Fossil fuel dependence and poor governance? Fasten your seatbelts

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“The geopolitical drama lies in the decline of fossil fuels, not the growth of renewables.”

That is one of the headline statements in a study published by Indra Overland – head of the Center for Energy Research at the Norwegian Institute for International Affairs – and researchers from Germany, Kyrgyzstan and the United States.

The GeGaLo index: Geopolitical gains and losses after energy transition reports 156 countries and, rather than assessing whether the energy transition will occur, considers the geopolitical fallout of such a scenario.

“Although we do not assume that [an] energy transition will necessarily happen, we think the need for it and the stated intention of many states to make it happen is sufficient reason for taking this as a hypothetical starting point,” Overland told pv magazine in another interview for our renewables and geopolitics series. The uncertainty surrounding the future shape of the global energy mix is exemplified by the International Energy Agency’s (IEA) approach to solar, added Overland. “The IEA – perhaps the most competent and prestigious institution working in this field – is infamous for its repeated failure to grasp the ongoing expansion of solar power.”

Starting point

The hypothetical starting point for the ‘GeGaLo Index’ is the phasing out fossil fuels. “Thus, we have given extra weighting to fossil fuels not to show that they will continue to play a role but because we think that the most geopolitically disruptive aspect of the energy transition is the decline of old fossil fuel producers rather than the rise of new renewables producers,” said Overland.

If the world transitions to renewables, he said, oil countries may come crashing down and will certainly experience a serious weakening of their position in the international system. “Iceland is the biggest winner no matter how the index is put together,” said the energy expert. The remote outpost in the North Atlantic has no fossil fuel exports or reserves to lose, a small population and a lot of space including an extensive exclusive economic zone where offshore wind generation facilities could be developed.

While many European net importers of fossil fuel stand to benefit geopolitically from the switch to clean energy, Russia stands out as a fall guy in that scenario. If Russia’s predicted fate comes as no huge surprise, Overland and his colleagues point out that also major renewables markets China and the U.S. will be losers in a global energy transition.

Although other studies have focused on the large volumes of oil imported by both countries, they have a tendency to let that obscure the large domestic oil and gas operations as well as the dependency on coal for the trade war rivals.

“Our findings on China and the USA exemplify one of the advantages of doing this analysis based on a systematic numerical data, rather than a more qualitative approach, as it forces us to face the facts,” said Overland.

Space for renewables

The importance of having land available to host renewables should not be overlooked either, said the professor. “[It] is important to consider not only how much sunshine or wind a country has per square meter, but also how many square meters it has and how many people it has living on those square meters,” said Overland. “Especially in the case of wind power, conflicts over the use of space are already evident and this concerns not only a densely populated country such as the Netherlands but also a more sparsely populated country such as Norway.”

Indra Overland

Image: Norsk Utenrikspolitisk Institutt (NUPI)

The expansion of wind power is a bitterly divisive issue in Norway. “However, I think it is too early to say that countries with limited space – or resistance to use of their space for renewable energy purposes – are going to be losers,” added Overland. Opposition could be overcome by giving the communities affected a stake, probably financial, in such infrastructure. “If they saw the prospects of sizable and very long-term income from wind turbines – their stance might be more positive,” said the energy expert.

A simple index

Overland defended the fact that the GeGaLo Index builds on only five factors – fossil fuel production and reserves, renewable energy resources, governance and conflict – in comparison to studies such as the Energy Transition Index published by the World Economic Forum which, he says, considers “a grand total of 38 disparate sub-indicators”.

Such a wealth on information can result in readers being unable to see the wood for the trees, he said, adding: “Selecting a few indicators and getting them to play out in a way that makes sense is the real challenge. With fewer indicators, it is clearer what an index is and is not about and it is more transparent how it is composed and why a given country achieves a certain rank.”

As an example, Overland mentions the positive score attributed in the World Economic Forum’s Energy Transition Index to nations with a diversity of energy sources, based on the fact such a choice strengthens energy security. “For some countries this may make sense,” he said, “but for other countries it has a paradoxical effect. For example, it leads to a low score for a country such as Norway [which] has vast amounts of reliable cheap, domestic hydropower [but little else in terms of variety] … This is the kind of distortion that can happen when one has too many indicators and one loses sight of what they represent and how they impact the index.”

Managing the transition

That said, governance and conflict indicators are considered and included in the GeGaLo Index to create more nuanced outcomes in a study which examines how the energy transition could affect states.

“The inclusion of governance in our index is about the capacity of states to handle their resulting geopolitical declines or rises,” said Overland. Rulers accustomed to bolstering their legitimacy and the welfare of their population with oil revenue will need a strong governance capacity to handle decline, he predicted. “In countries where there is a high dependence on fossil fuels combined with low capacity for governance it makes sense to fasten one’s seatbelt.”

Russia and Saudi Arabia rely on big oil revenue to bolster their security operations, pointed out Overland, whether to control domestic dissent or wage wars abroad. “If the world no longer needs to buy their fossil fuels, nor depends on them for energy security, they may find that they both have fewer, or less committed allies and that their capacity for military adventure is substantially reduced.”

The winners

Overland added, the GeGaLo Index is based on a concept of geopolitics intrinsically linked to geographical concerns such as natural resources – fossil fuel and renewable – and their location and transport routes. “‘Gaining’ in the context of the GeGaLo Index, means that a country has more valuable resources in a situation where the world is running on renewable energy than it did in a world running on fossil fuels,” said the professor. “Vice versa, a country that has lived high on fossil fuels will have a great loss of strength and advantage if these can no longer be sold or used.”

In the decades ahead, Overland predicted, there will be a larger number of moderate winners, in geopolitical terms, and a smaller number of major losers. That should mean the energy transition delivers a geopolitically flatter and less conflictual world. However, the transition phase itself may bring an escalation of international conflict as old systems and power relations unravel – especially if some of the incumbents are caught unprepared.

“Our purpose is not to condemn anyone,” added Overland, referring to the study, “but rather to give countries a heads up so that they can prepare, and avert problems.”

In previous interviews in this series, Indra Overland has discussed geopolitical issues related to the myths surrounding the geopolitics of renewable energy; the combination of solar and hydropower; China; the United States; Russia; Saudi Arabia; storage; super-grids; and the energy transition.