Insights from peer‑group analysis
Countries approach energy transition with different starting points and various structural, economic, social and institutional particularities. This implies that instead of straightforward comparisons based on scores in the ETI, countries should be compared to a peer group with similar structural characteristics. This section describes insights from a peer‑group analysis of assigned groupings (Figure 6). To provide perspective on the country groups, a series of macro variables are illustrated to show the share of global GDP, global population, CO2 emissions and primary energy supply (Figures 7 through 10). This section concludes with a readiness matrix (Figure 11) with the positionings of countries along the system performance and transition readiness measures.
Figure 6: Countries selected for ETI analysis, with peer groups
This map has been created for illustrative purposes only, using publicly available sources. The boundaries shown do not imply any opinion on the part of the World Economic Forum. No citation or use of this map is allowed without the written consent of the World Economic Forum.
Source: World Economic Forum
Figure 7: Share of global GDP (nominal, 2017)
Source: World Bank. World Development Indicators, “GDP (current US$)”, https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?page=
Figure 8: Share of global population, 2017
Source: World Bank. World Development Indicators, “Population, total”, https://data.worldbank.org/indicator/sp.pop.totl
Figure 9: Share of global CO2 emissions from fuel combustion, 2016
Source: IEA. CO2 emissions from fuel combustion, 2018 edition
Figure 10: Share of global total primary energy supply, 2016
Source: IEA, World Energy Balances Database, 2018
4.1. Advanced Economies
Advanced Economies rank high on the ETI due to well‑developed and modern energy systems coupled with a robust supportive environment with transition readiness enablers. Of the top 25 countries ranked in the ETI, 21 are Advanced Economies. This group’s relatively high score on energy system performance confirms both the importance of pursuing a balance between energy security, environmental sustainability and economic growth, and the synergistic effect with transition readiness enablers.
The group’s average score of 88/100 on the energy security and access dimension is noteworthy considering most countries in this group are net energy importers (except Norway, Canada and Australia). Diversification of the fuel mix and a sufficient pool of import partners have been instrumental in ensuring reliability and security of energy supply in Advanced Economies.
The key challenges for energy transition in these economies relate to affordability and environmental sustainability. Average scores for economic development and growth and energy security and access for Advanced Economies are higher than for all other groups. However, on environmental sustainability, the group lags behind the Latin America and Caribbean region, primarily because of comparatively higher emissions per capita and higher carbon intensity of the fuel mix. High retail electricity prices in high‑ranking countries, such as Denmark, Germany, Belgium, Spain and Portugal, highlight the complexity of keeping energy prices affordable while investing in energy transition. Recent evidence2930 suggests rising electricity prices are affecting households and small business more than large industrial energy consumers, which affects the equity and inclusiveness in sharing the costs of energy transition.
Analysis of Advanced Economies’ data underscores the challenge of ensuring energy security and economic growth while improving environmental sustainability. Scores on environmental sustainability are the lowest of the three when considering the three corners of the energy triangle. Moreover, while the average score on environmental sustainability for Advanced Economies improved over the years, the rate of improvement has slowed over the past year. The Advanced Economies demonstrate challenges in reducing the energy intensity of their economies, as the rate of energy intensity improvement in 2017 was slower than in previous years across many countries in this group. Canada, Australia and South Korea are the only large economies in this group with scores below the top quartile on the ETI, which is primarily due to their low scores on environmental sustainability. Although ranking high on economic growth and energy security, the three economies are among those with the highest carbon intensity of fuel mix, per‑capita energy consumption and carbon emissions in the world.
Sweden, the top‑ranked country on the ETI, also has the highest scores on environmental sustainability. Its energy intensity and greenhouse gas emissions per capita, while higher than half the countries ranked in the Index, have been declining over the past few years. Sweden has a low‑carbon power generation mix, generating more than half its electricity from renewable energy sources and the remaining portion from nuclear energy.31 The country’s energy transition is supported by an effective institutional and regulatory framework, and by political commitment. For example, the Climate Act, which entered into force in 2018, introduced legally binding commitments to achieve net zero greenhouse gas emissions by 2045. It also requires an annual climate report with its budget bill each year to ensure cross‑party commitment, stability of policy and continued progress on implementing reforms across political cycles.32
4.2. Emerging and Developing Asia
With nearly 50% of the world’s population, Emerging and Developing Asia has the largest share of the world’s energy consumers among the regions analysed in this report. Most of the growth in energy demand comes from this group of countries, and data shows its total primary energy supply grew by 28% over the past eight years, which underscores the region’s relevance when considering energy transition. While the group’s 13 countries are diverse, for example in their income levels, institutional arrangements and economic structures, they share common challenges related to their energy system.
