the global energy architecture performance index report 2013

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The GlobalEnergy Architecture

Perormance IndexReport 2013

Industry Agenda

December 2012

Prepared in collaboration with Accenture


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World Economic Forum

2012 - All rights reser ved.

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necessarily reect the views o all participants or o the World Economic Forum.

REF 271112

This publication has been prepa red or general guidance on matters o interest only, and the

views expressed do not necessarily reect those o the World Economic Forum, the World

Economic Forum USA, or any o the contributing companies or institutions, nor does it

constitute proessional advice. The reader should not act upon the inormation contained inthis publication without obtaining specifc proessional advice. No representation or warranty

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3The Global Energy Architecture Performance Index Report 2013

Contents Preace

Over the past century, aordable energy has been a signifcantcomponent o global economic growth and development. Now atransition is occurring across the global energy system to a degree andorder o magnitude seen only a ew times in human history and undercompletely distinct conditions on both supply and demand sides.

The transition pathway rom the current energy architecture tothe new will look dierent or each country, with energy systemobjectives planned according to the trade-os and complementaritiessurrounding the core imperatives o every energy system: managingrisk to energy supplies while ensuring a countrys economic, social andenvironmental well-being.

The World Economic Forum is pleased to present this reportexamining the actors or eective global transition to a new energyarchitecture, ramed through the outputs o the Energy ArchitecturePerormance Index (EAPI) a tool designed to help countries monitorand benchmark the progress o their transition against a series oindicators. The report considers what the new energy architecturemight look like and how best-in-class enabling environments havealready helped some high-ranking countries begin their transitionsto better perorming energy systems. The varying demands o eachcountrys energy architecture the sometimes competing goals oeconomic growth and development, environmental sustainability,and energy access and security orm the crux o the index and thisanalysis.

The New Energy Architecture project is conducted under the ForumsEnergy Industry Partnership with support rom the authors oTheGlobal Competitiveness Reportand involves a range o business,government and civil society constituents rom the energy industry andother related sectors. The project uses a methodology that identifesthe key perormance indicators that can impact the eectivenesso the transition to a new energy architecture and more eectivelyunderpin economic growth and development, environmentalsustainability, and energy access and security.The World Economic Forum partnered with Accenture andcollaborated with Forum Industry Partners and other expertconstituents to drive the dialogue and research. Representativesrom 28 global companies, government agencies and civil societyare actively involved, including the Akio Morita School o Business,Bloomberg New Energy Finance, Chevron, the China Center orEnergy Economics Research at Xiamen University, the Departmento Energy and Environmental Protection in Connecticut, theEnvironmental Deense Fund, Hewlett-Packard, the InternationalElectrotechnical Commission, the International Energy Agency,the Joint Institute or Strategic Energy Analysis, the US NationalRenewable Energy Laboratory, Maplecrot, Royal Dutch Shell, SolarCentury, Suzlon Energy, the UK Energy Research Centre and theUnited Nations Industrial Development Organization.

Representatives rom these organizations contributed strategicdirection and thought leadership through an Expert Panel; its membersare listed at the end o the report. Through events in Austria, Brazil,France, India, Indonesia, Japan, Myanmar, the Peoples Republic oChina, South Arica, Turkey and the United Kingdom, the project hasengaged additional business, government and civil society leaders.

The EAPI 2013 will prove to be a useul addition to the global dialogue

around the transition to a new energy architecture and a practical toolor energy decision-makers. This version should be seen as an initialeort, and the team behind it will look to expand the EAPI over utureiterations to include better data, where available, and other relevantindicators.

3 Preace

4 The Energy Architecture PerormanceIndex 2013 in Numbers

6 The Expert Panels View: The UseCase or the Energy ArchitecturePerormance Index

8 Executive Summary

10 1. The New Energy ArchitectureChallenge Balancing the Energy

Triangle

11 Defning Energy Architecture andthe Energy Triangle

13 The Challenges Associated withthe Transition to a New Energy

Architecture

14 A Tool or Transition The EnergyArchitecture Perormance Index

16 2. Understanding Perormance on theEnergy Architecture PerormanceIndex 2013

17 The EAPI 2013 Rankings

18 Top Ten Key Takeaways

21 Economic and Regional ClustersAnalysis

24 3. Economic Growth andDevelopment

25 Top Ten Economic Growth andDevelopment Perormers Key

Takeaways

32 4. Environmental Sustainability

33 Top Ten EnvironmentalSustainability Perormers Key

Takeaway

38 5. Energy Access and Security

39 Top Ten Energy Access andSecurity Perormers Key

Takeaways

44 6. Key Takeaways and Focus Areas

45 Key Takeaways

46 Focus Areas or Selected Regionaland Economic Clusters

48 7. Defnitions

50 8. Methodological Addendum

50 Methodology

50 EAPI 2013 Indicators: SelectionCriteria and Profles

51 Weighting: Approach andRationale

56 Indicator Metadata

62 EAPI Data Limitations A GlobalRallying Call

66 Contributors and Data Partners

Roberto BoccaSenior Director, Heado Energy Industries,World EconomicForum

Espen Mehlum

Associate Director,Head o KnowledgeManagement andIntegration, EnergyIndustries, WorldEconomic Forum


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4 The Global Energy Architecture Perormance Index Report 2013

The Energy ArchitecturePerormance Index 2013in Numbers

105countries energy systems assessed

16indicators used

64countries assessed with a ossil-uel subsidy in place 0.75 / 1highest score achieved on the EAPI 2013 comparedwith a 0.55 / 1 EAPI 2013 sample average

36%the average total primary energy supply rom alternativeor renewable energy sources (including biomass andlarge-scale hydropower) o the top 10 perormerscompared with a 29% Energy Architecture Perormance

Index (EAPI) 2013 sample average

89countries in the EAPI sample have renewable energysupport policies in place, in the orm o regulation, fscalincentives or public fnancing

66%o countries assessed are net energy importers

US$ 46,000the average GDP per capita o the top 10 EAPI 2013perormers, bar Latvia. An average GDP per capitao US$46,000 puts these countries within the top 25countries globally on this metric

12%the average nuclear total primary energy supply o thetop 10 perormers compared with a 6% EAPI 2013sample average

US$ 7.14the average EAPI 2013 sample score or energyintensity (GDP per unit o energy use) compared withan EU15 average score o US$ 9.77

9%the average total primary energy supply romhydropower o the top 10 perormers compared with a5% EAPI 2013 sample average


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06

04


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6

Morgan Bazilian, Deputy Director, Joint

Institute or Strategic Energy Analysis, USNational Renewable Energy Laboratory,

on behal o the Energy Architecture

Perormance Index 2013 Expert Panel

The transition to a new energy paradigmwill not be easible without a suite ostrategic tools that help the understandingo dierent pathways to the uture. Thisis the primary motivation or working withthe World Economic Forum to developan innovative new tool the EnergyArchitecture Perormance Index (EAPI).

The EAPI is a global initiative with the aimo creating a set o indicators that helpto highlight the perormance o variouscountries across each acet o their energysystems. In doing so, it attempts to meettwo interlinked goals. First, it aims to assess

energy systems across their three primaryobjectives: delivering economic growth,doing so in an environmentally sustainablemanner, and ensuring security o supplyand access or all. Second, it aims to createa one-stop shop or stakeholders wherethey can easily access transparent androbust datasets and the resulting analysis.The EAPI thus combines an innovativeblend o indicators to this end. O course,the EAPI is highly abstracted and notmeant as a comprehensive treatment orclassifcation o an energy system. Rather,it is one way to present and consider

the complex inormation and the highlyinterdependent issues that prevail in theenergy sector.

The Expert Panel advising this projectbrings together senior representativesrom various sectors across the energyvalue chain. The panel is acutely aware othe importance o the provision o qualitydata in supporting inormed decision-making. Governments, industry and civilsociety cannot hope to ully understand theunctions and idiosyncrasies o their energysystems without it. Across some metrics,there are excellent data resources available.But data paucity means that severalaspects o the global energy system cannotbe adequately evaluated. Nevertheless,the EAPI will be a useul tool or policy-makers, investors and other stakeholdersas they assess energy systems and as theyconsider the design and implementation ostrategies to improve them.

The Expert Panel has contributed to andstress-tested the methodology. It has doneits utmost to ensure that the team leadingthe exercise has been rigorous, and thatthe EAPI is frmly grounded in reality on theground. The product is thus strong andcredible, and can be urther augmentedand refned in subsequent years. Theonline data platorm provides an intuitive

user interace that allows or many types ocustom research, including deep-dives inspecifc areas o interest.

But the fnish line remains distant. Nextyear, the panel will work closely with theForum team to address some o the criticaldata sets that are still missing rom theEAPI. It will also drive urther dialogue withkey institutions connected to the energysector to ensure that the work remainsvibrant and continues to evolve.

The Global Energy Architecture Perormance Index Report 2013

The Expert Panels View:The Use Case or theEnergy ArchitecturePerormance Index

We are sure that the EAPIwill be an invaluable tool orpolicy-makers andresearchers alike. With thistool we hope that policy-makers can benchmark theirpolicies with the endobjective o achieving a

transition to the new energyarchitecture.

