The International Energy Agency has made a dramatic call for governments to end their policy inertia and push towards a radical transformation of the global energy network, ending the dependence of centralised fossil fuel generation and pushing towards more flexible systems, where more than half of the world’s electricity comes from renewables by the middle of the century.

“When will governments wake up to the dangers of complacency and adopt the bold policies that radically transform our energy system?” IEA executive director Maria van der Hoeven said. “Let me be straight. Our ongoing failure to realise the full potential of clean energy technology is alarming.”

In its long-awaited analysis entitled Energy Perspectives 2012 – a 68 page document that looks at the status of technology development, the alternatives, the state of policy support and R&D, and various scenarios for the future – the IEA says the transformation of the energy grid to meet the “2°C scenarios” which could give the world the best chance of avoiding dangerous climate change would be costly.

But by 2025, the investment would have paid itself back, and by 2050 would have delivered three times the extra investment required in savings. “An additional $US36 trillion of investment would be required to overhaul the world’s current energy system by the middle of the century, but this would be offset by $US100 trillion in savings through reduced use of fossil fuels,” it says. (Note that this $US36 trillion is over and above the $100 trillion that will be spent in business-as-usual).

But the IEA warns that the window for action is closing fast. It repeats its calls for the replacement of subsidies for fossil fuels, a level playing field for new technologies, and laments the fact that R&D for emerging technologies is less than it was in the 1980s.

“Continued heavy reliance on a narrow set of technologies and fossil fuels is a significant threat to energy security, stable economic growth and global welfare, as well as to the environment,” van der Hoeven said.

The IEA wants global investments in clean energy to double by 2020, and renewed focus on what it sees as critical technologies – CCS, solar thermal, and offshore wind. Two of those technologies are areas where Australia can play a critical role – as it can with enhanced geothermal systems, which the IEA sees as providing 5 per cent of global electricity by 2075 – but where policy failings and the lack of private funds have caused inertia in development.

The 2075, projections are particularly interesting, and the table below shows how such a scenario would look when 99 per cent of the world’s electricity comes from zero-carbon sources. As the IEA says, zero carbon is within reach, but we’re not quite there. Solar thermal (or concentrating solar power) accounts for 13 per cent of the world’s electricity needs by 2075, underlining the importance of a technology highlighted by the report we wrote about last week.

Solar PV contributes nearly 10 per cent, and wind 20 per cent. Geothermal power, mostly through enhanced geothermal systems (being pioneered in Australia and Germany) account for nearly 5 per cent. Nuclear provides 19 per cent.

However, the IEA has also canvassed the possibilities should CCS fail to deliver, and nuclear is not deployed as much as expected. In the Hi-Ren scenario in the table at the bottom of the story, the share of renewables by 2050 goes from 57 per cent to 71 per cent. Note the huge jumps in contribution from the likes of solar PV. Under the various scenarios, solar PV rises from 20TWh now to more than 4,800TWh in less than four decades; CSP goes from 1TWh to more than 4,200TWh. Offshore wind shows similar growth, while nuclear doubles and biomass rises 10-fold. Onshore wind rises more than 15-fold. However, gas’ ambitions are greatly reduced from under the business-as-usual scenario, but not as dramatically as coal.

(It’s important to note that, in these scenarios, the IEA is not factoring in any radical changes in habits – i.e. less material consumption, people living in caves in hair shirts, etc. It factors in increased demands with a growing and wealthier population, the only change that might occur is more use of mass transit).

But as the IEA underlines throughout the document, it is not merely a matter of delivering new technologies, but requires a rethink of the way energy systems are managed.

The Agency laments the fact that current energy system is dominated by large, centralised generation based mainly on fossil fuels. It says the low-carbon energy system of the future will be characterised by greater diversity of technologies and fuels, more renewable energy, and increased complexity across the entire infrastructure. The change in thinking requires a focus on the efficiency of the actual service provided, (e.g. thermal comfort, instead of the energy delivered), so is more about a service than a commodity.

And the new energy system will look for complementary resources and needs across different sectors. Examples of these include the use of electric vehicles that link the transport sector to the power sector, increased use of electricity or cogeneration in heating; use of thermal storage to balance variable renewable generation; more sophisticated demand response; and the possibility of using hydrogen for energy storage and as an energy carrier for heating, power generation and transportation.

Fossil fuels would not disappear – although the table below does suggest their market share is hugely diminished – but their role would change to one of flexibility, to balance generation and demand fluctuations. The coal-fired plants that remain will need to have CCS to cut emissions, and they will have to learn how to become dispatchable, and to change load in demand.

This also has particular relevance to Australia, because of our current dependence on coal, and was a prospect raised by Professor Ross Garnaut in his report. Garnaut was mocked by the electricity industry experts as someone who knew nothing about the subject. But as the IEA pointedly notes, one of the key ingredients to a clean energy future will be the addition of experts from other areas – demand management, efficiency, IT and systems management. It’s time for new technologies, and a new way of thinking.