With the exception of Malaysia, Mongolia, Cambodia and Brunei Darussalam, the countries are net energy importers. Rising income levels, the increasing rate of urbanization and energy security concerns have been leading factors in the development of their respective energy policies. As a result, several countries have opted for an energy mix with an important role for coal, an abundant resource in many Asian economies. This has compromised the region’s environmental sustainability score, which averages 49% (below the Advanced Economies’ average of 54%). Relatively high industry electricity prices and wholesale gas prices, given the region’s many energy importers, have led to lower rankings in the economic development and growth indicators.
Malaysia is the highest‑ranked country from the region in the Index, and also scores highest in system performance. Its energy security and access score is among the top 20 of the 115 countries surveyed in the ETI, thanks to its high electrification rate, low usage of solid fuels, diverse fuel mix and high quality of electricity supply. On the environmental front, however, its carbon intensity and per‑capita carbon emissions are over 20% above the global average, leading to a lower score on this dimension. To tackle the challenge of carbon emissions, Malaysia has pledged to increase the installed capacity of renewables from 21% to 30% and will require new coal plants to employ technologies with higher efficiency and lower emissions.33 Given the country’s strategic priority to maintain affordable energy,34 using these technologies could present a challenge as they are among the most expensive means of reducing carbon emissions compared to employing renewable energy sources.35 This confirms the challenge of achieving a balanced transition across the energy triangle’s three dimensions.
The difficulty of balancing across the triangle’s three imperatives is also observed in China. Although the country has a relatively high score in energy transition readiness, its system performance ranking remains low, driven by its low score on environmental sustainability. China’s high level of pollution at PM2.5, with a pollutants level of 56.3 micrograms per m3 , is almost double the average of the countries analysed in the Index. Additionally, the carbon intensity of the country’s energy mix, at 73 kg of CO2 per gigajoule, ranks it among the highest three countries in the ETI; this is no surprise given that China consumes 51% of the world’s coal demand,36 and that coal constitutes more than 60% of the country’s primary energy mix. Over the years, China has implemented several ambitious air quality plans and regulations with varying degrees of success. In 2013, it enacted the Air Pollution Action Plan, which set targets for particulates in key regions and resulted in an over 30% reduction in the PM2.5 level in Beijing over its five‑year implementation. This led to the closure of several coal‑fired power stations in the city and a ban on using coal for heat. Despite the success in the key regions covered by the policy, the mean levels of exposure to particulate matter in 2016 improved by only 3% over 2010 levels.37 The Plan expired in 2017 and was followed by the Three‑Year Action Plan for Winning the Blue Sky, which expands the coverage of regulations on air quality to additional regions. It is viewed by some critics, however, as having relaxed requirements over regions that have achieved or exceeded the initial plan targets.38
4.3. Sub‑Saharan Africa
Sub‑Saharan Africa has the lowest levels of per‑capita energy consumption, with about 600 million people lacking access to electricity and many more without access to clean cooking fuels. The region’s energy demand, representing 3.4% of global demand (per the IEA), is expected to grow three‑fold by 206039 driven by a rising population, improved access to energy and economic growth. Due to unresolved challenges on energy access and environmental sustainability, and the lack of enablers such as policy stability, a strong institutional framework and supporting infrastructure, countries in Sub‑Saharan Africa rank low on the ETI.
The analysis of ETI subcomponents and their dimensions reveals the complexity of energy transition challenges in the region. The average scores on energy system performance have improved over the past five years, but all Sub‑Saharan countries score lower than the global average on energy system performance. The scores on the economic development and growth dimension are closer to the global average, largely driven by increasing exports of oil and gas. As the region is rich in natural resources, fossil fuel production and export are key contributors to economic growth and job creation. Modernization and digitalization of exploration and production infrastructure to increase productivity and operational efficiency, as well as reskilling of the workforce,40 can help unlock further improvements. Effective institutions are critical, however, in ensuring the available natural resources are used optimally.
