Making of a Megatrend: Episode 2 – Geopolitics

As discussed in Episode 1, one of the key drivers of the alternative energy megatrend is the potential for it to provide a new means of empowerment. While it gives individuals and civil society a powerful boost, the potential geopolitical leverage derived from winning the technological race to harness (and store!) energy from the sun, wind, oceans and even space is motivating the development of alternative energy resources. The promise of greater energy independence is also a powerful motivating force. Indeed, as Paddy Ryan notes in Defense News, “[e]nergy is woven into the fabric of modern geopolitics.”

The megatrend’s most outstanding geopolitical trait is its contribution to creating new spaces on the contemporary energy map.  Control over energy resources is part of the security landscape and is a destabilizing factor both domestically and internationally. The more alternative energy technologies take hold, the more important it is to rethink the political topography of energy. 

From conflicts over the Nile, Indus, Yangtze, and Tigris/Euphrates valleys to modern Angola’s oil and diamonds, the use of force by those seeking control over natural resources is nothing new. Today, however, the competition is entering a new phase, reshaped by new technological capabilities and geographical distribution of these capabilities and resources. Like with fossil fuels, some countries will be better positioned to take advantage of these resources based on their geological or technological endowments. Renewables could introduce new “energy resource regions” that transform the geopolitical map by bestowing new potential upon areas that were previously lacking energy. 

A snapshot of the top 4 renewable energy technologies shows the potential for geopolitical shifts. The geographical distribution of solar resources favors countries in the “solar belts” including the U.S. Southwest, Tibetan Plateau, Sahel, and Middle East. While the wind power map is still being charted, it currently appears that the greatest wind power potential can be found in North America, northern Europe, the southern tip of South America, the Australian island of Tasmania, north and northwest Africa, Mongolia, and Sri Lanka. Sub-Saharan Africa seems to have the greatest biofuel potential, closely followed by South America and Russia. However, biofuels are among the most contentious of alternative energy sources from a geopolitical perspective due to their impact on other essential resources. Biofuel feedstock production depends on the ability to grow feedstock crops. And corn, for example, uses 1,500 gallons of water for each gallon of ethanol produced. While the U.S. and China currently top the list in installed hydropower capacity, the most significant new development is concentrated in China, Latin America, and Africa. Access to hydro energy is already exacerbating existing geopolitical tensions as countries interfere with their neighbors’ access to water. 

The geopolitical energy map also must take into account supply chain security for minerals and materials needed in renewable energy technologies. The Lithium Triangle – Argentina, Bolivia, Chile – accounts for 58% of the world’s identified lithium reserves. Lithium, aka “white gold,” is indispensable for rechargeable devices (electric cars, cell phones, laptops, etc). Securing lithium has become a strategic concern for technology manufacturing hubs (China, the EU, Japan, South Korea, and the United States), which together import 78% of the world’s total dollar value of lithium carbonate.  Another key battery input, especially for electric cars, is cobalt. The Democratic Republic of Congo has far and away the most cobalt reserves in the world. 

Just being endowed with sun, wind, water or strategic minerals and materials isn’t enough to tip the geopolitical scales. Countries must also address “extra-geographic” drivers for wide scale and effective utilization of alternative energies, including financing, clear policies, sound legal frameworks, and developed transmission infrastructure. For example, today’s leading solar PV power capacity holders (China, Europe, the U.S., Japan and India) do not entirely coincide with those possessing the most impressive solar energy resource potential.

Technology is increasingly a dominant factor when assessing the geopolitical equilibrium. Exponential technological changes unleashed by the Fourth Industrial Revolution, including those propelling the megatrend, also impact the geopolitical landscape. When it comes to energy, a 21st century “Great Game” is on. This time, it’s not about land, but the next generation of energy technologies. 

A prime example is the hydrogen race. Governments around the world are supporting the emergence and development of a hydrogen economy. The U.S. has stepped up its game with the announcement of its new Earth Shot – Hydrogen Shot Program. China ramped up its support for hydrogen fuel cells, commissioning hydrogen fueling stations in Shandong Province in support of the “Hydrogen into Ten Thousand Homes” demonstration project (a high-level project initiated by China’s Ministry of Science and Technology to create a hydrogen-powered society).

The geopolitical and geo-strategic considerations of the alternative energy megatrend are taking place against the backdrop of a new age in great power competition. China’s enormous energy needs have underpinned its foreign policy for decades. Xi Jinping has called for an “energy revolution” with a focus on electricity security.

China’s 14th Five-Year Plan (2021-2025) puts policy targets and financial support behind their plan to become greener and more self-reliant. By 2060 China aims to transform its power generation mix from roughly 70% from fossil fuels today to 90% from renewable sources. Between 2019 and 2040, China will account for almost half of new global renewable capacity. China intends for half of their on-road vehicles to be electric, or fuel-cell powered by 2035, and the other half to be hybrid. 

As the alternative energy megatrend takes hold, Beijing aims to claim greater control of what comes next. Chinese-owned companies have invested heavily in Congo to take advantage of its vast cobalt reserves. China accounts for almost three-quarters of lithium-ion battery manufacturing capacity. Magnets used in wind turbines use rare-earth elements such as neodymium and dysprosium, nearly all of which are found in China.

The transition from hydrocarbons to renewables will not be an easy ride, nor will it happen tomorrow. While there may be new winners in the grand energy game – there will also be losers. As major energy importers increasingly turn to alternative energy technologies to meet their needs, former suppliers (e.g., Russia, Iran, Saudi Arabia, Venezuela) could find themselves lacking important revenue streams that undergird their leadership paradigms. Taken together, the geopolitics of the 21st century are looking to be just a complicated as those of the 20th.