Energy System Overview

Energy efficiency is called the “first fuel” in clean energy transitions, as it provides some of the quickest and most cost-effective CO₂ mitigation options while lowering energy bills and strengthening energy security. Energy efficiency is the single largest measure to avoid energy demand in the Net Zero Emissions by 2050 Scenario, along with the closely related measures of electrification, behavioural change, digitalisation and material efficiency. All together these measures shape global energy intensity – the amount of energy required to produce a unit of GDP, a key measure of energy efficiency of the economy. To get on track with the Net Zero Scenario, the rate of improvement in global energy intensity needs to be two to three times higher than historical rates and increase to just over 4% per year between 2020 and 2030. While all measures to avoid energy demand help improve energy intensity, and many do overlap, the energy performance of specific technologies – the main focus of this page – is the second largest contributor to emission reductions in the Net Zero Scenario, after renewable energy.

Behavioural changes play an important role in the Net Zero Emissions by 2050 Scenario, cutting CO₂ emissions and reducing energy demand growth. Behavioural changes can both improve wellbeing and public health and address three main challenges to decarbonisation: existing carbon-intensive assets, hard-to-abate sectors and the rapid growth in clean energy supply.

Behavioural changes are active and ongoing changes in energy use by consumers, typically in everyday life, which tackle excessive or wasteful energy consumption. The behavioural changes in the Net Zero Scenario also address equity issues, shrinking the wide gulf between the disproportionately high per-capita energy use in wealthy countries and that in developing economies.

The availability of infrastructure (such as cycle lanes or high-speed rail) and socio-cultural norms affect the likelihood of consumers changing their energy behaviours. Changes are also only likely to happen at the level of individual citizens if governments bring about systemic changes related to mobility and consumer awareness through effective policy. The gradual shifts in lifestyles and opinions needed for these changes will therefore require timely, clear and consistent policy interventions and investment. In the Net Zero Scenario, around three-quarters of the emissions reductions due to behavioural changes could be directly incentivized or mandated by government policies.

With significant potential to mitigate emissions and decarbonise energy supply chains, electrification is an important strategy to reach net zero goals. As more energy end uses become electrified, the share of electricity in total final energy consumption increases in the Net Zero Emissions by 2050 Scenario from 20% in 2021 to 27% in 2030.

In recent years the share has been increasing steadily, but to get on track with the Net Zero Scenario the speed of this increase will need to nearly double to reach the 2030 milestone. Much of the need can be met by the shift towards electric transport and the installation of heat pumps. In industry the highest potential for electrification is in low-temperature heat processes, such as drying of food and beverage processes. Due to the highly competitive market and long lifetime of equipment, the electrification of industrial end uses is slower.

Renewables play a critical role in clean energy transitions. They are responsible for over one-third of the CO² emission reductions between 2020 and 2030 under the Net Zero Emissions by 2050 Scenario. The deployment of renewables in the power, heat and transport sectors is one of the main enablers of keeping the rise in average global temperatures below 1.5°C. Modern bioenergy is the largest source of renewable energy globally, with a 55% share of global production in 2021. Bioenergy is discussed separately, and this evaluation is dedicated to the other renewable technologies.

Recent progress has been promising, and initial estimates suggest that 2022 is a record year for renewable capacity additions, with annual capacity expected to amount to about 340 GW. Key policies announced this year, especially REPowerEU and the US Inflation Reduction Act, will lend further support to accelerate renewable electricity deployment in the coming years.

Still, solar, wind, hydro, geothermal and ocean energy use needs to expand significantly faster to get on track with the Net Zero Scenario. These sources need to increase their share of total energy supply from just over 5% today to approximately 17% by 2030. To achieve this, annual renewable energy use (not including bioenergy) has to increase at an average rate of about 13% during 2022-2030, twice as much as over 2019-2021.

Bioenergy is a source of energy from the organic material that makes up plants, known as biomass. Biomass contains carbon absorbed by plants through photosynthesis. When this biomass is used to produce energy, the carbon is released during combustion and simply returns to the atmosphere, making modern bioenergy a promising near zero-emission fuel.

Modern bioenergy is the largest source of renewable energy globally, accounting for 55% of renewable energy and over 6% of global energy supply. The Net Zero Emissions by 2050 Scenario sees a rapid increase in the use of bioenergy to displace fossil fuels by 2030. Use of modern bioenergy has increased on average by about 7% per year between 2010 and 2021, and is on an upward trend. More efforts are needed to accelerate modern bioenergy deployment to get on track with the Net Zero Scenario, which sees deployment increase by 10% per year between 2021 and 2030, while simultaneously ensuring that bioenergy production does not incur negative social and environmental consequences.

Hydrogen and its derivatives should play an important role in the decarbonisation of those sectors where emissions are hard to abate and alternative solutions are either unavailable or difficult to implement, such as heavy industry, shipping, aviation and heavy-duty transport.

