The following sections explore the key findings from this year’s EAPI, including insights from top performers, the most significant changes in performance, and opportunities for improvement across specific sides of the energy triangle. This information was analysed making use of the latest data from the EAPI.
Top performers come in all shapes and sizes
This year’s list of top performers remains fairly stable against the 2016 cohort. Ireland (16th), Germany (19th) and the Slovak Republic (20th) are the only new entrants in the top 20. Top performers share a number of characteristics. They tend to be smaller countries – for example, Switzerland (1st), Uruguay (10th), Portugal (11th) and Slovenia (13th) – which makes it comparatively easier to enact changes in their energy systems than in those of larger countries. Most of the highest performers are also advanced economies, defined principally as having a high level of gross domestic product (GDP) per capita, diversified exports, and being well integrated into the global financial system (12).
However, a significant number of countries do not fit this mould and demonstrate that few boundary constraints limit high performance. In fact, high performers come in all shapes and sizes. While small economies are common, France (5th), the United Kingdom (15th) and Germany (19th) are examples of large economies, defined in GDP, that are also top 20 performers on the EAPI. And, although the top 20 commonly have a high GDP per capita, an advanced economy by no means guarantees a high-performing energy sector, nor is it a prerequisite (Figure 3). Paraguay (22nd) and Albania (25th) are strong examples of this, with GDPs per capita in the bottom 40% for the cohort, yet are found in the top 20% on the EAPI. Countries with large supplies of natural resources are at an advantage in being able to boost their economies and provide their populations with secure, low-cost energy, if managed well. However, the majority of the top 20 are net importers of energy, reflecting their lack of natural resource endowment, with the exceptions of Norway (2nd) and Colombia (8th), as net exporters, and Denmark (4th), which is close to parity on this metric. 4 These net importers of the top 20 show that weaknesses on individual indicators can be overcome through a balanced focus on others.
The many variations in the contexts of the top performers underscores the potential of any country to make improvements in providing secure, affordable and sustainable energy to its population, regardless of its economy’s size, its level of advancement, geographical region or exporter status.
European countries dominate the leader board
Switzerland (1st) tops the rankings for the third consecutive year, benefiting from a diverse supply mix, low-energy intensity and low carbon dioxide (CO2) emissions from electricity production. It has continued to improve its scores since last year in economic growth and development (5th to 3rd) and environmental sustainability (18th to 16th), staying constant for energy access and security (7th). Switzerland has achieved improvements or maintained its position across all EAPI indicators, with the exception of the diversification of its import counterparts, where it moved from 52nd to 63rd, highlighting a need to consider further diversifying these sources. However, clouds are on the horizon, with negotiations on bilateral energy agreements with the European Union (EU) recently stalling after the referendum on immigration, and with the United Kingdom’s vote to leave the EU, which is likely to impact these discussions.
Switzerland is followed closely by Norway (2nd), Sweden (3rd), Denmark (4th) and France (5th), cementing their position as the top five countries on the EAPI from last year (with France and Denmark switching ranks). Nordic economies have successfully balanced performance across each side of the energy triangle. Norway ranks 1st on energy access and security, reflecting how it has successfully translated a high supply of natural resources into benefits across its entire energy system. Sweden ranks in the top 10 globally on environmental sustainability, with investment in renewables paying off. From being heavily reliant on oil in the 1970s to achieving one of the highest shares of renewables across the EU, it has reached 50% of consumption from renewable energy before the 2020 deadline. Denmark is 8th on economic growth and development, achieving low levels of energy intensity and competitive energy prices.
The 28 Member States of the EU (EU28) dominate the top of the EAPI, making up 14 of the 20 highest-performing countries and all sitting in the top half of the table, with the exception of Cyprus (67th) and Malta (71st). While not part of the EU, Norway and Switzerland also benefit from many of the factors driving this group’s success. As a cluster, the EU28 outperform the average on 13 of 18 indicators (Figure 4). The group has maintained or increased its score on all indicators compared to the 2009 EAPI benchmark, with the exception of the two indicators measuring price distortion for gasoline and diesel fuel. This drop in score is indicative of the general trend in the EU of increasing taxes on fuels. The more modest decrease in the score for diesel price distortion reflects an overall lower rate of tax on this fuel compared to gasoline. This difference has contributed to an increasing “dieselization” of the EU’s vehicle fleet, encouraged by governments nudging their populations towards a higher average fuel economy for passenger vehicles (the increase for this indicator, averaged across the EU28, was 0.03 in the 2009-2017 period).
