaddressclimatechangeandtheongoingglobalenergycrisisduetogeopoliticalevents,manycountriesarecommittedtoacceleratingoffshorewinddevelopmentasakeytechnology.Offshorewindcancontributetomeetingglobalclimategoalssinceitrepresentsanefficientwaytolowerprices,supportenergysecurity,createlocaljobsandadvancetheenergytransitionatscale,inalignmentwithachievingthelong-termtemperaturegoaloftheParisAgreement.In2022,globalinstalledoffshorewindcapacityreached63GW,with70%ofthiscapacityfoundinjusttwocountries:ChinaandtheUnitedKingdom.Accordingtothe1.5°CScenario,offshorewindcapacityisexpectedtoreachapproximately500GWand2500GWin2030and2050,respectively.Thiscallsforurgentaccelerationinthedeploymentofthistechnology.Meanwhile,amajorbottlenecktoacceleratingoffshorewinddeploymentrelatestolongpermittingprocessesforrelatedprojects.IRENA’sCollaborativeFrameworkforOceanEnergyandOffshoreRenewables(CFOR),supportedbyIRENAandtheGlobalWindEnergyCouncil(GWEC),hasdiscussedthisissuetodeterminehowglobalpermittingpracticescanberemodelledandrepurposedtoensuretheyareagileandresponsive.Permittingentailsenvironmentalandallotherpermissionstoinstallandoperateanoffshorewindproject.Inmostcountries,thefirststepisgenerallytoobtainalicencetoconductpreliminaryinvestigations,followedbyseveralpermits:aseabedleasingpermit,anauthorisationtoexploittheenergysourceorgenerateelectricity,agridconnectionagreementandapermissionforanyworksthatshouldbedoneonshoretosupportoffshoreturbineinstallations.Thepermittingprocessfollowstwobroadapproaches:acentralisedandadecentralisedapproach.Athird,hybridapproachcombinestheelementsfromtheaforementionedapproaches.Thecentralised(one-stage)approachgrantsgovernmentsfulldiscretionintheEnvironmentalImpactAssessment,sitefeasibilitystudies(geographical/geotechnicalsurveys),stakeholderengagementandconsentingforoffshorewinddevelopment.Thedecentralised(two-stage)approachgivesdevelopersanopportunitytotakeupandleadthemajorityofthestepsoftheprocess.Permittingprocessesarehamperedbyseveralchallenges.Theseincludethevarietyofdifferentpermits(onaveragesevenperproject)tobeacquiredbeforeaprojectcancommence,thelengthypermitting73VOLUME1CHAPTER02leadtimesrequired(onaverage2.25years)andoppositiontoprojectsduetoconcernsraisedbysomestakeholders.Manyprojectsremainstuckinthepipelineduetothelongleadtimes.BelowisalistofsomeofthekeysolutionsdiscussedbytheCFOR,IRENAandGWECtospeedupthepermittingprocessforoffshorewind:(1)Havingdedicatedcentralisedauthoritiesandsinglefocalpointswhocanworkwithoffshorewinddeveloperstostreamlinethesitingandpermittingprocess.Forexample,inthePhilippines,a2021executiveorderhaspromptedthecreationofataskgrouptoimplementtheEnergyVirtualOne-StopShop,anonlineplatformtoco-ordinatedataandinformationforallrenewableenergyprojectapplications.(2)Implementingdifferentchannelstopromoteactivedialogueforsharedunderstandingofprioritiesduringtheconsentingandconstructionstagesofwindprojects.AnexampleofthisaretheoffshorewindprojectsthatwerebeingplannedinTongyeong-si(RepublicofKorea).In2021,theprojectdevelopersorganisedpublic-privatecouncilmeetingswithdifferentstakeholderstoensurethelatter’sviewswereconsideredintheprojectplanningprocessandallinterestswereprotected(Parketal.,2022).(3)Introducinglegislationmandatingmaximumleadtimesforpermittingoffshorewindenergyplants,withadditionaldiscretionarytimeallowedunderextraordinarycircumstances.Forexample,theEuropeanCommissionhastabledanewlegislativeproposalonrenewablespermittingwithinitsREPowerEUplan.Theproposalkeepstheexistingpermittingdeadlines–twoyearsfornormalnewprojectsandoneyearforrepoweredprojects.Thelegislationalsoclarifieswhichpermitsandproceduresmustbedeliveredwithinthesedeadlines(WindEurope,2022).TheserecommendationsarebeingusedbytheGlobalOffshoreWindAlliance(GOWA),whichisacomprehensive,multi-nationalplatformfoundedbyIRENA,DenmarkandtheGWECthatconvenesgovernments,theprivatesector,internationalorganisationsandotherstakeholderstoexpediteoffshorewindpowerdeployment.GOWA’soverarchingobjectiveistoassistintherealisationofrenewableenergytargetsbybridgingthegapbetweenambitionandimplementation,whileaddressingpressingeconomic,energysecurityandclimate-relatedconcerns.UsingtheWorldEnergyTransitionsOutlookastheirfoundationalbasis,the30+GOWAmembersarecollaboratingacrossnational,regionalandgloballevelstodriveoffshorewinddeploymentforward,whileremovingentrybarriers.Withoffshorewindholdingpotentialtomeettherenewableenergytargetswhilesimultaneouslyacceleratingactualimplementationrates,GOWAispushingforgreaterambitioninoffshorewinddeploymentfordeliveringsustainableenergysolutionsworldwide.Source:(IRENAandGWEC,forthcoming).74AstheshareofVREincreasesinapowermix,complementarymeasureswillbeneededtosupportitsintegrationinthepowersystem.Examplemeasuresinclude:restructuringsystemsandupdatinggridcodestomakethemsuitable,centralisingplanningprocesses,settingupone-stopshopsforlicencing,providingfinancialsupportforflexiblegridsandpumpedhydropower,andofferingfinancialincentivessuchassubsidiesforsmartmeters,batteriesandotherstoragetechnologies.Mostpresent-daypowersystemsweredesignedinthefossilfueleraforcentralised,dispatchablepowerplantswithhighvariablecosts.Thiswillnotbethestandardintherenewableenergyera.Newdesignswillbeneeded,andimplementedsoon,giventhelongleadtimeinvolved(seeBox2.3).Non-utility-scaleprojects,suchasgrid-connecteddistributedsolutions,requiretailoredregulatoryandpricinginstruments.Distributedgenerationcanbesupportedthroughnetmeteringandnetbilling.However,caremustbetakentoavoidjeopardisingasystem’sabilitytorecovercosts,andtopreventcross-subsidisation5amongcustomerswhodonotself-consumeandthosewhodo.Thedesignofregulatorymeasuresmustallowforinnovativeresponsestodynamicmarketconditions.Indeed,misalignmentsbetweentheexpectedandactualoutcomesofpowersystempoliciesandregulationscouldincreaseasthetransitionprogresses,unlessmeasuresaretakentoredesignthepowersystem’sorganisationalstructure.Pricingmechanisms,alongwithamarket’sdesign,mustbesetproperlysoastoreflectthebenefitsandoverallcostsofagiventechnology,aswellassystemcosts.Fiscalandfinancialincentivessuchastaxincentives,subsidiesandgrantscomplementregulatoryandpricingmechanismsandarealsoneededtoimproveaccesstocapital,reducefinancingcostsandensurethattransitiontechnologiesarebroadlyaccessibletoendusers.5Asituationinwhichonegroupofcustomersischargedahigherpriceforaproductorservicetosubsidiseprice(orasubsidyoranyothersupportscheme)foranothergroup.Non-utility-scaleprojects,suchasgrid-connecteddistributedsolutions,requiretailoredregulatoryandpricinginstrumentsWORLDENERGYTRANSITIONSOUTLOOK202375VOLUME1CHAPTER02BOX2.3Powersectorsintherenewableenergyera–settinguporganisationalstructuresRenewableenergypolicieshaveevolvedastechnologieshavematured,transformingwhathadbeensupportschemesintopowerprocurementsystems.Itistimetotakestockofpastexperiencesandbeginre-designingpowersystems’organisationalstructures–namelytheinstitutions,proceduresandsocialrelationsthroughwhichelectricityservicesareexchangedandrewarded.aRenewableenergytechnologies,withtheexceptionofbioenergy,aredominatedbycapitalcosts:mostofthespendingoccursbeforeapowerplantiscommissioned.Moreover,variablerenewableenergy(VRE)technologiesarenotdispatchableandcannotfollowpricesignals.bWhileitispossibletodevelopVREplantsintoday’spowermarkets(e.g.merchantplants),theverystructureofthesemarketsposeschallengestoVRE.Forexample,assharesofVREinthepowermixrise,powermarketpricesfall,reducingtheattractivenessofnewinvestmentsandincreasingtherisksthatexistingVREproducerswillnotbeabletorecovertheirinitialinvestments.Auctions(oradministrativelysetfeed-intariffs)solvesomeoftheseproblemsbyprovidingregulatedpaymentsthatlowerthecostsofVREdeploymentbyreducingrisks.Ultimately,however,largeVREsharescallforenhancedpowersystemflexibility.Flexibilitycancomefromthesupplyside(e.g.grid-levelbatteries,dispatchablegenerators)orfromthedemandside(e.g.electricvehicles,heatpumps,demandresponse).Moreandmoreflexibilitywillbeneededinpowergrids,andpolicymakersmustactnowtocreateanenablingenvironmentforit.Atthesametime,theyshoulddomoretoaddressthedecarbonisationofend-usesectors.Integratingbothdirectandindirectelectrification,forexample,allowsend-usesectorstogeneratetheirownflexibility.A“dualprocurement”designmeetsthetworequirementsoftheenergytransition–thatis,increasingVREandincreasingflexibility–whilefocusingonaholisticvisionofhowpowersystemstructurescanbeshapedtosuittheenergytransition.Dualprocurement,asoutlinedin(IRENA,2022f),encompassesthelong-termprocurementofrenewableelectricity,andtheshort-termprocurementofflexibilityresources.Undertheproposeddualprocurementdesign,long-termcontracts,likeauctions,becomethebackboneoftheenergymarket;electricityisexchangedvialong-termcontractsthatproperlyaddresstherequirementsofcapital-intensivetechnologies.Thelong-termprocurementmechanismfacilitatesVREinvestmentsatthelowestpossiblecapitalcosts,therebyminimisingthecostofrenewablepowergenerationwhileallowingforcapacityexpansion.Theshort-termflexibilitymarket,ontheotherhand,hastheobjectiveofprocuringandaffordablydispatchingtheflexibleresourcesneededforareliablerenewables-basedpowersystem.Liketoday’swholesalemarkets,short-termflexibilityprocurementisbasedonmarginalpricesbutinvolvesonlytechnologiesthatprovideflexibility.Thiscomponentoftheprocurementsystemincorporatesamoregranularbiddingformatandisfreeofthescarcitypricecapsthatmightotherwiselimittheeconomicfeasibilityofinvestmentsinflexibility.aForexample,the“powermarket”inliberalisedpowersystems.bTheevolutionofavailablerenewableresourcesovertime(windblowingorsunshining)cannotbemadetofollowpowerdemand.Hencemostoftheweightinaligningdemandwithgenerationfallsonthedemandside–andonotherflexibilityresources.cInregulatedsystems,directpublicinvestmentcouldalsoplayaroleinlong-termelectricityprocurement.76Renewabletechnologiesaredominatingtheglobalmarketfornewpowergenerationcapacity.Theenergytransitionrequiresthattheirdeploymentaccelerates–notonlyinthepowersector,butalsointhefuelmixandinend-usesectors(i.e.industry,buildingsandtransport),aswillbediscussedbelow.2.3Emergingfuels:CleanhydrogenanditsderivativesOfthe87Mt(10440petajoules)ofhydrogenconsumedin2020,almostallcamefromfossilfuels(IRENA,2022g).Whatstepsareneededtoexpandtheproductionofcleanhydrogen,whichissettoplayacrucialroleintheenergysystemofthefuture?Asglobaleconomiesaimtobecomecarbonneutral,competitivehydrogenandsyntheticfuelsderivedfromhydrogen(suchasammonia,methanolandkerosene)emergeaskeycomponentsoftheenergymix.Thesefuelswillofferanemissionsmitigationsolutionforindustryandtransportprocessesthatarehardtodecarbonisethroughdirectelectrification.Ina1.5°Cfuture,hydrogenrequiressignificantsupportencompassingphysicalinfrastructure(e.g.productionfacilities,storagesystemsandpipelines),policyandtechnology.Internationaltradeagreementsareneededtoestablishaglobalhydrogenmarket,withgovernmentsactingtospurearlyadopterstodriveinitialdemand.Certificationschemeswouldhelpensurethesustainabilityoflow-carbonhydrogenproductionandminimiseemissions.Innovativesolutionsandtechnologicaladvancementsarealsoneededtoimproveefficiencyandreducethecostofhydrogenproduction,storageanddistribution.KeyareastoconsiderforR&Dincludeelectrolysis,CCS,advancedmaterialsforhydrogenstorageandfuelcelltechnologies.Bluehydrogen,producedfromnaturalgaswithCCS,canserveasaninterimsolutionwhilegreenhydrogenproductionfromrenewableelectricityscalesup(providedthatCCStechnologycontinuestoadvance).Directelectrification,wherepossible,ispreferabletousinghydrogen,basedontheefficiencyofthegas'conversiontousefulenergy.Abouttwotothreetimesmoreelectricityisneededtodeliverthesameserviceviahydrogenasdirectelectricity,duetoconversionlosses.Economicefficiencydependsonarangeoffactors,includingtheavailabilityandcostofprimaryenergysources,thecostofelectricitygenerationandstoragetechnologies,andthecostofhydrogenproduction,storage,andtransport.Thismeansthattheuseofhydrogenneedstobecarefullyconsideredandundertakenonlywhentherearenopracticalalternatives.Asoutlinedintheprevioussection,theglobalpowersystem’scapacityneedstoincreasefive-foldtosupporttheenergytransition–andmuchofthiscapacityisforhydrogenproduction.By2050,theelectricityneededforhydrogenproductioncouldamounttoone-quarterofpowergenerationintheworld,andevenmoreinsomecountries.Integratedplanningisneededtoensureabankablepipelineofrenewablepowerprojectstomeetthisgrowingdemandforhydrogenaswellaselectrolysers.Cleanhydrogenisvitalforalow-carbonfutureandrequiresinfrastructure,policiesandglobalco-operationWORLDENERGYTRANSITIONSOUTLOOK202377Hydrogenanditsderivativefuels,suchasmethanolandammonia(whicharemoresuitableforsomeapplicationsandasliquidfuelsareeasiertotransportoverlongdistances),wouldtogetheraccountfor14%offinalenergyconsumptionby2050inthe1.5°CScenario,whichismuchmorethantheirnegligibleshareoftoday’sglobalenergymix.Todeliveremissionsreductionswouldnecessitateaseachangeinhowhydrogenisproduced:by2050mostwouldneedtobegreenandproducedfromrenewableelectricitythroughelectrolysis.“Blue”hydrogen–producedfromfossilfuelsbutwiththeiremissionscaptured–willalsobeneeded.VOLUME1CHAPTER02FIGURE2.5Globalcleanhydrogensupplyin2020,2030and2050inthe1.5°CScenario1.5-S1.5-S1.5-S1.5-S1.5-S1.5-S202020302050Total(PJ)(GW)Cleanhydrogen(PJ)Totalelectrolysercapacity(GW)01000020000300004000050000600007000001000200030004000500060007000Notes:1.5-S=1.5°CScenario;GW=gigawatt;PJ=petajoule.78UnderIRENA’s1.5°CScenario,greenandbluehydrogenproductionneedstogrowfromnegligiblelevelstodaytoalmost15exajoules(EJ)(125Mt)by2030and63EJ(523Mt)by2050(seeFigure2.5),withgreenhydrogendominantacrossthelongertimehorizon,risingfrom40%in2030to94%by2050.Inthiscontext,hydrogenneedstobelowcarbonfromtheoutsetandultimatelygreen(producedviaelectrolysis,usingrenewableelectricity).Greenhydrogentodaymaycostbetweentwoandthreetimesmorethanbluehydrogen,whosebasecostsaredifficulttoestimatewhilefacilitiesarenascent.Reducingrenewablepowercostsandimprovingelectrolysertechnologiescouldmakegreenhydrogencost-competitiveby2030orearlier.Thecumulativeinstalledcapacityofgreenhydrogenelectrolysersneedstogrowtosome233GWby2030and5722GWby2050,whenawidedistributionofhydrogenproductionisenvisagedacrosstheworld(IRENA,2022b).Thisalsoimpliesaneedforthefullsupplychainandproductioncapacityfortheseelectrolyserstobedeveloped,inadditiontohydrogeninfrastructuretotransportthegas.Projectstobuildhydrogenpipelinesareespeciallychallengingsincetheyrequirematerialsthatcanwithstandhighpressuresandareresistanttoembrittlement.Theyalsorequirecarefuldesigntoensurepuritypreservationofhydrogen,safeoperationaswellasmaterialcompatibility.Atcurrentprices,costbenefitratiosaregenerallyunfavourable.Thesebarrierswillneedtobeovercometoseeuseofgreenhydrogenandrelatedcarriers,suchasammoniaandmethanol,reachalmost1%ofTFECin2030and13%by2050inIRENA’s1.5°CScenario.Cleanhydrogenislikelytoplayanimportantroleintheindustrysectorincludingforgreensteelproductionusingdirectreducediron,andfeedstocksinchemicalsandpetrochemicals.Itstotaluse(includingnon-energyapplications)wouldgrowtoaround14EJby2030and40EJby2050inthosesectors.Hydrogencanalsoplayafundamentalroleinbalancingrenewableelectricitysupplyanddemandbyabsorbingshort-termvariationsandofferinglong-termstoragetohelpbalancerenewables’seasonalvariability.Inthe1.5°CScenario,theproductionofaverylargevolumeofhydrogenfromrenewablepowerincombinationwithhydrogenstoragecanhelpsecurelong-termseasonalflexibilityfrom2030onwardsandprovidestoragecapacityestimatedat800TWhby2050.Inotherend-usesectors,cleanhydrogenanditsderivatives,suchasmethanolandammonia,willplayanimportantroleincertaintransportmodes.Inthe1.5˚CScenario,theycompriselessthan1%ofthetransportsector’senergyin2030,butalmost25%by2050.Cleanhydrogen’suseinthebuildingssectorwouldremainminor,ataround0.15EJby2030,largelyduetothelowefficiencyofitsusecomparedtodirectelectrification.Table2.2outlineskeyindicatorsforhydrogenusein2030and2050underthe1.5°CScenario.Cleanhydrogenproductionmustrisesignificantlytosupportbroadutilisationacrosssectorsunderthe1.5°CScenarioWORLDENERGYTRANSITIONSOUTLOOK202379TABLE2.2Keyperformanceindicatorsforcleanhydrogenanditsderivatives:PlannedEnergyScenarioand1.5°CScenarioin2030and2050Historical203020502020PES1.5°CScenarioPES1.5°CScenarioKPI.05CLEANHYDROGENANDDERIVATIVESCleanhydrogenproduction(EJ)Global<1<115363G20<1<111245Cleanhydrogen(directuseande-fuels)shareintotalfinalenergyconsumption(TFEC)(%)Global<1%<1%2%<1%14%G20<1%<1%2%<1%15%Cleanhydrogen(directuseande-fuels)shareintransporttotalfinalenergyconsumption(TFEC)(%)Global<1%<1%<1%2%24%G20<1%<1%<1%2%17%Cleanhydrogen(directuseande-fuels)shareinindustrytotalfinalenergyconsumption(TFEC)(%)Global<1%<1%5%<1%17%G20<1%<1%6%<1%17%Cleanhydrogen(directuseande-fuels)shareinbuildingstotalfinalenergyconsumption(TFEC)(%)Global<1%<1%<1%<1%<1%G20<1%<1%<1%<1%<1%VOLUME1CHAPTER02Notes:EJ=exajoule;G20=GroupofTwenty;KPI=keyperformanceindicator;PES=PlannedEnergyScenario;TFEC=totalfinalenergyconsumption.Thetableshowstheshareofcleanhydrogen(directuseande-fuels),andincludesonlyenergyuse.802.3.1PoliciesforincentivisingtheuptakeofgreenhydrogenanditsderivativesGreenhydrogenisstillinitsearlystagesandrequirespolicymakers’proactivesupporttogofromnichetomainstream.Policymakershaveakeyroletoplayinsupportingthegrowthofgreenhydrogenaswellastheenablingenvironmentforsuchgrowth.AsdetailedinChapter1,thescaleandspeedatwhichgreenhydrogenwillneedtoincreaseissubstantial,callingforconcertedgovernmentaction.Whendraftinghydrogenstrategies,policymakersanswervariousquestionsaboutthefutureofhydrogen,reassesstheenergysectorfromanewperspectiveandaddressenergyusesoftenignoredinpublicdiscussions(e.g.theuseoffossilfuelproductsasfeedstocksinchemicalprocesses).Thepublishedstrategycanprovideanswerstoindustryandthegeneralpopulationonhowthegovernmentplanstobackthehydrogensector.WhentheWorldEnergyTransitionsOutlook2022waspublished,30countrieshad,orweredrafting,astrategy;atthetimeofwriting,morethan60countrieshadtakenonthistask.Notably,theUnitedStatesnowhasaroadmapforhydrogenanditsderivatives.Ashort-termmeasureforpolicymakersistoaligncertificationefforts.AsofAugust2022,15differentinitiativesaimedtocertifyhydrogenorregulateitsemissions.Theseinitiativesdifferedregardingtheparametersofthesystemscovered,emissionsthresholds,labels,productionpathways,thechain-of-custodymodelandconditions.Certificationiscrucialtoensurethathydrogen’sproductioncontributestoclimatemitigationandcomplieswithinternationaltraderules.CertificationalsoallowshydrogenflowstobedifferentiatedbytheirassociatedGHGemissions,whichinturnhelpsinthesettingofprices,economicincentivesandemissionsallocationsamongusers.Sincehydrogencanbeconvertedtoothermaterialsandcommodities,itscertificationshouldbemodularandaddresseachconversionstepseparately.Certificationshouldalsobecompatiblewithexistingeffortstosupportsomehydrogen-relatedcommodities.GreenhydrogenhasrisenrapidlyupthepolicyagendainrecentyearsWORLDENERGYTRANSITIONSOUTLOOK202381Finally,itiskeyforpolicymakerstounderstandthespecificchallengesofhydrogen.Amongthem,theoff-takerisksetshydrogenapartfromotherproductsnecessaryfortheenergytransition.Whilethepowersector’soff-takeisnaturallyguaranteedbypowermarketrules,inthecaseofhydrogen,policymakersneedtofirstmakesuredemandforgreenhydrogenexists.Whilesupplycommitmentsfromgovernmentsadduptobetween140GWand150GW(whichcouldproduceroughly15MtH2/year–dependingonthecapacityfactor)andtheEuropeanUnionalonehasa2030targetof20MtH2/year,commitmentsonthedemandsideonlyadduptolessthan3MtH2/year.Inthehydrogensector,potentialoff-takersneedtoknowtheprice,physicalpropertiesandquantityoflow-carbonhydrogenfrompotentialsuppliers,whointurncannotstartdeployingelectrolyserswithoutanoff-takeagreement.Allplayersneedtoknowthesupportpoliciesinplaceandtherelevantstandardsandregulationsinthejurisdictionswheretheyoperate.Wherepolicymakershavenoexperiencewithhydrogentechnologies,thiswillmakethecreationofpolicymorearduous.Inturn,infrastructurecanbedevelopedonlyaftersupplyanddemandpointsaredetermined.Finally,financeinstitutionsneedclearinformationfromprojectstoevaluatetherisksandmakeinformeddecisions.Toaddressthedeadlock,policymakerscansetnewpoliciestoco-ordinatethesupplyanddemandforgreenhydrogen,asrecommendedinIRENA’srecentreportfortheGroupofSeven(G7)(Box2.4).Mostofthepoliciesenactedsofarfocusonthesupplyside.Fewpoliciestodatefocusoncreatingananchorhydrogendemandspecifically.Policymakersshouldworktoidentifysolutionstogrowsupplyanddemandatthesametime.Assistanceforoff-takeagreementswouldhelpkick-startahydrogenmarket.PoliciesforhydrogendemandandsupplyneedtobedevelopedintandemVOLUME1CHAPTER0282WORLDENERGYTRANSITIONSOUTLOOK2023BOX2.4RecommendationsforacceleratinghydrogendeploymentCleanhydrogenwillplayanimportantroleintheenergytransition.Inthe1.5˚CScenario,14%oftotalfinalenergyconsumptionin2050ismetusingcleanhydrogen.Thistranslatesto523milliontonnesperyear,mostofitgreenhydrogen.Itisimportanttohighlightthatspecificindustriesshouldbegivenpriorityincleanhydrogenuse.Steelandfertiliserproduction,long-distanceshippingandaviationallstandtobenefitfromcleanhydrogenuse.Theproductionofcleanenergywouldneedtorampupsignificantlyfrom0.8milliontonnesin2020tomeettheincreaseddemand.IRENA’sreport,AcceleratinghydrogendeploymentintheG7:RecommendationsfortheHydrogenActionPact,providesspecificrecommendationstoG7memberstospeedupthedevelopmentoflow-carbonhydrogenvaluechainsintheircountries(IRENA,2022i).Theserecommendationsareto:•Aligneffortsonstandardsandcertification.