"Green” politics: miscalculations of global energy transition
Today, the UN and other international organizations view the development of renewable energy sources as the only way to stop global warming. In the coming years, investments in clean energy projects are expected to replace those in traditional sectors of the economy. However, the global energy transformation will affect the already vulnerable economies, where most of the budget revenues are generated by oil and gas. The transition will be arduous and, at the same time, will not save the global community from fossil fuels. Liquid fuels will be replaced by metals and minerals, whose reserves are also limited.
Complexities of energy transition
A recent report by the Intergovernmental Panel on Climate Change (IPCC) provides sobering data: in the near future, the global community will not be able to limit global warming to 1.5 °C. The negative consequences of such a scenario include severe floods, drought, coral reef extinction, forest fires, and food shortages. Experts believe that the main reason for the failure of the Paris Agreement, whose long-term goal is to contain the rise of mean global temperatures, is the limited geography of the energy transition. According to the IPCC, almost half of the world's population lacks access to alternative energy sources. At the same time, in order to avoid the devastating effects of climate change, a global transformation of the energy system must take place within the next 30 years.
To achieve these goals, the International Renewable Energy Agency (IRENA) recommends large-scale investments in energy networks, land and sea routes, regulatory frameworks, and the structural transformation of the entire industry. The agency also emphasizes the crucial role of policy changes and institutional modernization on the path towards a more sustainable and productive economic system. Countries will have to expand and redesign theirs entire international energy cooperation. The latter will be particularly important for developing countries where the risk of ill-considered investments is disproportionately high.
The International Energy Agency, controlled by the Organization for Economic Co-operation and Development, estimates that Latin America, Africa, Southeast Asia, and the Middle East are not on track to replace oil, coal, and natural gas as their main sources of electricity. In all these regions except Africa and Latin America, gas and oil still remain the prevailing energy sources. Analysts predict that the exporting countries, mainly Saudi Arabia, Qatar, the UAE, Kuwait, and Brunei, will only be able to adapt their economies to renewable energy at huge financial losses. Libya, Angola, Congo, East Timor, and South Sudan will suffer the most from the energy transition due to the high share of fossil fuel revenues in their GDP and their lack of financial reserves.
Since oil and gas revenues form a significant part of the exporting countries' budgets, which are the main sources of funding for social welfare programs, their depletion could trigger a wave of popular resentment, questioning the legitimacy of the authorities. Only a small group of countries with a less than 10% share of energy resources in their GDP (Malaysia, Norway, or Bahrain) will undergo the transition relatively painlessly.
The diversified economies of Russia, Azerbaijan, Kazakhstan, Uzbekistan, Iran, and Algeria will only be able to cope with the energy transition if they initiate large-scale structural reforms similar to those currently underway in China. Beijing's energy demand will reach its peak in the coming years, but IRENA predicts that the dynamic growth of renewable energy sources will significantly reduce the country's demand for fossil fuels. They estimate that increasing solar PV capacity by 800 GW by the end of the decade will lead to a 20% reduction in coal-fired electricity generation. China could achieve such an effect as early as 2030, but, according to the agency's report, it is unattainable under "today's political parameters".
Restructuring of industrial sector
In recent years, investment patterns have begun to shift towards a more electrified energy system based on renewables. According to a report by the International Energy Agency, the largest increase in investment was witnessed in low-emission technologies (carbon capture, utilization, and storage, as well as low-carbon energy sources including nuclear and hydrogen energy): from $362 billion in 2015 to $660 billion in 2022. Whereas investment in oil and gas technologies decreased by $186 billion and $104 billion, respectively.
Between 2023 and 2050, the energy transition will require the removal of a total of 109 gigatons of carbon dioxide, which plays an important role in the operation of power plants, as well as thermal and cogeneration facilities.
Brazilian oil and gas company Petrobras has announced the signing of a memorandum with global mining company Vale to explore low-carbon solutions. The two-year agreement will allow the companies to evaluate joint decarbonization opportunities, including the development of clean fuels and carbon dioxide capture and storage technologies.
According to IRENA's forecasts, the installed capacity of renewable energy sources should almost quadruple by 2030. Electricity demand should triple by 2050 due to widespread electrification of end-use sectors; 37% should come from solar energy and 36% from wind energy.
French oil and gas company TotalEnergies has announced a new partnership with Adani Green Energy to invest $300 million to develop wind and solar power plants that will generate 1,050 MW of green energy in India.