The region’s average scores on the energy security and access dimension are the lowest among the energy triangle’s three dimensions. While electrification across Sub‑Saharan Africa has been steadily increasing, it has struggled to keep pace with the rising population.41 Moreover, the pace of electrification is slow compared to Emerging and Developing Asia.42 India, Indonesia and Bangladesh have made fast progress towards universal electrification due to strong political commitment, a stable policy regime, use of grid expansion and decentralized generation sources, and a supportive environment for investment in infrastructure. In Sub‑Saharan Africa, the Last Mile Connectivity Project43 in Kenya and the National Electrification Program in Ethiopia44 are steps in the right direction. Ensuring affordability is critical, however, to making progress on electrification goals; average household electricity prices in real terms are higher in Sub‑Saharan Africa than in all other regions. The affordability challenge is a result of low per‑capita income levels and high costs of electricity supply due to system losses and inefficient operations. Modernizing utilities to make the power supply more reliable can result in further tariff hikes, and introducing cost‑recovery tariffs can further exacerbate concerns about affordability. Thus, better targeting of energy subsidies to low‑income households is required,45 as is prioritizing decentralized sources of generation.
Despite relatively low CO2 emissions per capita and average carbon intensity of primary energy supply, the average scores on environmental sustainability dimensions are on par with the global average and have declined consistently over the past few years. Apart from Namibia, Ghana and Botswana, countries in this region have among the highest energy intensities in the world. Due to recent discoveries of oil and gas, and abundant coal in Botswana and South Africa, the share of renewable energy in the power generation mix declined in 2018.46 Leveraging domestic resources is essential for growth, which shows the link between environmental sustainability and economic growth in Sub‑Saharan Africa.
The challenge on environmental sustainability is also closely linked to energy security and access concerns. Due to the lack of access to reliable and affordable electricity, industries and households increasingly use diesel generators to supply power. Moreover, limited access to clean cooking fuels leads to the use of traditional biomass for cooking purposes. As a result, countries in the region have high PM2.5 concentration in the atmosphere. Sub‑Saharan Africa has abundant potential in renewable energy, including hydro, solar and wind. Given the significant power deficit and strong forecasted growth in generation capacity, the region could avoid carbon lock‑in and the risk of stranded assets by increasing the share of renewable energy and decentralized sources in the generation mix.
Namibia is the highest‑ranking country in the region, with a combined aggregate score of 55/100, while the region’s two largest energy consumers, Nigeria and South Africa, rank in the bottom 10 percentile. Nigeria has high scores on economic development and growth due to large fossil fuel reserves, but the overall scores are affected by low scores on the remaining system performance dimensions, as well as a lack of enabling infrastructure, regulatory framework and governance of energy transition. In South Africa, the energy transition challenge relates to shifting away from coal as the dominant source of power supply, as well as reforming the energy market to improve the reliability of this supply.47
4.4. Latin America and the Caribbean
Latin America and the Caribbean has 8.3% of the world’s population and accounts for almost 6% of the global energy demand. The IEA estimates demand will increase by almost 40% by 2040.48 The region shows great disparity in per‑capita energy demand where, for example, Chile, Argentina and Venezuela have four times the per‑capita energy demand of Honduras, Nicaragua or Haiti. To a certain degree, the disparity coincides with both the level of income and energy access of these countries. The heterogeneity in the distribution of natural and economic resources and income levels carries over to the ETI rankings, where the countries are scattered between the 11th and 115th rank with no concentration.
Looking at the ETI’s subcomponents, and particularly system performance, most of the countries in this group scored consistently well over the past several years, buoyed by strong environmental sustainability scores with low levels of pollution, emissions per capita and carbon intensity. This results from having the highest share of renewables and second‑lowest share of oil, gas and coal within its energy mix compared to other country groups; renewables’ share was 8% in 2016 while Advanced Economies had only a 2% share in their energy mix. The impact of renewable energy production on the environmental scoring is even more evident for Uruguay, Costa Rica and Brazil, who are among the 10 highest‑scoring countries in the ETI’s environmental sustainability dimension with large shares of renewables in their total primary energy supply.
