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What is Energy Transition? (Definition, Benefits and Challenges)


Energy transition is the move by the global energy sector away from fossil fuels such as coal, natural gas and oil towards renewable energy sources such as wind and solar energy.

The energy transition requires long-term strategies from the global energy sector to create cleaner, sustainable options via an energy mix that will reduce carbon emissions as well as strategies for decarbonisation.

In many instances, wind power has become cheaper than traditional high carbon energy sources, while energy efficiency and energy storage improvements are also a strong driver for the transition away from fossil fuels.  This transition towards a mixed renewable energy supply also includes the development of electrification, such as with electric vehicles.

While the move towards cleaner energy is a global concern, the global structures to achieve this are still uneven, with Europe leading the way by pushing towards carbon-neutrality with targets to reach net zero by 2050. Political momentum is growing in other areas and almost 200 nations have committed to tackling global warming by reducing greenhouse gas emissions, although some nations are still growing their emissions despite these promises.


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History of Energy Transition

There are two schools of thought when to the history of energy transitions; the first says that humanity has experienced several transitions over the past three centuries while the second view says that humans have not had energy transitions but rather ‘energy additions.’

The first view supports the idea that humanity has moved from different energy systems – from wood to coal and then oil to a mixture of coal, oil and natural gas. However, the second view states that each new form of energy did not replace the previous form, but rather worked alongside it.

The term ‘energy transition’ was first coined in the 1977 during U.S. President Jimmy Carter’s ‘Address on the Nation of Energy,’ where he said, "look back into history to understand our energy problem. Twice in the last several hundred years, there has been a transition in the way people use energy ... Because we are now running out of gas and oil, we must prepare quickly for a third change to strict conservation and to the renewed use of coal and to permanent renewable energy sources like solar power."

The urgency with which calls for a move to renewable energy grew during the 1990s as the effects of climate change were increasingly discussed as a matter of importance. The 2015 COP21 Paris Agreement saw 196 nations agree to reach carbon neutrality by the middle of this century, with calls to limit global warming to "well below 2°C, preferably 1.5°C compared to pre-industrial levels." In order to achieve this a transition is required away from fossil fuels to reduce carbon emissions. This new transition differs from previous energy changes in that it requires the change to occur much faster. In addition, where previous transitions were caused by a scarcity of resources, this modern transition is driven by climate change, as coal, oil and gas combustion accounts for 89% of all CO2 emissions. The transition will require a 95% reduction in coal use, a 60% reduction in oil and a 45% reduction in gas use compared to 2019 levels in order to reach a 50% chance of meeting the Paris Agreement targets of 1.5 °C.


Benefits of Energy Transition

Despite the calls for a reduction in fossil fuels from the 1980s onwards, the global deployment of renewable energy was hampered by cheaper coal, oil and gas. However, from 2010 to 2019 solar and wind power costs reduced dramatically, making them the cheapest option for new installations in many areas. In addition, renewable energy sources provide improved energy security, which has become more important in the light of the Russian invasion of Ukraine in 2022. Renewable energy also offers additional benefits, such as higher employment rates, industrial development, improved health and greater access to energy.

Of course, the greatest benefits of the current move away from fossil fuels involve the climate and decarbonisation. This needs to be supported by improved energy storage to allow for times when sources such as solar or wind power cannot be depended upon. 

Challenges of Energy Transition

Despite the benefits of a renewable energy transition, achieving a truly global change requires support from governments, business and the public. Much of the push towards a transition is led by public opinion over climate change, yet many governments and businesses have been slow to engage with the transition in favour of continuing to reap profits from existing systems.

Part of the challenge also comes down to investment and the uptake of renewables by energy companies and electric utilities. In addition, much of the global workforce and many industries are still reliant on a fossil fuel economy, whether directly or indirectly.

This dependence on fossil fuels was highlighted with the Russian invasion of Ukraine, which caused a European energy shortage.


Energy Transition Factors

The energy transition away from fossil fuels and towards renewables includes a number of factors aside from simply using a renewable energy mix rather than continuing the use of fossil fuels.

