Throughout human history, energy transitions have always represented turning points that led to deep geopolitical consequences. The shift from wood to coal for example was the locomotive for capitalism and the imperial ambitions of colonial powers in18th century.
The geographic concentration of oil, natural gas and coal reserves has shaped the international geopolitical scene in the last two centuries when control over the production of, and trade in oil has been a key driver to many conflicts and political alliances.
Today, as climate change forces shift from fossil fuels to renewable energy sources, it’s reasonable for the world to prepare for new transformative effects that are likely to dominate the geopolitical landscape of the twenty-first century. Maybe it’s too early to define the nature of these changes, however, experts can suggest different credible scenarios that deserve deliberation.
GROWING AT SPEED
Over the past decade, renewable energy consumption has grown at an average annual rate of 13.7%. The pace and scale of the transition to renewables during the past decade have already shot past the most optimistic forecasts as renewables were the only category of energy that grew globally at double digits over the past decade. This can be affirmed by data published by bp’s Statistical Review of World Energy 2020. According to the data, the world consumed 8.2 exajoules of renewable energy in 2009, while this had nearly quadrupled to 29.0 exajoules in 2019.
The coronavirus pandemic has even accelerated the trend, as new renewable power hit a record 200 gigawatts in 2020, the same time when the rest of the energy sector shrank.
Amid the recession triggered by the pandemic, demand for oil fell 8.8% and demand for coal 5%, compared to the year before, according to the International Energy Agency, the Paris-based oil watchdog. Clean energy was the only part of the energy sector that had growth in 2020.
In 2021, the world is even poised for a more accelerated energy transition with the coming of the new US presidential administration of Joe Biden, who targets reducing emissions from the US by 50-52% by 2030 compared to 2005 levels.
During a two-day virtual gathering, called by Biden, he urged for the global transition to renewables such as solar and wind, as well as advances in electric cars and other technologies, to be accelerated. His calls were met with ambitious commitments by other world powers including China and European Union.
There are no doubts about the seriousness of such commitments especially in the light of the new advanced technologies and the reduction in renewable energy costs. According to a recent report published by International Renewable Energy Agency (IRENA), the share of renewable energy that achieved lower costs than the most competitive fossil fuel option doubled in 2020 as 162 gigawatts (GW) or 62% of total renewable power generation added last year had lower costs than the cheapest new fossil fuel option.
A NEW GLOBAL ORDER IN THE HORIZON
As renewable energy continued its prompt growth pace, the transition from fossil fuels to renewable energy is expected to involve a much deeper transformation that will not be limited to the world’s energy systems, as it is expected to involve major social, economic and political consequences.
World analysts believe the inevitable transition would cause a shift in global power relations and politics similar to those shifts caused by transitions from wood to coal and from coal to oil.
Such expectations can be largely supported when realizing the wide differences between the aspects of renewables and fossil fuels. Unlike fossil fuels which are concentrated in specific geographic locations, renewable energy resources can be found in one form or another in most of the world countries. In most cases, renewable energy resources take the form of flows, which do not run out and are harder to disrupt. Renewable energy sources also may have “democratizing” effects as they can be deployed at almost any scale and can introduce decentralized forms of energy production and consumption.
According to a report published by IRENA in 2019 on the geopolitics of the energy transition, different countries will try to exert influence in the new world energy system through different ways that may include exporting green fuels, controlling the raw materials used in clean energy, or by gaining an edge in technology, such as electric vehicle batteries.
However, experts suggest that it’s the technology that will give an edge to countries in the new energy system. Taking this into consideration, we will find no country has put itself in a better position to become the new world’s energy superpower than China.
According to the IRENA report, China has a leading position not only in manufacturing but also in innovation and deployment of renewable energy technologies. It is the biggest location for renewable energy investment, accounting for more than 45% of the global total in 2017.
Thanks to its initiative to be carbon neutral before 2060, China looks, for now, to be winning the global race to invent and manufacture the technologies that will allow a new low-carbon world.
China’s efforts in this field have helped it to establish itself as the undisputable global leader of renewable energy worldwide. The IEA forecasts that by 2021, more than one-third of global cumulative solar PV and onshore wind capacity will be located in China.
China has even outspent its arch-foe the US by nearly 2-to-1 on energy transition-related investment between 2010 and 2020, according to BloombergNEF data.
The US, which is still resting on the energy boom of the shale oil revolution, still needs a clear strategy if it wants to keep a leading position in new energy markets and technologies, which can happen easily thanks to its robust high-tech sector and wealth of private investment.
Thus, expectations are very high that the two superpowers, who have long been at loggerheads over trade, technology and capital markets, are turning their attention to climate change and energy transition as the next path to commercial supremacy.
Europe, which has made its own commitment to become climate neutral by 2050, is not far behind China, however, according to the International Energy Agency, all of the projected growth in energy demand in the next 25 years will take place in emerging and developing countries.
According to a Bloomberg report, investment in clean energy technologies totaled over $330 billion in 2017 and is expected to accelerate over the coming decades.
The rush toward leadership of renewables should cause the demand for minerals critical to these technologies to soar too. The global lithium-ion battery market for example could more than quadruple to $93 billion by 2025. The booming of the electric vehicle market and expanding energy storage sector are going to push demand for lithium, cobalt, and magnesium.
Hence, mineral-rich countries such as Bolivia, Mongolia, and the Democratic Republic of Congo (DRC) have an opportunity to become part of the global production and value chains necessary for renewable technologies.
A report published by the International Institute for Sustainable Development (IISD), a global think-tank focusing on sustainable development, found that many of the reserves of the 23 key minerals, which will be critical to the development of renewables, are found in states perceived to be both “fragile and corrupt.”
The authors of the report, which came under the title “Green Conflict Minerals: The fuels of conflict in the transition to a low-carbon economy,” found real risks of tensions and conflicts emerging or continuing around the extraction of these minerals that must be governed in a way that is responsible, accountable and transparent.
The growth of clean energy technologies may fuel outbreaks of violence in states with weak institutions, competition over global resource commons, and weaponization of minerals essential to these technologies in trade disputes.
Many analysts see that renewable energy influence will not be limited to the balance of power between countries as it’s expected to reconfigure alliances and trade flows.
One of the prime examples that may come to mind when thinking of alliances that may change, if global demand for fossil fuels declines, is the alliance between the United States and Saudi Arabia in which oil plays a key role. The alliance, dates back to 1945, states that the US would provide military assistance in exchange for access to Saudi oil.
In fact, the global low-carbon energy transition is posing critical questions to oil and gas producers in the Middle East, as it may imply sustained pressure not only on their alliances but also on their development models, which rely heavily on hydrocarbon revenues. Without economic reforms, this may translate into macroeconomic unbalances and ultimately put at risk established social systems of this region.
Thus, the biggest resistance for the energy transition is likely to come from countries that produce fossil fuels although it will be decades before oil and gas are removed from the energy system.
NEW BENEFITS AND OPPORTUNITIES
The renewable energy transition is leading to very different global power structures where the influence of some states, such as China, will grow while states that rely heavily on fossil fuel exports and do not adapt to the energy transition will face risks and lose influence.
Renewables could reduce conflicts, and alleviate competition for important natural resources, notably oil, gas, water, and food. On the other hand, cybersecurity and access to important minerals may generate increased concern and tension.
However, the majority of countries can increase their energy independence significantly and generate considerable benefits and opportunities.