What was the impetus for the Seven Challenges, and why is it important for RMI to frame the challenges of the energy transition?
The main driver is a sense of urgency about the gap between our current progress on the energy transition and what needs to be achieved to be on a pathway to limit average global temperature change this century to well below 2 degrees Centigrade. At RMI, we periodically review the portfolio of integrated assessment models (IAMs) that analyze global energy and climate systems. These studies are unambiguously clear that we are not currently on a pathway that will deliver a less than 2-degree outcome. The window of opportunity for that possibility is closing very quickly in the next decade. So, we are very much focused on that.
This is a driver for us to take a step back and ask ourselves the question: what must be done? It’s a pretty vivid picture when we step back and look at that.
So, which parties were involved in the drafting of the challenges, and what other articulations of this problem influenced it?
We were influenced by the very considerable body of research that is available at the climate pathway. That includes studies by the International Energy Agency (IEA), International Renewable Energy Agency (IRENA), Wood Mackenzie, DNV GL, Bloomberg New Energy Finance, and, of course, the Intergovernmental Panel on Climate Change (IPCC) scenarios. Among the IPCC scenarios, the Low Energy Demand scenario is one that RMI sees a lot of kinship with. We share the view that energy demand can be rapidly reduced through greater efficiency. All of those studies were part of our toolkit to assess the challenge. We didn’t want to try to reinvent that world of building yet another big energy and climate system model. We had the benefit of the analysis that had already been done.
“This is a driver for us to take a step back and ask ourselves the question: What must be done? It’s a pretty vivid picture when we step back and look at that.”
The RMI team was drawn from across our programs. We worked with literally every one of RMI’s programs in building our understanding of the energy system, not just from an analytic or economic perspective but also from a change model perspective. That is really the lens we were trying to challenge ourselves to see through. Let’s look at the world from the perspective of where we can make things happen fast and work backwards into identifying the key intuitions and the sensitive points for intervention.
That brings me to the next question. You touched on it here, but you can you go deeper into why the Seven Challenges takes this approach rather than going sector by sector, saying, “These are the problems in electricity, these are the problems of transport, these are the problems of buildings…”?
We launched this work from a systems thinking perspective, asking ourselves: where are the most influential points to intervene in the system? We have tried to create a framework that is comprehensive, that covers the major areas at stake.
When we ask ourselves about the most important leverage points, we identify some things that are not energy sectors. We think about finance and the tremendous leverage just finance has. We think about data. We have already seen that data and information systems have fundamentally transformed a couple of our global industries—for example, retailing, and now with the advent of Uber and its competitors, the mobility sector is being transformed by data. So, data is a really critical leverage point.
“We launched this work from a systems thinking perspective, asking ourselves: where are the most influential points to intervene in the system?”
We also see the subnational actors as especially important today, given the current geopolitical context, where there are few nation states really leading on climate, and trade and security and economic and political forces are at the top of the agenda for national governments and not leaving much space for attention to the climate. It’s subnational actions by cities, communities, and voluntary corporate actions that are turning out to be high leverage points.
We felt it was important to develop a framing that really went straight at those, looking at what’s been successful there and how to continue to expand that influence in new ways and to expand it more effectively globally.
So in terms of all of these challenges, which ones concern you most, and which keep you up at night?
Well, the one that is maybe both the most important and the most formidable in my mind is the efficiency or energy productivity challenge. It is, as we have known for decades, the least-cost solution.
If we look backwards, efficiency has unambiguously provided the biggest contribution to decarbonization in the last two decades. But it’s highly diffuse. It requires attention and action by billions of people to harvest it. It’s both incredibly important and incredibly time sensitive, because if we wait five years, we’ll have to shoot for even faster rates of improvement.
The marks we’d have to hit for improving energy productivity go up every year that we fail to increase that rate. It is hard to overestimate how significant that is. We have seen some amazing progress in recent years. As an example, I’d hold up India’s program through Energy Efficiency Services Limited (EESL) in purchasing LED light bulbs for hundreds of millions around the country. Over time, EESL has been expanding its finance and procurement function to new areas.
So, there are some leverage points on efficiency, but this is the one area that keeps me up at night thinking, how can we make sure it happens? And how can we engage public awareness around climate to enlist more grassroots push in this area?
Many people will say that these things are happening already in the market. In some cases, wind and solar are beating out fossil fuels in many places by being less expensive than electricity. There are certain advantages to EVs that are causing them to gain a greater market share. Why is it essential to accelerate these trends? And why is this not something that we’re just marking the happening of?
That’s a great question, because there are certainly positive signs in leading markets about the direct competitive advantage that renewables have at the margin. Honestly, we are very far from that cost advantage alone being a prevalent or dominant force in the marketplace globally.
The gap between what’s happening today and the deployment at scale around the world needed to get us anywhere close to the 2030 marks we need to hit is a really big one. The good thing is that those economics are favorable in much of the world. But in many cases, business models are not aligned to harvest the least-cost solutions.
“The gap between what’s happening today and the deployment at scale around the world needed to get us anywhere close to the 2030 marks we need to hit is a really big one.”
The finance isn’t always readily available to make this work in emerging countries, where demand is growing fast. And we need to ensure that a wider range of technologies continues to come forward to cross those critical thresholds, especially in areas like mobility, where we’re beginning to see some light but we are nowhere close to the pace of change that is needed. Mobility is a major part of the climate problem and industry. As you know, there are emerging solutions in the industry, but we can’t depend on slow capital stock turnover to get to the necessary climate goals.
What role do you see the Seven Challenges ultimately playing? What is their ultimate purpose, and what could they achieve?
They have several purposes. One of them is a purpose within RMI, which is to challenge our teams, our organization, to explicitly align our work with a well-below 2-degree pathway, to understand the connections between everything that we’re doing programmatically and the global leverage points to get to that goal. We have these goals in mind, but we are adding another layer of rigor and challenge to ourselves to make sure that we’re lining up in that way.
The second is to stimulate a conversation and engagement with our partners about these questions, about how to deliver impact. We look at the work that we and our peers in the NGO world are doing, and the voluntary programs by corporates, and we see a lot of good work. But we know that even doubling or tripling that effort, while still in the same way, won’t get us to the goal.
The conversation now is about how to leapfrog. How do we find places where there are actually exponential change opportunities or positive feedbacks in the system? This is our real strategic focus. Honestly, it is a very challenging one. I think, in a good way, it challenges our creativity. It also makes us look at some of the things we might do otherwise and say they’re great, but they’re not enough; they’re not fast enough to make a difference. So, let’s keep looking. If we have to take a higher risk or consider different change models to get there, we’re willing to do that.
“The conversation now is about how to leapfrog. How do we find places where there are actually exponential change opportunities or positive feedbacks in the system?”
The third thing is making a bridge between local and global actions. Most of our work is local. We engage at the level of a community or a company. Part of the work of the seven challenges is to create a bridge between looking at the local or even national level and the global forces. When we talk about the real successes in the energy transition—like solar and wind going way faster than anybody has expected, and/or the rapid ongoing advances in lithium-ion batteries—these are events clearly driven by globally scaled manufacturing and the technology transfer and investment pipelines that support it. We’re pushing ourselves to better understand the global forces and to replicate what’s already happened in these instances.
It’s no accident that wind and solar power have moved so fast because there has been a really well-designed and concerted set of pushes and nudges from governments and corporate actions at many different levels. I believe we can enlist those kind of partnerships more effectively going forward.