•Collaborateandsharelessons.•Balancethefocusonsupplyanddemand.•Promoteindustrialuseanduptake.•Reachouttocivilsocietyandindustrystakeholders.Theserecommendationshighlighttheimportanceofcollaborationamongcountries.Asmuchasone-fourthofcleanhydrogendemandin2050wouldneedtobemetviainternationaltrade(IRENA,2022b).Demand-sidepolicies,especiallyforindustrialuse,areneededalongsidethosethatfocusoncleanhydrogenproduction.Unlockinghydrogentradealsomeansaligningeffortstowardsstandardisationandcertification.Ashydrogenisafungiblecommodity,certificationcanprovideoff-takerswithinformationonitsproduction.Certificationshouldincludetheproductionmethod,accountingofgreenhousegasemissions,transparentauditingcriterionandaregistryforcreditissuanceandretirement.IRENA’sreport,Creatingaglobalhydrogenmarket:Certificationtoenabletrade,divesdeeperintothenuancesofarobustcertificationsystem(IRENA,2023c).Thereportcallsfortheharmonisationofstandardsworldwidetoenabletheinternationaltradeofhydrogen.Certificationalonewillnotfacilitatesuchtradebutwillbeintegralinsecuringhydrogendemandinthe1.5°CScenario.83VOLUME1CHAPTER02FIGURE2.6RecommendationsforG7membersIncreaserenew-ablehydrogenresourcesConductoutreachtocivilsocietyandindustrystakeholdersBalancefocusonsupplyanddemandcreationPromoteindustrialuseanduptakeCollaborateandsharelessonsAligneortsonstandardsandcertiﬁcationSource:(IRENA,2022i).842.4Bioenergysupplyandconsumption2.4.1KeyindicatorsforbioenergysupplyandconsumptionBioenergyplaysakeyroleinreachingthe1.5°Cclimategoal(IRENA,2021a).Givenitspotentialtoreplacefossilfuelinallenergysectors–includinginelectricityproduction;inendusesinindustry,buildingsandtransport;andasachemicalfeedstock–itisimportantinthetransitiontowardsarenewables-basedenergymix.In2020,bioenergyaccountedfor9.5%ofthetotalprimaryenergysupply.Bioenergysupplywasdominatedbymodernusesofsolidbiomass(43%),followedbybiomassfortraditionalcookingandheatingpurposesindevelopingcountries(39%)andbybiogasandbiofuelfeedstocks(18%).AsshowninFigure2.7,underthe1.5°CScenario,biomasssupplywouldneedtogrowto86EJby2030and135EJby2050,fromthe2020level(56EJ).Thisincludesreducinginefficientuseoftraditionalbiomass,whichiscurrentlyusedasfuelforcookingandheating.Modernbioenergywouldneedtoincreasefrom33EJ(currentlevels)byafactorofabout2.5by2030andincreasefour-foldby2050.Whiletheestimateofabout135EJofbiomasssupplyistowardsthehigherendofwhatcanpotentiallybesustained,asestimatedbyIRENAandotherinstitutionsfor2050(Faaij,2018;IRENA,2014,2016b,2016a),suchalevelcaninprinciplebesuppliedsustainablywithoutnegativechangesinlanduse.However,itwillbeamajorchallengetoscaleupbiomassproductiontothoselevelswhileavoidingadverseenvironmentalorsocialconsequences.WORLDENERGYTRANSITIONSOUTLOOK2023FIGURE2.7Primarybioenergysupplybycarrierin2020,2030and2050underthePlannedEnergyScenarioand1.5°CScenarioGaseousbiofuelsfeedstockLiquidbiofuelsfeedstockOthersolidbiomassBiomassfortraditionalusesPrimarybioenergysupply(EJ)0140120100806040200202020301.5-S2030PES202020501.5-S2050PESNotes:1.5-S=1.5°CScenario;EJ=exajoule;PES=PlannedEnergyScenario.856Includingbiomass,biogasandbiomasswaste.Powergenerationfrombioenergy6wouldrepresentaround4.5%ofthegeneration–6.5EJin2030and14.9EJin2050–underthe1.5°CScenario.Thiswouldbeanincreaseofmorethanthreeandseventimes,respectively,fromcurrentlevels.BiomassusecombinedwithCCSinthepowersectorandsomeindustrialsectorswouldbecriticalinachievingthenet-zerogoal.Processesusingbiomass,towhichCCScouldinprinciplebeapplied,couldpotentiallycaptureapproximately10GtCO2equivalentperyearby2050(Lyonsetal.,2021).Underthe1.5°CScenario,bioenergywithcarboncaptureandstorage(BECCS)isassumedtocaptureandstoreabout3.4GtCO2in2050(84%fromthepowerandheatsectorsand16%fromindustry).Bioenergyaccountedfor11%ofthefinalenergyconsumptionin2020.Itsconsumptionwasdistributedamongtraditionaluseofbiomass(51%),andmodernusesinindustry(22%),buildings(17%),transport(9%)andotherconsumption(1%)(seeFigure2.8).Traditionaluseinvolvestheuseofbiomassinsimpleandinefficientstovesandopenfires.Thistypeofusecausesindoorairpollutionandhasseverehealthconsequences.Italsoresultsinforestdegradation,leadingtoGHGemissionsandbiodiversityloss.Aglobaleffortisneededtoprovidecleancookingfuelforall–asembodiedinUNSustainableDevelopmentGoal(SDG)7(IEAetal.,2021:7).Themainstepsrequiredtoachievethe1.5°CScenarioincludesubstantialreductionofinefficient(traditional)biomassuseby2030;greatermodernbiomassuseforenergyinbuildingsuntil2030andstabilisinggrowthuntil2050;steeprisesinbioenergyinindustryuntil2050;andgreateruseofbiofuelsforroadtransport,aviationandshipping.Underthe1.5°CScenario,modernbioenergysupplywouldneedtoincreasefour-foldby2050comparedto2020VOLUME1CHAPTER0286Substantialreductionoftraditionalbiomassuseby2030isrequiredtoachieveSDG7WORLDENERGYTRANSITIONSOUTLOOK2023FIGURE2.8Bioenergyfinalenergyconsumptionbysectorin2020,2030and2050underthePlannedEnergyScenarioand1.5°CScenarioBioenergyﬁnalenergyconsumption(EJ)706050403020100TransportIndustryBuildingsBiomassfortraditionalusesOtherenergyuse202020301.5-S2030PES202020501.5-S2050PESNotes:1.5-S=1.5°CScenario;EJ=exajoule;PES=PlannedEnergyScenario.87By2030,the1.5°CScenarioenvisagesmassivereductionsininefficientusesofbiomassforcookingandheatinginthebuildingssector.Achievinguniversalaccesstocleancookingtechnologiesandfuelsby2030wouldrequirerollingoutcleantechnologiessuchasefficientimprovedcookstovesfuelledbysustainablyproducedbioenergyorelectricstoves.Modernuseofbioenergyinbuildingswouldgrowfrom7.3EJin2020to11.3EJby2030,and9.4EJby2050.Bioenergywillplayanimportantroleinmedium-andhigh-temperatureheatapplicationsinindustry,andasachemicalfeedstock.Underthe1.5°CScenario,globalbioenergydemandintheindustrysectorwouldbe21EJby2030and27.6EJby2050.Meanwhile,globalbio-basedplasticproductionwouldreach73Mtannuallyinthechemicalandpetrochemicalsector,upfromjustabove2Mttoday.Thiswouldrepresentapproximately20%ofthetotalplasticproduction.Afurther51Mtofothersyntheticorganicmaterialswouldbeproducedfrombiomassfeedstockby2050.Bio-basedfeedstocksplayaminorroleinchemicalproductiontoday.Bio-basedfeedstocksareusedtoproduceabout1%ofplasticsandlessthan1%ofchemicals.Underthe1.5°CScenario,useofbioenergyfeedstocksforchemicalproductiongrowsto4.1EJin2030and10.9EJin2050.Bioenergycontributestotransportdecarbonisation.Underthe1.5°CScenario,bioenergyconsumptionintransportwouldgrowfrom3.7EJin2020to9.1EJby2030,andto12EJby2050.Thisgrowthwouldcomplementfuelefficiencyimprovementsandtheincreasednumberofelectricvehiclesontheroad.Increasingbiofuelblendingratios,especiallyinthisdecade,couldbecrucialtoreduceemissionsfromroadtransportuntilglobalfleetsareelectrified.Inaviation,biojetfuelsplayamuchbiggerrole.Theirusetogetherwithsyntheticfuelsopensopportunitiestodecarbonisethesector.Underthe1.5°CScenario,approximately110billionlitresofbiojetfuelswouldbeproducedannually.Liquidbiofuelwouldmeet24%oftheoverallenergydemandinthetransportsector,andtheirproductionwouldgrowalmostfour-foldby2050.Intheshippingsector,biofuelwouldplayamorelimitedrole,withonlya10%shareintheenergymixby2050underthe1.5˚CScenario.Table2.3outlineskeyindicatorsforbioenergysupplyandconsumptionin2030and2050underthe1.5°CScenario.VOLUME1CHAPTER0288TABLE2.3Keyperformanceindicatorsforbioenergysupplyandconsumption:PlannedEnergyScenarioand1.5°CScenarioin2030and2050Historical203020502020PES1.5°CScenarioPES1.5°CScenarioBIOENERGYSUPPLYBioenergyprimarysupplyformodernuses(EJ)Global34508673135G203043655886BioenergyformodernusesshareinTPES(%)Global6%7%15%9%22%G206%8%14%10%19%KPI.01RENEWABLES(POWER)Bioenergyshareinpowergeneration(%)Global2%3%5%4%5%G202%3%4%2%3%KPI.02RENEWABLES(DIRECTUSES)ModernuseofbioenergyshareinTFEC(%)Global6%6%12%7%15%G206%7%11%9%14%ModernuseofbioenergyshareinbuildingsTFEC(%)Global6%6%11%6%9%G208%8%7%8%5%ModernuseofbioenergyshareintransportTFEC(%)Global4%5%8%6%13%G204%5%8%8%12%ModernuseofbioenergyshareinindustryTFEC(%)Global7%9%14%10%20%G207%9%14%11%20%KPI.06CCS,BECCSANDOTHERSBECCScarbonremoval(GtCO2/year)Global––0.7–3.4G20––0.5–1.8WORLDENERGYTRANSITIONSOUTLOOK2023Notes:BECCS=bioenergywithcarboncaptureandstorage;CCS=carboncaptureandstorage;EJ=exajoule;G20=GroupofTwenty;Gt=gigatonne;KPI=keyperformanceindicator;PES=PlannedEnergyScenario;TFEC=totalfinalenergyconsumption;TPES=totalprimaryenergysupply.892.4.2PoliciesforbioenergysupplyandconsumptionBioenergydeploymentisbelowthelevelneededtoachievethemedium-andlong-termtargets.Thisisduetomultiplebarriers,whichcanbepoliticalandinstitutional(e.g.policyuncertainty,weakinstitutionalstructures),financialandeconomic(e.g.fossilfuelsubsidies,highcosts,lackofaccesstoaffordablefinance),technicalandinfrastructurerelated(e.g.lowtechnologyreadiness,technologyreliability,lackofinfrastructure),supplychain-related(e.g.lackofstablefeedstocksupplyorqualifiedworkers,sustainabilityrisks)andinformationandpublicawareness-related(e.g.lowpublicawareness,lackofreliableinformation)(IRENA,2022j).Bioenergysustainabilityisacomplextopic.Inprinciple,bioenergyusecanprovidevariousbenefits.Forexample,itcanmitigateGHGemissionsbyreplacingfossilfuelsinpowergeneration,heating,transportandindustry.Itcanalsobringenvironmentalandsocio-economicbenefits.Meanwhile,bioenergydevelopmentcouldcreateadverseenvironmental,socialoreconomicimpactsbeyondtheenergysectorifnotmanagedwell.Theseimpactsstemfromthestronginterlinkagesbetweenbioenergyandanumberofimportantsectors,suchasagriculture,forestry,ruraldevelopmentandwastemanagement.Meanwhile,decarbonisationthroughbioenergyshouldphaseoutthetraditionaluseofbiomassandfactorinthecarbonstockloss,oremissionsfromindirectland-usechangeandfromthesupplychain.SustainabilitymustbeakeyconsiderationinbioenergypolicyVOLUME1CHAPTER0290Agivenbioenergyproductionmodelmaybeconsideredsustainableinonelocationbutnotanother.Thiscouldbeduetoclimaticandbiophysicaldifferences,forexample.Socio-economicfactorssuchasdemography,politics(e.g.wheninvolvinglandownership)andculturealsodeterminewhetherbioenergycanbedeployedatasite.Decisionmakingandsustainabilityaroundbioenergydevelopmentcouldbeenabledthroughacomprehensiveframework,whichshouldincludesettingsustainabilitytargetsandlong-termplanning,cross-sectorco-ordinationforbioenergy,sustainabilitygovernancesupportedbyregulationsandcertificateschemesandintegrationofbioenergypolicymakingwiththeSDGs(Figure2.9).WORLDENERGYTRANSITIONSOUTLOOK2023FIGURE2.9ApolicyframeworkforsustainablebioenergydevelopmentSustainability-basedtargetsettingandlong-termplanningCross-sectorco-ordinationforbioenergySustainabilitygovernancesupportedbyregulations,certiﬁcatesandpartnershipsIntegrationofbioenergypolicymakingwithSDGsSource:(IRENA,2022j).91Along-termnationalbioenergydevelopmentstrategyandplancanprovideaconsistentandlong-termpolicysignaltobuildconfidenceamonginvestorsandprojectdevelopers,andguidepolicymakers.Long-termroadmapswithmultipletargetsaretofacilitategreaterinvestmentsintechnologiesandacceleratingcommercialisationandscale-up.Clearmedium-andlonger-termbioenergytargetscanenhancepolicycertaintythroughconcreteplansandincentives.However,bioenergytargetsshouldbebasedonthequantityoffeedstockthatcanbesourcedsustainably.Thiswouldpreventadditionalnegativeimpactsonenvironmentandsociety.Long-termbioenergydevelopmentrequiresco-ordinatedandintegratedpoliciesandactionplansacrossvarioussectors,includingindustry,environment,forestry,agricultureandenergy.Cross-sectoralco-ordinationandintegrationcanensurepolicyconsistency,preventpotentialsustainabilityissuesandopenopportunitiesforinter-departmentsynergy.Mandatesandobligationscanincreasethedemandforbioenergyandattractinvestments.Theseincluderequirementsontheuseofrenewablesinheatingorbiofuelblendingobligationsintransport.Theycouldalsoincludepoliciessuchaslicences,permitsandquotasforbioenergyproductionorconsumption.Commitmentsandmeasurestobanfossilfueluseforspecificend-usesectorscouldalsosupportthedevelopmentofthebioenergyindustry.Inthisregard,countriesneedtourgentlyphaseoutfossilfuelproductionandconsumptionsubsidies–especiallyG20countries,whichaccountforthebulkofthesubsidies(Parryetal.,2021).Additionally,carbonpricingpoliciesareneededtocreatealevelplayingfieldforbioenergyandotherrenewables.Bioenergyproductscouldbemademorecost-competitivethantheirfossilfuelcounterpartsthroughreducedleviesandduties,forexample,valueaddedtaxonbioenergyproducersandimporttariffsonliquidbiofuels.Capitalgrantsandsubsidiesarecommonwaystosupportbioenergyandotherrenewablesolutions.Theyreduceupfrontinvestmentandoperationcosts.Supportforinnovationthroughtechnicalresearch,developmentanddemonstrationcanincreasetechnologyreadinessandacceleratethecommercialisationofnovelbiofuels,suchasaviationbiofuels,andbioenergyforuseinindustries.Investmentsinnecessaryinfrastructure,suchasdistrictheatingnetworksorbiofueldistributionsystems,canbepromotedthroughmandatoryconnectionorcouldcomedirectlyfrominvestmentsbymunicipalities.Training,education,capacitybuildingandskilldevelopmentinitiativesandrelatedpoliciescanhelpworkersimprovetheirskills,whichtheycanthenapplytodesign,install,operateandmaintainbioenergysystemsacrossthesupplychain.Nationalandregionalgovernmentscanhelpimproveawarenessofthebenefitsandchallengesassociatedwithbioenergyandencouragetechnologyadoption.Bioenergypolicyneedstobeco-ordinatedwithenvironment,forestryandagriculturepoliciesVOLUME1CHAPTER02922.5Industrysector2.5.1KeyindicatorsforindustrysectortransformationIndustrialproductionofkeymaterialsisanessentialenablerofmoderneconomies.Ascountriesdevelop,thedemandforsuchmaterialsgrows,and,thus,energyconsumption.Theindustrysectoraccountedfor36%oftheglobalfinalenergyconsumptionin2020.Moreover,productionprocessesarecarbonintensive,makingindustryresponsibleforone-fourthoftheglobalenergy-relatedCO2emissions(thesecond-largestemitterafterthepowersector).Mostoftheindustrialenergyconsumptioniscurrentlythroughfossilfuels,anditisconcentratedinkeycountriesandregions.Fossilfuelsaccountedfor71%ofthesector’senergyconsumptionin2020,complementedwithelectricity(20%)andbioenergyanddistrictheating(9%),asshowninFigure2.10.Withrespecttokeymarkets,Chinaaccountedforover41%oftheglobalenergyconsumptioninindustry,followedbytheUnitedStates(9%),theEuropeanUnion(8%)andIndia(8%)in2020.Reducingemissionsacrossindustrialsectorswillrequireradicalshiftsinhowmaterialsareproduced,consumedanddisposedof.IRENA’s1.5°CScenarioproposesaportfolioofdecarbonisationstrategiesbuiltonfivepillars:reduceddemandandimprovedenergyandmaterialsefficiencyalongwithcirculareconomypracticesandstructuralchanges;directuseofcleanelectricity(predominantlyproducedfromrenewablesources);directuseofrenewableheatandbiomass(includingsolarthermal,geothermal,biofuelsandbiofeedstock);indirectuseofcleanelectricityviasyntheticfuelsandfeedstocks(predominantlyusingrenewableelectricity);useofCO2removalandCCSmeasures(includingbioenergywithcarboncapture,utilisationand/orstorage[CCUS]).AradicalshiftintheindustrysectorvaluechainisrequiredWORLDENERGYTRANSITIONSOUTLOOK202393The1.5°CScenarioincludesrecommendationstoensuretheefficientuseofenergyinindustry,reachingc.180EJby2030andremainingatsimilarlevelsby2050(withaslightincreasecomparedto2020).Topconsumerswouldcontinueleadingthesector,withaswitchinsharesasthesecountriesevolveinthemarket.RegardingCO2emissions,thisambitiousscenarioallowsover100%sectoralreductionsby2050intheG20countries(Table2.4).Themainenablerofthiseffectistheincreasedshareofrenewablesintheindustrysector(directusesandsupplysiderelated),from12%in2020to35%in2030and72%in2050.Electricitywouldmeetabout27%ofthesector’senergydemand,followedbybioenergy,districtheatingandotherrenewables(meeting27%),andcleanhydrogen(meeting22%)in2050.VOLUME1CHAPTER02FIGURE2.10Industry:FinalconsumptionunderthePlannedEnergyScenarioandthe1.5°CScenarioin2020,2030and2050,andcorrespondingemissionsRenewableenergyshare12%12%12%12%22%22%17%17%35%35%72%72%202020301.5-S2030PES05010015020025030002.5-157.51012.515Finalconsumption(EJ/year)NetCO2emissions(GtCO2/year)202020501.5-S2050PESDistrictheatingRenewablesHydrogenElectricityBioenergyGasOilCoalCO2emissions(net)-1.5-SCO2emissions(net)-PESNotes:Thefigureincludesenergydemandfornon-energyuses,cokeovens,blastfurnaces,chemicalfuelsandfeedstocksalongwithindustryco-generation.Renewableenergyshareincludesdirectusesandcontributionsonthesupplyside(electricity/heat/greenhydrogengeneration).Netemissionsconsidertheeffectofcarboncapture.1.5-S=1.5°CScenario;EJ=exajoule;GtCO2=gigatonnesofcarbondioxide;PES=PlannedEnergyScenario.94TABLE2.4Keyperformanceindicatorsfortheindustrysector:PlannedEnergyScenarioand1.5°CScenarioin2030and2050aHistorical203020502020PES1.5°CScenarioPES1.5°CScenarioKPI.02RENEWABLES(DIRECTUSES)Biomass(incl.feedstocks)(EJ)Global915242136G20812191828Solarthermalconsumption(TWhth)Global5b458851254G205b451651031Solarthermalcollectorarea(millionm²)Global11b81254112673G2012b81101112198KPI.03ENERGYINTENSITYTotalfinalconsumption(EJ)Global173213181268183G20148172148211143KPI.04ELECTRIFICATIONINEND-USESECTORS(DIRECT)ElectricityshareinTFEC(%)Global20%20%25%19%27%G2020%21%25%19%28%Heatpumps(million)Global<1335680G20<1331571KPI.05CLEANHYDROGENANDDERIVATIVESCleanhydrogenconsumption(EJ)cGlobal0d0.214.40.840.0G200d0.212.00.831.1KPI.06CCS,BECCSANDOTHERSCCS(GtCO2captured/year)Global0d0.11.00.43.1G200d0.10.80.32.1BECCS(GtCO2captured/year)Global0d00.701.0G200d00.400.7EMISSIONSCO2emissionswithcarboncaptureandremoval(GtCO2/year)Global9.011.05.812.9-0.5G207.79.04.810.0-0.3WORLDENERGYTRANSITIONSOUTLOOK202395Threeindustrysubsectorsarethetopenergyconsumersandemitters:ironandsteel,cementandlime,andchemicalsandpetrochemicals.Theircontributiontoenergy-relatedemissionswascloseto70%(28%,30%and11%)in2020.Thesesubsectorswillbeaddressedindetailinthefollowingsubsections.CementCementmanufactureinvolvesdifferentkilndesigns.Clinkerproductionisoftwobasictypes(“dry”and“wet”)dependingontherawmaterials’moisturecontent(IEA,2018).Currently,dry-processkilnsarethemostwidelydeployedtechnologyforcementproduction,sincetheyrequirelessenergythanwet-processkilns(IEA,2018).In2020,about4.2billiontonnesofcementwereproducedglobally,correspondingto3%ofglobalfinalenergyconsumption(12.5EJ)andan8%contributiontoglobalCO2emissions(2.7Gt),with60%comingfromrelatedprocesses.Chinaleadsincementproduction(57%),followedbyIndia(7%),theEuropeanUnion(4%)andtheUnitedStates(2%).IRENA's1.5°CScenarioseestopenergyconsumersandemittersintheindustrysectorreachingnegativeemissionsby2050VOLUME1CHAPTER02Table2.4notes:a.Valuesincludenon-energyuses.b.2019data.c.Cleanhydrogenconsumptionreferstodirectuseofgreenandbluehydrogeninindustrialprocesses.d.Therearecurrentlylow-scaleeffortsforcleanhydrogenproductionaccountingfor28kilotonnesperyearglobally,with8.4kilotonnesperyearfromG20countries,globalCCSinindustrywith3.9MtCO2capturedperyearcomingfromG20countriesandglobalBECCSwith0.97MtCO2capturedperyearalsofromG20countries.BECCS=bioenergywithcarboncaptureandstorage;CCS=carboncaptureandstorage;EJ=exajoule;G20=GroupofTwenty;GtCO2=gigatonnesofcarbondioxide;KPI=keyperformanceindicator;PES=PlannedEnergyScenario;TFC=totalfinalconsumption;TWhth=terawatthourthermal.96Tosuccessfullytransformthecementsector,whilemaintainingitscompetitiveness,severalstrategieswillhavetobepursuedsimultaneously,takingintoaccountthecompletecementcycle:1)Reducetheuseofcement(e.g.maintainingqualityandmaterialstrengthwhileusinglesscementinconcreteandlessconcreteininfrastructureandbuildings).The1.5°CScenariosees8%lessuseofconventionalcementthanunderthePlannedEnergyScenarioin2030andaround25%lessby2050.Thisisduetolesscementinconcreteandlessuseofconcreteinconstruction.2)Enhancetheuseofadditivesandfillerstosubstituteforclinker,complementedbycirculareconomypractices.Themostcommontypeofcementis“Portlandcement”,whichcontainsclinkeralongwithsmallerquantitiesofotheradditives,suchasgypsumandgroundlimestone(IRENA,2020c).Conventionalclinkercanbepartiallysubstitutedwithalternativescalled“supplementarycementitiousmaterials”(e.g.blastfurnaceslag,coalflyash,redmud,calcinedclay),mostofwhicharewastefromothermaterialsproductionprocesses.The1.5°CScenarioenvisages40%lessclinkerincementby2050(IEA,2018)(IRENA,2020c).Thismeanstheclinker-to-cementratiogoesfromaglobalaverageof73%toc.60%in2050,mainlyintopmarkets.Therearefurtherattemptstocontinuethesubstitution,whicharecurrentlyunderinvestigationortesting.Meanwhile,theavailabilityofthesealternativematerialsandnationalstandardsforcementpropertiesshouldbeconsidered.3)Promoteefficiencymeasuresincementproduction.Plannedgreenfieldprojectsmainlyinemergingeconomies