Ishwar V. Hegde, Chie Economist, SuzlonEnergy


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7The Global Energy Architecture Perormance Index Report 2013


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8

Over the past century, aordable energyhas been a signifcant driver o globaldevelopment. Humankinds continuedevolution towards a modern energy systemrom the adoption o coal-powered energygeneration technology in the 1800sthrough to widespread electrifcation in the1900s has helped to shape and developsocieties.

The world is again in a period o transitionor the global energy system. Nowmore than ever, decision-makers mustunderstand the core objectives o energyarchitecture generating economic growth

and development in an environmentallysustainable way while providing energyaccess and security or all and how theyare being impacted by changing dynamics.

Responding to these oten competingobjectives is challenging, as actions totackle issues such as resource scarcity andclimate change must be delivered againstthe background o difcult economicconditions ollowing the global fnancialcrisis. Difcult trade-os need to be made,but sometimes complementarities betweenthe imperatives o the energy triangle can

be realized. Overall, ux in the system isgenerating uncertainty or industries andinvestors.

The Energy ArchitecturePerormance Index A Tool toAssist Decision-makers

The Energy Architecture PerormanceIndex (EAPI) is a tool that can helpdecision-makers manage and monitorthis changing landscape, enablinga more eective transition to a newenergy architecture. The EAPI measures16 indicators aggregated into threebaskets relating to the three imperativeso the energy triangle to which energyarchitecture should contribute: economic

growth and development, environmentalsustainability, and access and security osupply. The EAPI both scores and rankseach countrys current energy architecturebased on how well it contributes to theseimperatives.

The assessment has highlighted a numbero key trends that are common to themajority o countries analysed:

1. Rich, high GDP per capita countriesare more likely to be able to score wellagainst one or more objectives o theenergy triangle. Such countries havethe economic exibility to engage inconcerted action on environmentalsustainability and the adoption o moreefcient, cleaner technologies involvinglegacy inrastructure upgrading acrossthe energy system and incorporationo renewables into the energy mix.

2. Europe dominates the leader boarddue to concerted regional action onenvironmental sustainability and betterenergy efciency across the valuechain.

3. Fast-growing, industrial countriesand regions fnd it harder to perormwell on sustainability and securityindicators than their richer, moredeindustrialized counterparts. Withlarge energy requirements to be met,scoring well across these imperatives

o the energy triangle becomes harderwith ast-growing, industrializedeconomies generally relying oncheaper or subsidized ossil uels,such as coal, petroleum and naturalgas, to meet demand.

4. In some regions, much basicwork is still to be done to improveperormance on the EAPI.The lowestscorers, as might be expected, acechallenges around energy access,efciency and sustainability, and tendto be located in Sub-Saharan Arica,

developing countries in Asia or thehighly resource-endowed countries othe Middle East.

The Global Energy Architecture Perormance Index Report 2013

Executive Summary

The EAPI provides inormed,rigorous and actionablesupport or policy andinvestment decision-makingacross the energy sector.

Morgan Bazilian, Deputy Director, JointInstitute or Strategic Energy Analysis, USNational Renewable Energy Laboratory


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Considerations or managing an eectivetransition:

1. Improvements in environmentalsustainability should be a priority orhigh-income and rapidly growingeconomies.For high-incomeeconomies with the highestimpact energy sectors combinedperormance against this imperative othe energy triangle is ar lower than theother two. Progress must be made onthis ront to meet targets consideredand set by experts in the feld opollution mitigation and climate policy.

2. No country achieves top scoresagainst any dimension o the energytriangle.This reects the EAPI panelsbelie that, although some countriesscore relatively highly and balance therequirements o the energy trianglewell, not one has managed to do allthat can be done. This is especiallytrue o the scores in the environmentalsustainability basket.

3. A large natural energy resourceendowment is not a criticalperormance actor. Many o thecountries under analysis achieve highperormance because they have alarge provision o exploitable naturalresources. However, the prevalence ocountries without large endowments inthe upper quartile o results indicatesthe importance o efciency andsustainability measures, as well aseective access to energy markets.

These aspects are largely linked to thevision and efcacy o each countrysenergy policy.

4. Managing the trade-os andcomplementarities o the energytriangle is critical.The imperativeso the energy triangle may reinorceor act in tension with one another,orcing difcult trade-os to bemade and meaning that, in somecases, decisions have unintendedconsequences. Sometimes, mutuallybenefcial complementarities can berealized. In response, decision-makers

Table 1: EAPI 2013 Top 10 Perormers

must ensure that they careully weightheir choices, creating a portolio opolicies to build an energy mix thatbest balances the challenges andopportunities presented.

5. Globally, policy-makers need toaddress some big issues around ossil-uel subsidies, water use or energyproduction and eective resourcewealth management. A concertedglobal eort is needed to gathermore data around the applicationo ossil-uel subsidies, water useper type o energy generation and

extraction technology (and the impactthis has on a countrys overall waterresources), and the best models orthe development o energy resources.

Against each o these energy priorities,a paucity o detailed global data islimiting action. Neither the EAPI norany index can paint the ull picture o acountrys energy situation and prioritieswithout a more detailed view o theseactors and their impact on a countrysenergy architecture.

EAPI 2013

Country/economy Economic growthand development

Environmentalsustainability

Energy accessand security

Overall rank Overall score

Norway 0.67 0.63 0.95 1 0.75

Sweden 0.58 0.76 0.80 2 0.71

France 0.58 0.75 0.78 3 0.70

Switzerland 0.73 0.58 0.79 4 0.70

New Zealand 0.63 0.69 0.77 5 0.70

Colombia 0.76 0.54 0.78 6 0.69Latvia 0.62 0.74 0.71 7 0.69

Denmark 0.64 0.56 0.82 8 0.67

Spain 0.71 0.55 0.75 9 0.67

United Kingdom 0.59 0.63 0.78 10 0.67

All scores rounded to two decimal places


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1. The New EnergyArchitecture Challenge Balancing the EnergyTriangle


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Defning EnergyArchitecture andthe Energy Triangle

The World Economic Forum defnesenergy architecture as the integratedphysical system o energy sources, carriersand demand sectors that are shaped bygovernment, industry and civil society.

The energy triangle sometimes knownas the energy pyramid or energy tri-lemma rames the inherent objectivescentral to every energy system: theability to provide a secure, aordable andenvironmentally sustainable energy supply.

The Energy Architecture PerormanceIndex (EAPI) conceptualization o energyarchitecture can be seen in fgure 1. Whilethis is a greatly simplifed view, it highlightsthe complex interactions and systems thatwill need to be actored into the transitionprocess.

Figure 1: Energy architecture conceptual ramework


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Energy architecture should promoteeconomic growth and development

Energy architecture underpins economicgrowth. Given energys importance orindustrialization and inrastructure building,energy prices strongly correlate with theglobal business cycle. As an industrialsector, it is oten a critical value creator. In2009, the US energy sector contributed

4% o GDP. In countries that are netenergy exporters, the share is even higher:30% in Nigeria, 35% in Venezuela and57% in Kuwait.1 Energy is a prerequisite orall sectors o an economy so its cost iscritical price volatility and supplyinterruptions can destabilize economies.Reliable energy promotes economicand social development by boostingproductivity and acilitating incomegeneration, and so it ollows that energyavailability should aect job availabilityand national productivity. However, pricesignals must reect the true associated

costs o energy production to ensureconsumption is economically viable andproducers remain lean and responsive toan undistorted market.

in an environmentally sustainable way

The production, transormation andconsumption o energy are associatedwith signifcant negative environmentalexternalities. The most critical areglobal energy-related emissions: energyarchitecture remains the main contributorto global warming.2 The International

Energy Agencys (IEA) 450 scenario

3

suggests that a global warming omore than 3.5C would have, severeconsequences: a sea level rise o up to2 metres, causing dislocation o humansettlements and changes to rainallpatterns, drought, ood, and heat-waveincidence that would severely aect oodproduction, human disease and mortality.4

A range o urther issues relating toenvironmental degradation (or instanceparticulate matter pollution and land-useimpact) remain o continuing concernand the energy sectors reliance on otherconstrained resources water and metals

to name but two highlight sustainabilityas a critical transition priority.

while providing universal energy accessand security.

What constitutes energy security ismuch debated. Physical supply o energyis subject to a number o risks anddisruptions. Principal concerns relate to thereliability o networks or the transmissionand distribution o energy, and vulnerabilityto interruptions o supply, particularly or

countries dependent on a limited range oenergy sources. But energy security is alsoabout relations among nations, how theyinteract with one another, and how energyimpacts their overall national security.5Chatham House research suggests thatthe Asia-Pacifc and European regions mayneed imports to meet about 80% o theirrespective oil demand by 2030.6 So thesecurity o supply rom trade partners, riskso energy autarky (prompting disintegrationo energy markets) and uncertainty overprices creating volatility are criticalconcerns that must be managed.

Security o supply is immaterial withoutaccess to that supply. Universal energyaccess is a United Nations (UN) MillenniumDevelopment Goal.7 According to theUN, the level o access to energy serviceshas implications in terms o poverty,employment opportunities, education,community development and culture,demographic transition, indoor pollutionand health, as well as gender- and age-related implications.8 The degree oimpact links to economic development;wealthy countries enjoy modern, clean,

aordable and efcient energy services(or lighting, heat, cooking uses) almostuniversally. In low-income economies,energy is responsible or a larger portiono monthly household income, and theuse o basic equipment oten means uelssuch as kerosene and charcoal are burnedinside houses, impacting human healthand contributing to disease through airpollution.

