Political and business leaders from around the world have outlined the far-reaching geopolitical implications of an energy transformation driven by the rapid growth of renewable energy.
In a new report launched at the Assembly of the International Renewable Energy Agency (IRENA), the Global Commission on the Geopolitics of Energy Transformation says the geopolitical and socio-economic consequences of a new energy age may be as profound as those which accompanied the shift from biomass to fossil fuels two centuries ago. These include changes in the relative position of states, the emergence of new energy leaders, more diverse energy actors, changed trade relationships and the emergence of new alliances.
The Commission’s report A New World suggests that the energy transformation will change energy statecraft. Unlike fossil fuels, renewable energy sources are available in one form or another in most geographic locations. This abundance will strengthen energy security and promote greater energy independence for most states. At the same time, as countries develop renewables and increasingly integrate their electricity grids with neighboring countries, new inter-dependencies and trade patterns will emerge. The analysis finds oil and gas-related conflict may decline as will the strategic importance of some maritime chokepoints such as the Straits of Hormuz.
The Strait of Hormuz is the world’s most important oil artery, which links Middle East crude producers to key global markets. At its narrowest point, it is only 21 miles wide and the shipping lane is only 2 miles wide in either direction. Each day, around 30 percent of all seaborne traded crude oil passes through it, as well as a significant volume of LNG. There have been several military incidents in the Strait. In 2018, Iran hinted it could disrupt oil flows through the Strait in response to the oil sanctions announced by the U.S.
The energy transformation will also create new energy leaders, with large investments in renewable energy technologies strengthening the influence of some countries. China, for instance, has enhanced its geopolitical standing by taking the lead in the clean energy race to become the world’s largest producer, exporter and installer of solar panels, wind turbines, batteries and electric vehicles. Fossil-fuel exporters may see a decline in their global reach and influence unless they adapt their economies for the new energy age.
The Commission says countries that are heavily reliant on fossil fuel imports can significantly improve their trade balance and reduce the risks associated with vulnerable energy supply lines and volatile fuel prices by developing a greater share of energy domestically. With energy at the heart of human development, renewables can help to deliver universal energy access, create jobs, power sustainable economic growth, improve food and water security and enhance sustainability, climate resilience and equity.
IRENA estimates that by 2025 the global weighted average cost of electricity could fall by 26 percent from onshore wind, by 35 percent from offshore wind, by at least 37 percent from concentrated solar power technologies, and by 59 percent from solar photovoltaics.
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