(e.g.India)shoulddefineminimumstandardsandpromotetheapplicationofthebestavailabletechnologiestoalsoimprovetheefficiencyofexistingunits.Inthe1.5°CScenario,improvementsinspecificenergyconsumptionofproductionprocessesacrosscountrieswouldhelpmaintainasimilarenergyconsumptiontothatoftoday–at12EJ–by2030.Consumptiondecreasestoc.10EJin2050.Consumptionis13%and36%lessthanunderthePlannedEnergyScenariointherespectiveyears.Currenttopmarketswouldaccountforapproximately50%ofthisindustry’sfinalenergyconsumptionin2050.4)Switchtorenewableenergyandalternativefuels.IRENA’s1.5°CScenarioindicatesthattheoverallshareofrenewables(bioenergy,otherrenewables,electricity)wouldincreasefrom4%in2020toc.55%by2050,dominatedbybioenergy.Largeeconomieswithbiomasspotential(e.g.India,ChinaandBrazil)deservespecialattentionregardingbiomassavailability,sincebiomassproductionanditsdisposalatcementunits(facilities)arekeytodeliveringtherequiredemissionsreductions.5)ApplyCO2removalmeasuressuchasCCS-CCUSandBECCStechnologies,particularlytocaptureresidualprocessemissions,withtotalcapturereachingtheorderof2.1GtCO2/yearin2050inthe1.5°CScenario.Finally,emergingsolutionstodecarboniseheatingprocessesinthecementsectorincludetheuseofelectricarccalcinersandsolarkilns(seeBox2.6).Substitutionofclinker,circulareconomypracticesandtheincreaseofrenewableswillbeneededtotransformthecementsectorWORLDENERGYTRANSITIONSOUTLOOK202397IronandsteelIn2020,1.9billiontonnesofsteelwereproducedglobally.ProductionwasdominatedbyChina(57%),theEuropeanUnion(7%),India(5%)andtheUnitedStates(4%).Ironandsteelproductionconsumed35EJofenergy(9%oftheglobalfinalenergyconsumption)andcontributed7%toglobalCO2emissions.Over70%oftheglobalsteelisproducedusingblastfurnaces/basic-oxygenfurnaces(BF-BOF),whichrelymostlyonmetallurgicalcoalasthechemicalreducingagent.Thereareseveraloptionstodecarbonisetheironandsteelsector:1)Circulareconomypracticesalongwithincreaseduseofrecycledscrapinelectricarcfurnace–basedsteelproductionwillplayakeyrole.Globalsteelproductionisprojectedtoincreasebyaround40%by2050,reachingcloseto2.6billiontonnes,comparedwithover1.9billiontonnesin2020.UnderIRENA’s1.5°CScenario,in2050,steelproductionwouldbe7%lessin2030and15%lessin2050,thankstocirculareconomymeasures,whileapproximatelyone-thirdoftheglobalsteelproductionwouldinvolvescrap-basedelectricarcfurnaces,withChinaandIndiaasthemaincontributors.2)Astructuralshiftinironandsteelproductionisneeded,withrenewablesdisplacingfossilfuelsasbothenergyconsumptionandreducingagents.Thesteelsectorwouldseeagrowthinrenewables’share(bioenergy,otherrenewables,supplyinelectricityandgreenhydrogenproduction)from6%in2020to20%in2030and61%in2050.Keyinnovationssuchashydrogen-baseddirectironreductionwithelectricarcfurnacesrepresentapromising,efficientandlow-emissiontechnologicalpathway(seeBox2.5),complementedbyprocessdigitalisation(i.e.theintegrationofIndustry4.0practices).Implementationofthesetechnologiesandenergyefficiencymeasureswouldresultinthesubsector’sfinalenergyconsumptiontoevolveto36EJin2030,decreasingto24EJin2050,underthe1.5°CScenario(14%and55%lessthanunderthePlannedEnergyScenariointherespectiveyears).Themainmarketswouldaccountforover40%ofthefinalenergyconsumption,withIndiaandChinaasmajorplayers.3)CCSisanalternativetofurtherreduceemissionsincasesofcontinuationofusageoffossilfuel-basedprocessestoproduceironandsteel(e.g.BF-BOF,naturalgas/directreducediron).Thismeasurehasbeenimplementedinthe1.5°CScenariowithtotalcapturereachingtheorderof0.3GtCO2/yearin2050.4)Relocationofindustries.Newvalueandsupplychainscouldbecreatedwhileachievingemissionsreductionsifironoreminingandgreenironmakingarecoupledinregionswithabundantandlow-costrenewableresources(e.g.Australia,Brazil),whiledecouplingtheironmakingandsteelmakingprocessesincountriesrelyingheavilyonfossilfuels(e.g.China,Japan,theRepublicofKorea).Furtherinnovativesolutionstodecarboniseheatingprocessesintheironandsteelsectorincludetheuseofhigh-orvery-high-temperatureheatpumps,electricboilersandironoreelectrolysis(seeBox2.6).Keyinnovationsbasedonhydrogen,complementedbyelectrificationandrecycling,wouldenablelow-emissionironandsteelproductionVOLUME1CHAPTER0298WORLDENERGYTRANSITIONSOUTLOOK2023BOX2.5Acceleratingthetransitiontoadecarbonisedsteelsector:KeyactionsfromtheBreakthroughAgendaReportTheBreakthroughAgenda,launchedatthe2021UnitedNationsClimateChangeConference,aimstoaccelerateinnovationanddeploymentforcleanenergytechnologies.Itestablishesanannualassessmentcyclefortrackingprogresstowardsthegoalssetwithintheagendaandpointstoareasforinternationalcollaborationtoadvancedeployment.IRENAjoinedforceswiththeInternationalEnergyAgencyandtheUNHigh-levelClimateChampions,providingasuggestedcourseforinternationalcollaborationunderanannualBreakthroughAgendareport.Thereport’sfirstedition,launchedinSeptember2022,focusedonthepower,road,transport,steel,hydrogenandagriculturesectors(IEAetal.,2022).Steelcanbeproducedviatworoutes:primarysteelmakingfromironoreandsecondarysteelmakingfromscrapsteel.Primarysteelmakingishighlyenergyandemissionintensive.However,decarbonisingthesteelindustrywouldrequiredeployinglow-emissionprimarysteelmakingalternatives.Theseincludemainlyusinghydrogen,alongwithcarboncaptureordirectelectrification.Thisreporthighlightskeyactionstoacceleratethetransitiontoadecarbonisedsteelsector:•Topsteelmakingcountriesmustimplementrobustcommondefinitionsandstandardsforlow-carbonandnear-zero-carbonsteel.Thiswillincreasetheconfidenceandeasewithwhichbuyerscandifferentiatebetweenhigher-andlower-emissionsteel.Forexample,severalorganisationsareworkingonestablishingcarbonaccountingstandardsandcertifications.Fifty-onecompanieshave,forinstance,signedupforResponsibleSteel.•Stepsmustbetakenurgentlytocreateademandforlow-carbonandnear-zero-carbonsteeltoovercomecostpremiums.Governmentsandbusinessescancreateasufficientdemandthroughprocurementandadvancedpurchaseobligations.Guaranteeddemandusingsuchmechanismscantriggerinvestmentsininnovativesteelmakingprocessesandinfrastructure.ExamplesinthisregardincludeSteelZeroandtheGreenPublicProcurementPledgeundertheCleanEnergyMinisterial(CEM)IndustrialDeepDecarbonisationInitiative(IDDI),whichareprivateandpublicsectorinitiativesforcreatingamassmarketcommitmentforlow-carbonandnear-zero-carbonsteel.•Mobilisingprivateandpublicsectorinvestmentsinresearch,developmentanddemonstrationtoscaleupinnovativesteelmakingtechnologiesinseveralregions.Thesetechnologiesincludeusinghydrogen;carboncapture,utilisationand/orstorage(CCUS);anddirectreductionfurnaces.Supportmustalsobeextendedbeyondtechnologyscale-uptoassociatedsupplychains.Thesteelsectorhasafewresearchandinnovationforums,includingtheEuropeanSteelTechnologyPlatformandtheGlobalLow-CarbonMetallurgicalInnovationAlliance.99VOLUME1CHAPTER02•Commercial-scaleprojectswillrequireafar-sightedapproachtodeployingcriticalenablinginfrastructure.Thisincludesdevelopingelectricitytransmissionandcarbondioxide(CO2)andhydrogenstorageandtransportation.Commercialactivityandassociatedinfrastructurewillalsoneedskilledlabour.Globalinvestmentstargetinginfrastructureandsupplychainsforlow-carbonfuelandCCUSisatUSD16billion.•Earlymovers,fromgovernmentsandcompanies,mustsharelearningstoensureastreamof“fastfollower”countrieswithinafewyearsfromthefirstplants.Thiscanencompassknowledgeofprojectdevelopment,plantoperations,permittingandregulations,supplychainsforlow-CO2feedstocks,andintegrationofCO2pipelineswithironandsteelinfrastructure.Theapproachessharedneedtobeinclusiveoflocalcommunities.•Astechnologyandpolicypathwaysbecomeapparent,publicandprivatesectorsmustestablishmedium-andlong-termstrategieswithmilestonesfordeepdecarbonisation.Thestrategiesshouldincluderelationsbetweensegmentsofcircularsupplychains,suchasmaterialefficiency,recyclingandrawmaterials.Forexample,morethan30roadmapscovering15countries/regionsfocusondeepdecarbonisationofthesteelsector.100ChemicalsThechemicalsandpetrochemicalssectorisamajorcontributortoglobalindustryCO2emissions.Chemicalproductionreleasedapproximately0.83Gtofenergy-andprocess-relatedCO2emissionsin2020.Inthesameyear,theglobalchemicalsectorconsumed20EJoffinalenergy.ThehighestsharewasforChina(46%ofenergy),followedbytheUnitedStates(15%),theEuropeanUnion(11%)andIndia(2%).UnderthePlannedEnergyScenario,thetotalglobaldemandforplasticswouldincreasefrom406Mtin2020to986Mtby2050.Meetingthisdemandwouldrequireanadditional600Mtinplasticsupplyannually.Thesector’sprocessenergy(includingelectricity)demandisestimatedtoreach41EJperyearinthesame31-yearperiod,withgasandoilmeetingmorethanhalfofthetotalglobalprocessenergydemandunderthePlannedEnergyScenario.Meanwhile,underthe1.5°CScenario,finalenergyconsumptioninthechemicalandpetrochemicalsectorwouldreach26EJby2030,comparedwith20EJin2020.In2050,processenergyusewouldincreaseto36EJ(China31%,theUnitedStates19%,India5%andtheEuropeanUnion4%).Theestimatedprocessenergyuseunderthe1.5°CScenarioisabout12%lessthanunderthePlannedEnergyScenario.Thisresultsfromanannualenergyefficiencyimprovementof3%forproductionprocesses.Estimatednon-energyuseunderthe1.5°CScenarioisnearly25%lessthaninthePlannedEnergyScenario.Thisisdrivenbycirculareconomystrategies,includingreuseandacceleratedrecyclingcoupledwithsubstantialreductionofplasticdemand.Energyefficiency,circulareconomymeasuresanduseofcleanenergyresourcesarenecessarytodecarbonisethechemicalsectorWORLDENERGYTRANSITIONSOUTLOOK2023101Achievingtheseobjectiveswouldrequiremultipleactionsaspartofanenergytransitionadaptedtothechallengesofthechemicalsector:1)Aneedtotransfertoalternativefuels.In2020,theprimaryenergycarriersinthechemicalsectorweregas(32%),electricity(22%)anddistrictheatingandcooling(16%),followedbyoil(15%)andcoal(14%).Biomasswouldaccountforthehighestshareofenergy(27%)in2050underthe1.5°CScenario,aheadofbothelectricity(21%)andhydrogen(19%),whichwouldbefollowedbyoil(10%)andgas(9%).Theremainingshareswouldbeaccountedforbydistrictheating,coalandsolarthermal(7%,5%and2%,respectively).2)Switchingtorenewableenergyandenergyefficiencyinchemicalprocesses.Thetechnologyportfolioforthe1.5°CScenariomakesthesectornetnegativeby2050worldwide.Theemissionsmitigationeffortincludesrenewablesolutionsforprocessenergygenerationandasfeedstockaswellasrenewablehydrogen,energyefficiency,CCSandBECCS.3)Introducingcirculareconomymeasuressuchasincreasingreuse,mechanicalandchemicalrecyclingrates,materialssubstitution,andtheuseofsustainablefeedstocksfordemandreduction.Theemissionsmitigationeffortcomprisesdemandreductioncoupledwithrecyclingandtheuseofrenewablestomeettheelectricitydemandforproductionprocesses.TheglobalchemicalsectorisestimatedtoreleasetwicetheCO2emissions,from2.4Gtin2020to4.7Gtin2050,underthePlannedEnergyScenario.Bio-basedchemicalsarethecornerstonefordecouplingchemicalandplasticdemandgrowthfromfossilfuels.4)Ashifttogreenhydrogenandbiomass.Thedemandforrenewablehydrogenwouldincreaseto25EJglobally(equivalenttoabout180Mtperyearofhydrogen).By2050,biomassusebytheglobalchemicalandpetrochemicalsectorwouldincreaseto22EJperyear.Renewableenergy’sshare(excludingrenewablepoweranddistrictheating)intotalprocessenergywouldgrowto50%by2050.Inadditiontothesemeasures,thechemicalsectorcouldachieveheatingprocessdecarbonisationusingtheemergingtechnologyofelectriccrackingfurnaces,andbyconsideringhigh-orvery-high-temperatureheatpumpsandothertechnologies(seeBox2.6).Moreover,keygreeninnovationsinthechemicalsectorincludegreenchemistryandprocessintensification.VOLUME1CHAPTER02102WORLDENERGYTRANSITIONSOUTLOOK2023BOX2.6EmergingtechnologiesfordecarbonisingheatinginindustryIndustrialprocessesrequireawiderangeoftemperatures.Thismeansthatnosingulartechnologycanmeetallindustrialenergyneeds,contrarytothebuildingssector,whereheatpumpscanpotentiallymeetallspaceconditioningneeds.Figure2.11providesanoverviewofthetemperaturerangesandinnovativeapplicationsintheindustrysector.Ascanbeseen,specificindustrialprocessescanhavetemperaturesrangingupto2000°C.Whileindustrycanbenefitfromindirectelectrification(whichinvolvesusingelectricitytoproducesyntheticfuels,whichreplacetraditionalfuels[e.g.powertohydrogentoheat),electricitycanbeadirectinputinelectricfurnaces,electricboilers,heatpumpsorotherelectrolyticprocesses.FIGURE2.11TemperaturerangesandtechnologiesfortheindustrysectorBuildingsIndustryTechnologiesInnovations0200400600800100012001400160018002000Temperature(°C)Infraredheater/inductionfurnace/resistancefurnace/electricarcfurnace/plasmatechnologiesElectricboilerHeatpumpHightemperatureheatpumpIronoreelectrolysis(Steelindustry:Ironorereduction)Electriccrackingfurnace(Ethylene,Propylene,Butadiene,AromaticsandAcetylene)Solarkiln(Cementindustry:Clinkerisation)VeryhightemperatureheatpumpIronoreelectrolysis(Steelindustry:Ironorereduction–electrowinning)Electricarccalciner(Cementindustry:calcination)Source:(IRENA,forthcoming[a]).103VOLUME1CHAPTER02High-temperatureheatpumps(HTHPs)refertoheatpumpsthatcanprovideheatsinktemperaturesbetween90°Cand160°C(Arpagausetal.,2018).HTHPsarenotmatureandmakingthemcommerciallyavailablewouldallowelectrificationforalargenumberofapplications.Onesuchapplicationisthepasteurisationprocess,whereelectrificationaddssubstantialenergysavings.Similarly,alldryingprocesseswouldbenefitfromheatpumpdeployment,asdemonstratedbytheEUDryFiciencyproject(DRYFICIENCYproject,2016).Thethreemainindustrysectors–chemical,cementandsteel–arethemostchallengingtoelectrify.Althoughpromisingsolutionshavebeendevelopedforthesesectors,theirtechnologyreadinessremainslow.Forthechemicalindustry,electriccrackers(e-crackers)areinthepilotphase.Thecementindustryisworkingonnewkilnswhereheatisprovidedviaplasmagenerators(Somers,2020).Last,thesteelsectorisdedicatingeffortsonnewelectrolyticreductionprocesses,whicharestillatapilotscale.e-crackingfurnace(eCF)experimentalunitShellandDowhavestartedanexperimentalelectricity-poweredheatsteamcrackerfurnaceunit.Theunit,installedattheEnergyTransitionCampusinAmsterdam(theNetherlands),representsakeymilestoneinthecompanies’jointtechnologyprogrammetoelectrifysteamcrackingfurnaces,movingonestepclosertodecarbonisingoneofthemostcarbon-intensiveaspectsofpetrochemicalmanufacturing.Over2023,theunitwillbetestedasareplacementfortoday’sgas-firedsteamcrackerfurnace.Thesolutioncouldpotentiallybescaledupby2025,subjecttoinvestmentsupport.BostonMetal:FromironoretosteelviaelectrolyticprocessThetechnologycompanyspunoutoftheMassachusettsInstituteofTechnologyhasdevelopedasquatmetalcylinderwithachimney-liketubeemergingfromthetopandanovularopeninginfront.Itisdesignedtoproduceferroalloys,ahigh-marginmaterialusedtoproducecertaingradesofsteel–andthestart-up’sinitialtargetmarket.The“chimney”isananode.Athinlayerofmetalalongthebottomformsthecathode.Together,thepositiveandnegativeelectrodesactasatypeofpump,pushingelectronsthroughtheelectrolyteinthechamber,whichisamixofmetallicmineralsandotheroxides.Theelectrolyte’sconstituentsareacriticalpartofthecompany’scoretechnology.Inthecaseofsteel,theotheroxidesactasasolventathightemperatures,dissolvingtheironoxidewithoutbeingdecomposedthemselves.Aselectriccurrentheatsupthesoup,oxygenfreedfromironbubblesrisestothetopwhereastheresultingmetalaccumulatesatthebottom.Onceoperators“tap”,orcrackthrough,aliningthroughtheholeinthefront,moltenmetalisreleased(Temple,2018).+InertanodeLiquidoxideelectrolyteMoltensteelO2bubblesElectricity-Source:(Temple,2018).continued1042.5.2PoliciesforindustrysectortransformationIndustrialtransformationrequiresacombinationofstrategies,regulations,standards,financialandfiscalincentives,andothermeasurestocreatetheinitialmarketdemandforlow-carbonindustrialproductsandmakethemprofitableandinalevelplayingfieldwithfossilfuel-basedproducts.Policiesandmeasuresthatactasenablersincludestrategiesandroadmaps,carbonpricingpolicies,greenpublicprocurement,standardsonlow-carbonmaterialsandproducts,acircularity-basedframework,aswellasprogrammesandinitiativestopromoteinformationandexperiencesharing.Nationalindustrialtransformationstrategiesandroadmapssendalong-termsignaltoinvestorsandindustrialplayers.Theyguideindustrialdevelopmentandcanthusdriveacceleratedtechnologyadvancementandbusinessinnovation.Meanwhile,thetargetsandtimelinesincludedinthesestrategiesshouldbealignedacrossrelevantsectors(e.g.greenhydrogen,sustainablebiomassandelectrificationtargets).Forexample,in2021,theUKgovernmentadoptedanationalIndustrialDecarbonisationStrategy,whichaimsatatwo-thirdsreductioninindustrialemissionsby2035andatleast90%reductionby2050.Thestrategythereforefocussesonmaximisingenergyandresourceefficiency,andpromotingelectrification,replacementoffossilfuelswithhydrogenandbioenergy,aswellasCCUSmeasures(GovernmentoftheUnitedKingdom,2021).WORLDENERGYTRANSITIONSOUTLOOK2023BOX2.6Emergingtechnologiesfordecarbonisingheatinginindustry(contd.)SolarclinkerproductionEarlyin2022,Cemex,S.A.B.deC.V.(Cemex;Monterrey,Mexico)andSynhelionSA(Lugano,Switzerland)successfullyconnectedtheclinkerproductionprocesswiththeSynhelionsolarreceivertoproducesolarclinker.Themilestoneisafirststeptowardsfullysolarcementplants.Clinkerisproducedbyfusinglimestone,clayandothermaterialsinarotarykilnattemperaturesnearing1500°C.Becausekilnsaretypicallyheatedwithfossilfuels,theyareresponsibleforapproximately40%ofthedirectcarbondioxideemissionsfromtheprocess.Replacingfossilfuelsentirelywithsolarthermalenergyisagamechangerinindustry’seffortstoachievecarbonneutralityby2050.TheresearchanddevelopmentteamsatSynhelionandCemexsetupapilotbatchproductionunittoproduceclinkerfromconcentratedsolarradiationbyconnectingtheclinkerproductionprocesswiththeSynhelionsolarreceiver.Thepilotwasinstalledatthevery-high-concentrationsolartowerofIMDEAEnergy,locatednearMadrid,Spain.105Greenpublicprocurementcanhelpincreatinganinitialmarketdemandforlow-carbon,renewable-basedindustrialproductsandmaterials.Itmayalsohaveanimportantroleincatalysingthetransitionintheshortandmediumterms.Bymobilisingpublicbudgetforconstructionsandphysicalinfrastructure,itcanspurthefirstwaveofstableandgrowingmarketdemandforrenewables-basedsteel,aluminiumandcement.Similarly,theuseoflow-carbonbuildingmaterialscanbeincentivisedthroughcorporatesourcingandminimumrequirementregulationsorpreferentialbuyingobligations.Forexample,intheUnitedStates,apublicprocurementpolicycalledBuyCleanwasintroduced(in2017inCaliforniaandthenexpandedtofederallevel)toencouragetheuseoflow-carbonconstructionmaterialssuchassteel,concrete,asphaltandglass.Incentivessuchascarbonreportingandlabellingprogrammesarealsoprovidedforsupportingindustrydecarbonisationefforts(SEI,2023).Europe,France,Germany,theNetherlands,SwedenandtheUnitedKingdomhaveadoptedmeasuresandpoliciestoencouragethepublicprocurementoflow-carbonconcrete(MPP,2022).Harmonisedstandardsforlow-carbonindustrialproductsprovideabasisforprocurementandconsumption(Gangotraetal.,2023).Certificationschemes,eco-designinitiativesandenvironmentallabellingcansupportconsumers’willingnesstopaythepremiumrequiredforlow-carbonalternatives.Informedconsumerchoicescanalsobesupportedbyeffortstocollectandsharedataontheenergyefficiencyoremissionsofkeyproductsandmaterials.Forexample,theUnitedNationsEnvironmentProgrammehasdevelopedaninternationalnetworkcalledtheGlobalLifeCycleAssessmentDataAccess(GLAD).Thisnetworkaimstopromotebetterdataaccessibilityandinteroperabilitybyprovidinguserswithaninterfacetofindandaccesslifecycleinventorydatasetsfromdifferentproviders(IDDI,2023).Energyefficiencymeasurescanreducetheenergyconsumptionandassociatedemissionsofexistingprocessesandfostercirculareconomypractices.Forexample,improvingtheefficiencyofclinkerandcementproductioncouldcutthecementsector’semissionsby25%(WEFandAccenture,2022).Availablemeasuresincludesettingminimumstandardsforenergyefficiency;theadoptionofthebestavailabletechnologiesandthecarbonintensityrequirementsoffuels,processesandproducts.Thecirculareconomyisakeypillarofindustrialdecarbonisation(Box2.7).Integratingcirculareconomyprinciplesinindustrialandprocessdesigncansignificantlyreducematerialandenergydemand,andassociatedcosts.Atthesametime,productlifetimesneedtobeextendedandreuseencouraged.Forindustry,relatedpracticesincludematerialrecycling,sustainablewastemanagement,reusinghigh-valuechemicalsandrecyclingby-productsofindustrialprocesses–allofwhichcanbeenabledbyvoluntaryinitiativesthatholdproducerstoaccount(IRENA,forthcoming[b]).ThecirculareconomyisakeypillarofindustrialdecarbonisationVOLUME1CHAPTER02106WORLDENERGYTRANSITIONSOUTLOOK2023BOX2.7ThecirculareconomyandindustrialdecarbonisationThecirculareconomyhasthreekeyprinciples:eliminatingwasteandpollution,circulatingproductsandmaterialsattheirhighestvalue,andregeneratingnature.Itentailsdecouplingeconomicactivityfromtheconsumptionoffiniteresources(EllenMacarthurFoundation,2021).Tosupportindustrialdecarbonisation,theseprinciplescanbeappliedtocloseenergyandmaterialloops;promotemoreefficientconsumptionofenergy,waterandmaterials;andminimisewasteintheenvironment(IPCC,2022b).Usingrenewableenergyandreducingtoxicchemicals,thedesignofindustrialproductscanbeimprovedsotheycanbeeasilyrepaired,reusedandrecycledtoprovideenergyorrawmaterialfornewproducts(Ekinsetal.,2019).Applyingcirculareconomyprinciplesinindustrycanreduceproductioncostsandimprovecompetitiveness;reducegreenhousegases,wasteandotherpollutants;increaselong-termavailabilityofrawmaterialsupply;createnewmarketopportunities,incomesandjobs;aswellasimprovestabilityandresilienceinthefinancialeconomy.Circulareconomypracticeshavesignificantpotentialtoreducefinalwasteamountsanddemandforvirginmaterials,theextractingandprocessingofwhichisresponsibleforhalfofglobalgreenhousegasemissionsandthemajorityofenvironmentalimpacts(UNIDO,2019).Forexample,aluminiumcanberecycledmanytimeswithoutlosingitsoriginalproperties.Usingrecycledaluminiuminproductioncanreduceemissionsby95%relativetoprimaryaluminium(EuropeanAluminium,2020).Thepotentialofcirculareconomysolutionsremainsuntapped.Highcosts,technologicalandinfrastructure-relatedbarriers,alackofcapacitytoimplementsolutionsforproductionandprocesses,aswellaslimitedaccesstoinformation(aboutcirculareconomybenefits,solutionsandproducts)areamongthemainhurdlestoindustrialtransformationviathecirculareconomy.Governments,institutesandindustrialstakeholdersneedtoco-operatetobridgeinformationgapsandshareknowledgeandexperiences,increasingrelevantmarketdemandandimprovingcostcompetitiveness.Furthermore,financialandfiscalmeasuresareneededtosupporttheresearch,developmentanddemonstrationofnoveltechnologies.Nationalandregionalcirculareconomystrategiesandplanscansendlong-termsignalstoinvestors.China,theEuropeanUnion,France,Germany,Italy,JapanandtheUnitedKingdomhavebegunplanningforacirculareconomy(IEA,2022b).Morecountriesneedtoadoptcircularity-basedmeasuresintheirindustrialplansandpracticestoachievemultipleSustainableDevelopmentGoals.107Financialandfiscalincentives,suchastaxrebates,taxcredits,subsidiesandgrantscanmitigatethehighcostsofrenewable-basedandlow-carbonmaterials,whichhaveposedamajorbarriertodate.TheUSgovernmentrecentlyannouncedfundsofUSD6billiontosupportthedecarbonisationofheavyindustries(Gardner,2023).InChina,BaowuSteelGroupreleasedCNY500million(approximatelyUSD72million)ofgreenbondsin2022tosupportaplantforhydrogen-basedsteelmaking(ChinaSteel,2022).Programmesorplatformstopromoteinformationandknowledgesharingarealsoneededtoraiseawarenessamongstakeholders.Majorproducingnations,suchasChina,Indiaandsomeotherdevelopingcountries,woulddowelltoconsiderinternationalstandardsandinformationplatformsforlow-carbonindustrialproductsandsolutions.In2019,thegovernmentsofSwedenandIndialaunchedaninitiativecalledLeadershipGroupforIndustryTransition.Itinitiatedtwoprojects–GreenSteelTrackerandGreenCementTechnologyTracker–in2021toprovideinformationongovernmentcommitmentsandindustrialprojects(Leadit,2023).Apartfromcross-cuttingmeasures,sector-specificpoliciesandactionscanalsoacceleratethetransformationofhighemitters,includingthecement,ironandsteel,andchemicalindustries.Cementdecarbonisationcouldbenefitfromsupportfortheresearch,developmentanddemonstrationofinnovativesolutionsforlow-carbonandrenewable-basedclinkeralternatives(e.g.blastfurnaceslagorflyash)andcementinoperationalplants.Financialincentivesarealsoneededtosupportthedeploymentofalternativeconstructiontechniquesandwoodmaterialstoreducecementconsumption,andpromotetheuseofcarbonremovaltechnologiessuchasBECCStooffsetresidueemissionsfromclinkerandcementproductionprocesses.Similarly,theironandsteelsectorneedsadditionalfinancialandfiscalsupportfortheR&Dofinnovativesolutions,includinghydrogen-baseddirectironreduction,infrastructureforCCSandtheretrofitofanyremainingfossilfuel-basedinstallations.Governmentscouldalsoexploremeasurestoincentivisetherelocationofironproductiontoareaswithhighpotentialforlow-costrenewableenergy,whichmayalsocreatenewvalueandsupplychains.However,attentionmustbepaidtoavoidincreasingthewaterstressorotherenvironmentalimpactsinareaswheretheplantswillberelocated.Thechemicalindustryisamongtheharder-to-decarbonisesectorsandcanthereforebenefitfrommeasures(e.g.regulations,mandates)creatingawell-functioningmarketforlow-carbonchemicalproducts,aswellasdevelopmentofresource-efficientandenvironmentallyfriendlymaterialsforbulkapplications.Governmentsandindustriescanalsoadopttargets,regulationsandmandatespromotingthedevelopmentofsustainablechemicalsandmaterials,andcleanproductionprocessesandtechnologies.Thedeploymentofhigh-efficiencyheatpumpsandotherenergyefficiencysolutionsforchemicalproductionmayalsobeencouraged.VOLUME1CHAPTER021082.6BuildingssectorBuildings(residential,commercialandpublic)contributednearly9%ofdirectCO2emissionsin2022(IEA,2023a).Althoughtheneedtoundergoaprofoundtransformationiswidelyrecognised,thesectorhassofardonelittletopromotetheglobalenergytransition.In2020,buildingsconsumed30%oftotalfinalenergy(124EJinabsoluteterms)withelectricitybeingthemainenergycarrierataboutone-thirdoftotalsectorialconsumption(Figure2.12).Bioenergy(bothtraditionalandmodern)andnaturalgaseachsuppliedaboutone-quarter,andtheremainderwasroughlyhalfoilandhalfothersources.Amongservices,directuseoffuelsforheatingconsumesthemostenergyinthesector,withmorethantwo-thirdscomingfromfossilfuels,mainlynaturalgas.WORLDENERGYTRANSITIONSOUTLOOK2023Renewableenergyshare35%35%35%35%54%54%42%42%53%53%86%86%202020301.5-S2030PESFinalconsumption(EJ/year)202020501.5-S2050PESCO2emissions-1.5-SCO2emissions-PES1801601401201008060402000123CO2emissions(GtCO2/year)HydrogenDistrictheatElectricityGeothermalSolarthermalModernbiomass(solid/liquid/biogas)TraditionalbiomassGasOil,coalandotherfossilfuelsFIGURE2.12Buildings:FinalenergyconsumptionunderthePlannedEnergyScenarioand1.5°CScenarioin2020,2030and2050,andcorrespondingemissionsNotes:1.5-S=1.5°CScenario;EJ=exajoule;GtCO2=gigatonnesofcarbondioxide;PES=PlannedEnergyScenario109Asportrayedinthe1.5°CScenario,by2050,buildingswouldbesmart,inter-connected,highlyenergyefficient,andpoweredandheatedorcooledpredominantlybyrenewableenergy.Realisingthisvisionisnecessarytomeetglobalclimategoals,andwouldalsomakebuildingsmorecomfortableandaffordablefortheiroccupants.Italsooffersawindowforcost-effectiveenergyefficiencyimprovements,byofferingsitesforenergyproductionthroughdistributedenergyresources,byprovidingenergystoragetothepowersystem(bothwithbatteriesandwithEVs)andbyallowingbettergridmanagementthroughelectricitydemandresponse.Betterbuildingscouldalsofosteremploymentandimproveairqualityinurbanareas.Shiftingtowardsadecarbonisedbuildingssectorentailspursuingmultipleenergytransitionstrategiesinparallelasenvisionedinthe1.5°CScenario:1)Enhancetheenergyefficiencyofbuildingswithtopstandards,efficientlightingandappliances,andrenewableandelectricity-basedheatingandcookingtechnologies.Expeditetherenovationandrefurbishmentofbuildingsindevelopedeconomies,wherethree-quartersoftheexistingbuildingstockareoldandinefficient,withtheaimofachieving30%and60%efficientbuildingsby2030and2050,respectively.2)Prepareforariseinelectricitydemand.By2050,theincreasedelectrificationofheatingincoldregions,growingdemandforcoolinginwarmclimatesandwideradoptionofelectriccookinginurbanareaswouldalmostdoubleelectricitydemandcomparedwith2020.Heatpumps,inparticular,areakeytechnologysupportingtheglobalenergytransitionamidgrowingdemand.Heatpumpscanachieveenergyefficiencylevelsthreetofivetimesgreaterthanfossil-fuelledboilersandcanbepoweredbyrenewableelectricity.Itisenvisionedthattheirusewillgrowtwelve-foldby2050(seeBox2.8).Electricityisalreadythesingle-largestenergysourceinthebuildingssector,atashareof35%in2020,andthiswouldriseto53%in2030and73%in2050(ordoublethe2020levelinabsoluteterms).However,733millionpeoplestilllackedelectricityaccessin2021(IEAetal.,2023c).3)Replacetraditional,unsustainablebioenergysourcescausingindoorairpollutionwithclean,efficientstovespoweredbysustainablebiomass,biogasandelectricity.InregionslikeAfrica,traditionalusesofbioenergyinhouseholdsrepresentahighshareofthetotalenergyconsumption,largelyforcooking.By2030,inlinewithSDGtarget7.2,traditionalbiomasswillbephasedout,replacedbysustainablebiomassstovesinruralareasandelectricstovesinurbanareaswithreliablegridconnectivity.Electricityshareinbuildingswouldincreasesignificantlytoalignwiththe1.5°CScenarioVOLUME1CHAPTER021104)Promoterenewablessuchasbiofuels,biomethaneandsolarthermalforheating.Solarthermalhotwatersystems–reliableandcost-effectiveinplaceswithhighersolarirradiance(andpossibletobackupwithelectricboilersincloudyareas)–wouldexpandfrom729millionsquaremetres(m2)in2021(IEA,2022c)tosome1.4billionm2in2030and2billionm2in2050.Modernbiomasscanefficientlyheatbuildingsthroughdistrictheatingsystemsorbuilding-scaleboilersusingwoodchipsandpellets.IntheEuropeanUnion,amixofcleanhydrogenandbiogascouldrepresent6%ofheatingdemandby2050,utilisingexistinggassupplyinfrastructure.5)Coupleheatingsystemswiththermalandseasonalstoragetoprovideflexibilityinhigh-demandregionswherewintersareparticularlyharsh.IRENAestimatesglobalthermalenergystorageatabout234gigawatthours(IRENA,2020d).Suchstoragesupportsreliable,secureandflexibleenergysystems(IRENA,2020c).6)Promotesystemicinnovation,includingnewtechnologies,materials,designsandbusinessmodelsfornet-zerobuildings.Efficientconstruction,low-emissionmaterialsandcirculareconomyprincipleswillbekeyinhelpingtoreduceemissionsinothersectors,notablyindustry.Smartenergymanagementsystemsinbuildingsanddigitalisation(theInternetofThings)willchangehowbuildingsconsumeenergyandevenallowthemtoprovidegridservicesthroughenhanceddemandflexibility.AparallelshifttoEVswillenablehomecharging,whiledecentralisedenergysupplywillenablemorelocalgenerationofbuildings’electricitydemandthroughsolarPVsystemsandstorage,bothelectricandthermal.Implementingthesemeasureswouldincreaserenewableenergy’sshareinthebuildingssectorfrom35%in2020to53%in2030and86%in2050.Moreover,thistransitionwouldleadtoadecreaseinfinalenergyconsumptionof25%and31%in2030and2050,respectively,comparedtothereferencescenario.Inthe1.5°CScenario,energy-relatedCO2emissionsdrop40%by2030comparedto2020(2.8Gt)andreach0.4Gtby2050(Table2.5).Acceleratedbuildingrenovationrates,efficientappliancesandheatpumpsarekeyWORLDENERGYTRANSITIONSOUTLOOK2023111TABLE2.5Keyperformanceindicatorsforthebuildingssector:PlannedEnergyScenarioand1.5°CScenarioin2030and2050Historical203020502020PES1.5°CScenarioPES1.5°CScenarioKPI.02RENEWABLES(DIRECTUSES)Biomass(incl.traditional)(EJ)Global29.332.411.231.69.3G2012.012.16.311.44.3Solarthermalandgeothermalconsumption–heating(EJ)Global2.32.64.53.06.0G202.34.02.54.82.9Solarthermalcollectorarea(millionm2)Global74663614457982028G2072361512407711545REbaseddistrictheatgeneration(EJ)Global6.47.87,08.48.1G205.77.06.27.37.1KPI.03ENERGYINTENSITYBuildings–TFEC(EJ)Global124.0141.2105.7158.2109.3G2092.7104.484.5115.782.1Buildingrenovationrate(%ofstockperyear)Global11213G2011213Smartmeters(billionunits)Global0.131.11.22.32.8G200.130.91.01.61.9KPI.04ELECTRIFICATIONINEND-USESECTORS(DIRECT)Electricityshareinbuildings(%)Global34%37%53%43%73%G2038%43%53%50%74%Heatpumpinstallations(millionunits)Global5897447156793G205897447156793Heatpumpsinstalledcapacity(GW)Global115919438937311115867G20115919438937311115867KPI.05CLEANHYDROGENANDDERIVATIVESCleanhydrogenconsumption(EJ)Global000.1600.14G20000.1600.14EMISSIONSDirect(GtCO2/year)Global2.82.91.72.90.4G202.42.41.52.30.4VOLUME1CHAPTER02Notes:Estimatedassumingaunitcapacityof20kW/unit;EJ=exajoule;G20=GroupofTwenty;GtCO2=gigatonnesofcarbondioxide;GW=gigawatt;KPI=keyperformanceindicator;m2=squaremetre;PES=PlannedEnergyScenario;TFEC=totalfinalenergyconsumption.112WORLDENERGYTRANSITIONSOUTLOOK2023BOX2.8ElectrifyingheatingandcoolinginbuildingsHeatingandcoolingcontributemorethan40%ofglobalenergy-relatedcarbondioxideemissions.Electrifyingthebuildingssectoriscrucialbothtodecarbonisethesectorandachievethe1.5°CScenarioby2050.Heatpumpsarereceivingunprecedentedpolicysupportglobally.Examplesinclude:•TheEuropeanUnion’sREPowerEUPlan,mandatingtheinstallationofabout20millionheatpumpsintheEUby2026and60millionby2030(EHPA,2022).•TheUSInflationReductionActheat-pumprebate,offering100%ofthecostofanewheatpumptohouseholdswithincomes80%belowmedian;upto50%oftheheatpump’scostforhouseholdswithincomesbetween81%and150%ofthemedian;anda30%taxcreditofuptoUSD2000onnewheatpumpsforhouseholdswithincomeexceeding150%ofthemedian(HVAC,2022).TheEuropeanheatpumpmarkethasexperienceddouble-digitgrowthsince2015.In2020,1.6millionheatpumpsweresold,and14.9millionunitsinstalled.Themarketthengrew34%in2021,raisingthetotalnumberofunitsinstalledto17million.Thistrendislikelytocontinueduetofavourablelegislativeframeworkandfallingcosts(IRENA,2022k).FIGURE2.13Heatpumpsalesin21EUmarkets,2014-20222.52.01.51.00.50NorwaySpainSwedenFranceAllothersFinlandGermanyItalySales(million)2014201520162017201820192020202120220.680.200.160.160.240.220.500.46Source:(EHPA,2023).113VOLUME1CHAPTER02Innovationsinheatpumptechnologiesaimtoimprovethecoefficientofperformance,decreasingelectricityconsumptionandcarbondioxideemissions,facilitatinginstallation,improvingoperationswhenintegratedintolargersystemsandincreasingusercomfort.Electrifyingtheresidentialheatingsectorwillsignificantlyincreasetheelectricityloadonthepowersystem,presentingbothchallengesandopportunities.Energyefficiencytogetherwithflexible,smartelectrificationstrategiesareoftremendousimportanceindecarbonisingend-usesectors.Successdependsoninnovationsintechnology,marketdesignandregulation,systemplanningandoperations,andbusinessmodels.Smartelectrificationstrategiesseektoenhancerenewableintegration,reducepeakloadsanddecreasegridcongestion.IRENAhasmapped35keyinnovationsforsmartelectrificationstrategiesintheheatingsector(IRENA,forthcoming[a]).1142.6.1PoliciesforbuildingssectortransformationThetransitiontonet-zerobuildingsrequirespolicysupportandenablingmeasures,includingtoreducebuildings’energydemand,makethemenergyefficientandpromoteelectrificationandthedirectuseofrenewablesforheatingandcooling.Suitablepolicypackagesmaybechosenbasedonclimateconditions,renewables’potential,financialresourcesandotherfactorsuniquetocountriesandcities.Somewidelyadoptedpoliciesincludebuildingcodes;banoffossilfueluseforheating;financialandfiscalincentivesforrenovation,efficiencyandrenewables;targetsonnet-zerobuildings;minimumenergyperformancestandards(MEPSs)aswellasmandatesofsolarhotwaterforpublicorresidentialbuildings.Buildingenergycodesarethemostwidelyrecognisedandscalableactionstodecarbonisethebuildingssector(UNEP,2018).Enactedbynationalorsubnationalgovernments,theytypicallyincluderegulationsfortheconstruction,renovationandrepairofbuildingsandotherstructuresthatpeoplemayoccupy.Thesecodescanpromoteenergyefficiencythroughperformancestandardsfornewandrefurbishedbuildingsorencouragingthedeploymentofrenewableapplications,includingsolarPVrooftopandsolarwaterheaters.Over80countriesworldwidehaveimplementedbuildingcodes,withthemajoritycoveringbothresidentialandpublicbuildings(IEA,2022d).Policymakerscanenhancebuildingenergycodesbyextendingtheirscopetocoveralltypesofbuildings,imposingstricterenergyperformancerequirements,inalignmentwithnet-zerotargets.Forexample,Australia,Japan,Türkiye,theUnitedStatesandmanyEuropeancountrieshavemandatorybuildingenergycodesforexistingbuildings(BattelleMemorialInstitute,2021).BuildingenergycodesareakeyinstrumenttopromoteenergyefficiencyWORLDENERGYTRANSITIONSOUTLOOK2023115Relianceonfossilfuelscanbeminimisedbyphasingouttheiruseforheatinginbuildings,inturncreatingamarketforelectrifiedsolutionsandrenewables’directuse.By2022,some13countriesand59citieshadpassedorproposedrestrictionsontheuseoffossilgas,oilorcoalforheatingorcookinginbuildings(REN21,2022).In2017,Norwayadoptedanationalregulationtobanfossiloilforheatinginbuildingsfrom2020(MCE,2019).IntheUnitedKingdom,startingin2025,low-carbonheatingsourceswillbemandatoryinnewhomes.Also,asof1May2023,thecountrybannedallsalesoftraditionalhousecoal(DEFRA,2022).Municipalitiescanplayastrongerrole.Forexample,in2021,NewYorkCityadoptedapolicytoprohibitnaturalgasinnewbuildingsundersevenstories,effective2024,andforallnewbuildings,effective2027(Maldonado,2023).Similarly,in2020,Seattle(UnitedStates)announcedabanonfossilfuelforheatinginnewconstructions(IRENA,2022j).MEPSsarethemainpolicymeasurestoachieveenergyefficiencyforelectricappliances.Some80countrieshaveadoptedMEPSstopromoteefficienthomeappliances.Thesecoveralmost80%ofenergyuseforallresidentialrefrigerationandthree-quartersofenergyusefortelevisions(IEA,2022e).Somedevelopingcountries,suchasThailand,VietNamandMalaysia,haveadoptedmandatoryMEPSsforairconditionersandrefrigerators(InternationalCopperAssociation,2016).However,newMEPSsshouldbetechnologyneutraltoavoidpersistenceoflessefficientappliancesinthemarket(CLASP,2023).AsidefromMEPSs,energyefficiencyinbuildingscanalsobepromotedthroughenergylabellingandenergyperformancecertificates.Leadingcountriesandregionshavebegunadoptingtargetsforregulatingemissionsfromnewbuildings.Thesetargetsfor100%zero-emissionbuildingsareachievedthroughhighenergyefficiencyandthesupplyoftheremainingenergyrequirementswithrenewables.In2021,theEuropeanCommissionproposedapolicyrequiringallnewbuildingstoreleasezeroemissionsstartingin2030(EuropeanCommission,2021a).TheCityofVancouver(Canada)alsoaimstohaveallnewbuildings100%emissionfreestartingin2030(CityofVancouver,2016).About21cityauthorities,includingCapeTown,Copenhagen,Johannesburg,MedellínandSanJosé,havecommittedtoowning,occupyinganddevelopingonlynet-zeroassetsby2030(C40,2023).VOLUME1CHAPTER02116Energyefficiencyandrenewablesinbuildingscanalsobesupportedthroughfinancialandfiscalpolicies,includingdirectfunding,subsidies,grants,rebatesandloans.In2022,theEuropeanCommissionapprovedaschemeproposedbytheGermangovernmenttoprovidestateaidofEUR2.98billioningrantsuntil2028toencouragethepromotionofnewdistrictheatingnetworks,whichmustoperateonatleast75%renewablesandwasteheat.Thegrantcancoverupto40%oftheinvestmentcostofrenewableheatingprojects(Abnett,2022).Seoul(RepublicofKorea)metropolitangovernmentlaunchedaprogrammein2020tosupportprojectsintegratingsolarPVinbuildings.Theprogrammecancover80%oftheinstallationcosts(C40,2021).Governmentscanalsoconsiderapplyinginformationandcommunicationstechnologytocollect,monitorandanalyseenergyconsumptiondata(throughsensorsandsmartmeters)forbuildings,includingconsumptionforlighting,heatingandcooling,andallelectricappliances.Thiscanprovideabasisfordiagnosingenergyconsumption,settingbuildingefficiencybenchmarksanddevelopingtailoredactionstoimproveoperationandproposechangestooccupants’behaviours.InShanghai,China,themunicipalgovernmentlaunchedadigitalplatformtomonitortheenergyconsumptionofgovernment-ownedofficebuildingsandlarge-scalepublicbuildings(over20000m2offloorarea)since2010.Bytheendof2021,themonitoringsystemhadcovered2143publicbuildings(approximately101millionm2offloorarea)withinthecity.Thesystemhasbeencrucialinimprovingcity-levelbuildingcodesandsupportingotherrelevantpolicymaking(SHHURDandSHDRC,2022).Districtheatingandcoolingnetworkscanallowusinglow-temperaturerenewablesandcanbefeasibleandcost-effectiveindenseurbanareaswithhighheating/coolingdemandsandabundantrenewableresources.Thenetworkscanbemadeevenmoreeffectivewiththermalstorageforexcessheatingandcoolingcapacityduringlow-demandperiods,whichcanbesuppliedduringpeakdemand(IRENAandAalborgUniversity,2021).Connectionmandatesfornewdevelopmentsandpublicbuildingscansupporttheexpansionofdistrictenergynetworksandensureheatingdemand.Forexample,allnewdevelopmentsinAmsterdam(theNetherlands)arerequiredtohaveadistrictheatingconnection.ThesameisalsorequiredforallmunicipalbuildingsinOslo(Norway),unlessthereisevidencethattheyhavelower-emissionsalternatives(IRENA,2022j).Tosupporttheenergytransition,countriesshouldalsoprioritisepoliciesandmeasurestopromotethedirectuseofsolarthermalandgeothermalforheating.Inthisregard,solarthermalinstallationmandatesforneworexistingbuildingshavebeenimplementedinmanycountriesandcities,andhaveproveneffective,withBarbados,CyprusandIsraelbecomingthetopthreecountriesintermsofinstalledpercapitacapacity(IRENAetal.,2020).Solarthermalmandatesaretypicallycombinedwithfinancialorfiscalincentives.Forinstance,Italy’snationalscheme,ContoTermico,helpedthecountrytoachieve83%moresolarthermalinstallationsin2021thaninthepreviousyear.Theschemeprovidessolarheatingplantsofsizesupto2500m2withanincentivethatcoversupto65%ofsolarthermalprojectinvestmentcosts(SolarThermalWorld,2022).MandatesandfiscalincentivescanhelppromotethedirectuseofrenewablesinbuildingsWORLDENERGYTRANSITIONSOUTLOOK20231172.7Transportsector2.7.1KeyindicatorsfortransportsectortransformationMobility,ofpeopleandgoods,iskeyintoday’seconomyandsociety.Thetransportsector,whichreliesheavilyonfossilfuels,released6.9GtCO2emissionsin2020,representingafifthoftheglobalenergy-relatedCO2emissions.However,theseemissionswerelowerthanthosein2019,duetotheimpactoftheCOVID-19pandemic.In2019,thetransportsectorreleasedclosetoaquarteroftheglobalenergy-relatedCO2emissions.Thesectorconsumed104EJofenergyin2020,14%lowerthanin2019,meetingitsdemandpredominantlywithfossilfuels(95%),followedbybiofuels(4%)andelectricity(1%).Roadtransportalonewasresponsibleformorethanthree-quartersofthesector’senergyconsumption,followedbyshipping(10%),aviation(8%)andrail(2%).Withtheglobaldemandfortransportservicesexpectedtoincreaseinfutureyears,itiscrucialtosustainablytransformthesectortoazero-carbonsector.IRENA’s1.5°CScenarioseesthetransportsectorundergoingafasterandmoresignificanttransformationcomparedwithcurrentprojections,withaccelerateddeploymentoflow-carbonsolutions.Figure2.14showstheestimatedevolutionoftransportenergyconsumptionalongwiththeCO2emissionstrajectoryuntil2050accordingtothe1.5°CScenario.Accelerateddeploymentoflow-carbonsolutionsisneededtotransformthetransportsectorVOLUME1CHAPTER02118Acombinationoflow-carbonapproacheswouldreducetransportemissionstojust0.6GtCO2annuallyby2050,a91%reductioncomparedwith2020.Theseincludemeasuresinelectrification,scale-upofrenewablefuels,includingbiofuels,hydrogenandderivativefuels;andenergyefficiencyandtechnologicalinnovationmeasuresacrossalltransportationmodes.WORLDENERGYTRANSITIONSOUTLOOK2023FIGURE2.14Transport:FinalenergyconsumptionunderthePlannedEnergyScenarioand1.5°CScenarioin2020,2030and2050,andcorrespondingemissionsTransportﬁnalenergyconsumption(EJ/year)CO2emissions(GtCO2/year)MethanolAmmoniaHydrogenElectricityBiogasSynthetickeroseneLiquidbiofuelsNaturalgasOil1801601401201008060402009876543210Renewableenergyshare4%4%4%4%19%19%6%6%13%13%84%84%202020301.5-S2030PES202020501.5-S2050PESCO2emissions-1.5-SCO2emissions-PESNotes:1.5-S=1.5°CScenario;EJ=exajoule;GtCO2=gigatonnesofcarbondioxide;PES=PlannedEnergyScenario119AcceleratingEVadoptionforroadtransport,alongwithpowersupplydecarbonisation,isbyfarthemostimportantleverfortransportsectordecarbonisation.Technologicalprogress–notably,evolutionofbatteries–hasgreatlyimprovedtheeconomiccaseforEVsinrecentyears,andthescopeofapplicationisquicklyexpandingtoabroadersetofroadvehiclesegmentsandservicetypes(seeBox2.9).UnderIRENA’s1.5°CScenario,EVs7wouldaccountformorethan90%ofallroadtransportstockby2050(95%ofthetechnologymixinmotorcycles,93%inlightpassengervehicles,82%inbuses,80%inlight-dutytrucksand67%inheavy-dutyvehicles).SomeG20countriesalreadyhaveverystrongelectrificationtargetstoreducefossilfueldependency,asreflectedinthePlannedEnergyScenario.AnexampleistheplantobanCO2-emittingcarsfrom2035inEurope(EuropeanCouncil,2023).OthercountrieswouldhavetosetmoreambitioustargetsalignedwithIRENA’s1.5°CScenario.Electrificationisalsocrucialfordeeperdecarbonisationoftherailsector.In2019,electricitymet42%ofglobaltrainenergydemand.Electrictraintechnologyismature,andelectrificationistechnicallypossibleandcanbecost-effectiveunderabroadsetofcircumstances.High-speedtrainroutesreducethedemandforshort-haulaviation.UnderIRENA’s1.5°CScenario,electricitywouldaccountfor89%shareinrailenergyconsumptionby2050.Transportsectordecarbonisationwillrequirescalinguptheadoptionofrenewablefuels,includingsustainablebiofuels,hydrogenandsyntheticfuels.UnderIRENA’s1.5°CScenario,theproductionofsustainableliquidbiofuelswouldneedtobescaledup3.3timesoverthecurrentlevelby2050.MitigatingtransportsectorCO2emissionswouldrequirecountriestoadoptambitiousbiofuelblendingtargets,especiallyinthisdecadeuntilramp-upofEVs.Incertaincountries,suchasBrazilorIndonesia,biofuelswouldbecrucialinroadtransportdecarbonisation,reachingaround35%inthefinalenergyconsumptionby2050.Othercountriesarecurrentlysettingambitioustargetsforbiofuelblending,forexample,India’s20%blendingratiotargetforethanolingasolineby2030(MoPNG,2018).Biojetfuelswouldaccountfor24%ofthetotalenergyconsumptioninaviationunderthe1.5°CScenarioby2050.7IncludesbatteryEVsandhybridEVs.The1.5°CScenarioseeswidescaleelectrificationoftransportsectorenergyconsumptionVOLUME1CHAPTER021208Includeshydrogen,ammonia,methanol,andsyntheticfuels.Renewables-basedfuels8wouldhavea23%shareintransportfinalenergyconsumptionby2050(21EJ).Theaviationsectorwouldaccountfor39%ofthisconsumption,followedbyshipping(31%)androadtransport(30%).Roadtransportwouldseehydrogendemandcomingmostlyfromheavy-dutytrucks.Theglobalhydrogenstockwouldrepresentashareof17%by2050.Internationalshippingwouldseeadiversemixoflow-carbonfuelsfordecarbonisation,withammonia,methanolandhydrogencomposingalmost61%ofthefuelmixby2050underIRENA’s1.5°CScenario.Inaviation,synthetickeroseneuseinthetotalenergyconsumptionwouldgrowupto42%by2050.Stringentefficiencystandardsforalltransportationmodesarecrucialforsectoraltransformation,alongwithbehaviouralchanges.Decarbonisationcanbesupportedthroughstructuralchangesinthedeliveryofmobilityservices.Amodalshiftfromprivatepassengercarstocollectivetransport,andfrompassengeraviationandroad-basedfreighttorail,ishighlypossiblebutwouldrequiredevelopingthenecessaryinfrastructure.Thiscouldreducetheenergyintensityofthetransportsector.Despiteanincreaseintransportdemand,thesector’sfinalenergyconsumptionwoulddecrease13%by2050comparedwith2020levelsorby25%comparedwith2019levelsunderIRENA’s1.5°CScenario.Transportdemandinmoredevelopedeconomieswouldstabiliseinthecomingdecades.Consumptioninsomeofthesemarketsisestimatedtodecreasebyaround50%by2050comparedwith2019,duetotheuseofmoreefficienttechnologiesandmodalshifts.However,someemergingeconomiesareexpectedtoseeaconsiderableincreaseintransportdemandinthecomingdecades;despiteaswitchtomoreefficienttechnologies,thiswouldseeanincreaseintransportenergydemandintheorderofupto80%by2050overthatof2019.IRENA’sanalysisofthe1.5°CScenarioshowsthatacombinationofefficiencymeasuresandlow-carbonapproacheswouldreducetransportconsumptionto91EJby2050.Underthisscenario,electricitywouldaccountfor52%ofconsumption(91%ofwhichissuppliedbyrenewables),followedbyhydrogenanditsderivatives(accountingfor23%)andbiofuels(representingabout13%ofthefuelmix).Fossilfuelswouldmeettheremainingconsumption(approximately11%).Atthesametime,increasedenvironmentalawareness,improvedurbanplanningandbehaviouralchangesareprojectedtoresultinasmallerincreaseintransportdemandcomparedwiththePlannedEnergyScenario.StringentefficiencystandardsandbehaviouralchangesarecrucialfortransportsectortransformationWORLDENERGYTRANSITIONSOUTLOOK2023121TABLE2.6Keyperformanceindicatorsforthetransportsector:PlannedEnergyScenarioand1.5°CScenarioin2030and2050Historical203020502020PES1.5°CScenarioPES1.5°CScenarioKPI.02RENEWABLES(DIRECTUSES)BiofuelsshareintransportTFEC(%)Global4%5%8%6%13%G205%6%8%6%10%KPI.03ENERGYINTENSITYTransport–TFEC(EJ)Global10413612115991G20871119812073KPI.04ELECTRIFICATIONINEND-USESECTORS(DIRECT)ShareofelectricityinTFEC(%)Global1%4%7%15%52%G202%6%9%25%63%Electricandplug-inhydridlightpassengervehiclesstock(millionunits)Global1025535913312182G201025532813311811EVchargers(millionunits)Global126037213672300G20126033913671905KPI.05CLEANHYDROGENANDDERIVATIVESCleanhydrogenshareintransportTFEC(%)Global0%0%0.3%1%10%G200%0.1%0.4%2%12%Ammonia,methanol,syntheticfuelsshareintransportTFEC(%)Global0%0%0.1%0.4%14%G200%0%0%0.1%5%EMISSIONSCO2emissionswithcarboncaptureandremoval(GtCO2/year)Global7.08.87.28.60.6G205.87.05.85.90.4VOLUME1CHAPTER02Notes:a.Vehiclesin2020accordingtoIEA'sGlobalEVOutlook(IEA,2022h).b.EVchargersin2020accordingtoIEA'sGlobalEVOutlook2022.EVchargerprojectionsincludepublicandprivatechargers.EJ=exajoule;EV=electricvehicle;G20=GroupofTwenty;GtCO2=gigatonnesofcarbondioxide;KPI=keyperformanceindicator;PES=PlannedEnergyScenario;TFEC=totalfinalenergyconsumption.122LandtransportPopulationandeconomicgrowthindevelopingeconomiesisexpectedtoboostroadtransportactivity.Emergingeconomiesareexpectedtoseeaconsiderableincreaseinlight-dutypassengervehiclespercapita(fromabout0.04to0.23vehicles)by2050,whereasthisisexpectedtoremainstableindevelopedeconomies,andevendecline,duetobehaviouralchangesandmodalshifttowardspublictransport.Railtransportactivityisexpectedtocontinueincreasingtowards2050–growthbeinghigherunderthe1.5°CScenariotoaccommodatetheincreaseddemandduetoamodalshift.AviationAviationdemandisexpectedtorecovertopre-pandemiclevelsby2023.Futuregrowth,measuredinrevenuepassenger-kilometres,wouldbe2.6%peryearonaverageunderthePlannedEnergyScenarioandslightlylower(at2.4%)underthe1.5°CScenario.IRENA’s1.5°CScenarioseesaggressivegrowthofsustainableaviationfuels(SAFs)(bothbiojetfuelandsyntheticfuel)fromthepredominantuseofoiltoday,withsharesupto82%intheenergymixby2050.Meanwhile,theintroductionofnovelhydrogenandelectricaircraft(orhybrids)from2035forshort-haulflightswouldradicallytransformtheaviationsector.ShippingTheinternationalshippingsectorwouldseeadiversemixoflow-carbonfuelstodecarbonisethesector,withammonia,methanolandhydrogencomposingalmost61%ofthefuelmixby2050inIRENA’s1.5°CScenario.AstheInternationalMaritimeOrganization(IMO)aimstoreducethesector’scarbonintensitybyatleast40%by2030(relativeto2008),significanteffortstoaddresssupply,infrastructureandtechnologicalchallengesarenecessarytoincreasetheuptakeofalternativefuelsunderthe1.5°CScenario.Themaritimesectorisalreadyadoptingdual-fuelenginesforbothnewvesselsandretrofits,withmethanol-fuelledoptionsexpectedtoenterthecommercialmarketasearlyas2024.Fueldiversification,andunlockingallpossibledecarbonisationsolutionsintransport,arevitalWORLDENERGYTRANSITIONSOUTLOOK20231232.7.2PoliciesfortransportsectortransformationPoliciesforlandtransportDecarbonisationofroadtransportwillrequireimplementinganumberofpoliciestopromoteenergyefficiencyandtheuseofrenewables.Theoverallframeworkincludestargets,mandates,financialandfiscalincentives,fuelstandards,supportforresearch,developmentanddemonstration;andcity-levelpoliciesfordeployingEVs,9biofuelsandotherrenewablealternatives(IRENA,forthcoming[c]).Thesemeasuresareoftensummarisedasahierarchyofactions,as“avoid,shift,improve”(Box2.10).9EVsincludeplug-inhybridelectricvehicles(PHEVs),batteryelectricvehicles(BEVs)andfuelcellelectricvehicles(FCEVs).VOLUME1CHAPTER02BOX2.9Emergingtechnologiesforthee-mobilitysectorElectricvehicles(EVs)areemergingassolutionsfordecarbonisingthetransportsectorthroughdirectelectrificationusinghighsharesofrenewablesintegratedintopowersystems.WithincreasingpolicypressurefornewEVadoption,rapidgrowthisoccurringglobally,withmoremodelsenteringthemarketandconsumersshowingincreasedinterest.CharginginfrastructuredevelopmentiskeyfordeployingEVs,anditinvolvesvariousaspects:location,chargingtype,chargingmodeandothercapabilities.Ensuringuniversalaccesstochargingwouldentailthepossibilitytochargeatanysharedparkingspacesuchasthoseonstreets,atworkplaces,incommercialestablishments,publicspaces.WithincreasingEVsales,batterydemandisrisingswiftly.Meanwhile,batterypricesaredecreasing,asignalthatmarketandtechnologyaremovinginsync.TheindustryhasbeensuccessfulindecreasingthecostsofLi-ionbatteriesfromapproximatelyUSD1200/kWhin2010toUSD132/kWhin2021,andslightlyincreasedin2022toUSD151/kWh(BNEF,2022).Batteryimprovementinvolvestrade-offs,sinceimprovingoneperformancecriterioncanresultinthedeteriorationofatleastoneothercriterion.Ingeneral,thefocushasbeenonimprovingenergydensity,cost,safety,and–toalesserextent–depthofdischarge(DoD)andcalendarageing(years).Butfurtherimprovementsarealsonecessaryincyclicalageing(numberofchargingcycles),powerdensityandfast-chargingcapability.However,thisdependsonthebatterycelltype(i.e.theelectrochemistry)andbatterypack(i.e.howcellsarepackedtogetherandhowchargingismanaged)(IRENA,2023,forthcoming[d]).Innovationsnotonlyintechnologybutalsoinmarketdesignandregulation,systemplanningandoperation,andbusinessmodelsareneededtoachievesmartelectrificationofend-usesectorsandbuildsmartchargingstrategies.Smartelectrificationstrategiesseektoincreaserenewables’integration,reducepeakloadsand,therefore,decreasegridcongestion.IRENA’sreportontheinnovationlandscapeforsmartelectrificationofend-usesectorsmaps35keyinnovationsandsmartelectrificationstrategiesforthemobilitysector(IRENA,forthcoming[a]).124WORLDENERGYTRANSITIONSOUTLOOK2023BOX2.10Avoid-shift-improvestrategiesforroadtransport“Avoid”policiescanreducethefrequencyofcartripsandthedistancetherein,reducetriplength,orremovetheneedtotravelbycaratall.Availablepoliciesincludeland-usestrategies,transit-orienteddevelopment,tripandrouteoptimisation,simplifiedsupplychains,andtelecommutingandonlinelearning(IRENA,2021b).AstudyfocusedonAuckland,NewZealand,estimatedthattheimplementationofpropertyland-usepoliciescanreducethecity’stransportemissionsbyanadditional10%(OECD,2022).However,“avoid”policiesmayrequiremakingsystemicchangestoplanningandtransportationsystems,forexample,redesigninglanduseforgreaterdensity,andthusneedlong-termandconsistentpolicysupport(seeFigure2.15).“Shift”policiescanpromotemodalshiftstomoreefficientandlower-emissiontransportationmodes,suchaspublictransit,andwalkingandcycling(whicharecomplementaryandworkwelltogether).Policiesandincentivesincludedistance-basedtaxes,publictransportsubsidiesandamanagedexpansionoftheurbanarea.In2021,theUKgovernmentpublisheditstransportdecarbonisationplan,whichincludedshiftpoliciestopromoteelectricbusesandtoboostwalkingandcyclingthroughimprovementinstreetinfrastructure(REN21,2022).Finally,“improve”measurescantargetoperationalandtechnicalenergyefficiencymeasurestoreducethecarbonintensityofalltransportationmodes,aswellasthescale-upofzero-emissionvehicles(e.g.batteryelectricvehiclesandfuelcellelectricvehicles),hybridplug-inelectricvehiclesandlow-emissionfuels(e.g.bioethanolandbiodiesel).FIGURE2.15Measurestoimprovetransportstrategies•Integratedlanduseplanning(focusonproximityandaccessibility)•Tripandrouteoptimisation•Telecommuting•Shortersupplychains•Activetransport(walkingandcycling)•Publictransport(neworupgrade)•Carsharing•E-mobility•Fueleconomyandquality•Restrictionsoninternalcombustionengines•BiofuelsSHIFTMEASURESIMPROVEMEASURESAVOIDMEASURESSource:(IRENA,2021b).125Vehicleefficiencypoliciesandstandards,includingfueleconomystandardsandtailpipeemissionsstandards,areacornerstoneofthedecarbonisationofthetransportsector.Fueleconomystandardstypicallyregulatethedistancenewcarsmustbeabletotravelonaunitoffuel,andtheycanpushautomakerstomanufacturemoreenergy-efficientvehicles.Wideadoptionofenergy-efficientvehiclesandcontinuousenhancementoffuelefficiencystandardscanimprovetheaveragefueleconomyofvehicles.Morethantenjurisdictions,includingBrazil,Canada,China,theEuropeanUnion,India,Japan,SaudiArabia,MexicoandtheRepublicofKorea,accountingfor80%ofnewlight-dutyvehiclesales,haveadoptedorproposedsuchpolicies.Sixofthem(China,Canada,India,theEuropeanUnion,theUnitedStatesandJapan)alsoapplystandardsforheavy-dutyvehicles(GFEI,2020).Similarly,tailpipeemissionsstandardscanimposealimitonthemaximumpollutantemissionsfromvehicles.In2023,theUSgovernmentproposednewfederalvehicleemissionsstandards,which,ifadopted,wouldaddsubstantialvehicleemissionsreductionsandincreasethesalesofelectricvehicles(USEPA,2023).Targetsonzero-emissionvehicles(ZEVs)canprovidestrongsignalstovehiclemarketsandrapidlyincreaseZEVs’marketshare.In2021,morethan30nationalgovernmentssignedtheZEVdeclarationatCOP26.Thedeclarationsignatoriespledgedtoworktowards100%ZEVsalesfornewcarsandvansgloballyby2040,andbynolaterthan2035inleadingmarkets(Owen-Burge,2021).FiveofthesignatoriesareinAfrica–namelyCaboVerde,Ghana,Kenya,MoroccoandRwanda.In2022,majormarketsannouncednewtargets.China,forinstance,announcedtargetstobuildcharginginfrastructuresufficienttomeettheneedsofmorethan20millionZEVsby2025andfor60%ofexpresswayserviceareastohaverapidchargingby2025(GovernmentofChina,2022)withsubnationaltargetsannouncedinGuangxiandGuangzhou.ZEVtargetswillalsoimpactEVsupplychains,suchasbatteries,andinstallersandoperatorsofcharginginfrastructure.Similarly,bansonnewsalesofinternalcombustionengine(ICE)vehiclescansendclearsignalstoinvestorsandmanufacturers.TheEuropeanUnionhasagreedtobanthesaleofICE-poweredcarsandvansfrom2035.FueleconomystandardshaveproveneffectiveinenhancingvehicleefficiencyVOLUME1CHAPTER02126ZEVdemandcanbeeffectivelyboostedthroughfinancialandfiscalincentives,includingsubsidies,capitalgrantsortaxrebateforZEVpurchases,measuresthatmanycountriesandsubnationalgovernmentshaveadoptedsuccessfully.France,GermanyandtheUnitedStatesareamongmajorEVmarketsprovidingfinancialsupportforEVpurchases.In2023,theUnitedStatesundertheInflationReductionActofferedaconsumertaxcreditofUSD7500forEVs,whileinFranceandGermanysubsidiesofuptoEUR8000andEUR6750wereavailable,respectively.However,subsidiesforEVsareacostlymeasure,andmanycountries,especiallythoseinthedevelopingworld,maynotbeabletoaffordthem.ThestateofGujaratinIndiaisoneoffewexamplesofEVsubsidiesinthedevelopingworldforcars,twoandthreewheelers(FirstPost,2021).Rapidelectrificationoftwo-andthree-wheelersindevelopingandemergingmarketsprovidesaffordablecleantransportoptionsandmaximisessynergieswithenvironmentandlivelihood.Keymeasuresincludefiscalandfinancialincentives,andstandardisation.ExamplesofthiscanbefoundinChina,India,KenyaandRwanda.Subnationalauthoritiesalsohaveanimportantroletoplay.Forexample,Athens,MadridandMexicoCityhavedecidedtobanpetrol-anddiesel-poweredcarsby2025,andParisaimstodosoby2030(IRENA,2021b).Citiescanalsotransitiontozero-emissionmobilitythroughpublicprocurementofelectricbusesforpublictransitoperatorsandmunicipalfleets.InChina,forexample,theministriesoftransport,finance,andindustryandinformationtechnologyjointlypromulgatedarulein2015thatrequiresall-electricbusestorepresent80%ofalladditionsandreplacementsintencitiesandprovinces,includingBeijing.InEurope,Oslo,TrondheimandGothenburghavealsodeployedelectricbuses.InLatinAmerica,Chile’scapital,Santiago,deployed100electricbusesattheendof2018,withthenumberreachingalmost800bytheendof2020.Colombiaconsideredreplacing75%ofallpublicbusesinBogotáandMedellínwithzero-emissionvehiclesby2040(IRENA,2021b).MunicipalgovernmentshaveseveralpolicyoptionstopromoteZEVsforurbantransport.City-levellow-andzero-emissionzonescansupportthetransitionbydeterringpeoplefrompurchasingfossilfuel-basedcarsandmotivatingthemtousepublictransitmodes(buses,trams,lightrailandsubways).London,UnitedKingdom,providesaleadingexampleonlow-emissionzones,whichhavealsobeenadoptedbyhundredsofotherEuropeancities.NumerouscitiesincludingMilan(Italy),Stockholm(Sweden),Singapore,Tehran(IslamicRepublicofIran)andWashington,DC(UnitedStates)haveimplementedcongestionpricingforurbanareas.Somecities,especiallyShanghai,ShenzhenandGuangzhouinChina,haveadoptedvehiclequotasthroughauctionsorlotterysystems.Similarly,MexicoCity(Mexico),Delhi(India)andJakarta(Indonesia)haveadoptedlicenseplaterestrictionswithpreferentialpoliciesonEVstoencourageEVdeployment.WORLDENERGYTRANSITIONSOUTLOOK2023127GovernmentscanpromoteEVcharginginfrastructurethroughmandatesandincentives.TheycanmakecableavailabilityforEVcharginganecessityfornewlyconstructedandrenovatedbuildingsorrequiretheinstallationofspecificpercentagesofEVchargersinpublicorbusinesscarparks.WiththeEVstockgrowinginsomemarketsandcities,“smart”chargingsystemshavebecomecriticaltopreventadverseimpactsonpowergridsandharnessthepotentialgridflexibilityservicethatEVscanprovidetothepowersystem.Policymakersshouldthereforeconsidersmartchargingpoliciesaspartoftransporttransitionmeasures,whichhavebeenadoptedintheUnitedKingdom(mandatingOpenChargePointProtocolcompliancefrom2022),BelgiumandLuxembourg.Toachieveajusttransitionforthevehicleindustry,governmentsandcompaniesmustprovideretrainingandrecertificationprogrammesforICEindustryworkers,includingsocialprotectionfortheaffectedworkersandcommunitiestocopewithapotentiallylengthyanddifficulttransitionperiod.Intheshortandmediumterm,policiestoincreasethebiofuel-fossildieselandbiofuel-gasolineblendingratiowillbeneededtodecarboniseICEstocksandpromotebiomethaneusefortransportinsomecountries.Keypoliciesincludeblendingmandatesandrenewablefuelstandards,whichhavebeenadoptedintheUnitedStates,Brazil,Indonesiaandmanyothercountries.However,policiesmustensuresustainablebiofuelfeedstockandproductionprocessesthroughtargetsintegratingsustainability,cross-sectoralco-ordination,regulationsandcertifications.TheEU’ssustainabilitycriteriaintherenewableenergydirectiveandBrazil’sRenovaBioprovidesomeexamples.Railwaydecarbonisationwillmainlyrelyonelectrificationthroughrenewableprojectsorprocurementofrenewableelectricity.InIndia,thecentral-government-ownedDelhiMetroRailCorporationhasbeenusingsolarPVrooftopssince2014toproviderenewableelectricitytothesystem.ThecompanysignedapowerpurchaseagreementwiththestategovernmentofMadhyaPradeshtoprocuremoresolarPVelectricityforthesystem(IRENAandGIZ,2018).AwiderangeofpolicieswillbeneededtosupportadoptionofEVsVOLUME1CHAPTER02128PoliciesforaviationTargetsfortheuseofSAFsremainthemostimportantpolicyforaviationdecarbonisation.Theaviationindustry,throughtheInternationalAirTransportAssociation(IATA),hasadoptedatargettoachievenet-zerocarbonemissionsby2050insupportoftheParisAgreementgoal.TheInternationalCivilAviationOrganisation(ICAO)alsoadoptedtwoglobalaspirationalgoalsfortheinternationalaviationsector,whichinclude2%annualfuelefficiencyimprovementthrough2050andcarbon-neutralgrowthfrom2020onwards,asestablishedatthe37thAssemblyin2010(ICAO,2022).TheReFuelEUAviationproposalmandatesfuelsupplierstoincludeSAFsinaviationfuelsuppliedatEUairports,startingat2%SAFsin2025,andincreasinggraduallyto5%in2030.Thetargetswillincreasemorerapidlyto20%in2035,32%in2040and63%in2050.Theproposalalsoincludesasub-obligationof0.7%fore-kerosenefrom2030(EuropeanCommission,2021b).Blendingmandatesforaviationcanhelptocreatemarkets,butiftheyareforSAFsingeneral,thenquotasmightbefulfilledwithbiofuelsinsteadofpromotingsyntheticfuels.SixEuropeancountrieshaveadoptedblendingtargetsforSAFs,withtheScandinaviancountriesleadingtheway.Mandatingpoliciescanspecifyagraduallyincreasingshareofsustainablerenewablefuelsforaviation,beforereaching100%renewablefuelsby2050.PoliciesforshippingShippingdecarbonisationwillmainlyrelyoninternationalmeasuresforemissionsreductionininternationalshipping.TheInternationalMaritimeOrganization(IMO)canplayaroleinsettingsectoraldecarbonisationtargetsandstrategiesandpromotingitswideadoptionbyindustriesandcountries.In2018,theIMOadoptedastrategytoreduceshippingsectorGHGemissions,whichsetsquantitativecarbonintensityandGHGreductiontargetsforinternationalshipping,includingatleast40%reductionincarbonintensityby2030andeffortstowards70%reductionby2050,bothcomparedwith2008levels.ItalsoaimstopeakGHGemissionsfrominternationalshippingassoonaspossibleandreducethembyatleast50%by2050comparedwith2008levels,whilepursuingeffortstowardsphasingthemoutconsistentwiththetemperaturegoalsintheParisAgreement(IMO,2018).IMO’sstrategyadoptedenablingmeasurestoalignnationalactionswithinternationaltargets,includingsupportingthedevelopmentandupdateofnationalactionplans;encouragingportstofacilitateGHGreductionsfromshipping;initiatingandco-ordinatingR&DactivitiesbyestablishinganInternationalMaritimeResearchBoard;pursuingzero-carbonorfossil-freefuelsfortheshippingsectoranddevelopingrobustlifecycleGHG/carbonintensityguidelinesforalternativefuels;undertakingadditionalGHGemissionsstudiestoinformpolicydecisionsandestimatemarginalabatementcostcurvesforeachmeasure;andencouragingtechnicalco-operationandcapacity-buildingactivities.ShippingdecarbonisationwillneedeffectiveinternationalmeasurestosucceedWORLDENERGYTRANSITIONSOUTLOOK20231292.8ConclusionsAsthischapterhasshown,theenergytransitionwillrequirewide-rangingtransformationsinthepowerandend-usesectors.Whilemosttechnologiestoachievethistransitionarealreadyavailable,therequiredscale-upwillbechallenging.Governmentswillhavetointervenewithcomprehensivepoliciesandmeasurestoacceleratethetransitionandensuresufficientinvestmentflowsintotheenergysector,asfurtherexploredinChapter3.Thepolicyframeworkforpowerandend-usesectortransformationalsoneedstoincludemeasuresthatgobeyondthosefocusedontechnologydeployment.Itwouldneedtoincentivisebehaviouralchangesandsustainableproductionandconsumptionpractices.Mostimportantly,thetransformationpolicyframeworkshouldincludebroaderpolicyinterventions(suchasindustrialandlabourmarketpolicies)toensurethetransitionisjustandinclusive.ThesecondvolumeoftheWorldEnergyTransitionsOutlook2023,tobepublishedlaterintheyear,willexaminethisinmoredetail.VOLUME1CHAPTER02130WORLDENERGYTRANSITIONSOUTLOOK2023CHAPTER03INVESTMENTNEEDS,FINANCINGANDENABLINGPOLICYFRAMEWORKSWORLDENERGYTRANSITIONSOUTLOOK2023131VOLUME1CHAPTER0303•Energyinvestmentshoulddrivethetransitionwhileavoidingtheriskofstrandedassets.ThePlannedEnergyScenarioforeseescumulativesector-wideinvestmentsofUSD103trillionbetween2023and2050.About60%ofthisinvestmentisintendedfortransitiontechnologies–mostlyinrenewables,efficiency,electrification,hydrogenandcarbonremoval.But40%ofplannedinvestmentremainsaimedatfossilfuels.•Tokeepthe1.5°Ctargetwithinreach,bothscale-upandre-allocationofinvestmentintransitiontechnologiesareneeded.ComparedwiththePlannedEnergyScenario,the1.5°CScenariorequiresadditionalcapitalspendingofUSD47trillion,foratotalofUSD150trillion,andredirectingaboutUSD26trillionincoal-andoil-basedfossilfueltechnologiestowardstransitiontechnologiesandinfrastructureovertheperiodto2050.•Toachieveclimateobjectives,thedeploymentofrenewablesinpowergenerationandend-usesectorsmustaccelerate.Electrificationofend-usesectorsandimprovedenergyefficiencyrequireattentionaswell.AlthoughinvestmentsinenergytransitiontechnologiesreachedrecordlevelsofUSD1.3billionin2022,theystillfallshortoftheinvestmentsneededtoachievethe1.5°Ctarget.Inaddition,considerableinvestmentisrequiredtocreateanenablingenvironmentfortheenergytransition,includingfundingpoliciesandmeasuresandbuildinglocalcapacities(e.g.training).Moreover,theinvestmentsmadewereconcentratedinjustafewcountriesandregions,leavingthe1.5°Ctargetoutofreach.Fortheenergytransitiontobecomeglobal,accesstofinancingmustexpand.•Thescale-upofrenewablesrequiresstronginternationalcollaborationandco-ordinatedactionsacrosspublicandprivatesectorsthatentailpoliticalwillandcomprehensivepolicyframeworkstargetingmultiplebarriersandmoreinvestment.Giventheurgentneedtospeedthegeographicspreadoftheenergytransitionandtorealiseitssocio-economicdevelopmentgoals,innovativeinstrumentsareneededsounder-investedcountriescanreapitslong-termbenefitswithouthinderingtheireconomies.HIGHLIGHTScontinued132WORLDENERGYTRANSITIONSOUTLOOK2023•Amorecomprehensivedefinitionofriskaroundinvestinginenergyassetsisneeded.Ablinkeredfocusontherisktoinvestorsregardingreturnsmustexpandtoembraceenvironmentalandsocialrisks.Withlimitedpublicfundsavailableinthedevelopingworld,theinternationalcommunitymuststepup.•Publicfundingforrenewableenergyfinance(andclimatefinancemorebroadly)hasfacedseveraldifficulties.Macro-economicandgeopoliticalchallengesoverthepastthreeyearshavedivertedtheattentionofmostcountriestowardsinflation,disruptionsofsupplychains,foodshortagesandslowgrowth.Still,investmentsintheenergytransitioncanpavethewayforequitable,inclusiveandresilienteconomies.Forthat,internationalcollaborationandpublicfinanceflowsfromtheGlobalNorthtotheGlobalSouthareessential.•Publicfunds(domesticorthroughinternationalcollaboration)mustflowthroughintermediaries(e.g.governments,developmentfinanceinstitutions,globalfundssuchastheGreenClimateFund)usingvariousinstruments,includinggovernmentspendingsuchasgrantssubsidies,andtrainingprogrammes;debt,includingconcessionalfinancingandguarantees;equityanddirectownershipofassets(e.g.transmissionlines);andfiscalpolicyandregulationssuchastaxexemptionsandpowerpurchaseagreements.Suchinstrumentsshouldchannelpublicfundstowardstheneededpoliciesincludingthosethatsupportstructuralchangeandjusttransitions.Inaddition,theseinstrumentsshouldbedesignedprogressivelytoensurethateconomicbenefitsaresharedinanequitableway.HIGHLIGHTS031333.1IntroductionThischapterhighlightstheinvestmentsrequiredby2050underthe1.5°CScenario,derivedfromtheanalysispresentedinChapter2.Itconsidersinvestmentneedsbytechnologyandexploreshowgovernmentscanbalanceshort-andlong-termenergytransitioninvestmentneeds(section3.1).Renewables-basedelectrificationwouldrequiremassivelyexpandedandstrengthenedpowergridsandthegrowingroleofhydrogenwouldneedpipelines,electrolysersandstoragefacilities.Thecrucialroleofacceleratinginvestmentininfrastructureisexaminedinsection3.2.Section3.3detailsthetrendsinenergy-transition-relatedinvestmentsoverthepastdecade,focusingoninvestmentsandthepoliciesdrivingthem,settingthestageforsection3.4,whichdescribestheroleofpublicpoliciesandinvestments,financingneedsbeyondtechnologydeploymentandtheenablingpolicyframeworkrequiredtode-riskfinancing.Thesectionoffersrecommendationsforgreaterpublicinvestmentinbothtechnologyandinfrastructureandintheinstitutionalandlegalcapabilitiesneededtomakethemostofthem.3.2Investmentstoacceleratetheenergytransition3.2.1Globalenergytransitioninvestments:Long-andshort-termprioritiesToachieveclimateobjectives,theenergytransitionrequiresmorespeedinrenewablepowerandend-usegeneration,inelectrificationofend-usesectorsandinbetterenergyefficiency.AconcomitantriseincapitalspendingwouldrequireanadditionalUSD47trillion,foratotalofUSD150trillioninthe1.5°CScenario,comparedwithUSD103trillionunderthePlannedEnergyScenario(PES)(seeFigure3.1).VOLUME1CHAPTER03134Betweennowand2050,USD150trillionininvestmentswouldberequiredunderthe1.5°CScenarioWORLDENERGYTRANSITIONSOUTLOOK2023Notes:BECCS=bioenergy,carboncaptureandstorage;CCS=carboncaptureandstorage.FIGURE3.1Globalinvestmentbytechnologicalavenue:PlannedEnergyScenarioand1.5°CScenario,2023-2050PlannedEnergyScenario1.5°CScenario2023-20502023-20501501209060300Carbonremoval,captureandstoragemeasures–CCSandBECCS(incl.transportandstorage)PowergridsandenergyﬂexibilityHydrogenanditsderivatives(incl.infrastructure)Renewables-directusesanddistrictheatRenewables-powergenerationcapacityElectriﬁcationinendusesEnergyconservationandeciencyFossilfuelsandnuclear-powergenerationcapacityFossilfuel-supplyUSD+47trillionor+1.7trillionperyearCumulativeenergysectorinvestments,2023-2050(USDtrillion)USD103trillionUSD150trillion15%11%29%26%8%34%23%10%17%135Inthe1.5°CScenario,investmentsofUSD150trillionintransitiontechnologiesandinfrastructureby2050amounttoUSD5.3trillionperyearonaverage.Putanotherway,thisisanadditionalUSD1.7trillionperyearcomparedwiththePlannedEnergyScenario.Inend-usesectors,investmentsintransitiontechnologiesamounttoUSD73trillionorabout47%ofthetotalinvestmentrequiredby2050.Thisincludesinvestmentsinconservationandefficiency(USD43trillion),electrification(USD16.6trillion),productionanddirectuseofrenewabletechnologies(USD6trillion),greenhydrogen(USD4.7trillion)andcarbonremoval(USD3trillion).CumulativeinvestmentsinmovingthepowersectortowardrenewableswouldneedatotalofUSD61trilliontobespentonrenewablepowergenerationcapacity(USD39trillion)andenablinginfrastructureforrenewablesi.e.powergridsandflexibility(USD22trillion).InvestmentinfossilfuelssupplywouldaccountforUSD12trillionandinvestmentinfossilfuelandnuclearpowergenerationforUSD1.9trillionandUSD1.6trillion,respectively.AboutUSD1trillionofaverageannualinvestmentsincoal-andoil-basedfossilfueltechnologiesinthePlannedEnergyScenariowouldberedirectedtowardstransitiontechnologiesandinfrastructureinthe1.5°CScenario.TotalredirectedinvestmentswouldtotalaboutUSD26trillionovertheperiodto2050.3.2.2InvestmentopportunitiesbysectorandtechnologyGlobalinvestmentacrossalltransitiontechnologiesreachedarecordhighofUSD1.3trillionin2022(section3.3).Yetannualinvestmentwouldneedtomorethanquadrupletoremainonthe1.5°Cpathway.Table3.1explorestherequiredannualinvestmentsforachievingthe1.5°CScenarioinvarioustechnologiesandsectors,whilstthefollowingsectionexploresspecificinvestmentrequirementsinmoredetail(section3.2.3).VOLUME1CHAPTER03136WORLDENERGYTRANSITIONSOUTLOOK2023TABLE3.1RequiredaverageannualinvestmentsunderthePlannedEnergyScenarioand1.5°CScenario,2023-2050Basedon:(IRENAstatistics:2021investments;IEA,2022f;BNEF,2023a).Notes:Gridsandflexibility:Transmissionanddistributionnetworks,smartmeters,pumpedhydropoweranddecentralisedandutility-scalestationarybatterystorage(coupledmainlywithdecentralisedPVsystems).Renewablepowergenerationcapacity:Deploymentofrenewabletechnologiesforpowergeneration.Renewablesendusesanddistrictheat:Biofuelssupply,renewablesdirectusesanddistrictheatapplications(e.g.solarthermal,modernbioenergy)andammoniaandmethanolproductionfrombiomass.Energyefficiencyinindustry:Improvingprocessefficiency,demand-sidemanagementsolutions,highlyefficientenergyandmotorsystemsandimprovedwasteprocesses.Energyefficiencyintransport:Allpassengerandfreighttransportmodes,notablyroad,rail,aviationandshipping.Vehiclestockinvestmentsareexcluded.Energyefficiencyinbuildings:Improvingbuildingthermalenvelopes(insulation,windows,doors,etc.),deployingefficientlightingandotherappliances.Hydrogenelectrolysersandinfrastructure:Electrolysercapacity(alkalineandpolymerelectrolytemembrane)fortheproductionofgreenhydrogen,infrastructureforthetransportofhydrogenandhydrogenlongdurationseasonalstorage.continuedcontinuedPowerFlexibilitymeasures(e.g.storage)9Electricitynetwork300663151706301249528993406103913827130-1606333639557159139356283Ocean/Tide/WaveWindoshoreWindonshoreCSPBioenergy(total)GeothermalSolarPV(utilityandrooftop)Historical2023-502023-501.5°CScenarioPESAnnualaverageinvestmentsovertheperiod(USD2021billion)21811018663PowergenerationcapacityGridsandﬂexibilityHydro-all(excl.pumped)Total137VOLUME1CHAPTER03continuedRequiredaverageannualinvestmentsunderthePlannedEnergyScenarioandTABLE3.11.5°CScenario,2023-2050(contd.)Notes:Hydrogen-basedammoniaandmethanol:Productionofammoniaandmethanolfromhydrogenfeedstocks.Carbonremoval:CCSdeployment,mainlyforprocessemissionsinindustryandbluehydrogenproduction.BECCSdeploymentinchemicals,powerandcogenerationplants.Circulareconomymeasuresinclude:Chemicalsandmechanicalrecycling,energyrecovery,bio-basedalternativeproducts(e.g.bioplastics)andorganicmaterials.BECCS=bioenergycarboncaptureandstorage;CCS=carboncaptureandstorage;CSP=concentratedsolarpower;EV=electricvehicle;PES=PlannedEnergyScenario;PV=photovoltaic.Renewablesdirectusesanddistrictheat57Biofuels-supply16344798111Hydrogen-basedammoniaandmethanol-Hydrogenelectrolysersandinfrastructure022334136IndustryTransport40Buildings23721241842493519201147HeatpumpsTransport60EVchargers829118230CO2capturedfromCCS,BECCSandotherremovalmeasures-3107Recyclingandbio-basedproducts4418314-8250Historical2023-502023-501.5°CScenarioPESAnnualaverageinvestmentsovertheperiod(USD2021billion)EndusesanddistrictheatEndusesanddistrictheat26051173442RenewablesendusesanddistrictheatProductionofgreenhydrogenanditsderivativefuelsCarbonremovalCirculareconomymeasuresEnergyeciencyElectriﬁcationTotal138InvestmentinthepowersectorwouldcontinuetoincreaseinboththePlannedEnergyScenarioandthe1.5°CScenario.Thisinvestmentwouldbedirectedtowardsadditionalrenewablepowergenerationcapacity,gridextensionandresiliency,andothergridflexibilitymeasures(frombetterrenewablepowergenerationforecastingtointegrateddemand-sideflexibilityandstationarybatterystorage).InthePlannedEnergyScenario,annualaverageinvestmentinrenewablepowergenerationcapacityandpowergridsandflexibilityisestimatedatmorethanUSD1trillionoverperiodto2050.TransformingthepowersectorunderIRENA’s1.5°CScenariowouldrequireanaverageofmorethanUSD2.2trillionperyearthrough2050.AtotalofUSD61trillionwouldbeneededunderthescenario–morethandoublethecumulativeinvestmentrequiredunderthePlannedEnergyScenario(USD28.5trillion)until2050.Theincreasedinvestmentisnecessitatedbyhigherdemandstemmingfromwidespreadelectrification,greenhydrogenproductionandhigherupfrontcapitalcostsforrenewablecapacity(comparedtofossilfuels)andflexibilitymeasures.UnderIRENA’s1.5°CScenario,investmentinthepowersectoraccountsfor43%oftotalinvestmentovertheoutlookperiod.By2050,annualinvestmentneedsinrenewablepowergenerationtechnologywouldreachalmostUSD1.4trillionperyear,whiletheannualaverageinvestmentneedsingridsandsystemflexibilityisestimatedtoneedtoreachUSD0.8trillionperyear.Thisinvestmentmustbefullyintegratedandco-ordinatedtoensurethatwhenpowergenerationprojectsarecommissioned,theycanmeaningfullybeintegratedintothesystemandboththeirvalueandutilitytothesystemmaximisedtodeliverareliablepowersystem.Renewableenergytechnologiessuchassolarandwindattractthelargestshareofinvestment.Fromnowuntil2050,SolarPV(rooftopandutilityscale)woulddrawanannualaverageinvestmentofUSD333billion,onshorewindwouldrequireanannualaverageinvestmentofUSD356billion,andoffshorewindwouldrequireannualdeploymentofUSD283billion.Anannualincreaseininvestmentof2.6,3.7,and5timesinsolarPV,onshoreandoffshorewind,respectively,over2021wouldberequired.WORLDENERGYTRANSITIONSOUTLOOK2023139Investmentalsoneedstobescaledupinotherrenewablepowertechnologies.ThisincludesoverUSD400billionannuallyuntil2050inarangeoftechnologiesincludinghydropower,bioenergy,geothermal,solarthermalandoceantechnologies.Inthebuildingssector,cumulativeinvestmentsovertheperiod2023-2050wouldexceedUSD34trillion,whichrepresentsabout23%ofthetotaltransitioninvestmentstowards2050underthe1.5°CScenario.Energyefficiencyaccountsforthelargestshare,reaching77%followedbyinvestmentinheatpumps(17%),anduseofotherrenewables(largelysolarthermal)fortheremainder6%.Thisrepresentshikesinannualinvestmentinheatpumpsandenergyefficiencyof2.1and3.7times,respectively,comparedwithpreviousyears.Inthetransportsector,investmentswouldrisetoUSD15trillionto2050(11%oftotaltransition-relatedinvestment).Electriccharginginfrastructurewouldaccountfor58%ofthetotalanditsdevelopmentwouldbekeyfortherampingupoftheelectricvehicle’sadoption.Energyefficiencywouldrepresent27%,supportfortransportelectrification9%andhydrogenstationsandbunkeringfacilitiestheremaining5%.Anannualinvestmentincreaseof39timesincharginginfrastructurecomparedwithpreviousyearswouldberequired.Investmentsintheindustrysectorarefocusedonenergyefficiencyandconservationmeasures(implementationofbestavailabletechnologyandprocessesbasedonnewcarriers).Cumulativeinvestmentsunderthe1.5°CScenarioareestimatedataboutUSD12trillionbetween2023and2050,doublethelevelsunderthePlannedEnergyScenario.Othereffortsinthesectorinvolvecarbonremovalinfrastructure–carboncaptureandstorage(CCS)andbioenergycarboncaptureandstorage(BECCS)–withcumulativeinvestmentsestimatedatUSD2.2trillion,deploymentofotherrenewables-basedtechnologies(i.e.biomass,geothermalandsolarthermal)estimatedatUSD0.7trillion,bio-basedammoniaandmethanolatUSD0.7trillion,circulareconomymeasuresatUSD0.5trillionanduseofheatpumpsatUSD0.06trillion.VOLUME1CHAPTER03140Whenfocusingonothertypesofenergysupply,itisimperativetonotetheimportanceofexpandingandbroadeningbiomasssupplychainswhileensuringtheirsustainabilityandenhancingandscalingupconversiontechnologies.Meanwhile,hydrogenproductionandinfrastructurewouldneedtobescaledconsiderably.BioenergyinvestmentswouldrisetoUSD6.2trillionby2050(5%oftotaltransition-relatedinvestment),mostofitforbioenergy-basedpowergenerationcapacity(USD2.6trillion)andtoincreasebiofuelssupply(USD2.4trillion).Theremainderwouldbeneededtoproduceammoniaandmethanolfrombiomass(USD0.7trillion),deploybio-basedplasticsandorganicmaterials(USD0.3trillion)aspartofcirculareconomypracticesandfacilitatethedirectuseofbioenergyinend-usesectors(USD0.2trillion).Investmentsinelectrolyserstoproducegreenhydrogen,hydrogensupplyinfrastructureandrenewables-basedhydrogenfeedstocksforchemicalproductionwouldamounttoUSD170billionperyearonaveragethrough2050.Duetotheearlystageofdevelopmentofgreenhydrogen,supplychaininvestmentsofUSD5billionpergigawatt(GW)ofsupplywouldberequired.3.2.3InvestmentsinphysicalinfrastructureenhancementsforthetransitionRequiredenhancementsinpowergridstoscaleuprenewablesAstheworldtransitionstowardsa1.5°Cemissionspathway,theintegrationofrenewablesourcesintothepowergridbecomesmoreandmorevital.Butpowergridspresentachallengeforrenewables,asthegridsweredesignedtoaccommodatelarge,centraliseddispatchablepowerplants.Tofacilitatetheintegrationofrenewables,powergridswouldrequirearangeofenhancements.Theseincludeinvestmentsinmanagementandcontrolsystemsabletoaccommodatedistributedpowergeneration.Upgradedtransmissionanddistributioninfrastructurecouldhandletheincreasedcapacityneedsandbi-directionalflowsofpower.Furthermore,theadoptionofsmartgridsandtheuseofadvancedanalyticswouldoptimiseoperationsandimprovesystemreliability.Inthe1.5°CScenario,theseinvestmentsinnetworkscumulativelyamounttoUSD22.4trillionto2050.Roughly80%ofthisinvestmentwouldexpandtheelectricitygrid;theremaining20%wouldgotoflexibilitymeasures,likestorage.Withenhancements,powergridscanaccommodaterenewablesandpresentaresilient,flexibleandsustainableenergysystem.WORLDENERGYTRANSITIONSOUTLOOK2023141GreenhydrogenandsyntheticgaspipelinesforupscalingofrenewablesPowersectortransformationinaclimate-compatible1.5°Cpathwaywouldseeavastscale-upofallrenewables,firstandforemostofwindandsolarpower.Asdistributedandvariablepowersources,windandsolarwouldrequireaparadigmshiftinpowersystemoperationandplanning.Greenhydrogencouldbekeyinmitigatingemissionsfromharder-to-decarbonisesectorssuchasaviation,shippingandheavyindustrysectors,wheredirectelectrificationisnearlyimpossible.Globally,theemergenceofacleanhydrogensystemiskeybothtomeetingdemandfromtheseend-usesectorsanddeliveringelectrolysercapacityexpansion.Electrolysercapacitywouldincreasefromanegligibleleveltodayto233GWby2030and5722GWby2050.Anexpansiononthisscaleshowstheneedforarapidevolutioninhydrogeninfrastructureexpansionanddemandsectors.Underthe1.5°CScenario,atotalofUSD3.8trillionwouldneedtobeinvestedingreenhydrogenproductionandinfrastructure(includingseasonalstorageneeds)by2050.Greengaseswillrequireappropriateinfrastructuretoscaleupitsuse,primarilytosupportgrowingconsumptionofgreenhydrogenandbiomethane.Whilebiomethanecanrelyonexistingnaturalgasinfrastructure,thetransportofhydrogenviapipelinerequiresupgradedinfrastructure.Butthedevelopmentofhydrogentransportrequirescostlyinvestmentsthatmaylimittheirviability.Yetthedemandforcleanenergyandhydrogenintheheavyindustryandtransportsectorsissuchthatdedicatednetworksofhydrogenpipelinemaybeinevitable.Still,uncertaintiesremainaroundboththeregulatorylandscapeandtheproductionandstoragetechnologies.Overall,hydrogenpipelinescouldsupportthetransitiontoanet-zerocarbonemissionspathway.Butuncertaintiesconcerningtheirconstruction–includingthepaceofexpansionandtheirinter-connectionwithexistingnetworksanddemandcentres–areforestallingdevelopment.Aviationandshipping-requiredportandbunkeringinfrastructureforrenewablesandhydrogen-derivativefuelsTheshippingandaviationsectorseachcontributeabout2-3%ofglobalemissions.Cuttingemissionsinthesesectorsunderthe1.5°CScenariowouldrequirebetterenergyefficiencyandtransitioningtolow-carbonfuels.Underthe1.5°CScenario,64%ofallfuelsrequiredinshippingwillbeadiversemixofammonia,methanolandhydrogen-basedfuelsby2050,whileinaviation82%oftheenergymixwillneedtobefromsustainableaviationfuels(biojetandsyntheticfuels)by2050.Thetotalrequiredinvestmentsintoenergyefficiency,retrofittingandadditionaloutlaysinnoveltechnologiesforbothaviationandshippingunitswouldreachUSD1.4trillioninthe1.5°CScenarioby2050.Withmorediversefuelsforshippingandaviation,therewouldbeaneedtoinvestintostoragefacilitiesatportsandbunkeringfacilities,especiallytohandleandstoreammonia,methanolandhydrogen.Meanwhile,mostbiofuelandsyntheticfuelblendingwouldoccurmainlyalongthesupplychain,andcurrentstoragefacilitiesforkerosenejetfuelcanbereused.Therefore,acumulativetotalofUSD0.3trillionwouldberequiredby2050inthe1.5°CScenariotoenableatransitioninbunkeringfacilitiessuchasshippingportsandairports.Investmentsininfrastructurearenecessarytoincreasegridflexibility,electrificationanduptakeofrenewablefuelsVOLUME1CHAPTER03142ElectricvehiclecharginghydrogenrefuellinginfrastructurerequiredforroadtransportTheintroductionofelectricandhydrogenvehiclesiskeyforthedecarbonisationofthetransportsector.Inthe1.5°CScenarioby2050,therewouldbeover2billionelectriccars,representing93%ofthefleet.Electricbusesandsmalltruckswouldrepresent76%ofthefleet,whilsthydrogen-fuelledlargetruckswouldrepresent17%ofthefleet.Developinganelectric-charginginfrastructureandhydrogenrefuellingstationsisessentialifthesetargetsareattained.Underthe1.5°CScenario,theelectriccharginginfrastructurewouldrequireacumulativeinvestmentofUSD9trillionthrough2050.CumulativeinvestmentofUSD0.5trillioninhydrogen-refuellingstationsisexpectedthrough2050.Requiredretrofitinindustrysubsectorssuchasiron-steel,chemicalsandcementEmissionreductionsinheavyindustrydependonarangeoftechnologies.Inaddition,transitioningthesesectorswouldtakearoundthreedecadestoreacha100%CO2emissionsreduction.Inthe1.5°CScenario,installationofconventionaltechnologies(mainlyfossilfuel-based)inthesteelandcementsectorsisnotconsideredinthepost-2030timeframe.Energyefficiencymeasuresovertheshorttermincludetheretrofitofexistingplantsandnewbuildswiththebestavailabletechnology.Besidesenergyconservation,CCSinfrastructureisimplementedfrom2030onwardsasretrofitsforcoalandnaturalgasproductionplants,approachinguniversalcoverageby2050.Intheironandsteelindustry,cumulativeinvestmentsinenergyefficiencyandretrofitsamounttoUSD20billion.Forthecementsector,cumulativeinvestmentsareestimatedatUSD1.7trillion.Intheproductionofhighvalue-addedchemicals,ammoniaandmethanol,thetraditionalsteam-crackingprocessseesasharpfallinthe1.5°CScenario.Energyefficiencymeasuresalongwithrenewableheatandrawmaterialsimproveoutcomes,especiallycomparedwiththePlannedEnergyScenario.Inaddition,importantrolesareperformedbymechanicalandchemicalrecycling,shiftstohydrogen-basedfeedstocksformethanolandammoniaandshiftstorenewableelectricitythroughpower-supplytransformation.Theidentifiedtechnologyportfolioofthe1.5°CScenariowillrequireatleastUSD4.5trillionthrough2050.Theshiftfromfeedstockstobiomassandhydrogenaccountsforthelargestshareofinvestments(40%),followedbyheatpumps(35%),energyefficiency(12%),CCS(6%)anddirectuseofrenewableenergies(1%).Theshareofthecirculareconomyofplasticwouldbe3%whereonlyrecyclingisconsidered.WORLDENERGYTRANSITIONSOUTLOOK2023143RequiredretrofitofbuildingsforefficientconsumptionofrenewablesMorethanthree-quartersofthebuildingstockindevelopedmarketsispoorlyinsulated.Worse,itdependsonconventionalfossilfueltechnologiesforheat.Majorgainsinefficiencyandenergyusecouldberealisedwithadeeprenovationofbuildingstock.By2050,over80%ofthestockindevelopedmarkets,60%to80%indevelopingmarketsandcloseto50%inemergingmarketsmustmeethigherefficiencystandards.CumulativeinvestmentsonaglobalscalewouldrequirearoundUSD21.6trilliononbuildingrenovationmeasuresandUSD5.8trillionforheatpumpdeploymentthrough2050.3.3Renewableenergyinvestmentsandpolicies3.3.1EnergytransitioninvestmentsanddrivingpoliciesIn2022,globalinvestmentsintransitiontechnologiesreachedUSD1.3trillion,arecordhigh.Thesefiguresareup19%from2021,and70%from2019,beforethepandemicbegan(Figure3.2),despitearangeofsupplychainissuesandinflationarypressuresonlabourandfinancingcostsaswellasonshippingandconstructionmaterialssuchassteelandcement.Whilerenewablesandenergyefficiencyremainedthelargestsectors–withacombinedvalueofUSD772billionin2022–theirshareofoverallinvestmentshasdeclinedasothertechnologieshavebeguntoattractmoreinvestment.Electrifiedtransporttechnologies(includingelectricvehiclesandtheircharginginfrastructure)10reachedUSD466billionin2022,a54%increaseover2021.Globalsalesofelectriccarsrosestronglyin2022,with2millionsoldinthefirstquarter,up75%fromthesameperiodin2021(IEA,2022g).CommitmentssuchasthedeclarationonZEVsandnewtargetssuchasthoseannouncedinChina(seesection2.7.2),aswellaspoliciesandmeasuresintroducedin2021-2022helpedsupportthisuptake.10Electrifiedtransportinvestmentsincludesalesofelectriccars,commercialvehiclesandbuses,aswellashomeandpubliccharginginvestments(BNEF,2023b).VOLUME1CHAPTER03144Investmentsinelectrifiedheat(mainlyheatpumps)11reachedUSD64billionin2022,representinga35%increaseover2020.Thissharpuptickstandsincontrasttotheperiodpriorto2020,wheninvestmentsgrewatamodestcompoundannualgrowthrate(CAGR)ofjust9%.Sincethen,investmentgrowthhasalmostdoubled,asheatpumpsarereceivingunprecedentedpolicysupportglobally.ExamplesincludetheEuropeanUnion’sREPowerEUPlanandtheUSInflationReductionAct(Box2.8).Meanwhile,hydrogen12investmentsmorethantripledfrom2021,attractingUSD1.1billionin2022.Policysupportforhydrogenisgainingmomentumacrosstheworld:asofOctober2022,morethan60countrieshaddevelopedorwerepreparinghydrogenstrategies,upfromjustonecountry(Japan)in2017.Hydrogentechnologyhasseenstronginflowsofbothearly-stagecapitalandnationalfunding(IRENAandCPI,2023).Globalinvestmentsinenergyefficiency–includingbuildingrenovations,publictransportandelectriccarinfrastructure–reachedUSD273billionin2022(IRENAandCPI,2023).Measurestoboostenergyefficiencywerewidelyadoptedin2022asgovernmentsandconsumersembracedeffortstoaddressfuelsupplydisruptionsandhighenergyprices(IEA,2022g).GlobalinvestmentinenergytransitiontechnologiesreachedUSD1.3trillionin202211Electrifiedheatinvestmentsincluderesidentialheatpumps(BNEF,2023b).12Hydrogeninvestmentsincludehydrogenelectrolyserprojects,fuelcellvehiclesandhydrogenrefuellinginfrastructure(BNEF,2023b).WORLDENERGYTRANSITIONSOUTLOOK2023145VOLUME1CHAPTER03Source:(IRENAandCPI,2023).Notes:Renewableenergyinvestmentsfor2021and2022representpreliminaryestimatesbasedondatafromBNEF.SinceBNEFdatahavelimitedcoverageoflargehydropowerinvestments,thesewereassumedtobeUSD7billionperyear,equivalenttotheannualaverageinvestmentsin2019and2020.Energyefficiencydataarefrom(IRENA,2022m).Thesevaluesareinconstant2019dollars,whereasallothervaluesareincurrentpricesandexchangerates.Duetothelackofmoregranulardata,theunitscouldnotbeharmonisedacrossthedatabases.Forthisreason,thesenumbersarepresentedtogetherforindicativepurposesonlyandshouldnotbeusedtomakecomparisonsbetweendatasources.Dataforotherenergytransitiontechnologiescomefrom(BNEF,2023b).FIGURE3.2Globalinvestmentinenergytransitiontechnologies,2015-2022Investment(USDbillion)040020014001200100080060020152016201720182021202220202019ElectriﬁedheatRenewableenergyElectriﬁedtransportEnergyeciencyEnergystorageHydrogenCarboncaptureandstorage66266265665674974976476477277283983910961096130813081463.3.2RenewableenergyinvestmentsandpoliciesAnnualinvestmentsinrenewableenergypeakedatUSD499billionin2022–43%higherthanin2020(BNEF,2023b);(Figure3.3).Inpartdrivenbythedemandforcleanenergy,renewablesbenefitedfromstronginvestorappetiteandrisingawarenessamongpolicymakersaboutclimatechange,energysecurityandstabledomesticenergysources.Theyears2020and2021alsocoincidewithdeadlinesforsomejurisdictionstoachieverenewableenergytargetsandforpowergenerationcompaniestoapplyforgovernmentsubsidiesincertaincountries,withnotableexamplesbeingthefeed-intariff(FiT)inChinaandVietNam(IRENAandCPI,2023),basedon(Doetal.,2021;Jaghory,2022).WORLDENERGYTRANSITIONSOUTLOOK2023FIGURE3.3Globalannualfinancialcommitmentsinrenewableenergybytechnology,2013-202220142013239239201534034020162632632017351351201832232220193293292020348348202143043020224994990200100600500400300Commitments(USDbillion)OnshorewindHydropowerBiofuelsUnknownOshorewindMarineSolarPVBiomassSolarthermalincludingCSPGeothermalCompoundannualgrowthrate2013-20222882888.5%Source:(IRENAandCPI,2023).Notes:Investmentsfor2021and2022arepreliminaryestimatesbasedondatafrom(BNEF,2023c).SinceBNEFdatahavelimitedcoverageoflargehydropowerinvestments,thesewereassumedtobeUSD7billionperyear,equivalenttotheannualaverageinvestmentforthetwopreviousyears.CSP=concentratedsolarpower;PV=photovoltaic.14713SolartechnologiesincludesolarPVandthermal.Investmentsinsolarthermalincludeconcentratedsolarpowerplantsaswellassolarwaterheaters.Windtechnologiesincludeonshoreandoffshorewind.14Itshouldbenoted,however,thatasinvestmentsforend-useapplicationsareoftenmadeatthehouseholdorfirmlevel(e.g.biomassboilers,geothermalheatpumps),datacanbelimited.Renewableenergyinvestmentsbytechnologyandenduse.Cost-competitivesolarPVandonshorewindcontinuetoleadinvestmentfigures.Theirambitioustargetsandpolicysupportinstruments(FiTsandauctions)makethemattractiveinvestments.Between2013and2022,solarandwindtechnologies13attractedthelion’sshareofinvestment,asshowninFigure3.3.In2013,theircombinedshareoftotalrenewableenergyinvestmentwas82%;in2022thisshareroseto97%.Mostrenewableinvestmentscontinuetoflowtothepowersector,withendusesmakinguponly10%ofinvestmentseachyearonaveragebetween2013and2022(Figure3.4).14Theshareofrenewableenergyinvestmentsgoingtoend-useapplicationshasfallenovertime.In2013,renewableenergyforend-useapplicationsreceived8.5%ofthetotal(orUSD20billion),downtolessthan5%(orUSD17billion)in2020.Preliminarydatashowthattheirsharehasslumpedto3%in2022.Thechroniclackofinvestmentsinenduses,whichincludesheatgeneration(e.g.solarwaterheaters,geothermalheatpumps,biomassboilers)andtransport(e.g.biofuels)leavesmuchoftheglobalenergysystemreliantonfossilfuels.SolarPVandonshorewindreceivemorethan90%ofrenewableenergyinvestmentsVOLUME1CHAPTER03148RenewableenergyinvestmentsbyregionRenewableinvestmentsremainconcentratedinlow-riskcontexts,withEastAsiaandthePacificcontinuingtoattractthemostinvestment,obtainingabout45%ofthetotalin2019-2020(equaltoUSD307billionperyear)(Figure3.5)andalmosttwo-thirdsoftheglobaltotalin2022.Chinamadeupmorethanfour-fifthsoftheregion’sinvestment,drivenbyitsgovernment’simmenseambitionthattargetedpeakemissionsin2030andcarbonneutralityby2060.Chinahasinvestedhistoriclevelsoffundsinrenewabledeploymentanddevelopment.VietNamrecentlyovertookJapanastheregion’ssecond-largestdestinationofcapital.TheseweredrivenbyFiTssettoexpirein2020and2021,leadingtoawaveofprojectapplicationsreachingfinancialcloseduringthoseyears.WORLDENERGYTRANSITIONSOUTLOOK2023FIGURE3.4Globalannualrenewableenergyinvestmentsbyapplication,2013-202220132014201520162017201820192021202223928834026335132232943049934823923923928828828834034034026326326335135135132232232232932932943043043049949949934834834820200200100600500400300Investments(USDbillion)UnknownEnd-usePowerSource:(IRENAandCPI,2023).Notes:Investmentsfor2021and2022arepreliminaryestimatesbasedondatafrom(BNEF,2023c).SinceBNEFdatahavelimitedcoverageoflargehydropowerinvestments,thesewereassumedtobeUSD7billionperyear,equivalenttotheannualaverageinvestmentforthetwopreviousyears.149In2022,EuropeandNorthAmericatogetherreceivedabout24%oftheinvestment,splitalmostequallybetweenthetworegions.TheUnitedStatesobtainedmostoftheinvestmentsinNorthAmerica,whileinEurope,theUnitedKingdom,GermanyandFrancereceivedthehighestshares(Figure3.5).Bywayofcontrast,theregionscontaining120developingandemergingmarketsobtainedonlyabout15%oftotalinvestmentsin2022.Withtheirambitiousrenewableenergytargets,risk-mitigationschemesandrobustpolicysupport(FiTs,auctions),IndiaandBrazilbenefitthemost.TheshareofinvestmentsgoingtoAfricakeepsfalling(seeBox3.1),withaccesstofinancingexpectedtobecomemoreconstrainedunlessgovernments,developmentfinanceinstitutions(DFIs)andotherorganisationssuchasphilanthropiesmobilisemorepublicfunds(seesection3.4).VOLUME1CHAPTER03FIGURE3.5Investmentinrenewableenergybyregionofdestination,2013-2022Investment(%)20132014201520162017201820192021202220200102030405060708090100EuropeEastAsiaandPaciﬁcNorthAmerica(excludingMexico)EurasiaSouthAsiaSub-SaharanAfricaOthersLatinAmericaandtheCaribbeanSource:(IRENAandCPI,2023).Notes:“NorthAmerica(excludingMexico)”includesBermuda,CanadaandtheUnitedStates.“Others”includetheMiddleEastandNorthAfrica,OtherOceania,Transregional,OtherAsiaandUnknown.Formoredetailsonthegeographicclassificationusedintheanalysis,pleasesee:(IRENAandCPI,2023).150RenewableenergyinvestmentsbyfinancinginstrumentandsourceoffundingAmongfinancinginstruments,theshareofdebtfinancingincreasedfrom23%in2013to56%in2020(seeFigure3.6).ThisislikelylinkedtothematurationandconsolidationofmajorrenewabletechnologiessuchassolarPVandonshorewind,whichattracthighlevelsofdebt,especiallyindevelopedmarkets(e.g.G20),aslendersareabletoenvisionregularandpredictablecashflowsoverthelongterm,facilitatedbypowerpurchaseagreementsandotherpolicysupport(e.g.FiTs).In2019-2020,debtaccountedforalmosthalfofsolarPVinvestment(43%)andalmost70%ofonshorewindinvestment.ThehighershareofdebtinonshorewindrelativetosolarPVcouldrelatetothelargerroleplayedbystate-ownedfinancialinstitutionsindevelopingwindprojects,whichgenerallypreferdebtlending.Theshareofconcessionalfinance(grantsandlow-costprojectdebt)accountedforonly1%oftotalrenewablefinancein2020.Scarceconcessionalfinance–mostoftenprovidedbygovernmentsandmultilateral,bilateralornationalDFIs–isnotreachinglessmaturemarkets,whichmeanstheenergytransitionisalsounabletoreachmanydevelopingcountries.Governmentsprovidedmostgrant-basedfinance(55%),withDFIstogethercontributing93%oftotallow-costprojectdebtcommittedforrenewableenergybetween2013and2020.Oftheconcessionalfinancethatcouldbetrackedtospecificcountries,68%wasdirectedtolow-andlower-middle-incomecountries.16Withinthatpoolofgrantsandlow-costdebt,30%flowedtotheleast-developedcountries.17Grantsandlow-costprojectdebtaccountedforonly1%oftotalrenewablefinancein202016AspertheWorldBank’s(2021)country-incomeclassification.17AspertheUnitedNation’slistofleast-developedcountries.WORLDENERGYTRANSITIONSOUTLOOK2023151Amongregions,LatinAmericaandtheCaribbeanhadthelargestshareofconcessionalfinance(37%);otherdevelopingregionshadamoreevenspread.Theshareoflow-costprojectdebtwasalsolargestinLatinAmericaandtheCaribbean(43%oftotallow-costdebt),whileSub-SaharanAfricareceivedthemostgrantfinancing(29%oftotalgrantsbetween2013and2020).TheseregionaltrendsareexplainedbytherelativedominanceofDFIsprovidinglow-costdebtinLatinAmericaandthemixofDFIsandgovernmentsprovidinggrantsinSub-SaharanAfrica(Box3.1).Grantfinanceisessentialforbuildingapipelineofbankableprojects,helpingprojectsreachalevelofmaturitythatmightattractinvestors,launchingpilotprojects,aswellashelpingtofundnon-profit-drivenactivitiessuchasgeothermalexplorationdrillingorthedecommissioningoffossilfuelplants.VOLUME1CHAPTER03FIGURE3.6Globalinvestmentinrenewableenergy,byfinancialinstrument,2013-202020132014201520162017201820192020Investment(%)0102030405060708090100UnknownProject-levelequityGrantBalancesheetﬁnancing(equityportion)Project-levelmarketratedebtLow-costprojectdebtBalancesheetﬁnancing(debtportion)Source:(IRENAandCPI,2023).152Lookingatallfinancialinstruments(concessionalandnon-concessional)byregion,publicspending(particularlymultilateraldevelopmentfinance)dominatedinmostdevelopingmarkets,hencetheirhighersharesofdebtlending.AgroupofcountriesinCentralAsia–Kazakhstan,KyrgyzstanandTajikistan(classifiedas“OtherAsia”inFigure3.7)–hadthelargestportionofdebtlendingovertheperiod2013-2020(69%),followedbyLatinAmericaandtheCaribbeanandSub-SaharanAfrica(eachat58%)(Figure3.7).Meanwhile,privatefinancedominatedinEuropeandNorthAmerica,withhighinvestmentfromcommercialfinancialinstitutionsandcorporations,resultingintheemergenceofequityfinanceintheseregions.Privateactorsprovidedtwo-thirdsofinvestmentsin2020.Commercialfinancialinstitutionsandcorporationssupplythemainprivatefinance,togetheraccountingforalmost85%ofprivatefinanceforrenewablesin2020.Upuntil2018,privateinvestmentscamepredominantlyfromcorporations(onaverage,65%in2013-2018),butin2019and2020theshareofcorporationsfellto41%,withalargersharefilledbycommercialfinancialinstitutions.Thisalignswiththefallingshareofequityfinancingdiscussedpreviously.WORLDENERGYTRANSITIONSOUTLOOK2023FIGURE3.7Renewableenergyinvestmentbyregionandtypeofinvestment(debtvs.equity),2013-2020OtherAsiaLatinAmericaandtheCaribbeanSub-SaharanAfricaSouthAsiaEurasiaEastAsiaandPaciﬁcMiddleEastandNorthAfricaEuropeNorthAmerica(excludingMexico)OtherOceaniaTransregionalOtherDebtEquityInvestment(%)0102030405060708090100Source:(IRENAandCPI,2023).153State-ownedfinancialinstitutions,nationalDFIsandstate-ownedenterpriseswerethemainsourcesofpublicfinancein2020(morethan80%).MultilateralDFIsprovided9%ofpublicfinance–inlinewiththeirpastannualcommitments–andaccountedforabouthalfofinternationalflowsfromthepublicsector.CommitmentsfrombilateralDFIsin2020fell70%comparedto2019.ThismeansthatmultilateralandbilateralDFIsprovidedlessthan3%oftotalrenewableenergyinvestmentsin2020.Goingforward,multilateralandbilateralDFIsneedtodirectmorefunds,atbetterterms,towardslarge-scaleenergytransitionprojects.In2020,financingfrombilateralandmultilateralDFIswasprovidedmainlythroughdebtfinancingatmarketrates(requiringrepaymentwithinterestrateschargedatmarketvalue),whilegrantsandconcessionalloansamountedtojust1%oftotalrenewableenergyfinance(Figure3.8).Theseinstitutionsareuniquelyplacedtosupportlarge-scaleandcross-borderprojectsabletoacceleratetheglobalenergytransition.VOLUME1CHAPTER03FIGURE3.8PortionofDFIfundingintheformofgrantsandlow-costdebt,2013-20202013201320142014201520152016201620172017201820182019201920202020BilateralDFIs(%)0255075100MultilateralDFIs(%)0255075100GrantUnknownProject-levelmarketratedebtProject-levelequityLow-costprojectdebtBalancesheetﬁnancing(equityportion)Source:(IRENAandCPI,2023).Note:DFI=developmentfinanceinstitution.154WORLDENERGYTRANSITIONSOUTLOOK2023BOX3.1InvestmentsinrenewableenergyinAfricabyregionandsourcesoffinancingIRENAanalysedthefinancelandscapeofAfricainitspublicationRenewableenergymarketanalysis:Africaanditsregions(IRENAandAfDB,2022).Despitethecontinent’svastpotentialandrequirements,just2%oftheUSD2.8trillionspentonrenewablesgloballybetween2000and2020–equivalenttoUSD60billion,excludingmajorhydropower–wenttoAfrica(Figure3.9).Moreover,three-fourthsoftheinvestmentsmadebetween2010and2020werecapturedbyjustfourcountries:SouthAfrica,Morocco,EgyptandKenya.Thesecountriesofferrelativelyfavourablerisk-returnprofilesowingtotheirpolicyandinstitutionalenvironments,regulations,accesstofinanceandmarketcharacteristics(e.g.size,prospectsandstability).FIGURE3.9CumulativerenewableenergyinvestmentinAfricaandglobally,2000-2020Source:(IRENAandAfDB,2022).2000-20092010-2020Cumulative2000-2020587USDbillionGlobalAfrica2254USDbillion2841USDbillionNorthAfricaWestAfricaEastAfricaCentralAfricaSouthernAfricaUSD1.9billionUSD0.5billionUSD2.0billionUSD0.1billionUSD0.3billionUSD17.5billionUSD3.9billionUSD9.7billionUSD1.3billionUSD22.4billionUSDbillioncurrentCentral3%Africa20%EastAfrica32%NorthAfrica38%SouthernAfricaWest7%Africa60USDbillion4.8USDbillion0.8%ofglobalinvestment55USDbillionofglobalinvestment60USDbillionofglobalinvestment2.4%2%155Africareceivedonly2%oftheUSD2.8trillionspentonrenewablesgloballybetween2000and2020VOLUME1CHAPTER03NorthAfricawasthesecond-largestrecipientofrenewableenergyinvestmentsonthecontinentduring2000-2020,afterSouthernAfrica.MoroccoandEgyptreceivedthemajorityoffunding(47%and45%,respectively),primarilyforsolarPV(57%)andonshorewind(22%).TheNorthAfricanregionbenefitsfromgreaterprivatesectorparticipationthanisseenelsewhereonthecontinent.In2020,privateactorsprovided65%ofallrenewableenergyfinanceinNorthAfrica,upfromonly11%in2013.Incontrast,Sub-SaharanAfricareliesonpublicfinancing.EastAfricatookinone-fifthofthecontinent’sinvestmentoverthepasttwodecades,whilepublicsourcesmakeup57%oftheoverallinvestmentbetween2013and2020,mostofitfrombilateralandmultilateralDFIs(51%).WestAfrica,whichtookinjust7%ofthecontinent’sinvestment,saw61%ofinvestmentscomefrompublicsources,abouthalfofthembackedbybilateralandmultilateralDFIs.Halfofallrenewableenergyinvestmentsintheregionwenttojusttwocountries–Nigeria(29%)andSenegal(21%).Intermsoftechnologies,investmentsweremainlyinsolarPV(55%)andonshorewind(13%)projects.Finally,CentralAfricareceivedthelowestlevelsofinvestmentofanyregiononthecontinent,despitethedireneedtoexpandenergyaccess.About56%offinancingcomesfrompublicsources,thoughsomemarketscanattractnotableinvestmentfromprivatesources,namelyAngola(57%)andChad(79%).1563.3RoleofpublicfinanceandpoliciesforajustandinclusiveenergytransitionPrivateinvestmentsmadeupabout75%ofthetotalinvestmentsintheperiod2013-2020,whichwentmainlytomoreadvancedeconomies.Thedisproportionateflowofinvestmentstowardsmaturetechnologies/applicationsandspecificmarketsrevealsakeycharacteristicofmainstreamprivatecapital:itfavourslower-riskinvestmentsandprioritisesfinancialreturnsoversocial,environmentalandclimate-relatedgains.Assuch,privatecapitalflowstocountrieswithlowerrealorperceivedrisks,orintofrontiermarketsonlywhenrisk-mitigationfacilitiesareprovided.Meanwhile,thepoorestcountriesremainunderserved(IRENAandCPI,2023).Whencapitaldoesflowtohigher-riskenvironments,itgenerallydoessoatafarhighercost.Thismeansthatthelowestincomepopulationspaythemostforoftenbasicenergy–energythatisuniversallyrecognisedasessentialforpovertyalleviationandsocio-economicadvancement.Thismandatesastrongerroleforpublicfinancingwithlessrelianceonprivatecapital,whichpersistsinwideningthedisparities.Butpublicfundsarelimited,sogovernmentshavebeenfocusingwhatisavailableonde-riskingprojectsandimprovingtheirrisk-returnprofilestoattractprivatecapital.Risk-mitigationsolutionshavebeenusedtolowertherisksassociatedwithrenewableenergyprojects’abilitytorepayobligations.Suchrisksstemfromuncertaintiesregardinggovernmentactions(political,regulatory,policy),macro-economicconditions(e.g.currencyrisks),off-takercreditworthiness,forcemajeureandotherevents.Amongrisk-mitigationinstruments,apreferenceforsovereignguaranteeshasemergedamonglendershopingfora“one-size-fits-all”solution.Butsuchguaranteesaretreatedascontingentliabilitiesbyregulators,credit-ratingagenciesandinternationalinstitutions(e.g.theInternationalMonetaryFund)andmayhamperacountry’sabilitytotakeonadditionaldebtforcriticalinfrastructuredevelopmentandotherinvestments.Moreover,sovereigndebtsarealreadystressedtotheirbreakingpointinemergingeconomiesgrapplingwithhighinflationandcurrencyfluctuationsordevaluationsinthewakeoftheCOVID-19pandemic.Inthismacroeconomicenvironment,manycountriescannotaccessaffordablecapitalininternationalfinancialmarketsorprovidesovereignguaranteesasarisk-mitigationinstrument.WORLDENERGYTRANSITIONSOUTLOOK2023157Giventheurgentneedtostepupthepaceandgeographicspreadoftheenergytransition,andtocaptureitsfullpotentialinachievingsocio-economicdevelopmentgoals,moreinnovativeinstrumentsareneededthathelpunderinvestedcountriesreapthelong-termbenefitsofthetransitionwithoutputtingtheirfiscallyconstrainedeconomiesatafurtherdisadvantage.Moreover,amorecomprehensivewayofdefiningriskisneeded.Thenarrowfocusontheriskofenergyassetsnotpayingoff–fromtheperspectiveofreturns-to-investorsonly–needstobebroadenedtoincludeenvironmental,planetaryandsocialrisks.Theseincludetheriskofleavinghugeswathesofthepopulationoutoftheenergytransitionandlockedinunderdevelopment,andtheriskofnotachievingtheSustainableDevelopmentGoals.Investmentrisksmustbeviewedfromtheperspectivesofgovernmentsandtheinternationalcommunity.Publicpoliciesandfundingmustbetailoredaccordingly,withspecificinterventionsaimingtocorrectmarketfailuresthatmanifestintheformofnegativesocial,economicandenvironmentalexternalities.Thisapproachcanfurtherhelpalignprivateincentiveswithbroaderpublicandsocialgoals.Withthelimitedpublicfundsavailableinthedevelopingworld,theinternationalcommunitymuststepup.Mostpublicinvestmentsaremadefromnationalsourceswithrelativelylittleinternationalcollaboration.BilateralandmultilateralDFIstogetherprovidedlessthan3%ofglobalinvestmentin2020.Inaddition,moreandmorefinancingcomesfrombilateralandmultilateralDFIsintheformofdebtfinancingatmarketrates,requiringrepaymentwithinterestrateschargedatmarketvalue.Grantsandconcessionalloansamountedtojust1%oftotalrenewableenergyfinance.Sincetheinterestratesarethesame,theonlydifferencethatDFIfinancingprovidesistomakefinanceavailable,butathighcostsforusers.Thismeansthatthelowest-incomepeoplepaythemostforrenewableenergy(IRENAandCPI,2023).VOLUME1CHAPTER03158Morepublicfundsneedtobedirectedtoregionsandcountriesthathaveimmenseuntappedpotentialbutfinditdifficulttoattractprivateinvestment;butpublicfundingforrenewablefinance(andclimatefinancemorebroadly)hasstruggled,especiallyoverthepastthreeyears.Therecentmacro-economicandgeopoliticalhurdlesfacingmostcountrieshaverequiredthemtodiverttheirattentionandfundstowardspoliciestotackleinflation,supply-chaindisruptions,foodshortagesandslowgrowth.Theynowfaceadauntingeconomiccontextwhererenewableinvestmentsarecompetingforscarcepublicresources.But,asshowninIRENA’sreportonpost-COVIDrecovery,energytransitioninvestmentscanpavethewayforequitable,inclusiveandresilienteconomies(IRENA,2020e).Forthat,internationalcollaborationandpublicfinanceflowsfromtheGlobalNorthtotheGlobalSouthareessentialtoachievingthe1.5°CScenarioandrealisingitssocio-economicbenefits.Thiswasexemplifiedintheoff-gridrenewableenergysectorthatfacedstrongheadwindsin2020-2021.Butdespitethesetbackin2020,investmentsreachedrecord-highlevelsin2021owingtosupportfrominternationalpublicfinancinginstitutions(Box3.2).MorefundingneedstoflowfromtheGlobalNorthtotheGlobalSouthtoachievethe1.5°CScenarioandrealiseitssocio-economicbenefitsWORLDENERGYTRANSITIONSOUTLOOK2023159VOLUME1CHAPTER03Figure3.10Globalsharesofannualcommitmentsinoff-gridrenewablesbyfinancialinstrument,2013-2021InstitutionalinvestorsPrivateequity,venturecapitalandinfrastructurefundsDevelopmentﬁnanceinstitutionsGovernmentagenciesandintergovernmentalinstitutionsIndividuals(incl.crowdfundingplatforms)CorporationsandbusinessassociationsUndisclosedOthers(incl.non-proﬁt/impactfunding)Commercialﬁnancialinstitutions0200100600500400300USDmillion(constant2020)1101102323264264332332409409438438558558468468438438201320142015201620172018202120192020BOX3.2Off-gridrenewableenergyinvestmentsindevelopingcountriesDespitetheCOVID-19pandemicanditseconomicfallout,investmentsintheoff-gridrenewablesectorcontinuedtogrowandhelpelectrifymillionsofpeople.Annualinvestmentsinoff-gridrenewableenergyreachedarecordhighofUSD558millionin2021(WoodMackenzie,2022);(seeFigure3.11).RecentgrowthhasbeendrivenbyinvestmentsinSub-SaharanAfrica,particularlyinEastAfrica,andmorerecentlyinWestAfrica.Moreover,thescopeofinvestmentshasgraduallyexpandedfromservingresidentialpurposestoalsoincludingmorecommercialandindustrialapplications.Supportfrominternationalpublicfinancialinstitutionswasvitalforthesectorinthepeakpandemicyears2020-2021.Theshareofpublicfinancingclimbedfrom30%in2015to44%in2019,aspublicfinancialinstitutionsprovidedUSD435billion,equivalentto44%oftheoverallvolumeofinvestments.Developmentfinanceinstitutionsinjectedmuchofthiscapitalintoinvestments,andtheircontributions,infact,exceededthosefromprivateequity,venturecapitalistsandinfrastructurefunds,whichhaddominatedthesectorinthepre-pandemicperiodbeginningin2020.Morethan80%oftheoverallinvestmentsflowedintointernationaloutlays,highlightingtheimportanceofinternationalflowsofpublicfinancingfortheoff-gridsector.Source:(IRENAandCPI,2023).160Publiccapitaltransferredthroughofficialdevelopmentassistance,includingdonationsandgrants,concessionalandmarket-ratefinancingfromDFIsandexportcreditagencies,willbeessentialforfinancingtheenergytransitionintheGlobalNorth,especiallyincountriesthatarefiscallyconstrained,suchasLDCs.ThismayalsobedonethroughthecapitalisationofmultilateralandUnitedNations–linkedfunds(suchastheGreenClimateFund).Carbonemissionpermitsandoff-settingmarketscancomplementfinancing.Publicfunds(domesticorthroughinternationalcollaboration)mustflowthroughintermediaries(e.g.governments,multilateralandbilateralDFIsandglobalfundssuchastheGreenClimateFundorJustEnergyTransitionPartnership)usingavarietyofinstruments.Theseinstrumentscanbeexistingornewlydesignedandmayinclude:•Governmentspendingsuchasgrants,rebatesandsubsidies.•Debt,includingconcessionalfinancingandguarantees.•Equityanddirectownershipofassets(suchastransmissionlinesorlandtobuildprojects).•Fiscalpolicyandregulations,includingtaxesandlevies,exemptions,accelerateddepreciationandregulationssuchaspowerpurchaseagreements;thisisespeciallythecasewhenthetariffspaidtoproducers–andthecostofrunningthesystem–arelessthantariffscollectedbyconsumers,withthedifferencepaidthroughagovernmentsubsidy.Suchinstrumentsshouldbeusedwithcaution.Benefitsshouldbedistributedequitablyandnotbeclusteredamongcertainindustryinstruments.PublicfundsmustflowthroughintermediariessuchasmultilateralandbilateralDFIsusingavarietyofinstrumentsWORLDENERGYTRANSITIONSOUTLOOK2023161AsshowninFigure3.9,publicfinanceflowsviainstrumentsinthecategoriesofIRENA’sbroadpolicyframework.Examplesincludethefollowing(IRENAandCPI,2023):•Deploymentpoliciesdictatethatpublicfundscanflowasdirectinvestmentsingovernment-ownedtransitionassets,public-privatepartnershipsorindesigningandfundingpoliciesthatcanattractorsupportprivateinvestment(e.g.concessionalfunds,capitalsubsidies,grantsandtariff-basedmechanismssuchasauctions,FiTsandfeed-inpremiums).•Integratingpoliciesstipulatehowpublicinvestmentscanfundinfrastructureandassetsthatintegraterenewablesintotheenergysystem(e.g.regionalandnationaltransmissionlines,pumpedhydroelectricenergystoragefacilities).Intherun-upto2030,publicinvestmentinenergyefficiencyandtransition-enablinginfrastructure(suchasgridexpansionandflexibility)willbevital(Box3.3).•Underenablingpolicies,publicmoneycansupportlong-termenergyplanning,capacitybuildingandtraining,researchanddevelopment,thedevelopmentoflocalindustryandvaluechainsaswellastechnicalassistanceofferedviamultilateraldevelopmentbanksandinter-governmentalorganisationssuchasIRENA.•Understructuralchangeandjusttransitionpolicies,publicfundscangointothere-designofpowermarketstomakethemmoreconduciveforlargesharesofvariablerenewableenergy,towardscompensationforthephasing-outoffossilfuels,aswellaspoliciestoensurethattheenergytransitionpromotesgenderequalityandsocialinclusion,amongmanyotherpriorities.•TheglobalpolicyframeworkdefinesinternationalandSouth-Southcollaboration,whichiskeytostructuringandensuringtheinternationalflowsfromtheGlobalNorthtotheGlobalSouth.•Inaddition,althoughnotdirectlyrelatedtoanyspecificsector,therearemacro-economicpolicies(fiscal,monetaryandcurrencyexchangepolicies)thataffectthedeliveryofpublicfundstowardstheenergytransition.Tofurtherstrengthenpublicinvestmentflows,moreattentionshouldbepaidtopoliciesthatgivegovernmentsmoreflexibility(fiscalspace)intheirspendingchoices.Morecollaborationonclimate,enabledthroughaglobalwealthtax,couldcontributetothisgoal.Intheforthcomingsecondvolumeofthisstudy,IRENAoffersnumerouspolicychoicestocreateadditionalinvestmentspace.Becauseofthehighconcentrationofwealth,evenjustafewprogressivetaxincreasescanyieldenormousbenefits.Aglobalrevenueboostmighthelppublicexpendituresoneducation,healthcareandtheachievementofajustandinclusiveenergytransition.VOLUME1CHAPTER03162Someelementspresentedintheframework(Figure3.10)mightoverlap.Forexample,taxincentivesarefiscalormacroeconomicpolicieswhileactingasdeploymentpolicies,andfundinggridinfrastructurecanbeeitheranenablingoranintegratingpolicy.Whilefundingcapacitybuildingispartofanenablingpolicy,thesefundsfacilitatestructuralchangeaspartofsocialdevelopmentprogrammes,inadditiontoeducation,socialprotectionandcompensationpolicies,etc.Thus,therearecomplexinter-linkagesandfeedbackloopsamongthedifferentpoliciesandinstruments.Byunderstandingthebroadstructuralworkingsoftherenewableenergyeconomy,publicpolicyandfinancingcanbeusedinstrategicfashiontoadvancetheenergytransition.WORLDENERGYTRANSITIONSOUTLOOK2023FIGURE3.11TheflowofpublicfinanceforajustandinclusiveenergytransitionGovernmentsNationalInternationalSOFIs/SOEs/nationalDFIsLocalbanks/microﬁnanceinstitutionsCo-operatives/foundations/NGOs/crowdfundingplatformsDirectinvestmentsingovernment-ownedassets,designingandfundingpoliciesInvestmentininfrastructurethatsupportintegrationofrenewablesintotheenergysystemSupportforlong-termenergyplanning,capacitybuildingandtraining,researchanddevelopment,technicalassistance,etc.PoliciestoaddressmisalignmentsandmarketfailuresGovernmentspendingincludinggrants,rebates,subsidiesDebtincludingexistingandnewissuances,creditinstruments,concessionalﬁnancing,guaranteesEquityanddirectownershipofassetsFiscalpolicyandregulationsincludingtaxesandlevies,exemptions,accelerateddepreciation,andregulationssuchasPPAsMultilateralandbilateralDFIsExportcreditagenciesGlobalfunds(e.g.GCF,JETP)CarbonﬁnanceplatformsInternationalandSouth-SouthcollaborationMacroeconomicpolicies(formulateandimplementﬁscal,monetaryandforeignexchangepoliciesthatimpactthedeliveryofpublicfunds)StructuralchangeandjusttransitionpoliciesEnablingpoliciesIntegratingpoliciesDeploymentpoliciesPOLICIESPotentialinstrumentsIntermediariesFUNDINGSOURCESSource:(IRENAandCPI,2023)Notes:DFI=developmentfinanceinstitution;GCF=GreenClimateFund;JETP=JustEnergyTransitionPartnership;NGO=non-governmentalorganisation;PPA=powerpurchaseagreement;SOFI=state-ownedfinancialinstitution;SOE=state-ownedenterprise.163VOLUME1CHAPTER03BOX3.3Short-terminvestmentpriorities(by2030)Through2030,investmentmustbescaledupalongsideaparallelanddrasticshiftintotransitiontechnologiesandinfrastructure,whilstavoidingoptions(suchasfurtherinvestmentsinnaturalgaspipelines)thatwilllockinemission-intensiveenergysourcesandphysicalinfrastructureandincurtheriskofstrandingassets.Itisimperativetolaythegroundworkforresilient,inclusivephysicalinfrastructurethatenablesemergingtransitiontechnologiestopredominate.The1.5°CScenarioseescumulativeinvestmentsbetweennowand2030totallingUSD45trillion,withtransitiontechnologiesrepresenting81%oftheinvestment,orUSD36trillion.TotalcumulativeenergysectorinvestmentsinthePlannedEnergyScenariountil2030areUSD29trillion.Therefore,anadditionalcumulativeinvestmentofUSD16trillion-oranannualadditionofUSD2trillion–wouldbeneededinthe1.5°CScenariothrough2030.Investmentsinefficiency,gridexpansionandflexibilityareimperative,whileanyfinancingoffossilfuelandrelatedinfrastructuresshouldhewtotransitiongoalsifonlytoavoidstrandingassets.Therefore,the1.5°CScenariorequiresanaverageannualoutlayofUSD4.5trillionintransitioninvestmentsthrough2030.Theseoutlayswouldfocusonrenewables,efficiencyandlow-carbontechnologiesandincludeenablinginfrastructurelikepowergridsandstorage.Until2030,investmentswouldneedtofocusonrenewables,infrastructureandefficiency.Thesetechnologiesareaffordable,readilyavailableandfeasibletoscale.As2030approaches,end-usesectorsinenergyefficiencywillneedanannualaverageinvestmentofUSD1.8trillion,followedbyrenewablepowergenerationcapacity(US1.3trillionperyear).InfrastructureforthescaleupofrenewableswillrequireannualinvestmentsofUSD0.6trillionforelectricitynetworkexpansionandmodernisation.Theelectrificationofend-usesectorswillrequireUSD0.4trillion,alongwithrenewables’directusesanddistrictheat(USD0.3trillion)andhydrogenanditsderivatives,includinginfrastructure(USD0.1trillion).Thetransitionisalsodrivingasurgeindemandforcriticalmaterialssuchascopper,lithium,cobalt,nickel,rareearthelementsandplatinumgroupelements.Asuccessfuldeploymentofrenewabletechnologieshingesontheirreliablesupply.Asavitalmaterialforelectricgrids,solarpanelsandelectricvehicles,copperisprojectedtoseedemanddoubleby2030.Similarly,lithiummayseeathree-tosix-foldhikeindemand.Demandforcobaltisalsoexpectedtwotothreetimesby2030.Additionally,nickel,usedinelectricvehiclebatteriesandhydrogenelectrolysers,isprojectedtofaceanincreaseindemandoftotothreetimesby2030.Itisworthnotingthatdespitetheforecasteddemandforthesematerials,theycanremaininthecirculareconomyfordecadesthroughreuseandrecycling.Bywayofcontrast,themassiveinvestmentsinthefossilfueleconomy(oil,coalandgas)arewastedafterfirstuseandrepresentaneconomicburdenintermsofgreenhousegasemissions.Tomeetsoaringdemand,thesectorwouldneedtoseesignificantinvestmentsinbothminingandprocessingcapacities.Forexample,thedemandforcopperisexpectedtorisebyabout7Mt/yearfrom2022to2030,requiringaninvestmentofUSD160billionby2030,assumingtheaveragecapitalintensityfromrecentprojects.Similarly,forlithium,aninvestmentofUSD52billionby2030wouldsecurethe2.4Mt/yearrequiredforthetransition.Note,however,thatminesoftenproducevariouskindsofores,e.g.nickelandcobaltalongsidecopper,soinvestmentsinonematerialoftenyieldothermaterials.Whileinvestmentsinminingandprocessingarecrucialthisdecade,investmentsininnovationacrossthesupplychainarealsoneeded.Forinstance,inthecaseofelectricvehiclebatteries,substantialinvestmentsareneededtoovercomekeytechnologicalchallengesandtoincreaserecyclingcapacitybyafactorof25by2030(WEF,2019).164Movingforward,publicinvestmentsinrenewableenergyneedmorecapital.Similarly,lendingtodevelopingnationsneedstobetransformed,forexample,withgrantsandconcessionalloans,likethelossanddamagefundlaunchedatCOP27.Meanwhile,publicfinanceandpolicyshouldcontinuetobeusedtocrowdinprivatecapital.IRENA’sInvestmentForumssupportmemberstates’financingprojectsthroughprivatecapital(Box3.4).Atthesametime,policiesandinstrumentsbeyondthoseusedtomitigaterisksareneeded,suchasincentivisinginvestmentswapsfromfossilfuelstorenewableenergybybanksandnationaloilcompaniesandincentivisingtheparticipationofphilanthropies.Finally,fortheenergytransitiontohaveapositiveimpact,governmentsanddevelopmentpartnersneedtoplayamoreactiveroleinensuringamoreequitableflowoffinancethatrecognisesthedifferentendowmentsandstartingconditionsofcountries.LendingtodevelopingnationsneedstobetransformedandcapitalmustbeincreasedWORLDENERGYTRANSITIONSOUTLOOK2023165VOLUME1CHAPTER03BOX3.4IRENAInvestmentForumsInvestmentForumsconstituteakeyelementofIRENA’sstrategytosupportmemberstatesinfinancingtheirenergytransition.Theyaimtohelpfacilitateinvestmentsintransitionprojectsandprovideaneffectiveorganisingframeworkforfinancefacilitationthroughasub-regionalapproach.TheForumshavetwoaims:first,toencouragedecisionmakerstoestablishastrongenablingenvironmentforenergytransitioninvestments;second,tofacilitatetheengagementandmatchmakingbetweenfinanciersandprojectdeveloperssointernationalandlocalfinancingoftransitionprojectsaretargetingParisAgreementgoals.EachInvestmentForumfocusesonageographicclusterofcountrieswithcomparablesocio-economiccharacteristicsandfinancingecosystems.ThefirstInvestmentForumwasorganisedinSoutheastAsiatargetingcountriesoftheAssociationofSoutheastAsianNations,inco-operationwiththeGovernmentofIndonesia(MinistryofEnergyandMineralResources)undertheirG20presidencyfor2022.TheG20InvestmentForumonEnergyTransitionswasheldon31Augustto1September2022inBali,Indonesia.Theforumwasatwo-dayeventwithdeep-divesessionsonprojectrisks,parallelmatchmakingsessionsandhigh-levelenergytransitionsdialogue.Duringtheevent,discussionswereheldontransitiondevelopmentandimplementationprojectsfromtheperspectiveofpolicymakers,regulators,developersandinvestors,includinginvestmentmechanismsaswellaschallengesandopportunities.OverthecourseoftheForum,21projectswerepresentedin29matchmakingsessionsbetweenfinanciersandprojectproponents.TwoprojectspresentedattheinvestmentforumwereabletoreachfinancialclosurebenefittingfromIRENA’sendorsementandsupportthroughtheAgency’sprojectfacilitationtools:a3-megawattbiogaspowerplantinUjungBatuinIndonesiaanda30megawattsolarPVinprojectinJalanPintasanBidorinMalaysia.ThesecondInvestmentForum,theIRENA-CaribbeanCooperationforFosteringEnergyTransitionInvestmentsandFinanceconferencewasheldbetween30Mayand1June2023,co-hostedbyIRENAandtheGovernmentofBarbadosthroughtheSIDSLighthousesInitiative.AttheForum,17projectswerepresentedto15financiers.TwofurtherInvestmentForumswillbeheldduringthesecondhalfof2023.One,targetingWestAfricancountries,willbeco-hostedbyIRENAandtheGovernmentofNigeria,inpartnershipwiththeAfricanDevelopmentBank.Theforumwillconvenedecisionmakersfromthepublicandprivatesectorsfrom15WestAfricancountriesthatbelongtotheEconomicCommunityofWestAfricanStates,includinggovernments,financiers,projectdevelopersandotherstakeholders,andfocusontransitioninvestments.ThesecondForum,targetingprojectsfromLatinAmericancountries,tobeco-hostedbyIRENAandtheGovernmentofUruguay.166WORLDENERGYTRANSITIONSOUTLOOK2023REFERENCESAbnett,K.(2022),"EUapproves3-billion-euroGermangreenheatingscheme",Reuters,https://www.reuters.com/markets/commodities/eu-approves-3-billion-euro-german-green-heating-scheme-2022-08-02/(accessed3April2023).Amelang,S.andJ.Wettengel(2022),"Germanyagrees200-billioneuro‘defenceshield’againstsoaringenergyprices",Journalismfortheenergytransition,29Septembe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