The EU28’s performance is underpinned by advantages gained through a long history of regional coordination between Member States, which began almost three decades ago when the European Commission started to focus on cross-border trade and increasing competition for lower energy prices. The first initiatives to liberalize the energy market in the 1990s targeted electricity and gas, with the focus in the new millennium shifting first to renewable energy targets and then to energy security issues (13). In 2007, An Energy Policy for Europe set objectives covering all three sides of the energy triangle. The results to date of these ongoing efforts include strong regional infrastructure links, increased cross-border trade in gas and electricity, and healthy levels of competition across the entire energy value chain. The impact of these efforts is reflected in the EU28’s EAPI scores, which are particularly high on the use of market forces (low levels of price distortion for gasoline [0.85] and diesel [0.90]) and diversity of the total primary energy supply (0.79).
As a cohort in general, the EU28 is challenged by a lack of natural resources, resulting in a high dependence on imports (scoring 0.23 for energy imports as a percentage of GDP) and limited contribution of fuel exports to its economies (0.06). In addition to a wide diversity of import counterparts (0.81), the advantages of regional integration contribute to mitigating these weaknesses and maintaining high-performing energy sectors. Recognizing these benefits, the EU’s Energy Union is set to further strengthen the internal energy market as well as address other areas for improvement, including security of supply and sustainability of the regional energy system, as reflected in targets embedded in the Energy Strategy for 2020, 2030 and 2050 (14). However, much work remains to be done to meet these targets, not least in sustainability. Alternative and nuclear energy, as a percentage of the EU28’s total primary energy supply, is notably low, and lags behind the overall average. With the exceptions of Sweden, France and Finland, none of the Member States exceed 50% on this metric. While the cohort has made marginal gains in this area since 2009 (from 0.21 to 0.26), a long path remains to achieving the targeted levels of decarbonization in the energy mix.
The world’s biggest energy consumers are being outperformed
Major energy consumers continue to struggle to take leading positions on the EAPI. While showing strengths in certain areas, and early signs of strong trajectories in others, China (95th), India (87th), Japan (45th), the Russian Federation (48th) and the United States (52nd) have either slipped in the rankings since 2009 or experienced only marginal gains. The energy consumption of these nations dwarfs that of the highest-performing top 20 (Figure 5). Big consumers need to intensify their efforts and overcome the inherent challenges of their large, complex energy systems; doing so will allow them to make a disproportionately positive impact on global energy architecture. With the world’s energy markets underpinned by the global economy’s performance, the global energy sector will continue to be challenged for as long as these countries, which are some of the largest economies in the world, find it difficult to exceed average performance.
China (95th) is showing signs of tackling the significant challenge to enable rapid growth of its energy sector while also balancing the three sides of the energy triangle. The world’s largest energy consumer drops one place in this year’s rankings. The country’s strongest score is for diversification of import counterparts, where it achieves first place globally. While China has taken significant steps to respond to growing air pollution, sustainability remains the greatest challenge (112th on this side of the energy triangle). China lags behind other global superpowers, with high levels of energy intensity (107th) and high CO2 emissions from electricity production (102nd) impacting its comparative performance. To improve energy-sector competitiveness, China is taking targeted action across its energy system. The 13th Five-Year Plan includes targets and measures to address key issues, such as air pollution and climate change, and ranges from setting mandatory targets for cutting emissions and improving efficiency to launching a nation-wide carbon market. China also pledged to reduce energy intensity by 60-65% by 2030 as part of the Paris Agreement.
India (87th) is gradually improving its performance on the EAPI (90th last year). Similar to China, the country boasts a strong score on the indicator for diversification of import counterparts (5th), but its energy system continues to face some significant challenges, particularly in environmental sustainability (109th). India has some of the lowest scores in the EAPI for CO2 emissions from electricity production and PM2.5 levels (117th and 123rd, respectively). While sources of pollution are diverse and intermittent (e.g. agricultural crop burning, refuse combustion, fireworks), the energy sector is a large, consistent contributor to this issue of major concern. Many solutions have been attempted with varying degrees of impact, but the country sorely needs a comprehensive plan of action to implement an effective and sustainable answer.
