Overcoming the Energy Trilemma: Secure and Inclusive Transitions

Overcoming the Energy Trilemma: Secure and Inclusive Transitions

Introduction

The International Energy Agency (IEA) has been tasked by G7 leaders to address the triple challenge of energy security, climate change, and rising geopolitical risks. This report focuses on the context of the global energy crisis and the strategic responses from the G7, particularly highlighting the importance of diversifying energy sources and supplies.

Key Challenges

1. Energy Security Concerns: The global energy crisis, exacerbated by the Russian invasion of Ukraine and the resulting gas and coal shortages, led to significant price spikes. The IEA activated emergency oil stock releases, the largest in its history, to mitigate these shortages.

2. Geopolitical Tensions: Geopolitical risks, especially in regions like the Middle East, have intensified due to ongoing conflicts and alliances, putting pressure on oil markets.

3. Climate Crisis: Despite a decline in energy-related CO2 emissions in 2020 due to the pandemic, emissions rebounded sharply in 2021 and 2022. Global energy demand, particularly for coal and oil, is expected to reach new highs in 2023. Extreme weather events have become more frequent, leading to widespread adverse impacts.

Opportunities and Solutions

1. Deployment of Clean Energy Technologies: G7 countries are leaders in deploying cost-competitive clean energy technologies, which can help address energy security concerns. For instance, renewable energy has saved billions of euros in electricity costs in the European Union, displacing more expensive fossil fuel generation.

2. Diversification and Supply Chain Resilience: Diverse energy sources and supply chains are crucial. The IEA emphasizes the importance of diversifying energy supplies and critical minerals to enhance resilience and reduce exposure to immediate risks.

3. Global Commitments and Partnerships: The report highlights the need for global commitments and opportunities to build bridges between advanced and emerging economies, particularly in the G7, G20, and COP processes.

Key Data Points

• Electricity Cost Savings: Solar PV and wind installations in the European Union have saved approximately €100 billion in electricity costs from 2021 to 2023.
• Energy Price Impact: Without additional renewable power generation, the average wholesale price of electricity in the European Union in 2022 would have been 8% higher.

Conclusion

The report underscores the urgent need for comprehensive and modernized energy security strategies that address current and future risks. It calls for continued commitment to a 1.5°C-aligned pathway and emphasizes the importance of diversifying energy sources and supply chains to achieve net-zero emissions by 2050.

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Figure 1: Savings in Electricity Costs Thanks to Solar PV and Wind Additions in the European Union, 2021-2023 Note: Cumulative costs are calculated based on EU wholesale spot electricity prices. Source: IEA (2023), Renewable Energy Market Update – June 2023.

Figure 2: Global Energy Sector CO2 Emissions in the Pre-Paris Agreement Baseline Scenario and the Stated Policies Scenario Source: IEA (2023), Stated Policies Scenario.