1World Economic Forum, Energy Vision Update, 2012.2 International Energy Agency (IEA), Topic: Climate Change;

see www.iea.org/topics/climatechange.3450 Scenario is a scenario presented in the World Energy

Outlookthat sets out an energy pathway consistent with

the goal o limiting the global increase in temperature to

2C by limiting the concentration o greenhouse gases in

the atmosphere to around 450 parts per million o CO2

equivalent.4International Energy Agency (IEA), World Energy Outlook,2011, Chapter 6, Climate Change and the 450 Scenario.

5Yergin, Daniel, The Quest: Energy, Security and theRemaking o the Modern World, 2011.6

Mitchell, John V., More or Asia: Rebalancing world oil andgas, Chatham House, 2010.7UN Secretary-Generals Advisory Group on Energy andClimate Change, Energy or a Sustainable Future, 2010.8United Nations Department o Economic and Social Aairs

and International Atomic Energy Agency, Energy Indicators

or Sustainable Development, 2007.


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In this context, governments are trying to reshape their energy systems to meet theobjectives o the energy triangle. This process will be enabled by new technologiesacross the value chain.

This is a time o change or the global energy architecture.

Figure 2: World energy consumption projections, 1990-2035

1. The New Energy Architecture Challenge Balancing the Energy Triangle

The ChallengesAssociated withthe Transition toa New EnergyArchitecture

Over the past century, aordable energyhas been a signifcant component o globaleconomic growth and development. Butthe past decade alone has seen a serieso signifcant changes impact the globalenergy system.

The Challenges Charting theTransition Course

Achieving the imperatives o theenergy triangle has become particularlychallenging as security and environmentalpressures including tackling resourcescarcity and climate change must bedelivered against the background odifcult economic conditions ollowing theglobal fnancial crisis.

Due to the economic slowdown, countriesare changing legislation and exercisingcaution around the deployment onew energy projects with large uprontcapital costs. Some countries have been

reconsidering their renewables obligationsand CO2

targets9 while others have beenreafrming them. Consumers, concernedby bills, are less willing to carry the costo greener technologies as part o theirutilities spend. With the recovery o coaland oil prices since 2008,10 a squeeze onOECD industrial production can be elt,with energy costs absorbing an increasingslice o revenue.

With global energy demand expectedto increase 53% by 2035 (see fgure 2)and the Peoples Republic o China andIndia accounting or hal o that growth,increased scarcity may herald an era osustained high prices or traditional energysources.11

9Germany has instigated solar tari cuts, India has removeda fscal support structure or the wind sector, and Italy

has issued more cuts to the preerential rates awarded to

renewables projects. Source: Ernst & Young, Renewable

energy country attractiveness indices, 2012.10 The price o the ront-month utures contract or Brent

crude oil averaged US$ 114.77 in August 2012. Source: USEnergy Inormation Administration (EIA), The Availability and

Price o Petroleum and Petroleum Products Produced in

Countries other than Iran, August 2012.11US Energy Inormation Administration (EIA), InternationalEnergy Outlook, 2011 (no release or 2012); available at www.

eia.gov/orecasts/ieo/.

0

100

200

300

400

500

600

700

800

1990 2000 2008 2015 2020 2025 2030 2035

QuadrillionBtu(qBtu)

Non-Organisation for Economic Co-operation and Development countries

Organisation for Economic Co-operation and Development countries

Figure 3:Advances expected across the energy value chain to help meet transition challenges

Source: US Energy Inormation Agency data


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A Tool orTransition TheEnergy ArchitecturePerormance Index

The Energy Architecture PerormanceIndex (EAPI) is a tool that will helpdecision-makers manage and monitorthese challenges. By creating moretransparency and a basis or assessingoverall energy system perormance, it caninorm decisions to enable a more eectivetransition to a new energy architecture. Itbuilds on the beta version used in the NewEnergy Architecture: Enabling an EectiveTransition report released in April 2012.

The EAPI measures an energy systemsspecifc contribution to the three

imperatives o the energy triangle:economic growth and development,environmental sustainability, and accessand security o supply. It comprises 16indicators aggregated into three basketsrelating to these three imperatives. Itboth scores and ranks the perormanceo a countrys energy architecture (seefgure 4). The EAPI helps stakeholdersas they look or perormance areas toimprove and balance the imperatives othe energy triangle over the long term.By measuring and reporting on a various

set o indicators, the EAPI provides atransparent and holistic set o insightsinto energy architecture successes andchallenges, acting as a base rom which tomake policy and investment decisions andprioritize opportunities or improvementacross the energy value chain.

Indicators were selected against theollowing criteria:

Output data only: The measuremento output-oriented observational data(with a specifc, defnable relationship

to the sub-index in question) or a bestavailable proxy, rather than estimates

Reliability: The use o reliable sourcedata rom renowned institutions

Reusability: Data sourced romproviders that the EAPI team can workwith on an annual basis and that canthereore be updated with ease

Quality: The data selected representsthe best measure available givenconstraints; with this in mind, the

12Please see the Data Paucity & Country Exclusions

section o the Methodological Addendum or urther detail

around these criteria.

Expert Panel reviewed all potentialdatasets or quality and verifability andthose that did not meet these basicquality standards were discarded12

Completeness: Data is o adequateglobal and temporal coverage; it hasbeen consistently treated and checkedor periodicity to ensure the EAPIsuture sustainability.

The EAPI team also wished to includeother indicators than those listed infgure 4 but could not due to a lack o

compliance with the criteria or, moreoten, a lack o data availability. In theMethodological Addendum, the team agsto the international energy community thestark gaps ound in global energy-relateddata banks in a bid to raise awarenessand take action. A pull-out ocused on thewater/energy nexus can also be oundin the Methodological Addendum as thisis an important topic around which lateriterations o the EAPI should include data.
http://www.weforum.org/reports/new-energy-architecture-enabling-effective-transitionhttp://www.weforum.org/reports/new-energy-architecture-enabling-effective-transitionhttp://www.weforum.org/reports/new-energy-architecture-enabling-effective-transitionhttp://www.weforum.org/reports/new-energy-architecture-enabling-effective-transitionhttp://www.weforum.org/reports/new-energy-architecture-enabling-effective-transitionhttp://www.weforum.org/reports/new-energy-architecture-enabling-effective-transition


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Figure 4: Structure o the Energy Architecture Perormance Index 201313

1. The New Energy Architecture Challenge Balancing the Energy Triangle

13For a detailed technical description o the methodology, please see the Methodological Addendum at the end o this report.


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2. UnderstandingPerormance on theEnergy ArchitecturePerormance Index2013


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The Energy Architecture PerormanceIndex (EAPI) uses a universal set oindicators to assess dierent countriesperormances. Accepting the very dierentset o circumstances each country is in,all countries are heading or the same endgoal o a high perorming and balancedenergy system across each aspect o theenergy triangle, but each has a uniquestarting position on that journey.

Within this context, certain countries aredemonstrating that they can achieve thetransition to a new energy architecturemore in line with the imperatives o theenergy triangle. The analysis in this sectionstudies a selection o EAPI 2013 topperormers and the drivers o their highscores and ranks.

The EAPI 2013

Rankings

Table 2 shows the rankings or eacho the separate components o theenergy triangle (economic growth anddevelopment, environmental sustainability,and energy access and security) and theEAPI 2013 overall ranking. All scores arebetween 0 and 1.

No country achieves top scores againstany basket. This reects the act that,although some countries score relativelyhigh and balance the requirements othe energy triangle well in comparison toother countries, not one has managed todo all that can be done. This is especiallytrue o the scores in the environmentalsustainability basket. Here, countryresults are oten compared with targets orpolicy directives. For example, particulatematter (PM10) country-level emissions areassessed against compliance with the 20microgram per cubic metre (g/m3) annualmean that the World Health Organizationstipulates in its air quality guidelines, whilethe target value o 5.2 l/100 kilometres

or average uel economy or passengercars represents the European Unionobjective. This sets a higher threshold orperormance in this basket and reectshow much work is still to be done toaddress the global challenges associatedwith sustainable energy production andconsumption.

