Traditionally, the geopolitics of energy has simply been the geopolitics of oil and gas. It’s not surprising – all national economies currently depend on oil and gas and as such it has shaped the way states interact with each other and also how a states economy will develop. Oil and gas account for approximately 50% of global energy consumption.
However, the global energy landscape is changing. Traditional geopolitics looks at how geography influences and impacts on a country’s foreign relations. However, recently there have been significant and recognised challenges form non-state players which have become more prevalent and increased the level of transnational threats impacting on a state – issues such as cyber-security, terrorism and climate change.
Against this, the costs of wind and solar have been driven down drastically over the last few years with renewable energy akin significant inroads to the global energy mix. Key statistical projects published from various multi-nationals and think tanks show renewable energy rising to 30-45% of total primary energy by 2035/40 and then to 50-70% by 2050.
This has several key impacts from a geopolitical perspective.
Investment. Simplistically, in oil and gas dependent economies, there is a high level of intellectual property associated with extraction / generation at a specific point. As the resource is moved from the point of extraction, the requirement for IP protected equipment and processes diminished. As renewable energy increases, however, the distributed nature of the resource means that IP will play a bigger part as infrastructure and the management of the infrastructure will need to be established. This makes the transfer of technology from developed to developing countries more important. As the investment required for this comes more to the fore, company’s with strong balance sheets will begin to lead the way. Often, these are oil and gas company’s and we see this with BP, Shell and Total moving to a stronger investment position in renewable energy.
Resource Curse. Traditionally, resource curse is a term applied to fossil fuel extraction driving developmental ills. These are usually overvalued exchange rates, decline in non-tradeable sectors of the economy, increased corruption, authoritarian institutions and violent conflict. Renewable energy increase could affect vulnerable states in a number of ways – firstly, reduced rents for resource extraction could lead to declining economies and civil unrest. Secondly, the renewable energy resource curse could affect countries just as the oil and gas resource curse did. This effect is debatable as funds and institutions which typically fund renewable energy development are usually constricted in development investment by a range of factors including ensuring the country has a high level of governance and strength in various sectors of the economy. Thirdly, as discussed above, the evolution of cartels to control access to rare earth minerals may occur.
Demand for Rare Minerals. Rare earth elements are critical to the production of renewable energy components. Many of these elements are sunk into a small number of geographical locations. Currently, 57% of the total resource of rare earth minerals are located in China and Russia. A key risk here is the development of cartels to control access and drive up prices. To mitigate this, synthetic substitutes are required, and this may well impact on existing R&D. Also, significant levels of reuse and recycling would be beneficial.
Reduced Oil and Gas Demand. These impacts will be primarily experienced by producers. In terms of producers, a sharp drop in oil price as it races to the bottom with renewables could be seen. Recently the world has seen the impact of this. In Scotland, the effects of a drop in oil price is still being felt likewise in the US. Typically, this manifests in unemployment, disruption in labor markets and deteriorating local economies. However, it can provide an impetuous for diversification of economies – often only achieved with government intervention. Failure to do so can lead to pressure on a governments credibility and authority.
Grids. Supergrids are often touted as a geopolitical face of increased decentralised energy. However, whether supergrids spanning several countries would lead to reduced – or increased – conflict is up for debate. More likely is the evolution of grid shirking where players don’t get involved as they don’t want to be part of any confrontation with a potentially larger neighbour further down the line. An important element of this will be asymmetry of needs rather than military might.
Another evolution may be the increase in micogrids as these will be more locally prevalent and less likely to be subject to corruption and central control. Poor, rural areas have a lot gain from this. The key impact form this will be the challenge to central government revenue models.
Climate Change. Large scale renewable energy deployment will decrease climate change impacts. This has implications for human health in both developed and developing economies. Also, this may lead to an easing of pressure from ‘climate change migrants’ as sea levels rise. Another geopolitical element impacted by this is that of stability. Drought leads to significant rural / urban migration which can lead to instability in overcrowded urban locations. Recent work has shown that these migrants were key players in the anti-Assad movement as Arab Spring began to gain momentum. To be clear, drought didn’t cause the Syrian War – however, it did make a contribution by moving certain sectors of the population into close proximity.
Access to Energy. A precursor to achieving sustainable development is a populations access to sustainable energy. This precursor has so many know-on effects – from human health, economic development, employment opportunities and environmental benefits to increasing communications and internet provision thus driving opportunities for marginalized sectors of a population. Driving down energy poverty is a recognized element is driving down regional instability which itself leads to easing of migratory pressures. This is very simplistically outlined here. However, it is valid. Decentralised energy has a significant impact on rural poor who are not connected to any grid infrastructure.
As can be seen, the geopolitics of energy is changing as renewable energy makes headway into the global energy mix.