The UAE has launched its first commercial wind power project capable of generating 103.5 MW of renewable energy. Masdar, based in the UAE, has announced its plans to invest $8 billion in renewable energy projects in Malaysia, including ground-mounted, rooftop, and floating solar panels with a total capacity of 10 GW. The company will also help build wind power plants and battery-powered storage systems.
Japanese companies Sojitz and Eneos made public the launch of a large-scale solar power plant in Australia at the end of September. It will generate 204 MW of solar power.
Another Tokyo-based trading company, Mitsui & Co., has issued a statement that it has made an agreement with Canada's Northland Power Company to build a 1 GW offshore wind farm in Taiwan. The $6.5 billion deal includes the construction of 73 large wind turbines at three sites in Changhua County.
TuNur, a solar power project in Tunisia, will use concentrated solar power (CSP) technology, which will deploy parabolic mirrors connected to molten salt energy storage on an area of over 5,000 hectares, which is nearly three times the size of Manhattan. Submarine cable systems will then transmit clean electricity to Europe via three different routes.
Bioenergy in various forms (solid biomass, biogas, biomethane, and liquid biofuels) will provide 22% of total primary energy by 2050, 2.5 times the current level. By that time, production of pure hydrogen will have increased to 523 million tons. Hydrogen and its related compounds – ammonia, methanol, and kerosene – will account for 14% of final energy consumption.
An unprecedented surge of liquefied natural gas (LNG) projects implemented from 2025 onwards will add more than 250 billion cubic meters of new capacity per year by 2030, which is equivalent to about 45% of today's total global LNG supply.
New segment of corporate battle
By 2040, more than 50% of natural gas will be traded in liquefied form. According to the estimates of Russian Energy Minister Alexander Novak, Russia intends to occupy a substantial niche in LNG production. These plans were immediately supported by the State Duma, which prepared a draft law authorizing the registration of floating LNG storage facilities in the Russian International Ship Register. It was also proposed to introduce tax benefits for those who appear in the Register.
Benefits, grants, and special loan programs are incentives used by federal governments to encourage renewable energy projects all around the world. For example, in the U.S., there are tax credits for renewable electricity generation, the Investment Tax Credit, the Residential Clean Energy Credit, and the special Modified Accelerated Cost Recovery System. Some states and individual electricity companies set special rates for purchasing electricity from certain types of renewable energy systems. All of this stimulates clean energy development and leads to the complete reshaping of the fossil fuel market, where actors are now forced to diversify their assets and increasingly favor renewable energy sources.
Shell has invested in German energy storage company Sonnen, U.S. solar power firm Silicon Ranch, and several wind power projects in the U.S. and Europe. British Petroleum (BP) has formed a joint venture with grain giant Bunge in the sphere of bioenergy and sugarcane ethanol production. The company has stakes in wind generation projects in seven U.S. states, including Hawaii. French company Total, which is currently developing in the spheres of wind, bio-, hydro-, and photovoltaic solar power, plans to add 25 GW of clean energy generation capacity by 2025 and significantly expand its share in its portfolio by 2035. Chevron from the U.S. has acquired capacities for 65 MW of wind power in West Texas and 29 MW of solar power in Southern California. It is collaborating on renewable transportation fuels with Pacific Ethanol, Waste Management, and CalBio.
As major European and American oil and gas companies are restructuring their assets and investing in the development of renewable sources, oil and gas production will eventually concentrate in a number of regions in the Middle East. For example, Saudi Arabia, which now accounts for 13% of global production, will provide an even larger share in the future, inevitably increasing its geopolitical influence. This will enable the Saudis to shape their own regional agenda with regard to security and stability in neighboring states.
On the contrary, Angola, Chad, Gabon, Nigeria, and Sudan will face shortfalls in oil and gas revenues, which will provoke popular discontent and call into question the effectiveness of the authorities in power. Any increase in political instability in the region would almost certainly jeopardize the national security interests of the United States and its allies. A confrontation on the African continent with Russia could force Washington to increase spending on its diplomatic and military establishments, sacrificing their influence in the Asia-Pacific region.
It is evident that a large-scale transition to low-carbon energy undermines the entire global energy system, affects the economies of different countries, and changes the political dynamics both within and between them. On the other hand, the development of renewable energy sources will generate unprecedented demand for rare metals and minerals, including cobalt, copper, graphite, iridium, lithium, manganese, nickel, platinum, and a number of rare earth elements. This sector is set to grow in the coming years, so a major concern is the replacement of the dependence on imported fossil fuels by the dependence on other critically important materials imported from China, Russia, India, Latin America, and Africa.
