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China Will Be Global Renewables Superpower

The continuing growth in renewable energy around the world is set to boost the power of China while undermining the influence of major oil exporters such as Russia and Middle East states like Saudi Arabia, according to a new report on the geopolitical implications of the changing energy landscape.

With a leading position in renewable energy output as well as in related technologies such as electric vehicles, Beijing now finds itself in an influential position which other countries may struggle to counter.

“No country has put itself in a better position to become the world’s renewable energy superpower than China,” says the report, which was issued by the Global Commission on the Geopolitics of Energy Transformation – a group chaired by a former president of Iceland, Olafur Grimsson.

The commission was set up by the International Renewable Energy Agency (IRENA) last year and its findings were published on January 11 in Abu Dhabi, at IRENA’s annual assembly.

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Olafur Grimsson, former president of Iceland and chairman of the Global Commission on the Geopolitics of Energy Transformation, speaking at the launch of the group’s report on January 11 in Abu Dhabi, UAE (photo: IRENA)IRENA

The report argues that the geopolitical and socio-economic consequences of the rapid growth of renewable energy could be as profound as those which accompanied the shift from biomass to fossil fuels two centuries ago. The changes are likely to include the emergence of new energy leaders around the world, changing patterns of trade and the development of new alliances. It could also spark instability in some countries which have grown dependent on oil and gas revenues.

One of the key factors driving these changes is that, unlike traditional fossil fuels, renewable energy sources are widely available around the world. Whether it is solar or wind power, tidal energy or hydroelectric plants, most countries have the potential to develop some clean energy themselves. This means that many countries which currently have to import most of their energy will in the future be able to generate their own power – helping to improve their trade balance and reducing their vulnerability to volatile prices.

While the changes promise to democratise the provision of energy, not all countries will fare equally well in the new landscape.

The report points out that China has taken a lead in renewable energy and is now the world’s largest producer, exporter and installer of solar panels, wind turbines, batteries and electric vehicles.

China also has a clear lead in terms of the underlying technology, with well over 150,000 renewable energy patents as of 2016, 29% of the global total. The next closest country is the U.S., which had a little over 100,000 patents, with Japan and the E.U. having closer to 75,000 patents each.

While not all patents are useful or valuable, these figures give an indication of how much investment different countries have been putting into the industry. By contrast, major oil exporters such as Russia, Indonesia and Saudi Arabia had negligible numbers of renewable energy patents.

“The renewables revolution enhances the global leadership of China, reduces the influence of fossil fuel exporters and brings energy independence to countries around the world,” said Grimsson, speaking at the launch of the report. “The transformation of energy brings big power shifts.”

Beyond China, there are a few other groups of countries which stand to gain from the trends now under way. They include countries with high potential for renewable energy generation, such as Australia and Chile, which could become significant exporters of renewable electricity. Mineral-rich countries such as Bolivia, the Democratic Republic of Congo and Mongolia could also tap into rising global demand for their raw materials.

There are great dangers for other countries though. In particular, there is the potential for political instability in oil-exporting countries which find their revenues drying up. And some countries blessed with large reserves of newly-popular resources used by the renewable energy industry may also be at risk of a new wave of the resource curse.

The Global Commission’s report notes that the states of the Middle East and North Africa, together with Russia and other countries in the Commonwealth of Independent States are most exposed to a reduction in fossil fuel revenues. On average, these regions have net fossil fuel exports of more than a quarter of their GDP. “Declining export revenues will adversely affect their economic growth prospects and national budgets,” the report says. “To prevent economic disruption, they will need to adapt their economies and reduce their dependence on fossil fuels.”

Many of these governments are well aware of the risks they face and have been making significant investments into renewable energy in recent years. For example, the UAE has developed vast solar energy parks and Saudi Arabia recently unveiled plans to develop 59GW of renewable energy by 2030. However, while these will provide a useful source of energy in the future, they won’t do anything to replace the loss of income if oil and gas demand slumps around the world. Despite launching many economic diversification programs, governments in the Gulf in particular have yet to find a way to break their dependency on oil revenues.

However, the Gulf states at least have the benefit of large savings which they can use to try and remodel their economies, or at least soften the blow as oil and gas demand declines. Other oil exporting countries are more vulnerable to instability, particularly those which are already unstable or have weak political systems, such as the Republic of Congo, Iraq, Libya, South Sudan, Venezuela and Yemen.

On a more positive note, most countries in sub-Saharan Africa ought to benefit from lower energy costs if they can develop domestic renewable energy to replace their existing fossil fuel imports. The same is true for countries in south Asia and other energy importers such as European countries, China and Japan.

Stressing a more optimistic view, Adnan Amin, director general of IRENA, said at the launch of the report that “The global energy transformation driven by renewables can reduce energy-related geopolitical tensions as we know them and will foster greater cooperation between states. This transformation can also mitigate social, economic and environmental challenges that are often among the root causes of geopolitical instability and conflict.”

However, he acknowledged that the changes now under way present both opportunities and challenges and said “the benefits will outweigh the challenges, but only if the right policies and strategies are in place. It is imperative for leaders and policy makers to anticipate these changes, and be able to manage and navigate the new geopolitical environment.”

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