Remarks by a top official of the International Energy Agency (IEA) highlights fallout from the war in the Middle East, and the US and Iran standoff over the Strait of Hormuz, a key channel for shipping oil and gas globally.
The conflict “will have permanent consequences for the global energy markets for years to come”, Fatih Birol, executive director of the Paris-based IEA, told the UK’s Guardian newspaper in an interview.
According to Birol, “the damage is already done”, with governments worldwide switching policies towards renewable and nuclear energy. This crisis was “bigger than all the biggest crises combined, and therefore huge”, he said. “I still cannot understand that the world was so blind-sided, that the global economy can be held hostage to a 50km strait.”
As one sign of this policy shift, the UK government late last month announced the rollout of plug-in solar panels to reduce domestic power demand, vowing “to go further and faster on clean energy in response to conflict in the Middle East”. UK solar and heat pump sales have reportedly risen over 50% since March.
Pakistan has become an unlikely poster child for solar power adoption, with home and business installations likely to supply 20% of national energy demand by 2026 alone, according to the World Resources Institute. This transition has helped insulate Pakistan from the ongoing energy crisis, saving the country some US$12 billion since 2020 in oil and gas costs.
Pakistan has benefitted from cheap solar power equipment imports from China, whose latest five-year policy plan reinforces objectives of the last plan, which pushed domestic electric vehicle sales to 50% of Chinese car sales in 2025, among other achievements.
The same impetus is visible at the heart of global petrochemicals. Saudi Arabia’s Vision 2030 plan includes increasing renewable energy generation to 50% of domestic production by 2030.
Other countries looking to reduce their dependency on hydrocarbon imports are inevitably going to turn to China for the needed equipment. China’s influence will increase commensurately.
According to a recent report from data provider PitchBook, private equity deal value in clean energy hit a record $47 billion last year, with 16 of them exceeding $1 billion. This was in spite of US policy headwinds and before the new energy crisis started boosting activity.
Every country, even the US, now has a stark geopolitical imperative to reduce dependency on fossil fuel. The Trump administration created this imperative, just one more area where its policies are damaging and self-defeating. Clean energy investors can take cold comfort while China seizes the initiative.
