September 2019

These are very interesting times globally, especially from an energy market perspective. A sharp reduction in renewable energy technology costs, in particular solar and wind, and the growing commercialisation of energy storage systems have driven many countries to replace conventional sources of energy with clean energy, be it for power generation, industrial applications or transportation. With the evolution of storage technologies, electric vehicles are emerging as a strong growth market with a potential to significantly reduce the demand for oil in road transportation.

The ongoing global energy transformation driven by the rapid growth of renewable energy and storage systems will have far-reaching geopolitical implications. Germany and the US are well-positioned to take advantage of the rise in renewables, owing to their technological leadership. The US, moreover, has a big advantage in terms of the sheer size of its market. Meanwhile, China seems to have secured a preeminent position for itself in the clean energy race to become the world’s largest producer, exporter
and installer of solar panels, wind turbines, batteries and EVs. It is also the world’s biggest miner and supplier of rare earth materials, the biggest deployer of renewable energy capacity and the biggest market for EVs.

India too is staking a claim in the emerging energy order by laying strong emphasis on its renewable energy market. While the country has a modest renewables industry as compared to China, the US or Germany, it boasts one of the world’s largest markets for renewable energy. With the objective of carving a global role for itself in the renewables realm, India launched the International Solar Alliance, a joint initiative with France that is aimed at building and financing affordable solar power infrastructure in developing countries including in sub-Saharan Africa. The project, if successful, will enable India to increase its influence on the global energy stage. The country is also implementing a large-scale e-mobility programme, which will help it reduce its dependence on oil imports. However, the pace at which this takes place will depend directly on the advancements in storage technology and the cost of these systems.

For key oil-exporting countries, however, the rise in renewable and EVs will be disadvantageous.
Countries such as Venezuela and Kazakhstan and the Gulf Cooperation Council states will be among the hardest hit by the transition away from fossil fuels. Russia likewise may lose some of its clout though its edge in nuclear energy could work in its favour if enough countries opt for this resource in their climate change mitigation strategies.

Summing up, a big change is under way, and it will be interesting to see how the ongoing transition impacts the world energy order.

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