- The Writer holds an MSc in Eurasian Political Economy & Energy from King’s College London and also an MA in European Studies from Sabancı University.
The intersection between energy and geopolitics has been synonymous with oil and gas for nearly a century. However, the conventional understanding of energy geopolitics based largely on dependence on fossil fuels started to change and move towards the rapid growth of renewable energy with far-reaching consequences. Factors to consider in this shift include the depletion of critical materials, potential rivalries in electric grid deployment, technological competition in an environment of reduced oil and gas demand.
While oil and gas accounted for more than half of global energy consumption and attracted around 70 percent of total energy investment between 2000 and 2015, as reported by U.S. IEA data, renewable energy has made significant inroads in the global energy mixture in recent years, thanks to the drop in overall costs of wind and solar power.
Renewable investments have become more cross-national and even in some cases, overall renewable investments have surpassed those of fossil fuels. Therefore, policymakers, investors and government officials who understand trends in the rapid expansion of renewables will be better able to anticipate the consequences of geopolitical developments. Up to now, geopolitical consequences from the transition towards renewable energy have not been the focus of attention.
Over the past decade, many forecasting scenarios have underestimated the potential growth rate of renewable capacity. For this reason alone, renewable installed capacity could potentially outpace current projections. However, if geopolitical risks with renewable energy were better understood, policymakers would be better prepared for upcoming uncertainties.
The U.S. Geological Survey 2016 reported that approximately 60 percent of the world’s rare elements could be found in China and Russia. China produces almost 50 percent of all cobalt used in solar panels. Mainly three countries - Australia, China Argentina produce another element, Lithium. In the case of supply shortages, not only would production be hampered, but also global trade would also be hit hard.
Among the many geopolitical risks, the formation of cartels to control materials critical to renewable energy technologies could exert influence over producers or consumers increasing the risk of conflict, especially as many rare elements used in renewable energy hardware are also located in undeveloped parts of the world. Consequently, strategies based on avoiding cartels are of utmost importance in combatting the leverage that might be used against consumer countries.
Another major risk with renewables comes in the form of electric grids. The deployment of both and microgrids can cause tension. With the aim of enhancing electricity system reliability and in benefiting from resource sharing and economies of scale, many projects have been proposed around the globe. The Asia Super Grid and the North Sea Grid are designed specifically for these purposes. While some energy experts suggest that create regional peace through facilitating interdependency, others, however, propose that before beginning such vast projects, tensions could arise. In the case of projects, it is uncertain if it is possible to create a flexible system to avoid any undesired consequences.
Given that energy could be used as political leverage over others, and in the case of , the potential of shutting off supplies to a country is a concern of all project participant countries rendering them all equally vulnerable should conflicts arise.
Off-grid and micro-grid solutions generally offer a solution to combat fierce geopolitical competition with the help of strong decentralization and reduced interdependency. This can be seen particularly in developing parts of the world where they allow greater electricity access and flexibility.
Geopolitical risks could also become important in the field of finance and technology. While technology investment, research and development (R&D) and renewable project financing can be examples of great cooperation; it can also create rivalry when it comes to gaining a share in the global market. It is likely that countries that currently invest in renewable technology and form alternative financing will eventually become dominant players in the near future.
From building the necessary renewable infrastructure to creating innovative solutions for greater utilization of renewable consumption, more expansive funding options are needed. To this end, the development of funding options, such as the Green Climate Fund or a fund resembling Norway’s Sovereign Wealth Fund, is a necessity for the greater distribution of energy.
The many international oil companies that are increasingly investing in the renewable market reflect the potential in this sector. But it can also mean that competition will become fiercer when it comes to sharing the energy market in the near future. With international companies entering the market, the greater availability of funding options, which was once available for local companies, could crowd out alternative financing options. These are major concerns that policymakers need to take into account, and with the view of diversifying their economies financing options need to be enlarged to benefit local and smaller companies.
Lastly, geopolitical concerns stemming from cyber risks are a major impediment to policymakers, companies and any decision makers. Since renewable energy is more prone and vulnerable to cyber attacks, the large-scale deployment of critical infrastructure is vital to protect systems from cyber intrusion and for the continuity of service.
The increased use of renewable energy brings many geopolitical risks. Experience gained from conventional geopolitical risks in the fossil fuel industry cannot be applied to the renewable sector. Risks stemming from critical infrastructure, the availability of raw materials, difficulties in gaining access to alternative financing options, and cyber attacks have put policymakers down a path of uncertainty. In this predicament, countries that tackle the challenges and planned the risks associated with greater deployment will win out over others.
- Opinions expressed in this piece are the author’s own and do not necessarily reflect Anadolu Agency's editorial policy.