7. What are the Geopolitical Implications of the Energy Transition?
The geopolitics of energy as a subject of interest and study is a huge one (Victor, Jaffe and Hayes, 2006; Looney, 2012; Dannreuther and Ostrowski, 2013; Fouquet, 2012; Considine and Paik, 2018). It concerns a whole range of variables, encompassing the functioning of international markets for hydrocarbons; trade routes; market power; access to hydrocarbon energy in these international markets; and issues to do with both security of supply for importers and security of demand for suppliers. To illustrate the point, in 2017, according to BP data (BP, 2018a), 55 per cent of global oil exports came from just eight countries, while 60 per cent of global gas exports came from seven countries and the majority of global coal exports from five countries.
This carries implications for many aspects of foreign and domestic policy, ranging from industrial to energy policy at national, regional and international levels. Both explicitly and implicitly, the transition involves competition and potential conflict. A classic historical example was the switch by Britain’s Royal Navy in 1914 to fuelling warships with oil rather than with coal, as discussed briefly in Box 3.
Box 3: Britannia waives the rules – the geopolitical implications of switching fuel for warships
In 1914 the British government switched the warships of the Royal Navy, which had been the cornerstone of British imperial power, from burning coal to burning oil. The decision made excellent sense. Burning coal produced highly visible black smoke at a time when naval gunnery was increasingly accurate at ranges of 16 to 18 kilometres. Handling coal was extremely labour-intensive, while oil could simply flow down a pipe. Furthermore, this could be done while the warship was still at sea, negating the necessity of entering a port to refuel. Finally, oil’s greater energy density (1.5 times the energy content by volume compared to coal) allowed smaller boilers to be used and increased ships’ range.
There was, however, a problem. While Britain had plenty of coal, it had no oil. Following the end of the First World War, the only major exporters of oil outside what was to become the Soviet Union – off-limits for security reasons – were the US and the Middle East. This context went a long way to explaining British foreign policy up to the 1960s, coupled with the obvious point that the Middle East was also the route to India, until 1947 the jewel in the imperial crown. As a result, much of the UK’s foreign policy was aimed at securing oil supplies in the Gulf region to ensure Britain’s naval supremacy. This also affected UK policy in other areas. For example, in 1913 the government acquired 50.0025 per cent of the Anglo-Persian Oil Company (later BP), and in 1912 commissioned the Abadan refinery, at the time the largest in the world.
By stark contrast, the study of the geopolitics of renewables is not very fruitful. Modern renewable energy and low-carbon electricity can be delivered on a small scale, offering decentralized sources of supply outside any potential control by suppliers exercising market power (IRENA, 2019b). The transition is therefore unlikely to generate policies of ‘electron independence’ or provoke cartelization of electron energy supplies.56 The key significance of this is that, as the transition progresses, the geopolitics of energy will effectively fade away.
We can expect conflict over oil market share, linked to a contest for hegemony in the Middle East, as oil-producing countries in the region and elsewhere in the world struggle to disguise their economic failure.
This is, of course, a simplification. The geopolitics of energy per se will not disappear overnight. During the process of transition, in the short to medium term, the geopolitics of energy will continue to be dominated by the same sorts of issues that have featured prominently since the start of the 20th century. Indeed, such geopolitics may become more intense and threatening for a time. We can expect conflict over oil market share, linked to a contest for hegemony in the Middle East, as oil-producing countries in the region and elsewhere in the world struggle to disguise their economic failure. This could provoke serious military conflict, potentially triggered by another oil price shock and aggravated by the efforts of ever more failed states in the region to distract restive populations with foreign adventures.57 However, as electrons increasingly replace hydrocarbon molecules in the energy mix, such conflict will diminish.
New geopolitics may well emerge to replace the old paradigms of energy geopolitics associated with hydrocarbons (IRENA, 2019b; Carbon Tracker, 2019). There may well be problems associated with the supply of key metals, especially cobalt. Contestation around a variety of planned electricity interconnector projects – such as China’s planned global super-grid, or the ‘Desertec’ project to supply solar energy from North Africa into Europe – could generate similar conflict to that currently associated with oil and gas pipelines (Stevens, 2009). There is also a real threat that cyberattacks on electricity systems could be used as weapons in conflicts caused by non-energy issues.
56 This assumes that restrictive international patents do not excessively limit access to renewable technology.
57 This sort of development is by no means exclusive to the MENA region. For example, of real concern is the possibility that Russia, facing growing economic problems at home, seeks to create distractions by being more belligerent.