Table 2: EAPI 2013 rankings

EAPI 2013

Country/economy

Economicgrowth and

development


Energy accessand security

Overall rank Overall score

Norway 0.67 0.63 0.95 1 0.75

Sweden 0.58 0.76 0.80 2 0.71

France 0.58 0.75 0.78 3 0.70

Switzerland 0.73 0.58 0.79 4 0.70

New Zealand 0.63 0.69 0.77 5 0.70

Colombia 0.76 0.54 0.78 6 0.69

Latvia 0.62 0.74 0.71 7 0.69

Denmark 0.64 0.56 0.82 8 0.67

Spain 0.71 0.55 0.75 9 0.67United Kingdom 0.59 0.63 0.78 10 0.67

Romania 0.65 0.63 0.73 11 0.67Uruguay 0.69 0.58 0.72 12 0.67Ireland 0.61 0.63 0.74 13 0.66

Germany 0.60 0.58 0.79 14 0.66Peru 0.78 0.55 0.63 15 0.65

Hungary 0.53 0.67 0.76 16 0.65

Slovak Republic 0.48 0.69 0.78 17 0.65

Portugal 0.64 0.56 0.75 18 0.65

Costa Rica 0.62 0.61 0.72 19 0.65

Austria 0.61 0.52 0.79 20 0.64

Brazil 0.59 0.60 0.73 21 0.64

Lithuania 0.53 0.64 0.73 22 0.63

Canada 0.61 0.47 0.82 23 0.63

Slovenia 0.55 0.56 0.77 24 0.63

Japan 0.60 0.48 0.77 25 0.61

Croatia 0.66 0.47 0.71 26 0.61

Russian Federation 0.58 0.54 0.71 27 0.61

Australia 0.66 0.36 0.81 28 0.61

Belgium 0.51 0.55 0.77 29 0.61Estonia 0.56 0.59 0.67 30 0.61

Chile 0.57 0.51 0.73 31 0.61

Finland 0.53 0.47 0.81 32 0.60

Greece 0.63 0.48 0.70 33 0.60

Israel 0.61 0.47 0.73 34 0.60

Paraguay 0.60 0.66 0.54 35 0.60

Argentina 0.65 0.48 0.66 36 0.60

Poland 0.60 0.48 0.71 37 0.60

Korea, Rep. 0.59 0.43 0.76 38 0.59

Mexico 0.61 0.50 0.67 39 0.59

Singapore 0.70 0.41 0.67 40 0.59

Netherlands 0.50 0.50 0.77 41 0.59

Azerbaijan 0.47 0.51 0.78 42 0.59

Iceland 0.30 0.70 0.75 43 0.58

Turkey 0.51 0.53 0.70 44 0.58

Thailand 0.54 0.49 0.70 45 0.58

Italy 0.48 0.53 0.72 46 0.58

Panama 0.60 0.54 0.58 47 0.57

Bulgaria 0.56 0.55 0.62 48 0.57

El Salvador 0.48 0.60 0.64 49 0.57

Tunisia 0.43 0.54 0.73 50 0.57

Kazakhstan 0.55 0.45 0.70 51 0.57

Dominican Republic 0.53 0.61 0.55 52 0.56

Czech Republic 0.50 0.40 0.78 53 0.56

Ecuador 0.56 0.52 0.59 54 0.56

United States 0.56 0.34 0.77 55 0.56

Cyprus 0.57 0.51 0.57 56 0.55

Georgia 0.37 0.61 0.66 57 0.55

Algeria 0.37 0.52 0.75 58 0.54

South Arica 0.60 0.49 0.54 59 0.54

Armenia 0.36 0.61 0.64 60 0.54

Philippines 0.41 0.62 0.58 61 0.53

India 0.54 0.59 0.47 62 0.53

Indonesia 0.48 0.56 0.53 63 0.52

Morocco 0.41 0.54 0.61 64 0.52

Malaysia 0.30 0.48 0.77 65 0.52

Libya 0.35 0.47 0.73 66 0.52

Bolivia 0.37 0.55 0.62 67 0.51

Brunei Darussalam 0.40 0.35 0.79 68 0.51

Sri Lanka 0.43 0.63 0.48 69 0.51

Tajikistan 0.29 0.66 0.58 70 0.51

Botswana 0.48 0.57 0.45 71 0.50

Ukraine 0.22 0.56 0.70 72 0.49

Egypt, Arab Rep. 0.27 0.52 0.68 73 0.49

China, Peoples Rep. 0.34 0.53 0.60 74 0.49Trinidad and Tobago 0.46 0.37 0.62 75 0.48

Oman 0.34 0.29 0.80 76 0.48

Nicaragua 0.37 0.60 0.45 77 0.48

Vietnam 0.29 0.55 0.57 78 0.47

Namibia 0.43 0.57 0.39 79 0.47

Cameroon 0.40 0.66 0.33 80 0.46

Senegal 0.42 0.63 0.33 81 0.46

Saudi Arabia 0.30 0.28 0.78 82 0.46

Kyrgyz Republic 0.20 0.58 0.58 83 0.45

Cote dIvoire 0.36 0.68 0.31 84 0.45

Ghana 0.34 0.66 0.34 85 0.45

Jamaica 0.32 0.50 0.52 86 0.45

United Arab Emirates 0.38 0.22 0.73 87 0.44

Pakistan 0.31 0.59 0.42 88 0.44

Nigeria 0.36 0.70 0.25 89 0.44

Syrian Arab Republic 0.31 0.38 0.62 90 0.44

Jordan 0.25 0.38 0.66 91 0.43

Qatar 0.35 0.15 0.78 92 0.43

Kenya 0.34 0.69 0.26 93 0.43

Haiti 0.44 0.64 0.20 94 0.43

Kuwait 0.35 0.16 0.76 95 0.42

Iran, Islamic Rep. 0.22 0.36 0.68 96 0.42

Zambia 0.33 0.71 0.22 97 0.42Cambodia 0.37 0.64 0.22 98 0.41

Bahrain 0.29 0.23 0.68 99 0.40

Mongolia 0.29 0.48 0.41 100 0.39

Nepal 0.31 0.69 0.18 101 0.39

Mozambique 0.27 0.71 0.19 102 0.39

Lebanon 0.35 0.37 0.44 103 0.39

Tanzania 0.30 0.72 0.11 104 0.37

Ethiopia 0.25 0.72 0.11 105 0.36


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Figure 5: Map o top perormers overall


1. High GDP correlates with highperorming energy systems.

The top ten EAPI 2013 perormersenjoy an average GDP per capita oover US$ 46,000 and all, bar Latvia,are within the top 25 countries globally

on this metric. The link between higherGDP and better EAPI perormance isalso replicated in the overall economicand regional cluster analysis (seesection 2. Economic and RegionalClusters Analysis or urther detail).

2. Having a low-carbon uel mix is aperormance actor.

The top ten perormers source onaverage 36% o their total primaryenergy supply (TPES) rom alternativeor renewable energy sources, includingbiomass and nuclear. Sweden, France

and Switzerland all source over 26% otheir TPES rom nuclear (France 42%),with an average nuclear TPES o 12%or the top ten compared to 4% or theEAPI 2013 sample. Large-scale hydropower use also drives perormance,with an average hydro TPES o 9% orthe top 10, 5% or the rest o the EAPI2013 sample.

Top Ten Key Takeaways

14US Energy Inormation Administration (EIA), NorwayCountry Report, August 2012; available at www.eia.gov/

countries/cab.cm?fps=NO.15 Norden, Nordic Council o Ministers, Nordic Energy

Solutions; available at www.norden.org.

7

8

9

6Norway

0.75

Sweden

0.71

France

0.70

Switzerland

0.70

New Zealand

0.70

Colombia

0.69

Latvia

0.69

Denmark

0.67

Spain

0.67

United Kingdom

0.67

1st

2nd

3rd

4th

5th

6th

7th

8th

9th

10th

3. Other actors also contribute.Top quartile scores or low energyintensity, diverse energy supply andlow emissions rates also contribute.

The top ten have an average energyintensity score o US$ 9.93 GDP per

unit o energy use (2005 PPP US$ perkilogram o oil equivalent), above theEAPI sample average o US$ 7.14.

They score an average 0.90 / 1 ordiversity o TPES and an average o0.64 / 1 or environmental sustainability above the EAPI sample average o0.54.

4. Two success stories are surprises.Latvias aordable energy (no uelsubsidy and marginal taxes) andexcellent energy intensity score, andNew Zealands supply diversity (39%

alternative or nuclear sources and3rd most diverse TPES) boost theirperormance signifcantly.

5. Europe dominates the leader board.This is due to concerted regional actionon environmental sustainability, betterenergy efciency across the value chainand the adoption o clean technologies.

Spotlight on 1st Place: Norway

Norway owes much o its excellentscore to its geological resources andits efcient management o them.Norway provides much o the oil and gas

consumed in Europe and, in 2011, wasthe 2nd largest exporter o natural gas inthe world ater the Russian Federation, andthe 7th largest exporter o oil.14 This drivesGDP: in 2010, crude oil, natural gas andpipeline transport services accounted oralmost 50% o Norways exports revenues,21% o GDP, and 26% o governmentrevenues according to the NorwegianPetroleum Directorate.

Strong policy has met with resource wealthto see Norway rank 1st in the EAPI 2013.

A strong policy vision has had an obviousimpact on Norways score acrossthe efciency metrics. The Enova SFprogramme promotes energy savings, newrenewables and natural gas solutions andis owned by the government o Norway.It promotes environmentally sound energyuse and production, relying on fnancialinstruments and incentives to stimulatemarket actors15 to boost the energy


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2. Understanding Energy Architecture Perormance Index Perormance

efciency o Norwegian industry andmitigate its environmental impact. Projectswith energy requirements o more than0.1 gigawatt-hour (GWh) can apply orinvestment support or efciency initiatives(i.e. measures or energy recovery or

waste heat conversions to renewableenergy) rom a managed energy und oover 874 million. Under the programme,publically unded research, developmentand deployment (RD&D) or clean energyinitiatives has more than tripled rom 2007to 2009 public unding or energy RD&Dis now the 3rd highest among IEA membercountries.16

Hydropower delivers clean and cheapelectricity to Norways consumers.

From an environmental sustainability

perspective, Norway scores airly well at25th overall. Hydropower is the principalsource o Norways electricity supplyat 95%, while only 4% comes romconventional thermal sources, ollowedby 1% rom other renewables, namelybiomass and waste and wind accordingto IEA data.17 Norway hosts two o theworlds fve large-scale carbon captureand sequestration (CCS) projects and,according to the IEA, the government isstrongly committed to signifcant supporto urther CCS technology development.

