The global energy transition, shifting from fossil fuels to renewable sources, is significantly impacting the geopolitics of energy. This move is not just an environmental imperative but a geopolitical one, affecting international relations, trade, and national security. The transition is creating new power dynamics, with countries competing for dominance in emerging clean energy technologies and supply chains.
What is Driving the Energy Transition?
The pressing need to combat climate change is driving the energy transition toward renewable energy. The shift is altering how energy is produced, distributed, and consumed based on the Paris Agreement, national policies, and technological innovation.
The key drivers of the global energy transition are:
- Many countries like China, India, the United States, Japan, the European Union, and others have pledged to achieve net-zero greenhouse gas emissions.
- Over the past decade, there has been a significant drop in the cost of solar and wind energy. As a result, renewable energy sources are becoming increasingly competitive with fossil fuels.
- Generating energy locally using renewable sources can reduce a country’s dependency on imported energy. Consequently, many countries are relying heavily on renewables like wind, solar, geothermal, and hydropower to generate energy, enhancing their energy security and independence.
- Green investments, like wind parks, solar farms, electric vehicles, and energy-efficient infrastructure, are attracting eyeballs with public and private funding opportunities worldwide. These projects help reduce carbon emissions and also create millions of jobs in manufacturing, installation, maintenance, and research, boosting long-term economic growth.
This shift makes energy more accessible to everyone and eliminates the old fossil-fuel-driven system. Unlike oil and gas, which are only found in certain places, sunlight and wind are available almost everywhere. This means countries that once had to rely on others for energy can now produce their own, changing the global balance of power.
The World’s Progress and Investment in Energy Transition
The deployment of renewables has grown rapidly, driven by policy support and sharp cost reductions. In 2024, renewables accounted for one-third of global electricity generation. The largest increase in renewable energy capacity to date was also witnessed, with 585 gigawatts (GW) added, expanding the global stock by 15.1%.
Renewables comprised a record 92.5% of global power additions, primarily from solar and wind. Projections indicate significant milestones, with renewables-based electricity generation geared to surpass coal-fired generation in 2025, and wind and solar power generation each expected to surpass nuclear in 2026.
The transition isn’t limited to electricity generation. Electric vehicle (EV) sales surged by 3,300% from 2015 to 2024, reaching over 17 million units and representing more than 20% of all car sales. Experts believe solar, wind, and EVs have become self-sustaining and irreversible. In 2023, the renewable energy sector employed 16.2 million people globally, with China alone accounting for 46% of these jobs.
The renewable energy transition, while promising energy independence from fossil fuels, introduces new and complex resource dependencies, particularly on critical minerals.
Are Critical Minerals the New Oil?
While sunlight and wind are free, renewable technologies are mineral-intensive. Batteries, solar panels, wind turbines, and electric vehicles require lithium, cobalt, nickel, and rare earth elements. This makes critical minerals the new focal point of energy geopolitics.
Unlike oil, which is produced by relatively few countries, critical minerals are more dispersed, with fragile supply chains, and extraction is environmentally damaging.
- 70% of the global supply of cobalt comes from the Democratic Republic of Congo, often under poor labour and environmental conditions.
- Lithium is found in the “Lithium Triangle” (Chile, Argentina, Bolivia), as well as Australia and China.
- China holds a near-monopoly on the production and processing of rare earth elements.
This concentration raises concerns of trade wars and supply chain challenges. Countries are racing to secure stable mineral supply chains through diplomatic deals, strategic stockpiling, and investment in recycling technologies.
Recent Geopolitical Developments in the Energy Transition
The shift from oil and gas to renewable energy is reshaping politics, trade, and alliances.
- In Europe, the EU is speeding up its move away from Russian fossil fuels after the Ukraine war. It has set a deadline to end all Russian energy imports by 2027, while investing heavily in wind, solar, and hydrogen projects to cut dependence on imports.
- Russia, facing reduced sales to Europe, is building new partnerships with countries like Iran. The two have signed long-term agreements for joint oil, gas, and renewable projects, while also exploring new transport routes that bypass Western-controlled chokepoints.
- In the United States, large-scale funding under the Inflation Reduction Act is boosting domestic solar, wind, and battery production, aiming to compete with China’s dominance in clean energy manufacturing.
- India is buying discounted Russian oil to keep energy costs low, while also expanding solar power and green hydrogen production at home. This balancing act has created trade tensions, especially with the U.S., which recently raised tariffs on Indian goods over its Russian oil imports.
- The Middle East, long dependent on oil exports, is investing in massive renewable projects like Saudi Arabia’s NEOM city and the UAE’s large solar parks, hoping to stay relevant in the post-oil era.
Geopolitics of Energy – Wrapping Up
These changes show that the energy transition is not just about technology; it’s also about power, alliances, and competition. Countries that adapt quickly to renewables are likely to gain influence in the new global energy order.
Article by Gayatri Sarin