Energy Transition Requires Optimised Models for Investment Planning
Experts argue that countries need comprehensive energy system models to guide their transition to renewable energy, as current tools like NDCs fail to provide clear investment pathways. Optimised models can integrate sectors, reduce costs, and attract private investment, while upcoming COPs should prioritise regional planning and funding for modelling capacity.
The urgency of transitioning to renewable energy has never been more apparent. Recent disruptions, such as the closure of the Strait of Hormuz, have highlighted the vulnerabilities of fossil fuel-dependent systems. Meanwhile, advancements in renewable energy costs, electric vehicle adoption, and demand flexibility underscore the benefits of a clean, secure, and integrated energy system. However, the challenge remains in determining how to achieve this transition effectively.
Countries worldwide are advocating for accelerated renewable energy deployment and alternative energy solutions. A secure, affordable, and resilient decarbonised system requires strategic investments in specific locations and sequences, optimised across sectors and borders. Yet, many governments lack the analytical tools to translate these goals into actionable investments.
Current instruments like Nationally Determined Contributions (NDCs) and country platforms fall short in addressing the fundamental question of what an optimal energy system should look like. These tools do not provide the detailed planning necessary for effective decarbonisation.
## The Need for Optimised Energy Models
To bridge this gap, experts recommend that every country develop a bankable, economy-wide optimisation model for its energy system. Such models, while not a definitive plan, can offer critical insights into the future energy landscape. They can illustrate how optimal scenarios shift with policy adjustments, calculate necessary investments and their sequencing, and quantify the impact of various assumptions and policies on system costs.
Optimisation models can treat the energy system and its sectors as an integrated whole, optimising across projects and sectors to create mutually reinforcing solutions. For instance, industrial demand growth, transport electrification, and digital infrastructure can be managed efficiently to avoid stressing the energy system. Additionally, these models can enhance the financeability of investments by providing a coherent, optimised plan that reduces uncertainty and lowers the cost of capital.
## Regional Planning and Financial Support
The upcoming COP31 and COP32 conferences present an opportunity to shift international climate cooperation from fragmented commitments to comprehensive planning. Three key actions are proposed:
1. **Optimised, economy-wide, long-term energy system planning** should underpin NDCs, country platforms, and finance commitments. Current NDCs are often drafted by single ministries with limited cross-sectoral input, lacking an analytically grounded vision of the energy system. Country platforms typically consist of existing project pipelines rather than a system-level analysis of an optimised, decarbonised energy system.
2. **Regional planning** should be recognised as a crucial unit. Modern energy systems are inherently regional, with uneven renewable endowments and the need for cross-border balancing to reduce costs and unlock economies of scale. Assessing domestic infrastructure without regional optimisation can perpetuate the misconception that decarbonisation is more expensive than it actually is.
3. **Financial support for planning capacity** is essential. A coordinated effort by multilateral development banks, bilateral donors, and philanthropic partners to help regions and countries develop and maintain their own modelling capabilities, using open-source tools and regional analytical hubs, would address a significant gap in the current framework. This support should extend to regional institutions like the ASEAN Centre for Energy, the African Energy Commission, and regional power pools to determine the requirements of optimised regional systems.
The 2026 energy crisis highlighted the costs of unplanned, fossil-dependent systems. The international community should seize this moment to build the planning foundation that has been missing for decades, rather than continuing with ineffective NDCs or pledges.
