Augustin’s Research Blog#10 : Energy transition differences between countries and their implications

Energy transition differences between countries and their implications

Energy transition is a complex phenomenon which has happened many times during History. Such transitions have different steps and have happen differently at different periods or in different countries, but some patterns are recognizable. Because energy transition affects the future of countries for the coming decades and even centuries, it is important to understand how the transition is likely to happen. Usually, a new energy source gains importance and becomes able to provide cheaper services than the predominant sources [1]. Initially, the new technology/source is developed in a niche (limited area suitable for experimentations) and uses this niche to gain trust and demonstrate capacities to be used in the core energy system when affordable enough [1]. But there are other ways transition can happen:

  • Pressure from the demand: the predominant energy sources can’t supply enough to match the population needs.
  • The predominant energy sources become too expensive or rare.
  • Pressure from other countries: historical events like wars or globalization have pushed countries to look for better energy sources to stay competitive.
  • Influence from businesses, agencies, lobbies to switch to a different source (in which case producers of the current energy source will likely try to restrain transition).
  • Major crisis making previous energy sources unusable.

In many times over the course of History, transition was initiated following one or multiple of these events. But even initiated, transition can be restrained in its course: public opinion can be opposed to new sources, people and organizations benefitting from the current sources will be opposed to transition, the new source or technology struggles to be adapted to the current system… To make sure new energy sources are successfully implemented inside the core system, technological innovation needs to go along with financial innovation (usually from entrepreneurship), effective policies need to be implemented to support these innovations, and strong incentives from different actors are required to push the transition forward [2].

              Sometimes, however, this is not enough. The current transition from fossil fuels to low carbon energy sources shows some differences with the previous transition, making it look more complicated than before. One reason is that there is not a new source but multiple ones. Another reason is that the advantages of transition are not as appealing as before: the purpose of this transition is mainly to avoid losses and damages in the form of climate change, but what is gained with this transition is not obvious. Finally, the main driving force of transition is not the government, but the government is needed to make the transition happen fast as time is limited [1].

In every country where industry is important, transition struggles to happen. Because industry was mostly developed using fossil fuels, it was designed to function using fossil fuels. Now that fossil fuels are being replaced by low carbon energy sources, reforming the industry to its foundation to make it suitable for low carbon energy sources is also needed but complicated and it requires time. This is part of a larger phenomenon which can be called carbon lock-in: due to the fact many countries have developed using fossil fuels as a base, entire systems like locomotion, heating, electricity are not suitable for different energy sources, making transition to renewables more complicated than current developing countries [3]. Because of this, governments worldwide keep on subsidizing 200£ to fossil fuels industries every year, despite acknowledging the existence of climate change and its consequences [3]. Implementing low carbon technology into the energy system of developed countries requires them to adapt to the system first, which often reduces the potential of these technologies [4]. And sometimes these new technologies are promising but the implementation cost is too big or requires the economic activity to be reduced, which is not easy to accept [3]. Nevertheless, the most concerning problems for developed countries might not be science of finance innovation but rather implementation of these innovations into the system [4].

On the other hand, minor consumers of energy or current developing countries are not relying as much on fossil fuels yet and could potentially do their low-carbon energy transition faster than developed countries [5]. Even if innovation is not as important as in developed countries, less change is also needed to switch to a new energy system. This already happened in South America during the 20th century in the transition from coal to oil. In most developing countries depending on coal at that time, oil only became prevalent after WWII (1951 for USA, 1961 for Japan, 1971 for UK…) [5]. Because most South American countries were not as developed and didn’t rely on coal so much, they were quickly attracted to oil as a better energy source for their development. Because of this, oil quickly became prevalent (1896 in  Ecuador, 1915 in Mexico, 1918 in Venezuela, 1922 in Colombia, 1928 in Argentina…) enabling them to develop faster than developed countries did [5]. Brazil and Chile were the only countries to adopt oil later because they had already adopted coal to a larger extent before (in 1940 and 1953 respectively) [5]. In some countries like Ecuador or Venezuela, oil was even adopted before coal, then coal became predominant, only to be replaced again by oil later. This suggests that some countries could have already done their transition to low carbon energy sources in the past and chose to revert to fossil fuels in the current situation (inverted transitions) [5].

 

            By looking at the evolution of the share of renewables in primary energy, it is possible to study low-carbon energy transition status for different countries. Below is a clustering analysis done on a database containing 36 countries, mostly from OECD (see countries picture list) from 1970 to 2019 [6]. Results of the clustering analysis are shown below.

Looking at Figure 1, 5 clusters seem to appear which are detailed in the analysis below.

