The U.S./Israeli-Iran war, together with disruptions in the Strait of Hormuz, through which a significant share of oil and liquefied natural gas shipments passes, has brought supply security policies back to the agenda in energy-import-dependent countries in Europe and Asia. The vulnerability of economies dependent on fossil fuel imports to geopolitical risks has strengthened discussions on diversifying energy sources and increasing domestic production.
Natural gas was trading at €31.96 per megawatt-hour on February 27, described as the pre-war period, before rising to €80.82 on September 11, its highest level. Brent crude was priced at around $76.30 per barrel on February 27 before rising to $126.41 on April 30. West Texas Intermediate crude reached $117.63 on April 7; on September 11, Brent traded at $105.62 and WTI at $100.87.
Europe accelerates its energy transition
Europe has entered a new era in energy security after the shock to natural gas supplies following Russia’s invasion of Ukraine and the pressure exerted by the conflict in the Middle East on oil and gas markets. Policies aimed at reducing dependence on energy imports are being reshaped around electrification, energy storage, grid investments and renewable sources.
The European Investment Bank said that the clean energy transition increases the economy’s resilience to global energy shocks by reducing dependence on energy imports. Europe brought 8.8 gigawatts of new wind power capacity online in the first half of the year. According to WindEurope data, this capacity increased by approximately 33 percent compared with the same period last year.
Installations in Germany and the connection of offshore wind projects to the grid contributed to the increase in new capacity. In Germany, the share of renewable energy sources in electricity consumption reached a record 58 percent in the first half of the year.
In the United Kingdom, electricity generation from wind rose 31 percent year on year in the first quarter, while wind farms’ share of electricity generation increased to 42 percent. The rise in wind generation enabled electricity companies to use gas-fired power plants less frequently.
Rising energy prices encouraged consumers to generate their own electricity not only to reduce their power bills but also to protect themselves against market fluctuations. Rooftop solar power in particular has become one of the leading options during energy crises because it can be installed more quickly than large-scale plants and generates electricity at the point of consumption.
Asia increases storage capacity
Asian countries’ high dependence on energy imports has brought policies to strengthen supply security and diversify resources to the forefront. Alongside solar and wind power, investments in storage are being increased so that electricity generated from these sources can be integrated into the system.
India’s Ministry of New and Renewable Energy is increasing storage investments to enable greater integration of renewable sources into the electricity system. The ministry projects that the country’s energy storage requirement will reach 411.4 gigawatt-hours by 2032. India’s Central Electricity Authority also recommends developing storage systems together with solar power projects.
South Korea is focusing on strengthening its electricity grid while increasing renewable energy capacity. The country aims to reach 100 gigawatts of renewable energy capacity by 2030 and develop its grid infrastructure to integrate the additional generation into the system.
The Philippine Department of Energy plans to create an additional 25 gigawatts of renewable energy capacity by 2035. The country’s Power Development Plan projects that the share of renewable sources in electricity generation will rise to 35 percent in 2030 and 50 percent in 2040. A total of 1,471 megawatts of capacity from renewable energy and storage projects is planned to be integrated into the grid this year.
Thailand’s high dependence on natural gas makes the development of solar and other renewable sources important for energy diversification. In China, energy security and the development of a new energy system are being addressed together, while investments in solar and wind power, storage and electricity grids are identified as key elements of the transition.
Policies in Europe and Asia show that renewable energy investments are being linked not only to emissions reductions and climate goals, but also to energy supply security, reduced dependence on external sources and greater resilience to price fluctuations.
