RIYADH: The rapid adoption of clean technologies could improve energy affordability, according to a new report.
A key challenge for governments around the world is to make clean energy technologies more accessible to people who struggle to afford the upfront costs, the International Energy Agency said in a new study.
The Energy Agency said further investment was needed in the sector to meet net-zero targets by 2050.
“The report shows that additional investments are needed to put the world on a trajectory to achieve net-zero emissions by 2050, but at the same time, it would cut the operating costs of the global energy system by more than half over the next decade, compared to a trajectory based on current policy settings. The end result will be a more affordable and fairer energy system for consumers,” the energy think tank said.
Clean technology is cost-competitive
According to the IEA, clean energy technologies are already more cost-competitive over their lifetimes than technologies that rely on traditional fuels such as coal, natural gas and oil, with solar photovoltaics and wind power being the cheapest electricity generation options.
“By 2023, more than 95% of new large-scale solar PV and onshore wind capacity will have lower electricity generation costs than new coal-fired and natural gas plants,” the Energy Agency said.
He added: “Solar module prices are very low right now, falling 30% for 2023. This creates affordable opportunities for everything from utility-scale projects to home solar systems, and cheap batteries are making them more valuable.”
The analysis highlighted that although electric vehicles are more expensive than conventional cars, their lower maintenance costs make them more cost-effective in the long run.
“Electric vehicles, including two- and three-wheelers, can sometimes, but not always, have higher upfront costs, but usually result in savings through reduced operating costs. Energy-efficient household appliances such as air conditioners offer similar cost benefits over their lifetime,” the IEA noted.
The clean energy transition depends on upfront investment
The energy think tank further noted that the transition to clean energy depends on unlocking higher levels of upfront investment, particularly in developing countries.
Clean energy investment in emerging economies is slowing due to real and perceived risks that hinder new projects and access to finance, the report says.
“Furthermore, existing distortions in the global energy system in the form of fossil fuel subsidies favour incumbent fuels, making investment in the clean energy transition more difficult,” the IEA said.
It added: “Governments around the world will have spent a combined total of approximately $620 billion in subsidies for fossil fuel use in 2023, far more than the $70 billion spent supporting consumer clean energy investments.”
How clean energy technology benefits customers
According to the analysis, because clean technologies are less volatile than the prices of petroleum products, benefits from an accelerated energy transition and an increased share of renewable energy such as solar and wind will benefit end consumers.
The IEA added that electricity is expected to overtake oil as the leading fuel source for final consumption by 2035.
“The data makes it clear that the faster the transition to clean energy, the more cost-effective it will be for governments, businesses and households,” said IEA Executive Director Fatih Birol.
He added: “If policymakers and industry leaders put off action and spending today, we will end up paying more tomorrow. The first global analysis in our new report shows that the way to make energy more affordable for more people is to accelerate, not slow, the transition. But more needs to be done to help poorer households, communities and countries get a foothold in the new clean energy economy.”
Policy interventions are key to accelerating the energy transition
The agency also noted that increased incentives and support, mainly targeted at disadvantaged households, could boost the adoption of clean energy technologies in the coming years.
According to the IEA, encouraging clean energy technologies will help consumers fully realize the benefits and cost savings of renewable energy, and will also support efforts to meet international energy and climate targets.
The report suggested additional steps the government could take to speed up the use of clean technologies, such as offering energy efficiency programs to low-income households, requiring utility companies to fund more efficient heating and cooling packages, and providing affordable, green transportation.
“Policy interventions will be crucial to address the significant inequalities that already exist in the current energy system, which put affordable and sustainable energy technologies out of reach for many people,” the IEA said.
“The most fundamental inequalities are faced by some 750 million people in emerging and developing countries who have no access to electricity, and more than two billion who lack clean cooking technologies and fuels,” the statement added.
However, the energy think tank warned that the transition to clean energy will not be free of the risk of price shocks and governments need to remain vigilant against emerging dangers that could affect energy security and affordability.
According to the IEA, geopolitical tensions remain a major source of potential fluctuation in both traditional fuel and, more indirectly, clean energy supply chains.
Moreover, the transition to a more electrified energy system could bring about a new set of more local and regional risks, especially if investments in the grid, flexibility and demand response are delayed.
“Power systems will be vulnerable to extreme weather events and increasing cyber-attacks, making appropriate investments in resilience and digital security crucial,” the IEA concluded.
In a follow-up report released in May, the agency said ensuring a stable and diversified supply of energy transition minerals is crucial to achieving the net-zero target.
The study also noted that the market size for key energy transition minerals is expected to double by 2040, reaching $770 billion.