Cluster 1:

Figure 4. Evolution of the share of primary energy from renewable energy for Cluster 1

This cluster regroups countries with a very low share of renewables in their primary energy from 1970 to 2019. They are mostly from Europe. Other sources of energy like fossil fuel or nuclear are the main concern of these countries due to historical development with fossil fuels. However, all these countries show an increase since 2000. Recent interest in renewables could have been caused by the acceleration in climate change, increase in the price of fossil fuels or commitment to increase renewable energy production for EU members.

 

Cluster 2:

Figure 5. Evolution of the share of primary energy from renewable energy for Cluster 2

This cluster regroups countries with a low-middle share of renewables in primary energy showing an important increase since 2000 approximately. The countries with the highest GDP are all inside that cluster, along with some EU countries and other very dynamic countries like India, Australia, Turkey, or Mexico. Historically, these countries have all developed using fossil fuels and are a good example of carbon lock-in today: because their system fits better with fossil fuels than renewables, adapting the economy to renewables takes time. Therefore, transition is slowed down, even if innovation is important and climate change is acknowledged in most countries. One notable country is Denmark, where transition to renewables is happening very fast thanks to very effective policies.

Cluster 3:

Figure 6. Evolution of the share of primary energy from renewable energy for Cluster 3

This cluster regroups Iceland and Norway only. These countries have the highest share of renewable energy in their primary energy system today. Norway relied on hydropower for its development, so there was no transition from 1970 to 2019. Iceland did an important transition from fossil fuels to hydropower, recently adding other renewables like geothermal energy. The main reason for this important transition is that hydropower was the main support for industrialization.

Cluster 4:

Figure 7. Evolution of the share of primary energy from renewable energy for Cluster 4

This clusters regroups Finland, Portugal, and Chile. Although located in different places, these countries share a common attribute: high fluctuations in renewable energy production from one year to another. This trend tends to stabilize in the recent years with an increase in renewable energy production. These countries developed using fossil fuels and encounter the same problems as countries from cluster 2, but they started their transition with already many existing renewable energy facilities.

Cluster 5:

Figure 8. Evolution of the share of primary energy from renewable energy for Cluster 5

This cluster regroups countries with a high share of renewables in their primary energy system. Due to specific geographic location, these countries have developed using fossil fuels as well as renewables. This is why they have a higher ratio than most developed countries from 1970. Hydropower and biomass were the most important renewables for their development but recently wind and solar energy are also important, for example in New Zealand. Brazil, Austria and Sweden show recent increase in renewable energy production, but Canada, Switzerland and New Zealand seem to stagnate. It is probably because shares of renewable energy and fossil fuels are increasing at the same speed.

 

         Due to very different historic, economic, and geographic context, transition is happening very differently between countries. Current developing countries have a choice to develop using renewable energy: even though the path to do so is not as clear as the fossil fuel path that developed countries have chosen in the past, they could gain an important advantage and potentially develop their economy more rapidly [5]. As for current developed countries, the clustering analysis shows that most of them have chosen to accelerate transition in recent years [6]. There is a global effort to use more low-carbon energy sources, which is mostly driven through innovation in the financial and scientific sector [4]. Every transition takes time, however. Past transitions showed that new energy sources needed minimum 40 years of research and development to become promising, and that implementation before they become prevalent in the energy system could take even longer [1]. In the end, rapid development of innovations inside niches and the reactivity of governments to implement policies will be the decisive factors to determine if low-carbon energy transition will be done in time.

 

Sources:

[1] Fouquet R., Pearson P. (2012, November). Past and prospective energy transitions: Insights from history. Energy Policy.

https://www.sciencedirect.com/science/article/pii/S0301421512006805

[2] Foxon T.J. (2011, October 15th). A coevolutionary framework for analysing a transition to a sustainable low carbon economy. Ecological Economics.

https://www.sciencedirect.com/science/article/pii/S0921800911002898

[3] Unruh. G.C. (2000, October 1st). Understanding carbon lock-in. Energy Policy.

https://www.sciencedirect.com/science/article/pii/S0301421500000707

[4] Unruh. G.C. (2002, March 2nd). Escaping carbon lock-in. Energy Policy.

https://www.sciencedirect.com/science/article/pii/S0301421501000982

[5] Mar Rubio M.d., Folchi M. (2012; November). Will small energy consumers be faster in transition? Evidence from the early shift from coal to oil in Latin America. Energy Policy.

https://www.sciencedirect.com/science/article/pii/S0301421512002595?via%3Dihub

[6] Our World in Data. Share of primary energy from renewable sources. BP Statistical Review of World Energy.

Retrieved December 20th, 2021 from https://ourworldindata.org/grapher/renewable-share-energy?tab=chart