A “fundamental shift” in energy thinking: the Energy Transition Index 2026

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Lucy Craig, Director of Growth, Innovation, and Digitalization, DNV: There's really been a shift, a fundamental shift, in how policymakers are viewing energy supply, and this current conflict has underlined the vulnerability of current energy supply chains and the need for greater diversification.

Robin Pomeroy, host, Radio Davos: Welcome to Radio Davos, the podcast from the World Economic Forum that looks at the biggest challenges and how we might solve them. This week we look at the latest Energy Transition Index and ask how the current oil crisis might transform the world of energy. Has China’s massive increase in renewables and electric vehicles insulated it from what’s happening in the Strait of Hormuz?

Boqiang Lin, Chair Professor, School of Management, Xiamen University: I think that we do not fear much actually about what happened in Hormuz, not much, and we are quite confident that it's not going to affect China even if it lasts longer.

Robin Pomeroy: The Energy Transition Index is a snapshot of how countries are doing to develop energy systems that are clean, secure and equitable. How will the current oil shock affect that in the short and long terms? We hear a range of views.

Nicholas Wagner, Manager, Energy Initiatives, World Economic Forum: There's a sort of dichotomy. If we look at the short term, a shock like we've seen is likely to increase the use of oil and gas, and, in many markets in Southeast Asia and South Asia, coal.

Lucy Craig: Our own modelling indicates that actually the long-term outcome is that this increased focus on security will actually become a driver of renewables and electrification.

Boqiang Lin: Wind and solar can be localised. Every country has wind and solar. You want to localise. I think Hormuz fundamentally will change the strategy of every country to localise the energy supply because you don't know what's going to happen next.

Robin Pomeroy: I’m Robin Pomeroy at the World Economic Forum, and with this look at the global energy transition…

Lucy Craig: The long-term direction continues towards decarbonisation.

Robin Pomeroy: This is Radio Davos

Robin Pomeroy: Welcome to Radio Davos. This week we're talking about the energy transition as the World Economic Forum's just published its Energy Transition Index.

We've got two experts joining us on the line, but before we meet them, I also have a co-host for this episode. He's Nick Wagner. Hi Nick, how are you?

Nicholas Wagner: Hi, Robin. I'm great. How are you?

Robin Pomeroy: I'm very well, thank you. What do you do at the World Economic Forum?

Nicholas Wagner: I'm a manager in the Energy Initiatives team here at the Centre for Energy and Materials, one of the Centres at the World Economic Forum, and I lead the work on our Energy Transition Index.

Robin Pomeroy: The Energy Transition Index is this annual report. Tell us what it says. I mean, tell us before we go into the details of what it says, what actually is it? What's the concept of it?

Nicholas Wagner: Yeah, so we're in our 16th year of producing this benchmark. It's a benchmark that looks at 120 countries around the world, assesses them based on their energy transition.

And we define energy transition as a more sort of complex matrix that involves system performance, which is how well energy systems are performing based on data around three dimensions of sustainability, equity, and security. That last part's very important, I think will come up today.

But we also have a look at the broader readiness environment in those countries that looks at their ability to embrace change, that's through financial regulation, innovation, human capital, infrastructure investment.

So every year we produce an analysis and then we summarise that in our Energy Transition Index and we launch it in the summer timeframe just before the Summer Davos in China and we try our best to reflect on the current market situations in that report, but it's a snapshot of where countries stand at the time of production.

Robin Pomeroy: It's a snapshot, but the fact you've been doing it 16 years means there's a trajectory you could chart where certain countries are going, how things are changing.

Before we introduce the two guests that you've brought for this episode today, could you give us some of the headlines from the report? People will be able to find it. There'll be a link in the show notes. If you're interested in global energy and the energy transition, it's an absolute must read. But tell us, Nick, what are some of the headlines for you?

Nicholas Wagner: We say so much. If you're interested in any, in a topical area, there's interesting insights in there about security, about sustainability. If you are interested in any of the 120 countries, you can go into more depth.

