Geopolitical uncertainties require new energy strategy – WEC Germany

Ongoing geopolitical changes mean Germany and Europe must rethink their energy strategy to better link it with security, industry, and climate challenges, the World Energy Council (WEC) Germany has said in a report. As the world economy undergoes a realignment in which global supply chains and a focus on economic efficiency give way to more fragmentation and political influence on trade, an adapted energy strategy must strike a balance between cooperation and competition, the WEC said. 

“Energy no longer is a mere economic good but has become a key factor in geopolitical and industrial power politics,” said WEC executive director Carsten Rolle. According to the council, a full return to the market-based global order appears unlikely, as global conflicts in various shapes are likely to dominate international politics in the foreseeable future.

The WEC considered three scenarios for future energy supply: one with a multipolar order and an ongoing tendency towards more trade competition among states, a second scenario that features further military escalation and power concentration in a few blocks and a third one in which international agreements and institutions largely uphold their current function. In all three scenarios, technological competition, lower costs and greater resilience are important drivers of a transition to clean energy, while globally coordinated climate governance is either incomplete or absent.

As resilience is gaining importance as a guiding principle for energy and resource security, Germany so far lacks a clear vision of its own resilience ambitions and how it will be funded, said Rolle. An approach based on redundancy that builds up parallel infrastructures can reduce dependence and increase supply security, but it comes with substantial costs, the WEC Germany director said. “These have to be weighed carefully,“ he added. 

Competitiveness and supply security in the future will depend on the control over value creation chains, from raw materials through production and infrastructure to standardisation, for example regarding the budding hydrogen industry. Upholding multilateralism and pursuing strategic partnerships offer Europe greater resilience in this context, the WEC pointed out. “There needs to be governance across several policy fields to adequately respond to the changed requirements of the new more fragmented energy and climate world,” Rolle said. 

Germany’s Renewable Energy Federation (BEE) welcomed the WEC’s focus on resilience and the council’s conclusion that renewable energy sources are a key for greater security and competitiveness. “The geopolitical situation makes the fast expansion of renewables even more urgent,” said BEE head Ursula Heinen-Esser. In addition, she said, Germany and Europe would have to increase their own capacity for producing energy transition technologies, diversify their supply chains, strengthen recycling and intensify strategic partnerships. 

The WEC's call for better aligning energy and security policy also echoes recent warnings from Kerstin Andreae, head of the German Association of Energy and Water Industries (BDEW) earlier this year. Andreae said that financing the energy transition needs a rethink, arguing that resilience "needs to be discussed in the context of geopolitics, not only as part of climate policy."