What is an energy transition?

The energy sources key to the modern energy transition are hydropower, wind power and solar power. Technologies that support the transition include energy storage systems, electric devices and supply chain management tools. While issues such as upfront costs and reliability pose challenges to renewable energy adoption, government policies and recognition of renewable energy benefits can help accelerate the transition.

Historically, energy transitions are fueled by innovation and necessity. For example, industrialization drove the transition from burning wood to burning coal, while the internal combustion engine and production of gas-powered vehicles precipitated the world’s reliance on oil.

In the 1970s, the oil crisis and spiking energy prices prompted a greater interest in renewable energy: energy that comes from sources that are replenished faster than they are used. Later, growing awareness of climate change and its anthropogenic causes—namely, the greenhouse gases (GHG) released with the burning of fossil fuels—added more urgency to the movement to adopt renewable energy solutions and transform the energy sector.

Most renewable energy generation produces little to no carbon emissions nor other GHG emissions, which is why it’s often referred to as green energy or sustainable energy. Supplanting fossil fuel-based power with this green energy can facilitate decarbonization around the world.

Such emissions reductions are necessary to follow the roadmap outlined by global policymakers: In 2015, the Paris Agreement on climate change set a target to prevent the average global temperature rising to 2°C (35.6°F) above preindustrial levels and established emissions limits for countries around the world. According to the United Nations, forestalling this level of global warming requires net-zero emissions by 2050.

Renewable energy sources generated less than a third of the world’s electricity as of 2023, according to the International Energy Agency (IEA).¹ Limiting the increase in global temperatures, however, requires that renewable sources comprise a much greater proportion of the global energy mix. Accordingly, at the United Nations’ 2023 climate conference, governments agreed to triple renewable energy capacity by 2030. The main forms of energy resources being deployed to meet this goal are:

Geothermal energy and biomass also contribute to the world’s energy supply, albeit in much smaller quantities.

The major energy technologies supporting today’s energy transition are:

Energy storage systems can help stabilize power flow by providing energy at times when renewable energy sources aren’t generating electricity. For example, this happens at night for solar energy PV installations, and during calm days when wind turbines don’t spin. Energy storage technologies include lithium-ion batteries, pumped hydro storage and compressed air energy storage.

Electrification is the conversion of a device, system or process that depends on nonelectric energy sources into one powered by electricity. When electric equipment fueled by renewable electricity replaces fossil fuel-powered equipment, it supports the renewable energy transition. Electrification is happening in both domestic and industrial settings. For example, natural gas-powered stoves are replacing induction cooktops in many homes, while some manufacturing facilities are switching to industrial heat pumps instead of fossil fuel-based heating technologies.

Electric vehicles, or EVs, are increasingly replacing fossil fuel-powered vehicles, making them one of the most prominent and widespread examples of electrification. But EVs can also support the renewable energy transition in another way: energy storage. Electric vehicles can provide energy storage for electric grids when they are plugged into charging stations. Through vehicle-to-grid (V2G) technology, unused energy stored in the EV’s battery can be fed into a power grid.

Carbon capture and storage is the process of capturing and sequestering carbon dioxide emissions before they enter the Earth’s atmosphere. While it’s part of broader efforts to mitigate climate change and achieve carbon neutrality, carbon capture and storage also plays a role in today’s renewable energy transition by reducing emissions from fossil fuel-powered energy sources. Like energy storage technologies, energy from fossil fuels can help stabilize energy supply at times when renewable power generation is intermittent. Carbon capture technology can enable low-carbon energy production from fossil fuel sources as necessary.

According to a report by the Carbon Disclosure Project (CDP), companies' supply chains are responsible for more than 90% of their total greenhouse gas emissions, including CO2 emissions. Sustainable supply chain management integrates environmental considerations into the sourcing, production and distribution of goods and services. Those environmental considerations can include using renewable energy sources in place of fossil fuels. Supply chain management tools encompassing artificial intelligence and Internet of Things (IoT) devices can help monitor energy usage and inform energy sourcing decisions.

While emissions reductions and climate change mitigation are the primary drivers of the current energy transition, switching to renewable energy provides a host of other benefits.

Renewable energy sources diversify energy markets and shore up countries’ energy security at times when geopolitical conflicts and supply chain disruptions reduce access to fossil fuel power sources around the world. Using renewable energy and electrification technologies often results in greater energy efficiency and lower maintenance needs, helping reduce energy and upkeep costs. And research has shown that renewable energy projects can spur economic growth, create jobs, alleviate energy poverty and put developing countries on a path to a cleaner future, facilitating what’s known as a just transition.

However, energy transition efforts face several challenges. These issues include the intermittent nature of renewable energy production, high upfront costs for building and installing renewable energy equipment and plants, and lack of grid capacity and infrastructure to support electrification.

Governments from Europe to Asia have launched policy initiatives in recent years to encourage renewable energy adoption in concert with other climate actions. These programs help defray the costs of the renewable energy transition and strengthen the infrastructure necessary to support it.

• The European Union’s Renewable Energy Directive set a target for at least 42.5% of EU energy uptake to come from renewables by 2030. The directive calls for member states to provide incentives for renewable energy adoption.

• In the United States, the Inflation Reduction Act provides incentives that reduce renewable energy costs for businesses, nonprofits and local government organizations, while the Bipartisan Infrastructure Act deploys subsidies to improve the flexibility and reliability of energy grids.

• In Africa, multiple renewable energy development initiatives are under way through partnerships between African governments, private investors and organizations such as the International Renewable Energy Agency (IRENA). In June 2024, the Africa 50 Fund announced it would work with IRENA to invest up to USD 100 million in energy transition projects on the continent.

• Both China and India are making progress on what the IEA describes as “ambitious” renewable energy targets. In 2023, China added 216 gigawatts of solar capacity—setting a new record— while the government of India plans to install 500 gigawatts of clean energy by 2030.