But if I had to summarise, maybe two topics on the highest level, one headline that stands out to me is that we're seeing a divergence in a way that we have not seen in the 16 years of producing the index.

So energy systems around the world are performing well. So we're seeing record investment in clean energy technology. We're seeing the highest share of clean energy electricity production and gigawatts of renewable energy capacity in record investment.

So the transition is happening on the ground, but at the same time, the conditions that are needed to sustain this progress, so those are things like policy stability, access to finance, innovation, infrastructure, what we call transition readiness, have weakened.

And it's actually the first time in over a decade that the overall score for transition readiness has declined as opposed to increase. We've seen continuous increase for the last 10 years of transition readiness. This year it's declined.

System performance on the ground has improved but you could say, so to say, this could be a foreshadowing of what might be to come in the future.

Robin Pomeroy: Why has that declined what kinds of things are not happening that kind of were developing before?

Nicholas Wagner: So policy stability is one. A major bottleneck that we see is infrastructure and delivery.

So it's no longer specifically about deployment, meaning installing capacity in the case of renewable capacity or electric vehicles or efficiency. It's more about the systems around that that are really struggling to incorporate that technology.

This isn't new. But it's really coming to the fore that we're seeing a lot of infrastructure bottlenecks.

For instance, there's over 2,500 gigawatts of clean energy capacity that's in the pipeline and a lot that's blocked through infrastructure constraints.

Robin Pomeroy: So it's things like the grid just can't handle it.

Nicholas Wagner: There's the grid side. So we see very significant electricity demand growth. It's coming from EVs, but it's actually a lot of it's coming in many markets from AI. But also cooling. Let's not forget that many markets are getting very hot and are deploying cooling, which is very important also for quality of life. So we're seeing that on the electricity side.

We're also seeing this sort of infrastructure stickiness on the fuel side. The majority of energy is still delivered in the form of molecules, oil and gas essentially, also coal. And there's, the infrastructure that's needed to supply that is very, very sticky in a way, and it's not very flexible.

And that leads me to the second main headline I would say. This year's analysis shows that the only system performance dimension, so the security, equity, and sustainability, both equity and sustainability improved this year, but security declined. And this does, this reflects data, and data isn't encapsulating the recent energy crisis in Hormuz, but we think it's a good indication that security was already having challenges. We think that would be exacerbated this year for obvious reasons.

Robin Pomeroy: Right, security, meaning security of supply of energy. You're an expert on energy, you're about to introduce two other experts on energy. I'm not an expert so much on energy so I'll explain. AI, obviously is artificial intelligence, everyone knows that. EVs are electric vehicles. And when you talk about security, you mean security of supply, it's a vital thing. It's no good if we get energy today but then tomorrow there's a risk of us not getting it. That's what we mean by security of supply, right?

Nicholas Wagner: And this is also why the Energy Transition Index and our definition of energy transition isn't solely focused on a single facet. So it's not just about reducing carbon emissions. It's also about having secure and resilient energy systems. So we measure that. It's about having equitable, which is another term for affordable. You can't have energy transition if prices are through the roof, the public won't accept it. And then it's also this holistic forward-looking transition readiness component.

Robin Pomeroy: Got it, right, let's get to these two guests who've been patiently waiting online for us. Tell us who they are.

Nicholas Wagner: Yeah, we're very happy to have two brilliant guests that actually know this work well. They both sit on the advisory board for the Energy Transition Index, and so are engaged throughout the year when we produce it. And so we were happy to collect their views, but also provide those views.

So the first guest is Lucy Craig. She is Director of Growth, Innovation, and Digitalization at DNV. And DNV is one of the world's leading advisory and assurance organisations. And works across the full energy value chain, from oil to gas to offshore wind and hydrogen and other technologies. And Lucy's focus is on innovation and digital technology and how that's reshaping energy systems. And she brings a uniquely practical perspective on how companies and investors are navigating the transition in real time. She's based here in Europe.

