The results of the global Energy Architecture Performance Index (EAPI) 2017 highlight key trends in the energy transition moving towards more sustainable, affordable and secure energy systems around the world, as well as the challenges countries continue to face, individually and as cohorts. Looking back at five years of data from the EAPI, this report also distils insights from countries that have shown significant improvements in performance or remained consistently high performers.
EAPI 2017: Key insights
- Top performers come in all shapes and sizes: While many of this year’s top performers tend to be smaller countries, both in size of gross domestic product and population, and typically have advanced economies, a significant number of countries do not fit this mould. These exceptions demonstrate that few constraints are limiting high performance. In fact, top performers come in all shapes and sizes. Their many variations underscore the potential for any country to make improvements in providing secure, affordable and sustainable energy to its population, regardless of its context.
- European countries dominate the leader board: As in previous years, countries from Europe continue to hold many of the top 20 ranks on the EAPI, with the exceptions of Colombia (8th), New Zealand (9th), Uruguay (10th) and Costa Rica (14th). This strong performance is underpinned by advantages gained through a long history of coordination between European nations, which is a model for regional cooperation. These countries score particularly high on using market forces (reflected in low levels of price distortion) and on the diversity of their energy mix. However, many of them have significant room for improvement, especially in continuing to ensure security of supply given the low level of resource endowment across the continent.
- 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 the EAPI 2009 benchmark or experienced only marginal gains. Their energy consumption dwarfs that of the highest-performing top 20. 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 – some of the largest economies in the world – have difficulty exceeding average performance.
- Top-ranked countries and the rest of the table exhibit a growing divide in performance: Since last year, the top 20 highest-performing countries have achieved twice the average increase in EAPI score compared to that of all other countries. This difference in improving performance reflects a further strengthening of energy sectors in countries already performing well, and an opportunity for other countries to understand these journeys more closely – ultimately so that they can interpret these in the context of their own transitions.
The global energy system is often perceived as slow to change, which is reflected by the modest improvement of less than two basis points in average score versus the EAPI 2009 benchmark. However, a number of countries have made significant improvements in this time frame and climbed the ranks, challenging the view of collective inertia. Examining the journeys of Uruguay, Mexico and Jamaica, which have made strides in their energy sector performance since 2009, and those of Sweden and France, both of whom have been consistently high performers, revealed three principles of energy-sector governance to effectively steer energy systems through transition:
- Frame the long-term direction for the energy sector, and commit to it: Change takes a long time to enact in energy systems. Today’s energy landscape looks very different compared to a decade ago, and will likely be significantly different in another 10 years’ time. Governments that steer their energy systems through these changes with long-term visions provide important continuity across these extended time frames. A long-term frame provides a vision for the energy sector’s many stakeholders to embrace and sets the boundary conditions for the transition. Long-term visions must be flexible to adapt to changing energy-sector realities, new emerging technologies and unforeseeable hindrances.
- Enable the energy transition with adaptable, co-designed policies: The policies most effective at advancing a country’s energy transition are those enabling solutions that best suit a country’s context. This means creating the necessary opportunities for innovation to flourish, and providing flexibility for the most appropriate technologies to emerge organically. While governments formulate the policies, other stakeholders are ultimately relied on to implement the changes and achieve the goals set. For effective implementation, good policy design involves the implementing institutions and end-users to rigorously test policies and assess their potential to drive the desired impact. Through this process and before implementation, an important sense of joint ownership is defined between formulators and executors, instilling among all parties a clear understanding of the policy’s intent.
- Steward investment to the most impactful areas: Significant investment is required to make progress on the energy transition and to meet growing demand for energy. The International Energy Agency estimates that $48 trillion in investment is needed globally to meet energy needs to 2035 (11). The stability of committing to a long-term vision is a must for establishing investor confidence. Once promoted, private-sector investment requires stewardship to guarantee it is focused on the right areas. Innovative approaches are required to ensure this is done to maintain an attractive investment environment. In addition, choosing the right public-private partnership model is key to promoting investment while protecting national interests.
Now more than ever, decision-makers must understand the core objectives of energy architecture – generating economic growth and development in an environmentally sustainable way while providing access to energy and energy security for all – and how changing dynamics affect them. Steering energy systems to a future state that is more affordable, sustainable and secure is a long-term endeavour with significant challenges for any country. However, that endeavour is worthwhile because the benefits of success are great. Energy is a prerequisite for all sectors of an economy, and reliable energy promotes economic and social development by boosting productivity and facilitating income generation. So it follows that energy availability should affect job availability, national productivity and the overall quality of life.