World Economic Forum 2018 – All rights reservedNo part of this publication may be reproduced ortransmitted in any form or by any means, includingphotocopying and recording, or by any informationstorage and retrieval system. REF 080118 - case 00039936 Contents Introduction 3 The future shape of the energy system4 The system has become less predictable5 Steering change 7 What we don’t know8 Managing the innovation tsunami 9 This paper has been written by the World Economic Forum Global Future Council onEnergy 2016-18. The fndings, interpretations and conclusions expressed herein are aresult of a collaborative process facilitated and endorsed by the World Economic Forum,but whose results do not necessarily represent the views of the World Economic Forum,nor the entirety of its Members, Partners or other stakeholders, nor the individual GlobalFuture Council members listed as contributors, or their organizations. 3Transformation of the Global Energy System As an integral part of the World Economic Forum System Initiative on Shaping theFuture of Energy, the Global Future Council on Energy provides vision and thoughtleadership. Since 2016, the Council has been looking at the forces transformingthe production, demand and impact of the energy industries. It has focused onthe profound technological changes, which may completely transform the energysystem, creating opportunities along with signifcant challenges. Here the Forumoffers insights into what has been learned, along with four specifc actions that itscommunity might consider in coming years to help corporate leaders and policy- makers grapple with the implications of massive technological change.Over a few decades, centred on the year 1900, energy systems underwent theirmost profound transformation. The internal combustion engine and electricityfound niche markets in wealthy industrialized cities before spreading and sendingshock waves through modern economies. New types of energy created newforms of architecture and urban planning (air-conditioning and elevators made highdensity working and living possible, even in hot climates), transport (buses andcars were much cleaner than horses) and the means of production across nearlyevery major industry. Economic growth boomed for a century.1An innovation tsunami has the potential to wash over the world’s energy systems.With it, disruption and transformation throughout the world economy could be asprofound as the shocks of electricity and oil a century ago.2 The size and scope oftoday’s energy systems create powerful inertia, but tsunamic forces could swiftlyupend businesses and also profoundly alter the outlook for how energy systemsaffect emissions and sustainable development.Anticipation of this tsunami has been a source of tremendous anxiety. Some frmsand industries fear survival. Others foresee riding these powerful waves into newmarkets. The energy system’s predictability has decreased while the risks andopportunities for investors have risen. Considering these issues over two years,those involved learned a number of things, the key points of which are briefyoutlined in this report.Introduction 4Riding the Innovation Tsunami Out of this uncertainty, several patterns are emerging.First, the century-long process of electrifcation is likely tocontinue and accelerate. Moving energy by wire is hugelyadvantageous when fexibility and cleanliness are at apremium, such as in cities. Pressure for decarbonizationwill likely accelerate electrifcation since the ability togenerate power with little or no carbon gradually becomescompetitive. Today, approximately 19% of fnal energy iselectricity; some studies see that portion doubling by 2050with deep decarbonization.3Second, growth in total energy demand is likely to slowas economies shift in structure, effciency improves andeconomic growth moderates. There are countries andregions where primary energy demand will continue togrow signifcantly, such as India, but what is most strikingis how many countries have made transitions to lowerdemand growth at rates that are relatively rapid consideringhow infrastructure-intensive the energy system is. Between1965 and 1975, total global demand for energy grewalmost 4.5% per annum; since 2007, it has averaged just1.8%.4Third, coal faces signifcant problems globally. Someniches for growth are possible, but the overall pictureputs the industry on the brink of fattening demand andcontraction. Oil continues to occupy invaluable rolesin transport and petroleum chemicals, which plausiblyplateau total demand for liquids at levels not muchhigher than current amounts. Gas is the big “wildcard”,in particular for use in electric power. With the righttechnologies and policies, total demand for gas could growsubstantially. Without them, markets that are seeking deepcuts in emissions will squeeze conventional natural gas.5Technology is the key to deciding whether or not gas willbe a transition fuel. Fourth, decentralization of energy systems is under way,in particular with the rise of self- and locally-generatedpower. This possibility, which is spoken about more thanobserved, is most striking in the ways in which rural andlow-income populations obtain electricity. Approximately1.2 billion people lack access to electricity, a number thatremains stubbornly high.6 Perhaps one-half of these peoplecan gain access to electricity from decentralized micro- grids and solar power generators, rather than traditionalextension of grids.7There is a lot of good news in these trends, but plausibletransformations do not necessarily align with the goals thatsocieties are setting for their energy systems. A large-scalerise in effciency, a shift toward natural gas and pervasivedeployment of renewables are not putting the world onThe future shape of the energy system track for stopping global warming below 2 degrees Celsiuslimit.8 The UN’s Sustainable Energy for All goal of universalaccess to modern energy services by 2030 will require anunprecedented spread of electricity to the most remoteareas of the world that, so far, have remained very hardto electrify, despite new decentralized technologies andbusiness models. The UN target of providing everyone withclean energy for cooking and heating may prove to be evenmore diffcult to achieve.Business and government must become much more adeptat talking about these realities. Tsunamic technologicalchange could bring profound improvements to how societyuses energy. Yet, improvements are still likely to lag farbehind society’s expectations.。。。。。。