Robin Pomeroy: Hi Lucy, how are you?

Lucy Craig: Hi Robin, great to be here, thank you for the invitation.

Robin Pomeroy: Great to meet you. Who's our second guest, Nick?

Nicholas Wagner: Our second guest is coming to us from China also on the advisory board. And he's Professor Boqiang Lin, we call him BQ for short, based out of Xiamen University and he is Dean of the China Institute for Studies in Energy Policy and chair professor of the School of Management. He is one of China's best well-known energy economists with many decades of research and energy policy in carbon markets and economics, and can bring an important perspective from the world's largest energy consumer and one of the most pivotal players in the world. And he also brings us at an indispensable moment where China's role in the global energy transition is top of mind.

Robin Pomeroy: BQ, nice to meet you.

I discussed with Nick questions we should put, and he allowed me, I think, to go straight into kind of the newsy stuff. But let's see where we go with this. The Strait of Hormuz has shown the delicate balance, I guess, of supply and demand of energy, and particularly of fossil fuels, and also of several other very important things. I guess my question is, we don't know how that's going to end as we're sitting here now, but we know it's having an impact. Is this impact temporary, or might it be an inflexion point that could really change the game when it comes to energy and the energy transition? Lucy.

Lucy Craig: Yes, so, of course, we hope that the current conflict will be solved as soon as possible. And this disruption is hugely significant. But it's also just one more in what's been a series of shocks over recent years.

And we see this as an accelerator in shifting the balance of the energy trilemma that Nick just outlined. It was already moving away from a focus on sustainability towards energy security and resilience.

And we in DNV have recently completed a survey over 1,000 energy industry professionals on this topic of the increased focus on energy security and resilience and that backs up that countries and companies are really seeing the vulnerability of global energy supply chains and they're now moving to prioritise diversification of supply, domestic production and then that resilience of infrastructure and supply chains.

And so this recent shock has really just accelerated those initiatives to reduce dependence on imported fuels.

Robin Pomeroy: And so what are the alternatives, what are countries and companies considering to reduce reliance on those imported fuels?

Lucy Craig: So of course a push towards renewables. In renewables the technology is already there and some of the limitations have been more related to policy and permitting and also grid infrastructure.

So in particularly Europe there's a focus on increasing the production of renewables and reducing the bottlenecks for that and we see that in other countries around the globe.

And, of course, also nuclear is part of an area of focus for some countries as well.

So really diversification of supply and diversification of the supply chain.

Robin Pomeroy: A lot of these things, these investments, are very long term though. You can't build a nuclear power plant and have it up and running in a few months. These are years and years away. Other things might be shorter term than that. I wonder if policy makers and decision makers are thinking, we could just hang on. This crisis will be over and we can just go back to the status quo ante.

Lucy Craig: We don't see that happening. No, we see that there's really been a shift, a fundamental shift in how policymakers are viewing the energy supply and this current conflict has underlined the vulnerability of current energy supply chains and the need for greater diversification to build that resilience that Nick touched on earlier.

Robin Pomeroy: Let's move to China. BQ, how do you see things from there?

Boqiang Lin: I think that we do not fear much actually about what happened in Hormuz, not much, and we are quite confident that it's not going to affect China even if it lasts longer.

The reason for that is very simple. Last year we added about 430 gigawatts of wind and solar into the system, and now the wind and the solar plus energy storage plus electric vehicles, this line, this path, two years ago I won't say that, but today it's workable, because it's actually cheaper.

And also wind and solar can be localised. Every country has wind and solar.

You want to localise, as for Hormuz, I agree with Lucy, fundamentally we change the strategy of every country to localise the energy supply. Because you don't know what's going to happen next. You don't what's going to happen. Next few years even Hormuz can be addressed.

So everybody will try to localise their energy supply.