The building code, introduced in 2007,

means long-term improvements in energyefciency in buildings are guaranteed.In the transport sector, Norway has asupportive incentive package to encourageuptake o electric vehicles, includingexemptions rom toll road charges, parkingees and certain taxes. The governmentalso plans to substantially increase publictransport and the use o rail in reighttransport.18

However, the slightly lower scorecompared to the other two sides o thetriangle (see fgure 6) can be explained

by Norways carbon-intensive industrybase. The oil and gas sector is a heavyCO

2emitter, with refneries representing

three-quarters o the countrys emissionsaccording to the EU Emissions TradingScheme. The energy sector emitted 19.2million tonnes o carbon dioxide in 201119and, although Norway sources almost allo its power needs rom its hydro plants,the transport sector is a large emitter withrelatively poor vehicle efciency (8.65 l/100km) compared to the European average.

Figure 6: Norways perormance on the EAPI 2013

16International Energy Agency (IEA), Norway Review, 2011.17 International Energy Agency (IEA), World Energy Outlook,

2011.18 International Energy Agency (IEA), Norway Review, 2011.19 Thomson Reuters Point Carbon, Point Carbon Research;

available at www.pointcarbon.com.

0.67

0.630.95

0.00

0.50

1.00

Environmental sustainabilityEnergy access

and security

Economic growth and

development

Norway

Bard Vegar Solhjell, the EnvironmentMinister, has recently pledged over US$8.2 billion to drive industry CO

2cuts to

meet the nations target o 30% emissionsreduction by 2020,20 with the transport,manuacturing and oil and gas sectorslikely to have to meet the majority o these.Overall, only 37% o total primary energysupply (TPES) is rom alternative andnuclear energy this sees Norway rank31st in the overall rankings or this indicator,pulling down this baskets overall score.

That said, industrial energy efciency isimproving ahead o the EU curve, as fgure7 shows.

Cost efciency is also seen as essentialin regulating the environmental impact otransport, so duties on petrol and dieselare high, as is the registration tax onvehicles. From an economic growth anddevelopment perspective, this reects asa relatively low score or the level o pricedistortion or pumped super gasoline anddiesel indicators, but these taxes are alsoused to fnance road inrastructure and/or to reduce trafc in cities, thus reducingair pollution. The Transnova initiativewas established in 2009 to encourage

more environmentally riendly transporttechnologies and manages some o thesetax revenues.

Although Norways oil production peakedin 2001 at 3.4 million barrels per day(bbl/d) and declined to 2 million bbl/d in2011, natural gas production has beensteadily increasing since 1993, reaching3.6 trillion cubic eet (TCF) in 2011. Andin terms o its resource management,Norways sovereign wealth und, the

Government Pension Fund, exemplifesthe correct resource model with theInternational Monetary Fund (IMF) citing itas an exemplary sovereign wealth und.21

This is an important point. The eects oindirect-deindustrialization on resourcewealth are well understood (see Pull-out:

Accounting or the Resource Curse orurther detail). Yet the Government PensionFunds obvious contribution to GDPshows a successul boom minimizationstructure at work, stabilizing the powerulrevenue stream to reduce the risk o Dutchdisease and drive competitiveness throughinvestment in education and inrastructure

programmes.

Figure 7: Norways compound annual change in the ODEX* energy efciency index or industry,2000-2009

1.31%

2.35%

EU27

Norway

Source: ODYSSEE

20Norwegian Ministry o the Environment, Roadmap or a

Low Carbon Economy Review, 2011.

21International Monetary Fund (IMF), Norways Oil FundShows the Way or Wealth Funds, www.im.org/external/

pubs/t/survey/so/2008/pol070908a.htm.

*The Odyssee ODEX is a European energy e fciency index combining Industry, Transport and Household energy efciency indicators


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Norways energy uturelooks bright

In June 2012 the Norwegian governmentconfrmed plans to partner in theconstruction o a subsea electric powerinterconnector with the United Kingdomand Germany, due or completion in 2020.

The purpose is to strengthen the northern

European electricity grid and increasesupply security. Measures to promoteenergy efciency, given that the electricitysupply is already practically carbon-ree,means the government should also avoida possible energy intensity increase.

And, as a result o a recent agreementwith the Russian Federation, Norway hasgained 54,000 square miles (139,859square kilometres) o continental shel orthe development o oil and gas depositsthat cross between the two countrieseconomic zones in the Barents Sea and

Arctic Ocean.22

With strong policy in place to support theimprovement o scores across each othe three elements o the energy triangle,Norway looks likely to continue its strongperormance over the near-term.

Spotlight on New Zealand andLatvia

New Zealand and Latvia break the topquartile GDP per capita/high perormancetrend, although they are very small interms o total population23 togetherthey represent just 3% o the top tenscombined population. So what are thedrivers o their perormance?

In New Zealand, the adoption o the 2009electricity market reorm, the ResourceManagement Act, the 2009 Petroleum

Action Plan and the Energy ResearchRoadmap have helped drive energymarket and inrastructure improvements.24Government policy statements on gasgovernance and land transport unding anda National Policy Statement on Electricity

Transmission have encouraged the movetowards a liberalized market. And geologyhas helped: hydroelectric power stationsgenerate the majority o New Zealandselectricity, with 24,831 gigawatt-hour(GWh) total generated by hydroelectricityin 2011 equal to 57.6% o total electricitygeneration.25 This translates to cheapindustrial power, a driver o economicgrowth and development, with pricesaveraging US$ 0.07 per kilowatt-hour(kWh), ranking New Zealand 14th overallor this indicator.

New Zealand enjoys abundant naturalresources. Thereore, although NewZealand is currently a net importer oenergy (it imports 10.6% o energy whenimports are defned as energy use lessproduction ), oil and gas production couldbe substantially increased potentially tothe point where New Zealand becomesa net exporter o oil by 2030, accordingto the New Zealand governments Energy

Strategy Document 2012.

Latvias energy efciency has largelyimproved ollowing its devolution romthe ormer Soviet Union with GDP perunit o energy use (at purchasing powerparity, PPP) leaping rom a 1990 level oUS$ 2.66 per kilogram o oil equivalent(kgoe) to US$ 8.50 per kgoe in 2011, justbelow the EU27 average o US$ 8.75per kgoe or 2011. This has been thedefning story or Latvia. It is the result ostructural reorms to the energy sector andliberalization o the electricity market, as

well as separate energy efciency initiativesocused on improving heat supply systemsand reducing consumption in buildings.27Latvia also scores well due to aordableuel pricing without subsidy distortion(and marginal tax) on pumped gasolineand diesel, leading to a rank o 4th and12th respectively on these products priceindicators.

New Zealand and Latvias geologicaladvantages drive good environmentalsustainability scores.

From an environmental sustainabilityperspective, New Zealand scores verywell relative to the other economiesassessed. In 2010, approximately 39%o total primary energy supply was romrenewable sources. Renewables will likelyplay a more signifcant role in the utureenergy mix. In 2005, geothermal and windgenerated 9% o New Zealand electricity,whereas in 2010 the proportion generatedrom these sources increased to 17%, andoverall 74% o electricity was generatedrom renewable sources. The large shareo renewable energy sources makes NewZealand one o the most sustainable

countries in terms o energy generation,though electricity demand is also stillgrowing, by an average o 2.1% per yearsince 1974.28 The government goal is toincrease the proportion o renewables to90% o electricity generation by 2025 (inan average hydrological year), providingthis does not aect security o supply.29 In2008, the government introduced a NewZealand Emissions Trading Scheme (NZETS). By 2015, this will cover all sectorsand all gases. And given the excellent,though currently underused, wind and

22

US Energy Inormation Administration (EIA), NorwayCountry Report, August 2012; available at www.eia.gov/

countries/cab.cm?fps=NO.23World Bank, Databank, Population (Total), 2011.24International Energy Agency (IEA), New Zealand EnergyPolicy, 2010.25Government o New Zealand, Energy Data File, 2011.

geothermal energy resources available,New Zealand could be a world leader inrenewable energy generation very soon.

(For an in-depth analysis o Latviasenvironmental sustainability score, seethe Spotlight on top three perormers:Sweden, France and Latvia in section 4.Environmental Sustainability.)

Both New Zealand and Latvia have adiverse total primary energy supply.

Although New Zealand uses more energyper capita than most OECD countries, ithas improved its energy intensity by 21%between 1990 and 2011. The growth orelatively less energy-intensive serviceindustries is a actor. Total consumedenergy dropped by 0.2% between 2007and 2011, although the impact o thefnancial crisis on energy use must notbe overlooked when considering thisdrop. Oil still dominates New Zealands

TPES. In 2011 it accounted or 34% oTPES, geothermal energy or 19% andgas or 19%. As a net importer o energy,the predominant slice o which is crude(in 2011 98% o refnery input was romimported crude and eed stocks30), NewZealand needs to manage this trend.

The real success story or New Zealandrelating to energy access and securityis its diversity o supply. With a scoreo 0.98 on the Herfndahl31 index, NewZealands TPES portolio is almost perectlybalanced, as is reected in its rank o 3rdor this indicator.

