Rapidly growing renewables have unquestionably started to transform the global energy landscape in an irreversible way. At the same time, considerable uncertainty still surrounds the energy transition that is taking place.

As the rapid uptake in renewables shows, we live in an age of exponential change and disruption. Which technological innovations will accelerate the transformation cannot yet be foreseen. Political choices will affect the course and pace of the energy transformation, which is likely to progress at different speeds in each country and in each sector.

However, three primary aspects characterize and underpin the transition: energy efficiency, the growth of renewables, and electrification.

Energy efficiency

Energy efficiency enables economic growth with lower energy inputs. In the twentieth century, the average growth rate of energy demand was 3%, about the same as the growth rate of global GDP. In recent decades, improvements in energy efficiency have broken this link. Primary energy demand is now forecast to grow at 1% a year in the period to 2040.

Growth of renewables

Renewables have emerged as the fastest growing energy source. The main renewable energy sources are bioenergy, geothermal, hydropower, ocean, solar and wind. Among these, solar energy and wind power are undergoing very rapid growth, while the others are growing more gradually. Solar and wind share a characteristic that is largely unique to them.

The amount of power they generate varies with the weather and the time of day. This is why they are called variable renewable energy sources. The impact of the extraordinary growth in renewables has mostly been felt in the electricity sector. Since 2012, renewables have added more new power generation capacity than conventional sources of energy.

Solar power added more new capacity in 2017 than did coal, gas, and nuclear plants combined. Wind and solar now provide 6% of electricity generation worldwide, up from 0.2% in 2000. In the aggregate, renewables account for around a quarter of global electricity generation. Countries such as Denmark already generate more than half their electricity from variable renewable energy sources.

In 2017, Costa Rica’s electricity was generated entirely from renewable energy for 300 days. For several days in the past year, the power systems of Germany, Portugal and Denmark were able to run entirely on renewables.

Electrification

Electricity accounts for 19% of total final energy consumption, but its share is expected to grow as increased electrification of end-use sectors takes place. The deployment of heat pumps and electric vehicles, for example, permits electricity to be used for heating, cooling, and transport.

Electricity has been the fastest growing segment of final energy demand, growing two thirds faster than energy consumption as a whole since 2000.

This trend is set to continue. Since 2016, the power sector has attracted more investment than the upstream oil and gas sectors that have traditionally dominated energy investment, another reflection of the ongoing electrification of the world’s economy.

The speed of the energy transformation is uncertain. Because of the complexity of energy systems, there are as many scenarios on the future of energy as there are forecasters.

Nevertheless, scenarios that model an energy future compatible with the goals of the Paris Agreement have a similar structure: a near-term peak in fossil fuel demand, a rapid uptake of renewables, and a long decline in fossil fuel demand.

Even though nuclear energy is a low-carbon technology, the growth prospects for nuclear energy seem limited. After rapid expansion in the 1970s and 1980s, the growth of nuclear power has slowed in the last three decades.

The share of nuclear in electricity generation declined from 17% in 2000 to 10% in 2017. Around two thirds of today’s nuclear power plants in advanced economies are more than 30 years old and will be shut down in the foreseeable future unless their lifetimes are extended.

Some countries are building new nuclear power plants, notably China, India, Russia, and the UAE. In others, governments are planning to phase out nuclear power, as in Germany, Switzerland, Spain and South Korea.

Overall, the global energy transformation is characterized primarily by a rapid growth of renewables, and in particular solar and wind. Oil, gas and coal will be affected differently by the energy transition because they have distinct characteristics and are used in a variety of sectors.

Why renewables will transform geopolitics

The main story of the energy transition is the rise of renewables, particularly solar and wind, and the future decline of fossil fuels. Renewables differ in many respects from fossil fuels, and these differences will have geopolitical consequences.

First, renewable energy resources are available in one form or another in most countries, unlike fossil fuels which are concentrated in specific geographic locations. This reduces the importance of current energy choke points, such as the narrow channels on widely used sea routes that are critical to the global supply of oil.

Second, most renewables take the form of flows, whilst fossil fuels are stocks. Energy stocks can be stored, which is useful; but they can be used only once. In contrast, energy flows do not exhaust themselves and are harder to disrupt.

Third, renewable energy sources can be deployed at almost any scale and lend themselves better to decentralized forms of energy production and consumption. This adds to the democratizing effects of renewable energy.

Fourth, renewable energy sources have nearly zero marginal costs, and some of them, like solar and wind, enjoy cost reductions of nearly 20% for every doubling of capacity. This enhances their ability to drive change but requires regulatory solutions to ensure stability and profitability in the power sector.

The energy transformation will be one of the major elements that reshape geopolitics in the 21st century, alongside trends in demography, inequality, urbanization, technology, environmental sustainability, military capability, and domestic politics in major states.