And that's wind and solar, and that's working. Today, I can confidently say it's working, because it's cheaper. And I think in two years, it's a little bit more expensive in China at this moment. But two years later, I think it will be competitive to coal. And also it's easy to build. It is secure and it's cheaper.

And also the distributed nature of wind and solar actually is really a plus for energy security for any country.

Electric vehicles last year, our penetration rate in China exceeded 50%. This year, last month, it's 62%.

Last year alone, I think we used roughly about 10% of the gasoline consumption in China.

And I have estimated. If we have 100 million of electric vehicles, we can reduce roughly 100 million tonnes of oil consumption. And that's roughly half of 20% of China's imports.

And if we reach 100 million units of electric vehicle, the Hormuz for China is not important anymore. So that's why we are quite confident at this point that China is not really panicking.

Robin Pomeroy: Nick, what are your reflections on it?

Nicholas Wagner: I think Lucy and BQ brought up some interesting points that I'd like to just expand on briefly.

I think there is an important differentiation between the short term and the long term. And some of that was alluded to in the challenge of infrastructure.

I think it was a positive message that came out of China about how China through its really decades now of energy planning is a bit more insulated from the current crisis that we see.

I'll point out that another country that is less impacted is Brazil. Brazil, from the fuel standpoint, has produced a lot of indigenous fuels but also biofuels and has seen a lot less impact on its energy prices.

But there's a sort of dichotomy. I think if we look at the short term, a shock like we've seen is likely to increase the use of oil and gas. And in many markets in Southeast Asia and South Asia, coal. Because those are the fuels they can turn to. And the ability to deploy alternatives is oftentimes limited by the deployment of the infrastructure challenges.

There's also a question longer term. So there's one view, and most certainly there'll be multiple transitions that occur. One is that they'll invest in efficiency, invest in renewables, invest in hydrogen, invest in greater grid and nuclear and electrification.

But there's also another argument to say that there's a lot of investment that's occurring at the moment in fossil fuel extraction outside of the Middle East, looking at Africa, looking at North America, which is the largest producer now, both oil and gas, looking at South America.

So you see a lot of the energy majors producing new fuels and that will take time to develop. But a lot of that, there's a lot of resource out there in regions outside of the Middle East.

Presuming that the Middle east, the Strait of Hormuz goes back to normal operation, then you have a lot of additional supply that will come out of that region.

So we could be in a place in two years, five years where the world actually has a lot more oil and gas supply and prices are very suppressed. Which could have a very detrimental effect on the cost benefit calculations for alternatives.

Robin Pomeroy: That's an unexpected conclusion. And the reason for that would be that people are diversifying where oil and gas comes from.

Nicholas Wagner: Correct, and there's a lot on the north shore of Alaska, all throughout in Argentina, all throughout offshore in Brazil, and huge portions of Africa and Venezuela. There's a a lot of oil and gas around the world, not to mention unconventional in the US and in other places.

So I think it's it's important for policymakers to understand that the short-term reaction is what it is. But longer term without the continued policy support for around transition readiness if the aim is to continue to address emissions, that there needs to continue to be policy because the market will likely, who knows, nobody can predict the future, but the market will likely continue with lower cost oil and gas.

Currently oil and gas, even though certain types of products are very expensive, is at $90 a barrel. And so you could only imagine if things rectify in the Strait of Hormuz and then additional supply comes online that we have many decades to come of oil and gas at low levels.

Robin Pomeroy: Which doesn't bode well for climate change.

If, as Lucy said, a lot of the policy emphasis has switched away from sustainability to security of supply, well, you could fix security of supply by finding new sources of fossil fuels, but you're totally not achieving the sustainability objective, right? I'll just leave that out there. Nick, do you want to ask the next question?

Nicholas Wagner: I think we've discussed some dynamics about the global energy landscape, it's being shaped by a complex mix of uncertainty geopolitical tensions and evolving policy priorities. So how will this grouping of challenges affect the investment decisions of companies and governments? And maybe alluding to what we just discussed, how might that affect the trajectory looking ahead of the energy systems? So Lucy, what do you see from where you're sitting?

