Renewables and geopolitics: storage could rip up the current global picture

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In a recent interview in our series about how renewables could influence the shape of grids and global energy systems, Prof Indra Overland highlighted storage as a possible game changer, defining a mature storage sector as the missing link in the energy transition. When and how geopolitics could be affected by it, however, remains difficult to fathom.

What is certain, Overland told pv magazine, is that cheap, large scale energy storage would upend energy geographies and long established strategic dependencies, rendering diverse locations – towns, provinces, nations – more self-reliant and less dependent on remote geographical regions.

“There is so much research going on, both applied and basic, into so many different potential energy storage technologies that it would not be surprising if there were a major technological breakthrough during the coming years,” said Overland, who believes the geopolitical consequences of improved storage technology will be evenly spread around the world. “I think storage will be important everywhere, because it can greatly help all locations become self-sufficient, with their own renewable energy. The geopolitical impact of such a development would be felt most where geopolitical dependencies on fossil fuel trade relationships have been greatest.” In other words, major fossil fuel exporters such as Saudi Arabia and Australia, as well as big importers, including India and Japan. “For an oil exporter like Saudi Arabia, such a development could be dramatic, but not necessarily only negative,” he added. “Depending on how one sees the role of oil in that country today, in the long run Saudi Arabia could possibly become more democratic and less belligerent in international affairs if it were not propped up by oil revenue any longer.” It is a viewpoint articulated by Overland in an earlier interview in this series.

Indra Overland

Image: Norsk Utenrikspolitisk Institutt (NUPI)

The loss of revenue during periods of low oil prices can be a challenge for petrostates such as Saudi Arabia, that combine low levels of industrialization with authoritarianism. The effects of the transition to renewable energy may play out similarly, but go further. “Normally the oil price goes up and down in a cyclical manner and after a period of low oil prices they rise again, bringing respite; but competition from renewables is not cyclical in that way,” Overland said.

Fossil fuel dependent states will face challenges similar to those they have overcome before, but in the energy transition, such challenges could be relentless. If finances come under pressure for a protracted period of time, affected states may have to borrow more, try to renegotiate social contracts and cancel centrally directed mega projects. They would probably feel the need to maintain spending on security forces and intelligence services and as they try to navigate a new social contract with subjects, those personnel would become even more important to retain a grip on power.

“Thus, in the short to medium term, such states may become more authoritarian,” said Overland. “But over time social tensions and alternative ideologies are likely to rise and pose a greater challenge to the state, which will have a harder time maintaining its legitimacy without massive revenue from fossil fuel exports.”

We may also, of course, see peaceful, well-organized energy transitions as states adjust to the loss of fossil fuel revenues, but most petrostates don’t have the capacity or political and administrative culture to achieve such a smooth changeover. “More likely, many of them may experience situations a bit like what Venezuela is currently going through,” said the professor.

The new role of grid operators

In security terms, grid operators and power distributors are traditionally considered national assets. When asked if the development of storage could undermine that centrality, and whether that could represent a threat for states, Overland said he foresees two possible paths for renewable energy and grids, one featuring the current, limited storage technology scenario, and another marked by new storage tech.

In the first scenario, electricity grid operators would become more important, as prosumers exchange power on a peer-to-peer basis in large networks to compensate for the intermittency of renewable power generation.

A world with more advanced storage options, however, could see a further two outcomes, according to Overland. If storage is cost-effective at a small scale, bigger volumes of its capacity would reduce the need for electricity transmission and grid operators would, at best, have the same level of importance as today. In that scenario, a loss of importance for grid operators would be associated with improved energy security in states. However, if storage technology depended on economies of scale to be viable, the role of grid operators could become more important – especially if they owned the large scale storage.

In such a world, grid operators could become ‘energy banks’, where prosumers could deposit surplus energy and withdraw it when they face a deficit. That would see grid operators becoming more central to national security and having their physical and cyber security beefed up.

“The only thing that is clear is that, for grid operators, new storage technologies are probably the most important possible development to monitor,” said Overland.

Technological breakthrough

Predicting which storage technologies, if any, will prevail is difficult, Overland said, but anyone who can develop a form that maximizes cost-efficiency and is easy to roll out would see their tech quickly take hold.

And it is that sort of breakthrough that will determine when storage starts to affect geopolitics. According to Overland, we can envisage broad scenarios at present. “For example, let’s say there is a technological breakthrough over the next three to four years,” he said. “Then perhaps it takes three to four more years to scale up manufacturing, and yet another three to four years to roll out enough storage capacity to really start affecting the global energy supply picture.” In such a scenario, it would take around a decade before we saw an effect on international affairs – and that is an optimistic prediction.

However, in terms of financial markets and access to credit, the effects of affordable storage might be felt as soon as a major innovation became known, said Overland. “Who will want to lend money to Saudi Arabia or Russia if they know that their main sources of income are facing a major threat from some new and unproven, but promising technology?” asked the professor.

The race for lithium

A breakthrough in storage, however, especially one that concerns lithium-based products, would pose similar problems to those being experienced with fossil fuels. A significant lithium-dependent advance would immediately elevate the geopolitical importance of the biggest producers of the basic material, such as Australia and Bolivia. “If we end up sticking to some form of lithium-ion batteries there may be bottlenecks and supply-demand imbalances for lithium,” Overland said. “However, such problems are not likely to be very long term, as lithium is actually quite an abundant mineral.”

In fact, most of the rare earth elements are actually quite abundant, and fears of a war over lithium, rare earth elements or other critical materials verge on hysteria, in Overland’s view, although he did concede: “Obviously, those countries with the lithium reserves that are easiest to mine may make a lot of money.

“Apart from the countries that get rich on lithium,” he added, “I think it is those countries that hold the intellectual property rights to the best technologies that will be the big winners, rather than those with the manufacturing capacity.”