The momentum behind hydrogen remained strong over the past year. Nine countries – which cover around 30% of global energy sector emissions today – released their national strategies in 2021-2022. Hydrogen demand grew in new applications, although from a very low base, reflecting accelerated deployment of fuel cell EVs, particularly in heavy-duty trucks in China. Some key new applications for hydrogen are showing signals of progress, particularly in the steel sector where announcements for new projects are growing fast just one year after the start-up of the first large pilot project for the use of pure electrolytic hydrogen in direct reduction of iron. In transport, the first fleet of hydrogen trains started operating in Germany and major shipping companies have signed strategic partnerships to secure the supply of hydrogen and its derivative fuels in the short term. On the supply side, electrolyser manufacturing capacity has doubled since last year, reaching nearly 8 GW per year; and the realisation of all the projects in the pipeline could lead to an installed electrolyser capacity of 134-240 GW by 2030, twice the expectations from last year.

Nonetheless, these laudable developments still are below what is needed to get on track with the Net Zero Emissions by 2050 Scenario. Faster action is required on creating demand for low-emission hydrogen and unlocking investment that can accelerate production scale up and deployment of infrastructure.

Carbon capture, utilisation and storage (CCUS) refers to a suite of technologies that can play a diverse role in meeting global energy and climate goals. CCUS involves the capture of CO₂ from large point sources, such as power generation or industrial facilities that use either fossil fuels or biomass as fuel. The CO₂ can also be captured directly from the atmosphere. If not being used on-site, the captured CO₂ is compressed and transported by pipeline, ship, rail or truck to be used in a range of applications, or injected into deep geological formations (including depleted oil and gas reservoirs or saline aquifers), which can trap the CO₂ for permanent storage. In the Net Zero Emissions by 2050 Scenario, the vast majority of the captured CO₂ is stored.

There are around 35 commercial facilities applying CCUS to industrial processes, fuel transformation and power generation. CCUS deployment has been behind expectations in the past but momentum has grown substantially in recent years, with around 300 projects in various stages of development across the CCUS value chain. Project developers have announced ambitions for over 200 new capture facilities to be operating by 2030, capturing over 220 Mt CO₂ per year. Nevertheless, even at such level, CCUS deployment would remain substantially below what is required in the Net Zero Scenario.

To translate momentum into action, policy makers should roll out additional policy support, while also ensuring that appropriate legal and regulatory frameworks are in place. Growing recognition of CCUS technologies’ role in meeting net zero goals is translating into increased policy support such as in the United States, where the Inflation Reduction Act (IRA) of 2022, coupled with funding under the Infrastructure Investment and Jobs Act, is expected to incentivise greater CCUS deployment.

Innovation in clean energy technologies needs to accelerate to get on track with the Net Zero Emissions by 2050 Scenario. While most of the CO₂ emission reductions can be achieved by 2030 with existing technologies, the path to 2050 relies on technologies that are not yet ready for widespread uptake, particularly in sectors that are hard to decarbonise such as heavy industry and long-distance transport.

There has been important progress in 2021-2022, including in R&D in key areas such as low-emission hydrogen-based steelmaking, small modular nuclear reactors, and lithium-free batteries. Despite the Covid-19 pandemic, governments are spending more and more on energy R&D – which could reach USD 40 billion in 2022 assuming steady growth – and venture capital investments in clean energy start-ups reached an all-time high in 2021. Furthermore, governments are supporting major R&D and demonstration projects, such as through the US Bipartisan Infrastructure Law, the EU Innovation Fund, Japan’s Green Innovation Fund and China’s 14th Five-Year Plan, with an increasing focus on heavy industry, hydrogen, CCUS and other critical energy technologies. Still, more efforts are needed this decade to reach Net Zero Scenario milestones.

International collaboration will be vital to get the world on track with the Net Zero Emissions by 2050 Scenario. It will be particularly important for decarbonising heavy industry and the long-distance transport sectors, given that they are often highly traded, serve global markets and their net zero transition involves the massive deployment of technologies under development today. Without well-targeted international collaboration, the energy transition in these sectors could be delayed by decades. This review focuses on these sectors, while noting that international collaboration in other sectors and on climate change more broadly will also be important. The year 2021 saw increased momentum, with the launch of nine net zero initiatives in the steel, shipping, aviation and cement sectors. Other sectors, such as trucking and aluminium, are yet to launch initiatives aligned with net zero, although a number of decarbonisation initiatives already exist.

Digital technologies and data hold tremendous potential to accelerate clean energy transitions across the energy sector. In electricity systems, digital technologies can help integrate increasing shares of variable renewables and improve the reliability of grids, while in end-use sectors they can improve energy and material efficiency and reduce emissions. Moreover, digital services like videoconferencing offer low-carbon alternatives to travel while also supporting behavioural change towards low-carbon options.

Advances in digital technologies and services, declining costs and ubiquitous connectivity have accelerated the digital transformation of energy in recent years, particularly in electricity networks. Grid-related investment in digital technologies has grown by over 50% since 2015, reaching 18% of total grid investment in 2021. However, further efforts by policy makers and industry are necessary to realise digitalisation’s full potential to accelerate clean energy transitions, including implementation of enabling standards, policies and regulations that prioritise innovation and interoperability while addressing risks to cybersecurity and data privacy.