Lucy Craig: Yes, so very relevant question Nick.

What we see under the current huge uncertainty, you know, both at levels of policy and the geopolitical environment, companies and governments are shifting towards projects which have shorter payback, low regulatory risk, and are aligned with their energy security priorities.

So that means looking at domestic renewables, power grids, LNG in some regions. And so we see that capital is being concentrated in lower risk markets.

And then we also see that the current high interest rates, uncertainty in policy are increasing the cost of capital. And that's particularly true for less mature technologies. So offshore wind or clean hydrogen are much less attractive in the short term.

And I think that goes back to your point, Nick, that there's a short term scenario that is putting a break on the pace of the energy transition.

But then there's also a longer-term scenario and you know, I'd like to just pick up, say a few words on that longer-term scenario because yes, the focus on energy security means that energy exporting countries are perhaps looking at new ways of investing in oil and gas exploration, but energy importing countries are doing the reverse.

They're shifting their focus away from fossil fuels towards the alternatives, renewables and in some cases nuclear and so our own modelling indicates that actually the long-term outcome is that this increased focus on security will actually become a driver of renewables and electrification.

So yes, short term I think we see a slowdown, but longer term we see that in some regions energy security focus is achieving a result on a faster energy transition that previously we have not seen.

Robin Pomeroy: That's two quite different scenarios that are set out there. And no one has a crystal ball, right, I guess. Keep reading the Energy Transition Index every year. You're going to see how this develops.

So we've looked at the Strait of Hormuz, current situation, which could go on, could stop tomorrow, could go for months.

Another trend that you've already mentioned, Nick, is a massive increase in demand for electricity. You mentioned various reasons for that. One of them is artificial intelligence, the data centres. Lucy, you work with the technology sector on energy. How are you seeing things changed by this rise in AI?

Lucy Craig: So certainly, let's talk first about electricity. It's rapidly becoming the backbone of the energy system. So currently, electricity is about 20% of total energy demand. And we foresee through our modelling that by 2060, it will be over 40% of total energy demand, and that electricity will be generated mainly by renewables, around 80% of electricity globally.

And of course AI adds a new demand vector and data centres are expected to grow very significantly but we're showing that it's manageable, we're expecting it to be around 5% of total electricity by 2040.

So yes AI is important but there are other vectors which are increasing electricity, we talked about EVs earlier, and also the increased use of electricity for cooling demand that Nick mentioned at the start.

But that goes back to the point that the power system is a main driver for the energy transition, and also a potential constraint. And so looking at how we can unlock potential of bottlenecks in grid capacity and permitting delays is another important factor.

Robin Pomeroy: BQ, what's the view from China? Artificial intelligence development there is massively important as well. Is this a real challenge for China to meet demand, energy demand for that?

Boqiang Lin: Energy demand in China is not really a problem. Because China has a huge electricity and energy system that has a huge capacity for either for renewables or for coal. In fact, the coal-fired system right now, the design hours is 5,500. Right now it only generated about 4,400 in 2004. Last year could be even lower.

In other words, we have enormous capacity there. And the reason is that the coal fire system is so low is because of supporting the expansion of renewables. In fact, we are using coal, coal fire systems, to support the renewable expansion, not use energy storage. And we are hoping that this can be changed because energy storage is expensive now but will be cheaper in the future.

Those are strategies someone needs to make a decision to make a choice, but I think they will be intelligent enough to choose the energy storage at this moment, not to expand the coal system.

So another one is that I do believe that the AI will have impact on China's electricity demand, but the impact is manageable.

Electricity demand right now, in the last seven years, it's about 6.5 percent growth. In about 10 years time, it will double. And I think that this trend will continue because right now the manufacturing of wind and solar together with electric vehicles becomes immense demand for electricity.