Latvias supply profle sees a good diversityscore (0.89 on the Herfndahl index) andsustainability o the energy mix, averaginga normalized score o 0.62 (out o apossible 1.00) or all specifc emissions-related indicators.32 However, unlike NewZealand, it does relatively poorly in termso energy access, with median scoresacross the quality o electricity supply(4.9 out o 7) and a signifcant proportiono the population still using solid uels orcooking (10%), contributing to Latviasestimated 235,658 deaths per year dueto indoor air pollution, as estimated by the

Global Alliance or Clean Cookstoves. Withlittle evidence that these indicators arethe subject o any policy initiatives, it maybe an area or the Latvian government toconsider ocusing on in order to improve itsEAPI ranking moving orwards.

26World Bank, Energy imports, net (% o energy use), 2010.27Energy Charter Secretariat, In-depth Review o EnergyEfciency policies and Programmes, Latvia, 2007.28New Zealand Government, Energy Data File, 2012.29International Energy Agency (IEA), New Zealand EnergyPolicy, p. 7-8.

30

New Zealand Government, Energy Data File, 2012.31See section 7. Defnitions or a description o the Herfndahlcalculation.32These include: nitrous oxide emissions in the energy sector

(tmte CO2)/total population, CO

2emissions rom electricity

and heat production (total)/total population, PM10 country

level (micrograms per cubic metre).


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Figure 8: Regional energy intensity scores

0.32

0.44

0.50

0.67

BRICs - Brazil, Russia, India and People'sRepublic of China

Nordic Countries - Denmark, Finland, Iceland,

Norway and Sweden

MIST - Mexico, Indonesia, South Korea and

Turkey

EU15

GDP per unit of energy use - EAPI Normalised Score (0 - 1)

Economic andRegional ClustersAnalysis

This section considers some o the macrotrends rom the analysis o the EAPI results

and the actors at play or dierent regionsand economic clusters as they look tomanage the transition to new energyarchitectures.

Fast-growing, industrial clusters fnd itharder to perorm well on sustainabilityand security indicators than richer, moredeindustrialized counterparts.

The need to meet large energyrequirements makes it harder orcountries to score well across each o theimperatives o the energy triangle.

33The EU15 comprises Austria, Belgium, Denmark, Finland,France, Germany, Greece, Ireland, Italy, Luxembourg,

Netherlands, Portugal, Spain, Sweden, and the United

Kingdom. This report excludes data or Luxembourg, whichshould be discounted rom the grouping.34The Nordic designation encompasses the economies o:Denmark, Finland, Iceland, Norway and Sweden.

Comparing our economic clusters theBRIC (Brazil, the Russian Federation,India and the Peoples Republic oChina), MIST (Mexico, Indonesia, SouthKorea and Turkey), EU1533 and Nordiceconomies34 though with very dierentrequirements o their energy systems,they show similar scores in terms o howtheir energy systems drive economicgrowth. The average economic growth

and development score or the BRICcountries is 0.51, 0.54 or the Nordiccountries and 0.55 or the MIST grouping.

The EU15 cluster scores highest with anaverage score o 0.59. It is worth notingthat energy intensity scores were highlydispersed (see fgure 8). However, it wasthe environmental sustainability and energyaccess and security scores that showeda greater divergence (see fgure 9). This

aligns with the clusters dierent situationsand energy priorities. The BRIC (and to alesser degree MIST) countries are drivingglobal energy demand. Total primaryenergy supply among BRIC countrieswas 1,024 million tonnes o oil equivalent(mtoe) in 2010, up 28% rom 2005.Comparatively, the EU15s TPES was 103mtoe in 2010, down 4% rom 2005. TheBRIC economies are generally relying on

cheaper or subsidized ossil uels, such ascoal, petroleum and natural gas, to meetdemand. In the Peoples Republic o Chinaalone, coal-fred electricity generatorsrepresented 78% o the 1 billion kilowattso installed capacity in 2011 and demandor coal will likely exceed 4 billion metrictonnes in 2015 more than hal o theworlds total demand or coal.35

36CME Group, BRIC Country Update, July 2012; available at

www.cmegroup.com/education/fles/ed133-market-insights-

bric-2012-8-1.pd.

Figure 9: Energy access and security and environmental sustainability scores

0.00

0.50

1.00

Nordic economies

EU15

BRICs

MIST


Energy access andsecurity

Economic growth anddevelopment

BRIC economies are growing. GDPlevels per capita are not ully realized andare showing growth despite the globaleconomic crisis (BRIC real GDP grew6.53% in 2011 alone36). Yet the demandsthat they are putting on the engine roomso their growth their energy systems means these engines are being stressed.

35World Economic Forum and IHS CERA, Energy orEconomic Growth Energy Vision Update, 2012.

Source: World Bank


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How does GDP correlate with EAPI perormance?

Figure 10 shows the higher levels o GDPper capita generally indicating a higherspread o scores on the EAPI 2013globally. How might this be the case? Andwhat would explain the exception to thisrule the Middle East and North Aricasperormance and the less than stellarperormance o the Advanced Economies,

given their proportionally higher GDP percapita?

Simply ramed, rich countries are morelikely to be able to score well against oneor more objectives o the energy triangle.

Figure 10: Regional Clusters Comparison o 2013 EAPI score by average GDP per capita37

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

0.20

0.40

0.60

0.80

Sub-Saharan

Africa

Middle East and

North Africa

ASEAN and

Developing Asia

Commonwealth

of IndependentStates

Latin America

and theCaribbean

Central and

Eastern Europe

Advanced

Economies

AverageGDP

percapita(currentUS$,

2011)

EAPI2013score

Economic Cluster

Average GDP per capita (current US$, 2011) Linear (Median)

Max

Min

UQ

LQ

Spread charts show the distribution of a

dataset in this case the different economic /

regional clusters' average Energy Architecture

Performance scores

The silver bars are the spread of data from

minimum, median to the maximum value

The blue boxes show the quartiles

Quartiles are a set of values that divide the

data set into four equal groups, each

representing a fourth of the sample

The upper quartile represents the split of the

highest 25% of data the top performers

The lower quartile represents the split of the

lowest 25% of data the bottom performers

These spreads are charted against average

GDP per capita for the cluster

Figure 10 is a box or spread chart

They have the economic exibility andclout to engage in concerted actionon environmental sustainability andthe adoption o more efcient, cleanertechnologies involving legacy inrastructureupgrading across the energy systemand the incorporation o renewablesinto the energy mix. With diversifed or

large service-based economies anda deindustrialized GDP base, energyefciency is easier to achieve. Figure 11shows average energy intensity or aselection o regional/economic clustersagainst the World Banks Energy Price

37See Defnitions section or explanation o the graph structure and economic/regional clusters.

Source: World Economic Forum analysis, World Bank, World Bank Commodit y Price Data. For more inormation about country cluster defnitions, please see the Defnitions section.

Index. Developing, largely industrialeconomies all show lower perormance onan aggregate level than developed, largelydiversifed economies. Unsurprisingly, theenergy intensity scores dip or at-line withthe tumultuous frst years o the globalfnancial crisis between 2008 and 2010 ascheaper energy ooded world markets in

the wake o the slowdown, and this eectis most noticeable in the intensity scoreso the relatively more deindustrializedeconomies.

Figure 11: Energy intensity perormance


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Geology also plays a part in perormance;in the case o many o the AdvancedEconomies, natural resources suchas hydro, geothermal and oil and gas

resources are blended into their energysystems and economies to enable strongperormance across each aspect othe energy triangle. A strong degree odevelopment oten indicates a successulmanagement strategy or the distributiono resource revenue within an economy,and the establishment o suitable securitymeasures to maintain low reliance onimports and strong, transparent tradenetworks.

Perormance at the top end, amongthe Advanced Economies, is lower than

might be expected proportional to thelevel o GDP per capita. The averagerank or Advanced Economies is 25th,and the average score 0.63 / 1, but aew economies score particularly badlyon certain indicators, drawing down theclusters perormance overall. The US,which ranks 55th overall, is an example oan Advanced Economy that aces somekey energy architecture challenges, mostspecifcally around emissions intensity.Globally, the US accounts or about18% o ossil uel combustion-relatedemissions. By OECD standards, the USreliance on ossil uels is relatively high atapproximately 85% o TPES, according toIEA data. These ossil uels are combustedto generate energy and contribute tothe increase in CO

2emissions over the

decade rom 1990 to 2010 (see fgure 12).I Cyprus (56th), Czech Republic (53rd)and Italy (46th) the lowest ranked o the

Advanced Economy cluster were also toimprove their environmental sustainabilityscores, the group would likely see largeimprovement in EAPI scores overall theour countries average just 0.44 / 1 onenvironmental sustainability as opposed to0.56 / 1 or all other Advanced Economies.

The Middle East and North Aricasperormance bucks the trend towardhigher GDP levels and higher EAPIperormance. From a production pointo view, resource wealth in this area hastranslated into enormous sovereign wealthor many o the (mainly) Middle Easterneconomies, but these countries energysystems oten struggle to maximizeperormance against all three objectives othe triangle.

From a consumption perspective, ossil

uel products are heavily subsidized,creating economic drag; a glut o energyavailability has discouraged the adoptiono efciency measures impacting on botheconomic and sustainability metrics;economies have been (historically)

undiversifed38 and susceptible to oil pricevolatility; and access rates and quality oenergy supply are below the leader boardsstandards as grids have sagged underpressure to cater to soaring demand.39

A comortable degree o energy securityhas been achieved by taking advantageo domestic resources as generationeedstock, but even this success has been

vulnerable to the dangerous combinationo sharply increasing demand rom bothsupply partners and consumers.

