With the U.N. Climate Change Conference set to convene in Glasgow on Oct. 30, the International Energy Agency’s World Energy Outlook 2021 report, released Wednesday, delivers a familiar but still urgent message: A virtuous cycle of policy action, technology innovation and low costs is powering a global energy transition that has strong momentum but is still not moving fast enough to cut global greenhouse gas emissions to net-zero by 2050 and limit climate change to 1.5 degrees Celsius.

“Every data point showing the speed of change in energy can be countered by another showing the stubbornness of the status quo,” the report says. “For all the advances being made by renewables and electric mobility, 2021 is seeing a large rebound in coal and oil use,” resulting in the second-largest annual increase in carbon dioxide emissions in history.

Intended as a guide for policymakers before the 26th Conference of Parties (COP26) in Glasgow, the report focuses on what it calls the “ambition gap” between countries’ announced pledges under the 2015 Paris Agreement and the road to net zero.

“If we look at the CO₂ emission trajectory that the Glasgow pledges are bringing us to, and we compare it to where we would need to be if we were to follow a pathway consistent with 1.5 degrees … the Glasgow pledges, in 2030, would cover only 20% of this emission gap,” said Laura Cozzi, IEA’s chief energy modeler. “We are going into Glasgow not with the glass half-empty; it is actually 80% empty.”

By 2050, the glass could still be 60% empty, with existing pledges producing only a 40% cut in emissions and a rise in global average temperatures of 2.1 C above preindustrial levels by 2100, the report says. The outlook based on existing policies, as opposed to pledges, is even more dire, with global average temperatures rising 2.5 C by 2100, with potentially devastating impacts to the energy sector, the report says.

One-quarter of global electric grids would face a high risk of destructive hurricanes and cyclones, while 10% of dispatchable generation and refineries would be prone to coastal flooding. “The frequency of extreme heat events would double by 2050 compared to today — and they would be 120% more intense, affecting the performance of grids and thermal plants while pushing up the demand for cooling,” the report says.

With the report weighing in at 386 pages, response from U.S. energy groups was slow in coming. Gregory Wetstone, president and CEO of the American Council on Renewable Energy, called it “a wake-up call and a stark reminder of the challenge ahead.”

“The IEA’s World Energy Outlook confirms two things that we know to be true,” Wetstone said in an email to RTO Insider. “First, in most markets around the world, the cheapest source of new electricity is renewable energy. Second, the public and private sector decarbonization commitments we have seen thus far, while ambitious, fall short of what scientists say is needed to avert a climate catastrophe.”

$4 Trillion ‘Surge’ in Investment

Beyond COP26, such scenarios could hit home with U.S. policymakers following this summer’s heat waves that melted power lines in the Northwest and the widespread power outages in Louisiana caused by Hurricane Ida. IEA’s recommendations for bridging the ambition gap in the next decade also align closely with many of the climate and energy provisions in the bipartisan infrastructure package and budget reconciliation bill now increasingly mired in political battles in Congress:

• “Accelerating the decarbonization of the electricity mix is the single most important lever available to policymakers” and could close one-third of the emissions gap, the report says. In addition to doubling deployments of wind and solar over the amounts in the announced pledges, IEA calls for the expansion of nuclear, “where acceptable,” along with “a huge buildout of energy infrastructure and all forms of system flexibility.”
• Reducing energy demand with a “relentless” focus on energy efficiency is also part of IEA’s net-zero vision, with government support to help consumers with the upfront costs of efficiency improvements. A drop in demand would be achieved by behavior change and more efficient technology and materials, the report says.
• Cutting methane emissions, particularly in oil and gas operations, could close another 15% of the emissions gap, the report says. “Methane abatement is not addressed quickly or effectively enough by simply reducing fossil fuel use; concerted efforts from governments and industry are vital.”
• Ramping up innovation will also be critical to develop the emerging technologies needed for ongoing emissions cuts. Such technologies, in the development and demonstration stages, will be needed to tackle emissions from heavy industry — such as iron, steel and concrete — and long-distance transport. Advances in hydrogen and carbon capture, utilization and storage will also be needed.

The catalyst for progress on all these fronts is finance, the report says, calling for a $4 trillion “surge” in clean energy investment by 2030, with 70% of that amount channeled to developing economies. Government incentives to accelerate investments in flexibility, efficiency and demand-side response will also be needed.

IEA’s net-zero world includes 240 million rooftop solar systems and 1.6 billion electric cars by 2050. “Such a system will need to operate very flexibly, enabled by adequate capacity, robust grids, battery storage and dispatchable low-emissions sources of electricity,” ranging from hydropower and geothermal to hydrogen and small modular nuclear, the report says.

The call for accelerated investment is balanced by the report’s findings on cost savings for consumers. Cozzi said that 40% of the emissions reductions needed by 2030 could be achieved with existing cost-effective technologies. Solar and wind deployments, backed up by improved market designs, could carry no cost for consumers, and energy-efficiency measures could provide cost savings.

“It is tough to understand why these emissions reductions are not on the table because there is not an economic rationale behind not doing them,” she said.

Tim Gould, IEA’s chief energy economist, also noted that an incremental energy transition, based on current policies, could raise consumer energy bills about 15% over the next decade versus a 10% decrease for the rapid energy transition needed to get to net zero.

An ‘Unmistakable Signal’

With energy prices an increasing concern in the U.S. and worldwide, IEA Executive Director Fatih Birol addressed the issue and the “gross mischaracterization” that the situation is “the first crisis of the clean energy transition.”

One of the main drivers of current high prices is the rebound in the global economy, mainly powered by fossil fuels, which Birol said is not sustainable. “Fossil fuels are growing very strongly; the prices are high, putting a break on economic growth,” he said.

Other contributing factors include extreme weather events and planned and unplanned power outages, many from maintenance work that had been postponed because of the COVID-19 pandemic, he said.

“The clean energy transition is not the reason [for] what we are experiencing today,” Birol said. “It may well be the solution.”

Heading into Glasgow, Birol’s wish list includes stronger emission-cutting commitments, more clean energy investment, especially in developing economies, and a strong message from world leaders “that we are united to build a clean energy future.”

“Energy transitions depend on many groups — communities, companies, civil society, investors — but no one has the same capacity and influence as governments to shape our energy destiny,” Gould said. “So, we look to government leaders in Glasgow for an unmistakable signal that they are committed to rapidly scaling up the clean and resilient technologies of the future.”