If this line continues in China, and I believe so, because China believes the geopolitics and energy security is quite important. And our weakest point is oil import, roughly 70%, a little lower right now. We used to go up to 73%. The past few years has been declined by what roughly 1-2% each year. And this year could be even lower because of electricity coming from the wind and solar and charged by the electric vehicles. So I think that the impact of the AI is mixed into the overall electricity demand because it's only a small percentage of electricity demand.

So if China is determined to meet electricity demand, AI wouldn't be a problem.

Our focus right now, China's focus right now, is using the wind and solar to support the data centre. That's why we move the data centres in the west, where the wind, and solar could be, cost could be very reasonable.

So the AI demand will merge with the general electricity demand in China.

Remember that right now, China's electricity system is about, every three kilowatt hour generated globally, one kilowatt hour is in China. And I think 10 years from now, it's quite possible. 2 kilowatt-hour generated, 1 kilowatt hour will be in China. If China continues by roughly 6.5% growth, this year I think probably will be a little still more than 6% growth for electricity.

So the expansion of electricity is dramatically supported by the wind and solar rapid growth. And therefore, we're hoping that not only to meet the AI demand, also meeting the AI demands in a cleaner way. So, I think it will happen.

Robin Pomeroy: And China is also supplying wind and solar infrastructure to the rest of the world.

Do you see, is that going fast enough? Are there barriers for Chinese exporters? The West, the US is worried about trade deficits, these kinds of things. But we do know that China can supply a lot of that and does supply a lot of the equipment. Does anything need to change there, do you think, BQ?

Boqiang Lin: I think that the change is not on the China side, it's on the other side, the demand side. Whether you are willing to adapt to use China's wind and solar and electric vehicles, that kind of stuff.

If the developed countries are willing use China's wind and solar equipment plus electric vehicles, I think we can move much faster in the in the transition of the energy system.

But right now, I believe that China has no problem of supplying equipment or even technology. The problem is the West, in general developed countries are really afraid of depends too much on China. And that's one of the problems. That's geopolitics. And there's not much China can do at this point.

Robin Pomeroy: Nick, what else is in the Energy Transition Index about this rise of electricity demand?

Nicholas Wagner: I think it was actually quite well addressed. It is also a localised challenge. We talk about AI and electricity. Cooling is going to drive more electricity demand than AI globally.

Robin Pomeroy: Air conditioning then.

Nicholas Wagner: Air conditioning in many markets, but that's extremely distributed, I mean more in urban areas. The AI data centres are very localised. They're huge sources of electricity demand. So in many instances, we see that in the case of the U.S., it is putting pressure on local grids, on local energy affordability. So I think that's like the more granular challenge that exists in AI. But it's just another driver, I think as Lucy mentioned, about this increase in electricity we see.

Electricity is growing globally. Over three percent per year as opposed to energy which is growing around two percent. So The largest component is electricity demand growth

I wanted to talk a little bit about emerging markets and specifically Africa, because this year's findings of ETI, when we look at regional levels, Africa is actually the best performing region on an aggregate in terms of improvement. It's the, from overall score standpoint, it is the lowest, but it's the most improved year to year.

And Africa's a complex story, it's one dimensional, and the continent does face a lot of challenges. But because we see that improvement, I just want to ask about emerging markets because we that the majority of energy demand into the future will come from emerging markets, not just Africa, but the Global South and other areas.

And there are a lot of challenges in meeting that demand. There's a high financing premium in most of those markets, and where most of the capital is, is not in those markets. So there's a capital demand sort of mismatch in addition to a lot of infrastructure challenges.

So I think it's encouraging to see the improvement that we've seen in emerging markets particularly. Last year, the best improving region was emerging Europe. That's Eastern Europe, Central and Eastern Europe. And this year, and they've actually done quite well this year as well. And this year it's Africa.

The transition is happening really also in those emerging markets. I just want to point that out.

But also how countries, advanced economies and emerging economies, complement that work would be interesting.