In some regions, theres muchwork still to do

The lowest scorers, as might be expected,ace challenges around energy access,efciency and sustainability, and tend to belocated in Sub-Saharan Arica, developing

Asia or the highly resource-endowedcountries o the Middle East.

The small, resource-strapped economieso Sub-Saharan Arica exhibit lowelectrifcation rates and patchy electricitysupplies. They oten have limited uelsource diversity (in the case o thebottom ten perormers, oil which is

38Growth has been below potential in the Middle East and

North Arica (and not labour absorbing) because o the lack

o economic diversifcation, low private investment (averaging

15% o GDP relative to over double this level in East Asia) in

the wake o barriers to entry and an incentive ramework that

promotes privileges rather than competition. These countries

have undertaken a range o economic reorms over the past

years, but the quality o implementation o reorms has beenlow. Source: World Bank, MENA: Emerging Developments

and Challenges, 2011.39Up to 2020, electricity demand will rise by 7% to 8%per year on average in Gul Cooperation Council member

countries. Source: Economist Intelligence Unit, The GCC in

2020: Resources or the uture, 2010.

Figure 12: Comparison o US greenhouse gas emissions 1990 - 2010

362 319

1,8212,258

1,486

1,746

846

778338

340

219

224

28

42

0

1,000

2,000

3,000

4,000

5,000

6,000

1990 2010

MillionmetrictonnesCO2

Other Electricity generation Transportation Industrial Residential Commercial US territories

Source: United States Environmental Protection Agency; World Economic Forum analysis

mainly imported and biomass are theprimary components o TPES). The highsustainability scores (in relation to theireconomic growth and energy accessand security scores) that these countriessometimes exhibit an overwhelmingdependence on biomass energy consistingo wood, charcoal and agriculturalresidues. This ranking thereore needs to

account or the high-poverty contexts omany o these countries.

Many resource-rich Middle Eastern uelexporters score poorly due to high energyintensity and a low-diversity uel mix.With a dominance o hydrocarbons in theenergy supply and the attendant negativeenvironmental impact, these countriesalso score poorly against environmentalsustainability metrics, especially CO

2

and nitrogen oxide (NOx) emissionsrelating to energy. This plays out themessage inherent in the structure o theindex inefcient, intensive energy use isproblematic or a secure and sustainableenergy supply, regardless o the resourceendowment enjoyed by a country.

The bottom ten perormers average ascore o 0.39 out o a possible 1 overall,compared to the top ten, which enjoy anaverage score o 0.70 per country, andthe mid-range perormers, which average0.55.


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3. Economic Growthand Development


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The relationship between energy andeconomic growth has always been close.Since the industrial revolution, and evenbeore, ossil and other sources o energyhave been the engines o economicgrowth, replacing physical labour andchanging the shape o the worlds workorces and work patterns. Increasingefciency has kept uel prices low duringthe 20th century, even as efciency gains

have driven growth. Can these efciencygains continue in the uture?

Figure 13: Map o top economic growth and development perormers

Here, economic growth and developmentcan be broken down across three corecomponents:

1. How aordable the energy provided is taking into account price distortionsas the result o subsidy and tax

2. How efciently it is used

3. Whether the provision o this energyadds to or detracts rom a countrysaccounts.

Top Ten Economic Growth and Development Perormers Key Takeaways

Energy intensity or the top tenperormers is, on average, arlower than the Energy ArchitecturePerormance Index (EAPI) sample, withan average GDP per unit o energy use

o US$ 11.37 compared with the ullEAPI sample average o US$ 7.14.

Cheap electricity or industry is a drivero top ten perormance, with a US$0.09 US / kWh average or the topten, compared with a US$ 0.11 US /kWh average or the ull EAPI sample(the EAPI indicator represents availabledata that cannot take into account thepotential subsidizing o this price).

All o the top perormers have a clearlydefned energy efciency programmeor policy measures in place, withexamples in Uruguay, Romania andCroatia receiving unding rom external

parties such as the World Bank.

Generally, pump gasoline and dieselprices reect the cost o productionmore accurately, with a 0.86 / 1average score or (lack o) gasoline anddiesel price distortion across the topten compared with 0.67 / 1 across theull EAPI sample.

Excluding Singapore, uel importsrepresent an average o 0.03% oGDP or the top ten, below the EAPIsample average o 0.10%; whenincluding Singapore in the analysis, the

fgure raises to 0.07%. The inclusiono Singapore in the result may bemisleading, however, owing to itsstatus as one o the worlds top threeoil trading hubs (with approximatelyUS$ 500 billion in trade channelledthrough Singapore annually) and theworlds biggest shipping uel industry,with 26 million tonnes o bunker (uel toreuel a ship) delivered last year.40

40Singapore Economic Development Board/Reuters,

Factbox: Singapore, 2012; available at uk.reuters.

com/article/2007/06/12/singapore-economy-oil-

idUKSIN19966120070612.

1

1 0.66

0.65

Peru

0.78

Colombia

0.76

Switzerland

0.73

Spain

0.71

Singapore

0.70

Uruguay

0.70

Norway

0.67

Australia

0.66

Croatia

0.70

Romania

0.69

1st

2nd

3rd

4th

5th

6th

7th

8th

9th

10th


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41A US$ 25 million loan rom the Inter-American

Development Bank to Peru was authorized in 2010 to: study

the potential or mitigating emissions; make an assessment

o hydropower inrastructure vulnerability to climate change

risks; develop a Strategic Environmental Assessment; boost

environmental standards through regulations training and

support or municipal eco-efciency plans; issue guidelines

on minimum standards and energy efciency labelling; andhelp set up an energy efciency agency. According to the

Asia Pacifc Energy Research Centre, Peru has developed 42

appliance standards since 1996, with 29 o them reerring to

energy efciency.42 World Bank, Peru: Country Overview, September 2012;

available at www.worldbank.org/en/country/peru/overview.

Spotlight on the Top ThreePerormers: Peru, Colombia andSwitzerland

Peru, Colombia and Switzerland headup the table or economic growth anddevelopment, with an average EAPI scoreo 0.76 against a global average o 0.45.

Peru and Colombia have reormed energymarkets and taken advantage o naturalresource endowments to drive economicgrowth and development.

Perus results speak or themselves. It isone o the best perorming Latin Americaneconomies, with an average GDP growthrate o 6.5% between 2002 and 2011,contributing to an excellent energy intensityscore (1st in the EAPI this year) that isalso the result o various campaignspromoting energy efciency.41 The past5 years have seen much progress onmany fscal ronts, with high growth ratescoupled with low ination. From a marketstructure perspective, a distinct movetowards trade openness, exchange rateexibility, fnancial liberalization, higherreliance on market signals and prudentmonetary policy, including strong build-upo reserves has been the strong suit o aseries o reorms that have seen incomeper capita rise over 50% over the pastdecade.42

The wider country trend or fscal reormhas been reected in the energy sector;laws such as the Ley de Concensiones

Electricas (electrical concessions act)have seen the generation, transmissionand distribution divisions o generatorssplit and have opened the door or privatecompanies to own these operations,increasing competition and efciency.

Overall exports averaged US$ 28.8 billionUS between 2007 and 2009, a fve-oldincrease over a single decade, with therising production o natural gas liquidscontributing signifcantly to this revenue.Electricity comes rom the abundantnatural gas (52%) and hydropower

resources (48%) enjoyed by the country,and which contribute to the low costo electricity (just US$ 0.079 US / kWhaccording to IEA data). According to theUS Energy Inormation Administration (EIA),

Peru is seeing increased production oboth natural gas and petroleum, with newreserves (Peru has added 50 million barrelso reserves in each o the past two years)generating a stream o investments rominternational oil companies. New policieshave been ocused on attracting oreigndirect investment towards the developmento these resources or both export anddomestic customers.

Colombias story is very similar. Animproved regulatory ramework andsecurity situation has boosted investmentin the country by international business andinternational oil companies. Markdowns tothe royalties that the government requiresrom smaller (less than 125,000 barrelsper day) hydrocarbon discoveries haveencouraged this process. Hydropowerprovides or almost all o Colombiaselectricity needs (more than 70%according to IEA data) and so it is able toexport many o the energy commodities

that it produces.43

The uture is bright too; according to theEIA, production is expected to reach1 million barrels per day by the end o2012 and 1.5 million barrels per day by2020.44 Colombias liberalized market andresource-rich geology means the energysector provides a strong revenue streamor the country.

Lacking the resource wealth o Peruand Colombia, Switzerland represents adierent model o success to that o its

Latin American counterparts.The SwissEnergy programme has beenrunning or more than 30 years undervarious incarnations and is solely ocusedon projects relating to energy efciencyand the development o renewable energysources. It has pursued a successulstrategy. According to an Energici report,Switzerland had a total installed renewablecapacity (biomass + geothermal +hydroelectricity + solar + wind) o 14,189megawatts in 2011, an increase o 158megawatts (or 1.13%) on 2010,45 puttingthe Swiss renewable energy market at

17th globally or total installed renewablecapacity.

