How countries are managing the energy transition

There isn’t one all-encompassing energy transition. Countries are all advancing at different rates, based on their unique challenges, resources, and other factors. But as energy demand continues to grow, it’s critical to understand the local dynamics of these transitions, and how they contribute to the broader goal of global sustainability. PwC recently collaborated with Oxford Economics to create the Changing Energy Order Index, which assesses the progress of G20 countries in shifting from fossil fuels to renewable power.

The index scores were based on assessments of five key areas: transition progress, investment and financing ability, economic and political stability, transition resources, and policy ambition. We also grouped countries that had common characteristics—both in their scores across these five areas but also in their economic and national resources. Here’s how several groups break out:

Advanced extractors: Australia, Canada, Saudi Arabia, and the US
These countries all possess large, resource-rich, industrialised economies with deep fossil fuel ties. They have access to ample financing, a strong and stable business environment, and robust natural resources to deploy renewable technologies. The energy transition within this group is fundamentally about industrial policy and diversification across energy systems. The approach shouldn’t demonise fossil fuels. Instead, it should acknowledge their current role in facilitating the transition.

Policy drivers: France, Germany, Italy, Spain, and the UK
Countries in this group have invested heavily in clean energy technologies, thanks to highly favourable public opinion regarding the transition, even as their general business outlook continues to be fragile. They’ve all substantially reduced their emissions in recent years, but they must balance further progress against the need to shore up short-term energy resilience and security with fossil fuels. Governments in the policy driver group should offer more carrots in the form of business incentives and fewer sticks, such as taxes and rules.

Coal-fired emergers: China, India, and Indonesia
The three populous, rapidly industrialising economies in this group are a crucial part of the global energy transition puzzle. Though heavily dependent on coal to provide the stable power generation needed for their economic development, they also have the potential to transition to more sustainable energy sources. One short-term measure for these countries is to shift to less-carbon-intensive natural gas, even as they invest in comprehensive renewable infrastructure.

The analysis also lists recommendations for all governments, regardless of their grouping in this exercise, to accelerate progress:

Build short-term resilience for a successful long-term transition
Many countries have built out clean energy supply capacity but haven’t sufficiently considered their growing energy consumption, the stability of their energy grid, and their storage capacity. Policymakers can create a cohesive and resilient approach by addressing these elements together.

Focus on affordability and economic benefits
In the geographies where investing in renewables can reduce costs and increase competitiveness, governments need to highlight the economic positives of the energy transition and shift the conversation away from the valid but less tangible debate about saving the planet.

Highlight security impacts
Faith in the resilience of the energy supply is a key pillar of national security. Whatever the level of national development, governments need secure energy supplies to support society. Focusing now on energy resilience and diversification can lay the groundwork for the energy transition and create a stronger and better-protected nation.

Make regulations transition-friendly
Regulations and permitting processes that prevent innovation and clean energy deployment represent a major hurdle for many countries. Streamlined requirements are needed, as is continued protection of stakeholders and better collaboration between local and federal government agencies and ministries.

Scale up blended finance
Despite the opportunities in green finance, the risk factor in some countries remains too high to attract international investment. Governments and multilateral organisations can fill this gap or work with the private sector to develop blended finance solutions that spread the risk, guarantee returns, and accelerate the transition.