So maybe BQ could let us know a little bit more about how China is approaching emerging markets and supporting them in their transition.

Boqiang Lin: Right now, China has determined not to build any coal-fired power plant abroad. That has been a policy for a long time. So right now, whatever going to the emerging markets, particularly Africa, is actually wind and solar.

I believe that the problem in the emerging markets is the grid, they have a weak grid. And that's different from China. China has a very strong grid, so they can support renewables through other means.

But Africa, I believe that if somehow that China can force lower the cost of the solar further, then it will become affordable for the African countries, for emerging markets.

So I think that's a good path to go because it's clean, it's secure, has a security future here. And I think it will be for sure and also for long.

I would say that a few years from now, the solar plus storage could be actually cheaper than coal and possibly cheaper than natural gas, not necessarily US, but in all other countries. That might be the case. If there's a case, why not?

So right now is that China is still working very hard to lower the cost of energy storage. And let's see how it's going to happen in the next few years.

The cost has been reduced tremendously for energy storage in the past few years. Somebody told me it's about five times lower, something like that. And efficiency is about three times higher.

Wind and solar is not a problem at this moment. The problem is really the storage, and it's moving very fast.

So I do believe that a certain point that the renewables could be competitive with the fossil fuel. Even fossil fuel costs could be lower, a little bit lower in the future.

Robin Pomeroy: Technology, I just want to make an advert now for another fantastic report from the World Economic Forum, which is the Top 10 Emerging Technologies. There'll be a Radio Davos episode on that coming out in about a week's time from when this one comes out.

So those are top 10 technologies that are viewed as having potentially world changing impact in the next five years. And at least two of them, if not three of those top 10 are to do with energy. One of them is passive radiative cooling, which might offset some of the demand for air conditioning.

And another one is everything to grid energy. And this is stuff like electric vehicles having a battery that can both take electricity off the grid, but also put it back on at times of peak demand. Things like that, Nick, are they still at the very early stages? They're not filtering through to the energy transition index yet, right?

Nicholas Wagner: No, I think passive cooling is a design principle that's been used a lot, but it could definitely be deployed in much more interesting ways. As could things like building integrated PV. There's structures, there's roofing structures...

Robin Pomeroy: Photovoltaic, solar...

Nicholas Wagner: Yeah, exactly. So there's a lot of ways that you can do that. The issue with the building stock is that it's very costly to renovate, and it's it's very time consuming. So Europe, for instance, only renovates around 1% of its building stock per year. And there's been a lot of ambition to increase that. And it's been very difficult outside of like heat pump systems.

For new structures, absolutely, but for existing structures, it's quite challenging.

And on the two-way charging or sort of the interaction, everything to grid, now maybe AI can assist with that, I don't know. I know that this is something that's been talked about for a long time but hasn't seen wide-scale deployment.

Maybe there's something interesting occurring in China that Lucy knows of. It's always sort of, for me, a test of concept. In principle, it makes a lot of sense to be able to have that electric vehicle fleet. But those vehicles need to be made available to the grid and right now there's not sufficient charging infrastructure in most markets, needless to say, having those vehicles connected. It would work in more suburban societies where those vehicles can park in garages, but most of the world doesn't live in suburban single homes with garages.

Boqiang Lin: It really requires a large number of electric vehicles for this grid to vehicle or vehicle to grid to become meaningful. And I think there's a pilot testing in China in several cities is working now. And somebody told me it's workable.

But of course the charging stations in China developed very quickly in recent years.

And if this technology will happen, it will happen first in China, because China has most of the electric vehicles at this point. And it has an urgent need for the electric vehicle to become part of the energy storage to support the peak. So there's a need, there's a market. So if something, this will happen will happen in China first. And let's see what will happen the next few years.

Robin Pomeroy: Lucy, I'll bring you in, feel free to comment on that. But I know you've got something to say about cyber security and cyber resilience.