Switzerlands excellent energy intensityscore (3rd overall) is partially a result o thepredominance o hydro in the electricitygeneration mix, as well as the lowerreliance on industrial output to drive GDP.Several targets have been implementedto reduce the consumption o ossil uelsby 10% beore 2020 compared with 2010levels and to cap electricity consumptiongrowth at 5% over the same period.

These include: energy labels or householdappliances and lamps; building codes(MINERGIE label); voluntary efciencyagreements with industry; and a tax und,which deducts up to US$ 0.83 cents perkWh (US$ 1.25 cents per kWh as rom2013), to fnance urther energy efciencyprojects.

The government has also unded a districtheating scheme worth US$ 28 million aspart o a strategy to replace electric heatingsystems. And although it is dependent onossil uels or 52% o total primary energy

supply according to the IEA, Switzerlandsgood overall score can be urther explainedby its small expenditure on uel imports(just 2% o GDP), cheap electricity orindustry (hydro generates 70.9% o totalinstalled energy capacity) and low CO

2

emissions.46

43 Although Colombia consumed 298,000 barrels o oil per

day in 2011, it currently produces over 951,000 barrels per

day and can export most o its oil. It can also export most o

its coal Colombia was the 4th largest coal producer in the

world in 2010. Source: US Energy Inormation Administration,Colombia Country Analysis, 2012.44 US Energy Inormation Administration, Colombia Country

Analysis, 2012.45 Energici, Switzerland Renewable Energy Annual, 2011;

available at www.energici.com/energy-profles/by-country/

europe-m-z/switzerland.

46 Emissions per unit o GDP decreased twice as ast as the

total energy intensity over the period 1990 to 2009 (1.2% peryear) thanks to substitutions o oil with gas and biomass. This

switch out explains around 70% o the reduction in the CO2

intensity since 2000. Source: Sachs, J. D. and A.M. Warner,

Centre or International Development and Harvard Institute or

International Development, Natural resource abundance and

economic growth, 1997.


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3. Economic Growth and Development

Pull-out: Accounting or the Resource Curse

Figure 14: Oil- and gas-related sovereign wealth unds

The expert panel and World EconomicForum team requently debated theinclusion o a uel exports (% GDP)indicator. The eects o indirect-deindustrialization, or the resourcecurse, are well understood. Many studieshave reported on the inverse correlationbetween resource abundance and theeconomic development o a country.47 Thesymptoms include a decline in national

manuacturing sector productivity due tothe currency-strengthening eect o naturalresource exploitation.

What might be the impact o the resourcecurse on the various economies assessedby the EAPI?

Brazil must careully manage its revenuesrom hydrocarbon production.

Taking Brazil as an example, the case iscomplex. The benefts o the exploitation oits hydrocarbon reserves are undeniable.Revenues rom the 2.6 million barrels o

crude oil produced daily48 have been usedto help millions o Brazilians out o povertyand drive down the countrys net debt to37.2% o GDP rom a high o 60.4%.49But in a world o weak European and UScurrencies, the historical boom and bustpattern o Brazils economy may be hard toavoid. How concerned should Brazil be?

Source: Sovereign ealth Fund Institute. October 2012

56.7

61.8

65

70

115

149.7

296

538.1

656.2

740.5

0 100 200 300 400 500 600 700 800

Algeria

Kazakhstan

Libya

United Arab Emirates Dubai

Qatar

Russia

Kuwait

Saudi Arabia

Norway

United Arab Emirates Abu Dhabi

Billion US$

47 Sachs, J. D. and A.M. Warner, Centre or International

Development and Harvard Institute or International

Development, Natural resource abundance and economic

growth, 1997.

48 US Energy Inormation Administration, Brazil Country

Analysis, February 2012.49 Bristow, Matthew and Juan Pablo Spinetto, Brazil Faces

New Oil Boom Curse as the Worlds Resource Engine,

Bloomberg, 13 March 2012; available at www.bloomberg.

com/news/2012-03-13/brazil-aces-new-oil-boom-curse-as-

the-world-s-resource-engine.html.


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The answer might be vigilant. Brazilseconomy is well-positioned to avoidthe long-term pitalls that might ollowlarge resource discoveries. From a widereconomic perspective, the relatively stablecurrency, low ination, positive tradebalances and a growing service sectorcoupled with a reduction o the numbero people employed in agriculture can beseen as signals o a developing economy

that is well-positioned to counterbalancethe potentially destabilizing injection oresource revenue into the economy.50 Thegovernments legislation in this area shouldprove eective too; oil-feld operators otenuse domestic technology and must uselocal content or up to 65% o the goodsand services required. They also attracta vast amount o FDI in terms o the R&Dspend stipulated. Thereore, Brazil is not

just an exporter, but is growing as a talentand technology hub.

Norway oers a best practice example o

how to manage resource wealth eectively.

Norways Government Pension Fund(established by the Norwegian governmentto manage resource revenues) is valuedat over US$ 600 billion. Through theund, Norway is actively avoiding asituation in which oil money is pouredinto the Norwegian economy, resulting inoverheating and ination.51 Instead, theocus has remained on the developmento oil and gas sub-sectors like platormconstruction (which has had a positivespill-over eect into other engineering

and inormation and communicationstechnologies industries) and consideredinvestment initiatives in rural regions withno access to the revenues accrued by theextraction industry.52

Given the EAPIs strict ocus on countryenergy architecture and, within thisbasket, the contribution o energyto GDP, it was elt that on an overallglobal basis, revenues rom ossil uelendowments contributed positively tocountry GDP, especially when successulboom minimization structures (e.g.investment into sovereign wealthunds, stabilizing the powerul revenue

stream) were used to reduce the risko indirect-deindustrialization and drivecompetitiveness through investment ineducation and inrastructure programmes.

This is a point o view reected in recentstudies into resource curse theory.53 Anobvious caveat would be that this is truei the economy remains diversifed andproductive in other areas o its operation,not restructuring solely to exploit naturalresources. Due to the lack o dataaround the dispersal o uel export relatedrevenues or the majority o countries inscope, the EAPI has had to assume a

positive net outcome rom the uel exportprocess.

50 Imperial College London Business School, Can Dutch

disease harm the export perormance o Brazilian Industry?,

2010.51 Royal Norwegian Embassy / Thor Englund; available at

www.norway.org/ARCHIVE/business/businessnews/ethicoil.52 World Economic Forum and IHS CERA, Energy or

Economic Growth Energy Vision Update, 2012.

53 In Does Oil Abundance Harm Growth?,Applied

Economics Letters, 2011, Cavalcanti et al challenge whether

natural resource abundance is a curse, citing analysis that

shows oil abundance having a positive eect on both long-

run income levels and short-run economic growth, as well as

social and human capital.


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3. Economic Growth and Development

Any analysis o the economics o globalenergy architecture must considersubsidies, which aect prices, publicsector budgets and the signals to energyconsumers. The EAPIs take on the

issue is upront: ossil uels subsidiesare detrimental to every angle o theenergy triangle. But this position needs

justifcation.

Consider the trajectory o the World Banksglobal energy index (see fgure 15).

Figure 15: World Bank Energy Price Index, 1960 to present

0

20

40

60

80

100

120

140

160

180

1960 1970 1980 1990 2000 2010

WorldBa

nkEnergyPriceIndex(2005=100)

1970soil shock

Recession

"Super-cycle"of developing world growth

Figure 15 shows energy prices growingat an exponential rate. Should continuousupward pressure persist, many developingcountries will reach an untenable situationas many o them commit upwards o 5%

o their GDP to ossil energy subsidies(an aggregate total o between US$ 300billion to US$ 550 billion depending oncurrent oil prices).54 The IEAs 2011 WorldEnergy Outlookreport estimates a potentialreduction in global energy demand o4.8% or some 900 million tonnes o oilequivalent by 2035 rom the removal oall supply-side subsidies that are targeted

54 McKinsey Global Institute, Resource Revolution: Meeting

the worlds energy, materials, ood, and water needs ,

November 2011.

at reducing consumer prices or ossiluels and electricity generated rom ossiluels.55 This is a staggering potentialsaving. The declaration o the G20 CannesSummit in 2011 reafrmed commitments

to rationalise and phase-out over themedium term inefcient ossil-uel subsidiesthat encourage wasteul consumption,while providing targeted support or thepoorest,56 demonstrating that there is arecognized political will to end ossil-uelsubsidies on a global basis.

55 International Energy Agency (IEA), World Energy Outlook,

2011.56 G20 Declaration; available at www.g20-g8.com/g8-g20/

g20/english/or-the-press/news-releases/cannes-summit-

fnal-declaration.1557.html.

Pull-out: The Case or Reorm o Fossil-Fuel Subsidies


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Table 3: Estimated energy subsidies, 2007-2010 (US$ billion, nominal)

Source: Source: International Energy Agency, World Energy Outlook, 2011

*Fossil-uel consumption subsidies designated as electricity actor out the component o electricity subsidies attributable to nuclear

and renewable energy they reect the under-pricing o electrici ty generated by the combustion o ossil uels

Why arent subsidies working?

Fossil-uel subsidies have a wide arrayo proponents. Frequently, improvingsocial equity, boosting employment andensuring energy security are advocatedas reasons or ossil-uel subsidies. Butthis type o subsidy oten has an array odamaging side eects. Fossil-uel subsidiesdivert investment rom other potentiallymore needul government departments.

They reduce uel consump

the global energy architecture performance index report 2013

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