India also faces an uphill battle to increase energy access and security (95th). A large percentage of the population still lacks access to electricity (101st) and uses solid fuels for cooking (108th). The government of Prime Minister Modi is taking action on this, having committed to increase solar power capacity to 100 gigawatts by 2022, which would make India a leader in renewable capacity.
This year, Japan (45th) has managed to turn around its declining performance on the EAPI for the first time since placing 21st in the 2009 benchmark and reaching a low of 51st last year. This indicates the country is beginning to overcome the long-lasting impact of the 2011 Fukushima Daiichi nuclear disaster on its energy sector. Japan is diversifying its energy import counterparts (15th), from which it imports fossils fuels that now dominate its total primary energy supply. Expensive imported fossil fuels filled a 30% gap left in the electricity supply following the disaster (15). The effects of this are still clearly present on all sides of the energy triangle, particularly in indicators measuring electricity prices for industry (55th), use of alternative and nuclear energy (102nd), CO2 emissions from electricity production (88th) and net energy imports as a percentage of energy use (121st). Japan faces many challenges, and restarting its nuclear power reactors is of primary importance to overcoming many of them, judged as “critical” to the success of the country’s energy policy, according to the International Energy Agency (IEA) (15). In the meantime, the country is taking advantage of new opportunities to drive improvements in the energy sector, notably the deregulation of its retail and generation electricity markets in 2016. By creating one of the largest deregulated electricity markets in the world, this move may help to significantly modernise Japan’s energy sector and lower hiked prices.
The Russian Federation (48th) has improved its ranking marginally since last year. Its energy sector remains heavily reliant on oil and gas, with a weak performance on the proportion of renewable energy in its total primary energy supply (92nd). Its highest score was on energy access and security (37th), due to a high level of self-sufficiency. The country’s performance on the EAPI points to high energy intensity (110th) and high levels of fossil fuel subsidies (105th and 102nd for gasoline and diesel, respectively), as well as areas for improvement within environmental sustainability (75th overall). While the sector has long acted as an engine for growth in the country, contributing over 25% of GDP (16), the challenges Russia faces will only become more acute given the current headwinds, most notably the lower price of oil.
When compared to last year, the United States (52nd) has dropped four places. It achieves its highest score on energy access and security (5th), and has an increasingly diverse total primary energy supply (19th). The surge in shale gas and growing investment in renewables, especially solar, underscores this performance. It lags behind its peers in the Organisation for Economic Co-operation and Development (OECD) on environmental sustainability (105th), with particularly low scores on indicators relating to emissions. The country still has to tackle a high energy intensity (86th). Overall, the context is shifting, with the low price of oil at the root of declining investment in oil and gas and of lower production levels, and increased regulations on emissions likely to impact the future shape of its energy architecture.
The performance divide between top-ranking countries and the rest of the table is growing
Compared to last year, the average increase in the EAPI score of the group of top-20 highest-performing countries is double that of all other countries. This growing difference in the magnitude of performance improvement between the two groups reflects a further strengthening of the energy sectors of countries that already perform well.
The rate of improvement displayed by these highest-performing countries is driven primarily by improvements across economic growth and development, with the group’s average improvement on sub-index almost three times that for all other countries. Improving the role of the energy system in a country’s economy is often the most difficult task, as reflected by this sub-index being the consistently lowest-performing one, year to year. It is also the most volatile, fluctuating in response to swings in the global economy. This highlights the challenges policy-makers face to ensure their transitioning energy systems are competitive and resilient to unforeseeable events. The above-average improvement of the top 20 in this area was in part due to much stronger improvement in the indicator measuring electricity prices for industry, demonstrating the group’s ability to pass on lower commodity prices through market pricing mechanisms. The group has mostly benefited from the fall in the price of oil, seeing less of a decrease in the score measuring fuel exports as a percentage of GDP. This also highlights the lack of dependency on the production and trade of fossil fuels in many of the group’s economies.
Where the rest of the table has averaged a decrease in environmental sustainability, the highest performers have maintained a steadily strong performance. This is primarily tied to the majority of these countries making incremental improvements in the ratio of low-carbon fuels in their energy mix and improving average fuel economy for passenger vehicles. The average increase in energy access and security for the top 20 is in line with that of the rest of the cohort. Energy security is a key concern, as many of these countries’ energy sectors depend on energy imports.