Lucy Craig: Yeah, I think it's very well linked, actually, because I definitely see that two-way charging as a tool in the future to add the flexibility that is needed for the electrified energy system to really be effective.

And we talked about buildings becoming net generators of electricity, and this is all part of an increasingly complex energy system and power systems that are two-way flow distributed as well as with large distant power generation stations like offshore wind, all controlled through digital technologies and some use of AI. It means that they are increasingly vulnerable to cyber attacks.

And we've already seen how cyber is being used, as a result of some of the global conflicts, to attack energy systems and we see an increasing risk.

And that goes back to the point that we mentioned at the beginning that energy security and resilience has this new vector which is also a driver towards re-evaluation of supply chains and looking at where energy is produced as well as consumed.

Robin Pomeroy: It's another area where the World Economic Forum produces very interesting work, cybersecurity. I'll put some links in the show notes to reports on cybersecurity and to radio Davos episodes about it.

Nick, we wanted to end on a note of, I think there's been a lot of optimism in this conversation, but if we go round, maybe start with a guests and I'll end with you. BQ, do you want to, in your final words, tell us what makes you most optimistic when it comes to the energy transition.

Boqiang Lin: Two years ago, I wouldn't say that, but today I can definitely say that wind, solar, storage, electric vehicle is workable now. And it's going to be even better a few years from now.

So I hope that globally that all the countries will see the benefit of this and begin a transition of also protect their own energy security.

It's really enormous progress in the wind solar storage plus electric vehicle in China. I still remember that five years ago penetration rate of electricity vehicle is roughly 10%. Three years ago, it's at 30%, okay? This year, last month, 62%. So it's a tremendous growth there. We have a lot of problems need to be addressed, but I believe that today it's workable.

Robin Pomeroy: Lucy?

Lucy Craig: Yes, reasons for optimism. I think on the technology front, we see that there's continued cost reduction, particularly solar and storage that BQ mentioned, and also in wind. So that means decarbonized electricity generation is also tackling the affordability part of the energy trilemma that was discussed.

And so there's a strong technology momentum. We have strong foundations. We see increasing scale in deployment and the long-term direction continues towards decarbonisation and also, as I mentioned, in the longer term, there's an expectation that the focus on energy security can also drive decarbonisation.

Robin Pomeroy: Nick?

Nicholas Wagner: Yeah, and I think I also share the optimism. The technology is there. The cost of many of those technologies is there, there are really great examples coming out of many different countries, not just China, about how they can be deployed at scale and the systems that are supporting that.

From ETI this year, you know, we have a lot of positivity in certain areas, but one of them is that we do see one in four countries improving across all elements of the Index, meaning they've improved their security, they've improved their sustainability, and they've improved their equity.

One in four may not sound like a lot, but it's quite impressive to improve across these holistic dimensions. But more importantly, these countries are actually very different. They range from European countries like France to Asian countries like Japan. We have countries in Africa, such as Nigeria, and Turkey.

So I think this sort of reiterates that there isn't a single global energy transition. There are multiple transitions. Each country will find its own way to do it. Might emphasise a little bit more security or a little more sustainability or equity depending on their situation. But you can improve across the broad-based index and this year's ETI shows that and also highlights some of those success stories and contextualises it.

So I think it's a great read and I hope everybody has a look at it.

Robin Pomeroy: That's it. Get your plug in at the end.

So we can find out how the energy transition's going across the world in the Energy Transition Index. Nick, link to that in the show notes. Thanks to you for co-hosting with me this episode. Thanks to our guests, Lucy Craig, Director of Growth, Innovation and Digitalization at DNV. And thanks to Boqiang Lin, BQ, Chair Professor at the School of Management in Xiamen University.

Find the Energy Transition Index on our website, link in the show notes. Please follow Radio Davos wherever you get your podcasts or at wef.ch/podcasts where you'll also find our sister programmes, Meet the Leader and Agenda Dialogues.

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