How the Iran war could lead to an acceleration in renewables

Analysts told CNBC that the effects of the Iran war will likely accelerate the shift away from fossil fuels and cause countries to think differently about the role renewables can play in supporting energy security.

The Middle East crisis has seriously disrupted oil exports through the strategically vital Strait of Hormuz. typically It carries approximately one-fifth of the world’s oil and liquefied natural gas (LNG) and represents a major choke point for the fertilizer trade.

Rising oil and gas prices have shaken energy markets and triggered widespread inflation fears, shedding light on the extent to which the world remains dependent on fragile fossil fuel trade routes.

Asia’s dependence on imported energy means it is now at the forefront of the global fossil fuel crisis; but supply disruptions are also hitting Europe and Africa hard, where countries are responding to rising fuel costs and a significant threat to food security.

The head of the International Energy Agency said the energy transition was progressing “very strongly” before the Iran war began, but the effects of the resulting energy shock mean countries are likely to direct more investment into clean energy sources.

“I hope one of the answers to this crisis will be: [an] Accelerating renewable energies. Not only because they help reduce emissions, but also [a] “It is a domestic energy source,” IEA Executive Director Fatih Birol said in his speech at the National Press Club in Australia’s capital on Monday.

Birol noted that clean energy sources dominated new energy installations last year, for example, renewable energy accounted for 85% of all new global energy capacity, and that solar energy was the main driver of this trend.

“This is amazing. Ten years ago solar energy was a romantic story, but now solar energy has become a business,” Birol said.

However, fossil fuels such as coal, oil and gas continue to dominate the global energy mix, meeting approximately 80% of worldwide demand by 2023. based on To the IEA.

“The Iran crisis is accelerating the transition to renewables and electrification. High fossil prices are driving the transition by making already cheap electrotechnology even more competitive,” Sam Butler-Sloss, director of research at global energy think tank Ember, told CNBC via email.

“In the old fossil fuel world, energy security meant diversifying fuel supplies. Thanks to electrotechnology, countries now have the tools to increasingly eliminate imported fuels.”

Ember found that Electrotech, which stands for solar, wind, batteries and electric transportation, heating and industrial, became the world’s dominant engine of global energy growth last year. analysis It was published in December. This happened with the emergence of China as the world’s first so-called “electro-state”.

Butler-Sloss said the adoption of electric vehicles was already growing rapidly around the world, especially in Asia, and this crisis has exacerbated that trend. He estimated that scaling up electric vehicles could save importers more than $600 billion a year in oil imports, describing the transition as a “super lever for safety.”

“This is Asia’s Ukraine moment. Just as Ukraine forced Europe to cut its dependence on gas, Hormuz will force Asia to cut its dependence on oil – but with even cheaper technology,” Butler-Sloss said. he said.

Ana Maria Jaller-Makarewicz, chief energy analyst for the European team of the Institute for Energy Economics and Financial Analysis (IEEFA), called the war energy shock in Iran a “wake-up call” for the European Union.

Jaller-Makarewicz said Spain provides an important example of how countries can limit their exposure to fossil fuel price volatility.

He noted that the Spanish government had come under heavy criticism following an attack. Last year’s catastrophic power outage, which some policymakers blamed on renewables, only meant that the country was now reaping the rewards of its investments in wind and solar technologies.