The global push for clean power generation and increased electrification in transportation is creating a new world order in energy where new winners and losers may emerge.
If the world moves toward predominantly renewable energy sources, the influence of a small number of oil-producing petrostates concentrated in a conflict-prone region is set to wane. At the same time, new power players will emerge, analysts say. These will be the countries holding reserves of the key energy transition minerals or hosting sites for the production of batteries, solar panels, and such with interconnectors for export and import of electricity.
In a world described by the International Energy Agency’s bombshell report from last week—in which it was explained that no new investment in oil and gas is needed, ever, if we are to achieve net-zero emissions in 2050—the energy warfare and the war for resources could shift from large-scale conflicts about oil to potential conflicts about electricity supply, including via cyber warfare.
Cyberattacks On Electricity Grids Could Intensify
America just got a glimpse of what a cyberattack could do to its energy supply. Although no electricity grids were targeted in the ransomware attack on Colonial Pipeline, the cyberattack on computer systems cut off supply of the main fossil-fuel product used in the United States as it stopped gasoline shipments to the Eastern Seaboard.
As the share of electricity in the global energy mix is set to grow exponentially in the coming decades, along with digitalization of operations and asset monitoring, the new threat to energy supply may not be a skirmish or a full-blown conflict near the Strait of Hormuz in the Middle East. It could be state-sponsored cyberattacks on electricity grids, Amy Myers Jaffe, a research professor at Tufts University’s Fletcher School, argues in an article in The Wall Street Journal.
The higher the digitalization and the adoption of the Internet of Things and Industrial Internet of Things in electricity grids and supply, the more chances hackers—including such backed by governments—could get to target parts of the networks, Myers Jaffe says.
To protect themselves against such threats, countries and companies may not only need to boost investment and defenses against cyber threats, but they may also need to show they are ready to retaliate if need be, Myers Jaffe notes.
Will The Energy Transition Lead To A More Peaceful World?
Some analysts argue that increased electrification and the rising share of renewable sources will lead to a more even distribution of energy resources as many countries either have wind or solar resources. This would compare to the current influential energy players—several oil producers in the Middle East, as well as Russia and Venezuela, which even today are managing global oil supply via the OPEC+ alliance to “ensure market stability.”
Researchers at the Norwegian Institute of International Affairs (NUPI) published last year a review of the existing research on the geopolitical consequences of the energy transition.
“We can distinguish between two camps: the “renewed conflict” camp and the “reduced conflict” camp. The first holds that renewables will not change the extent and frequency of energy conflicts and that they will just come in new forms. By contrast, people in the second camp think that renewable energy will increase energy independence and thereby reduce the level of conflict in the world,” Senior Research Fellow Roman Vakulchuk says.
Increased renewable energy use is likely to lead to increased ‘democratization’ of countries and could make the geopolitics of energy “less conflictual,” Vakulchuk and NUPI Research Professor Indra Øverland argue.
At any rate, the geopolitics of renewable energy will be much different from the geopolitics of oil and gas, where the key weapon is the importing countries’ “fear of resource scarcity”, they say.
Most analyses reviewed by NUPI conclude that big oil exporters will be especially hard hit in a new energy world order, and the oil reserves of Saudi Arabia, Russia, Venezuela, Brazil, and Nigeria could become “stranded geopolitical assets.”
“Countries that have historically enjoyed geopolitical influence because they supply fossil fuels are likely to see a decline in their global reach and influence unless they can reinvent their economy for a new energy era,” a 2019 report from The Global Commission on the Geopolitics of Energy Transformation, an independent initiative launched by the International Renewable Energy Agency (IRENA), concluded.
The Gulf countries such as Saudi Arabia, Kuwait, the UAE, and Qatar are highly exposed to changes in global energy influence, but they are also highly resilient with financial resources “to reinvent themselves and adapt to the energy transition,” the report said.
The question is, will those Middle Eastern oil and gas producers will move to “reinvent themselves” as fast as to willingly lose the still large geopolitical clout that comes from being the world’s major oil-exporting region.
Renewables Transition To Create New Energy Powerhouses
According to IRENA’s report, “No country has put itself in a better position to become the world’s renewable energy superpower than China.”
China, the world’s single largest oil importer, has made early moves into solar panels production, extraction of the key metals of the energy transition, and battery-grade minerals production, also with a view to reduce its reliance on oil and gas imports.
China, as well as countries like the Democratic Republic of Congo, which holds cobalt and copper resources, are set to increase their relevance in the supply chains. This fact is not sitting well with the United States as both the previous Trump Administration and the Biden Administration were and are working to reduce the risks in the supply chain for critical minerals.
The energy transition would shift the fear of resource scarcity away from the Strait of Hormuz and onto the resource holders of lithium, cobalt, copper, and nickel, as well as the security of electricity grids and interconnectors.