The Fostering Effective Energy Transition initiative, facilitated by the World Economic Forum, aims to accelerate the speed of the global energy transition by promoting the adoption of effective policies, corporate decisions and public‑private collaboration for the transition to a secure, sustainable, affordable and inclusive future energy system. The Energy Transition Index (ETI), a part of this initiative, establishes and disseminates a fact‑based framework to foster greater understanding of the state and readiness of energy systems across countries for this transition.
The ETI 2020 is a continuation of the annual energy system benchmarking series published by the World Economic Forum. Previously published as the Energy Architecture Performance Index (EAPI) series from 2013 to 2017, the framework was revised to reflect the interdependencies of energy system transformation with macroeconomic, political, regulatory and social factors that determine a country’s readiness for transition.
The ETI framework consists of two parts: current energy system performance and the enabling environment for the energy transition (Figure 1). System performance provides an assessment of countries’ energy system related to their delivery in three key priorities: the ability to support economic development and growth, universal access to a secure and reliable energy supply, and environmental sustainability across the energy value chain. The objective of energy transition in a country should be to deliver simultaneously across these three priorities, thereby maintaining a balanced “energy triangle”. However, countries approach energy transition from different starting points and unique socio‑economic characteristics, and hence prioritize objectives for energy transition that reflect country‑specific circumstances. Such priorities may include expanding access to modern energy services, meeting a rising energy demand, modernizing energy system infrastructure, providing employment, reducing environmental footprints of energy‑sector activities, etc. While countries will inevitably choose a diverse set of short‑term objectives, pursuing the long‑term goal of achieving a balanced “energy triangle” can support the choice of appropriate policies and instruments, and help the synchronization of efforts across countries and the maintenance of a steady course on the global energy transition.
Progress on a country’s energy transition will be determined by the extent to which a robust enabling environment can be created. This includes strong political commitment, a flexible regulatory structure, a stable business environment, incentives for investments and innovation, consumer awareness and the adoption of new technologies, among other factors. Energy transition is not restricted to linear shifts in the fuel mix or the substitution of production technologies that can be unilaterally achieved by policies or innovation or investments. Rather, the social, economic and technological systems that are connected to the energy system need to co‑evolve19 to shape the transition.20
The ETI benchmarks the state of the energy transition in 115 countries. These countries constitute 90% of the global population, 93% of global total energy supply and 98% of global nominal GDP. The ETI is a composite score of 40 indicators, sourced from reliable international data providers to ensure comparability across countries and consistency over time. The indicators are standardized and grouped together to derive scores for higher order dimensions (Figure 1), which are equally weighted to obtain scores for the system performance and transition readiness sub‑indices. The composite ETI score is the average of these two sub‑indices.21
In addition to summarizing insights from the ETI 2020 scores, this report also examines the evolution of the global energy transition since 2015. Scores for the ETI composite, sub‑indices and dimensions were back‑casted prior to 2018 for a consistent group of 115 countries. Six years may not be long enough to study transitions, but given the speed of new policy announcements, increasing volumes or investments, and technology deployments, this time frame provides useful insights into the effectiveness and sufficiency of the efforts and the roadblocks that may lie ahead.
Figure 1: Energy Transition Index framework
Source: World Economic Forum
Energy transition definition
An effective energy transition is a timely transition towards a more inclusive, sustainable, affordable and secure energy system that provides solutions to global energy‑related challenges, while creating value for business and society, without compromising the balance of the energy triangle. While a long‑term vision and objectives are necessary, remaining flexible in a dynamic environment is critical. Given the complexity and scale of the energy system, which includes different fuel sources, technologies for extraction and conversion, and end‑use sectors, an effective energy transition needs to balance the priorities of diverse stakeholder groups. The World Economic Forum Fostering Effective Energy Transition initiative offers a platform to establish a common understanding among all stakeholder groups on the end‑state of the energy transition, necessary imperatives, market and policy enablers, and the resulting human impact.
Table 1: Energy Transition Index 2020 results
Source: World Economic Forum