While hydropower is the primary renewable source of electricity for many of the region’s countries, it also increases the electricity system’s vulnerability to the amount of rainfall over the year. Tougher regulations on dam construction in some countries has further exacerbated this, allowing only run‑of‑the‑river plants to be constructed. By design, those plants have less storage and increase the risk of supply shortages during droughts. Fossil fuel‑based plants are built to diversify power sources and to ensure sufficient reserve capacity is available at all times. The IEA anticipates a 2.5% average annual increase in the region’s gas‑based power production until 2040.49 Concerns over unexpected, prolonged droughts can lead to increased production of power from non‑hydro power plants, resulting in increased carbon emissions. Despite having one of the lowest‑carbon‑intensive energy systems, Brazil has seen carbon emissions per unit of power production nearly double between 2006 and 2015;50 the increase was due to growing reliance on backup power sources to maintain high levels of water storage in dams and to overcome the risk of prolonged drought conditions.51 The costs of addressing capacity shortages through thermal power production facilities were estimated at over $11 billion in 2014.52
The less‑diverse energy supply infrastructure has contributed to lowering this region’s scores along the energy security and access dimension. The impact is partially offset, however, by continuous improvement in energy access over the years; electricity access increased from 91.7% in 2000 to 97.7% in 2016.53 With the exception of the smaller countries of Honduras and Haiti, all nations in the region have enacted efficient access to modern energy policies and programmes.54
Along the economic development and growth dimension, this group’s scores are close to the global average. The most influential factor within this dimension has been the high industrial electricity prices and their impact on energy affordability. Of the group’s 21 countries, only five have prices lower than the global average: Chile, Mexico, Trinidad and Tobago, Ecuador and Paraguay. Deepening the integration of energy systems through regional electrical networks will likely help to increase competition and lower energy prices within the region. It could also facilitate further integration of renewable power capacity and improve the security of supply and resilience of the grid by adding diversity to the power mix.
Uruguay and Costa Rica are the highest‑ranking countries in this region with combined aggregate scores of 67/100 and 64/100, respectively. Both scores are driven by strong performance along the environmental dimension. The group’s lowest‑ranking country, Haiti, is also the lowest‑ranking this year in both energy system performance and transition readiness.
4.5. Middle East and North Africa
The Middle East and North Africa group accounts for 6.8% of the global energy demand and 7.1% of the world’s population. The region is well endowed with fossil fuel resources that have greatly influenced its energy mix, with 92% of its primary energy supply provided by oil and gas. Geopolitical tensions and instability in these countries affects political priorities, opportunities for energy systems integration and the ability to attract investments required for the energy transition. While the average score of system performance within the region is closer to the global average, analysis of the three dimensions reveals imbalance in meeting the three objectives of the energy triangle.
The group has consistently registered the lowest average score in the environmental sustainability dimension compared to other groups. Outdoor air pollution, measured by the level of airborne PM2.5, is the highest in the world, the result of relaxed requirements where, within the region, only Iran and Israel have adopted laws that set limits on particulate matter and air pollution.55 These counties also have the highest carbon intensity at double the world average, a direct result of the high concentration of oil and gas in their energy mix. Significant plans are under way to diversify the fuel mix. Earlier this year, Saudi Arabia announced the tripling of its renewable energy targets to have over 60 gigawatts of installed capacity by 2030, thereby increasing the share significantly to displace oil consumption in the power sector.56 The United Arab Emirates is targeting a shift in its energy mix to have 44% sourced from clean energy sources.57
Analysis of the underlying data reveals the region has the lowest average household and industry electricity prices and the lowest wholesale gas prices. The positive impact of low prices on the economic development dimension, however, is offset by the negative impact of having the highest level of energy subsidies in the world, calculated as the share of a country’s GDP. Significant efforts are under way within these countries to reform energy prices. Nine countries, at a minimum, have imposed certain forms or levels of energy price reforms over the past few years: Saudi Arabia, United Arab Emirates, Oman, Qatar, Kuwait, Bahrain, Algeria, Iran and Egypt.58 In Saudi Arabia, some fuel product prices have increased up to 200% compared to 2015 levels. Some of these efforts are not captured in the Index because data was unavailable at the time of publishing.
On the energy security and access dimension, the region scores high in electrification with an average of 98%. This is offset by the lower score in the energy security dimension resulting from the concentration of oil and gas within the energy mix. On both energy security and economic growth, the region can greatly benefit from further integration of the energy supply infrastructure. One notable effort is in Egypt, where a 3,000‑megawatt power transmission line has been approved to link the power grid to Saudi Arabia to improve the country’s energy security. Two other connections exist with Jordan and Libya, and studies are under way to evaluate a potential connection with Cyprus.59
In terms of ranking, Morocco ranks highest and is followed by Qatar, which is driven by a strong performance score supported through low energy prices and significant fuel exports. Lebanon ranks lowest, driven by low performance in the energy security dimension due to import diversity, low quality of electricity supply and high energy subsidies.
Finally, a readiness matrix (Figure 11) can show the positionings of countries along the system performance and transition readiness measures, which can prove helpful for benchmarking.
Figure 11: ETI 2019 Performance/Readiness matrix (by country groups)
Source: World Economic Forum