The war has widened since the US and Israel launched attacks on Iran more than 10 days ago. Critical infrastructure in the region has come under attack and the threat of Iranian attacks has essentially closed the Strait of Hormuz – the vital waterway used to transport 20% of the world’s oil and gas.
The disruption means the fuel could struggle to reach countries that depend on it to generate electricity, heat homes, power industry and run transportation. The resulting supply shortage is pushing prices higher around the world and could lead to cost-of-living pressures.
“Energy is the lifeblood of our society and our industries,” said Antony Froggatt, an aviation, shipping and energy expert at the Brussels-based NGO Transport & Environment. “And we are still highly dependent on fossil fuels.”
The world still gets about 80% of its primary energy from fossil fuels, the main source of greenhouse gas emissions that drive climate change.
This dependence makes economies and societies vulnerable to geopolitical shocks, says Rana Adeeb, executive secretary of the Renewable Energy Policy Network for the 21st Century (REN21).
They argue that countries with a higher share of “domestic” renewable energy in their energy mix are “less vulnerable to these shocks”.
Green energy technologies like wind turbines, solar panels and batteries – and the rare earths needed in their manufacture – have global supply chains that can also be affected by geopolitical tensions and trade disruptions. But renewable energy production generally occurs within national borders.
“Once you bring the technology into countries, the fuel you’re using is the sun, the wind, the local heat,” Adeeb told DW. “And that’s why renewable energy as a solution to energy production is more resilient to those global shocks.”
Uruguay bets on wind and hydroelectric power
Following the financial crisis in 2008, unease about dependence on oil and gas imports led Uruguay to switch to renewable energy.
Two decades ago, the small South American country of 3.5 million launched a plan to phase out fossil fuels from its power grid by rapidly expanding wind farms.
Today, more than 90% of the country’s electricity comes from renewable energy – primarily wind, solar, hydropower and biofuels. In some particularly wet and windy years this figure has reached 98%.
“This shows us that a 100% renewable electricity grid is completely possible,” Adib said, adding that Uruguay has managed to do this without huge amounts of storage, even when the sun isn’t shining and the wind isn’t blowing.
Adeeb says the shift to green energy helped Uruguay limit the risk of past energy price increases.
“During the energy crisis linked to the war in Ukraine, Uruguayan energy prices remained stable,” Adib said. “This is extremely important because it means that inflation does not affect this country in the same way as a country that has a heavy dependence on fossil fuel imports.”
Adeeb says the investment in renewable energy created 50,000 jobs and helped the country save $500 million (€430 million) in annual energy import costs.
Yet, like most countries, Uruguay relies on fossil fuels to power transportation, run its industrial sector, and heat homes. It is moving towards electrifying its public transportation and decarbonizing its industry. But it may take decades to completely phase out fossil energy.
More power is needed to promote change
Another country that has significantly reduced its dependence on fossil fuels is Denmark. The oil crisis hit the small Scandinavian country hard in the 1970s, prompting it to quickly begin developing renewable energy.
Today, more than 80% of Denmark’s electricity is supplied by green energy, with wind accounting for about 60%, followed by biogas. The country with a population of 6 million wants a completely independent electricity system from fossil fuels by 2030.
Its district heating system, to which more than 65% of homes are connected, has largely phased out coal and is planned to rely 100% on renewable biomethane by 2030.
Froggatt says renewable energy dominating the grid drives down prices, citing an IMF study showing that every 1% increase in the amount of renewable energy reduces the wholesale electricity price by an average of 0.6%.
“And that’s under normal circumstances. Obviously, when you’ve got huge increases in gas prices, the economic benefits of renewable energy are even greater,” he said.
But he emphasizes that consumers will only be protected from rising oil and gas prices if things like transportation and heating become fully electrified, for example, with electric vehicles and heat pumps.
“For this energy transition we will need a lot more electricity and so it is even more important that we build more renewable energy as we are expecting an increase in demand for electricity,” he said.
Analysts say clean energy is expected to become more competitive and financially attractive due to high fossil fuel prices and constraints in the supply of the commodity, putting pressure on governments to find alternative solutions.
“The current crisis shows again that we need to enter a renewables-based era and leave behind the fossil fuel-based era” if we want societies and economies that are more resilient, Adib said.
But accelerating renewable energy uptake to ensure a more stable energy supply will require massive investment and system change. Although green energy sources are now much cheaper than fossil fuels, oil and gas are heavily subsidized.
Froggatt says making the switch isn’t just about climate change, but also about energy security.
“These two things go hand in hand. And so, if there’s an upside to what we’re seeing right now, it’s energy and how we get our energy and how energy affordability comes back onto the political agenda,” Froggatt said.
Edited by: Jennifer Collins
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