Energy security needs both electrification and renewables
Molly Walton, Director of Energy, We Mean Business Coalition, and Sam Kimmins, Director of Energy, Climate Group
Countries aiming to reduce dependence on volatile fossil fuels are building their supply of home-grown energy – and electrification will expand its reach and deepen its impact.
The current energy crisis – the second in the last five years – has pushed import-dependent countries around the world to confront a familiar vulnerability: exposure to fossil fuel markets beyond their control.
In response, much of the attention has gone to accelerating renewable power. For instance, the European Union is eyeing a tenfold increase in renewables, and India is speeding up permitting for wind power plants and battery energy storage systems. With renewables, countries can produce the energy they need right in their own backyards, protecting against price shocks and the fragility of fossil fuel supply chains.
But growing the supply of renewable electricity is only part of the equation. While many countries are achieving ever higher percentages of renewables on the grid, around 65% of the final energy underpinning our economies – including in transport, buildings and industrial heat – is still directly supplied by fossil fuels. This is a structural mismatch that leaves countries exposed.
Electrification can substantially reduce that gap. This is because replacing fossil fuel-powered devices with more reliable and efficient electric technologies can dramatically expand the reach of renewable electricity, deepening its impact and making it an economy-wide asset.
Renewables cleans up the electricity system; electrification enables that clean power to replace fossil fuels at point of use.
Economies that electrify faster not only reduce exposure to volatility and build security; they also reap the benefits of greater efficiency, lower costs, higher competitiveness and improved health and productivity. To help bring about these benefits, We Mean Business Coalition, with Climate Group and other Coalition partners, recently launched Electric Advantage, a multi-year program focused on spurring industry action, reforming regulations and driving investment in electrification at scale.
IN PRACTICE
Three of every four people live in countries that are net importers of fossil fuels. But most of these countries can meet energy demand without fossil fuels: Renewables and electric technologies can provide 92% of the world population with abundant energy.
Noting this potential, countries are already investing in renewables to reduce exposure to imported fossil fuels and volatility. Electrification can build on these trends by enabling more of the economy to run on clean electricity.
We Mean Business Coalition’s Electric Advantage program is focusing on Europe and India to start, as these are two critical anchor markets for setting ambition, showcasing impact and shaping global outcomes and markets.
The European Union, for example, has long had to contend with repeated price shocks, made worse by its high dependence on fossil fuel imports.
For European countries, electrification offers a way to reduce exposure to fossil fuel volatility, stabilize prices and improve industrial competitiveness. In response to spiking petrol and diesel prices, interest in EVs has surged across the EU in recent weeks.
Electrification also reduces infrastructure mismatches by creating new sources of demand that absorb surplus renewable generation. Managed charging of EVs, for example, can both absorb larger volumes of renewable generation and export electricity back to the grid.
India is already benefiting from the rapid expansion of cheap solar power. Electrification offers a competitive growth strategy, allowing the country to leverage this cheap energy to support manufacturing and growth. For instance, electrification would provide Indian industry with low-carbon production pathways for export-oriented companies, to enable continued competitiveness given international regulations like the EU’s Carbon Border Adjustment Mechanism (CBAM), which taxes carbon-heavy imports.
Given India’s high dependence on fossil fuel imports for transport, industry and power, electrification also offers resilience and energy security. Additionally, electrification is a critical step for improving public health and reducing air pollution: the country is home to 17 of the world’s worst 30 cities for air pollution, costing India tens of billions of dollars in reduced productivity and work absences, alongside health impacts and premature deaths.
For these reasons, end-use electrification has been identified as a central pillar for India’s national goals, according to NITI Aayog. This includes the country’s goal of net zero by 2070 and its path to Viksit Bharat by 2047, which is the country’s vision to grow GDP through investments in infrastructure, education, technology and healthcare.
If demand isn’t electrified, the impact of clean power remains limited. But with electrification, countries can unlock the full economic value and benefits of renewable electricity. In both the EU and India, electrification is the key lever and what determines how much of the economy remains tethered to fossil fuels.
BARRIERS AND LEVERS
An electrified economy can be achieved, but it’s not without barriers.
Many countries face infrastructure constraints, which highlight the need for investments in grids, storage and flexibility. Countries also face challenges with the high upfront cost of electrification, expensive electricity and slow adoption rates of clean electricity across sectors.
To overcome some of these challenges, countries should consider the following key policies:
Realigning fiscal incentives, taxation and efficiency measures to accelerate electrification of end uses and reduce exposure to volatile fuel costs.
Delivering an effective electricity market to better reward non-fossil flexibility (including demand response and storage), strengthen long-term investment signals, and ensure resource adequacy through clean, flexible solutions while enabling the efficient integration of high shares of renewables.
Expanding, digitalizing, and future-proofing electricity grids by accelerating transmission and distribution investment, and deploying smart, grid-enhancing technologies to optimize existing capacity, reduce congestion and enable faster integration of renewable sources.
Streamlining permitting and grid connection processes to enable faster delivery of clean generation, storage, grid infrastructure and connections and electrification infrastructure, by reducing administrative timelines, improving coordination across authorities, increasing transparency and management of queues.
CONCLUSION
Home-grown renewables are essential for reducing reliance on volatile fossil fuels, but without electrification, they remain a partial solution, leaving countries vulnerable to the price shocks and fluctuations of geopolitics and international conflict.
It’s clear that both electrification and renewables are needed to build a more secure future. Creating this future will require dedicated efforts by both business and governments
With countries like France increasing investments in electrification, and the European Union unveiling pledges that prioritize electrification, many countries are showing their commitments to this critical part of the energy transition. We look forward to countries following their lead, as we continue this momentum toward an electrified economy.