Firstly, there are matters of efficiency, where renewable energy needs to be competitive against traditional energy sources. Recent advances have made this a more realistic proposition as new renewable energy sources such as wind, solar and lithium ion batteries are now cheaper than fossil fuels.

Electrification is another important factor in the energy transition and the move towards decarbonisation. Decarbonisation requires grid stability and resilience, which is being aided by digitalisation that can assist with power plant management and smart grids. Energy storage is another important factor in the transition in order to provide a reliable resource through a joined-up energy mix. 


An energy transition is the shift from one form of energy production to another, such as the move from burning wood to burning coal. Historic energy transitions were often brought about by a scarcity of one resource leading to the use of another alternative resource. However, in these instances the ‘transition’ could be argued to be a gradual shift whereby different energy sources coexisted rather than a complete change from one to another. An energy transition is a paradigm shift rather than a gradual evolution.

The current energy transition, as a result of climate change, is different as growing concerns over global warming and the environment have caused an urgency to replace fossil fuels with cleaner, renewable energy sources. This change is coupled with improved efficiencies and cleaner transport solutions as well as improvements in energy storage. 


Why is Energy Transition Important?

Energy transmission is important for a range of different reasons, from decarbonisation to job creation, industry growth, competitiveness and more.

Here are a few reasons why energy transition is important today…

Decarbonisation: Decarbonisation is vital in order to slow down climate change. Europe has led the way on this, outperforming China and the United States in efforts to decarbonise the economy by beginning the process in the early 2000s. As of 2018, Europe was 20% less carbon intensive than the United States and 70% lower than China.

Empowering Consumers: By adjusting electricity demands and supplying energy to the grid, consumers can play an active role in energy transition. Instead of just being consumers, customers can become ‘prosumers’ who sell their excess electricity back to the grid.

Financial Security: Renewable energy has been less affected by financial crisis over the past two decades than other investments, offering improved financial security.

Improved Competitiveness: Europe has already seen improvements in competitiveness as a result of the energy transition, with the energy used to produce one unit of economic output reducing by 20% between 2005 and 2017. While industries such as cement, chemicals, glass, plastics and steel still need to improve energy efficiency, this can be achieved through digitalisation, automation and the increased use of recycling and re-using materials.

Industrial Growth: The cost of renewable energy has reduced dramatically, with solar energy costs falling by 75% from 2010 to 2018 and wind power costs reducing by 35% in the same time period. However, subsidised fossil fuel continues to impair competitiveness of renewable energies globally.

Job Creation: Green energy has the potential to create jobs as climate change is tackled. Some 4 million jobs have already been created in Europe through the transition to cleaner energy solutions, with estimates suggesting that between 0.3% and 0.9% more jobs will be created by 2050 as a result of transition compared to if nothing changes.

Reduced Energy Dependency: The dependency on energy imports has been shown to have drawbacks with regard to energy security and pricing. Locally produced renewable energy removes this problem while being competitive with fossil fuels.

Why Do Energy Transitions Take Time?

It is estimated that each energy transition in the past has taken around 50-60 years. This is because energy systems lack the momentum for a fast change, while disruptive technologies and changes in consumer use are also required.

To increase the pace of transition towards the adoption of clean energy, several barriers need to be removed including transmission limitations, financial limitations, market and legislative regulations, and constraints on natural resources.

Why is Energy Transition Necessary?

Energy transition has been necessary as a means of progressing industry, leading to breakthroughs such as the Industrial Revolution as well as creating new energy resources as others became scarce.

However, with climate change, energy transition has become more critical than ever in reducing pollution and climate impacts. This climate effects of this transition has been estimated to offer global savings of to $4.2 trillion per year by 2030.

Reliable and efficient renewable energy resources could prove to be less prone to market shocks, improving energy security and resilience through a diverse energy mix. In addition, this energy transition will provide positive impacts for humanity via increased access to power and healthcare, as well as reducing air pollution, which is the fourth leading factor for early death worldwide. The energy transition will also create local jobs, reduce the reliance on imported fuels and increase cost efficiencies.

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